Premier natural gas company,
Spectra Energy Corp.
) reported first-quarter 2013 earnings per share from continuing
operations of 51 cents, beating the Zacks Consensus Estimate of
48 cents. The quarterly figure was in-line with the year-ago
The company's operating revenues of $1,589.0 million rose
approximately 2.9% from the year-earlier level of $1,544.0
million. However this failed to reach our projection of $1,665.0
U.S. Transmission: The segment posted quarterly earnings
before interest and taxes (EBIT) of $266.0 million, reflecting a
downside of 1.8% from the year-ago quarter. This was due to lower
storage and transportation revenues.
Distribution: The segment reported a year-over-year 11.3%
increase in its EBIT to $168.0 million from the prior-year level
of $151.0 million. The increase was mainly attributable to higher
customer usage year over year.
Western Canada Transmission & Processing: The segment
witnessed an EBIT of $111.0 million, down 19.6% from the
year-earlier level. The downside was due to lower contracted
volumes and lower propane sale prices.
Field Services: The segment's EBIT of $88.0 million fell
approximately 5.4% from the year-ago level of $93.0 million. The
underperformance was mainly due to lower natural gas liquid (NGL)
prices and volumes.
Production and Price Realizations
The company produced NGLs of 396 thousand barrels per day
(MBbl/d), down from the year-ago quarter level of 412 MBbl/d.
Price of NGLs averaged 74 cents per gallon (down nearly 26% year
over year), while crude oil averaged at approximately $94.66 per
barrel (down 8% year over year). Natural gas was sold at $3.34
per million British thermal units (MMBtu) versus $2.74 per MMBtu
in the first quarter of 2012.
As of Mar 31, 2013, Spectra Energy had long-term debt of
approximately $12,280 million with a debt-to-capitalization ratio
of 55.6% (versus 52.0% in the preceding quarter).
Spectra Energy is one of North America's premier natural gas
infrastructure plays and has strong business positions in growth
markets. Though we see lingering commodity price concerns in the
near term, the company's core fee-based businesses of storage,
transmission, distribution and Canadian gathering and processing
have the potential to move the needle toward solid earnings and
cash flow growth in the long run.
Spectra plans to invest about $25 billion over the next decade
on fee-based gas infrastructure growth projects. The company
plans to allocate an amount of $25 billion in growth projects
through the end of the decade. Further, momentum will be driven
by the advancing of the master limited partnership (MLP) dropdown
strategy through the recent asset additions. Currently, Spectra
is investing more than $6 billion in expansion projects.
However, we remain concerned about the lower price
realizations and also believe that the heavy
debt-to-capitalization ratio is a competitive disadvantage for
Spectra Energy holds a Zacks Rank #3, which is equivalent to a
Hold rating for a period of one to three months.
However, there are certain companies in the oil and gas
EPL Oil & Gas, Inc.
) that offer value and are worth buying now. These companies
sport a Zacks Rank #1 (Strong Buy).
EPL OIL&GAS INC (EPL): Free Stock Analysis
INTEROIL CORP (IOC): Free Stock Analysis
SPECTRA ENERGY (SE): Free Stock Analysis
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