Spectra Energy (ticker: SE, exchange: New York Stock Exchange (.N))
News Release -
4-Aug-2009
Spectra Energy Reports Second Quarter 2009 Results - Reported net income (controlling interests) of $140 million, $0.22 EPS, versus prior year quarter's $295 million, $0.47 EPS
- Ongoing net income of $141 million, $0.22 EPS, versus $276 million, $0.44
EPS, in prior year quarter
- Four major projects placed in service so far this year as company continues
successful execution of capital expansion program
HOUSTON, Aug. 4 /PRNewswire-FirstCall/ -- Spectra Energy Corp (NYSE: SE)
today reported 2009 second quarter net income from controlling interests of
$140 million, or $0.22 diluted earnings per share (EPS), compared with $295
million, $0.47 diluted EPS, in the prior year quarter.
(Logo: http://www.newscom.com/cgi-bin/prnh/20061030/CLM051LOGO )
"We had a good quarter, delivering solid results squarely in line with our
expectations," said Greg Ebel, president and chief executive officer, Spectra
Energy Corp.
"Our core, fee-based businesses - which will provide the overwhelming
majority of this year's earnings - performed well during the quarter, helping
to offset the effects of much lower commodity prices and a weaker Canadian
dollar," he said. "We also have placed key projects into service in both the
U.S. and Canada that will provide significant earnings and cash flow. And, our
remaining 2009 projects are on track for successful completion."
"With more than a billion dollars in operating cash flow, substantial cash
on the balance sheet, more than $2.5 billion of available liquidity and
lower-than-anticipated debt balances, we are very well positioned to continue
executing on our growth plan," continued Ebel.
SEGMENT RESULTS
U.S. Transmission
U.S. Transmission reported second quarter 2009 earnings before interest
and taxes (EBIT) of $234 million, compared with $244 million in second quarter
2008. The decrease was primarily due to a $31 million special item related to
a customer bankruptcy settlement in 2008.
Excluding the above special item, ongoing EBIT for second quarter was $234
million, compared with $213 million in the prior year quarter. The segment
benefited from business expansion projects and lower project development costs
during the quarter. These earnings were partially offset by lower gas
processing revenues as a result of lower prices and volumes, and lower equity
earnings.
Distribution
Distribution reported second quarter 2009 EBIT of $40 million, compared
with $54 million in second quarter 2008. Excluding the $8 million effect of
the decline in the value of the Canadian dollar and an $11 million charge to
reflect a settlement on prior year earnings to be shared with customers,
earnings would have increased $5 million this quarter. The segment continued
to benefit from higher storage and transportation revenues.
Western Canada Transmission & Processing
Western Canada Transmission & Processing reported second quarter 2009 EBIT
of $58 million, compared with $91 million during second quarter 2008.
Excluding the $10 million effect of the weaker Canadian dollar, earnings were
$23 million lower than the prior year period. Improved results in the base
gathering and processing business, due primarily to stronger activity in the
Fort Nelson and Grizzly Valley areas, were more than offset by lower Empress
earnings, primarily as a result of lower frac spreads.
Field Services
Field Services reported second quarter 2009 EBIT of $24 million, compared
with $216 million in second quarter 2008. The decrease in earnings was
primarily driven by lower commodity prices. During second quarter 2009 crude
oil averaged approximately $60 per barrel compared with $124 per barrel in the
prior year quarter and NYMEX natural gas averaged $3.50 per million British
thermal units (MMBtu) compared with approximately $11 per MMBtu during the
same period in 2008.
The decline in commodity prices was partially offset by lower operating
costs as a result of successful cost reduction initiatives, and lower losses
on non-cash mark-to-market hedges used to protect distributable cash flow at
DCP Midstream's master limited partnership.
Other
"Other" reported net costs of $12 million in second quarter 2009, compared
with net costs of $28 million in second quarter 2008.
Interest Expense
Interest expense was $146 million for second quarter 2009, compared with
$149 million for second quarter 2008. This decrease is primarily from the
effects of the weaker Canadian dollar, offset by higher long-term debt
balances.
Income Taxes
Second quarter 2009 income tax expense from continuing operations was $67
million, compared with $136 million reported in second quarter 2008. The
decrease was primarily as a result of lower earnings in 2009. The effective
tax rate was 30 percent in both quarters.
Special Items Affecting Spectra Energy's EPS for the Quarters Include:
(in millions, except per share amounts)
----------------------------------------------------------------------
Net Income -
Controlling
Pre-tax Tax Interests EPS
Amount Effect Impact Impact
------- ------ ------------ ------
Second Quarter 2009 $- $- $- $-
====== ====== ====== ======
Second Quarter 2008
Customer Bankruptcy Settlement 31 (10) 21 0.03
------ ------ ------ ------
Total $31 $(10) $21 $0.03
====== ====== ====== ======
Reconciliation of Reported to Ongoing Net Income
(in millions)
------------------------------------------------
Quarters Ended
June 30,
2009 2008
---- ----
Net Income - Controlling Interests as Reported $140 $295
Adjustments to Reported Net Income - Controlling
Interests:
Special Items - (21)
Discontinued Operations 1 2
---- ----
Ongoing Net Income $141 $276
==== ====
Reconciliation of Reported to Ongoing Diluted EPS
-------------------------------------------------
Quarters Ended
June 30,
2009 2008
---- ----
Diluted EPS as Reported $0.22 $0.47
Special Items - (0.03)
---- -----
Diluted EPS, Ongoing $0.22 $0.44
===== =====
Additional Information
Additional information about second quarter 2009 earnings can be obtained
via the Spectra Energy Web site: www.spectraenergy.com.
The Analyst call is scheduled for 9 a.m. CT today, August 4, to discuss
Spectra Energy's second quarter results. The webcast can be accessed via the
Investors Section of Spectra Energy's Web site and 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 "19871973" or "Spectra
Energy 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, November 4, 2009, by
dialing (800) 642-1687 with conference ID 19871973. 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, which are non-GAAP
financial measures as they represent net income (controlling interests) and
diluted EPS from continuing operations, adjusted for special items, as
measures to evaluate operations of the company. Special items represent
certain charges and credits which we believe will not be recurring on a
regular basis. 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. Ongoing
diluted EPS is also used as a basis for employee incentive bonuses.
The primary performance measure used by us to evaluate segment performance
is segment EBIT from continuing operations, which at the segment level
represents all profits from continuing operations (both operating and
non-operating) before deducting interest and taxes, and is net of
non-controlling interests related to those profits. We consider segment EBIT
from continuing operations, which is the GAAP measure used to report segment
results, to be a good indicator of each segment's operating performance as it
represents the results of our ownership interests in operations without regard
to financing methods or capital structures.
We also use ongoing segment and Other EBIT as a measure of performance.
Ongoing segment and Other EBIT is a non-GAAP financial measure as it
represents 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 it allows them to more accurately compare a
segment's or Other's ongoing performance across periods. The most directly
comparable GAAP measure for ongoing segment or Other EBIT is reported segment
or Other EBIT, which represents 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 represent our intentions,
plans, expectations, assumptions and beliefs about future events. One can
typically identify forward-looking statements by the use of forward-looking
words such as: may, will, could, project, believe, expect, estimate, continue,
potential, plan, forecast and other similar words. Such statements are subject
to risks, uncertainties and other factors, many of which are outside our
control and could cause actual results to differ materially from the results
expressed or implied by those forward-looking statements. Those factors
include: the implementation of 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; the outcome of litigation and
regulatory investigations, proceedings or inquiries; the effect of 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; our ability to
obtain financing on favorable terms, which can be affected by various factors,
including our credit ratings and general economic conditions; the levels of
supply and demand for natural gas in our areas of operation; the results 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; the effects of accounting pronouncements issued
periodically by accounting standard-setting bodies; the extent of success in
connecting natural gas supplies to gathering, processing and transmission
systems and in connecting to expanding gas markets; our ability to identify
opportunities for our business units and the timing and success of efforts to
develop pipeline, storage, gathering, processing and other infrastructure
projects; and our ability to successfully complete and integrate future
acquisitions. 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 2008 Form 10-K, filed on
February 27, 2009, 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. 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 285
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 was
recently ranked by FORTUNE as the world's "most admired" pipeline company. For
more information, visit www.spectraenergy.com.
Spectra Energy Corp
Quarterly Highlights
June 2009
(Unaudited)
(In millions, except per share amounts and where noted)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
-------------------------------------------------------------------------
COMMON STOCK DATA
Earnings Per Share From Continuing
Operations
Basic $0.22 $0.47 $0.69 $1.05
Diluted $0.22 $0.47 $0.69 $1.04
Earnings Per Share
Basic $0.22 $0.47 $0.69 $1.05
Diluted $0.22 $0.47 $0.69 $1.04
Dividends Per Share $0.25 $0.23 $0.50 $0.46
Weighted-Average Shares Outstanding
Basic 645 630 637 631
Diluted 646 633 638 634
-------------------------------------------------------------------------
INCOME
Operating Revenues $937 $1,133 $2,321 $2,733
Total Reportable Segment EBIT 356 605 956 1,317
Income from Discontinued Operations,
Net of Tax (1) (2) 2 1
Net Income - Controlling Interests 140 295 438 662
-------------------------------------------------------------------------
EBIT BY BUSINESS SEGMENT
U.S. Transmission $234 $244 $451 $470
Distribution 40 54 192 219
Western Canada Transmission &
Processing 58 91 139 220
Field Services 24 216 174 408
-- --- --- ---
Total Reportable Segment EBIT 356 605 956 1,317
Other EBIT (12) (28) (36) (48)
--- --- --- ---
Total Reportable Segment and
Other EBIT $344 $577 $920 $1,269
==== ==== ==== ======
-------------------------------------------------------------------------
CAPITAL AND INVESTMENT
EXPENDITURES (a)
U.S. Transmission $510 $680
Distribution 97 159
Western Canada Transmission &
Processing 100 75
Other 14 16
-- --
Total Capital and Investment
Expenditures $721 $930
==== ====
-------------------------------------------------------------------------
June 30, Dec. 31,
2009 2008
-------------------------------------------------------------------------
CAPITALIZATION
Common Equity - Controlling Interests 38% 34%
Noncontrolling Interests and
Preferred Stock 5% 4%
Total Debt 57% 62%
-------------------------------------------------------------------------
Total Debt $9,584 $10,047
Book Value Per Share (b) $9.98 $9.07
Actual Shares Outstanding 646 611
-------------------------------------------------------------------------
(a) Includes loans to affiliates for capital expansion projects.
(b) Represents controlling interests.
Spectra Energy Corp
Quarterly Highlights
June 2009
(Unaudited)
(In millions, except where noted)
Three Months Six Months
Ended Ended
June 30, June 30,
------------ ------------
2009 2008 2009 2008
-------------------------------------------------------------------------
U.S. TRANSMISSION
Operating Revenues $414 $400 $819 $803
Operating Expenses
Operating, Maintenance and Other 121 151 264 277
Depreciation and Amortization 62 58 121 116
Gains on Sales of Other Assets and Other,
net - 32 10 32
Other Income and Expenses 21 34 41 55
Noncontrolling Interests 18 13 34 27
-- -- -- --
EBIT $234 $244 $451 $470
---- ---- ---- ----
Proportional Throughput, TBtu (a) 574 476 1,287 1,113
-------------------------------------------------------------------------
DISTRIBUTION
Operating Revenues $284 $353 $992 $1,153
Operating Expenses
Natural Gas Purchased 120 158 555 650
Operating, Maintenance and Other 82 94 163 191
Depreciation and Amortization 42 46 82 93
Other Income and Expenses - (1) - -
EBIT $40 $54 $192 $219
--- --- ---- ----
Number of Customers, thousands 1,314 1,296
Heating Degree Days, Fahrenheit 918 899 4,616 4,550
Pipeline Throughput, TBtu 129 151 456 479
-------------------------------------------------------------------------
WESTERN CANADA TRANSMISSION & PROCESSING
Operating Revenues $239 $380 $510 $777
Operating Expenses
Natural Gas and Petroleum Products
Purchased 34 118 105 248
Operating, Maintenance and Other 108 128 196 232
Depreciation and Amortization 35 41 67 77
Other Income and Expenses (4) (2) (3) 1
Noncontrolling Interests - - - 1
--- --- --- ---
EBIT $58 $91 $139 $220
--- --- ---- ----
Pipeline Throughput, TBtu 136 142 298 304
Volumes Processed, TBtu 164 170 331 343
Empress Inlet Volumes, TBtu 198 208 409 425
-------------------------------------------------------------------------
FIELD SERVICES
Operating Expenses $- $1 $- $-
Equity in Earnings of DCP Midstream, LLC 24 217 174 408
EBIT $24 $216 $174 $408
--- ---- ---- ----
Natural Gas Gathered and Processed/
Transported, TBtu/day (b) 6.9 7.5 6.9 7.3
Natural Gas Liquids Production, MBbl/d
(b,c) 359 375 345 378
Average Natural Gas Price Per MMBtu (d) $3.50 $10.92 $4.19 $9.48
Average Natural Gas Liquids Price Per
Gallon $0.62 $1.49 $0.59 $1.42
-------------------------------------------------------------------------
OTHER
Operating Revenues $12 $12 $24 $21
Operating Expenses 28 38 60 66
Other Income and Expenses 4 (2) - (3)
EBIT $(12) $(28) $(36) $(48)
---- ---- ---- ----
-------------------------------------------------------------------------
(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
Spectra Energy Corp
Condensed Consolidated Statements of Operations
(Unaudited)
(In millions)
Three Months Six Months
Ended Ended
June 30, June 30,
------------ -----------
2009 2008 2009 2008
---- ---- ---- ----
Operating Revenues $937 $1,133 $2,321 $2,733
Operating Expenses 620 822 1,589 1,929
Gains on Sales of Other Assets and Other, net - 32 10 32
--- -- --- ---
Operating Income 317 343 742 836
--- --- --- ---
Other Income and Expenses 54 253 230 473
Interest Expense 146 149 296 307
--- --- --- ---
Earnings From Continuing Operations Before
Income Taxes 225 447 676 1,002
Income Tax Expense From Continuing Operations 67 136 206 308
-- --- --- ---
Income From Continuing Operations 158 311 470 694
Income (Loss) From Discontinued Operations,
net of tax (1) (2) 2 1
-- -- --- ---
Net Income 157 309 472 695
Net Income - Noncontrolling Interests 17 14 34 33
-- -- -- --
Net Income - Controlling Interests $140 $295 $438 $662
==== ==== ==== ====
Spectra Energy Corp
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
June 30, December 31,
2009 2008
------- -----------
ASSETS
Current Assets $1,231 $1,450
Investments and Other Assets 6,218 5,950
Net Property, Plant and Equipment 14,285 13,639
Regulatory Assets and Deferred Debits 924 885
--- ---
Total Assets $22,658 $21,924
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $2,325 $3,044
Long-term Debt 8,605 8,290
Deferred Credits and Other Liabilities 4,512 4,355
Preferred Stock of Subsidiaries 225 225
Stockholders' Equity 6,991 6,010
----- -----
Total Liabilities and Stockholders' Equity $22,658 $21,924
======= =======
Spectra Energy Corp
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
Six Months Ended
June 30,
----------------
2009 2008
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $472 $695
Adjustments to reconcile net income to net cash
provided by operating activities 547 446
--- ---
Net cash provided by operating activities 1,019 1,141
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities (544) (1,024)
---- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities (402) (123)
---- ----
Effect of exchange rate changes on cash 14 1
-- ---
Net increase (decrease) in cash and cash equivalents 87 (5)
Cash and cash equivalents at beginning of period 214 94
--- --
Cash and cash equivalents at end of period $301 $89
==== ===
Spectra Energy Corp
Reported to Ongoing Earnings Reconciliation
June 2009 Quarter-to-date
(In millions, except per-share amounts)
Discon- Total
Reported Special tinued Adjust- Ongoing
Earnings Items Operations ments Earnings
-------- ------- ---------- ------- --------
SEGMENT EARNINGS BEFORE
INTEREST AND TAXES
FROM CONTINUING OPERATIONS
U.S. Transmission $234 $- $- $- $234
Distribution 40 - - - 40
Western Canada Transmission &
Processing 58 - - - 58
Field Services 24 - - - 24
------ ------ ------ ------ ------
Total Reportable Segment
EBIT 356 - - - 356
Other (12) - - - (12)
------ ------ ------ ------ ------
Total Reportable Segment
and Other EBIT $344 $- $- $- $344
====== ====== ====== ====== ======
EARNINGS
Total Reportable Segment
EBIT and Other EBIT $344 $- $- $- $344
Interest Expense (146) - - - (146)
Interest Income and Other 27 - - - 27
Income Taxes from Continuing
Operations (67) - - - (67)
Discontinued Operations, Net
of Tax (1) - 1 A 1 -
------ ------ ------ ------ ------
Total Earnings $157 $- $1 $1 $158
Total Earnings -
Noncontrolling Interests (17) - - - (17)
------ ------ ------ ------ ------
Total Earnings - Controlling
Interests $140 $- $1 $1 $141
====== ====== ====== ====== ======
EARNINGS PER SHARE, BASIC $0.22 $- $- $- $0.22
====== ====== ====== ====== ======
EARNINGS PER SHARE, DILUTED $0.22 $- $- $- $0.22
====== ====== ====== ====== ======
A - Sonatrach settlement.
Weighted Average Shares (reported and ongoing) - in millions
Basic 645
Diluted 646
Spectra Energy Corp
Reported to Ongoing Earnings Reconciliation
June 2008 Quarter-to-date
(In millions, except per-share amounts)
Discon- Total
Reported Special tinued Adjust- Ongoing
Earnings Items Operations ments Earnings
-------- ------- ---------- ------- --------
SEGMENT EARNINGS BEFORE
INTEREST AND TAXES
FROM CONTINUING OPERATIONS
U.S. Transmission $244 $(31) A $- $(31) $213
Distribution 54 - - - 54
Western Canada Transmission
& Processing 91 - - - 91
Field Services 216 - - - 216
------ ------ ------ ------ ------
Total Reportable Segment EBIT 605 (31) - (31) 574
Other (28) - - - (28)
------ ------ ------ ------ ------
Total Reportable Segment
and Other EBIT $577 $(31) $- $(31) $546
====== ====== ====== ====== ======
EARNINGS
Total Reportable Segment EBIT
and Other EBIT $577 $(31) $- $(31) $546
Interest Expense (149) - - - (149)
Interest Income and Other 19 - - - 19
Income Taxes from Continuing
Operations (136) 10 - 10 (126)
Discontinued Operations,
Net of Tax (2) - 2 B 2 -
------ ------ ------ ------ ------
Total Earnings $309 $(21) $2 $(19) $290
Total Earnings -
Noncontrolling Interests (14) - - $- (14)
------ ------ ------ ------ ------
Total Earnings - Controlling
Interests $295 $(21) $2 $(19) $276
====== ====== ====== ====== ======
EARNINGS PER SHARE, BASIC $0.47 $(0.03) $- $(0.03) $0.44
====== ====== ====== ====== ======
EARNINGS PER SHARE, DILUTED $0.47 $(0.03) $- $(0.03) $0.44
====== ====== ====== ====== ======
A - Bankruptcy settlement of a customer's transportation contract.
B - Net results from Nevis and Brazeau River gathering and processing
facilities in Western Canada.
Weighted Average Shares (reported and ongoing) - in millions
Basic 630
Diluted 633
SOURCE
Spectra Energy Corp
CONTACT:
Media: Wendy Olson, +1-713-627-4072, or +1-713-627-4747
(24-hour media line); Analysts: John Arensdorf, +1-713-627-4600 |
Spectra Energy
