Spectra CEO: Lower Nat Gas Prices Don't Impact Our Profits
It might seem like now is the worst time to get into the nat gas business, but that's not the case for newly public Spectra Energy. Do they know something we don't? CNBC’s Erin Burnett asked Paul Anderson, the company’s chairman.
Erin Burnett– How much has the weather hurt you?
Paul Anderson - Well, actually we are somewhat independent of the weather because our business is based on service, not the production and sale of natural gas. We store natural gas. We process it. We gather it. We distribute it - but we don’t actually produce it.
Erin Burnett – But if the weather is warm and people are demanding less you transport less and distribute less, don’t you?
Paul Anderson - We make our money on capacity charges. Our variable costs are covered by the rates on a usage basis. It’s somewhat like the cable companies, you don’t really care how much people watch television you care how many subscribers you have and that is the way our rates are set up. They are primarily focused on capacity.
Erin Burnett – You’re saying you can continue to grow profits, even if you see a plunge in natural gas prices?
Paul Anderson - Certainly in the short term. The price of natural gas has very little to do with our profitability. In the long term the price of natural gas will obviously affect how much demand there is… but as far as the commodity impact in a given year, it is very minimal for us.
Erin Burnett – Is it your expectation that the price of natural gas will go down?
Paul Anderson - Our long term planning is based on natural gas prices in the range of $5 - $7. And you know there will be times when it spikes above that and drops below that, but that is the range we are using for our long range planning.