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Spectra Energy (SE) Earnings Beat, Revenues Miss in Q3

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Premier natural gas company Spectra Energy Corp. (SE - Free Report) reported third-quarter 2016 earnings per share from continuing operations of 31 cents, which beat the Zacks Consensus Estimate of 26 cents. The bottom line also improved from the year-ago quarter earnings of 23 cents per share.

The company’s operating revenues of $1,075 million fell 2.5% from the year-ago level of $1,103 million and also came in below the Zacks Consensus Estimate of $1,140 million.

Operational Analysis

Spectra Energy Partners: The segment posted quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $502.0 million, down 2.9% from the year-ago quarter. The decrease mainly stemmed from the absence of equity earnings from Sand Hills and Southern Hills natural gas liquids (NGL) pipelines, which Spectra Energy Partners owned till Oct 2015. Earnings from these NGL pipeline interests are now reflected in the Field Services segment.

Distribution: The segment reported a year-over-year increase of 10% in EBITDA to $77.0 million from $70.0 million. The upside was mainly driven by incremental earnings from the 2015 Dawn-Parkway expansion project and higher storage margins.

Western Canada Transmission & Processing: The segment witnessed an EBITDA of $109.0 million, down 6.8% from the year-earlier level. The downside is attributable to lower gathering and processing revenues.

Field Services: Spectra Energy reported that the 50% it owns of the Field Services segment generated earnings of $15 million in the third quarter, which compared favorably with a loss of $29 million in the year-ago quarter. Favourable contract realignment efforts, continued cost-saving initiatives and asset growth contributed to the improvement.

Production and Price Realizations

The company produced NGLs of 403 thousand barrels per day (MBbl/d), down from the year-ago quarter level of 421 MBbl/d. Price of NGLs increased 7.1% and averaged 45 cents per gallon, while crude oil costs declined 3.2% and averaged approximately $44.94 per barrel, both on a year-over-year basis. Natural gas was sold at $2.81 per million British thermal units (MMBtu) as against $2.77 per MMBtu in the third quarter of 2015.

SPECTRA ENERGY Price, Consensus and EPS Surprise

 

SPECTRA ENERGY Price, Consensus and EPS Surprise | SPECTRA ENERGY Quote

Balance Sheet

As of Sep 30, 2016, Spectra Energy had long-term debt of approximately $15.2 billion with a debt-to-capitalization ratio of 55.9% compared with 56.5% in the year-ago quarter.

Zacks Rank

Spectra Energy currently holds a Zacks Rank #3 (Hold).

Other favorably placed players from the same sector are Enbridge Energy Partners, LP EEP, Braskem SA BAK and Enviva Partners, LP EVA. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Energy Partners has an impressive earnings surprise history. The partnership posted positive earnings surprise in three of the last four quarters. It reported a positive earnings surprise of 69.23% in the preceding quarter.
 
Braskem SA posted a positive earnings surprise of 105.45% in the year-ago quarter.

Enviva Partners has a mixed earnings surprise history. The partnership posted positive earnings surprises in two of the last four quarters. It reported a positive earnings surprise of 20.51% in the preceding quarter.

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