National Fuel Gas (NFG) Rides on Appalachian Assets & Investments
National Fuel Gas Company’s NFG strong presence in the Appalachian region and the acquisition of Shell’s assets are expected to further drive its performance. The company’s systematic investment will further strengthen its natural gas and oil operations and help reduce greenhouse gas emissions.
However, this Zacks Rank #3 (Hold) company has to face strong competition from providers of natural gas and other sources of energy.
Tailwinds
NFG’s systematic capital spending to strengthen its natural gas and oil operations is having a positive impact on its total production. The company has been consistently increasing its total production since fiscal 2015. National Fuel Gas’ acquisition of Royal Dutch Shell’s upstream and midstream assets in Pennsylvania for $500 million boosted its earnings and production.
Since 2010, the company has invested $2.4 billion in midstream operations to expand and modernize its pipeline infrastructure. The objective is to gain access to Appalachian production. NFG has planned to invest more than $500 million over the next five years for the modernization of pipeline transportation and distribution systems. At present, its midstream operation has 4.5 million dekatherms of daily interstate pipeline capacity under contract.
National Fuel Gas continued replacing and modernizing the existing pipelines in the fiscal 2018-2022 period. It replaced 784 miles of utility main pipelines in the said period. It expects to replace more in the long term. The company invested $441.3 million in the fiscal 2017-2022 period. It plans to invest further toward the improvement of the pipeline distribution system.
Headwinds
There’s strong competition in the natural gas industry among providers of natural gas as well as other sources of energy such as fuel oil and electricity. Hence, a drop in the prices of alternate fuel and electricity could adversely impact natural gas demand and hurt the company’s prospects.
Additional expenses for compliance with the stringent regulations associated with exploration and production activities, as well as dependence on the performance of subsidiaries to meet its financial obligations are concerns.
Stocks to Consider
Some better-ranked stocks from the same industry are Northwest Natural Holding Company NWN, sporting Zacks Rank #1 (Strong Buy), and Atmos Energy Corporation ATO and Spire Inc. SR, both holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
NWN’s long-term (three to five year) earnings growth rate is 3.7%. The Zacks Consensus Estimate for NWN’s 2023 earnings per share (EPS) indicates a year-over-year increase of 6.3%.
ATO’s long-term earnings growth rate is 7.48%. The Zacks Consensus Estimate for ATO’s fiscal 2023 EPS implies an improvement of 7.7% year over year.
SR’s long-term earnings growth rate is 4.22%. The Zacks Consensus Estimate for SR’s fiscal 2023 EPS indicates year-over-year growth of 10.6%.
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