spectra energy _Q107Slides

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spectra energy _Q107Slides

  1. 1. First Quarter 2007 Earnings Review Fred Fowler May 8, 2007 President and CEO Greg Ebel CFO
  2. 2. Safe Harbor Statement Some of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to the additional information contained in Spectra Energy’s Form 10-K and other filings made with the SEC concerning factors that could cause those results to be different than contemplated in today's discussion. Reg G Disclosure In addition, today’s discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available on Spectra Energy’s Investor Relations website at www.spectraenergy.com. 2
  3. 3. Spectra Energy’s First Quarter • Infrastructure successfully in place to support stand alone company • Solid results at US Transmission and Distribution; extreme weather and commodity prices dampened Field Services earnings • On track with development and execution of projects to drive 5-7% compound annual ongoing diluted EPS growth for 2007-2009 • Filed Spectra Energy Partners S-1 Committed to delivering results to shareholders with solid, steady growth and an attractive dividend to provide a total return of 8-10% in a relatively low risk environment 3
  4. 4. Earnings Summary 1Q07 1Q06 Reported Net Income $ 236 $ 222 Discontinued Operations -- 22 Special Items 4 (25) Ongoing Net Income $ 240 $ 219 Reported Diluted EPS $ 0.37 n/a Ongoing Diluted EPS $ 0.38 n/a • Ongoing earnings were up 10% compared with 1Q06 • Special items: • 1Q07 – separation costs • 1Q06 – positive settlement of a customer’s transportation contract and a gain on an asset sale • Discontinued operations relate to the businesses retained by Duke Energy but reported as a part of Spectra Energy Capital for 2006 4
  5. 5. U.S. Transmission Reported & Ongoing Segment EBIT ($ millions) 1Q07 1Q06 Reported Segment EBIT $ 220 $ 235 Special Items --- (24) Ongoing Segment EBIT $ 220 $ 211 • 1Q07 ongoing segment results were up by $9 million or 4% compared with 1Q06 primarily a result of: • lower operating costs due to capitalization of project development costs and favorable resolution of ad valorem tax issues, and higher revenues from improved storage prices and expansion projects placed in-service • partially offset by decreased earnings from lower gas processing volumes associated with pipeline operations • Special item in 2006 was related to the positive settlement of a customer’s transportation contract 5
  6. 6. Distribution Reported & Ongoing Segment EBIT ($ millions) 1Q07 1Q06 Reported Segment EBIT $ 144 $ 118 Special Items --- --- Ongoing Segment EBIT $ 144 $ 118 • 1Q07 ongoing segment results were up by $26 million compared with 1Q06 primarily due to: • increased usage due to colder weather • higher distribution rates in 2007 • increased storage revenues reflecting strong storage values • Weather was close to normal for 2007; about 12% colder compared with 1Q06 • Phase I of Dawn-Trafalgar commissioned in last quarter of 2006 and is contributing to earnings 6
  7. 7. Western Canada Transmission & Processing Reported & Ongoing Segment EBIT ($ millions) 1Q07 1Q06 Reported Segment EBIT $ 74 $ 82 Special Items --- --- Ongoing Segment EBIT $ 74 $ 82 • 1Q07 ongoing segment results were lower by $8 million compared with 2006 as a result of: • lower processing revenues reflect reduced producer activity in the Fort Nelson area and higher operating costs • partially offset by higher NGL results at Empress • Empress average frac spread for 1Q07 was approximately $4.20 7
  8. 8. Field Services Reported & Ongoing Segment EBIT ($ millions) 1Q07 1Q06 Reported Segment EBIT $ 82 $ 144 Special Items 3 (14) Ongoing Segment EBIT $ 85 $ 130 • 1Q07 ongoing EBIT was down by $45 million compared with 1Q06 due primarily to: • reduced operating efficiency at various facilities as a result of extreme winter storms • lower commodity prices • higher gas marketing margins in 1Q06 • Special items relate to Spectra Energy’s 50% share of stand-up costs in 1Q07 and a gain on sale of assets in 1Q06 • 1Q07 crude oil prices averaged about $58/barrel -- the strip price for the remainder of 2007 is in the mid $60’s 8
  9. 9. Other Reported & Ongoing EBIT ($ millions) 1Q07 1Q06 Other Reported EBIT (Loss) $ (15) $ (49) Special Items 3 --- Other Ongoing EBIT (Loss) $ (12) $ (49) • “Other” primarily includes corporate governance costs and captive insurance • Favorable ongoing results due to lower corporate costs in 1Q07 and losses reported in 1Q06 of $24 million for corporate hedges associated with Field Services earnings, which expired at the end of 2006 • Special item for 1Q07 relates to separation costs 9
  10. 10. Ongoing EBITDA Ongoing Segment EBITDA ($ millions) 1Q07 1Q06 U.S. Transmission $ 282 $ 272 Distribution 182 153 Western Canada Transmission & Processing 106 117 Field Services 144 181 Other (12) (47) Total Ongoing EBITDA $ 702 $ 676 • U.S. Transmission Ongoing EBITDA also includes Spectra Energy’s 50% share of Gulfstream’s Interest and DD&A • Field Services Ongoing EBITDA represents Spectra Energy’s Ongoing Equity Earnings of DCP Midstream plus half of DCP Midstream’s Interest, Taxes and DD&A 10
  11. 11. Additional Items • Interest expense for 1Q07 was $155 million compared with $143 million for 1Q06 • Spectra Energy’s effective tax rate for the 1Q07 was 34% compared with 38% last year. • Canadian currency net after tax impact for 1Q07 was unfavorable by about $1.2 million compared with 1Q06 • Debt to Total Capital at March 31, 2007 is 59%; net Debt to Total Capital is approximately 57.5% • Expect new credit facility of about $1.5 billion to replace $950 million existing U.S. facility • Rating agency actions at Spectra Energy Capital • Moody’s: upgraded Senior Unsecured debt rating to Baa1 -- Outlook: Stable • S&P: affirmed Senior Unsecured debt rating at BBB -- Outlook: Stable 11
  12. 12. Well-Positioned for Growth ~$3 Billion of Expansion Opportunities 2007-2009 Gas Gathering Pipelines Processing Plant Expansion Maritimes Phase IV Dawn Storage St. Clair Power /Canaport Deliverability Dawn Area Cape Cod Storage Dawn-Trafalgar Phase II – III NE Gateway AGT East/West Time II Islander East Lebanon Project Strategy Ramapo Connector TEMAX/Lebanon Rockaway Beach Market Pull East Steckman Ridge Supply Push Accident Glade Spring Egan Expansion Moss Bluff Copiah Storage Expansion SE Supply Header Gulfstream Phase III & IV 12
  13. 13. Well-Positioned for Growth ~$3 Billion of Expansion Opportunities 2007-2009 Maritimes Phase IV /Canaport 13
  14. 14. Well-Positioned for Growth ~$3 Billion of Expansion Opportunities 2007-2009 NE Gateway 14
  15. 15. Well-Positioned for Growth ~$3 Billion of Expansion Opportunities 2007-2009 SE Supply Header 15
  16. 16. Value Proposition • A premier pure-play midstream natural gas company in North America • Attractive industry dynamics • Positioned in fastest growing markets • Diverse supply base • Seasoned management team • Strong balance sheet and stable cash flows • Financial flexibility • Solid steady growth and attractive dividend yield 16

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