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Press release from PR Newswire

Spectra Energy Reports Third Quarter 2011 Results

Thursday, November 03, 2011

Spectra Energy Reports Third Quarter 2011 Results06:30 EDT Thursday, November 03, 2011Ongoing Net Income Increases 23 PercentHOUSTON, Nov. 3, 2011 /PRNewswire/ -- Ongoing net income from controlling interests of $247 million, $0.38 earnings per share (EPS), compared with $201 million, $0.31 EPS, in the prior year quarter.Quarter benefited from expansion projects and higher commodity prices.Expect to exceed 2011 $1.65 EPS target.Quarterly dividend increased to $0.28 per share ? representing a $0.08 increase in annual dividend.Spectra Energy Corp (NYSE: SE) reported 2011 third quarter net income from controlling interests of $254 million, or $0.39 diluted EPS, compared with $197 million, or $0.30 diluted EPS, in the prior year quarter. Ongoing net income from controlling interests for the 2011 quarter was $247 million, or $0.38 diluted EPS, versus $201 million, or $0.31 diluted EPS, in the prior year quarter.(Logo: http://photos.prnewswire.com/prnh/20061030/CLM051LOGO )"We delivered solid results ahead of our expectations and exceeded last year's ongoing net income by 23 percent. All of our businesses continued to perform very well and are realizing earnings growth from expansion projects placed into service at attractive rates of return," said Greg Ebel, president and chief executive officer, Spectra Energy Corp."Given our strong year-to-date performance and the positive trends we are continuing to see during the fourth quarter, we expect to exceed our $1.65 EPS target," Ebel said. "That confidence and good visibility on 2012 growth led us to announce last week an overall 8 cent increase in our annual dividend. This underscores our ability to consistently deliver total shareholder return through both earnings and dividend growth."SEGMENT RESULTS    U.S. TransmissionU.S. Transmission reported third quarter 2011 earnings before interest and taxes (EBIT) of $235 million, compared with $231 million in third quarter 2010.  As anticipated, the segment benefited from Northeast expansion projects placed into service during fourth quarter 2010, mainly TEMAX/TIME III and Algonquin East-to-West. These benefits were partially offset by higher planned operating costs during the quarter.Distribution Distribution reported third quarter 2011 EBIT of $50 million, compared with $63 million in third quarter 2010. This decrease is mainly due to higher operating costs, primarily employee benefits costs, partially offset by a stronger Canadian dollar.Western Canada Transmission & ProcessingWestern Canada Transmission & Processing reported third quarter 2011 EBIT of $119 million, compared with $90 million in third quarter 2010. The segment benefited from improved results in the gathering and processing business, mainly driven by higher contracted volumes from expansions in the Horn River area of British Columbia and higher earnings at the Empress natural gas liquids (NGL) business, due mostly to higher sales prices. The segment also benefited from a stronger Canadian dollar. Field ServicesField Services reported third quarter 2011 EBIT of $134 million, compared with $70 million in third quarter 2010. The increase was primarily due to higher commodity prices. During the third quarters of 2011 and 2010, respectively, NGL prices averaged $1.24 per gallon versus $0.87 per gallon, NYMEX natural gas averaged $4.19 per million British thermal unit (MMBtu) versus $4.38 per MMBtu and crude oil averaged approximately $90 per barrel versus $76 per barrel. DCP Midstream paid distributions of $125 million to Spectra Energy in October 2011, bringing total distributions to $395 million this year. Other "Other" ongoing net costs were $23 million in third quarter 2011, compared with $16 million in 2010. Interest ExpenseInterest expense was $157 million for third quarter 2011, compared with $159 million for third quarter 2010.  Income TaxesThird quarter 2011 income tax expense from continuing operations was $108 million, compared with $69 million reported in third quarter 2010. The increase resulted from higher earnings as well as a higher effective tax rate, as a result of favorable tax settlements during the 2010 quarter. The effective tax rate was 28 percent in third quarter 2011, compared with 24 percent in third quarter 2010.Special Items Affecting Spectra Energy's EPS for the Quarters Include:(in millions, except per-share amounts)Pre-tax AmountTax EffectNet Income ?Controlling Interests ImpactEPS ImpactThird Quarter 2011$          ?$          ?$          ?$          ?Third Quarter 2010     Resolution of a Corporate Legal Matter$          (7)$          2$          (5)$    (0.01)Total Special Items$          (7)$          2$          (5)$    (0.01)Reconciliation of Reported to Ongoing Net Income ? Controlling Interests (in millions)Quarters Ended September 30,20112010Net Income ? Controlling Interests as Reported$       254$       197Adjustments to Reported Net Income ? Controlling Interests:Special Items ?5Discontinued Operations(7)(1)Ongoing Net Income ? Controlling Interests $       247$       201Reconciliation of Reported to Ongoing Diluted EPSQuarters Ended September 30,20112010Diluted EPS as Reported$         0.39$         0.30     Special Items?0.01     Discontinued Operations(0.01)?Diluted EPS, Ongoing$         0.38$         0.31Additional InformationAdditional information about third quarter 2011 earnings can be obtained via the Spectra Energy Web site: www.spectraenergy.com.The analyst call is scheduled for today, November 3, 2011, at 9:00 a.m. CT. The webcast can be accessed via the Investors Section of Spectra Energy's website 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 "17746586" 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 3, 2012, by dialing (855) 859-2056 with conference ID 17746586. The international replay number is (404) 537-3406, 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 MeasuresWe 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 StatementsThis 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 "Cautionary Statement Regarding Forward-Looking Information" in our 2010 Form 10-K, filed on February 24, 2011, 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 more than 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's operations in the United States and Canada include more than 19,000 miles of transmission pipeline, over 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 Carbon Disclosure Leadership Index. For more information, visit www.spectraenergy.com.Spectra Energy CorpQuarterly HighlightsSeptember 2011(Unaudited)(In millions, except per-share amounts and where noted)Three Months EndedNine Months  EndedSeptember 30,September 30,2011201020112010COMMON STOCK DATA Earnings Per Share From Continuing Operations, Diluted$   0.38$   0.30$     1.34$     1.09Earnings Per Share, Diluted$   0.39$   0.30$     1.37$     1.12Dividends Per Share$   0.26$   0.25$     0.78$     0.75Weighted-Average Shares Outstanding, Diluted652650652650INCOMEOperating Revenues$ 1,123$ 1,019$  3,923$   3,562Total Reportable Segment EBIT5384541,7881,488Income from Discontinued Operations, Net of Tax712317Net Income - Controlling Interests254197895729EBIT BY BUSINESS SEGMENTU.S. Transmission $    235$    231$     757$     701Distribution5063305282Western Canada Transmission & Processing11990373278Field Services13470353227Total Reportable Segment EBIT5384541,7881,488Other EBIT(23)(23)(76)(53)   Total Reportable Segment and Other EBIT$    515$    431$  1,712$  1,435CAPITAL AND INVESTMENT EXPENDITURES U.S. Transmission$     534$     478Distribution200126Western Canada Transmission & Processing515260Other5623Total Capital and Investment Expenditures$  1,305$     887Acquisitions, Net of Cash Acquired (a)$     390$     492September 30,December 31,20112010CAPITALIZATIONCommon Equity - Controlling Interests39%39%Noncontrolling Interests and Preferred Stock5%5%Total Debt 56%56%Total Debt $  11,248$  11,320Book Value Per Share (b)$    12.21$    12.03Actual Shares Outstanding 650649(a) Represents acquisitions of Big Sandy natural gas pipeline system in 2011 and Bobcat gas storage assets in 2010.(b) Represents controlling interests.Spectra Energy CorpQuarterly HighlightsSeptember 2011(Unaudited)(In millions, except where noted)Three Months EndedNine Months EndedSeptember 30,September 30,2011201020112010U.S. TRANSMISSION  Operating Revenues$    471$    442$ 1,411$ 1,341  Operating ExpensesOperating, Maintenance and Other184165486482Depreciation and Amortization6964203192  Gains on Sales of Other Assets and Other, net4181  Other Income and Expenses403810393  Noncontrolling Interests27217660  EBIT$    235$    231$    757$    701  Proportional Throughput, TBtu (a)6596242,0852,009DISTRIBUTION  Operating Revenues$    276$    261$ 1,347$ 1,260  Operating ExpensesNatural Gas Purchased6054556535Operating, Maintenance and Other11296326298Depreciation and Amortization5448160145  EBIT$      50$      63$    305$    282  Number of Customers, Thousands1,3521,334  Heating Degree Days, Fahrenheit2462854,9484,288  Pipeline Throughput, TBtu 139180626665  Canadian Dollar Exchange Rate, Average0.981.040.981.04WESTERN CANADA TRANSMISSION & PROCESSING  Operating Revenues$    392$    315$ 1,202$    959  Operating ExpensesNatural Gas and Petroleum Products Purchased8662275189Operating, Maintenance and Other148119428369Depreciation and Amortization4646140124  Loss on Sales of Other Assets, net-(1)-(1)  Other Income and Expenses73142  EBIT$    119$      90$    373$    278  Pipeline Throughput, TBtu180151529451  Volumes Processed, TBtu187164537490  Empress Inlet Volumes, TBtu 145163455441  Canadian Dollar Exchange Rate, Average0.981.040.981.04FIELD SERVICES  Equity in Earnings of DCP Midstream, LLC$    134$      70$    353$    227  EBIT$    134$      70$    353$    227  Natural Gas Gathered and Processed/Transported, TBtu/day (b)7.17.16.96.9  Natural Gas Liquids Production, MBbl/d (b,c)392378375364  Average Natural Gas Price Per MMBtu (d)$   4.19$   4.38$   4.21$   4.59  Average Natural Gas Liquids Price Per Gallon$   1.24$   0.87$   1.21$   0.96  Average Crude Oil Price Per Barrel (e)$ 89.76$ 76.20$ 95.48$ 77.65(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 monthSpectra Energy CorpCondensed Consolidated Statements of Operations(Unaudited)(In millions)Three Months EndedNine Months EndedSeptember 30,September 30,2011201020112010Operating Revenues$ 1,123$ 1,019$ 3,923$ 3,562Operating Expenses7656782,6102,387Gains on Sales of Other Assets and Other, net3-7-Operating Income3613411,3201,175Other Income and Expenses178105470314Interest Expense157159471476Earnings From Continuing Operations Before Income Taxes3822871,3191,013Income Tax Expense From Continuing Operations10869372242Income From Continuing Operations 274218947771Income From Discontinued Operations, net of tax712317Net Income281219970788Net Income - Noncontrolling Interests27227559Net Income - Controlling Interests$    254$    197$    895$    729Spectra Energy CorpCondensed Consolidated Balance Sheets(Unaudited)(In millions)September 30,December 31,20112010ASSETSCurrent Assets $              1,608$            1,638Investments and Other Assets6,9367,003Net Property, Plant and Equipment 17,59116,980Regulatory Assets and Deferred Debits1,0801,065Total Assets$            27,215$          26,686LIABILITIES AND EQUITYCurrent Liabilities$              2,513$            2,523Long-term Debt10,23410,169Deferred Credits and Other Liabilities 5,4445,249Preferred Stock of Subsidiaries258258Equity8,7668,487Total Liabilities and Equity$            27,215$          26,686Spectra Energy CorpCondensed Consolidated Statements of Cash Flows(Unaudited)(In millions)Nine Months EndedSeptember 30,20112010CASH FLOWS FROM OPERATING ACTIVITIESNet income $   970$   788Adjustments to reconcile net income to net cash provided byoperating activities717219Net cash provided by operating activities1,6871,007CASH FLOWS FROM INVESTING ACTIVITIESNet cash used in investing activities(1,546)(1,421)CASH FLOWS FROM FINANCING ACTIVITIESNet cash provided by (used in) financing activities(188)406Effect of exchange rate changes on cash(9)(2)Net decrease in cash and cash equivalents(56)(10)Cash and cash equivalents at beginning of period130166Cash and cash equivalents at end of period$     74$   156Spectra Energy CorpReported to Ongoing Earnings ReconciliationSeptember 2011 Quarter-to-date(In millions, except per-share amounts)Reported EarningsDiscontinued OperationsOngoing EarningsSEGMENT EARNINGS BEFORE INTEREST AND TAXES  FROM CONTINUING OPERATIONSU.S. Transmission$       235$            -$       235Distribution50-50Western Canada Transmission & Processing119-119Field Services134-134    Total Reportable Segment EBIT538-538Other(23)-(23)    Total Reportable Segment and Other EBIT$       515$            -$       515EARNINGS Total Reportable Segment EBIT and Other EBIT$       515$            -$       515Interest Expense(157)-(157)Interest Income and Other24-24Income Taxes from Continuing Operations(108)-(108)Discontinued Operations, net of Tax7(7)A-Total Net Income $        281$          (7)$       274Total Net Income - Noncontrolling Interests (27)-(27)Total Net Income - Controlling Interests $        254$           (7)$       247EARNINGS PER SHARE, BASIC$       0.39$      (0.01)$      0.38EARNINGS PER SHARE, DILUTED$       0.39$      (0.01)$      0.38A - Primarily net revenues from Sonatrach settlement transactions.Weighted Average Shares (reported and ongoing) - in millionsBasic  650 Diluted  652 Spectra Energy CorpReported to Ongoing Earnings ReconciliationSeptember 2010 Quarter-to-date(In millions, except per-share amounts)Reported EarningsSpecial Items     Discontinued OperationsTotal AdjustmentsOngoing EarningsSEGMENT EARNINGS BEFORE INTEREST AND TAXES  FROM CONTINUING OPERATIONSU.S. Transmission$                231$               -$              -$                    -$              231Distribution63---63Western Canada Transmission & Processing90---90Field Services70---70    Total Reportable Segment EBIT454---454Other(23)7A-7(16)    Total Reportable Segment and Other EBIT$                431$              7$              -$                    7$              438EARNINGS Total Reportable Segment EBIT and Other EBIT$                431$             7$              -$                    7$              438Interest Expense(159)---(159)Interest Income and Other15---15Income Taxes from Continuing Operations(69)(2)-(2)(71)Discontinued Operations, net of Tax1-(1)B(1)-Total Earnings $                219$              5$            (1)$                    4$              223Total Earnings - Noncontrolling Interests (22)---(22)Total Earnings - Controlling Interests $                197$              5$            (1)$                    4$              201EARNINGS PER SHARE, BASIC$               0.30$         0.01$              -$               0.01$             0.31EARNINGS PER SHARE, DILUTED$               0.30$         0.01$              -$               0.01$             0.31A - Resolution of pre-spin litigation.B - Net revenues from Sonatrach settlement.Weighted Average Shares (reported and ongoing) - in millionsBasic  648 Diluted  650 SOURCE Spectra Energy CorpFor further information: Media: Wendy Olson, +1-713-627-4072, +1-713-627-4747 (24-hour media line); Analysts: John Arensdorf, +1-713-627-4600