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Spire (SR) to Buy Assets for $175M, Expand Midstream Business
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Spire Inc. (SR - Free Report) announced an agreement to acquire MoGas Pipeline, an interstate natural gas pipeline, and Omega Pipeline, a connected gas distribution system, from CorEnergy Infrastructure Trust, Inc. . The contract is valued at $175 million, subject to customary working capital and other closing adjustments.
The transaction is expected to close in the fiscal fourth quarter of 2023, pending Hart-Scott-Rodino review and subject to customary closing conditions.
Benefits of the Agreement
About 263 miles of interstate natural gas pipelines are owned and operated by MoGas, principally in Missouri. MoGas interconnects with Spire STL Pipeline and other local pipelines and fits well with Spire’s existing natural gas midstream businesses. It also enhances SR’s ability to serve its expanding customer base in the counties of St. Charles, Franklin and western St. Louis, in addition to other utility, municipal, industrial and commercial customers in Missouri.
Omega owns and runs approximately 75-miles natural gas distribution network within Fort Leonard Wood in south-central Missouri that is linked to the MoGas network.
Rationale Behind the Purchase
Natural gas distribution pipelines play a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The natural gas network in the United States has nearly 3 million miles of pipeline. Increasing consumption of natural gas in the country and abroad is driving distribution pipelines’ demand.
The country has witnessed a rise in domestic natural gas production as a result of increased exports, domestic demand and public awareness of lower emissions. The need for additional distribution pipes will increase as demand for natural gas from various consumer segments rises.
Per a U.S. Energy Information Administration (“EIA”) report, natural gas consumption for electricity generation is expected to increase 40% and 38% in 2023 and 2024, respectively. The EIA also expects the second highest U.S. natural gas consumption of electricity generation on record this summer, behind last year, and averaging about 38 billion cubic feet per day.
Apart from Spire, National Fuel Gas Company (NFG - Free Report) and Atmos Energy Corporation (ATO - Free Report) also aim at expanding operations through pipeline businesses.
National Fuel Gas Company plans to further expand the pipeline transportation and distribution business by investing more than $500 million over the next five years. Since 2010, the company has invested $2.4 billion in midstream operations to expand and modernize its pipeline infrastructure for gaining access to Appalachian production. At present, its midstream operation has 4.5 million dekatherms of daily interstate pipeline capacity under contract. On completion, these projects are expected to further boost NFG’s pipeline capacity and annual revenues.
National Fuel Gas Company’s long-term (three- to five-year) earnings growth rate is pegged at 9.67%. It delivered an average earnings surprise of 2.52% in the last four quarters.
Atmos Energy operates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines. These are connected to 37 different pipelines across eight states, thereby providing supplier diversity. ATO has a sturdy capital expenditure plan, which helps it in increasing the safety and reliability of its natural gas pipelines.
The company’s long-term earnings growth rate is pinned at 7.48%. The Zacks Consensus Estimate for fiscal 2023 earnings per share is $6.03, implying a year-over-year increase of 7.7%.
Price Performance
In the past month, shares of Spire have lost 4.5% compared with the sector’s 5.1% decline.
Image: Bigstock
Spire (SR) to Buy Assets for $175M, Expand Midstream Business
Spire Inc. (SR - Free Report) announced an agreement to acquire MoGas Pipeline, an interstate natural gas pipeline, and Omega Pipeline, a connected gas distribution system, from CorEnergy Infrastructure Trust, Inc. . The contract is valued at $175 million, subject to customary working capital and other closing adjustments.
The transaction is expected to close in the fiscal fourth quarter of 2023, pending Hart-Scott-Rodino review and subject to customary closing conditions.
Benefits of the Agreement
About 263 miles of interstate natural gas pipelines are owned and operated by MoGas, principally in Missouri. MoGas interconnects with Spire STL Pipeline and other local pipelines and fits well with Spire’s existing natural gas midstream businesses. It also enhances SR’s ability to serve its expanding customer base in the counties of St. Charles, Franklin and western St. Louis, in addition to other utility, municipal, industrial and commercial customers in Missouri.
Omega owns and runs approximately 75-miles natural gas distribution network within Fort Leonard Wood in south-central Missouri that is linked to the MoGas network.
Rationale Behind the Purchase
Natural gas distribution pipelines play a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The natural gas network in the United States has nearly 3 million miles of pipeline. Increasing consumption of natural gas in the country and abroad is driving distribution pipelines’ demand.
The country has witnessed a rise in domestic natural gas production as a result of increased exports, domestic demand and public awareness of lower emissions. The need for additional distribution pipes will increase as demand for natural gas from various consumer segments rises.
Per a U.S. Energy Information Administration (“EIA”) report, natural gas consumption for electricity generation is expected to increase 40% and 38% in 2023 and 2024, respectively. The EIA also expects the second highest U.S. natural gas consumption of electricity generation on record this summer, behind last year, and averaging about 38 billion cubic feet per day.
Apart from Spire, National Fuel Gas Company (NFG - Free Report) and Atmos Energy Corporation (ATO - Free Report) also aim at expanding operations through pipeline businesses.
National Fuel Gas Company plans to further expand the pipeline transportation and distribution business by investing more than $500 million over the next five years. Since 2010, the company has invested $2.4 billion in midstream operations to expand and modernize its pipeline infrastructure for gaining access to Appalachian production. At present, its midstream operation has 4.5 million dekatherms of daily interstate pipeline capacity under contract. On completion, these projects are expected to further boost NFG’s pipeline capacity and annual revenues.
National Fuel Gas Company’s long-term (three- to five-year) earnings growth rate is pegged at 9.67%. It delivered an average earnings surprise of 2.52% in the last four quarters.
Atmos Energy operates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines. These are connected to 37 different pipelines across eight states, thereby providing supplier diversity. ATO has a sturdy capital expenditure plan, which helps it in increasing the safety and reliability of its natural gas pipelines.
The company’s long-term earnings growth rate is pinned at 7.48%. The Zacks Consensus Estimate for fiscal 2023 earnings per share is $6.03, implying a year-over-year increase of 7.7%.
Price Performance
In the past month, shares of Spire have lost 4.5% compared with the sector’s 5.1% decline.
Image Source: Zacks Investment Research
Zacks Rank
Spire currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.