Back to top

Image: Bigstock

Why You Should Hold on to National Fuel Gas (NFG) Stock Now

Read MoreHide Full Article

We recently updated a research report on National Fuel Gas Company (NFG - Free Report) . Its decision to acquire Royal Dutch Shell’s assets in Pennsylvania, strong presence in the Appalachian region, and expanding upstream and midstream operations make the stock a good option to hold onto amid the unprecedented economic crisis as a result of COVID-19.

Tailwinds

National Fuel Gas’ acquisition of Royal Dutch Shell’s upstream and midstream assets in Pennsylvania for $500 million will be immediately accretive to earnings and production, post closure of the buyout. The company now expects total production for fiscal 2020 in the range of 245-255 Bcfe (up from the previous guided range of 235-245 Bcfe), taking into consideration the contribution from the acquired Shell’s assets.

It has more than $1 billion pipeline projects under development. These projects, on completion, are expected to boost annual revenues by $150 million. In addition, National Fuel Gas continued to replace and modernize the existing old pipelines in the 2015-2019 period. The company replaced 737 miles of utility main pipelines in the said period and expects to replace more over the long term.

Its operating expenses has been declining since fiscal 2015. Finding & Development (F&D) cost per thousand cubic feet (Mcfe) was $1.32 at the end of fiscal 2016, which dropped to 56 cents at fiscal 2019-end. The decision to acquire Shell’s assets will further lower F&D costs of the company and boost margins.

Factors Acting as Headwinds

Fluctuation in natural gas prices is expected to affect its overall performance. Due to the same, National Fuel Gas Company has decided to reduce development activity in the Appalachia region and drop one of the three horizontal drilling rigs currently operating in the region.

Variation in weather conditions can impact the volume of natural gas delivered by the Utility segment, as majority of its residential and commercial customers use natural gas for space heating. During the fiscal second quarter, warm weather in its service territories had an adverse impact on demand for natural gas and margins.

Price Performance

National Fuel Gas’ shares have outperformed the industry in the past three months.



Zacks Rank and Other Key Picks

National Fuel Gas currently has a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Southwest Gas Corporation (SWX - Free Report) and NewJersey Resources Corporation (NJR - Free Report) , each holding a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term (three to five years) earnings growth for Southwest Gas and NewJersey Resources is projected at 6% for both.

The dividend yield for New Jersey Resources is 3.64% and the same for Southwest Gas Holdings is 3.04%. The dividend yield of both the companies is better than the Zacks S&P 500 composite’s 1.87%.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Southwest Gas Corporation (SWX) - free report >>

National Fuel Gas Company (NFG) - free report >>

NewJersey Resources Corporation (NJR) - free report >>

Published in