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BP Signs $9.61B LNG Supply Deal With South Korea's KOGAS

Zacks Equity Research

BP plc BP recently struck a 15-year liquefied natural gas ("LNG") deal with South Korea’s state-run natural gas company Korea Gas Corporation (“KOGAS”). The contract incorporates an option of extending the deal for three more years. Total value of the transaction is estimated at $9.61 billion.

Per the deal, BP will supply around 1.6 million tons of LNG per annum (MTPA) beginning in 2025. Low natural gas prices in the United States are expected to result in growing LNG exports and long-term deals, as is evident from BP’s contract with KOGAS. The British energy giant can supply the LNG either from the Freeport LNG terminal located in Texas or Calcasieu Pass terminal in Louisiana.

The Freeport LNG terminal, which was scheduled to start operations this month, will have a total export capacity of 13.9 MTPA. In 2013, BP had signed a 20-year sale and purchase agreement with Freeport LNG for 4.4 MTPA. Notably, Venture Global’s 10 MTPA Calcasieu Pass terminal is expected to come online in 2022. Last year, BP had struck a deal to buy 2 MTPA of LNG from the Calcasieu Pass terminal. The diversification of supply locations enables the energy major to serve the rising global demand for cleaner energy sources and expand its end-user portfolio.

Markedly, South Korea is the third largest importer of LNG. Being the only LNG wholesaler in the country, KOGAS’ imports stand at 35-40 MTPA, which is primarily supplied from Qatar and Australia. The latest deal will further diversify KOGAS’ LNG supplier base, making the United States its third-largest LNG supplier. Notably, in 2017, the company had entered into a deal with Cheniere Energy, Inc. LNG for the supply of 2.8 MTPA of LNG from the latter’s Sabine Pass terminal in Louisiana.

Price Performance

BP has gained 0.6% year to date compared with 0.8% rise of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, BP carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV and Dril-Quip, Inc. DRQ, both having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 137.5% year over year.

Dril-Quip’s 2019 earnings per share are expected to rise 133.3% year over year.

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Dril-Quip, Inc. (DRQ) : Free Stock Analysis Report
 
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Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
 
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