Spectra Energy Partners (SEP) Posts Light Q4 Results

Spectra Energy Partners (NYSE: SEP) reported Q4 EPS of $0.47, $0.19 worse than the analyst estimate of $0.66. Revenue for the quarter came in at $599.0 million versus the consensus estimate of $608.72 million.

EXPANSION PROJECT UPDATES

The company placed $800 million of capital into service during the year, including the Kingsport Expansion Project in the fourth quarter 2014. Spectra Energy secured $3.5 billion of new growth projects in 2014 supported by firm, fee-based contracts. Since 2013, Spectra Energy has placed approximately $7 billion into service and currently has an additional $9.5 billion into execution. These advancements mark significant progress towards the company's goal of securing $35 billion in growth opportunities by the end of the decade.

The company also exceeded its earnings and coverage targets for the year. Spectra Energy generated a significant amount of cash in 2014, surpassing the company's distributable cash flow expectation for the year by nearly 19 percent. And while the company anticipated cash flow coverage of the dividend during the year of 1.4x, those expectations were surpassed with actual coverage of 1.6x. Further, Spectra Energy continued to deliver value to investors and increased its annual dividend by 14 cents per share effective in the fourth quarter.

On the growth front, the company is advancing its projects in execution. The Sabal Trail pipeline into Florida submitted the project's Federal Energy Regulatory Commission (FERC) application in November and is on track to meet its planned in-service date of 2017. The Algonquin Incremental Market project, or AIM, is 100 percent subscribed by the major local distribution companies (LDCs) in New England. The project received its final environmental impact statement (FEIS) from FERC and expects to receive its FERC certificate in the first quarter of 2015.

The NEXUS pipeline, which will bring supply diversity to the U.S. Midwest and Eastern Canada by delivering Utica and Marcellus gas, received its pre-file authorization from FERC in January 2015. With an in-service date of 2017, the 1.5 Bcf per day project provides Spectra Energy with an investment opportunity in the $700 million to $1 billion range.

The Ohio Pipeline Energy Network (OPEN) project and the Uniontown to Gas City project both received their FERC certificates in December 2014. The OPEN project and the Uniontown to Gas City project have scheduled in-service dates in the fourth quarter of 2015.

Spectra Energy acquired the Brazoria Interconnector Gas (BIG) Pipeline last month and is expected to close in second quarter 2016, pending final investment decision of the Freeport Liquefied Natural Gas (LNG) facility. The acquisition is a component of the Stratton Ridge project, a Texas Eastern expansion to deliver supplies to Gulf Coast LNG markets. The $200 million capital expansion project, which includes the BIG Pipeline acquisition cost, is scheduled to be in service in 2019.

The Texas Eastern South Texas Expansion Project (STEP) is designed to provide an efficient means to transport Louisiana natural gas supplies to high-demand markets in South Texas, and is advancing. The targeted in-service date for STEP is early 2017. Additionally, Access South and Adair Southwest, two projects that advance bi-directional capabilities on Texas Eastern are moving forward. The PennEast Pipeline, the Pennsylvania to New Jersey project that Spectra Energy Partners joined during the quarter, is progressing.

Further, the Atlantic Bridge project, an expansion of the company's Algonquin and Maritimes & Northeast systems, is moving forward and submitted its pre-file application with FERC in late January, 2015. A new project in execution, the Loudon Expansion, is a 10-mile, 12-inch loop of the existing Loudon Lateral to move incremental supplies of natural gas on the East Tennessee system. The project is advancing with an in-service target of third quarter 2016.

At Union Gas, the 2015 Dawn-Parkway project is headed towards in-service in fourth quarter 2015. In addition, the 2016 Dawn-Parkway project filed its facilities application with the Ontario Energy Board in September and expects a decision in the first half of 2015, with an expected in-service date of late 2016. In development is the 2017 Dawn-Parkway project. The company held an open season for incremental capacity on its Dawn-Parkway system for 2017 and 2018 and is in the process of evaluating the bids for both years.

In Western Canada, two new projects on Spectra Energy's BC Pipeline are moving into execution and are advancing. The Reliability and Maintainability (RAM) Project is a demand-pull project serving the company's existing customers. This $300 million capital expansion project is expected to be in-service in 2017. Additionally, Jackfish Lake is a supply-push project and is contracted by various producers. This $200 million capital expansion project will be in-service in the 2016-2017 timeframe.

Beyond the above listed projects in execution, Spectra Energy also is advancing several other development projects. Access Northeast will provide improved electric reliability in New England by directly supplying approximately 70 percent of the region's most efficient gas-fired power generation. The project will expand the Algonquin and Maritimes & Northeast transmission systems by using existing pipeline footprints. Spectra Energy is partnering with Northeast Utilities and also has a strategic alliance with Iroquois Gas Transmission to advance this $3 billion pipeline development.

Also in development is the Texas Eastern Appalachian Lease Project, which will provide pipeline transportation capacity to deliver incremental production from the Appalachian Basin to gas distribution and end-use markets in the U.S. Midwest and Canada via a lease of the capacity to NEXUS. The target in-service date for the approximately $180 million project is November 1, 2017.

In its liquids business, the company is continuing to work on further enhancements to its Express and Platte pipelines. On Express, Spectra Energy is pursuing the construction of on-system storage to allow for additional contracted capacity. An open season on the Express pipeline enhancement, for service commencing in 2016, is currently under way. Separately, the new pipeline from Wyoming to Illinois, which was announced in October, is being re-scoped to reflect market dynamics and will likely be incorporated into a larger long-term project to twin the Express and Platte systems later in the decade.

Spectra Energy is also continuing development work on the Inland California Express oil transportation project with Questar Corporation, which includes a new rail terminal in Southern California and reactivation of an existing pipeline into the Los Angeles/Long Beach refining complex. The company has selected a site for the terminal and will complete preliminary engineering and submit permits in the next few months. The project has a targeted in-service date of 2017.

Finally, during the quarter, the second phase of the drop-down of assets from Spectra Energy to Spectra Energy Partners was completed, which involved dropping 24.95 percent of the Southeast Supply Header (SESH) into the company. This drop-down moved the asset from "Other" into Spectra Energy Partners.

For earnings history and earnings-related data on Spectra Energy Partners (SEP) click here.

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