Shell (SHEL) Inks Third Long-Term LNG Deal With Mexico Pacific

Shell plc (SHEL )  has agreed to acquire a further 1.1 million tons per annum (MTPA) of LNG from Mexico Pacific's projected Saguaro Energia LNG export facility on the Pacific Coast of Mexico, per media reports. During the course of the 20-year contract, Shell will buy LNG on a free-on-board basis.

The Shell unit, Shell Eastern Trading (Pte) Ltd, had signed a prior sale and purchase agreement in July 2022, for 2.6 MTPA from the first two liquefaction LNG export project, while the most recent deal was for LNG from a proposed third train. Once all three liquefaction trains are operational, the project will have a combined capacity of 14.1 MTPA, with an individual capacity of 4.7 MTPA.

The Shell deal contributed to the project's strong commercial momentum that Mexico Pacific has been developing over the past year.

According to Ivan Van der Walt, CEO of Mexico Pacific, the agreement with Shell accounted for more than 20% of train 3 capacity, building beyond their original 2.6 MTPA commitment from trains 1 and 2. The company also hinted that the liquefaction unit would receive commercial approval following the first two trains. A final investment decision (FID) on the first two trains is expected shortly and a Train 3 FID is likely to follow soon.

Zacks Rank & Key Picks

Currently, Shell carries a Zack Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI, Par Pacific Holdings Inc. PARR, each sporting a Zacks Rank #1, and Murphy USA Inc. MUSA carrying a Zacks Rank #2 (Buy).

CVR Energy, a diversified holding company with its main office in Sugar Land, TX, is an independent refiner and marketer of high-value transportation fuels. Over the past seven days, CVI has seen an upward revision in earnings estimates for 2023.

Par Pacific, a growth-oriented company, combines knowledge of corporate financing with experience in the oil and gas sector. With 94,000 bpd of active refining capacity and a logistical system that includes an SPM, storage, barges, pipelines and trucking operations, PARR owns and manages one of Hawaii's biggest energy networks. Over the past 30 days, the company has witnessed an upward revision in earnings estimates for 2023 and 2024.

Murphy USA operates stations close to Walmart supercenters and sells low-cost, high-volume fuel. This helps the company to get a lot more business than its competitors. Another significant competitive advantage for the firm is its access to product distribution centers and pipelines, which helps control costs in the intensely competitive retail sector. Over the past 30 days, MUSA has witnessed an upward revision in earnings estimates for 2024.

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