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Sempra (SRE), INEOS Sign a Long-Term Agreement for LNG Supply

Sempra Energy’sSRE subsidiary, Sempra Infrastructure, signed a long-term sale and purchase agreement with INEOS. Per the agreement, Sempra will supply 1.4 million tons per annum (Mtpa) of liquefied natural gas (LNG) from Phase 1 of its Port Arthur LNG project for 20 years.

A non-binding agreement has also been reached between the companies, wherein INEOS will purchase an additional 0.2 Mtpa from the Port Arthur LNG Phase 2 project, which is currently under development.

Both agreements indicate Sempra’s capabilities to meet the growing demand for natural gas and LNG globally. Such agreements with companies entail a steady inflow of revenues for the company.

Growth Prospects

Russia exports of LNG to European countries decreased significantly due to the Russian-Ukraine war. This led to a sharp increase in LNG exports from the United States to European countries, leading to a substantial surge in demand. A recent report by the Energy Information Administration 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.

The introduction of the latest technology in the LNG market, coupled with the evolving energy market, and the growing need for cleaner energy sources are fueling the demand for LNG.

This signifies huge opportunities for Sempra, which has been looking forward to the LNG market for a handful of returns. Underpinned by huge expansion strategies in the LNG arena, Sempra is likely to benefit from rising demand in the LNG space. Apart from Phase 1 & 2 of the Port Arthur LNG project, the company is developing Cameron LNG Phase 2, ECA LNG Phase 1 & 2, Vista Pacifico LNG, and Hackberry CS.

Such a strong portfolio of projects may enable the company to expand its footprint in the LNG space and boost its overall earnings.

Peer Moves

Other utilities that have invested in LNG business opportunities and are likely to benefit from the increased demand are:

Clean Energy Fuels CLNE owns and operates two LNG production plants, one in California and another 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.

UGI Corporation UGI operates 1.25 billion cubic feet of LNG storage, associated peak shaving services, and an LNG tanker truck-loading terminal at the Temple LNG plant, strategically located in southeastern Pennsylvania. UGI and its affiliates have safely and reliably operated this facility since 1972.

UGI has a long-term earnings growth rate of 8%. Shares of UGI have returned 11.3% in the past month.

Price Movement

In the past year, shares of Sempra have risen 37.7% compared with the industry’s growth of 20.8%.


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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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