Sempra Secures 20-Year LNG Deal with Petrobras

Sempra Infrastructure has locked in long-term demand for its Texas liquefaction expansion by signing a 20-year agreement with Petrobras. The contract secures the sale of approximately 0.8 million tonnes of liquefied natural gas per year, marking the first time a South American energy major has committed to purchasing from the Port Arthur facility.

This deal underpins the company's dual-coast strategy, expanding its customer base beyond North American markets. The volume is tied to Port Arthur LNG Phase 2, a project currently in development that will significantly increase the site's total annual capacity to roughly 26 million tonnes.

Petrobras Contract Anchors Long-Term Growth

The agreement provides revenue stability for assets that are not yet operational. Port Arthur Phase 2 reached a final investment decision in September 2025, with the two new liquefaction trains scheduled to come online in 2030 and 2031. By securing a buyer before the first cargo ships, Sempra mitigates market risk associated with the substantial construction lead time.

This expansion nearly doubles the total capacity of the Port Arthur complex. The long-term nature of the contract aligns with the company’s broader objective of diversifying its buyer base and reinforcing its position in the global LNG supply chain, particularly in the Atlantic Basin.

Strong Earnings and Texas Grid Demand

Sempra reported second-quarter 2026 GAAP earnings of $1.21 per diluted share, a significant increase from $0.71 in the same period last year. Adjusted earnings also rose to $1.16 per share, reflecting improved operational performance. The company raised its full-year GAAP EPS guidance to a range of $5.02 to $5.55, maintaining its target for 7% to 9% long-term earnings growth.

A major driver of this performance is surging electricity demand in Texas, where Oncor operates. ERCOT recorded an all-time peak load of 91 gigawatts in July, prompting regulators to approve over $7 billion in new transmission spending. A newly approved interconnection process, Batch Zero, could make roughly 44 gigawatts of large-load requests eligible for service, a volume exceeding the grid's current peak by more than 140%.

Capital Intensity and Execution Risks

Realizing these growth targets requires substantial capital deployment. Sempra’s five-year capital plan involves approximately $65 billion in spending. To manage this burden, the company is executing asset sales, including a deal to sell a 45% stake in Sempra Infrastructure Partners to KKR affiliates and the divestiture of its Ecogas México unit. Both transactions are still undergoing final approvals.

The company faces execution risks tied to the construction timeline of the LNG facilities. Phase 1 of the Port Arthur project is not expected to begin commercial operations until late 2027 and 2028. Additionally, earnings remain exposed to currency fluctuations and inflation pressures stemming from Sempra’s Mexican operations, while key California rate decisions for 2028 remain pending with regulators.

Market sentiment reflects a cautious stance despite the strong results. Hedge fund ownership decreased from 51 to 46 funds in the recent quarter. However, short interest remains low at 1.80% of the float, suggesting that investor skepticism is driven more by capital rotation than by concerns over the company's valuation or fundamental viability. The stock trades at a forward price-to-earnings ratio of 14.58, a modest multiple relative to its guided growth rate.