Moody's Investors Service – the rating unit of Moody's Corporation (MCO) – assigned a Prime-2 rating to Spectra Energy Partners LP's (SEP), $2 billion commercial paper program. The rating carries a stable outlook.
Headquartered in Houston, Texas, Spectra Energy Partners is a master limited partnership (MLP). The MLP core business is interstate natural gas transportation and storage, but it has recently diversified into liquids transportation. Premier natural gas company, Spectra Energy Corp. (SE) owns 82% limited partner plus 2% general partner interests in Spectra Energy Partners, LP.
Spectra Energy is one of North America’s premier natural gas infrastructure plays and has strong business positions in growth markets. On Nov 1, 2013, the company completed the drop-down of the remainder of its U.S. Storage and Transmission assets to its MLP SEP. The transaction transforms Spectra Energy Partners into one of the largest fee-based MLPs in North America with an enterprise value of almost $20 billion.
Spectra plans to invest about $25 billion over the next decade on fee-based gas infrastructure growth projects. The company also plans to allocate $25 billion in growth projects through the end of the decade.
The company has faced several challenges from volatile commodity prices, which impacted its bottom line in the recent quarters, similar to most of its peers. But with an improving price scenario, Spectra is enjoying growth momentum. The company has an upbeat 2013 outlook both on organic as well as inorganic growth.
Moody’s rating is based on the steady revenue stream provided by its predominately natural gas pipeline business. Additionally, the rating also incorporates the benefits of SEP's recently expanded and diversified asset portfolio as a result of SE's drop-down of its remaining U.S. pipeline and storage assets not already in the MLP.
Spectra Energy Corp. holds a Zacks Rank #2, which is equivalent to a Buy rating for a period of one to three months. There are other better-ranked stocks in the oil and gas sector like SM Energy Company (SM) which holds a Zacks Rank #1 (Strong Buy) and is also expected to provide above-average returns to investors.