Spectra Energy Releases Sustainability Report - Analyst Blog

In compliance with the Global Reporting Initiative GRI, Spectra Energy Corp. SE recently released its report on Corporate Sustainability efforts for the year 2013. The report contains detailed information about the company's practices related to Corporate Social Responsibilities (CSR) for both employees and clients.

The report divulged that during 2013, the company placed into service $6 billion of capital projects, through expansion and strategic acquisitions. Spectra added the Express-Platte crude oil pipeline system to its portfolio and secured $7 billion of new projects – further strengthening its base and positioning it to deliver strong earnings growth and competitive gains. The company directly contributed $5.3 billion to the economies and communities of Canada and the U.S. through its core business activities, including employment, procurement of materials and services, and tax payments to governments.

The report also observes that the company has experienced a 40% decrease in employee and contractor injury rates over the last 10 years. This is due to the fact that over the past seven years, the company has implemented more than 60 infrastructure projects, representing almost $8 billion of investment, through diligent consultation and collaboration with connected stakeholders.

Spectra Energy has reduced approximately 6.2 million metric tons of CO2 emissions, including methane, from 2007 to 2012 by focusing on operational efficiencies, capturing and storing carbon dioxide during gas processing, and providing Demand Side Management programs for its customers. Also, in 2013, U.S. Transmission business lowered the volume of hazardous waste significantly from 2012 level.

Spectra Energy is one of North America's premier natural gas infrastructure plays with a strong presence in growth markets. These positions should lead to value-accretive growth opportunities in the coming years. Spectra plans to invest about $25 billion over the next decade on fee-based gas infrastructure growth projects.

The company's core fee-based businesses of storage, transmission, distribution and Canadian gathering and processing have the potential to move the needle toward solid earnings and cash flow growth in the long run. Going forward, Spectra intends to increase its presence in the oil and refined products pipelines, storage tanks and terminals business.

Management remains optimistic on its future performance based on its expansion program, which remains on track. With its market leading position, diversified asset portfolio and strong investment opportunities, we expect Spectra Energy to sustain its growth momentum. Additionally, Spectra plans to invest $1 billion per year through 2015 on fee-based gas infrastructure growth projects. The company expects to commission around 8 projects through 2016.

However, Spectra's results are vulnerable to fluctuations in natural gas markets. The proposed liquid-rich drilling activities by the company clearly suggest that volatility in natural gas prices will change little going forward. Major investments in several Canadian projects also expose Spectra to fluctuations in currency rates that may affect the results of its operations.

Spectra Energy currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Meanwhile, one can consider better-ranked players from the broader energy sector like Encana Corporation ECA, Pembina Pipeline Corporation PBA and Matador Resources Company MTDR. All these stocks sport a Zacks Rank #1 (Strong Buy).