Spectra Energy Reports First Quarter 2010 Results

HOUSTON, May 4 /PRNewswire-FirstCall/ --

• Ongoing net income from controlling interests of $342 million, $0.53 earnings per share (EPS), compared with $210 million, $0.33 EPS, in the prior year quarter.
• Quarter positively affected by earnings from expansion projects and stronger commodity prices.
• Continued successful execution of capital expansion plan:
  • Received approval from Canada's National Energy Board for the Fort Nelson North processing facility, and
  • Placed into service T-North and North Maxhamish Loop projects in western Canada.

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Spectra Energy Corp (NYSE: SE) reported 2010 first quarter net income from controlling interests of $358 million, or $0.55 diluted EPS, compared with $298 million, $0.47 diluted EPS, in the prior year quarter. Ongoing net income from controlling interests for the 2010 quarter was $342 million, or $0.53 diluted EPS, versus $210 million, $0.33 diluted EPS, in the prior year quarter.

"We achieved very good first quarter results, which reflect sound performance from each of our businesses and the benefit of improved commodity prices. This quarter's results have given investors a very clear picture of the robust benefits of Spectra Energy's broad-based portfolio of natural gas infrastructure assets," said Greg Ebel, president and chief executive officer, Spectra Energy Corp.

"We continue to successfully execute on more than $3 billion in expansion projects that are fueling our 8 to 10 percent annual earnings growth through 2012."

SEGMENT RESULTS

U.S. Transmission            

U.S. Transmission reported first quarter 2010 earnings before interest and taxes (EBIT) of $247 million, compared with $217 million in first quarter 2009. The segment benefited from business expansion projects previously placed into service, including Maritimes & Northeast Pipeline Phase IV, Steckman Ridge Storage, Northern Bridge, Algonquin J-2 Expansion, and Moss Bluff and Egan Storage projects.

Distribution

Distribution reported first quarter 2010 EBIT of $146 million, compared with $152 million in first quarter 2009. The decrease is mainly due to lower customer usage, primarily driven by weather which was more than 10 percent warmer than the same period last year. This decrease was substantially offset by the effect of a stronger Canadian dollar.

Western Canada Transmission & Processing

Western Canada Transmission & Processing reported first quarter 2010 EBIT of $119 million, compared with $81 million in first quarter 2009. The segment benefited from improved results in the base gathering and processing business, primarily driven by higher contracted volumes from expansion programs, including West Doe, South Peace Pipeline and Fort Nelson. The segment also benefited from higher frac spreads at the Empress natural gas liquids (NGL) business as well as the effect of a stronger Canadian dollar.

Field Services

Field Services reported first quarter 2010 ongoing EBIT of $99 million, compared with $15 million in first quarter 2009. The increase in ongoing earnings was primarily driven by higher commodity prices. During first quarter 2010, crude oil averaged approximately $79 per barrel, compared with approximately $43 per barrel in the prior year quarter, and NYMEX natural gas averaged approximately $5.30 per million British thermal unit (MMBtu) versus $4.89 per MMBtu during the same period in 2009. The NGL to crude relationship averaged 58 percent during the first quarter 2010 versus 56 percent during the prior year quarter.

The prior year reported earnings of $150 million included a special item of $135 million related to a pre-tax recognition of a deferred gain.

DCP Midstream paid distributions of $75 million to Spectra Energy during the first quarter.

Other

"Other" reported net costs of $14 million in first quarter 2010, compared with net costs of $24 million in first quarter 2009, reflecting lower corporate costs during the current quarter.

Interest Expense

Interest expense was $159 million in first quarter 2010, compared with $150 million during the prior year quarter.

Income Taxes

First quarter 2010 income tax expense from continuing operations was $97 million, compared with $139 million reported in first quarter 2009. The effective tax rate was 21 percent in first quarter 2010, compared with 31 percent in first quarter 2009.  The lower effective tax rate is primarily due to favorable audit settlements totaling $24 million and lower Canadian tax rates.

Additional Information

Additional information about first quarter 2010 earnings can be obtained via the Spectra Energy Web site: www.spectraenergy.com.

The analyst call is scheduled for today, Tuesday, May 4, 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 "67797453" 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 August 6, 2010, by dialing (800) 642-1687 with conference ID 67797453. 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, adjusted for special items and discontinued operations, 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, 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 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 provides 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; general economic conditions, 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; 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; 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; 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 in general ; 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 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. 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 is a member of both the Dow Jones Sustainability Index North America and the U.S. S&P 500 Carbon Disclosure Leadership Index. For more information, visit www.spectraenergy.com.

SOURCE Spectra Energy Corp