spectra energy 3Q08EarningsReview_110608

Third Quarter 2008 Earnings Review

Fred Fowler
President and CEO

Greg Ebel
CFO

November 6, 2008

Safe Harbor Statement
Some 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 Disclosure
In 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.

Third Quarter 2008 Earnings Review | November 6, 2008
2

Third Quarter 2008
• 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

Expect to exceed employee incentive EPS target of $1.56

3

Third Quarter 2008 Summary
($ millions) 3Q08 3Q07
Reported Net Income $ 296 $ 234
Special Items 3 5
Discontinued Operations 3 (3)
Extraordinary Item - 4
Ongoing Net Income $ 302 $ 240
Reported Diluted EPS $ 0.48 $ 0.37
Ongoing 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
4

U.S. Transmission
Reported & Ongoing Segment EBIT ($ millions)
3Q08 3Q07
Reported Segment EBIT $ 213 $ 230
Special Items 4 ---
Ongoing Segment EBIT $ 217 $ 230

• 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
5

Distribution
3Q08 3Q07
Special Items --- ---

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

6

Western Canada Transmission & Processing
3Q08 3Q07
Special Items --- ---

• 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

7

Field Services
3Q08 3Q07
EBIT before MTM at DPM $ 216 $ 140
DPM Non-cash MTM 23 -
Special Items - 3
Ongoing Segment EBIT $ 239 $143
• 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
8

2008 Crude Oil Price
2008 Crude Oil Pricing
$140
2008 Annual Avg of
Settled and Forward
$130 Prices as of
11/04/08 ($103)

$120 11/04/2008 Fwds

$110
$/bbl

2008 Settled Prices
$100

$90
SE 2008 Annual Avg
$80 Forecast
Assumption as of
Late Oct 2007 ($83)
$70
Jun-08

Jul-08

Nov-08
Jan-08

Aug-08
May-08
Feb-08

Mar-08

Apr-08

Sep-08

Dec-08
Oct-08
Pric ing information c ompiled from NYMEX WTI Futures.

9

Other
Reported & Ongoing EBIT ($ millions)
3Q08 3Q07
Other Reported EBIT (Loss) $ (9) $ (15)
Special Items - 5
Other Ongoing EBIT (Loss) $ (9) $ (10)

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

10

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

• 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

11

Additional 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

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9/30/08 Liquidity Summary

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

Spectra Capital Westcoast Union Gas SEP Total

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

* 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.

Well-positioned to manage through current market volatility.

13

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

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

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

No significant long-term funding needs until late 2009

14

Major 2008 Projects Substantially Complete
2008 projects deliver returns on capital employed at the upper
end of our 10-12% targeted range
Expansion Project Segment Est. CapEx ($MM) In-Service
M&NE Phase IV (CanaportTM) Expansion UST 320 4Q08
Ramapo UST 260 4Q08
Dawn Storage Deliverability Dist 120 1Q09
TIME II (Phase II) UST 90 4Q08
Gulfstream Phase III UST (1/2 SEP) 60 3Q08
Egan Storage (Caverns 4) UST (1/2 SEP) 60 3Q08
West Doe Phase II WC 5 4Q08
Dawn-Trafalgar Pipeline – Phase III Dist 75 4Q08
Pine River Phase 3 WC 50 4Q08
Glade Spring Expansion UST (SEP) 20 4Q08
Tribute Storage Dist 35 2Q08
Southeast Supply Header UST ~600 3Q08
Total Major 2008 Projects $ 1.7 B

Total est 2008 EBIT $ 90 million
Total est 2009 Incremental EBIT $ 110 million

15

Questions & Answers

November 6, 2008

17

Appendix
Commodity Sensitivity Overview
Hypothetical Example for Commodity Price Changes

November 6, 2008

Commodity Sensitivity Overview – Jan 2008
• 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
DCP Midstream* • $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
* Represents Spectra Energy’s 50% interest in 1Based upon 2008 forward curve for last half of October
DCP Midstream

• Empress is sensitive to changes in frac spread
• Empress: estimated average frac spread for 2008 is ~ $7.25 / MMBtu2
Empress
• $0.50 / MMBtu change in frac = ~ $16 MM EBIT
2Based upon average frac spread for 2006 and 2007

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

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

19

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 $15
Change for Natural Gas Assumption 40 (($10 - $8)/$0.10)) x $2
Total 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

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