Spectra Energy Corp

Companies in the midstream sector that are included in the XLE portfolio include Kinder Morgan, Oneok, the Williams Company, and Spectra Energy.

Spectra Energy Corp. (SE), headquartered in Houston, Texas, owns and operates a large and diversified portfolio of natural gas–related assets in North America.

The Global X MLP & Infrastructure ETF (MLPX) tracks the Solactive MLP & Energy Infrastructure Index. The index consists of midstream energy infrastructure MLPs and corporations.

In 2015, Kinder Morgan (KMI) has put in place a strong project pipeline that can increase capex by 21% to ~$4.4 billion.

Spectra Energy’s distributable cash flow for 3Q15 was $223 million, compared with $236 million in 3Q14.

The total debt for Williams Companies (WMB) and Energy Transfer Equity (ETE) grew by 87% and 32%, respectively, on a YoY (year-over-year) basis in fiscal 3Q15.

Kinder Morgan (KMI) beat analysts’ 1Q15 earnings per share estimate, but Wall Street lowered its 2Q15 estimate to $0.191 compared to $0.216 in 1Q15. That’s a decrease of 11.6%.

In 4Q14, Sunoco’s adjusted revenues fell short of estimates by ~19%.

Enterprise Products Partners (EPD) is the largest company by market capitalization and enterprise value, or EV, among its closest peers. By market cap, Williams Companies (WMB) follows next.

PAA’s Transportation segment contributed ~57% to its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in 2Q16.

Midstream’s earnings recovery in year-to-date 2014 was aided by higher natural gas liquids (NGL) prices.

In this article, we’ll look at what Wall Street analysts recommend for DCP Midstream Partners (DPM).

On February 8, Spectra Energy’s 20-day moving average crossed above its 100-day moving average, reflecting a strong rising trend in the stock.

Spectra Energy’s Western Canada segment saw volume increase ~20% in 2014 over the previous year. In 4Q14, volume increased 14% over 3Q14.

Plains All American’s Transportation segment contributed ~45% of the total adjusted EBITDA in 4Q15, which was low due to the lower average price per barrel.

Shell Midstream Partners declared a quarterly distribution of $0.22 per limited partner unit for 4Q15—an increase of 7.3% over last quarter’s distribution.

WMB’s valuation has picked up since the merger termination with Energy Transfer Equity (ETE) and a few key announcements in recent months.

WMB’s LTM debt to EBITDA is one of the highest in the group because it has the lowest EBITDA. It also has one of the highest debt levels. This is a concern for investors.

Of the analysts covering DCP Midstream, 67% rate it as a “hold,” 22% rate it as a “buy,” and the remaining 11% rate it as a “sell.”

What should fixed income investors do today? Generally, widening spreads provide a buying opportunity for investors, because spreads widen when yield of a security rises.

Williams Companies Inc. (WMB) engages in the energy transport and processing infrastructure business. WMB’s assets are mainly located in the U.S. However, it has operations in Canada.

From 4Q13 to 4Q14, EBITDA jumped for Spectra Energy Partners and the Western Canada Transmission & Processing segments. But, Field Services recorded a loss.

On January 27, 2017, Midcoast Energy Partners (MEP) announced an agreement with Enbridge Energy (EECI), an indirect wholly-owned subsidiary of Enbridge (ENB).

In this section, we’ll look into the company’s assets in the distribution and western Canada transmission & processing segments.

Of the analysts surveyed by Bloomberg, 39% rate Spectra Energy (SE) as a “buy,” and 55.5% rate the stock as a “hold.” Only 5.5% rate it as a “sell.”

Columbia Pipeline Group has reaffirmed its 2015 targets in its 2Q15 and 3Q15 earnings releases—its only earnings releases since separating from NiSource.

Williams Companies has the highest consensus forward EV-to-EBITDA multiple of 13.0x among its peers.

The API crude oil inventory rose for the fourth consecutive week. The rising crude oil inventory will continue to put pressure on crude oil prices.

The NGL Pipelines & Services segment’s revenues fell 4.8% to $4.02 billion in 3Q14—from $4.23 billion recorded last year. However, operating profit increased 11.3% to $711.5 million.

Of the analysts that cover DCP Midstream, 71.0% rate it as a “hold,” 12.0% rate it as a “buy,” and the remaining 18.0% rate it as a “sell.”

The EIA reported that Cushing crude oil stocks rose by 523,000 barrels to 64.7 MMbbls for the week ending February 5, 2016—the highest number since April 2004.

Williams Companies (WMB) has $30 billion in total committed and potential capital investments in Williams Partners (or WPZ) and Access Midstream Partners (or ACMP).

Kinder Morgan (KMI), a Houston-based energy company, is one of the largest midstream operators and energy infrastructure companies in the United States.

In 1Q15, Kinder Morgan’s 1Q15 revenues decreased 11% to $3.59 billion, from $4.04 billion in 1Q14.

Spectra Energy’s earnings increased due to expansion projects and higher crude oil transportation revenues.

Midstream companies are trading well below their 20-day moving averages except for Kinder Morgan and Spectra Energy Partners.

Higher debt-to-equity ratios indicate increased risk associated with the management of debt levels. Spectra Energy has a higher ratio than others.

The Midstream segment has been PSX’s most consistent performer since 2013. From 4Q13 to 4Q14, weighted average NGL prices decreased ~31%.

On May 7, Spectra Energy reported its quarterly earnings. Revenue for the quarter was $1.84 billion, beating the consensus estimate of $1.82 billion.

Kinder Morgan Inc. (KMI) was formed in 1997 when current CEO Richard Kinder, and former vice chairman William Morgan acquired the general partner of a small limited partnership—Enron Liquids Pipeline L.P.

Between 2013 and 2020, Spectra Energy plans to invest in growth projects worth $35 billion.

Integrated utility holding company Eversource Energy (ES) is planning to sell 1,200 megawatts of its generation business in the next two years.

Spectra Energy (SE) has risen 27% since the start of 2016. Will this improvement last?

Kinder Morgan (KMI) released its financial information for 4Q14 and full-year 2014 on January 21, 2015.

Of the analysts surveyed by Bloomberg, 46.7% rate Spectra Energy (SE) as a “buy” and 46.7% rate the stock a “hold.” Only 6.6% rate it a “sell.”

Williams Companies (WMB) released its 3Q14 earnings on October 29, 2014. Between 3Q12 and 3Q14, WMB’s adjusted earnings per share (or EPS) decreased ~40%.

Recently, Dominion (D) completed the initial public offering (or IPO) of its master limited partnership (or MLP). It offered 17.5 million MLP shares at $21 per stock.

Spectra Energy Corp. (SE) was borne out of Duke Energy Corporation (DUK), which is an energy utility firm, forming Spectra Energy Partners (SEP) in 2007.

Takeaway capacity in Appalachia As we’ve learned so far in this series, rising natural gas production in the Appalachian region has created the need for new midstream infrastructure, including natural gas processing plants (see the previous article) and pipelines. Several new pipeline projects are being developed to increase takeaway capacities from the Marcellus and Utica supply […]

DCP Midstream’s EV-to-adjusted EBITDA ratio using a trailing 12-month adjusted EBITDA is 13.0x.

Williams Companies (WMB) has underperformed the sector index, the Alerian MLP Index, over the past three years in terms of total returns.

Enbridge Energy Partners (EEP) expects 2017 adjusted EBITDA to be lower than its 2016 estimated adjusted EBITDA.

Oneok (OKE), the midstream C corporation GP (general partner) of Oneok Partners (OKS), was downgraded by Jefferies from “hold” to “underperform.”

DCP Midstream Partners (DPM) is expected to keep its distributions flat for all of 2017, even after the simplification transaction.

DCP Midstream Partners (DPM) and DCP Midstream LLC announced a simplification of their organizational structures. The combined partnership would have an enterprise value of ~$11 billion.

Energy Transfer Partners (ETP) has agreed to merge into Sunoco Logistics Partners (SXL) in an all-stock deal.

On September 6, 2016, Enbridge (ENB) and Spectra Energy (SE) announced a stock-for-stock merger agreement, which values Spectra Energy common stock at $28 billion.

Enbridge’s (ENB) acquisition of Spectra Energy (SE) offers diversification benefits to Enbridge by expanding into SE’s natural gas business.

Spectra Energy’s (SE) Texas Eastern Transmission system connects Texas and the Gulf Coast with markets in the northeastern United States.

Spectra Energy’s debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of 6.8x ratio remained stable in 2Q16 compared to 1Q16.

DCP Midstream Partners (DPM) has risen 40.6% YTD (year-to-date) despite touching a multiyear low in the beginning of 2016.

ONEOK (OKE) and ONEOK Partners (OKS) are scheduled to report their 2Q16 results on August 2. Here’s what you need to know.

SEP’s 4Q15 EBITDA growth mainly came from expansion projects in its natural gas transmission business. These projects should continue to contribute to the segment’s EBITDA in 1Q16.

ONEOK (OKE) and ONEOK Partners (OKS) are scheduled to report their 1Q16 results on May 3, 2016.

In 2015, non-utility operations contributed nearly 40% to DTE Energy’s (DTE) operating revenues. This is expected to increase due to DTE’s aggressive focus on its midstream segment.

Kinder Morgan (KMI) is the largest company in the peer group by enterprise value (or EV).

Compared to crude oil, natural gas prices seem to have a lesser impact on the selected midstream stock prices, even though many of them have significant natural gas operations.

Last week’s API report showed that the US crude oil inventory had risen by 7.1 MMbbls (million barrels) for the week ending February 19, 2016.

On February 24, 2016, the EIA (U.S. Energy Information Administration) reported that the US distillate inventory fell by 1.7 MMbbls (million barrels) to 160.7 MMbbls for the week ending February 19, 2016.

The EIA reported that the US crude oil inventory rose by 3.5 MMbbls (million barrels) to 507.6 MMbbls for the week ending February 19, 2016.

Of analysts surveyed by Bloomberg, 40% rated ONEOK (OKE) a “buy,” 47% rated it a “hold,” and 13% rated it a “sell.” The consensus target price for ONEOK in one year is $28.10.

ONEOK Partners’ (OKS) EBITDA growth in 4Q15 was driven by increased NGL (natural gas liquids) gathering and fractionating volumes from recently connected natural gas processing plants.

On February 9, 2016, the API published its weekly crude oil inventory report. API crude oil inventory rose for the fourth straight week.

Non-OPEC unplanned supply disruptions are expected to average around 0.4 MMbpd in January 2016. They averaged almost 0.4 MMbpd in 2015.

US investments in mining and exploration fell by 35% in 2015. Barclays estimates that investments will fall by 15% in 2016. It fell by 23% in 2015.

On January 5, 2016, Spectra Energy increased its quarterly dividends from $0.37 per share to $0.41 per share—a quarter-over-quarter rise of 9.5%.

The midstream Kinder Morgan trades 39% below its 100-day moving average. During the last rate hike in December 2015, KMI traded in the range of $15 to $16.

As of January 26, midstream giants Kinder Morgan and Williams Companies were trading 36.2% and 40.1%, respectively, below their 100-day moving averages.

About 46% of the analysts surveyed have rated Plains All American a “buy,” while 50% have rated it a “hold,” and 4% have rated it a “sell.”

About 70% of the analysts surveyed have rated MPLX a “buy,” while 30% have rated it a “hold.” None of the analysts have rated it a “sell.”

Spectra Energy Partners’ debt-to-equity ratio has remained below 1 over the last two years. A ratio of below 1 is considered pretty conservative for MLPs.

Spectra Energy Partners manages its business through its US Transmission and Liquids segments. Its US Transmission segment contributes nearly 85% of EBITDA.

Spectra Energy Partners’ distributable cash-flows for the nine months ended September 30, 2015, are $945 million.

Despite an expected dividend growth close to the peer average, ONEOK has a higher forward yield compared to the average for its peers.

Despite a decrease in the last two quarters, ONEOK’s (OKE) debt-to-equity ratio is still 2.2x. It had a total outstanding debt of $8.7 billion at the end of 3Q15.

ONEOK’s cash flow available for dividends for the nine months ended September 30, 2015, is $474.7 million. So it’s on track to meet its guidance for cash flow available for dividends.

One factor impacting Spectra Energy’s stock price is the value of the Canadian dollar. Nearly 60% of SE’s 2014 revenues came from its Canadian operations.

Spectra Energy (SE) is trading at a high yield compared to its historical average. However, the stock is trading at a low yield compared to its peers.

Spectra Energy (SE) currently trades at a forward dividend yield of 5.6%. This is high compared to its three-year average dividend yield of 4.3%.

SE carries out operations through four segments: Spectra Energy Partners, Distribution, Western Canada Transmission & Processing, and Field Services.

Spectra Energy has generally been trading below its 50-day moving average since mid-2014, when energy prices began falling.

Spectra Energy’s performance in 2015 up to the third quarter is in-line with the guidance for the year provided in the company’s February analyst meeting.

Wall Street analysts’ 3Q15 consensus EPS estimate for Kinder Morgan (KMI) is ~$0.186, similar to the ~$0.188 they estimated in the previous quarter.

Kinder Morgan’s 2Q15 revenue estimate was ~$4.0 billion while the 3Q15 estimate is ~$3.8 billion, a decrease of ~4.8%.

According to Wall Street analysts’ estimates, Kinder Morgan’s dividend is expected to grow 3.7% quarter-over-quarter in 3Q15 and ~15% year-over-year.

Spectra Energy Partners (SEP) was the best performer among midstream MLPs at the end of trading on Wednesday, August 5. It rose 1.54%.

According to data from the U.S. Energy Information Administration, US crude production dropped to 9.4 million barrels per day in the week ended July 24.

The storage and transportation subsector within XLE rose by 0.66% during the week. Spectra Energy (SE) and Kinder Morgan (KMI) were the best and worst performers, respectively, in this subsector.

Kinder Morgan expects higher oil and gas prices in 2015. Its crude oil and natural gas estimates are 27% and 47% higher than current prices, respectively.

During 4Q14, Magnetar purchased around 1.4 million shares in Devon Energy (DVN). The position represented 1.61% of the fund’s portfolio.