spectra energy _Q107Slides

May 8, 2007

First Quarter 2007 Earnings ReviewFred Fowler

President and CEO

Greg Ebel CFO

22

Safe Harbor StatementSafe Harbor StatementSome 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 DisclosureIn 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.

33

Spectra Energy’s First Quarter Spectra Energy’s First Quarter • Infrastructure successfully in place to support stand alone

company • Solid results at US Transmission and Distribution; extreme

weather and commodity prices dampened Field Services earnings

• On track with development and execution of projects to drive 5-7% compound annual ongoing diluted EPS growth for 2007-2009

• Filed Spectra Energy Partners S-1Committed to delivering results to shareholders with solid, steady growth and an attractive dividend to provide a total return of 8-10% in a relatively low risk environment

44

Earnings SummaryEarnings Summary1Q07 1Q06

Reported Net Income $ 236 $ 222Discontinued Operations -- 22Special Items 4 (25)

Ongoing Net Income $ 240 $ 219Reported Diluted EPS $ 0.37 n/aOngoing Diluted EPS $ 0.38 n/a

• Ongoing earnings were up 10% compared with 1Q06• Special items:

• 1Q07 – separation costs• 1Q06 – positive settlement of a customer’s transportation contract and a gain on

an asset sale• Discontinued operations relate to the businesses retained by Duke Energy but

reported as a part of Spectra Energy Capital for 2006

55

U.S. TransmissionU.S. Transmission

• 1Q07 ongoing segment results were up by $9 million or 4% compared with 1Q06 primarily a result of:• lower operating costs due to capitalization of project development costs and

favorable resolution of ad valorem tax issues, and higher revenues from improved storage prices and expansion projects placed in-service

• partially offset by decreased earnings from lower gas processing volumes associated with pipeline operations

• Special item in 2006 was related to the positive settlement of a customer’s transportation contract

Reported & Ongoing Segment EBIT ($ millions)1Q07 1Q06

Reported Segment EBIT $ 220 $ 235Special Items --- (24)Ongoing Segment EBIT $ 220 $ 211

66

DistributionDistribution

• 1Q07 ongoing segment results were up by $26 million compared with 1Q06 primarily due to:• increased usage due to colder weather • higher distribution rates in 2007• increased storage revenues reflecting strong storage values

• Weather was close to normal for 2007; about 12% colder compared with 1Q06• Phase I of Dawn-Trafalgar commissioned in last quarter of 2006 and is contributing

to earnings


Reported Segment EBIT $ 144 $ 118Special Items --- ---Ongoing Segment EBIT $ 144 $ 118

77

Western Canada Transmission & ProcessingWestern Canada Transmission & Processing

• 1Q07 ongoing segment results were lower by $8 million compared with 2006 as a result of: • lower processing revenues reflect reduced producer activity in the Fort Nelson

area and higher operating costs • partially offset by higher NGL results at Empress

• Empress average frac spread for 1Q07 was approximately $4.20


Reported Segment EBIT $ 74 $ 82Special Items --- ---Ongoing Segment EBIT $ 74 $ 82

88

Field ServicesField Services

• 1Q07 ongoing EBIT was down by $45 million compared with 1Q06 due primarily to:• reduced operating efficiency at various facilities as a result of extreme winter storms• lower commodity prices• higher gas marketing margins in 1Q06

• Special items relate to Spectra Energy’s 50% share of stand-up costs in 1Q07 and a gain on sale of assets in 1Q06

• 1Q07 crude oil prices averaged about $58/barrel -- the strip price for the remainder of 2007 is in the mid $60’s


Reported Segment EBIT $ 82 $ 144Special Items 3 (14)Ongoing Segment EBIT $ 85 $ 130

99

OtherOther

• “Other” primarily includes corporate governance costs and captive insurance• Favorable ongoing results due to lower corporate costs in 1Q07 and losses reported

in 1Q06 of $24 million for corporate hedges associated with Field Services earnings, which expired at the end of 2006

• Special item for 1Q07 relates to separation costs

Reported & Ongoing EBIT ($ millions)1Q07 1Q06

Other Reported EBIT (Loss) $ (15) $ (49)Special Items 3 ---Other Ongoing EBIT (Loss) $ (12) $ (49)

1010

Ongoing EBITDAOngoing EBITDA

• U.S. Transmission Ongoing EBITDA also includes Spectra Energy’s 50% share of Gulfstream’s 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

Ongoing Segment EBITDA ($ millions)1Q07 1Q06

U.S. Transmission $ 282 $ 272Distribution 182 153Western Canada Transmission & Processing 106 117Field Services 144 181Other (12) (47)Total Ongoing EBITDA $ 702 $ 676

1111

Additional ItemsAdditional Items• Interest expense for 1Q07 was $155 million compared with $143 million for 1Q06• Spectra Energy’s effective tax rate for the 1Q07 was 34% compared with 38% last

year. • Canadian currency net after tax impact for 1Q07 was unfavorable by about $1.2

million compared with 1Q06• Debt to Total Capital at March 31, 2007 is 59%; net Debt to Total Capital is

approximately 57.5%• Expect new credit facility of about $1.5 billion to replace $950 million existing U.S.

facility• Rating agency actions at Spectra Energy Capital

• Moody’s: upgraded Senior Unsecured debt rating to Baa1 -- Outlook: Stable• S&P: affirmed Senior Unsecured debt rating at BBB -- Outlook: Stable

1212

Maritimes Phase IV /Canaport

Dawn Storage Deliverability

Dawn-TrafalgarPhase II – III

Processing Plant Expansion

Ramapo

Islander East

TEMAX/Lebanon East

Time II

Gulfstream Phase III & IV

Copiah Storage

SE Supply Header

Cape CodDawn Area Storage

St. Clair Power

Moss Bluff Expansion

Egan Expansion

Project Strategy

Supply Push

Market Pull

Gas Gathering Pipelines

Lebanon Connector

Rockaway Beach

AGT East/West

NE Gateway

Steckman Ridge

AccidentGlade Spring

Well-Positioned for Growth ~$3 Billion of Expansion Opportunities 2007-2009 Well-Positioned for Growth ~$3 Billion of Expansion Opportunities 2007-2009

1313

Maritimes Phase IV /Canaport


1414

NE Gateway


1515

SE Supply Header


1616

Value PropositionValue Proposition• A premier pure-play midstream natural gas company

in North America• Attractive industry dynamics• Positioned in fastest growing markets• Diverse supply base• Seasoned management team• Strong balance sheet and stable cash flows• Financial flexibility• Solid steady growth and attractive dividend yield

Economy & Finance

spectra energy _Q107Slides