On May 16, 2014, the units of Ferrellgas Partners LP (FGP) touched a 52-week high of $26.62. The unit price was finally closed at $26.33, up 1.3% from the previous day’s closing. We believe that the partnership’s strategic inorganic growth program and efforts towards diversification of its operations have led to the surge in unit price.
Ferrellgas Partners continues to pursue an acquisition strategy, which involves purchasing assets having the same line of business. In fiscal 2014, the partnership completed numerous acquisitions. On May 5, 2014, Ferrellgas Partners acquired a Madison, CA-based propane company, Viking Propane. The inorganic growth initiative is expected to help the partnership to expand its presence in the U.S. and enhance its product portfolio.
In addition, Ferrellgas Partners’ significant investment to upgrade its properties will help it to provide uninterrupted services to the retail and bulk propane customers.
Apart from extending core operations, Ferrellgas Partners is currently focusing on diversifying its asset base. On May 1, 2014, the partnership completed the acquisition of Sable Environmental, LLC. Sable Environmental is a fluid logistics provider in the Eagle Ford Shale region of south Texas. The acquisition will enable Ferrellgas Partners to enter into midstream operations arena. We consider the transaction as a significant step towards the diversification of service portfolio.
Many oil and gas exploration and production companies including Murphy Oil Corporation (MUR) are active in the mineral rich Eagle Ford Shale region. In this territory, demand for midstream services is expected to gradually increase in the future, thereby boosting Ferrellgas Partners’ financial performance.
Earlier, Ferrellgas Partners acquired New York-based Mr. Bar-B-Q, a high-quality barbeque instruments and allied accessories provider. We believe the acquisitions of non-core assets will bring in cash flows from different streams, thereby reducing product-specific risk.
Ferrellgas Partners has a stable liquidity position, including $18.3 million of cash and cash equivalents as of Jan 31, 2014 and available fund of $500 million under its secured credit facility. A favorable financial profile supports the partnership’s systematic growth activities.
Ferrellgas Partners currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the oil refining and marketing industry include CVR Refining, LP (CVRR) and Sprague Resources LP (SRLP), each carrying a Zacks Rank #1 (Strong Buy).
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