spectra energy SE_2Q08_Earnings_new

Second Quarter 2008 Earnings Review

August 6, 2008

Fred FowlerPresident and CEO

Greg EbelCFO

2Second Quarter 2008 Earnings Review | August 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.


• Exceptional earnings in 2Q08 • $0.44 ongoing fully diluted EPS• 47% increase over 2Q07

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

• Share repurchase progress through June 30th:

• $284 million• 10.5 million shares

• 2008 expansion projects on track• CEO succession plan in place

Excellent Second Quarter 2008Excellent Second Quarter 2008

Expect dividend yield and increased compound annual growth rate to deliver double-digit total shareholder return


$ 0.30$ 0.31$ 192

(11)7

$ 1962Q07

(21)Special Items

$ 274Ongoing Net Income$ 0.47Reported Diluted EPS$ 0.44

-

$ 2952Q08

Ongoing Diluted EPS

Discontinued Operations

Reported Net Income($ millions)

• Over 47% increase in ongoing EPS• Special Item:

• 2Q08 – gain on the bankruptcy settlement with Calpine at U.S. Transmission• 2Q07 – separation costs

• Discontinued Operations: • 2Q07 – Sonatrach settlement proceeds

Second Quarter 2008 SummarySecond Quarter 2008 Summary

Expect to significantly exceed employee incentive EPS target of $1.56


U.S. TransmissionU.S. Transmission

• 2Q08 ongoing segment results decreased $10 million compared with2Q07 primarily a result of:• Northeast Gateway, Time II and Egan projects in-service • capitalized interest on expansion projects • offset by:

• higher project development costs due to capitalization of costs in 2Q07 • higher transmission and storage costs in 2Q08

$ 223$ 213Ongoing Segment EBIT---

$ 2232Q07

(31)$ 2442Q08

Special ItemsReported Segment EBIT

Reported & Ongoing Segment EBIT ($ millions)


DistributionDistribution

• 2Q08 ongoing segment results unchanged compared with 2Q07 primarily a result of :• increased storage and transportation revenues • favorable foreign currency exchange• offset by a provision related to the OEB’s decision on unregulated

storage revenues collected 11/06 – 6/08


$ 542Q07

---$ 542Q08




Western Canada Transmission & ProcessingWestern Canada Transmission & Processing

• 2Q08 ongoing segment results were $39 million higher than 2Q07 due to: • higher Empress earnings due to frac spread and higher volumes

2Q08 average frac spread was $8.39 compared with $5.85 in 2Q07• favorable foreign currency exchange• higher processing revenues


$ 482Q07

---$ 872Q08




Field ServicesField Services

• 2Q08 ongoing EBIT higher by $90 million compared with 2Q07 due to:• favorable commodity prices• increased volumes and improved plant operating efficiencies • partially offset by DCP Midstream Partners (DPM) hedge Mark-to-Market (MTM)

• Commodity prices:• crude oil averaged $124/barrel in 2Q08; $65/barrel in 2Q07• correlation for 2Q08 was 50%; 68% for 2Q07• natural gas averaged $11/MMbtu for 2Q08; $8/MMbtu for 2Q07

• $444 million in cash distributions to Spectra Energy, including special dividend paid in April of $250 million

$ 124$ 241EBIT before MTM at DPM(1)(25)DPM Non-cash MTM

$126$ 216Ongoing Segment EBIT3

$ 123

2Q07

-$ 216

2Q08




OtherOther

• 2Q08 higher than 2Q07 due primarily to:• higher insurance claims and benefits costs

$ (19)$ (28)Other Ongoing EBIT (Loss)7

$ (26)2Q07

-$ (28)2Q08

Special ItemsOther Reported EBIT (Loss)

Reported & Ongoing EBIT ($ millions)


Additional ItemsAdditional Items• Interest expense for 2Q08 was $149 million compared with $156

million for 2Q07

• Effective tax rate was 31% for both 2Q08 and 2Q07

• Debt to Total Capitalization at June 30, 2008 is 57%

• Total credit facility capacity at June 30, 2008 of $2.7 billion; available liquidity of $1.9 billion

• Canadian currency net after tax effect on earnings for 2Q08 was favorable by about $5 million compared with 2Q07


Ongoing Segment and Other EBITDAOngoing Segment and Other EBITDA

$ 1,324(29)321189

275$ 568

YTD ‘07

$ 1,679(41)537297

312$ 574

YTD ‘08

(18)(24)Other$ 625$ 765Total

182280Field Services82129

Western Canada Transmission & Processing

94100Distribution$ 285$ 280U.S. Transmission2Q072Q08

Ongoing Segment and Other EBITDA ($ millions)

• U.S. Transmission Ongoing EBITDA also includes Spectra Energy’s 50% share of Gulfstream’s 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


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

• 55% NGL/crude price relationship (correlation)• $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 $0.10/MMBTU change in Natural Gas 2$

Hypothetical Example: Commodity Price Change Effect on Field Services EBITHypothetical Example: Commodity Price Change Effect on Field Services EBIT


2008 Crude Oil Price

2008 Crude Oil Pricing

$80

$89

$98

$107

$116

$125

$134

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

$/bb

l

08/04/2008 Fwds

2008 Annual Avg ofSettled and ForwardPrices as of08/04/08 ($117)

2008 Settled Prices

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

Pric ing information compiled from NYMEX WTI Futures.

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