Spectra Energy Partners, LP (SEP)

SEP 
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Spectra Energy Partners, LP (SEP)

Q1 2013 Earnings Call

May 03, 2013 11:00 am ET

Executives

Derick Smith – Director of Investor and Public Relations

Julie A. Dill – President and Chief Executive Officer

John Patrick Reddy – Chief Financial Officer

Analysts

Becca Followill – U.S. Capital Advisors

Elvira Scotto – RBC Capital Markets

Presentation

Operator

Good morning. My name is Brenda and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectra Energy Partners First Quarter 2013 Energy Earnings Conference call. All lines have been placed on mute to prevent any background noise.

After the speaker’s remarks, there will be a question-and-answer session. (Operator Instruction) Thank you. I would now like to turn the call over to Mr. Derick Smith. Sir, you may begin.

Derick Smith

Thank you, Brenda. Good morning. I'm Derick Smith, Spectra Energy Partners' Director of Investor Relations, and I'm pleased that you could join us for a review of our first quarter 2013 earnings. This morning Julie Dill, our Chief Executive Officer will begin by discussing yesterday’s news on the drop-down of 50% of the Express-Platte system, key business highlight and a brief review of the quarter. Then Pat Reddy, our Chief Financial Officer, will provide a review of our financial position and ongoing financial strategy. Following Pat’s presentation, we will be happy to answer any questions you may have.

Before we begin, let me take a moment to remind you that some of the statements we make today about future or company performance will include forward-looking statements within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements. You should refer to the additional information contained in our Form 10-K and other SEC filings concerning factors that could cause these results to be different than contemplated in today's discussion.

In addition, today's discussion includes certain non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of those measures to most directly comparable GAAP measures is available on our Investor Relations website at spectraenergypartners.com.

With that, I will turn the call over to Julie.

Julie A. Dill

Thank you, Derick and good morning everyone and thank you for joining us today. There is a lot to talk about this morning, beginning with a big welcome to Pat Reddy, who has assumed the role as Spectra Energy Partners’ Chief Financial Officer. Most you already know Pat as the CFO of our general partner, Spectra Energy Corp. I am delighted that Pat agreed to take on the additional position as CFO of Spectra Energy Partners particularly as we move forward with our more visible growth strategy.

And I would like to thank our previous CFO, Laura Buss Sayavedra for her leadership in helping establish our company as a reliable value creator for our investors. I know she will be equally successfully in her new executive role as Spectra Energy’s Vice President of Strategy.

So moving on now, let me speak to our first quarter results in a bit, but first I want to share more information on yesterday’s exciting news concerning Spectra Energy’s drop-down of 50% of the Express-Platte system to Spectra Energy Partners for $823 million. Both the Spectra Energy and Spectra Energy Partners’ Boards have approved the transaction and we anticipate closing early in the third quarter of 2013.

The Express-Platte system is one of just three major pipelines moving crude oil from Western Canada to the Rockies and Midwest refineries and markets. The system is made up of two major pipelines with a combined length of just over 1,700 miles. The Express pipeline with a capacity of 280,000 barrels a day transports Canadian crude to refining customers in the U.S. Rockies, specifically to Billings and Laurel, Montana, and Casper, Wyoming and the Platte pipeline which interconnects with the Express pipeline in Casper transport Bakken Shale and Canadian crude to refineries in Wood River, Illinois,

The capacity on Platte ranges from 164,000 barrels a day in Wyoming to 145,000 barrels a day to Wood River. This drop-down diversifies our portfolio, not only geographically, but also from a business mix as it presents us with a significant opportunity to participate in the rapidly expanding North American crude oil transportation and storage market.

The escalating fee based nature of the Express-Platte crude oil pipelines that makes this system an extremely attractive asset for Spectra Energy Partners, consistent with our current portfolio of assets, Express-Platte has no direct commodity price exposure as the system provides transportation and storage services without taking title to the product shipped.

Now assuming a July 1, 2013 closing date, we expect Spectra Energy Partners’ 50% of Express-Platte will contribute EBITDA of about $36 million, which equates to a full year 2013 EBITDA of about $72 million. The contribution to 2013 cash available for distribution then would be approximately $20 million which is net of financing and transaction costs. This would be in addition to our outlook of $239 million of cash available for distribution this year moving our CAD forecast for the year to $259 million.

Since Spectra Energy's acquisition of Express-Platte, the system's performance and revenue growth had exceeded their expectations. There has been a significant ramp up in volumes flowing on the Express Pipeline, thanks to increasing refinery demand in the Rockies and more Canadian crude moving into the Midwest via the Express and Platte pipelines.

Read the rest of this transcript for free on seekingalpha.com