10-QPeriod: Q1 FY2023

SEMPRA Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 4, 2023For Securities:SRESREA

Summary

Sempra Energy (SRE) reported a strong first quarter of 2023, with significant year-over-year increases in both revenues and earnings, driven by strong performance across its utility and energy infrastructure segments. The company's consolidated revenues reached $6.56 billion, a substantial rise from $3.82 billion in the same period last year. Net income attributable to common shareholders surged to $969 million, or $3.07 per diluted share, up from $612 million, or $1.93 per diluted share, in Q1 2022. This growth was supported by higher natural gas and electric revenues, particularly at Southern California Gas Company (SoCalGas), and significant contributions from Sempra Infrastructure's asset and supply optimization initiatives. The company also demonstrated robust operating cash flows, providing ample liquidity for its operations and strategic investments. Key drivers for the improved financial performance include favorable regulatory outcomes, increased operational efficiency, and strategic growth initiatives within Sempra Infrastructure, notably in the LNG sector. Despite the positive results, the company continues to manage regulatory proceedings and litigation, particularly related to the Aliso Canyon gas leak, which had a significant charge in the prior year's period. Sempra maintains a strong balance sheet with considerable available unused credit, positioning it well for future capital expenditures and shareholder returns.

Financial Highlights

45 data points
Beta

Revenue

$6.56B

Net Income

$969.00M

14.8% Net Margin

EPS (Diluted)

$1.53

Total Assets

$80.55B

Cash & Equivalents

$534.00M

Free Cash Flow

$150.00M

Financial Statements
Beta
Revenue$6.56B
Interest Expense$366.00M
Net Income$969.00M
EPS (Basic)$1.54
EPS (Diluted)$1.53
Shares Outstanding (Basic)629.84M
Shares Outstanding (Diluted)632.25M

Key Highlights

  • 1Consolidated revenues increased by 71.6% to $6.56 billion in Q1 2023 compared to $3.82 billion in Q1 2022.
  • 2Net income attributable to common shareholders rose by 58.3% to $969 million in Q1 2023, with diluted EPS of $3.07, up from $1.93 in Q1 2022.
  • 3SoCalGas saw a significant revenue increase, primarily driven by higher natural gas costs passed through to customers and the Gas Cost Incentive Mechanism (GCIM).
  • 4Sempra Infrastructure's earnings significantly increased due to strong performance in asset and supply optimization, driven by unrealized gains on commodity derivatives and higher LNG diversion fees.
  • 5Capital expenditures were $1.92 billion for the quarter, up from $1.29 billion in the prior year, reflecting increased investment in infrastructure projects.
  • 6The company maintained investment-grade credit ratings, with stable outlooks across major rating agencies.
  • 7Sempra Infrastructure made progress on significant projects, including the sale of an interest in the PA LNG Phase 1 project and continued development of other LNG export facilities.

Frequently Asked Questions

Sempra's revenues and earnings saw substantial year-over-year growth primarily due to higher natural gas revenues, driven by increased natural gas prices and cost recovery mechanisms at its utility operations (SoCalGas and SDG&E). Additionally, Sempra Infrastructure's performance was boosted by strong results from asset and supply optimization, including favorable movements in commodity derivatives and higher LNG diversion fees. Strategic investments and operational efficiencies across its segments also contributed to the improved financial results.

Regulatory actions and approvals played a crucial role. For instance, the CPUC's authorized cost of capital adjustments positively impacted SDG&E's earnings. SoCalGas benefited from its Gas Cost Incentive Mechanism (GCIM) and CPUC-authorized revenue increases. However, Sempra Texas Utilities experienced a decrease in earnings due to rate base disallowances from the PUCT's base rate review, impacting equity earnings from Oncor Holdings.

Sempra Infrastructure is actively developing several key projects. Notably, the sale of an interest in the Port Arthur (PA) LNG Phase 1 project to an affiliate of ConocoPhillips was completed, with a targeted closing for a sale to KKR Denali. Development continues for other significant projects like the ECA LNG Phase 1 and Phase 2, and the PA LNG Phase 2 project, with progress made on engineering designs and offtake agreements, though these projects remain subject to various risks and approvals.

Investors should remain aware of ongoing litigation and regulatory matters, particularly those concerning the Aliso Canyon natural gas leak, which led to a significant charge in the prior year and continues to be managed. Wildfire mitigation costs and potential impacts from the Wildfire Fund are also relevant for SDG&E. Furthermore, Sempra Infrastructure's international projects, especially in Mexico, face risks related to regulatory changes, land disputes, and permit challenges. The company also navigates risks associated with commodity price volatility and interest rate fluctuations, which are managed through various hedging strategies.