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Spectra Energy's (SE) Q3 Earnings in Line, Revenues Miss

Premier natural gas company Spectra Energy Corp.SE reported third-quarter 2015 earnings per share from continuing operations of 23 cents, in line with the Zacks Consensus Estimate. The bottom line, however, deteriorated from the year-ago quarter earnings of 31 cents.

The company's operating revenues of $1,103.0 million fell 8.6% from the year-ago level of $1,207.0 million. The top line also came in below the Zacks Consensus Estimate of $1,284.0 million.

Operational Analysis

Spectra Energy Partners : The segment posted quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $488.0 million, up 15.6% from the year-ago quarter. The rise in EBITDA is attributable to higher earnings from expansions completed earlier as well as during the third quarter. The expansion projects include TEAM 2014, TEAM South, and Uniontown to Gas City and OPEN.

Also, increased earnings from the company's natural gas transmission business supported the upside. The company's Express pipeline witnessed higher revenue growth on the back of increased volumes and tariff rates, which in turn, added to the segmental performance.

Distribution : The segment witnessed a year-over-year decrease of 14.6% in EBITDA to $70.0 million from $82.0 million. The decline mainly stemmed from a weaker Canadian dollar.

Western Canada Transmission & Processing : The segment reported EBITDA of $117.0 million, down 25% from the year-earlier level. Lower earnings at Empress pipeline and a weaker Canadian dollar led to the underperformance.

Field Services : Spectra Energy reported that the 50% it owns of the Field Services segment incurred a loss of $29 million in the third quarter, narrower than a loss of $63 million in the year-ago quarter. The decrease in equity earnings was mainly due to lower commodity prices and lesser gains on DCP Midstream Partners (DPM) unit issuances.

Production and Price Realizations

The company produced natural gas liquidss of 421 thousand barrels per day (MBbl/d), down from the year-ago quarter level of 471 MBbl/d. Price of NGLs averaged 42 cents per gallon (down 53.3% year over year), while crude oil averaged approximately $46.43 per barrel (down 52.3%). Natural gas was sold at $2.77 per million British thermal units (MMBtu) as against $4.06 per MMBtu in the third quarter of 2014.

Balance Sheet

As of Sep 30, 2015, Spectra Energy had long-term debt of approximately $12.3 billion with a debt-to-capitalization ratio of 56.5% (compared with 55.9% in the preceding quarter).

Zacks Rank

Spectra Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are Natural Gas Services Group Inc. NGS , Midcoast Energy Partners, L.P. MEP and Seadrill Partners L.P SDLP . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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SPECTRA ENERGY (SE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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