Spectra Energy Reports Net Income Of $315 Million In Q1 2009

Published: 05-May-2009

By: Staff Writer Staff Writer Staff Writer

Spectra Energy Corp. (Spectra Energy), a diversified energy company, has reported operating revenues of $1.4 billion for the first quarter of 2009, compared with the operating revenues of $1.6 billion in the year-ago quarter. It also reported a net income of $315 million for the first quarter of 2009, compared with the net income of $386 million in the year-ago quarter.

Reported first quarter results include a special item consisting of an $85 million after-tax gain at the field services business segment.

“We had a good quarter in a challenging environment and are pleased about where we are today,” said Greg Ebel, president and chief executive officer, Spectra Energy.

“Despite weaker than expected commodity prices and the Canadian exchange rate, there is good reason for optimism. Our core, fee-based businesses – which we expect will provide us with more than 80% of our earnings this year – all performed very well during the quarter. We put into service expansion projects in the US and Canada, and made an attractive pipeline acquisition through our MLP,” continued Ebel.

Segment Results:

US Transmission:

US transmission reported first quarter 2009 earnings before interest and taxes (EBIT) of $217 million, compared with $226 million in first quarter 2008. The segment benefited this quarter from business expansion projects placed into service last year.

This was more than offset by lower gas processing revenues as a result of lower prices and volumes.

Distribution:

Distribution reported first quarter 2009 EBIT of $152 million, compared with $165 million in first quarter 2008. Excluding the $36 million effect of the decline in the value of the Canadian dollar, earnings were $23 million higher, primarily as a result of higher storage and transportation revenues.

Western Canada Transmission & Processing:

Western Canada transmission & processing reported first quarter 2009 EBIT of $81 million, compared with $129 million during first quarter 2008. Excluding the effect of the weaker Canadian dollar, earnings were $29 million lower than in 2008. Improved results in the base gathering and processing business were more than offset by lower empress earnings, primarily as a result of lower natural gas liquids (NGL) prices.

Field Services

Field Services reported first quarter 2009 EBIT of $150 million, which includes a $135 million pre-tax recognition of a deferred gain associated with units previously issued by DCP Midstream’s master limited partnership. Excluding this special item, the segment reported ongoing EBIT of $15 million, compared with $192 million in first quarter 2008. The decrease in earnings was primarily driven by lower NGL prices, which have a close relationship to lower crude oil prices. Crude oil averaged $43 per barrel during first quarter 2009 versus $98 per barrel during the same period in 2008. The NGL to crude oil relationship averaged 56% during first quarter 2009 versus 58% during the same period in 2008.

Other

Other reported net costs of $24 million in first quarter 2009, compared with net costs of $20 million in first quarter 2008.

Interest Expense:

Interest expense was $150 million for first quarter 2009, compared with $158 million for first quarter 2008.

Income Taxes:

First quarter 2009 income tax expense from continuing operations was $139 million, compared with $172 million reported in first quarter 2008. The decrease was primarily a result of lower earnings in the 2009 quarter. The effective tax rate was 31% in both first quarter 2009 and first quarter 2008.

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