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Sempra Energy reported worse than expected second quarter earnings Monday. $SRE reported a net loss of $561 million  with a $755 million impairment charge from the planned sale of certain U.S. midstream assets and $145 million charge on sale of U.S. wind investments.



Sempra Energy (NYSE: $SRE) Missed Earnings Before Open Monday

Adj $1.35 Beat $01.18 EPS BUT $2.564 billion Missed $2.553 billion forecast in revenue 

Earnings

Sempra reported a net loss of $561 million, or $2.11 a share, in the quarter, after earnings of $259 million, or $1.03 a share, in the year-earlier quarter. Adjusted per-share earnings came to $1.35, beating the FactSet consensus of $1.18. Revenue rose to $2.564 billion from $2.533 billion but missed the FactSet consensus of $2.643 billion.

Sempra Energy NYSE: $SRE

Market Reaction  > Close $115.14 −1.74 (-1.51%)

Highlights

  • Sempra LNG & Midstream advanced development of its Port Arthur LNG and Energía Costa Azul natural gas liquefaction-export projects.
  • On June 26, Port Arthur LNG entered into a preliminary 20-year agreement for the sale of 2 million tonnes per annum (Mtpa) of natural gas to the Polish national oil company, beginning in 2023, subject to reaching a definitive agreement.
  • On June 22 and June 25, respectively, Sempra LNG & Midstream announced the selection of Bechtel as the engineering, procurement, construction and commissioning (EPC) contractor for the Port Arthur liquefaction project under development in Texas and a partnership of TechnipFMC and Kiewit as the EPC contractor for the Energía Costa Azul liquefaction project under development in Mexico.
  • Last month, Sempra Energy's Mexican operating unit, IEnova, announced it had been awarded a 20-year contract by the Topolobampo Port Administration in Mexico to build and operate an estimated $150 million receipt, storage and send-out liquid fuels marine terminal in the state of Sinaloa.
  • Operations are expected to commence in the fourth quarter 2020. To support the project, IEnova has entered into 10- and 15-year U.S. dollar-denominated contracts for 100 percent of the terminal's capacity. The two contracts are with refining and fuel marketing companies. Both contracts have the potential to be extended to 20 years.

Sempra LNG Q2

On the Gulf Coast Sempra Energy last year reported that they are expecting Cameron LNG Train 1 to be delayed until 2019 due to several unstated factors. The next two trains will follow throughout 2019. This drastically moved from the planned February 2018 completion date. Trains 2 & 3, which were also scheduled for completion in 2018, have been pushed back and expected to be staggered through 2019.


Cameron LNG receipt terminal is located 18 miles from the Gulf of Mexico and within 35 miles of a pipeline hub that can deliver domestic natural gas to the project.

Sempra and Activist Fund Intentions

The Sempra Energy CEO Martin in his conference call said he was 'very optimistic' about talks with Elliott Management after Elliott and Bluescape revealed their position in the company. Martin repeated  he believed $SRE's current strategy was best for creating long-term shareholder value and it remained focused on executing it.

Elliott and Bluescape have joined forces to influence other U.S. utilities in the last two years and disclosed a position in Sempra on June 11 and called for new directors and for the company to pursue a strategic review.

The activist investors called for selling international business lines and to split its existing business into two companies through a tax-free spinoff,  one focused on utilities and the other on natural gas infrastructure. In response Sempra has said it planned to sell some of its natural gas storage, midstream assets and its U.S. wind and solar power portfolio. They said this decision was part of its annual review and not related to the activists.

A spokeswoman for Sempra said on Monday “we will continue to welcome shareholder input as we evaluate our portfolio and, at the mtime and under conducive market conditions, pursue additional opportunities to create long-term value for all shareholders.”

Martin said he was “actually quite optimistic with the tone of the conversations ... All the right people are engaged and I remain very optimistic about it.” However. Elliott declined to comment.

There is also the added pressure on utilities based in California from the impact of devastating wildfires in the last two summers, with talk of possible legislation that could impose significant liabilities on them for damage caused by the blazes.

Sources:  Sempra Energy

From Traders Community Research    

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