Spectra Energy Western Canada Transmission and Processing A Western Canadian Growth Story April 6, 2009 Douglas P. Bloom President, Spectra Energy Transmission - West
Contents Western Canada Operations: Midstream Energy Value Chain Overview Gathering and Processing Pipeline Transmission Natural Gas Liquids Western Canada Financial Results Summary 2
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 our website. 3
Spectra Energy Strategically Located Assets One of North America s premier natural gas infrastructure companies 2008 Natural Gas Throughput 3.6 Tcf Miles of Transmission Pipe 18,300 Miles of Gathering Pipe 62,000 Miles of Distribution Pipe 37,000 Storage Capacity 270 Bcf Retail Customers 1.3 million 4
The Midstream Value Chain Wellhead to Market Western Canada Operations Gas Gathering & Processing Transmission NGL (natural gas liquids) ASSET TYPES E&P Gas Wells; Producer Tie-Ins Raw gas gathering and processing Must run facilities raw gas Gas Processing Plant sales gas pipeline Transportation of processed gas (sales gas) to downstream markets Compressor Station Extraction & fractionation facilities Pipeline Truck & rail terminals Storage & marketing Empress* Straddle Plant PIPELINE NGL Pipeline Underground NGL Storage Downstream Markets Gas markets Distribution systems Other pipelines COMMERCIAL DRIVERS Fee-for-service revenue Cost-of-service revenue Fee based revenue Frac spread revenue (C3+) * Extract, purchase and fractionate NGLs from natural gas on the TransCanada Pipeline System. 5
Gathering & Processing (Field Services and Midstream) Pine River Gas Processing Plant, British Columbia, Canada 6
Natural Gas Gathering & Processing (G&P) Largest G&P Business in Western Canada Number of Plants 16 Miles of Raw Gas Gathering Pipe 2,100 Capacity (net) 3.2 Bcf/d Throughputs (net) 2.1 Bcf/d GHG Sequestration (avg. annual) ~200 ktonnes Acid gas injection facilities 8 Integrated assets involved in gathering & processing natural gas including higher margin sour gas Readily expandable assets with extensive gas gathering systems Focused on three core areas with significant growth opportunities including vast new unconventional gas developments Industry leader in CO 2 & H 2 S sequestration 7
Natural Gas Gathering & Processing Fixed Fees with no Direct Commodity Price Exposure Commercial operations Negotiated fixed fee contracts Revenue based on fee for service contracted capacity Contracts a mix of short & long-term and contain a variety of commercial terms (fee escalators, volume commitments, land dedications, etc.) No direct commodity price exposure Customers ~95 customers with a mix of integrated, multi-national and small E&P firms Top 10 customers represent ~50% of revenue (2008) 8
Natural Gas Gathering & Processing Well Positioned for Growth New Gas Developments: Existing Spectra infrastructure extremely well positioned for growth Strong land sale activity a leading indicator of future exploration and development activity BC Government generated record C$1.0B in land sales in 2007; 2008 set another overall record (C$2.7B) Montney, Horn River, & Cordova areas hold significant reserves potential: Horn River Basin: 500 Tcf * Cordova Embayment: 200 Tcf * Montney/Doig: 450 Tcf * Spectra facility expansions underway in response to producer infrastructure requirements * Source: Canadian Society for Unconventional Gas; October 2008. 9
Natural Gas Gathering & Processing Expansion Projects Projects in Execution West Doe II West Doe III South Peace Pipeline In Service 2009 2009 2009 South Peace and West Doe projects required for increasing Montney production Increased gathering & processing capacity of 335 mmcf/d, including projects completed in 2008 Development Projects Fort Nelson Area Expansion Projects In Service 2009-2012 & beyond Returns averaging in excess of targeted 10-12% return on capital Significant gathering & processing expansion projects under development 10
Natural Gas Gathering & Processing West Doe Phase II and III West Doe Phase II Expansion to existing West Doe gas plant in Peace River Arch area of northeast BC Additional gas processing train, gathering pipeline and sales gas tie-ins to process an incremental 30 mmcf/d Est. capital expenditures of $40 million In-service 3/09 West Doe Phase III Further expansion to existing West Doe gas plant Additional gas processing train and sales gas tie-ins to process incremental 45 mmcf/d Est. capital expenditures of $60 million In-service 2H09 Total capacity of West Doe at 2009 year-end of ~100 mmcf/d 11
Natural Gas Gathering & Processing South Peace Pipeline Pipeline and plant modifications in northeast B.C. connect south Peace River Arch production to McMahon processing plant Over 55 miles of 20 pipeline with approximately 220 mmcf/day capacity Est. capital expenditures about $130 million In-service 2H09 12
Natural Gas Gathering & Processing Fort Nelson Area Expansion Proposed multi-phased expansion to increase gathering and processing capacity in Fort Nelson, BC to accommodate gas from Horn River Firm take-or-pay commitments from eight customers for 770 mmcf/d Expansion involves: Reactivation of existing processing capacity at Fort Nelson gas plant, looping and reconfiguration of area gathering and compression, addition of new processing capacity at Cabin Lake compressor station Staged in-service 2009 2012 & beyond 13
Natural Gas Gathering & Processing Why We re Optimistic Our assets are located in some of the most prolific, high growth producing areas in North America We expect a significant increase in natural gas production in our core operating areas including Horn River and Montney/Doig developments 6.0 BC Gas Production (Bcf/d - Sales Gas) 19 BC & AB Gas Production (Bcf/d - Sales Gas) 5.0 18 17 4.0 16 3.0 2.0 1.0 BC Horn River Shale Play BC Montney-Doig Play BC (current production) 15 14 13 12 11 BC Horn River Shale Play BC Montney-Doig Play BC (current production) AB (current production) 0.0 10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Company data, National Energy Board, Alberta Energy Resources Conservation Board 14
Pipeline Transmission 36 looping construction, Hudson s Hope, British Columbia 15
Natural Gas Transmission The backbone of BC s natural gas industry since 1957 Miles of Pipe 1,800 Transmission Capacity 2.2 Bcf/d Horsepower 675,000 (18 compressor stations) BC Pipeline: Delivery vehicle for vast majority of natural gas supply generated in British Columbia History of incremental expansions & capacity additions to meet market demand, both domestic & export National Energy Board (NEB) regulated rate of return Cost of service based rates Toll methodology established through negotiated settlements, NEB approves rate structure No risk on throughput/asset utilization 16
Natural Gas Transmission Interconnected to Diverse Supply & Major North American Markets Huntingdon/ Sumas BC Washington Oregon Spectra Energy GTN Nevada Idaho Gas Production Area TCPL Nova TCPL BC Alberta Alliance Williams Northwest Supply Access to supply diversity: BC, AB, Yukon, NWT Security of future supply; further enhanced through Montney & Horn River Basin developments An enabler of gathering & processing growth Reliable operations since 1957 with delivery security ensured through continuous mainline improvements (30, 36, 42 pipeline loops) Markets Deliveries within BC and to US PNW (WA, OR and ID) and AB and beyond Supplies most of BC market Supplies about half of US PNW demand Supply development driving additional capacity to AB and beyond through inter-connecting pipelines 17
Natural Gas Transmission T-North Expansion: Growth and Market Enabler Efficient expansion of east & west bound capacity Total CapEx: $50 million Eastbound Service Expansion From McMahon: 155 mmcf/d of additional capacity Addition of compressor package at CS A1 Gordondale Upgrade of existing compressor package at CS A1 Gordondale In-service 1H10 Westbound Service Expansion From McMahon: 110 mmcf/d of additional capacity Adding capacity at Compressor CS 2 In-service 1H10 18
NGL (Natural Gas Liquids) Empress Straddle Plant, Alberta, Canada 19
Natural Gas Liquids Strategically Situated for Canadian & Export Markets Empress Straddle Plant Capacity (gross) 2.4 Bcf/d Max. Annual Gross Extraction Capacity 63,000 Bbls/d NGL Pipeline Miles of Pipe 600 Capacity 15,500 Bbls/d Marketing & Storage Truck Terminals 7 Rail Terminals 3 Tanker Car Fleet ~550 rail cars Storage >4.0 MM Bbls Pipeline Access Cochin, AEGS, Bow River Fully integrated business: extraction, fractionation, transportation, storage, marketing/sales of products 20
Natural Gas Liquids NGL Margin Business with a Mix of Frac Spread & Fee Based Revenue NGL extracted and purchased from TCPL natural gas shippers NGL is fractionated into products Ethane is purchased from shippers by returning the natural gas shrinkage Propane plus is purchased from shippers by returning natural gas shrinkage and by paying a negotiated premium above AECO natural gas prices Propane plus products Sold in Canadian and northern US markets Frac spread based cash flow Commodity price exposure on propane, butane and condensate Full utilization risk Ethane Sold to AB petrochemical companies for shrinkage makeup plus a fee related to Empress operating costs Ancillary business (fee-based revenue) Storage leasing and agency marketing services 21
Natural Gas Liquids Integrated Assets Provide Competitive Advantage Integrated NGL business Provides access to the full NGL value chain Only area fractionation capability; area competitors only have extraction assets Lowest cost access to the premium Northern Tier markets Proprietary NGL Pipeline System Exclusive flexibility to sell products in Northern Tier markets via a network of related delivery points and a major underground storage complex Delivers to rail terminals, truck loading terminals, Cochin Pipeline and underground cavern storage Underground storage capacity of over 4 million barrels 22
Western Canada Transmission and Processing Summary 23
Western Canada Transmission & Processing EBIT: 2007-2009 $ millions (CAD) $ millions (US) $450 $400 $350 $300 $250 $385 $150 $418 $176 $450 $344 $400 $350 $359 $67 $300 $147 $250 $398 $170 $287 $55 $200 $200 $150 $100 $235 $242 $277 $150 $100 $212 $228 $232 $50 $50 $0 2007 2008 2009 Forecast $0 2007 2008 2009 Forecast Commodity Sensitive Primarily Fee Based 24
Western Canada Transmission & Processing Summary Preeminent natural gas infrastructure business in western Canada Largest gathering & processing business in western Canada Pipeline connections to major North American markets Strategically located, integrated NGL assets Well positioned for growth Proximity to world-class natural gas resource plays Significant projects in execution and development Strategically situated & integrated assets Balanced portfolio of commercial risk Diversified customer base 25
Q & A 26
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