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Sempra Energy reported better than expected fourth quarter earnings Tuesday on the the bootom and top lines. Last quarter $SRE announced a new partnership with Total on Cameron LNG, investors will be looking for more updates there and how Oncor is developing.

Sempra Energy (NYSE: $SRE) Reported Earning Before Open Tuesday

$1.56 Beat Exp $1.47 EPS AND $3,221B Beat $3.18 billion forecast in revenue 

Earnings

Sempra energy (SRE) reported fourth quarter adjusted earnings per share (EPS) of $1.56, beating the consensus estimate of $1.47 by 6.1% and up from $1.54 in the prior-year quarter. Barring one-time items, the company generated GAAP earnings of $3.03 per share, against a loss of $1.99 in fourth-quarter 2017. 

For 2018, Sempra Energy’s operating EPS came in at $5.57, up 2.8% from the prior-year quarter’s $5.42. ahead of the consensus $5.46 by 2%. Total Revenues In the quarter under review, total revenues were $3,221 million, up 8.7% year over year on higher contributions from both its Utilities (up 7.5%) and energy-related businesses (up 17.5%). ahead of consensus $3,183 million by 1.2%.

Investors were watching for Sempra Energy’s new Oncor acquisition which contributed $154 million to the company’s bottom line in Q3 to add more in the fourth quarter.  During the fourth quarter, Sempra Energy completed the sale of its U.S. operating solar assets, solar and battery storage development projects as well as its ownership interest in one wind facility to Consolidated Edison ED for approximately $1.6 billion in cash. .

Sempra Energy’s service territories witnessed favorable temperature for most parts of the fourth quarter. This indicates at increased electricity demand in the region, which in turn must have provided a boost to the company’s top-line performance. 

 

Sempra Energy NYSE: $SRE

Market Reaction> Pre-Market $119.43 ▲ 1.83 (1.56%)

Segment Highlights:

  • San Diego Gas & Electric (SDG&E): Quarterly earnings amounted to $148 million compared with the year-ago quarter’s $131 million.
  • Southern California Gas Company (SoCalGas): The segment quarterly earnings amounted to $156 million in the fourth quarter of 2018 compared with earnings of $128 million in the prior-year quarter.
  • Sempra Texas Utility: This segment registered earnings of $88 million in the reported quarter.
  • Sempra South American Utilities: The segment recorded earnings of $59 million, up from $52 million in fourth-quarter 2017.
  • Sempra Mexico: The segment recorded net earnings of $76 million compared with $64 million in the year-ago quarter.
  • Sempra Renewables: The segment recorded net quarterly earnings of $382 million, compared with $203 million in the fourth quarter last year.
  • Sempra LNG & Midstream: The segment reported earnings of $147 million compared with the year-ago quarter’s $126 million. Parent and Other: Quarterly loss declined to $192 million from the year-ago quarter’s loss of $1,205 million.

Sempra Energy Q4 2018 Earnings

Financial Update

  • As of Dec 31, 2018, Sempra Energy’s cash and cash equivalents totaled $190 million compared with $288 million as of Dec 31, 2017.
  • Long-term debt amounted to $21,661 million as of Dec 31, 2018, compared with $16,445 million at 2017 end.
  • Cash flow from operating activities was $3,447 million at the end of 2018, down from $3,625 million at the end of the prior year.
  • In 2018, the company’s capital expenditures, investments and acquisitions summed $14,160 million compared with $4,219 million in 2017.

LNG Highlights 

Sempra Energy announced several LNG agreements with commercial parties in the fourth quarter 2018, with respect to the company's LNG facilities in development: Port Arthur LNG in Jefferson County, TX; Cameron LNG Phase 2 in Hackberry, La.; and Energía Costa Azul LNG Phases 1 and 2 in Mexico.

The agreements support Sempra Energy's goal to become one of the largest U.S. exporters of LNG, targeting the export of 45 million tons per annum to global markets.

2019 Guidance

Sempra Energy issued 2019 earnings per share guidance. The company currently expects to generate earnings of $5.70-$6.30. The consensus estimate for 2019 earnings currently stands at $6.03 per share, which exceeds the mid-point of the company provided guidance.

 

Sempra Energy Q3 Earning Recap

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 and Activist Fund Intentions

The Sempra Energy CEO Martin in his second quarter  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 EnergyTraders Community Research  AlphaStreet

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