spectra energy 3Q07SpectraEnergyEarnings

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spectra energy 3Q07SpectraEnergyEarnings

  1. 1. Third Quarter 2007 Earnings Review Fred Fowler November 6, 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 Third Quarter • Ongoing EPS of $0.38 -- ongoing earnings up 32% compared with 3Q06 • Excellent results at U.S. Transmission, Distribution and Western Canada Transmission and Processing • $625-650 million of expansion projects in-service by end of 2007 • Confident we will achieve 2007 financial goals Committed to delivering results to shareholders with solid, steady growth and an attractive dividend to provide a total return in the 8-10% range in a relatively low risk environment 3
  4. 4. Earnings Summary 3Q07 3Q06 Reported Net Income $ 234 $ 447 Special Items 5 (11) Discontinued Operations (3) (254) Extraordinary Items 4 - Ongoing Net Income $ 240 $ 182 Reported Diluted EPS $ 0.37 n/a Ongoing Diluted EPS $ 0.38 n/a • Special items: • 3Q07 – gas spin-off separation costs • 3Q06 – gas spin-off separation costs and costs to achieve Duke Energy/Cinergy merger and gain on Spectra Energy Income Fund’s issuance of units for asset purchase • Discontinued operations: • 3Q07 – true-up on the 2005 sale of Fort Frances facility • 3Q06 – operations transferred back to Duke Energy prior to the spin-off of Spectra Energy • Extraordinary Item: • 3Q07 – regulatory asset adjustment for deregulation of storage assets at Union Gas 4
  5. 5. U.S. Transmission Reported & Ongoing Segment EBIT ($ millions) 3Q07 3Q06 Reported Segment EBIT $ 230 $ 179 Special Items --- --- Ongoing Segment EBIT $ 230 $ 179 • 3Q07 ongoing segment results increased by $51 million compared with 3Q06 primarily a result of: • higher demand for services and expansion projects • higher earnings related to capitalization of development costs, primarily SESH and Gulfstream Phase IV 5
  6. 6. Distribution Reported & Ongoing Segment EBIT ($ millions) 3Q07 3Q06 Reported Segment EBIT $ 40 $ 24 Special Items --- --- Ongoing Segment EBIT $ 40 $ 24 • 3Q07 ongoing segment results were up by $16 million compared with 3Q06 primarily driven by: • increased storage and transmission revenues, higher distribution margins, • partially offset by higher O&M costs, including higher costs for conservation efforts in 3Q07 which are recovered in rates 6
  7. 7. Western Canada Transmission & Processing Reported & Ongoing Segment EBIT ($ millions) 3Q07 3Q06 Reported Segment EBIT $ 102 $ 98 Special Items --- (15) Ongoing Segment EBIT $ 102 $ 83 • 3Q07 ongoing segment results were higher by $19 million compared with 2006 due to: • lower O&M due to turnaround in 3Q06 at Fort Nelson and timing of pipeline integrity work • favorable foreign currency exchange • Empress average frac spread for 3Q07 was $8.37, compared to $6.92 in 3Q06 • Special item relates to gain in 3Q06 due to Spectra Energy Income Fund’s issuance of units for purchase of Westcoast Gas Services, Inc. 7
  8. 8. Field Services Reported & Ongoing Segment EBIT ($ millions) 3Q07 3Q06 Reported Segment EBIT $ 140 $ 158 Special Items 3 -- Ongoing Segment EBIT $ 143 $ 158 • 3Q07 ongoing EBIT was lower by $15 million compared with 3Q06 due primarily to: • favorable commodity prices • offset by lower gathering and processing margins • higher operating costs • and gas marketing results in 3Q06 • Special items relate to Spectra Energy’s 50% share of stand-alone costs in 3Q07 • 3Q07 crude oil prices averaged about $76/barrel -- the settled and forward price for all of 2007 is about $72/barrel • 3Q07 distributions from DCP Midstream were $247 million 8
  9. 9. 2007 Crude Oil Price $95 10/31/2007 Fw ds $90 $85 Settled Prices $80 2007 $75 $/bbl $70 SE 2007 Annual Avg Forecast $65 Assumption as of 9/15/06 ($68.50) $60 2007 Annual Avg $55 of Settled and Forw ards as of $50 10/31/07 ($72.37) Jan-07 Feb-07 Mar-07 May-07 Jun-07 Jul-07 Oct-07 Nov-07 Dec-07 Sep-07 Apr-07 Aug-07 P ricing info rmatio n co mpiled fro m NYM EX WTI 9
  10. 10. Other Reported & Ongoing EBIT ($ millions) 3Q07 3Q06 Other Reported EBIT (Loss) $ (15) $ 19 Special Items 5 7 Other Ongoing EBIT (Loss) $ (10) $ 26 • 3Q07 ongoing Other was lower than 3Q06 due primarily to: • lower ongoing corporate governance and insurance costs • 3Q06 includes mark-to-market gains ($21) and management fees ($26) - Absent these, 3Q06 EBIT loss was $21 million • Special items: • 3Q07 relates to gas spin-off separation costs • 3Q06 relates to separation costs and costs to achieve the Duke Energy/Cinergy merger 10
  11. 11. Additional Items • Interest expense for 3Q07 was $156 million compared with $152 million for 3Q06 • Spectra Energy’s effective tax rate for the 3Q07 was 32% compared with 41% last year – full year 2007 tax rate estimated to be 32-33% • Debt to Total Capital at Sept 30, 2007 is approximately 56% • Third quarter financing activity: • At Union, redeemed about C$130 million of debt and closed on a credit facility of C$500 million to replace C$400 million facility • Texas Eastern issued $400 million 10 year notes at a 6% coupon - refinanced $300 million that matured in July, 2007 • Received $345 million from IPO of Spectra Energy Partners, LP • Total credit facility capacity at Sept 30, 2007 of $2.2 billion; available capacity of $1.8 billion • Canadian currency net after tax effect on earnings for 3Q07 was favorable by about $3.7 million compared with 3Q06 11

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