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Spectra Announces $1.3B Capex, Higher Earnings Target in '12

Spectra Energy Corp. said it plans to spend about $1.3 billion on capital expenditures (capex) in 2012 and hopes to continue growing the value of its stock, according to the company's financial plan for the upcoming year approved by its board of directors on Wednesday.

Houston-based Spectra said its ongoing diluted earnings per share (EPS) target for 2012 would be $1.90/share, up approximately 15% from the 2011 target of $1.65/share. The company also hoped to pay an annual dividend of $1.12/share, a figure consistent with previous 7.7% annual increases.

"As we close out 2011, we are on track to exceed our EPS goal of $1.65 [per share]," said Spectra CEO Greg Ebel. "We have successfully executed on our growth plan again this year, with aggregate returns on capital [deployed] exceeding our targeted 10-12% range."

Ebel said the 15% target increase in EPS was significantly above the expected growth rate in 2011. He also said the 2012 financial plan would include a previously announced 8-cent dividend increase.

"Given our earnings growth expectations, we anticipate future annual dividend increases of at least 8 cents per share per year," said Ebel.

On its capex plans, Ebel said the company expects to spend upward of $1 billion annually for the foreseeable future. He said Spectra is also ready for a return on its investment in DCP Midstream LLC, its joint venture with ConocoPhillips.

"We expect earnings and cash distribution growth from DCP Midstream as it continues to take advantage of its industry leading position," Ebel said, adding that the enterprise was "investing capital in key producing areas like the Eagle Ford, Permian, Midcontinent, Denver-Julesburg [DJ] and other basins."

Spectra's financial plan for 2012 assumes a composite NGL price of $1.25/gal, a natural gas price of $4/MMBtu, an oil price of $100/bbl and an even exchange rate between Canadian and U.S. dollars. The company will go into further detail on its outlook for 2012 at a breakfast meeting with industry analysts in New York on Jan. 17.

DCP Midstream announced in August that it would proceed with the Sand Hills Pipeline project, which would carry natural gas liquids (NGL) from the Eagle Ford and Permian to markets on the Gulf Coast by 3Q2012 and 2Q2013, respectively (see Shale Daily, Aug. 19). The 720-mile pipeline will have an initial capacity of 200,000 b/d but is expandable to 350,000 b/d.

DCP Midstream is also building a 110 MMcf/d gas processing plant and high-pressure gathering system in Weld County, CO, to support its position in the DJ Basin (see Shale Daily, May 16).

Meanwhile, Texas Eastern Transmission (Tetco), a Spectra subsidiary, received a Federal Energy Regulatory Commission certificate last month for a 200,000 Dth/d expansion of its mainline system in southwestern Pennsylvania (see Shale Daily, Nov. 18). Spectra is also seeking to expand Tetco and another subsidiary, Algonquin Gas Transmission, into New York City (see Shale Daily, Nov. 1).

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