A critical overview of Spectra Energy Corp. (Part 11 of 16)
Capital expenditure strong
In the previous sections of this series, we discussed Spectra Energy’s past performance and the growth drivers in each of the company’s businesses. In this article, we’ll discuss the projects that the company expects will fuel its short-term and medium-term prospects.
In 2014, Spectra Energy Corp. (SE) planned to spend ~$2.3 billion in capital expenditure, which would be ~4% higher than its 2013 capex. In contrast to the falling capex plans in many other energy sector companies due to the recent crude oil price slump, this speaks well of the company’s financial health.
As noted in the graph above, Spectra Energy Partners is the primary recipient of the growth capex. From 2011 to 2013, Spectra Energy invested $3.5 billion in this segment, or ~54% of its total capital expenditure on average.
In comparison, Kinder Morgan Inc. (KMI), Williams Companies (WMB), and AGL Resources (GAS) invested $6.58 billion, $8.89 billion, and $1.93 billion from 2011 to 2013, respectively. Spectra Energy is a component of the Energy Select Sector SPDR ETF (XLE).
Spectra Energy’s recent project developments
Below is an account of Spectra Energy’s key projects:
Team 2014
The Texas Eastern Appalachia to Market 2014 (or TEAM 2014) project began in February 2014. The project will increase Texas Eastern’s capacity by approximately 600 million cubic feet per day. With an investment of over $500 million, the project will enable transportation of natural gas production from the Appalachian region to the Northeast, Midwest, Southeast, and Gulf Coast markets.
Spectra Energy has struck contracts with CONSOL (CNX), Rice Energy (RICE), Chevron Corporation (CVX), and EQT Corporation (EQT) for this project.
Access South and Adair Southwest projects
These two projects will provide transportation capacity from Appalachian shale to markets in the southern US. Access South is fully subscribed with Rice Energy (RICE), while Adair Southwest is subscribed with Range Resources (RRC). With a $350 million investment, the projects are expected to be in service by November 2017.
Stratton Ridge project
As part of the Texas Eastern project, Spectra Energy expects this $200 million project to supply natural gas to the Gulf Coast LNG markets by 2019.
PennEast pipeline project
This project will connect Spectra Energy’s Texas Eastern Transmission and Algonquin Gas Transmission systems. Spectra Energy will invest $100 million in the project, which will be completed by November 2017.