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Press release from PR Newswire

Spectra Energy Partners Reports Third Quarter 2012 Results

Thursday, November 01, 2012

Spectra Energy Partners Reports Third Quarter 2012 Results08:00 EDT Thursday, November 01, 2012- Cash available for distribution of $56.3 million, up 5 percent over prior year - Reported net income of $46.1 million - 20th consecutive quarterly cash distribution increase to $0.49 per unitHOUSTON, Nov. 1, 2012 /PRNewswire/ -- Spectra Energy Partners, LP (NYSE: SEP) today reported third quarter 2012 cash available for distribution of $56.3 million, compared with $53.7 million in the prior-year quarter.  Net income was $46.1 million for the quarter, compared with $43.5 million in the third quarter 2011. Distributions per limited partner unit for the quarter were $0.49, compared with $0.47 per limited partner unit for the third quarter 2011.(Logo: http://photos.prnewswire.com/prnh/20071107/CLW064 )The increases in both net income and cash available for distribution were the result of the expansion of East Tennessee with the Northeastern Tennessee (NET) project in September 2011 and higher revenues from the Big Sandy Pipeline.  These increases were partially offset by lower revenues at Ozark."Spectra Energy Partners' portfolio of quality, fee-based natural gas transmission and storage assets continues to deliver solid earnings and value for our unitholders, as we just announced our 20th consecutive quarterly distribution increase," said Julie Dill, president and chief executive officer.  "I am also pleased to report that yesterday, October 31, we closed the acquisition of a 38.76 percent interest in Maritimes & Northeast Pipeline US, an asset which expands SEP's footprint into the Northeast and is another strong addition to our portfolio."Results from OperationsSpectra Energy Partners reported operating income of $27.7 million for the third quarter 2012, compared with $23.2 million for the prior-year quarter. Earnings from the East Tennessee NET expansion and higher revenues from the Big Sandy Pipeline were partially offset by lower revenues at Ozark.Equity Investment in Gulfstream Natural Gas System, L.L.C. (Gulfstream)Spectra Energy Partners recognized $16.8 million of equity earnings from its 49 percent interest in Gulfstream in the third quarter 2012, compared with $16.2 million in the prior-year quarter.Spectra Energy Partners' share of Gulfstream's cash available for distribution was $19.3 million, compared to $20.7 million in the third quarter 2011.  The decrease was driven by higher maintenance costs in the third quarter 2012 compared to the prior year quarter.Equity Investment in Market Hub Partners (MHP)Spectra Energy Partners recognized $9.6 million of equity earnings from its 50 percent interest in MHP in the third quarter 2012, compared with $11.1 million in the prior-year quarter. The decrease was driven by expected lower revenues in the third quarter 2012.Spectra Energy Partners' share of MHP's cash available for distribution was $10.6 million, compared to $11.8 million in the third quarter 2011.Interest ExpenseInterest expense was $7.7 million, in line with the prior-year quarter.Capital Expenditures and Equity InvestmentsDuring the 2012 quarter, Spectra Energy Partners invested $10.8 million in expansion and maintenance capital projects in the Gas Transportation and Storage segment and an additional $0.6 million in expansion projects for MHP. Capital expenditures for expansion projects were for the final completion of projects placed into commercial service in 2011 at the Gas Transportation and Storage segment and MHP.Additional InformationThe company will discuss its third quarter 2012 performance in greater detail during the analyst conference call today.  The call is scheduled for 10:00 a.m. CT today, November 1, 2012. The webcast and conference call can be accessed via the investor relations section of Spectra Energy Partners, LP's website, or by dialing (888) 252-3715 in the United States or (706) 634-8942 outside the United States. The Conference ID is 40012132.Please call in 5 to 10 minutes prior to the scheduled start time. A replay of the conference call will be available after 1 p.m. CT, November 1, 2012, until 5 p.m. CT, February 1, 2013, by dialing (855) 859-2056 with Conference ID 40012132. The international replay number is (404) 537-3406 with Conference ID 40012132. A replay and transcript also will be available by accessing the investor relations section of Spectra Energy Partners' website at http://www.spectraenergypartners.com.Reconciliation of Non-GAAP Financial Measures This press release includes certain financial measures, including cash available for distribution and adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), that are non-GAAP (Generally Accepted Accounting Principles) financial measures, as defined under the rules of the Securities and Exchange Commission (SEC).Spectra Energy Partners defines adjusted EBITDA as net income plus interest expense, income taxes, and depreciation and amortization, less equity in earnings of Gulfstream and MHP, interest income, and other income and expenses, net, which primarily includes non-cash AFUDC.Spectra Energy Partners defines cash available for distribution as adjusted EBITDA plus cash available for distribution from Gulfstream and MHP and net preliminary project costs, less interest expense, net cash paid for income taxes, maintenance capital expenditures, and other non-cash items affecting net income. Cash available for distribution does not reflect changes in working capital balances. Cash available for distribution for Gulfstream and MHP is defined on a basis consistent with Spectra Energy Partners.This press release is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses these financial measures because they are accepted financial indicators used by investors to compare company performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the Partnership's assets and the cash that the business is generating. Adjusted EBITDA and cash available for distribution are not presented as alternatives to net income or cash flow from operations. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States GAAP. Forward-Looking StatementsThis document 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 and federal 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 interest 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; growth in opportunities, including the timing and success of efforts to develop domestic pipeline, storage, gathering and other infrastructure projects and the effects of competition; the performance of natural gas transmission, storage and gathering facilities; the extent of success in connecting natural gas supplies to transmission and gathering systems and in connecting to expanding gas markets; the effect 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 in our filings that we make 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 Partners, LP (NYSE: SEP) is a Houston-based master limited partnership, formed by Spectra Energy Corp (NYSE: SE), that owns interests in natural gas transportation and storage assets in the United States, including more than 3,500 miles of transmission and gathering pipeline and approximately 57 billion cubic feet (Bcf) of natural gas storage. These assets are capable of transporting 4.5 Bcf of natural gas per day from growing supply areas to high-demand markets.Spectra Energy Partners, LPQuarterly HighlightsSeptember 2012(Unaudited)(In millions, except per-unit amounts)Three Months EndedNine Months EndedSeptember 30,September 30,STATEMENTS OF OPERATIONS20122011(c)20122011(c)Operating revenues$           57.2$              52.9$         177.8$           147.1Operating expenses29.529.785.983.5Operating income27.723.291.963.6Equity in earnings of unconsolidated affiliates26.427.377.681.9Other income and expenses, net-0.90.12.2Interest income---0.3Interest expense7.77.723.117.2Earnings before income taxes46.443.7146.5130.8Income tax expense0.30.21.10.8Net income $           46.1$              43.5$         145.4$           130.0Adjusted EBITDA (a) $           37.0$              32.9$         119.8$             88.5Cash Available for Distribution (b) $           56.3$              53.7$         175.6$           157.6Weighted average units outstanding   Limited partner units96.396.396.392.0   General partner units2.02.02.01.9Net income per limited partner unit$           0.40$              0.40$           1.30$             1.26Declared cash distribution per limited partner unit$         0.490$            0.470$         1.455$           1.395CAPITAL AND INVESTMENT EXPENDITURESCapital expenditures - Gas Transportation & Storage$           10.8$              46.1$           27.7$             78.0Investment expendituresGulfstream - 49.0%---3.8Market Hub - 50%0.62.613.811.7Total capital and investment expenditures$           11.4$              48.7$           41.5$             93.5September 30,December 31, 20122011DEBT$         710.9$           707.5(a) Adjusted EBITDA is defined as net income plus interest expense, income taxes, and depreciation and amortization, less equity in earnings of Gulfstream and Market Hub, interest income, and other income and expenses, net, which primarily includes non-cash allowance for funds used during construction (AFUDC).(b) Cash Available for Distribution is defined as Adjusted EBITDA plus Cash Available for Distribution from Gulfstream and Market Hub and net preliminary project costs, less interest expense, cash paid for income tax expense, maintenance capital expenditures, excluding the impact of reimbursable projects, and other non-cash amounts. Cash Available for Distribution does not reflect changes in working capital balances.(c) Cash Available for Distribution for the three and nine months ended September 30, 2011 has been revised to reflect the refinement to our definition that was effective January 1, 2012.  Spectra Energy PartnersReconciliation of Non-GAAP "Adjusted EBITDA" and "Cash Available for Distribution" (Unaudited)(In millions)Three Months EndedNine Months EndedSeptember 30,September 30,20122011(a)20122011(a)Net income $          46.1$           43.5$      145.4$       130.0Add:Interest expense 7.77.723.117.2Income tax expense0.30.21.10.8Depreciation and amortization9.39.727.924.9Less:Equity in earnings of Gulfstream16.816.246.648.4Equity in earnings of Market Hub9.611.131.033.5Interest income---0.3Other income and expenses, net-0.90.12.2Adjusted EBITDA37.032.9119.888.5Add:Cash Available for Distribution from Gulfstream19.320.757.861.0Cash Available for Distribution from Market Hub10.611.834.636.5Preliminary project costs, net----Less:Interest expense 7.77.723.117.2Cash paid for income tax expense----Maintenance capital expenditures3.04.013.911.3Other(0.1)-(0.4)(0.1)Cash Available for Distribution$          56.3$           53.7$      175.6$       157.6(a) Cash Available for Distribution for the three and nine months ended September 30, 2011 has been revised to reflect the refinement to our definition that was effective January 1, 2012.  GulfstreamReconciliation of Non-GAAP "Adjusted EBITDA" and "Cash Available for Distribution" (Unaudited)(In millions)Three Months EndedNine Months EndedSeptember 30,September 30,20122011(a)20122011(a)Net income $          34.3$             33.0$          95.1$        98.8Add:     Interest expense 17.417.752.652.4     Depreciation and amortization8.98.926.726.5Less:     Other income and expenses, net-(0.3)--Adjusted EBITDA - 100%60.659.9174.4177.7Add:  Preliminary project costs, net0.10.30.50.7Less:     Interest expense 17.417.752.652.4     Maintenance capital expenditures4.00.24.51.1     Other(0.1)-(0.1)0.3Cash Available for Distribution - 100%$          39.4$             42.3$        117.9$      124.6Adjusted EBITDA - 49.0% $          29.7$             29.3$          85.5$        87.0Cash Available for Distribution - 49.0%$          19.3$             20.7$          57.8$        61.0(a) Cash Available for Distribution for the three and nine months ended September 30, 2011 has been revised to reflect the refinement to our definition that was effective January 1, 2012.  Market HubReconciliation of Non-GAAP "Adjusted EBITDA" and "Cash Available for Distribution" (Unaudited)(In millions)Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011Net income$          19.1$           22.3$        62.0$      67.1Add:     Interest benefit--(0.1)-     Income tax expense (benefit)0.20.10.20.2     Depreciation and amortization2.82.78.58.0Less:  Interest income--0.10.1     Other income and expenses, net----Adjusted EBITDA - 100%22.125.170.575.2Less:     Interest benefit--(0.1)(0.1)     Cash paid for income tax expense----     Maintenance capital expenditures0.91.61.42.4Cash Available for Distribution - 100%$          21.2$           23.5$        69.2$      72.9Adjusted EBITDA - 50%$          11.1$           12.5$        35.3$      37.6Cash Available for Distribution - 50%$          10.6$           11.8$        34.6$      36.5 SOURCE Spectra Energy Partners, LPFor further information: Media & Analysts: Derick Smith, +1-713-627-4963