Spectra Energy CorporationSE

Morningstar Rating

Stock Research and Analysis

by Avi Feinberg

In January 2007, Duke Energy DUK split its electricity and gas businesses by spinning off Spectra Energy. Spectra, which retains all of Duke's natural gas gathering, processing, transmission, storage, and distribution assets, is one of the largest midstream Read more

Bulls Say

Spectra Energy is the 800-pound gorilla of the natural gas midstream business. Its size, market knowledge, and customer relationships give it an edge when developing new projects.

Ownership of 50% of DCP Midstream provides robust cash flows in high-commodity-price environments.

Spectra spun off an MLP, Spectra Energy Partners, which it can potentially use to help fund tax-efficient growth.

Spectra's growth opportunities in U.S. and Canada provide great geographic diversification. Small- to medium-size projects allow the company to vary capital spending as markets fluctuate. Read more

Bears Say

Higher costs of capital may change the types of projects Spectra can pursue, although so far the company has retained access to favorably priced capital.

The flip side to outsize cash flows from DCP Midstream in recent years is weak cash flows in low-commodity-price environments.

Because of its size, Spectra has to spend a lot in order to move the needle. Despite spending more than $3 billion toward growth in the past two years and plans to spend $650 million this year, the company's size will restrict growth to the mid-single-digit range over the long haul, in our opinion. Read more

Strategy

Spectra Energy is one of the 800-pound gorillas of the natural gas midstream business. The company will seek to play to its size advantage by expanding its pipeline and storage capacity, securing new Read more

Management

Spectra Energy runs a tight ship and is managed by longtime industry hands. With the retirement of longtime CEO and president Fred Fowler at the end of 2008, CFO and fellow board member Greg Ebel stepped up to head the company. The board is chaired Read more

Profile

Spectra Energy Corporation is one of the largest natural gas midstream companies in North America. Its operations span the entire value chain, from wellhead to burner tip. Read more

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