Methanex Inks Long-Term Natural Gas Supply Deal With ENAP

Methanex Corporation (NASDAQ:MEOH) recently announced that its existing commercial arrangements with Empresa Nacional del Petroleo (ENAP) to supply natural gas has been restructured. It will now support around 25% of Methanex’s 1.7 million tons of annual production in Chile from 2020 through 2025.

The long-term natural gas supply arrangement will ensure future gas volumes for the company’s operations in Chile. Moreover, it will enable ENAP to make additional investments in gas development activities.

Methanex believes that this gas supply deal along with commitments from other gas suppliers will enable annual production of up to 1.3 million tons or a maximum of 75% capacity of a two-plant operation. The company is optimistic of securing adequate gas to support a full two-plant operation over the coming years.

Notably, Methanex finished the first phase of the major refurbishment at its Chile I plant. Moreover, it has successfully restarted the plant. The refurbishment is expected to support the long-term reliability of the facility.

Methanex has made substantial progress to restore the Chile facility to a two-plant operation at lower cost of capital. This deal and completion of the first phase of the Chile I refurbishment are major steps for Methanex to return its assets in Chile to full operating rates.

Shares of Methanex have plunged 54% in the past year compared with the industry’s 34% decline.

In July, the company stated that it expects methanol prices to be sequentially lower in the third quarter of 2019. It also expects production levels to be flat on a sequential-comparison basis in the third quarter. Moreover, the company expects adjusted EBITDA to be sequentially lower in the third quarter.

Zacks Rank & Key Picks

Methanex currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation (NYSE:KGC) , Royal Gold, Inc (NASDAQ:RGLD) and Agnico Eagle Mines Limited (NYSE:AEM) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 170% for 2019. The company’s shares have surged 65% in the past year.

Royal Gold has a projected earnings growth rate of 82.1% for fiscal 2020. The company’s shares have rallied 68.9% in a year’s time.

Agnico Eagle has an estimated earnings growth rate of 158.6% for the current year. Its shares have moved up 47.5% in the past year.

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