Sempra’s plans to ship more liquefied natural gas (LNG) to overseas ports, as well as the condition of its broader business, came into clearer focus as the summer has unfolded.
Shares closed down 2% to $161.44 when the corporation announced second quarter financial results on Aug. 4. Earnings were $559 million (or $1.78 per share) on revenue of $3.55 billion.
By Tuesday (Aug. 9) they had gained ground, closing at $162.56. The stock’s 52-week range has been $119.56 to $173.28.
Because of strong execution and first half results, Sempra (NYSE: SRE) said that it would attain the high end of its adjusted earnings guidance of $8.10 to $8.70 per share. It affirmed 2023 earnings of $8.60 to $9.20 per share.
Excluding one-time items, Sempra turned in quarterly earnings of $1.98 per share — beating an analyst consensus of $1.78 per share.
Sempra has its headquarters in East Village and is parent to Southern California utilities San Diego Gas & Electric Co. and SoCalGas. It has a growing utility business in Texas as well as expansive energy infrastructure holdings in Mexico.
In its second quarter earnings presentation, Sempra noted that by the end of the decade, U.S. LNG export capacity is expected to double. Supply disruptions in Europe are helping Sempra’s efforts to market its LNG to buyers on the continent, said Justin Bird, CEO of Sempra Infrastructure, in remarks to analysts.
In mid-July, Sempra announced a preliminary partnership with ConocoPhillips on Sempra’s proposed LNG export plant in Port Arthur, on the Gulf of Mexico in Texas. If the deal is finalized, ConocoPhillips would take a 30% stake in the project and receive 5 million metric tons of LNG per year over 20 years.
The preliminary deal, called a heads-of-agreement, is nonbinding.
A Sempra spokeswoman said the company has not announced when it would make a final investment decision to go forward with the Port Arthur plant. In an Aug. 4 investor call, CEO Jeffrey W. Martin told financial analysts that there are scenarios where the decision could come during the first half of 2023.
Sempra has all its permits for the plant, envisioned for a 3,000-acre site. Plans for the first phase call for two production lines, or trains, two storage tanks and the capacity to export 11 million metric tons of LNG annually.
Bechtel would be the contractor building the plant.
Closer to San Diego, Sempra said that ConocoPhillips has an opportunity to acquire a stake and output from the second phase of Sempra’s Energía Costa Azul LNG project near Ensenada. (The plant’s first phase is expected to produce LNG by 2024.)
In June, U.K.-based INEOS announced a heads-of-agreement to ship 1.4 million metric tons of LNG per year over 20 years from Sempra’s Gulf Coast plants. Sempra operates its Cameron LNG plant in Hackberry, Louisiana, a short distance from Port Arthur. With the deal, INEOS is making an entry into the global LNG market.
June Quarter Results
On Aug. 4, Sempra reported financial results for the second quarter of 2022. Earnings were $559 million (or $1.78 per share) on revenue of $3.55 billion, when calculated according to generally accepted accounting principles (GAAP). In the same quarter one year ago, the corporation reported earnings of $424 million ($1.38 per share) on revenue of $2.74 billion.
During the recently ended quarter, Sempra reported $32 million in impacts associated with SoCalGas’ Aliso Canyon natural gas storage facility litigation, related to property developer claims.
Sempra’s Texas utility business, Oncor, continues to grow. It reported 90 new transmission interconnection requests in the second quarter, up 73% from the same quarter last year. The business also said it connected approximately 35,000 premises during the first half of 2022. Oncor received interconnection requests for 110 new housing subdivisions in June, which was a record.
“We continue to be encouraged by the TX growth story, particularly as we view the system as SRE’s highest quality/highest multiple asset,” wrote Sarah Akers, an analyst with Wells Fargo.
In May, both SDG&E and SoCalGas filed their 2024-2027 General Rate Cases with the California Public Utilities Commission. In addition to setting rates, the filings propose critical infrastructure investments.
In June, SDG&E announced it had received approval from the CPUC to build four microgrid facilities equipped with energy storage to help dispatch cleaner energy to the grid during peak demand.
Analyst Shar Pourreza of Guggenheim Securities is optimistic about Sempra, rating it a Buy and setting a $174 price target on the stock. The current, third quarter will likely bring disclosures as well as potential catalysts offering the market a better idea of Sempra’s businesses, he wrote in an Aug. 4 research note.
CEO: Jeffrey W. Martin
HEADQUARTERS: East Village
BUSINESS: Energy services holding company
REVENUE: $12.9 billion in 2021; $11.4 billion in 2020
STOCK: SRE on the New York Stock Exchange
EMPLOYEES: More than 20,000 companywide
SOCIAL IMPACT: Women represent 28% of Sempra’s total workforce, 35% of management and 33% of company leadership; some 36% of Sempra’s board of directors are women
NOTABLE: Sempra common stock is also listed on the Mexican stock exchange