Spectra Energy Corporation (SE) is gaining momentum in the prolific Montney play of northeast British Columbia (BC). The company has made an announcement to build a new natural gas processing plant west of Dawson Creek with the capacity of 200 million cubic feet per day (MMcf/d) at a total cost of $1.5 billion.
 
The entire capacity is contracted for long-term customer commitments. The processing plant will be constructed in two phases. The first phase is slated to come online in late 2011 with a capacity of 100 MMcf/d, and the second phase in early 2013.
 
Spectra has built a solid resources and asset base in BC during the last five decades. While natural gas production is expected to rise significantly in the area, the company aims at further infrastructure development. Spectra’s BC operations come under the Western Canada Transmission & Processing segment.
 
The segment provides natural gas transportation, gathering, and processing services; and natural gas liquid extraction, fractionation, transportation, storage and marketing to customers in Canada and the northern tier of the United States.
 
The company continues to execute expansion projects. Last December, Spectra announced an expansion project for its Algonquin Gas Transmission and Texas Eastern Transmission pipeline systems. Its growth trajectory is mainly driven by organic means.
 
Spectra has targeted 12% – 14% return on capital employed for the 2010 – 2014 period with at least $5 billion investment. With these significant investments, Spectra sees compounded annual earnings per share growth rate in the range of 8% to 12% for 2010 – 2012.
 
We believe that the company’s core fee-based businesses and capital expansion projects have potential to move the needle toward solid earnings and cash flow growth.
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