Spectra Energy Earnings Call Insights: Southern Hills Expansion, Capital Constraints in DCP
Southern Hills Expansion
Stephen Maresca – Morgan Stanley: I wanted to see if you could get your view on the Southern Hills, 150,000 barrel a day expansion and you talked about the Conway Belvieu and just review, is that – do you think the 150,000 along the other lines out there are enough to help alleviate this discount between Conway and Belvieu, is there an opportunity or need to expand Southern Hills beyond that 150,000 barrel a day, and how long do you think it takes before we get more even pricing between those two points?
John Patrick Reddy – CFO: Yeah. I think that there is definitely going to be need for more, and I think we could take the Southern Hills up to probably around 200 over time. So, there is no doubt that you still – I saw yesterday I guess it was still $0.30 or so delta between the two and as you know Steve, and we’ve got 50% of our barrels coming Conway base. So, obviously closing that is a big uplift for us. So, I think given the amount of investment that we’ve seen just by doing Sand Hills and doing Southern Hills. I think, you’ll continue to see more pipelines be built in. and there is some others with other phases as well. So, I don’t think by any stretch of the imagination, this will be the end or that that will be enough to close some of the delta that you see. It’s also like Front Range and Texas Express were important for us to be involved with as well.
A Closer Look: Spectra Energy Earnings Cheat Sheet>>
Stephen Maresca – Morgan Stanley: Then looking at the quarter, you guys realized about $1 I think a gallon on NGL pricing which I guess it compares to sort of a $1.25 guidance that you had to be end of the year, and just your views if you have any just on how this is going to play out in terms of NGL pricing for the rest of the year and how do you think that impacts you obviously?
Gregory L. Ebel – President and CEO: Well, Steve. I mean we’ve put out our impacts on a full year every change in $0.01 in NGLs and I think people have to – just a couple of things we can’t forget, one traditionally and historically, the odds are that your first quarter is going to be the weakest quarter on NGLs, not every first quarter, but most of them. Secondly, inventories tend to peak in May and then those inventories are drawn down and that’s driven by the fact you’ve got all the crackers and turnaround in the first quarter. This year interestingly enough a number of those turnarounds lasted longer than expected, and there were several that were unexpected. Williams, Eastman, they had downtimes that they hadn’t planned on. Then finally, you had the very warm winter that pushed down prices of propane, which obviously has an impact. All of those things I think you’ll see turnaround as the year goes forward and you’ll start to see recovery in the natural gas prices and the natural gas liquids prices as well. So, at this point in time, I’m optimistic that those will turn around and obviously whether we’ll go to the full $1.25 for the year average, we’ll have to see but it’s a little early to make that call.
Stephen Maresca – Morgan Stanley: Final point from me, you mentioned Greg, Southern and Sand Hills is going into DCP Partners in the ’13, ’14 timeframe, which I think was something new. Just how do you view financing there at DCP Partners, those are pretty big projects? Would the parent potentially be willing to take stock back as what we see in a lot recently with some parents helping out on big financing plans? Then just what this means potentially up, where you would like to be? You mentioned the payout ratio and the dividend at 65%, but upside potential, where would you be willing to go down the line with that?
Gregory L. Ebel – President and CEO: Well, just let me work those in reverse. I mean, we haven’t even got to 65%, so we still have ways to go there, and I think that gives us some opportunity which obviously we will look at with the Board later on in the year. With respect to DCP, I mean we’re already financing both Southern Hills and Sand Hills and we’ve typically taken back units for the proportion that we own. I will say DPM has put in its own funding capacity of up to $2 billion in the last year with a $1 billion capacity credit facility, and I would expect that access the market for the remainder of the equity. The real power of this is you will know is that basically the partners of Spectra and Phillip 66 through its ownership of DCP will fund about a third of it, DPM will fund about two-thirds of this and yet the partners will realize about 50% of the earnings and cash flow, all of which will come back in increased distributions to the parents. So, I am pretty excited about that. I think that’s the right way to do it for DCP and I think that will allow DPM to be able to manage that. You are going to use the cheapest cost of debt, i.e., at DCP and at least at this point in time, a cheaper cost of equity at DPM to be able to move those fee-based projects over.
Capital Constraints in DCP
Ted Durbin – Goldman Sachs: Just a follow-up on Steve’s question there. I guess, you are getting a lot bigger in terms of spending profile at DCP, which you – if you continue to expand which you consider not, taking distributions back for a limited amount of time, just to make sure that DCP Midstream can actually fund all the growth CapEx and part of what I am thinking is you continue to announce all these new pipeline projects, maybe you want to expand further into say storage, fractionation, et cetera. Just wondering what the capital constraints are in DCP and if you would be willing to give them a break?
Gregory L. Ebel – President and CEO: Look, I would suggest that the partners are going to do whatever in the long-term economic best interest. At this point in time, we don’t see the need for that, but as you know the pipes that we’re building now are going to quadruple the volumes on NGLs that we’ll be able to move, that’s going to generate cash obviously, some of which are already does stay with the business, but be open to that but at this point in time, I think with the two thirds funding come from DPM and one third from DCP, it should be manageable, but in if it quadruple again in terms of the amount of CapEx, then that’s something we’d obviously have a discussion that make economic sense, I would think that’s interesting to all the shareholders, both 66 and SE, but also and just SE shareholders directly.
John Patrick Reddy – CFO: We’ve modeled this in pretty good detail even for our five our plan at that partnership and it’s really reflecting the fact that it’s a combination of drop downs and co-investment and that construction takes place like on the pipelines over multiple years, so it does look like it fits pretty nicely with DPM’s ability to issue equity in reasonable tranches and even for things like the potential fractionation investments in the future, as Greg says we just haven’t faced that yet.
Ted Durbin – Goldman Sachs: Just any update you can give us on the New Jersey New York project when you’re expecting approval from FERC still feeling good about the sort of $1.1 billion cost estimate there?
John Patrick Reddy – CFO: Yeah. Absolutely, the range we put $1 billion to $1.2 billion, we feel good about that. I would expect that we’ll get FERC approval. I am reading tea leaves a little bit but I feel pretty good about getting that this month and then moving on to construction in the summer. As you know their schedules – they meet typically monthly and so obviously that’s takes up, but I’d expect that which getting into construction here, this summer is obviously going to be important for us to hit our November 23rd time frame, but we are all lined up from contractors, from equipment, from what we can do on the land side prior to getting a FERC approval. So, I feel good about where we are Ted, and believe we will get that in on the cost estimates that we’ve provided you.
Ted Durbin – Goldman Sachs: Then last one for me. I don’t know how much you can comment, but there is a large, called the large packets of natural gas pipeline assets that are out there in the market. I’m just wondering, how you’d see those as a potential set with your asset base?
Gregory L. Ebel – President and CEO: Yeah. I’m not going to comment about that other than to say that anything there are various assets, they come on the market every so often. We have a very strong balance sheet. The balance sheet just continues to get stronger. We have great liquidity, good cash flow. We obviously have SEP and we have DPM, and I don’t think there is any doubt that we could pounce very quickly if we found something that we thought a, make a good strategic sense and b, we could do from an economic perspective. So, I would leave it right there.