Spectra Energy CEO Discusses Q3 2010 Results – Earnings Call Transcript
Spectra Energy Corp (
)
Q3 2010 Earnings Call Transcript
November 3, 2010 10:00 am ET
Executives
John Arensdorf – Chief Communications Officer
Greg Ebel – President and CEO
Pat Reddy – CFO
Tom O’Connor – Chairman, President and CEO, DCP Midstream
Analysts
Ted Durbin – Goldman Sachs
Faisel Khan – Citigroup
Matthew Akman – Macquarie
Elvira Scotto – Credit Suisse
Monroe Helm – Barrow, Hanley
Presentation
Operator
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Spectra Energy Corp. Q2 2010 Earnings Call Transcript
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Spectra Energy Q3 2009 Earnings Call Transcript
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Spectra Energy Corp Q2 2009 Earnings Call Transcript
Good morning. My name is Taprika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectra Energy third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.
I would now like to turn the call over to your host, Mr. John Arensdorf. Sir, you may begin, sir.
John Arensdorf
Thanks, Taprika, and good morning, everyone. Welcome to Spectra Energy’s third quarter 2010 earnings review. We are very glad that you joined us this morning.
Leading our discussion today will be Greg Ebel, our President and Chief Executive Officer; and Pat Reddy, our Chief Financial Officer. Both Greg and Pat will discuss our quarterly results, the progress we’ve achieved year-to-date, as well as strategic growth opportunities we see on the horizon. And of course, we’ll leave plenty of time for your questions.
Before we begin, let me take a moment to remind you that some of the things we will discuss today concern future company performance and 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 Spectra Energy’s Form 10-K and in our other SEC filings concerning factors that could cause these results to be different than those contemplated in today’s discussion.
In addition, today’s discussion includes certain non-GAAP financial measures as defined by SEC Reg G. A reconciliation of those measures to the most directly comparable GAAP measures is available on our Investor Relations Web site at spectraenergy.com.
With that, let me turn the call over to Greg.
Greg Ebel
Thanks very much, John, and good morning, everyone. As you’ve seen from our earnings release this morning, Spectra Energy delivered ongoing third quarter results of $201 million or $0.31 per share.
We are pleased with the performance for the quarter and feeling confident as we close in on year end. As you know the fourth quarter is typically strong for us and I would expect no less this year. If we experience normal weather during the fourth quarter and commodity prices remain consistent with where they are to-date, we expect to exceed our 20% earnings growth expectations for the year and our 2010 $1.42 in ongoing per share target.
We’ve been busy executing on the growth plan and there are a number of key drivers for the third quarter. First, our core fee based businesses, U.S. Transmission and Storage, Distribution and Western Canada performed well, up about 3.5% from last year. You’ll hear the details from Pat shortly, but the businesses are experiencing steady profitable growth from expansion projects.
As we’ve mentioned to you many times before, the vast majority of our 2010 EBIT will come from these fee based businesses. Second, our Field Services segment experienced significantly improved earnings, thanks primarily to commodity prices being more favorable than what we saw in the third quarter of 2009.
A note on the commodities, well NGL prices have been very much in line or plan. Natural gas prices are considerably lower than our assumptions for 2010. We’re watching natural gas price movement closely as we finalize our 2011 plan.
Third, we’ve maintained our steady focus on executing an attractive growth plan during the quarter through strategic acquisition, project expansions at our fee based business, as well as growing the footprint at DCP Midstream. Together they affirm the earnings and cash generation potential of our businesses.
We’ll walk through some of the projects that drive our growth beginning with those already in service. This year we’ve placed five projects with $900 million of investment in full or partial service. These projects will realize $200 million in annual EBIT in 2011, generating returns well above our targeted range. So let’s look at a few of these.
The Algonquin East-to-West project uses existing infrastructure on the Algonquin system to offer shippers the opportunity to reach growing Northeast markets by moving new sources of supply into existing delivery points throughout the region. A unique aspect of this project is the fact that it moves gas from east to west opposite the traditional flow pattern.
This capacity supports the delivery of LNG from facilities recently added to the Eastern portion of our system. We broke ground this spring on TEMAX TIME III and just days ago brought into service the first phase of this $700 million expansion. The second phase is scheduled to come into service in the last half of 2011.
The project will allow shippers to receive new natural gas supplies from western basins at various points along Texas Eastern through enhancement of the existing mainline as well as incremental expansion.
In Western Canada, we’re making great progress on our multiphase Fort Nelson expansion project, which is increasing capacity in Fort Nelson BC to accommodate Horn River gas.
We recently brought back into service almost 0.5 billion cubic feet a day of previously laid up capacity at our Fort Nelson plant. Other facets of this project include looping of area, gathering pipelines, the installation of new compression, and the construction of a new processing facility.
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