Spectra Energy Corp. (SE) Thursday reported a drop in fourth-quarter net income, missing Street estimates as well, due to higher operating costs at US Transmission and Field Services segments, and lower customer usage related to warmer weather at its Distribution segment.
For the fourth quarter, Spectra Energy's net income attributable to controlling interests dropped to $289 million or $0.44 per share from $320 million or $0.49 per share in the year-ago quarter.
Total special items in the year-ago quarter were $41 million or earnings per share impact of $0.04 per share. They included a $31 million benefit from termination notice on Alliance capacity contract.
Ongoing net income for the quarter excluding special items was $287 million compared with $303 million last year. The ongoing earnings per share comparison was $0.44 versus $0.47.
On average, 10 analysts polled by Thomson Reuters expected earnings to improve from last year and to come in at $0.49 per share. Analysts' estimates typically exclude special items.
Revenues for the quarter grew to $1.428 billion from $1.383 billion last year. Four Street analysts had a consensus revenue estimate of $1.460 billion. Operating income for the quarter declined to $443 million from $499 million last year. U.S. Transmission earnings were down for the quarter reflecting higher operating costs and lower revenues at Ozark Gas Transmission, partially offset by expansion projects previously placed into service.
Distribution earnings were also down for the quarter, mainly due to lower customer usage related to warmer weather. Western Canada Transmission & Processing earnings improved on results in the gathering and processing business, primarily driven by higher earnings from expansions in the Horn River area of British Columbia.
Field Services earnings dropped reflecting the effects of planned higher operating costs, short-term reliability issues and NGL curtailments, primarily in the Permian Basin. These factors more than offset the benefits seen from increased NGL prices and volume growth.
Total capital and investment expenditures, excluding acquisitions, for 2011 increased to $1.9 billion from $1.4 billion in 2010.
Full-year ongoing net income rose 14 percent to $1.160 billion from $1.020 billion last year. Earnings per share was $1.77 compared to $1.57 in 2010. Street estimated earnings of $1.82.
Greg Ebel, president and chief executive officer, said," We benefited from expansion projects placed into service, which are delivering attractive returns on capital employed in excess of our targeted 10 to 12 percent range."
Providing the company's outlook for the current year, Ebel said Spectra is targeting an increase in 2012 earnings per share of almost 7.5 percent, derived from the earnings growth generated from capital expansion projects. The company expects to invest a further $15 billion in capital expansion projects through the end of the decade.
SE is currently trading at $31.15, down $0.36 or 1.14%, on the NYSE. Over the past year, the stock traded in a range of $22.80 - $31.98.
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