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Sempra's (SRE) Arm Clinches an Agreement With Williams for LNG

Sempra’s SRE subsidiary, Sempra Infrastructure, recently clinched a head of agreement (HOA) with Williams involving the offtake of liquefied natural gas (LNG). The agreement entails the expansion of associated natural gas pipeline projects to connect U.S. natural gas supplies on the Gulf Coast with markets globally.

Highlights of the HOA

The HOA, which is subject to further negotiation, anticipates two 20-year long-term sale and purchase agreements between the companies. It involves sale and purchase agreements for nearly 3 million tons per annum (MTPA) of LNG in total from the Port Arthur LNG project and the Cameron LNG Phase 2 project.

The HOA also highlights a natural gas sales agreement for roughly 0.5 billion cubic feet per day (Bcfd) to be delivered in the Gillis, LA area.

Additionally, Sempra and Williams are contemplating a strategic joint venture. The two companies intend to own, expand and operate the current 2.35 Bcfd Cameron Interstate Pipeline and the proposed Port Arthur Pipeline Louisiana Connector.

As the demand for LNG continues to rise worldwide, Sempra is well-positioned with strategically located opportunities in North America and the Pacific and Gulf coast regions. Moreover, such agreements and alliances may provide a platform to Sempra to expand its footprint in the opportunistic global LNG market and reap the benefits of the probable intensified demand.

Sempra’s LNG Projects

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

The ECA LNG Phase 1 is currently at the construction stage and is expected to come online during the second half of 2024. 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.

Peer Moves

The growing importance of LNG globally has led many companies in the utility space to strengthen their overall LNG portfolio. In this context, apart from Sempra, utility companies that have set their foot in the LNG space 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 48% in the past six months.

In August 2022, Centrica CPYYY signed an HOA with Delfin Midstream to purchase 1.0 MTPA of LNG for 15 years on a Free-on-Board basis at the Delfin Deepwater Port.

The Zacks Consensus Estimate for Centrica’s 2022 earnings suggests a growth rate of a solid 260.9% from the prior-year reported figure. CPYYY shares have increased 13.9% in the past year.

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 earnings growth rate of 5%. ONE Gas shares have returned 20.1% to its investors in the past year.

Price Movement

In the past year, shares of Sempra have risen 25.1% compared with the industry’s growth of 13%.

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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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