Mira Road Memorable Call Grls Number-9833754194-Bhayandar Speciallty Call Gir...
spectra energy _Q107Slides
1. First Quarter 2007 Earnings Review
Fred Fowler
May 8, 2007
President and CEO
Greg Ebel
CFO
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. Spectra Energy’s First Quarter
• Infrastructure successfully in place to support stand alone
company
• Solid results at US Transmission and Distribution; extreme
weather and commodity prices dampened Field Services
earnings
• On track with development and execution of projects to drive
5-7% compound annual ongoing diluted EPS growth for
2007-2009
• Filed Spectra Energy Partners S-1
Committed to delivering results to shareholders with solid,
steady growth and an attractive dividend to provide a total
return of 8-10% in a relatively low risk environment
3
4. Earnings Summary
1Q07 1Q06
Reported Net Income $ 236 $ 222
Discontinued Operations -- 22
Special Items 4 (25)
Ongoing Net Income $ 240 $ 219
Reported Diluted EPS $ 0.37 n/a
Ongoing Diluted EPS $ 0.38 n/a
• Ongoing earnings were up 10% compared with 1Q06
• Special items:
• 1Q07 – separation costs
• 1Q06 – positive settlement of a customer’s transportation contract and a gain on
an asset sale
• Discontinued operations relate to the businesses retained by Duke Energy but
reported as a part of Spectra Energy Capital for 2006
4
5. U.S. Transmission
Reported & Ongoing Segment EBIT ($ millions)
1Q07 1Q06
Reported Segment EBIT $ 220 $ 235
Special Items --- (24)
Ongoing Segment EBIT $ 220 $ 211
• 1Q07 ongoing segment results were up by $9 million or 4% compared with 1Q06
primarily a result of:
• lower operating costs due to capitalization of project development costs and
favorable resolution of ad valorem tax issues, and higher revenues from
improved storage prices and expansion projects placed in-service
• partially offset by decreased earnings from lower gas processing volumes
associated with pipeline operations
• Special item in 2006 was related to the positive settlement of a customer’s
transportation contract
5
6. Distribution
Reported & Ongoing Segment EBIT ($ millions)
1Q07 1Q06
Reported Segment EBIT $ 144 $ 118
Special Items --- ---
Ongoing Segment EBIT $ 144 $ 118
• 1Q07 ongoing segment results were up by $26 million compared with 1Q06 primarily
due to:
• increased usage due to colder weather
• higher distribution rates in 2007
• increased storage revenues reflecting strong storage values
• Weather was close to normal for 2007; about 12% colder compared with 1Q06
• Phase I of Dawn-Trafalgar commissioned in last quarter of 2006 and is contributing
to earnings
6
7. Western Canada Transmission & Processing
Reported & Ongoing Segment EBIT ($ millions)
1Q07 1Q06
Reported Segment EBIT $ 74 $ 82
Special Items --- ---
Ongoing Segment EBIT $ 74 $ 82
• 1Q07 ongoing segment results were lower by $8 million compared with 2006 as a
result of:
• lower processing revenues reflect reduced producer activity in the Fort Nelson
area and higher operating costs
• partially offset by higher NGL results at Empress
• Empress average frac spread for 1Q07 was approximately $4.20
7
8. Field Services
Reported & Ongoing Segment EBIT ($ millions)
1Q07 1Q06
Reported Segment EBIT $ 82 $ 144
Special Items 3 (14)
Ongoing Segment EBIT $ 85 $ 130
• 1Q07 ongoing EBIT was down by $45 million compared with 1Q06 due primarily to:
• reduced operating efficiency at various facilities as a result of extreme winter storms
• lower commodity prices
• higher gas marketing margins in 1Q06
• Special items relate to Spectra Energy’s 50% share of stand-up costs in 1Q07 and a gain
on sale of assets in 1Q06
• 1Q07 crude oil prices averaged about $58/barrel -- the strip price for the remainder of
2007 is in the mid $60’s
8
9. Other
Reported & Ongoing EBIT ($ millions)
1Q07 1Q06
Other Reported EBIT (Loss) $ (15) $ (49)
Special Items 3 ---
Other Ongoing EBIT (Loss) $ (12) $ (49)
• “Other” primarily includes corporate governance costs and captive insurance
• Favorable ongoing results due to lower corporate costs in 1Q07 and losses reported
in 1Q06 of $24 million for corporate hedges associated with Field Services earnings,
which expired at the end of 2006
• Special item for 1Q07 relates to separation costs
9
10. Ongoing EBITDA
Ongoing Segment EBITDA ($ millions)
1Q07 1Q06
U.S. Transmission $ 282 $ 272
Distribution 182 153
Western Canada Transmission &
Processing 106 117
Field Services 144 181
Other (12) (47)
Total Ongoing EBITDA $ 702 $ 676
• U.S. Transmission Ongoing EBITDA also includes Spectra Energy’s 50% share of
Gulfstream’s Interest and DD&A
• Field Services Ongoing EBITDA represents Spectra Energy’s Ongoing Equity
Earnings of DCP Midstream plus half of DCP Midstream’s Interest, Taxes and DD&A
10
11. Additional Items
• Interest expense for 1Q07 was $155 million compared with $143 million for 1Q06
• Spectra Energy’s effective tax rate for the 1Q07 was 34% compared with 38% last
year.
• Canadian currency net after tax impact for 1Q07 was unfavorable by about $1.2
million compared with 1Q06
• Debt to Total Capital at March 31, 2007 is 59%; net Debt to Total Capital is
approximately 57.5%
• Expect new credit facility of about $1.5 billion to replace $950 million existing U.S.
facility
• Rating agency actions at Spectra Energy Capital
• Moody’s: upgraded Senior Unsecured debt rating to Baa1 -- Outlook: Stable
• S&P: affirmed Senior Unsecured debt rating at BBB -- Outlook: Stable
11
12. Well-Positioned for Growth
~$3 Billion of Expansion Opportunities 2007-2009
Gas Gathering
Pipelines
Processing Plant
Expansion
Maritimes Phase IV
Dawn Storage
St. Clair Power
/Canaport
Deliverability
Dawn Area
Cape Cod
Storage Dawn-Trafalgar
Phase II – III
NE Gateway
AGT East/West
Time II Islander East
Lebanon
Project Strategy Ramapo
Connector
TEMAX/Lebanon Rockaway Beach
Market Pull East
Steckman Ridge
Supply Push
Accident
Glade Spring
Egan Expansion
Moss Bluff
Copiah Storage
Expansion
SE Supply Header
Gulfstream Phase III & IV
12
16. Value Proposition
• A premier pure-play midstream natural gas company
in North America
• Attractive industry dynamics
• Positioned in fastest growing markets
• Diverse supply base
• Seasoned management team
• Strong balance sheet and stable cash flows
• Financial flexibility
• Solid steady growth and attractive dividend yield
16
