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AGL Resources JV PennEast Pipeline Plans Marcellus Pipeline

SJI NJR

Trades from $3

AGL Resources Inc. venture, PennEast Pipeline Company LLC, declared plans to build a pipeline stretching 100 miles to carry low cost natural gas from Marcellus Shale area to the residential and business complexes of Pennsylvania and New Jersey in the Mid-Atlantic Region. PennEast Pipeline Company is a joint venture (JV) of gas distributors AGL Resources, New Jersey Resources Corp. (NJR - Free Report) , South Jersey Industries Inc. (SJI - Free Report) and UGI Energy Services.

PennEast Pipeline Co. estimates $1 billion for the pipeline project, which is expected to deliver gas to about 4.7 million households at a rate of roughly 1 billion cubic feet per day. The manufacturing work of the pipeline – likely to be operated by UGI Energy Services − is scheduled for 2017.

Natural gas is used mainly for electricity generation. Hence, low cost natural gas would push electricity prices down and in turn win customers’ favor with cheaper bills.

Houses and business complexes in Pennsylvania and New Jersey states were previously served with high priced natural gas, transported from the gas fields in the Gulf Coast and Canada through long-distance pipelines. But with the advent of hydraulic fracturing − a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals − natural gas is now available in abundance in the Marcellus Shale region. The construction of PennEast pipeline will thus give the Mid-Atlantic Region access to easily affordable natural gas.

AGL Resources, which has partial ownership in PennEast Pipeline Co., currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

One can also consider an energy sector player like Cameron International Corp. . The stock sports a Zacks Rank #1 (Strong Buy).


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