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ConocoPhillips (COP), Sempra Energy Finalize Port Arthur LNG JV

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ConocoPhillips’ (COP - Free Report) joint venture (JV) with energy services holding company Sempra Energy (SRE - Free Report) has been finalized for the Port Arthur liquefied natural gas (“LNG”) export project in Texas.

Sempra Energy reached a final investment decision to develop and operate the first phase of Port Arthur LNG in Jefferson County, which will involve two liquefaction trains, LNG storage tanks and associated facilities. The project is expected to produce up to 13.5 million tons per annum of LNG.

About 10.5 million tons per annum of the project’s LNG capacity is fully subscribed under long-term contracts with buyers, including ConocoPhillips and other offtakers. The project is estimated to cost $13 billion.

ConocoPhillips acquired a 30% stake in the first phase of the Port Arthur project. The company will purchase 5 million tons per annum of LNG from Sempra Energy’s Port Arthur Phase 1 project in Jefferson County for 20 years. COP will enjoy specific equity and offtake rights to engage in future expansion projects at Port Arthur LNG.

Oil and gas producers aim to drive domestic LNG supply and exports as western sanctions on Russia have hindered an already undersupplied market and put U.S. gas prices into a higher gear. ConocoPhillips’ participation in the Port Arthur project will provide a reliable supply of natural gas and enhance its portfolio.

Sempra Energy is advancing the global energy transition through electrification and decarbonization in the markets it serves, including California, Texas, Mexico and the LNG export market. Sempra Energy has also agreed to divest an indirect stake in the project to KKR & Co Inc.

Per the deal, an infrastructure fund managed by KKR will acquire a 25-49% indirect, non-controlling interest in the project. Sempra’s unit, Sempra Infrastructure Partners, will target 20-30% of indirect ownership interest in the project, subject to the closing of the KKR sale.

With strong customers and premier equity sponsors like ConocoPhillips, Port Arthur LNG can become one of America’s major energy infrastructure investments over the years. It will create employment opportunities and encourage continued economic growth across Texas and the Gulf Coast region.

Price Performance

Shares of COP have outperformed the industry in the past three months. The stock has declined 14.8% compared with the industry’s 15.3% decline.


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Zacks Rank & Stocks to Consider

ConocoPhillips currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following stocks that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco LP’s (SUN - Free Report) fourth-quarter 2022 earnings of 42 cents per unit missed the Zacks Consensus Estimate of 77 cents. Weak quarterly earnings resulted from the higher total cost of sales and operating expenses.

Sunoco has witnessed upward estimate revisions for 2023 earnings in the past 30 days. For 2023, Sunoco expects adjusted EBITDA of $850-$900 million.

RPC Inc.’s (RES - Free Report) adjusted earnings of 41 cents per share in the fourth quarter beat the Zacks Consensus Estimate of 30 cents. The strong quarterly results were backed by higher activity levels in all the service lines and rising equipment utilization.

As of Dec 31, RPC had cash and cash equivalents of $126.4 million, up sequentially from $73.2 million. Nonetheless, the company managed to maintain a debt-free balance sheet.

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