National Fuel Gas: Contrarian Strong

New Post Public Reply Private Reply Replies (0) Message Board
fitzkarz

Disclosure: I am long NFG . (More...)

National Fuel Gas ( NFG ) operates in the two of the worst performing groups for 2012 - Natural Gas Explora tion and Prod uction and Natural Gas Distribution. According to the Barron's performance listing of 98 S&P's Dow Jones Total Market Industry Groups, E&Ps ranked #90 and Gas Distribution clocked in at #75 for share performance over the trailing 12 months. This is where the value and opportunity lay for NFG investors, as investors have focused more on the top two groups of mortgage finance (#1) and home construction (#2). NFG's current valuation reflects this lack of interest and not the catalysts that will drive this unique company's fortunes over the next few years.

Below are one and three year price charts comparing NFG with S& P's Do w Jones Total Market Groups of E&Ps (DJUSOS) and Gas Distribution (DJUSGU):

(click to enlarge)

(click to enlarge)

As a follow-up to an article published in mid- September last year, NFG announced fiscal year September 2012 year-end results and were in line with expectations. Earnings per share came in at $2.59 and dividends paid were $1.46.

National Fuel Gas operates a regulated gas distribution system serving 730,000 customers in Buffalo, NY, Erie, PA and Sharon PA. In addition to itsregulated service, NFG operates 3,000 miles of pipeline and a sto rage network of 34 facilities along with an oil/gas exploration and production company. The crown jewel is about 750,000 fee acres in the Marcellus shale, upwards of 200 drilling locations on a 5-acre spacing in California, new acreage in the Mississippi Lime and acreage in the Utica shale.

Fourth quarter gas production increased both sequentially by 10% and y/y by 46%. Total production for year-end 2012 was 83.4 Bcfe, with 24.5 coming in the 4th quarter. The company anticipates total production for FY2013 to be between 95 and 107 Bcfe, for production growth of between 11% and 23%. For FY2012, proved reserves increased by 33% to 1,246 Bcfe, of which 67% was proved developed. Most importantly, reserve replacement of the year was 473% of production. NFG has doubled its proven reserves since 2009 while maintaining a high percentage of proved developed.

The current investor presentation is here and the latest conference call transcript here .

For FY2012, adjusted EBITDA by operating segment was:

E&P - $396 million ($226 million from Western operations and $170 million from Eastern operations)

Utility - $163 million

Pipeline - $136 million

Other - $11 million

Total - $704 million

Management expects earnings to increase this year to $2.95 a share based on natural gas prices averaging $3.50. However, these estimates are above consensus earnings of $2.75. FY2014 consensus earnings are estimated to come in at $3.00.

Mutual funds and institutions have been adding to their positions in NFG. Gabelli Utilities Fund has increased its holdings by 4.8% for the quarter ending 9/30 and now owns 2.7% of outstanding shares. Neuberger Berman, Tortoise MLP and Pipeline, Cutter & Co, and FMT/Miller Howard also increased their share counts by 20%, 42%, 18%, and 32% respectively. OZ Management reduced its holdings by 12% during the same timeframe.

Several catalysts could unlock shareholder value. EQT Corp ( EQT ) is a very similar company in structure. Prior to last summer, EQT owned midstream assets, a regulated utility, and an E&P segment. Since the summer, EQT has been remaking itself by first spinning off 15% of its midstream assets into EQT Midstream ( EQM ) while retaining an 85% ownership. Share prices for EQM have increased about 40% since the spinoff, rising from $24 to $34.

Recently, EQT announced it was selling its regulated gas utility to Peoples Gas, owned by privately held SteelRiver Infrastructure Partners. The deal was inked at a price equal to 9.5 times the utility's EBITDA.

In addition, Laclede Gas ( LG ) agreed to buy Southern Union's Missouri Gas and New England Gas for 10.8 times EBITDA.

Management believes they can increase production by 20% in FY2013 and by 20 Bcfe annually in FY2014 and beyond. A rising natural gas price will add earnings power to NFG's E&P, Seneca Resources.

Based on both the spinoff of EQM and the purchase by People's at 9.5 times EBITDA, these segments of NFG could be worth about $35 a share. Seneca Resources' proved reserves could be valued at $1.60 per Bcfe, or $24 a share. Combined, these assets could be worth about $59 a share, or about 20% higher than NFG's current market price.

The remaining assets would be their immense acreage in the Marcellus and Utica shale gas fields, beginning acreage in the Mississippi Lime, and their California acreage. Current share prices do not include valuations for these assets, and this is where the potential lies. New investors are in essence buying the utility, pipeline and proved reserves assets at a 20% discount and getting the acreage free.

Unlike many of its E&P competitors, NFG owns the Marcellus acreage and is not subject to the usual "use it or lose it" drilling clauses found in many mineral leases. Expansion plans from the Marcellus to gas-hungry New York City area and points northeast will put NFG in a preferred position to move product from both the Marcellus and Utica to these markets.

NFG was founded in 1902 and has paid a dividend for the past 110 years. Dividends have increased every year for over forty years. The next dividend increase should be in March of this year. At the current dividend rate and share price, NFG yields 3.0%.

Energy investors should review mid-cap National Fuel Gas as a potential addition to portfolios. While patience may be needed for the market to fully appreciate the assets, NFG could be considered substantially undervalued at its current price, but will not stay that way once natural gas pricing starts to climb out of its existing funk.

Author's Note: Please review important disclaimer in author's profile.

I'm in it to win it!

NASDAQ DIP and RIP
Here is the best word that describes what i do here.
Intuitive;
means having the ability to understand or know something without any direct evidence or reasoning process.

I was born with it, I'm truly blessed!


Alway's searching for winners'
937206596_images.jpg
Scroll down for more posts ▼

Top 10 Most Recent News Articles

Breakthrough T1D Pushes Global T1D Awareness Forward

Updated Category News Views 192

Shining a Light on T1D with Global Efforts In a world where a change in lifestyle can happen at the drop of a hat, Breakthrough T1D is making waves by expanding their global "See T1D" campaign in honor of World Diabetes Day. This isn't your run-of-the-mill awareness push—this is about propelling an understanding of what life truly entails for those living with type 1...

Continue Reading
EFICYENT Ventures to Connect at Singapore FinTech Fest

Updated Category News Views 204

Why the Singapore FinTech Festival Matters The world's hardly a stranger to hype, but the Singapore FinTech Festival carries some real weight. From November 18 to 20, 2026, this gig isn't just industry chatter—it's a high-stakes convergence of policymakers, financial institutions, fintech innovators like EFICYENT, and the money folk looking to mold the future of...

Continue Reading
YSTUDIO's Pens: A Nod to the Power of Writing

Updated Category News Views 344

Slow Down, Write On: A New Era for Stationery In a world where sentiments zip around with a swipe, here we find YSTUDIO tapping into something analog and profound. Their latest offerings—a 'Brand Day Gift Box' and the 'Inner Universe' pen series—are more than just high-end stationery. They’re an invitation to reconnect with the written word, a gesture to slow our...

Continue Reading
Webull Faces Class Action: Key Details for Investors

Updated Category News Views 254

What's Really Going on With Webull? When you hear there's a class-action lawsuit brewing, you know something's gone real sideways. Webull Corporation (NASDAQ: BULL) finds itself neck-deep in a securities fraud class action alleging some dicey dealings with China. If you've got skin in the game—and if you bought Webull stock between April 26, 2025, and October 6,...

Continue Reading
BETR's Slide: Investors Face Big Losses, Leadership Shift

Updated Category News Views 170

BETR Investors Left in the Lurch It's a real trainwreck, folks. Better Home & Finance Holding Company, trading under NASDAQ:BETR, is in the spotlight for all the wrong reasons. The company expanded the class period for its investor lawsuit to include even more dates between March and August 2026, reflecting a torturous ride for shareholders. Their stock cratered by a...

Continue Reading
CARsgen's CAR-T Breakthrough on China's Insurance List

Updated Category News Views 291

A Game Changer for CAR-T Therapies There's a breeze of optimism blowing from Shanghai these days—a rare sensation in this market of endless skirmishes. CARsgen Therapeutics Holdings Limited, a company entrenched in the development of cutting-edge CAR T-cell therapies, just notched a victory. They've announced that their CAR T-cell therapy product, satricabtagene...

Continue Reading
HONGQI's EHS4 Launch in Europe: Bridging East and West

Updated Category News Views 127

Revving Up a New Chapter: HONGQI in Venice There's a new player in the European automotive scene, and it's rolling in with more style than a Venetian gondola. HONGQI, a name that's been turning gears in China since '58, is packing its suitcases full of Eastern elegance and landing straight in Venice with the all-electric EHS4. On November 16, the brand is set to unveil...

Continue Reading
Servier's Data on Tovorafenib Shows Promise in pLGG

Updated Category News Views 346

New Light on a Critical Challenge Talk about a fight in the dark. Pediatric low-grade glioma (pLGG) is a menace that families dread, an uphill battle with odds that feel relentless. Enter Servier and its four-year updated data on OJEMDA® (tovorafenib), a beacon of hope for kids battling these tricky brain tumors. Results, presented at the SNO meeting, are fresh off the...

Continue Reading
Motphys Unleashes MotrixSim 1.0, Aiming at Simulation Dominance

Updated Category News Views 263

Motphys Breaks into the Global Simulation Scene The tech world just got slammed with what might be a seismic shift: Motphys, a bold outfit hailing from China, has dropped its brand-new, homegrown simulation engine, MotrixSim 1.0. It's causing quite the stir, unveiling at the Conference on Robot Learning 2026 (CoRL) and throwing down the gauntlet to Western titans like...

Continue Reading
El Pollo Loco Faces Class Action Over Wage Practices

Updated Category News Views 398

Alright, here's where things start sizzling—El Pollo Loco, the fast-food chicken chain whose name translates to 'The Crazy Chicken'—is in a legal pickle. The lawsuit hanging over their heads could spell a sticky situation for them and possibly ripple through the fast-food industry. The suit, filed by the steadfast firm Blumenthal Nordrehaug Bhowmik De Blouw LLP, has...

Continue Reading

Top 5 Most Recently Viewed Articles

Bitcoin's Consolidation Phase: A Bullish Sign for Altcoins

Updated Category News Views 168

Bitcoin's Recent Market Developments Bitcoin is currently seeing a phase of consolidation, with its price stabilizing approximately 5% above previous all-time highs. This behavior suggests a strong underlying structure in the market, according to various analysts. Recently, Bitcoin has displayed notable resilience despite potential volatility in price patterns. This...

Continue Reading
Transform Your Investment: Insights on Imperial Oil Growth

Updated Category News Views 101

Imperial Oil's Impressive Growth Over Five Years Over the last five years, Imperial Oil (AMEX: IMO) has demonstrated remarkable performance, surpassing the overall market by an impressive 7.98% each year. This achievement translates to an average annual return of 20.59%, making it a compelling option for investors seeking to enhance their portfolios. Visualizing Your...

Continue Reading
Investing Wisely: What You Need to Know About PubMatic Lawsuit

Updated Category News Views 162

Understanding the Class Action Lawsuit Against PubMatic PubMatic, Inc. has recently come under scrutiny as a class action lawsuit has been filed, bringing investor concerns to the forefront. The legal action involves allegations that PubMatic and some of its senior executives may have engaged in fraudulent activities or violated business regulations, creating a...

Continue Reading
Projected Growth of the Global Rocket and Missile Industry

Updated Category News Views 57

Projected Growth of the Global Rocket and Missile Industry The global rocket and missile market is on a trajectory to reach an impressive USD 85.22 billion by 2029, marking a significant increase from USD 62.50 billion in 2024. This growth showcases the expanding landscape of the defense sector, with a compound annual growth rate (CAGR) of 6.4%. Various driving factors...

Continue Reading
Grossman Law Offices Secures Landmark Truck Accident Settlement

Updated Category News Views 232

Groundbreaking Truck Accident Settlement By Grossman Law Offices In an impressive legal feat, Grossman Law Offices has achieved a remarkable settlement in a case involving catastrophic injuries from a truck accident. This Dallas-based firm has been recognized for securing what is now considered the largest publicly reported truck accident settlement in Texas since 2021....

Continue Reading