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Sempra Energy reported better than expected third quarter earnings Wednesday. $SRE announced a new partnership with Total on Cameron LNG this week, investors will be looking for more updates there..


Sempra Energy (NYSE: $SRE) Report Earning Before Open Wednesday

Exp $01.18 EPS on $2.553 billion forecast in revenue 

Earnings

Sempra energy (SRE) reported third quarter earnings of $334 million, a profit of 99 cents per share. Earnings, adjusted for asset impairment costs, came to $1.23 per share, beating Wall Street expectations of $1.13 per share. $SRE posted revenue of $2.94 billion beating the expected $2.83 billion.

Sempra expects full-year earnings in the range of $5.30 to $5.80 per share.with a consensus estimate for earnings per share of $1.13, reflecting a year-over-year improvement of 8.7%.  Sempra Energy’s service territories saw warmer-than-normal temperature for most parts of the third quarter. This indicates increased electricity demand which in turn is expected to have boosted the company’s top line. The consensus estimate for quarterly revenues is $2.83 billion, an increase of 5.5% year over year.

Sempra Energy NYSE: $SRE

Market Reaction> Pre-Market $116.08 ▲ 2.69 (+2.37%)

Highlights:

  • In Q3-18 made significant progress towards advancing their strategic vision of becoming North America’s premier energy infrastructure company
  • Progressing their LNG development projects through HOA and MOU announcements
  • Strengthening their balance sheet by paying down debt\
  • Reporting Q3‐2018 adjusted earnings of $1.23(1) per share compared to Q3‐2017 adjusted earnings of $1.04(1) per share
  • Reaffirming our 2018 adjusted earnings per share guidance of $5.30 - $5.80(1)
  • Planning to provide an update from the newly formed LNG and Business Development Committee at Analyst Conference in March

Segments

  • Sempra Texas Utility: Earnings of $154 million in the reported quarter.
  • Sempra South American Utilities: Earnings of $50 million, up from $42 million in third-quarter 2017.
  • Sempra Mexico: Earnings of $44 million compared with $66 million recorded in the year-ago quarter.
  • Sempra Renewables: Earnings of $34million, compared with $15 million in the third quarter last year.
  • Sempra LNG & Midstream: Earnings of $16 million against the year-ago quarter’s loss of $4 million.
  • Parent and Other: Quarterly loss rose to $215 million from  year-ago loss of $41million.

 

UPDATE ON TOTAL PARTNERSHIP:

Sempra Energy (NYSE: SRE) today announced that its subsidiaries Infraestructura Energetica Nova S.A.B. de C.V. (IEnova) (BMV: IENOVA) and Sempra LNG & Midstream have signed three Heads of Agreements (HOAs) with affiliates of Total S.A. (Total), Mitsui & Co., Ltd. (Mitsui) and Tokyo Gas Co., Ltd. (Tokyo Gas) for the full export capacity of Phase 1 of the Energia Costa Azul liquefied natural gas (ECA LNG) project located in Baja California, Mexico.

Total partners with Sempra on Cameron LNG

French oil major Total (TOT) announced on Monday it plans to partner with Sempra Energy for the expansion of the Cameron LNG project in Louisiana near the Texas border. Total is a partner on the first phase of the Cameron liquefied natural gas export project, said it wants to invest in the expansion that could begin as soon as 2020, as well as another LNG export project on the west coast of Mexico in Baja California.

The long-delayed $10 billion Cameron LNG project is expected to begin coming online next year with the first two LNG units. The third LNG facility in the first phase will start up in late 2019 or early 2020. The project is expected to produce 14 million tons of LNG a year.

Total said it is ready to partner with Sempra on a second phase that would build two more LNG trains, for another 9 million tons of LNG. Total also says it will partner with Sempra on the Energia Costa Azul LNG project in Mexico as well as both an investor and buyer of the LNG

"This relationship with Sempra Energy will support our goal of building a diverse portfolio of LNG supply options that offers our customers flexibility, reliability and low-cost North American natural gas," Total Chief Executive Patrick Pouyanné said

Total is a new partner to Sempra. Total acquired a 16.6 percent stake in Cameron LNG early this year when it bought the LNG assets of France's Engie. The sale made Total the world's second-largest player in LNG market share after Royal Dutch Shell. Sempra said it eventually wants to build 45 million tons of LNG export capacity in North America, including a project in Port Arthur, so Total would have future investment opportunities as well. 

Sempra Energy Q2 Earnings Recap

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

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