EX-99.1 2 dex991.htm PRESS RELEASE Press Release

 

Exhibit 99.1

LOGO

 

Media:

  

Wendy Olson

(713) 627-4072

(713) 627-4747 (24-hour media line)

Analysts:   

John Arensdorf

(713) 627-4600

Date:    November 3, 2010

Spectra Energy Reports Third Quarter 2010 Results

 

   

Ongoing net income of $201 million, $0.31 diluted earnings per share (EPS), versus prior year quarter’s $190 million, $0.30 EPS; reported net income (controlling interests) of $197 million, $0.30 EPS, compared with $191 million, $0.30 EPS, in the prior year quarter.

 

   

Quarter benefited from expansion project earnings and improved commodity prices.

 

   

Continued successful execution of growth plan.

 

   

Expect to exceed 2010 $1.42 ongoing EPS target.

HOUSTON – Spectra Energy Corp (NYSE: SE) today reported 2010 third quarter net income from controlling interests of $197 million, or $0.30 diluted EPS, compared with $191 million, or $0.30 EPS, in the prior year quarter. Ongoing net income was $201 million, or $0.31 EPS, versus $190 million, or $0.30 EPS, during the prior year quarter.

The higher results in the 2010 quarter reflect sound performance from the company’s fee-based businesses, the positive effect of higher commodity prices at its Field Services business and a stronger Canadian dollar.

“Having exceeded last year’s third quarter earnings by about 6 percent, we remain positive about realizing our growth objectives for the year. Given our strong year-to-date results and our typically strong fourth quarter, we expect to surpass our 20 percent earnings growth expectations and our $1.42 ongoing EPS target,” said Greg Ebel, president and chief executive officer, Spectra Energy Corp.


 

“We continue executing on our capital expansion plan, placing five projects into service this year – on time, on budget and generating returns on capital above our expectations,” said Ebel.

SEGMENT RESULTS

U.S. Transmission

U.S. Transmission reported third quarter 2010 earnings before interest and taxes (EBIT) of $231 million, compared with $239 million in third quarter 2009. Excluding the effect of certain 2009 items, EBIT increased slightly over last year’s quarter. Third quarter 2009 results included a $21 million net benefit related to project development costs, partially offset by an $11 million charge from a non-cash regulatory accounting adjustment related to Southeast Supply Header.

Consistent with our expectations, the segment benefited from business expansion projects, including Northern Bridge, Market Hub Partners Egan Storage and Algonquin J-2. These benefits were partly offset by higher operating costs, primarily due to timing.

Distribution

Distribution reported third quarter 2010 EBIT of $63 million, compared with $48 million in third quarter 2009. This improvement is primarily due to increased utilization by industrial customers, growth in the number of residential customers being served, lower operating fuel costs and a stronger Canadian dollar.

Western Canada Transmission & Processing

Western Canada Transmission & Processing reported third quarter 2010 EBIT of $90 million, compared with $84 million in third quarter 2009. The segment benefited from improved results in the base gathering and processing business, primarily driven by higher contracted volumes from expansions in non-conventional supply areas, including at Fort Nelson, South Peace Pipeline and West Doe, partially offset by declines in conventional supply areas. The segment also benefited from the effect of a stronger Canadian dollar.


 

Field Services

Field Services reported third quarter 2010 ongoing EBIT of $70 million, compared with $45 million in third quarter 2009. The increase in ongoing earnings was primarily driven by higher commodity prices as well as an $11 million pre-tax gain associated with ongoing unit issuances by DCP Midstream’s master limited partnership. These increases in earnings were partially offset by reduced volumes in the Mid-Continent region.

DCP Midstream’s EBIT is positively affected by higher commodity prices. During third quarter 2010, crude oil averaged approximately $76 per barrel, compared with approximately $68 per barrel in the prior year quarter. The natural gas liquids (NGL) to crude relationship averaged 48 percent during the third quarter 2010 versus 42 percent during the prior year quarter. This equates to an NGL price of $0.87 per gallon during the 2010 quarter versus $0.69 per gallon in third quarter 2009. NYMEX natural gas averaged approximately $4.38 per million British thermal unit (MMBtu) versus $3.39 per MMBtu during the same period in 2009.

DCP Midstream paid cash distributions of $41 million to Spectra Energy during the third quarter, bringing distributions to $228 million year-to-date.

Other

“Other” reported net costs of $23 million in third quarter 2010. Excluding a $7 million charge for resolution of a corporate litigation matter that arose prior to the 2007 spin-off of Spectra Energy, ongoing net costs were $16 million, compared with $10 million in third quarter 2009.

Interest Expense

Interest expense was $159 million for third quarter 2010, compared with $160 million for third quarter 2009.


 

Income Taxes

Third quarter 2010 income tax expense from continuing operations was $69 million, compared with $54 million reported in third quarter 2009. The increase resulted from higher earnings and a slightly higher effective tax rate during the quarter, compared with third quarter 2009.

 

Special Items Affecting Spectra Energy’s EPS for the Quarters Include:

(in millions, except per-share amounts)

 
     Pre-tax
Amount
    Tax
Effect
     Net Income  –
Controlling
Interests
Impact
    EPS
Impact
 

Third Quarter 2010

         

Resolution of Pre-Spin Litigation

   $ (7   $ 2       $ (5   $ (0.01
                                 

Total Special Items

   $ (7   $ 2       $ (5   $ (0.01
                                 

Third Quarter 2009

   $ —        $ —         $ —        $ —     
                                 

 

Reconciliation of Reported to Ongoing Net Income – Controlling Interests

(in millions)

 
     Quarters Ended
September 30,
 
     2010     2009  

Net Income – Controlling Interests as Reported

   $ 197      $ 191   

Adjustments to Reported Net Income – Controlling Interests:

    

Special Items

     5        —     

Discontinued Operations

     (1     (1
                

Ongoing Net Income – Controlling Interests

   $ 201      $ 190   
                

 

Reconciliation of Reported to Ongoing Diluted EPS  
    

Quarters Ended

September 30,

 
     2010      2009  

Diluted EPS as Reported

   $ 0.30       $ 0.30   

Special Items

     0.01         —     
                 

Diluted EPS, Ongoing

   $ 0.31       $ 0.30   
                 


 

Additional Information

Additional information about third quarter 2010 earnings can be obtained via the Spectra Energy Web site: www.spectraenergy.com. The analyst call is scheduled for today, Wednesday, November 3, 2010, at 9:00 a.m. CT. The webcast can be accessed via the Investors Section of Spectra Energy’s Web site or the conference call can be accessed by dialing (888) 252-3715 in the United States or Canada, or (706) 634-8942 for International. The conference code is “16896236” or “Spectra Energy Quarterly Earnings Call.”

Please call five to ten minutes prior to the scheduled start time. A replay of the call will be available until 5:00 p.m. CT, February 2, 2011, by dialing (800) 642-1687 with conference ID 16896236. The international replay number is (706) 645-9291, with above conference ID. A replay and transcript also will be available by accessing the Investors Section of the company’s Web site.

Non-GAAP Financial Measures

We use ongoing net income and ongoing diluted EPS as measures to evaluate operations of the company. These measures are non-GAAP financial measures as they represent net income from controlling interests and diluted EPS, adjusted for special items and discontinued operations. Special items represent certain charges and credits which we believe will not be recurring on a regular basis, and discontinued operations do not represent our ongoing core business. We believe that the presentation of ongoing net income and ongoing diluted EPS provide useful information to investors, as it allows them to more accurately compare our ongoing performance across periods.

The primary performance measure used by us to evaluate segment performance is segment EBIT from continuing operations, which at the segment level represents earnings from continuing operations (both operating and non-operating) before interest and taxes, net of noncontrolling interests related to those earnings. We consider segment EBIT, which is the GAAP measure used to report segment results, to be a good indicator of each segment’s operating performance from its continuing operations as it represents the results of our ownership interest in operations without regard to financing methods or capital structures.

We also use ongoing segment EBIT and Other EBIT (net costs) as measures of performance. Ongoing segment and Other EBIT are non-GAAP financial measures as they represent reported


segment and Other EBIT adjusted for special items. We believe that the presentation of ongoing segment and Other EBIT provide useful information to investors, as they allow investors to more accurately compare a segment’s or Other’s ongoing performance across periods. The most directly comparable GAAP measures for ongoing segment or Other EBIT are reported segment or Other EBIT, which represent EBIT from continuing operations, including any special items.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on our beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as: anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, potential, forecast, and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an effect on rate structure, and affect the speed at and degree to which competition enters the natural gas industries; outcomes of litigation and regulatory investigations, proceedings or inquiries; weather and other natural phenomena, including the economic, operational and other effects of hurricanes and storms; the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; general economic conditions, including the risk of a prolonged economic slowdown or decline, or the risk of delay in a recovery, which can affect the long-term demand for natural gas and related services; potential effects arising from terrorist attacks and any consequential or other hostilities; changes in environmental, safety and other laws and regulations; results and costs of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general market and economic conditions; increases in the cost of goods and services required to complete capital projects; declines in the market prices of equity and debt securities and resulting funding requirements for defined benefit pension plans; growth in opportunities, including the timing and success of efforts to develop U.S. and Canadian pipeline, storage, gathering, processing and other infrastructure projects and the effects of competition; the performance of natural gas transmission and storage, distribution, and gathering and processing facilities; the extent of success in connecting natural gas supplies to gathering, processing and transmission systems and in connecting to expanding gas markets; the effects of accounting pronouncements issued periodically by accounting standard-setting bodies; conditions of the capital markets during the periods covered by the forward-looking statements; and the ability to successfully complete merger, acquisition or divestiture


plans; regulatory or other limitations imposed as a result of a merger, acquisition or divestiture; and the success of the business following a merger, acquisition or divestiture. These factors, as well as additional factors that could affect our forward-looking statements, are described under the headings “Risk Factors” and “Forward-Looking Statements” in our 2009 Form 10-K, filed on February 25, 2010, and in our other filings made with the Securities and Exchange Commission (SEC), which are available via the SEC’s Web site at www.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. All forward-looking statements in this release are made as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Spectra Energy Corp (NYSE: SE), a FORTUNE 500 company, is one of North America’s premier natural gas infrastructure companies serving three key links in the natural gas value chain: gathering and processing, transmission and storage, and distribution. For nearly a century, Spectra Energy and its predecessor companies have developed critically important pipelines and related infrastructure connecting natural gas supply sources to premium markets. Based in Houston, Texas, the company operates in the United States and Canada approximately 19,100 miles of transmission pipeline, more than 305 billion cubic feet of storage, as well as natural gas gathering and processing, natural gas liquids operations and local distribution assets. The company also has a 50 percent ownership in DCP Midstream, one of the largest natural gas gatherers and processors in the United States. Spectra Energy is a member of the Dow Jones Sustainability World and North America Indexes and the U.S. S&P 500 Carbon Disclosure Project’s Leadership Index for both Carbon Performance and Disclosure. For more information, visit www.spectraenergy.com.

# # #


 

Spectra Energy Corp

Quarterly Highlights

September 2010

(Unaudited)

(In millions, except per-share amounts and where noted)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  

COMMON STOCK DATA

        

Earnings Per Share From Continuing Operations, Diluted

   $ 0.30      $ 0.30      $ 1.09      $ 0.98   

Earnings Per Share, Diluted

   $ 0.30      $ 0.30      $ 1.12      $ 0.98   

Dividends Per Share

   $ 0.25      $ 0.25      $ 0.75      $ 0.75   

Weighted-Average Shares Outstanding, Diluted

     650        647        650        641   

INCOME

        

Operating Revenues

   $ 1,019      $ 933      $ 3,562      $ 3,254   

Total Reportable Segment EBIT

     454        416        1,488        1,372   

Income from Discontinued Operations, Net of Tax

     1        1        17        3   

Net Income - Controlling Interests

     197        191        729        629   

EBIT BY BUSINESS SEGMENT

        

U.S. Transmission

   $ 231      $ 239      $ 701      $ 690   

Distribution

     63        48        282        240   

Western Canada Transmission & Processing

     90        84        278        223   

Field Services

     70        45        227        219   
                                

Total Reportable Segment EBIT

     454        416        1,488        1,372   

Other EBIT

     (23     (10     (53     (46
                                

Total Reportable Segment and Other EBIT

   $ 431      $ 406      $ 1,435      $ 1,326   
                                

CAPITAL AND INVESTMENT EXPENDITURES

        

U.S. Transmission

       $ 478      $ 340   

Distribution

         126        171   

Western Canada Transmission & Processing

         260        236   

Other

         23        21   
                    

Total Capital and Investment Expenditures, Excluding Acquisitions

       $ 887      $ 768   
                    

Acquisitions, Net of Cash Acquired (a)

       $ 492      $ 295   
                    

 

     September 30,
2010
    December 31,
2009
 

CAPITALIZATION

    

Common Equity - Controlling Interests

     39     40

Noncontrolling Interests and Preferred Stock

     4     4

Total Debt

     57     56

Total Debt

   $ 10,999      $ 9,918   

Book Value Per Share (b)

   $ 11.53      $ 11.01   

Actual Shares Outstanding

     648        647   

 

(a) Represents acquisitions of Bobcat gas storage assets in 2010 and Ozark gas transmission and gathering systems in 2009.
(b) Represents controlling interests.


 

Spectra Energy Corp

Quarterly Highlights

September 2010

(Unaudited)

(In millions, except where noted)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2010     2009     2010     2009  

U.S. TRANSMISSION

        

Operating Revenues

   $ 442      $ 427      $ 1,341      $ 1,246   

Operating Expenses

        

Operating, Maintenance and Other

     165        126        482        390   

Depreciation and Amortization

     64        61        192        182   

Gains on Sales of Other Assets and Other, net

     1        1        1        11   

Other Income and Expenses

     38        19        93        60   

Noncontrolling Interests

     21        21        60        55   
                                

EBIT

   $ 231      $ 239      $ 701      $ 690   
                                

Proportional Throughput, TBtu (a)

     624        607        2,009        1,894   

DISTRIBUTION

        

Operating Revenues

   $ 261      $ 244      $ 1,260      $ 1,236   

Operating Expenses

        

Natural Gas Purchased

     54        62        535        617   

Operating, Maintenance and Other

     96        89        298        252   

Depreciation and Amortization

     48        44        145        126   

Other Income and Expenses

     —          (1     —          (1
                                

EBIT

   $ 63      $ 48      $ 282      $ 240   
                                

Number of Customers, Thousands

         1,334        1,315   

Heating Degree Days, Fahrenheit

     285        348        4,288        4,964   

Pipeline Throughput, TBtu

     180        133        665        589   

Canadian Dollar Exchange Rate, Average

     1.04        1.10        1.04        1.17   

WESTERN CANADA TRANSMISSION & PROCESSING

        

Operating Revenues

   $ 315      $ 260      $ 959      $ 770   

Operating Expenses

        

Natural Gas and Petroleum Products Purchased

     62        38        189        143   

Operating, Maintenance and Other

     119        103        369        299   

Depreciation and Amortization

     46        38        124        105   

Loss on Sales of Other Assets, net

     (1     —          (1     —     

Other Income and Expenses

     3        3        2        —     
                                

EBIT

   $ 90      $ 84      $ 278      $ 223   
                                

Pipeline Throughput, TBtu

     151        148        451        446   

Volumes Processed, TBtu

     164        163        490        494   

Empress Inlet Volumes, TBtu

     163        169        441        578   

Canadian Dollar Exchange Rate, Average

     1.04        1.10        1.04        1.17   

FIELD SERVICES

        

Equity in Earnings of DCP Midstream, LLC

   $ 70      $ 45      $ 227      $ 219   
                                

EBIT

   $ 70      $ 45      $ 227      $ 219   
                                

Natural Gas Gathered and Processed/Transported, TBtu/day (b)

     7.1        7.0        6.9        7.0   

Natural Gas Liquids Production, MBbl/d (b,c)

     378        371        364        354   

Average Natural Gas Price Per MMBtu (d)

   $ 4.38      $ 3.39      $ 4.59      $ 3.93   

Average Natural Gas Liquids Price Per Gallon

   $ 0.87      $ 0.69      $ 0.96      $ 0.63   

Average Crude Oil Price Per Barrel (e)

   $ 76.20      $ 68.30      $ 77.65      $ 57.00   

OTHER

        

Operating Revenues

   $ 15      $ 12      $ 42      $ 36   

Operating Expenses

     39        30        93        90   

Other Income and Expenses

     1        8        (2     8   
                                

EBIT

   $ (23   $ (10   $ (53   $ (46
                                

 

(a) Trillion British thermal units
(b) Includes 100% of DCP Midstream volumes
(c) Thousand barrels per day
(d) Million British thermal units. Average price based on NYMEX Henry Hub
(e) Average price based on NYMEX calendar month


 

Spectra Energy Corp

Condensed Consolidated Statements of Operations

(Unaudited)

(In millions)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2010      2009      2010      2009  

Operating Revenues

   $ 1,019       $ 933       $ 3,562       $ 3,254   

Operating Expenses

     678         581         2,387         2,170   

Gains on Sales of Other Assets and Other, net

     —           1         —           11   
                                   

Operating Income

     341         353         1,175         1,095   
                                   

Other Income and Expenses

     105         72         314         302   

Interest Expense

     159         160         476         456   
                                   

Earnings From Continuing Operations Before Income Taxes

     287         265         1,013         941   

Income Tax Expense From Continuing Operations

     69         54         242         260   
                                   

Income From Continuing Operations

     218         211         771         681   

Income From Discontinued Operations, net of tax

     1         1         17         3   
                                   

Net Income

     219         212         788         684   

Net Income - Noncontrolling Interests

     22         21         59         55   
                                   

Net Income - Controlling Interests

   $ 197       $ 191       $ 729       $ 629   
                                   


 

Spectra Energy Corp

Condensed Consolidated Balance Sheets

(Unaudited)

(In millions)

 

     September 30,
2010
     December 31,
2009
 

ASSETS

     

Current Assets

   $ 1,422       $ 1,429   

Investments and Other Assets

     6,722         6,356   

Net Property, Plant and Equipment

     16,375         15,347   

Regulatory Assets and Deferred Debits

     997         947   
                 

Total Assets

   $ 25,516       $ 24,079   
                 

LIABILITIES AND EQUITY

     

Current Liabilities

   $ 3,065       $ 2,495   

Long-term Debt

     9,277         8,947   

Deferred Credits and Other Liabilities

     4,887         4,747   

Preferred Stock of Subsidiaries

     258         225   

Equity

     8,029         7,665   
                 

Total Liabilities and Equity

   $ 25,516       $ 24,079   
                 


 

Spectra Energy Corp

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In millions)

 

     Nine Months Ended  
     September 30,  
     2010     2009  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income

   $ 788      $ 684   

Adjustments to reconcile net income to net cash provided byoperating activities

     219        583   
                

Net cash provided by operating activities

     1,007        1,267   
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Net cash used in investing activities

     (1,421     (740
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Net cash provided by (used in) financing activities

     406        (289
                

Effect of exchange rate changes on cash

     (2     (10
                

Net increase (decrease) in cash and cash equivalents

     (10     228   

Cash and cash equivalents at beginning of period

     166        205   
                

Cash and cash equivalents at end of period

   $ 156      $ 433   
                


 

Spectra Energy Corp

Reported to Ongoing Earnings Reconciliation

September 2010 Quarter-to-date

(In millions, except per-share amounts)

 

     Reported
Earnings
    Special
Items
    Discontinued
Operations
    Total
Adjustments
    Ongoing
Earnings
 

SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS

          

U.S. Transmission

   $ 231      $ —        $ —        $ —        $ 231   

Distribution

     63        —          —          —          63   

Western Canada Transmission & Processing

     90        —          —          —          90   

Field Services

     70        —          —          —          70   
                                        

Total Reportable Segment EBIT

     454        —          —          —          454   

Other

     (23     7   A      —          7        (16
                                        

Total Reportable Segment and Other EBIT

   $ 431      $ 7      $ —        $ 7      $ 438   
                                        

EARNINGS

          

Total Reportable Segment EBIT and Other EBIT

   $ 431      $ 7      $ —        $ 7      $ 438   

Interest Expense

     (159     —          —          —          (159

Interest Income and Other

     15        —          —          —          15   

Income Taxes from Continuing Operations

     (69     (2     —          (2     (71

Discontinued Operations, net of Tax

     1        —          (1 B      (1     —     
                                        

Total Earnings

   $ 219      $ 5      $ (1   $ 4      $ 223   

Total Earnings - Noncontrolling Interests

     (22     —          —          —          (22
                                        

Total Earnings - Controlling Interests

   $ 197      $ 5      $ (1   $ 4      $ 201   
                                        

EARNINGS PER SHARE, BASIC

   $ 0.30      $ 0.01      $ —        $ 0.01      $ 0.31   
                                        

EARNINGS PER SHARE, DILUTED

   $ 0.30      $ 0.01      $ —        $ 0.01      $ 0.31   
                                        

A - Resolution of pre-spin litigation

B - Net revenues from Sonatrach settlement.

Weighted Average Shares (reported and ongoing) - in millions

 

Basic

     648   

Diluted

     650   


 

Spectra Energy Corp

Reported to Ongoing Earnings Reconciliation

September 2009 Quarter-to-date

(In millions, except per-share amounts)

 

     Reported
Earnings
    Discontinued
Operations
    Total
Adjustments
    Ongoing
Earnings
 

SEGMENT EARNINGS BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS

        

U.S. Transmission

   $ 239      $ —        $ —        $ 239   

Distribution

     48        —          —          48   

Western Canada Transmission & Processing

     84        —          —          84   

Field Services

     45        —          —          45   
                                

Total Reportable Segment EBIT

     416        —          —          416   

Other

     (10     —          —          (10
                                

Total Reportable Segment and Other EBIT

   $ 406      $ —        $ —        $ 406   
                                

EARNINGS

        

Total Reportable Segment EBIT and Other EBIT

   $ 406      $ —        $ —        $ 406   

Interest Expense

     (160     —          —          (160

Interest Income and Other

     19        —          —          19   

Income Taxes from Continuing Operations

     (54     —          —          (54

Discontinued Operations, net of Tax

     1        (1 A      (1     —     
                                

Total Earnings

   $ 212      $ (1   $ (1   $ 211   

Total Earnings - Noncontrolling Interests

     (21     —        $ —          (21
                                

Total Earnings - Controlling Interests

   $ 191      $ (1   $ (1   $ 190   
                                

EARNINGS PER SHARE, BASIC

   $ 0.30      $ —        $ —        $ 0.30   
                                

EARNINGS PER SHARE, DILUTED

   $ 0.30      $ —        $ —        $ 0.30   
                                

A - Net results from Nevis and Brazeau River gathering and processing facilities in Western Canada.

Weighted Average Shares (reported and ongoing) - in millions

 

Basic

     646   

Diluted

     647