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Spectra Energy (SE) Lags Q1 Earnings Estimate, Down Y/Y

Premier natural gas company, Spectra Energy Corp. SE reported first-quarter 2016 earnings per share from continuing operations of 35 cents. The bottom line not only lagged the Zacks Consensus Estimate of 38 cents but also deteriorated from the year-ago earnings of 41 cents.

The company’s operating revenues of $1,384.0 million decreased from the year-earlier level of $1,623.0 million and also came in below our estimate of $1,568.0 million.

Operational Analysis

Spectra Energy Partners: The segment posted quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $473.0 million, up from $464.0 million in the year-ago quarter. This was attributable to expansion, primarily in the natural gas transmission business.

Distribution: The segment reported a year-over-year decrease in its EBITDA to $170.0 million from $192.0 million. This decrease was mainly due to the effect of a weaker Canadian dollar and warmer weather.

Western Canada Transmission & Processing: The segment witnessed EBITDA of $123.0 million, down from the year-earlier level of $161.0 million. Lower earnings from the Empress processing facility led to the downside.

Field Services: The segment reported EBITDA of $10.0 million against a loss of $14.0 million in the prior-year quarter. The improvement was mainly backed by expansions and favorable contract realignment efforts.

Production and Price Realizations

The company produced natural gas liquids (NGLs) of 382 thousand barrels per day (MBbl/d), down from the year-ago quarter level of 399 MBbl/d. Price of NGLs averaged 37 cents per gallon (down from 49 cents per gallon a year ago), while crude oil averaged approximately $33.45 per barrel (down from $48.63 per barrel). Natural gas was sold at $2.09 per million British thermal units (MMBtu) against $2.98 per MMBtu in the first quarter of 2015.

Balance Sheet

As of Mar 31, 2016, Spectra Energy had total debt of approximately $14,993 million with a debt-to-capitalization ratio of 58.4% (against 59.8% in the preceding quarter).

Zacks Rank

Spectra Energy carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector are ReneSola Ltd. SOL, Seadrill Partners LLC SDLP and Braskem S.A. BAK. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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SPECTRA ENERGY (SE): Free Stock Analysis Report
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