spectra energy 3Q08EarningsReview_110608

Third Quarter 2008 Earnings Review

November 6, 2008

Fred Fowler President and CEO

Greg Ebel CFO

2Third Quarter 2008 Earnings Review | November 6, 2008

Safe Harbor StatementSafe Harbor StatementSome of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to the additional information contained in Spectra Energy’s Form 10-K and other filings made with the SEC concerning factors that could cause those results to be different than contemplated in today's discussion.Reg G DisclosureIn addition, today’s discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available on Spectra Energy’s Investor Relations website at www.spectraenergy.com.


• Excellent earnings in 3Q08• $0.49 ongoing fully diluted EPS• 29% increase over 3Q07

• Solid financial performance from all segments - robust commodity prices fueled Field Services and Western Canada earnings

• Completed share repurchase program in mid-August• 2008 expansion projects substantially complete• Healthy balance sheet and liquidity position

Third Quarter 2008Third Quarter 2008

Expect to exceed employee incentive EPS target of $1.56


($ millions) 3Q08 3Q07Reported Net Income $ 296 $ 234

Special Items 3 5Discontinued Operations 3 (3)Extraordinary Item - 4

Ongoing Net Income $ 302 $ 240Reported Diluted EPS $ 0.48 $ 0.37Ongoing Diluted EPS $ 0.49 $ 0.38

• Special Item: • 3Q08 – final resolution on the bankruptcy settlement with customer at U.S. Transmission• 3Q07 – separation costs

• Discontinued Operations: • 3Q08 – certain Western Canada midstream plants held for sale• 3Q07 – true-up on 2005 sale of Ft. Frances facility

• Extraordinary Item: • 3Q07 – loss from deregulated Distribution storage assets

Third Quarter 2008 SummaryThird Quarter 2008 Summary


U.S. TransmissionU.S. Transmission

• 3Q08 ongoing segment results decreased $13 million compared with 3Q07 primarily a result of:• Northeast Gateway, Time II and Egan projects in-service • capitalized interest on expansion projects • offset by:

• project development costs expensed in 3Q08 compared with the capitalization of costs in 3Q07

• higher transmission, storage and G&A costs in 3Q08

Reported & Ongoing Segment EBIT ($ millions)3Q08 3Q07

Reported Segment EBIT $ 213 $ 230Special Items 4 ---Ongoing Segment EBIT $ 217 $ 230


DistributionDistribution

• 3Q08 ongoing segment results were $4 million higher compared with 3Q07 primarily a result of :• increased storage and transportation revenues


Reported Segment EBIT $ 44 $ 40Special Items --- ---Ongoing Segment EBIT $ 44 $ 40


Western Canada Transmission & ProcessingWestern Canada Transmission & Processing

• 3Q08 ongoing segment results were $12 million higher than 3Q07 due to: • higher Empress earnings due to higher volumes and frac spread • partially offset by:

higher expenses primarily due to quarter-over-quarter timing higher repair and maintenance costs in 3Q08


Reported Segment EBIT $ 113 $ 101Special Items --- ---Ongoing Segment EBIT $ 113 $ 101


Field ServicesField Services

• 3Q08 ongoing EBIT higher by 67% compared with 3Q07 resulting from:• favorable commodity prices• derivative timing gains associated with gas marketing positions• favorable DCP Midstream Partners (DPM) hedge mark-to-market (MTM) • offset by impact of Hurricane Ike on volumes and plant operations and higher O&M

spending • Commodity prices:

• crude oil averaged $118/barrel in 3Q08; $76/barrel in 3Q07• correlation for 3Q08 was 51%; 62% for 3Q07• natural gas averaged $10.24/MMbtu for 3Q08; $6.16/MMbtu for 3Q07

• $269 million in cash distributions to Spectra Energy


EBIT before MTM at DPM $ 216 $ 140DPM Non-cash MTM 23 -Reported Segment EBIT $ 239 $ 140Special Items - 3 Ongoing Segment EBIT $ 239 $143


2008 Crude Oil Price

2008 Crude Oil Pricing

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2008 Annual Avg ofSettled and ForwardPrices as of11/04/08 ($103)

11/04/2008 Fwds

2008 Settled Prices

SE 2008 Annual AvgForecastAssumption as ofLate Oct 2007 ($83)

Pric ing information compiled from NYMEX WTI Futures.


OtherOther

• 3Q08 ongoing EBIT for other was flat with 3Q07• Continue to expect 2008 corporate costs to be in the $80 - $90

million forecasted range

Reported & Ongoing EBIT ($ millions)3Q08 3Q07

Other Reported EBIT (Loss) $ (9) $ (15)Special Items - 5Other Ongoing EBIT (Loss) $ (9) $ (10)


Ongoing Segment and Other EBITDAOngoing Segment and Other EBITDAOngoing Segment and Other EBITDA ($ millions)

3Q08 3Q07 YTD ‘08 YTD ‘07U.S. Transmission $ 285 $ 296 $ 856 $ 864Distribution 89 82 401 357Western Canada Transmission & Processing 151 136 448 315Field Services 309 203 846 524Other (5) (8) (46) (38)Total $ 829 $ 709 $ 2,505 $ 2,022

• U.S. Transmission Ongoing EBITDA also includes Spectra Energy’s 50% share of Gulfstream and SESH Interest and DD&A

• Field Services Ongoing EBITDA represents Spectra Energy’s Ongoing Equity Earnings of DCP Midstream plus half of DCP Midstream’s Interest, Taxes and DD&A


Additional ItemsAdditional Items• Interest expense for 3Q08 was $163 million compared with $156

million for 3Q07

• Effective tax rate was 33% for 3Q08 compared with 32% in 3Q07

• Debt to Total Capitalization at September 30, 2008 is 59.6%

• Canadian currency net after tax effect on earnings for 3Q08 was favorable by about $1 million compared with 3Q07

• Total credit facility capacity at September 30, 2008 of $2.7 billion; available liquidity of $1.7 billion


9/30/08 Liquidity Summary

* A subsidiary of Lehman Brothers is a lender under the Spectra Capital and SEP bank credit facilities and as of September 30, 2008 was in default in its obligation to fund borrowings under the Spectra Capital facility. As a result, Spectra Capital and SEP consider the $64 million of unfunded Lehman Brothers commitments to be unavailable.

Revolving Credit Commitments * 1,500$ 188$ 470$ 500$ 2,658$ Plus: Net Available Cash / Investments 23 42 6 94 165

Total Liquidity Sources 1,523$ 230$ 476$ 594$ 2,823$ Less: Borrowings (782) - (131) (240) (1,153) Less: Letter of Credit Utilization (5) - - - (5)

Available Liquidity 736$ 230$ 345$ 354$ 1,665$

As of 9/30/2008(USD in Millions)

TotalSpectra Capital Westcoast Union Gas SEP

Well-positioned to manage through current market volatility.


Long-term Debt Maturities – 4Q08, 2009 & 2010

No significant long-term funding needs until late 2009

Long-term Debt Maturities Spectra Capital TETLP Westcoast Union Gas SEP Total

4Q08 -$ -$ -$ -$ -$ -$

1Q09 148$ -$ -$ -$ -$ 148$ 2Q09 - - - - - - 3Q09 - - - 24 - 24 4Q09 500 - - 4 - 504

Total 2009 648$ -$ -$ 28$ -$ 676

Total 2010 -$ 300$ 235$ 209$ -$ 743$

As of 9/30/02008(USD in Millions)


Expansion ProjectExpansion Project SegmentSegment Est. Est. CapExCapEx ($MM)($MM) InIn--ServiceServiceM&NE Phase IV (CanaportTM) Expansion UST 320 4Q08Ramapo UST 260 4Q08Dawn Storage Deliverability Dist 120 1Q09TIME II (Phase II) UST 90 4Q08Gulfstream Phase III UST (1/2 SEP) 60 3Q08Egan Storage (Caverns 4) UST (1/2 SEP) 60 3Q08West Doe Phase II WC 5 4Q08Dawn-Trafalgar Pipeline – Phase III Dist 75 4Q08Pine River Phase 3 WC 50 4Q08Glade Spring Expansion UST (SEP) 20 4Q08Tribute Storage Dist 35 2Q08Southeast Supply Header UST ~600 3Q08Total Major 2008 ProjectsTotal Major 2008 Projects $ 1.7 B$ 1.7 B

Major 2008 Projects Substantially Complete

Total Total estest 2008 EBIT2008 EBIT $ 90 million$ 90 millionTotal Total estest 2009 Incremental EBIT2009 Incremental EBIT $ 110 million$ 110 million

2008 projects deliver returns on capital employed at the upper end of our 10-12% targeted range

Questions & Answers

November 6, 2008

AppendixCommodity Sensitivity Overview

Hypothetical Example for Commodity Price Changes

November 6, 2008


Commodity Sensitivity Overview – Jan 2008

DCP Midstream*

• DCP Midstream’s primary sensitivity is to NGL prices (for which we assume a 60% price relationship to oil); changes in contract mix have resulted in some exposure to natural gas

• Estimated average price of crude oil for 2008 is $83 / Bbl1

• $1.00 / Bbl change in oil = ~ $12 MM change in EBIT• Estimated average price of natural gas for 2008 is $8.00 / MMBtu• $0.10 / MMBtu change in natural gas = ~ $2 MM change in EBIT

• Empress is sensitive to changes in frac spread• Empress: estimated average frac spread for 2008 is ~ $7.25 / MMBtu2

• $0.50 / MMBtu change in frac = ~ $16 MM EBIT

• Canadian earnings have exchange rate risk• Exchange rate at parity for full year• $0.01 change in Fx rate = ~ $3 MM change in Net Income

Empress

Canadian Dollar

Hedging • No hedges in place for above sensitivities, except cash flow hedges at DCP Midstream’s MLP

* Represents Spectra Energy’s 50% interest in DCP Midstream

1Based upon 2008 forward curve for last half of October

2Based upon average frac spread for 2006 and 2007


Hypothetical Example for Commodity Price Change Effect on Field Services EBIT Hypothetical Example for Commodity Price Change Effect on Field Services EBIT

• Hypothetical average commodity prices for calendar year 2008:• $100/bbl crude oil

55% Crude/NGL price relationship• $10/MMBtu natural gas

Change for Crude Oil Price Assumption 204$ ($100 - $83) x $12 Change in Correlation Assumption (75) (55% - 60%) x $15Change for Natural Gas Assumption 40 (($10 - $8)/$0.10)) x $2Total potential EBIT Increase 169$

Field Services Sensitivities: (SE's 50% share)MM $ per each $1.00/barrel move in Crude Oil 12$ MM $ per each percentage move in Correlation 15$ MM $ per each $0.10/MMBTU change in Natural Gas 2$

spectra energy 3Q08EarningsReview_110608

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