News

Unitil Corporation UTL announced that it has agreed to purchase Bangor Natural Gas Company (Bangor) from PHC Utilities, Inc., a subsidiary of Hope Utilities, Inc., for $70.9 million on a debt-free basis. This transaction is subject to customary adjustments for closing working capital and transaction expenses.

Details of the Agreement

Bangor owns and operates nearly 351 miles of distribution pipelines and nine miles of transmission pipelines. It is an excellent addition to UTL's existing natural gas distribution operations in Maine, which are dedicated to giving customers access to safe, clean, reliable and affordable energy.

Bangor’s enterprise value is nearly 1.2 times its rate base (based on its estimated rate base as of Dec 31, 2023). Unitil will acquire full ownership of Bangor upon the transaction's closure, anticipated to take place by the end of the first quarter of 2025.

In order to retain its robust balance sheet, Unitil intends to finance this deal with a balanced combination of debt and equity.

Growth Prospects

The Gas Exporting Countries Forum report made optimistic global forecasts for natural gas, projecting a rise in demand from 4.02 trillion cubic meters (tcm) in 2022 to 5.36 tcm in 2050. Total global production is also expected to grow 33% to 5.3 tcm by 2050 (from the 2022 level).

Along with UTL, other utility companies like Spire Inc. SR, Atmos Energy Corp. ATO and National Fuel Gas Co. NFG are also set to gain from the expanding natural gas market.

Spire operates nearly 61,200 miles of natural gas pipelines. SR invested $663 million in fiscal 2023. SR has also increased its investment for fiscal 2024 to $800 million to support its storage expansion project. It also invested $290 million in upgrades of pipeline infrastructure and an additional $110 million to connect more homes and businesses to provide reliable and affordable natural gas service. During fiscal 2024-2033, the company aims to invest $7.3 billion to strengthen its existing operations.

SR’s long-term (three to five-year) earnings growth rate is 5%. The Zacks Consensus Estimate for fiscal 2024 EPS indicates a year-over-year increase of 6.7%.

Atmos Energy continues to benefit from rising demand for natural gas, courtesy of an expanding customer base. The company operates more than 73,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines. It has plans to invest $17 billion in fiscal 2023-2028 to further strengthen its natural gas operations.

ATO’s long-term earnings growth rate is 7%. The Zacks Consensus Estimate for fiscal 2024 EPS indicates a year-over-year increase of 10.2%.

National Fuel Gas benefits from its high-quality Appalachian natural gas assets. Since 2010, the company has invested $2.7 billion in midstream operations to expand and modernize its pipeline infrastructure to gain access to Appalachian production. It has more than $500 million in investment planned over the next five years for the modernization of its natural gas pipeline transportation and distribution systems.

The Zacks Consensus Estimate for NFG’s fiscal 2024 sales indicates a year-over-year increase of 3.2%. It delivered an average earnings surprise of 10.9% in the last four quarters.

Price Performance

In the past three months, shares of UTL have risen 5.5% compared with the industry’s 0.3% growth.

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Zacks Rank

UTL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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