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Spectra Energy Partners, LP (NYSE:SEP)

Q4 2013 Earnings Call

February 4, 2014 9:00 a.m. ET

Executives

Julie Dill - Chief Communications Officer, Spectra Energy

Pat Reddy - CFO

Greg Ebel - President & CEO

Analysts

Steven Maresca - Morgan Stanley

Brad Olson - Tudor Pickering

Carl Kirst - BMO Capital

Craig Shere - Tuohy Brothers

Curt Launer - Deutsche Bank

Operator

Good morning. My name is Natalia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter Spectra Energy and Spectra Energy Partners' Earnings Call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I would now turn the call over to Ms. Julie Dill. You may begin your conference.

Julie Dill

Thank you, Natalia, and good morning everyone. I'm Julie Dill, the Chief Communications Officer for Spectra Energy. Thanks all for joining us today for our review of Spectra Energy's 2013 fourth quarter and year-end results.

Before I hand the call over the call to Pat Reddy, our CFO, I'd like to mention a few items. You likely noticed in our press release this morning that we've made a number of changes to our financial reporting as a result of the drop-down to SEP of substantially all the U.S. pipeline, storage, and liquids assets on November 1 of last year.

I would like to walk through those with you now in some detail to ensure you're aware of all the changes you will be seeing. Let me start with Spectra Energy. We have a new reporting segment we call Spectra Energy Partners. This segment includes all U.S. Transmission and our Liquids business as well, which as you know reflects our crude and natural gas liquid assets. For financial reporting purposes, Maritimes and Northeast Canada is now reflected in our Western Canada Transmission and Processing segment. Previously, it was included as a part of U.S. Transmission. As a note, that asset was not included in the November, 2013 drop-down.

Our segment financials have been recapped to reflect these changes, so all variances will be on a comparable basis. So what we heard from you is that EBITDA and distributable cash flow will be more relevant financial measures going forward because of the greater emphasis on cash flow and cash generation capabilities associated with the drop-down. Consequently, our primary financial reporting will be of those metrics.

Our definition of EBITDA has changed just slightly. The EBITDA measure we will use today and going forward differs from the proportional EBITDA we previously reported, which included our share of interest, taxes, and depreciation associated with our unconsolidated subsidiary and was reduced for minority interest in those same items. Our new EBITDA metric is more aligned with our peers and represents EBIT and depreciation for consolidated entities, along with the equity earnings of our joint ventures. This will make our EBITDA more transparent and easier to calculate.

Now our EBITDA will reflect what is reported on the financial statements. This change is again in response to what we heard from you, as it will more closely align our reporting to that of our peers and should provide easier analysis as numbers will be more readily identifiable from the financial statements.

For Spectra Energy Partners, the gas transmission and storage segment has been renamed U.S. Transmission. SEP's other reporting segments are Liquids and Other. We're now using the term distributable cash flow instead of cash available for distribution.

And EBIDTA has been recapped for 2012 and 2013 as if SEP owned all the U.S. assets from January 1, 2012, and as if SEP owned all of the Express-Platte as of March 14, 2013. This recasting was done as a direct requirement of our accounting rule.

Distributable cash flow was not recapped because we're required to reflect the cash as it actually flows. We also did not recast any of our financing or number of outstanding units.

One final note, you'll notice that EBIDTA for SEP will be slightly different than the EBIDTA reported in the Spectra Energy Partners segment within Spectra Energy. This is related to the charges SEP pays to SE for services rendered in support of the partnership and because SEP reports its own corporate other when it's reported as a standalone company. At the Spectra Energy consolidated level those same amounts are included in corporate other, not within the SEP segment.

So there is lot of changes to be sure and if you need some help navigating through all this my team and I will be very happy to assist.

Now a quick reminder that we will rollout our 2014 business outlook and three-year financial plan tomorrow morning in New York and we look forward to seeing many of you there. For those who can't make it the meeting will be webcast and details are included on our websites at sepctraenergy.com and spectraenergypartners.com.

Now given our forward looking in-depth focus tomorrow I anticipate today's call may be a bit shorter than usual, but of course we will allow ample time for your questions related to our 2013 results and the reporting changes we've made.

For today's call Pat Reddy, our Chief Financial Officer, for both Spectra Energy and Spectra Energy Partners will go through our results for the quarter and the year, and then Greg Ebel, our President and CEO, will wrap up the call with some closing thoughts on the year and what to look forward to in 2014.

So let's get started. Some of what we will discuss today concerning future company performance will be forward-looking information 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 and Spectra Energy Partners Form 10-K and other filings made with the SEC concerning factors that could cause those results to differ from those contemplated in today's discussion.

As this is a joint presentation, the terms "we", "our", and "us" refer to Spectra Energy and/or Spectra Energy Partners' as appropriate.

And in addition today's discussion will include certain non-GAAP financial measures as defined as under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available on our website.

And with that, let me now turn things over to Pat.

Pat Reddy

Thank you, Julie, and good morning everyone, and thanks for joining us today as we report on our fourth quarter results and 2013 performance. As Julie explained, we're transitioning our reporting to reflect the structural changes implemented in late 2013, with the drop-down of the U.S. assets to Spectra Energy Partners.

As a result, we will be focused on EBITDA and distributable cash flow as our primary measures going forward. But that said we thought it would be useful in the transition to share with you our fourth quarter and full year 2013 net income, earnings per share, and EBIT results for the company and by business segment just as we did for the other quarters in 2013.

We reported $0.41 in ongoing earnings per share and $278 million in ongoing earnings for the fourth quarter compared with $0.32 of EPS and earnings of $213 million in the 2012 quarter. For the year, we delivered ongoing earnings of $1.64 per share or $1.1 billion in ongoing earnings. That's an almost 15% increase over last year and 9% increase over the target we shared with you at the beginning of the year.

And as a reminder, our earnings per share for the fourth quarter and for the full year of 2013 were reduced by the drop-down transaction, which resulted in an increase in non-controlling interests or NCI. This solution is in line with the $0.02 to $0.03 reduction in EPS we communicated to you last November when we announced the transactions closing.

Ongoing EBIT results for the quarter were $603 million compared to $474 million in the prior year. The EBIT summarized here is at the 100% level prior to NCI reduction. This is different from the EBIT we discussed previously which was net of NCI reduction.

You will also notice that we have a new reporting segment Spectra Energy Partners. As Julie explained, this segment includes the combined results of the Liquid segment and our former U.S. Transmission segment, excluding Maritimes and Northeast Canada, which is now reflected in Western Canadian results.

I'm not going to go through the variance this quarter-to-quarter for EBIT as I will do that using EBITDA. So let's take a look at our fourth quarter EBITDA results. Slide 6 shows fourth quarter EBITDA for our four reporting segments and other, which represents our corporate governance cost. This EBITDA measure is slightly different than the proportional EBITDA we reported on in the past, specifically the EBITDA we previously provided included our share of interest, taxes, and depreciation associated with unconsolidated subsidiaries and was reduced for minority interest in those same items. Now EBITDA is more aligned with our peers and represents EBIT and depreciation for consolidated entities along with the equity earnings of our joint ventures. This will make our EBITDA more transparent and easier to calculate.

So let's start with the Spectra Energy Partners segment, which includes two businesses U.S. Transmissions and Liquid. SEP's ongoing EBITDA was $369 million compared with $316 million in 2012. Quarterly results benefited greatly from the acquisition of the remainder of the Express-Platte pipeline system, which has performed better than expected due to higher revenues. The increased earnings also reflect the contributions from pipeline expansion including the New Jersey-New York project place into extended service November 1. Year-end EBITDA for SEP was about $1.4 billion compared to approximately $1.3 billion in 2012.

Turning to Distribution, that segment reported fourth quarter EBITDA of $156 million compared with $147 million in 2012. The increase is due to higher customer rates, colder weather, and the negative effect in the fourth quarter of 2012 of the decision from the Ontario Energy Board requiring certain transportation revenues be refunded to customers, partially offset by higher operating and fuel costs, and a weaker Canadian dollar. Year-end reported EBITDA for distribution was $574 million compared with $587 million in 2012.

Our Western Canada business reported fourth quarter EBITDA of $215 million compared to $152 million in 2012. The increase was primarily due to higher earnings at the Empress Natural Gas Liquids business attributable mainly to higher propane sales prices, improved contracting structures, and lower cost compared to fourth quarter of last year. You recall that in the fourth quarter of 2012 we realized an EBITDA loss of $13 million at Empress and this year Empress recorded EBITDA of $52 million, a $65 million improvement.

We did a lot of work this past year to stabilize realized cash flows in Empress and tomorrow Mark Fiedorek will talk about our continued plans to de-risk this asset and reduce the margins also that we've historically seen at Empress.

Our expansion projects did contribute positively to our EBITDA. These increases were partially offset by the effect of a weaker Canadian dollar. Year-end reported EBITDA for the segment was $736 million compared to $694 million in 2012.

Field Services reported fourth quarter EBITDA of $72 million compared with $58 million in 2012. The change in EBITDA is attributable primarily to higher commodity prices, and the favorable effect of NGL marketing, and the positive movement on hedges associated with drop-down to DCP Midstream Partners.

Higher earnings due to volume growth from the incremental processing capacity placed into service was more than offset by fourth quarter 2013 weather effect in the Permian Basin, and higher interest expense, primarily as a result of newly issued debt at lower capitalized interest in the 2013 quarter.

During the fourth quarters of 2013 and 2012 respectively DCP's realized NGL prices averaged $0.81 per gallon versus $0.77, NYMEX natural gas averaged $3.60 versus $3.40, and crude oil averaged $97 per barrel versus $88. Year-end reported EBITDA for Field Services was $343 million compared to $279 million in 2012.

DCP Midstream paid distributions of $215 million to Spectra Energy during 2013 compared to $203 million in 2012.

Other, as I mentioned, is comprised primarily of corporate costs including benefits and captive insurance. Net outgoing costs were $14 million in the fourth quarter compared to $10 million in the fourth quarter of 2012. Year-end ongoing costs for other were $59 million compared with $36 million in 2012 with the increase primarily related to equity based benefit cost.

Total ongoing EBITDA for the enterprise was $798 million for the quarter and just over $3 billion for the year.

So let's move to our other new metric for Spectra Energy distributable cash flow. For those of you who follow our MLP, you are accustomed to seeing distributable cash flow but this is a new metric for Spectra Energy at the corporate level. We think this is an important measure for you to follow as it will focus on the strength of our cash flow and our ability to pay any further dividend for our investors.

Distributable cash flow for the 2013 quarter was $296 million compared to the $161 million in 2012. For the year DCF was approximately $1.2 billion compared with about $1 billion in 2012.

This schedule is fairly straightforward but I wanted to highlight a few of the more material items. 2013 interest expenses was up compared to 2012 due to higher debt balances primarily related to the acquisition of Express-Platte and lower capitalized interests partially offset by a weaker Canadian dollar. 2013 cash taxes benefited from higher extended bonus depreciation. And lastly, maintenance CapEx for the year came in around $680 million, about $40 million more than 2012 primarily due to 2013 plant turnaround in Western Canada.

That's a look at Spectra Energy. So now let's turn our attention to results of Spectra Energy Partners. SEP reported strong results in the fourth quarter, which closed out a great year of transformative acquisition, continued solid performance from our fee-based assets, and substantial distribution growth for our unitholders.

As Julie mentioned at the beginning of the call, for comparative purposes SEP's distributable cash flow reflects the acquisitions as they occurred since cash is cash with no special accounting treatment. However, EBIDTA as reflected on this chart has been recapped as if the acquisition of U.S. Transmission assets occurred January 1, 2012, and the Express-Platte acquisition occurred as of March 14, 2013.

So as you can see the segments delivered strong results across the board. U.S. Transmission produced $326 million in EBITDA for the quarter and $1.3 billion for the year. Increased earnings was driven by expansion projects on our Texas Eastern, most notably contributions from New Jersey-New York project.

Our Liquids business delivered $41 million in EBIDTA for the quarter and $132 million for the year. We are very pleased with the contribution to our financial results that we're seeing from the Express-Platte system. In fact, the Express-Platte delivered EBITDA in the nine months we owned it equal to what we thought our first full year EBIDTA would be. Duane Rae will talk to you tomorrow about these assets, the value we've already captured and the opportunities we continue to see that will grow this segment's EBIDTA.

Next SEP's ongoing EBIDTA for other reflected higher cost for both the year and the quarter primarily as a result of governance cost falling in November, 2013 drop-down. You'll also noticed that ongoing 2013 EBIDTA reported for SEP is slightly lower than EBIDTA reflected within Spectra Energy's results. The difference represents the cost of services rendered by Spectra Energy in support of SEP what we call governance scheme. These are now included in Spectra Energy's corporate other at the SE levels, but SEP reports it's on corporate others as a standalone company. In total, SEP's ongoing EBIDTA for the year was $1.4 billion, up from about $1.3 billion in 2012.

I know you're particularly interested in distributable cash flow. So let's move there. First you will see that that we renamed cash available for distribution to distributable cash flow to be more consistent with the terminology used by other MLPs. For the quarter, distributable cash flow was $120 million, more than double the $54 million reported in the 2012 quarter.

DCF for the quarter and the year was driven significantly higher by the November 1 drop-down of Spectra Energy's U.S. transmission, storage, and liquids assets, and by the addition of the Express-Platte assets. These acquired assets bring quality, fee-based distributable cash flows, and future growth from organic expansion over the coming years. We will have more to say about our growth tomorrow at our Analyst Meeting.

These strong financial results enabled us to deliver our 25th consecutive quarterly distribution increase of $0.03 per unit, bringing us to the annual distribution equivalent of $2.185 for the partner unit. That's 10% above the annualized distribution a year ago and reflects our continued commitment to deliver unit value. The $0.03 increase was a significant one-time recognition of the acquisition of the U.S. assets. But going forward you can expect at least a $0.01 per unit increased per quarter.

As anticipated we saw distribution coverage in this quarter below one-time, primarily driven by just two months of cash contributions from the acquisition of the U.S. assets, offset by the full quarter's distribution increase.

Fourth quarter 2013 was unique and the coverage ratio should not be viewed as being indicative of future coverage. As we previously stated, and as you will see tomorrow, that reinforced when we go through our plan numbers, we continue to expect our ongoing distribution coverage to be between 1.05 to 1.15 times.

So to conclude, Spectra Energy and Spectra Energy Partners delivered great financial results and created substantial shareholder value in 2013.

So let me turn the call back to Greg to wrap up.

Greg Ebel

Well thanks very much, Pat. As you said 2013 really was a strong year for Spectra Energy, Spectra Energy Partners, and for investors. Beyond the financial results, they exceeded our commitments to investors in the reliable, attractive dividend and distribution growth we've been able to deliver. I did want to take a minute to highlight a few other successes in 2013.

Spectra Energy exceeded the S&P 500 average shareholder return and SEP's return surpassed the Alerian MLP index. We placed $6 billion of capital into service either through the expansion of our assets like New Jersey and New York or those at DCP or from the acquisition of new assets like the Express-Platte system and our interest in Sand Hills and Southern Hills NGL pipelines.

We secured $7 billion of new growth opportunities, projects like our Sabal Trail pipeline into Florida, AIM, OPEN and the Gulf markets expansion. We successfully completed the drop-down of our remaining U.S. pipeline assets to SEP, creating a $20 billion MLP with premier fee-based assets and an attractive distribution growth profile.

We implemented a strategy at Empress that derisks our earnings stream and that translates into an expected annual EBITDA in the $40 million to $70 million range. We completed a successful open season on Express pipeline resulting in 90% of the capacity now being committed for more than a decade and at higher rates. Union Gas reached a settlement on its 2014 to 2018 incentive rate structure, which ensures a stable platform for growth and with earnings upside. And we maintained the investment grade ratings across all of our entities and even secured an upgrade rating for SEP.

With our first and last mile advantage, over the last 12 months we furthered our leading positions in not only natural gas transportation in the Northeast and Southeast U.S., but also gathering and processing of natural gas in North America, natural gas distribution in Ontario, NGL production and logistics in the U.S. and Western Canada, and we made a very positive move into the crude oil transportation business.

I'm pretty pleased with the year and more value we've delivered to our investors. The successes of the past year leave us well-positioned for the future and provide great momentum as we move into 2014. We're going to full advantage of this positive momentum and continue to deliver attractive returns for our investors now and over the longer term. And I'm looking forward to talking with you more tomorrow about what you can expect from us in 2014 and going forward. We appreciate you joining us and your ongoing interest in Spectra Energy and SEP.

And with that, let me turn things over to Julie so that we can take your questions about 2013.

Julie Dill

Thank you, Greg. And again, thanks. We're ready to hear from you. So we're going to open the lines up for your question. So we look forward to being with you tomorrow to discuss our 2014 outlook. So I'd ask that your question this morning focus on our 2013 fourth quarter and year-end result. So Natalia, if you wouldn't mind giving instructions again on how to ask questions, I'd appreciate that.

Question-and-Answer Session

Operator

(Operator Instructions) We have a question from the line of Steven Maresca with Morgan Stanley.

Steven Maresca - Morgan Stanley

I look forward to seeing you guys tomorrow, so I'll be brief. Just one cash flow question and then just one fundamental question. On distributable cash flow you're now breaking this out for SE and thanks for doing that. It seems like coverage for your dividend based on the fourth quarter and full year was around 1.3 to 1.4, and I guess can you just remind us the target for SE to be in that 1.1 or 1.2 range and how does this fit into if you got this I guess coverage your stated dividend growth of 9% to 10%?

Pat Reddy

Yes, we're still expecting it to be 1.1 to 1.2 and in fact I think Q4 number was more like 1.5. And if you looked at it from the numbers perspective, but yes we will outline this tomorrow but absolutely still expect to be in that 1.1 to 1.2 range.

Obviously we're doing a lot better than that. I would suggest we have more room. So let's do something to watch for from perspective over the longer-term.

Steven Maresca - Morgan Stanley

Okay. Understood. And then the second one is just your fundamental and can you give any update on the NEXUS project in terms of discussion with LDC's design agreement and how that's progressing?

Greg Ebel

You're going to hear from Mr. Yardley about that tomorrow. So Steve, if you will, indulge us but let's chat about that tomorrow.

Operator

Your next question is from the line of Brad Olson with Tudor Pickering.

Brad Olson - Tudor Pickering

Two quick ones from me. First, it looked like Canadian results even leaving aside the impact of Maritimes and Northeast were up about $60 million year-over-year. I know one of your objectives for this year was to reduce the amount of commodity sensitivity in that business, and although upward commodity sensitivity is obviously better than downward, I was wondering how to reconcile the really strong fourth quarter results in Western Canada with your objective to reduce some of the propane exposure?

Greg Ebel

Well, I think a couple of things to say there. One, really, as I think we talked about the focus in 2013 was much more on contracting structures of commercial issue and how we get products and sell the product. In 2014, early at the start, we've started to put some hedging in place but it's still going to be a relatively small piece. So I'd say at any one point in time this is probably only about 45% of the margin that you would had if you will, from a commodity perspective. So rest of it it's all going to be from commercial structures.

You might recall, if you go back to 2012, and that second quarter where we saw the big drop. That was because we got outside from a contracting perspective in what we paid for the input product versus what we could sell it and between Pat and the commercial guys they made a real effort to break those down.

So as I said, Brad, I think thinking $40 million to $70 million in EBITDA we feel pretty comfortable in that range. That being said obviously much higher commodity prices that you're seeing in the first quarter are a real positive as well.

So I think though the whole complex there in Western Canada has got a little bit more stable commercial outlook. When I say the whole complex, not just our assets, but the entire both the consumers, the producers providing us, and obviously the infrastructure players into a more, shall we say, a rationale approach to how they're dealing with commercial issues.

Brad Olson - Tudor Pickering

And I guess following up on your comments about the contracting, is it fair to say even as propane prices have climbed pretty dramatically here recently that we wouldn't expect to see the impact of the extraction premiums that caused you the headaches in 2012?

Greg Ebel

I think that's fair of course the market bounced around. But as I said I think there is a more rational approach from a commercial perspective and I think I'm comfortable in saying the entire area if they realize that those extraction premiums weren't sustainable from a business perspective.

Pat Reddy

Hi, Brad, this is Pat. When Greg refers to sort of a different commercial model, we thought about a Bcf of in-light gas that they were purchasing and that's where our hedges and our fixed forward purchases of natural gas are concentrated that's where we do have extraction premiums and so our attempts there to lock in that cash margin. Then we buy raw mix in the field and we're able to fractionate it at our plant because we got capacity that some others don't have and that we do on a current basis. And so we know what the profitability of that is and then we make spot purchases that tend to go in and out in a month although some does go into inventory, and as our inventory rebuilds we will be doing some NGL hedging there but so that's kind of the three pieces of the business.

Brad Olson - Tudor Pickering

And then just one last one from me as far as the impact of the Express pipeline being fully contracted after your successful open season, is there anything from that open season or anything that that we're seeing contractually that is flowing through into the Q4 results or will we have to wait till 2014 to see some impact from that?

Greg Ebel

Yes, it's really '14 and '15 those contracts ramp up Brad. And again we will outline, you will be able to see that very clearly tomorrow.

Operator

(Operator Instructions) Our next question is on the line of Carl Kirst with BMO Capital.

Carl Kirst - BMO Capital

Just wanted to wrap back to Empress for a second just to clarify from the numbers that were said, and Pat I apologize you said $52 million, I didn't catch if that was from Empress, I didn't catch if that was in the fourth quarter or that was for the full year 2013?

Pat Reddy

Carl, our EBIDTA for the year from Empress was $80 million and in the fourth quarter it was $52 million.

Carl Kirst - BMO Capital

And then Greg did I understand then when you were saying that as you guys were looking forward and I understand you'll go into more depth in this tomorrow, but generically if we think of a 100% margin from Empress, 55% of that kind of gets a Field if you will by the new commercial structure and then 45% lends itself to hedges, is that a correct mix?

Greg Ebel

Yes, that's a way from a bottom-line perspective. Obviously, yes that's the way to think about it. Obviously even on the commodity, I mean if there is all commodity -- the part which you can't do contractually that easy, we wouldn't hedge all of that. That's why I'm thinking -- 45%, 55%. I think that's probably a fair way to look at it.

Pat Reddy

Just to clarify Carl, the 45% is what would be hedged. The rest would be Field purchases and spot.

Carl Kirst - BMO Capital

Then just a quick question with respect to DCP in the fourth quarter. Is there any way to quantify what the Permian results were either by volume impact or EBIDTA impact?

Pat Reddy

Let's see, it was I believe in about the $10 million range. Carl, I can check that for you.

Carl Kirst - BMO Capital

And then may be last question and understanding just a little bit more macro and Greg you may speak to this tomorrow. But as you think about the migration from EPS to EBIDTA and distributable cash flow obviously not for migration with everything, you guys have been doing, when management, if we think back to prior years the quote guidance wasn't always just a guidance, it was a budget and it was a number that was hit, that would also influence executive compensation et cetera. Has that shifted as well from EPS to an EBIDTA distributable cash flow or is this more what you might call communication changes?

Greg Ebel

No, I'd say that above. I mean we'll still have some element of EPS, 20%, 25% because ultimately that does flow through that. That's the only commodity exposure if you will directly on earnings that we have because everything else is EBIDTA and return on capital employed from a financial target perspective, which is commodity neutral.

So I think having that balance there obviously makes sense. And ultimately, as you know, the bulk of executive compensation is stuck and that's going to be driven by, I think we would agree from a dividend perspective or distribution perspective, which is obviously BCF related.

Operator

Our next question is from the line of Craig Shere with Tuohy Brothers

Craig Shere - Tuohy Brothers

Two quick questions. One, a quick follow-up on Brad and Carl's Empress questions. May be I don't recall correctly what the long-term legacy guidance was, but I thought it was may be in the $50 million range with volatility and now, if I understand, you're talking $40 million to $70 million with a lot less volatility. Am I understanding that you are effectively, perhaps, raising the bar while lowering risk?

Pat Reddy

Not exactly, Craig. We talked about $30 million of EBITDA as I'm kind of looking forward to 2014 and if we were to find out with our commercial model, which allows us to buy more raw mix, we are upping that EBITDA from $30 million to $40 million to $70 million and really that's kind of a wide range but just given the opportunities we're seeing right now, because we've got frac capacity at our plant to buy raw mix in the field, we believe for this year '14 and may be '15 at $40 million to $70 million is the right range. So let's take the midpoint of that call it $55 million, I think that's up from $30 million of EBITDA that we said was kind of our breakeven run rate.

Craig Shere - Tuohy Brothers

Do you feel this '14 and '15 is somewhat indicative of very long-term sustainable? Or we are just getting some nice tailwinds, whereas before we had headwinds and it will average a little lower, long-term?

Greg Ebel

Well, we will talk to that a little bit tomorrow. Look, I mean you're not going to remove all the commodity volatile, I think as we -- if you go back to 2012, Craig you will remember with that huge swing from very positive to very negative. That's what we're trying to take out. So that we don't actually have much discussion about Empress as a very small proportion of EBITDA and cash, but and so hence that's why I think we're feeling pretty comfortable about the range. And again let's avoid the negative type impacts and extraordinary upside while still leaving some variability in the business.

Craig Shere - Tuohy Brothers

Understood. And the second question, and I don't know if it's appropriate for this call or tomorrow, but in a number of calls recently there has been questions around potential incremental, favorable, shareholder-friendly restructuring efforts, particularly around the DCP interests. And you didn't quite get as good of uplift as you may in the beginning of '14. There was some Permian shut-in headwinds but it's certainly looking a lot better. A lot better. And I wonder if the commodity tailwinds are in any way affecting your decision-making about when something might be appropriate there?

Greg Ebel

Well, I will speak to that tomorrow, but I guess my long-term perspective would be -- we always from a planning perspective we always assume commodity neutral and I think we've had a long history of doing that so as not to plan upside or downside on commodity and that doesn't really go into the -- from a -- yes if we got served from a very long-term perspective if we didn't think NGLs were important that might have an issue just the same way that if we didn't think natural gas was going to be viable.

But in the near term or transactional perspective, we would stay neutral, which doesn't say positive or negative about any, the way we look at transactions. They have to be from a complete material valuation uplift perspective on anything from M&A to restructuring et cetera, and I think you see that with the SEP transaction.

Operator

Our final question is from the line of Curt Launer with Deutsche Bank.

Curt Launer - Deutsche Bank

One question cleaning up to fourth quarter relative to maintenance capital expenditures at SEP, this is the first time you disclosed the maintenance CapEx well without both segments being part of the C-Corp parent. So the $92 million was for the fourth quarter, many companies talk about seasonality in maintenance CapEx being more in the second and third quarters rather than the fourth. Seems like your maintenance increased as you approach the year-end I just wanted to ask whatever color you could provide about that at this point. So you could begin to think about '14.

Greg Ebel

Curt, good question. We sometime see seasonality if we try to get work completed by year-end. Actually what happened in the fourth quarter at SEP was we had some invoices come in related to some work we did in a place we call our Oakmont compressor station and we had thought that would be 2014 CapEx and it came in, in the fourth quarter of '13. So tomorrow we are going to give you some more inside into the run rate on growth and maintenance CapEx through SEP in our three year plan on more of a normalized basis. We will occasionally see changes between quarters or in this case a flip between the coming year and this year and but we'll show you what our run rate is tomorrow.

Pat Reddy

I think what you can see though from both the '12 and '13 numbers there, Curt, is that fourth quarter perhaps is not indicative of the run rate on annuity basis.

Operator

There are no further questions.

Julie Dill

Thank you, Natalia, and thanks everyone for joining us today and we do hope that we see or hear from you tomorrow when we rollout our 2014 business outlook and our financial plan during our analyst and investor meeting in New York.

For information on participating on that, via phone or the internet, please visit the Investor Section on either spectraenergy.com or spectraenergypartners.com.

And as always, if you have additional questions before then, please feel free to give Roni Cappadonna, Derick Smith or myself a call. We are traveling to New York today, so we may not be able to get back to you immediately but we'll get back with you just as quick as we can. So anyway, I hope to see you tomorrow and have a good day.

Operator

This concludes today's conference call. You may now disconnect.

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