Spectra Energy Benefits from Strong NGL Market in Third-Quarter 2013, Sees Opportunities in Gulf, Canada

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading North American pipeline and midstream company Spectra Energy Corporation (NYSE:SE) (Houston, Texas) reported solid gains in the third quarter of 2013, as higher prices, lower production costs and newly acquired businesses, including those in the Liquids segment, more than offset weaknesses in storage revenues. Net income was reported to be $263 million, a 46.93% increase from third-quarter 2012.

Total operating revenues stood at $1.14 billion, a 6.72% increase from the same period last year. The greatest boost came from the Field Services segment, which benefited from stronger commodity prices, lower operating costs, and higher volumes from new processing plants beginning service. These plants are owned by DCP Midstream Partners LP (NYSE:DPM) (Denver, Colorado), a 50:50 joint venture between Spectra and Phillips 66 (NYSE:PSX) (Houston, Texas).

Spectra also benefited from higher propane prices and lower production costs at the Empress Natural Gas Liquids (NGL) business, a part of the Western Canada Transmission and Processing segment. The Distribution segment; however, reported weaker earnings due to lower storage revenues.

During the quarter, Spectra completed the drop-down of its U.S. Storage and Transmission assets into Spectra Energy Partners (NYSE:SEP), which is now one of the largest fee-based master limited partnerships in the U.S. Spectra Energy Partners was formed by Spectra to own and operate natural gas and crude oil transportation and storage assets. Spectra also brought the expansion of its $1.2 billion New Jersey-New York pipeline into service, boosting natural gas supply to the U.S. Northeast region.

Capital and investment expenditures totaled $1.7 billion for the quarter, compared with $1.42 billion in third-quarter 2012. Much of the gain comes from $218 million in expenditures for the new Liquids segment, which was created in March 2013 following the acquisition of the Express-Platte Pipeline System and equity investments in the Sand Hills and Southern Hills pipelines.

Industrial Info is tracking more than $5.7 billion in active projects involving Spectra, including $200 million in additions at a helium and NGL production plant owned by DCP Midstream in Liberal, Kansas. The project constructing a new unit and installing equipment with an inlet capacity of 650 million standard cubic feet per day of NGL, with approximately 150,000 standard cubic feet per day of helium, at the existing 680 million-standard-cubic-feet-per-day plant.

"Express-Platte's operating results continue to exceed our expectations, due to highly favorable market dynamics in the North American crude oil sector, and the competitive positioning of our assets," said Pat Reddy, the chief financial officer of Spectra, in a conference call.

Spectra executives said that the company expects to see $25 billion in growth projects by the end of the decade, half of which already have been secured or put into service. Among the most important plans is a $150 million expansion project of the Texas Eastern pipeline system in the U.S. Gulf Coast region, which is being designed to supply natural gas to the booming manufacturing and LNG export industries on the Texas and Louisiana coasts. Spectra already has secured 650 million cubic feet per day of new, long-term contracts.

"We're pleased that during the quarter, the Ontario Energy Board approved an incentive regulation framework, which will be effective January 1, 2014," Reddy said. "The agreement will significantly reduce regulatory uncertainty over the five-year period. It will also provide a mechanism to adjust rates for significant capital projects, allowing us to continue to invest in natural gas infrastructure in Ontario in an economically attractive manner."

For more information on the growing industry, visit Industrial Info's North American Oil and Gas Transmission Project Database.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.