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Sempra (SRE) Clinches Agreement With ConocoPhillips for LNG

Sempra Energy’s SRE subsidiary, Sempra Infrastructure, recently inked a 20-year sale and purchase agreement with ConocoPhillips COP involving liquefied natural gas (LNG). Per the deal, Sempra will supply 5 million tons per annum of LNG to ConocoPhillips from its Phase 1 of the Port Arthur LNG project.

Moreover, SRE and ConocoPhillips have also teamed up in an equity sale and purchase agreement. The deal entitles COP to acquire 30% of the equity in Phase 1 of Port Arthur LNG.

Also, a natural gas supply management deal has been agreed upon by the two companies. Per the deal, ConocoPhillips will be accountable for the feed gas supply requirements for Phase 1 of the proposed liquefaction facility.

Sempra’s Phase 1 of the Port Arthur LNG project is under construction in Jefferson County, TX. The aforementioned 20-year deal with ConocoPhillips entails steady revenue generation prospects for the proposed project of the company in the long term.

Moreover, ConocoPhillips’ solid footprint worldwide may assist Sempra Energy in strengthening its position in the LNG landscape as global demand continues to rise.

Growth Prospects

Per the report from Mordor Intelligence, the global LNG market is expected to witness a CAGR of 6.9% over the 2022-2027 period. This exemplifies the strong demand for LNG globally when nations are struggling to have a reliable energy system for an emission-free future.

The recent Russia-Ukraine war led to a sharp rise in the export of LNG to European countries from the United States as European countries were mostly dependent on Russia for LNG requirements. This acted as a catalyst for the U.S. LNG export market. A recent report by the EIA signifies that LNG export from the United States may rise from 9.8 billion cubic feet per day (bcf/d) to 10.8 bcf/d in 2022 and 12.3 bcf/d in 2023.

Hence, such a strong demand scenario entails massive opportunities for utilities to scale up their operations in the LNG segment. Sempra’s Port Arthur LNG project is a bright example of utilities expanding their footprint in the LNG arena.

Further, Sempra is in advanced commercial discussions with many of its LNG projects. Also, Sempra Infrastructure is developing two separate natural gas liquefaction export projects at its existing ECA Regas Facility.

The company is also developing other LNG projects in the Pacific and Gulf coast regions. The Vista Pacifico LNG project will assist SRE in exporting LNG to Asian markets. In addition, its developing Cameron LNG Phase 2, Hackberry CCUS, Port Arthur LNG and ECA LNG Phase 2 projects will strengthen Sempra’s position in the global LNG market.

Such investments in the LNG arena highlight Sempra’s increased focus on strengthening its LNG infrastructure. Moreover, deals and agreements with companies with strong expertise and experience enhance its footprint globally in the LNG landscape.

Peer Moves

The global demand for LNG may continue to increase manifold. In such a scenario, investments in LNG can follow the northward trend as companies strive to take advantage of the opportunity in the LNG market. Apart from Sempra, companies that have increased their exposure in the LNG market are as follows:

Clean Energy Fuels CLNE owns and operates two LNG production plants, one in California and one in Texas. Its LNG plant in Boron is the only large-scale LNG plant in California.

The Zacks Consensus Estimate for Clean Energy’s 2022 sales suggests an improvement of 59.9% from the prior-year reported figure. CLNE shares have risen 34.8% in the past six months.

ONE Gas OGS specializes in the design, construction and operation of micro-LNG plants ranging from one to 10 million standard cubic feet per day and related applications. It developed and perfected optimal and cost-effective LNG solutions for small and/or remote gas production locations.

OGS boasts a long-term (three to five years) earnings growth rate of 5%. ONE Gas shares have returned 27.1% to its investors in the past year.

Price Movement

In the past year, shares of Sempra have risen 27.8% compared with the industry’s growth of 15.7%.

 

Zacks Investment Research
Zacks Investment Research


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Zacks Rank

Sempra currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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