Tags: Spectra | Energy | expansion | SE

Spectra Energy Plotting Ambitious Expansion

By    |   Tuesday, 06 March 2012 08:29 AM

Natural gas outfit Spectra Energy (SE) is plotting an ambitious, multi-prong expansion strategy. Rebounding natural gas prices are expected to add more oomph.

Spectra Energy gathers, stores and distributes natural gas. Its DCP Midstream unit, a joint venture with ConocoPhillips (COP), is tapping into key producing areas expected to generate future earnings growth.

Recent earnings disappointed analysts, though. For fourth quarter 2011, Spectra Energy logged sales of $1.4 billion, up 3 percent from 2010. However, net income totaled 44 cents, down from 51 cents.

For full-year 2011, the company reported sales of $5.3 billion, up from $4.9 billion. Net income was $1.77 per share, up from $1.60.

Spectra Energy is upbeat about 2012 earnings; management’s goal is $1.90 per share. Analysts 2012 consensus earnings estimate is a bit lower: $1.89 per share. For 2013, the consensus estimate is $2.02.

Strategic acquisitions and organic growth are company priorities, Spectra Energy CEO Julie Dill said in a statement. To drive growth, the company has set aside $5 billion in capital expenditures for the next five years. Projects include expanding its Texas Eastern pipelines, adding another gas storage facility and developing a new gas processing plant.

Some analysts worry, though, that the company’s heavy debt-to-capitalization ratio of 53.9 percent might curb expansion plans.

Diverse assets

Spectra Energy likes to reward investors, and its goal for future annual dividend increases is 8 cents per share or more. The dividend is currently 3.6 percent.

Analysts have mixed opinions about Spectra Energy, though. Of the 12 analysts followed by Thomson/First Call, two have strong buy recommendations and four have buys, with six holds.

S&P analysts have a buy rating, citing Spectra Energy’s diverse asset base that’s strategically positioned for growth.

The company next reports on May 3.

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Tuesday, 06 March 2012 08:29 AM
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