Natural gas company
Spectra Energy Corp.
) reported second-quarter 2014 earnings per share from continuing
operations of 22 cents, lagging the Zacks Consensus Estimate of 30
cents. Moreover, the results were down 26.7% from 30 cents in the
year-ago quarter. The downside came from all Distribution and
Western Canada Transmission & Processing segments.
The company's operating revenues of $1,253.0 million rose 2.7% from
the year-earlier level of $1,220.0 million but came short of the
Zacks Consensus Estimate of $1,313 million.
On Nov 1, 2013, Spectra Energy completed its dropdown of the
remainder of its U.S. Storage and Transmission assets to MLP
Spectra Energy Partners, LP. The transaction transformed Spectra
Energy Partners into one of the major fee-based MLPs in North
America, with an enterprise value of almost $20 billion.
Spectra Energy Partners:
The segment posted quarterly earnings before interest, taxes,
depreciation and amortization (EBITDA) of $374.0 million,
reflecting an increase of 4.5% from the year-ago quarter. The rise
was attributable to dropdown of Express-Platte, the performance of
which exceeded expectations and increased earnings from pipeline
expansions, mainly the New Jersey to New York project commissioned
on Nov 1, 2013. Moreover, higher natural gas transportation
revenues stemming from a record demand in the winter aided the
The segment reported a 2.6% decrease in EBITDA to $112.0 million
from $115.0 million in the year-ago quarter. The decline was mainly
due to weaker Canadian dollar, higher operating fuel costs and
earnings sharing under the incentive rate framework
Western Canada Transmission & Processing:
The segment witnessed EBITDA of $111.0 million, down 29.3% from the
year-earlier level. The downside came from the weaker Canadian
The segment's EBITDA of $54.0 million rose 17.4% from the year-ago
level of $46.0 million. The improvement came primarily on the back
of higher volumes from new processing plants, higher commodity
prices and positive results from gas and natural gas liquid (NGL)
marketing during the quarter. These factors were partly offset by
increase in interest expense, depreciation expense and operating
Production and Price Realizations
The company produced NGL of 452 thousand barrels per day (MBbl/d),
up from the year-ago quarter level of 412 MBbl/d. Price of NGLs
averaged $0.93 per gallon (up 13.4% year over year), while crude
oil averaged approximately $102.99 per barrel (up 9.3% year over
year). Natural gas was sold at $4.67 per million British thermal
units (MMBtu) versus $4.09 per MMBtu in the second quarter of 2013.
As of Jun 30, 2014, Spectra Energy had long-term debt of
approximately $14.4 billion with a debt-to-capitalization ratio of
57% (compared with 58% in the preceding quarter).
Spectra Energy is one of North America's major natural gas
infrastructure players and has a strong business position in growth
markets. The company plans to invest about $25 billion over the
next decade in fee-based gas infrastructure growth projects. It
also intends to allocate $25 billion in growth projects through the
end of the decade.
At present, Spectra Energy carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the oil and gas sector include Weatherford
International plc (
), CNOOC Ltd (
) and Natural Gas Services Group Inc. (
). All of these sport a Zacks Rank #1 (Strong Buy) and would offer
above-average returns to investors.
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