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What are Spectra Energy’s long-term plans?



Spectra Energy’s growth capex

In its business outlook, Spectra Energy has disclosed its long-term growth plans. Between 2013 and 2020, Spectra Energy plans to invest in growth projects worth $35 billion. As of 3Q14, $16 billion of this has been put under development or is already in service.

Spectra Energy’s spending plan includes ~$2 billion average annual growth capex through 2016. Spectra Energy Partners’ (SEP) share of this capital spending plan is 70%, 60%, and 45% in 2014 through 2016, respectively.

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Crude oil to feature prominently in Spectra Energy’s portfolio

Apart from its natural gas growth projects, which we have described in the previous part of this series, we’ll discuss the company’s crude oil and NGL (or natural gas liquids) projects in this article.

In 2013, Spectra Energy derived $130 million EBITDA from its liquids projects, primarily from the Express-Platte pipeline system. By 2016, the company expects to earn $305 million EBITDA from this project, along with its Southern Hill-Sand Hill project.

Express-Platte expansion is a crude oil project that the company expects to complete by 2015. Southern Hill-Sand Hill is an NGL pipeline project in the US Gulf Coast, which will be completed by 2015.

Spectra Energy’s NGL projects

Spectra Energy’s other major natural gas liquids (or NGLs) projects are in its Field Services segment, which DCP Midstream (DPM) executes. Spectra Energy Corp. (SE) has 50% ownership interest in DCP Midstream. DPM plans to increase NGL production to 525 thousand barrels per day in 2016 from ~500 thousand barrels per day in 2014.

The company also plans to increase its NGL pipeline length to 3,000 miles. Targa Resources (NGLS) and Plains All American (PAA) are two energy master limited partnerships (or MLPs) that produce and transport NGLs in the US. These companies are components of the Alerian MLP ETF (AMLP).

EBITDA to increase

Spectra Energy expects that execution of the natural gas and liquids projects will result in higher EBITDA.

By 2016, Spectra Energy expects to increase EBITDA to ~$3.5 billion, up 13% from the 2013 level. The company expects that each of its four segments will contribute to the higher EBITDA.

However, investors need to be careful about Spectra Energy’s growth concerns before mulling investments. Read the following article to learn about the issues that may affect the company negatively.


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