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TechnipFMC Advances With EPC Contract for Mexican LNG Facility

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TechnipFMC plc (FTI - Free Report) received a Notice to Proceed by Sempra LNG and IEnova, two subsidiaries of the energy provider Sempra Energy (SRE - Free Report)  for an Engineering, Procurement and Construction (“EPC”) contract worth more than $1 billion at the Energía Costa Azul liquefied natural gas (“ECA LNG”) facility in Baja California, Mexico.

ECA LNG is one of Sempra LNG’s natural gas liquefying infrastructure projects underway in North America to satisfy global LNG demands. The move was made after Sempra and IEnova reached a final investment decision to develop, construct and operate the first phase of the Pacific Coast project. TechnipFMC has been part of this project since 2017 and provided the Front End Engineering Design (“FEED”).

The Costa Azul project involves the extension of the existing regasification terminal by building a single-train liquefaction facility through a compressed as well as high-efficiency mid-scale LNG design. The facility is expected to have a nominal capacity of 3.25 million metric tons to connect natural gas supplies from Texas and the Western United States to markets in Mexico and throughout the Pacific Basin.

The liquefaction-export facility, which operates as a regasification terminal since 2008, would enable natural gas liquefaction, while strengthening its supply capacity. The first production, with estimated capital costs of $2 billion, from the initial phase is expected in late 2024.

Notably, the potentially largest investment in the history of Baja California is anticipated to uphold the Mexican economy through investment, taxation and jobs. It would also ensure natural gas supplies to regions with high energy demand due to manufacturing and economic growth, and simultaneously lower global emissions by developing low-emission fuel alternatives to emerging global markets.

For TechnipFMC, the EPC contract will add to its revenues and comes at a time when the oil market crash and the coronavirus-induced demand destruction for fuel has led to massive capital expenditure curtailments by the upstream players, which has created an extremely challenging operating environment for oilfield service players.

Company profile & Price Performance

TechnipFMC is a leading manufacturer and supplier of products, services and fully-integrated technology solutions for the energy industry. It operates through three business segments — Subsea, Surface Technologies and Technip Energies. The company’s shares have underperformed the industry in the past six months. Its shares have gained 16.9% compared with the industry’s 24.4% growth.

 

 

Zacks Rank & Stocks to Consider

TechnipFMC currently carries a Zack Rank #4 (Sell).

Some better-ranked players in the energy space are HighPoint Resource Corporation (HPR - Free Report) and DCP Midstream Partners, LP (DCP - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, the Zacks Consensus Estimate for HighPoint Resource’s 2020 earnings has been raised by 17.2%.

DCP Midstream is expected to see earnings growth of 183.4% in 2021.

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