NGI Mexico GPI / Producción

Sempra to Focus on Gulf Coast, Mexico for NatGas Growth

The pending $9.45 billion acquisition of the parent for Texas-based Oncor Electric Delivery Co. would help natural gas-focused Sempra Energy double down on its efforts to become a major player on the Gulf Coast, adding to liquefied natural gas (LNG) and Mexico opportunities, CEO Debra Reed said Monday.

During a 3Q2017 earnings conference call, Reed said the Texas regulatory review of the Oncor purchase should be completed by April, during which time Sempra expects to negotiate a settlement with key parties in regulatory proceedings and finalize its financing of the acquisition. "We'll consider a wide range of financing alternatives, so we can make the best decision based on market conditions at the time," she said.

Sempra already has a "strong presence in the Gulf Coast,” which is expected to get even stronger with Oncor, according to Reed.

"The addition of Oncor will further strengthen our footprint and serve as a new growth platform to expand our opportunities," she said. "Our strategic vision of the Texas Gulf Coast region is to be a major player in these growing energy markets."

The timetable for the Cameron, LA, LNG export project now under construction was pushed to 2019 because of issues related to the way one of the principal contractors, Chicago Bridge & Iron Co. NV (CB&I), handled engineering, procurement and construction.

Reed reiterated that Cameron’s first three LNG trains would be operating in 2019.

"We firmly believe that from everything we see now that Cameron will be liquefying gas on all three trains come 2019," Reed said. "They've made a lot of progress on construction and things seem to be going very well and there was not too much impact from the hurricane."

As the company already had indicated, Hurricane Harvey had “relatively little impact” on the Cameron project, said Sempra President Joe Householder. There is no change in the timetable, although the contractor filed a claim related to the hurricane that “was immaterial involving a couple of weeks delay and an immaterial amount of money," Householder said.

With Oncor and the ongoing opportunities, Sempra would be positioned as "a leading player in Gulf Coast and cross-border projects into Mexico,” Reed said. Sempra has a full plate of projects across the Gulf Coast, including a $2.1 billion marine pipeline joint venture project with a unit of TransCanada Corp. from the Gulf Coast region to Mexico that is under construction.

"We have a lot of opportunity, mostly on the natural gas side, and now Oncor adds other growth opportunities in electric infrastructure," Reed said. "Overall, there are some great opportunities in the Gulf."

For 3Q2017, Sempra reported earnings of $57 million (22 cents/share), compared with $622 million ($2.46) for 3Q2016. Adjusted earnings were $265 million ($1.04/share) from $259 million ($1.02).

Separately, during its 3Q2017 conference call on Monday, CB&I said Harvey had caused the shutdown of work at Cameron for around two weeks, but all 8,500 workers were back at work. CB&I's two major LNG projects on the Gulf Coast sustained about $16 million in added costs from the storm, CEO Patrick Mullen said.

"We're continuing to evaluate the impacts of Harvey on the Cameron project and are confident that any added costs are recoverable under our contracts," Mullen said. "We're also continuing discussions with Cameron regarding claims for extension of time and recovery of certain costs on the project. We are meeting with our customer regularly, and senior management at both companies have targeted a resolution before year-end."

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