Shares of premier natural gas company, Spectra Energy Corp. (SE) hit a 52-week high of $38.37 on Apr 10, 2014. The shares closed at $38.08, reflecting a solid return of 10.7% over the past six months. The average trading volume for the last three months aggregated 2,924,710 shares.
Spectra Energy is one of North America’s premier natural gas infrastructure plays with a strong presence in growth markets. These positions should lead to value-accretive growth opportunities in the coming years. Spectra plans to invest about $25 billion over the next decade on fee-based gas infrastructure growth projects.
The company’s core fee-based businesses of storage, transmission, distribution and Canadian gathering and processing have the potential to move the needle toward solid earnings and cash flow growth in the long run. Going forward, Spectra intends to increase its presence in the oil and refined products pipelines, storage tanks and terminals business.
Management remains optimistic on its future performance based on its expansion program, which remains on track. With its market leading position, diversified asset portfolio and strong investment opportunities, we expect Spectra Energy to sustain the growth momentum. Additionally, Spectra plans to invest $1 billion per year through 2015 on fee-based gas infrastructure growth projects. The company expects to commission around 8 projects through 2016.
However, Spectra’s results are vulnerable to fluctuations in natural gas markets. The proposed liquid-rich drilling activities by the company clearly suggest that volatility in natural gas prices will change little going forward. Major investments in several projects in Canada also expose Spectra to fluctuations in currency rates that may affect the results of its operations.
Spectra Energy currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Meanwhile, one can consider better-ranked players from the industry such as Range Resources Corporation (RRC), World Point Terminals, LP (WPT) and EOG Resources, Inc. (EOG). While Range Resources and World Point sport a Zacks Rank #1 (Strong Buy), EOG holds a Zacks Rank #2 (Buy).
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