National Fuel Gas CompanyNFG

Morningstar Rating

Stock Research and Analysis

by Mark Barnett

National Fuel Gas' traditional natural gas utility provides cash-flow stability and steady dividends, while its growing oil and gas exploration and production segment provides growth potential unlike most utilities'. The company's large acreage position Read more

Bulls Say

NFG is accelerating its oil and gas exploration and production in Appalachia. These shale plays should be a solid source of profitable growth for the company.

This company has an impressive record of 107 consecutive years of dividend payments, and its 39 consecutive years of dividend increases should appeal to income investors.

NFG is taking advantage of its footprint to develop additional pipeline capacity that can reach the increasingly gas-hungry region surrounding New York City and destinations further east.

With the burgeoning growth of its Appalachian shale production, NFG provides a rare opportunity for material growth in the otherwise slow-moving universe of utility stocks. Read more

Bears Say

The E&P segment makes NFG much more risky than many other utilities. The spike and subsequent crash in energy prices in 2008 and 2009 demonstrated the dangers of E&P investing.

Economic weakness hurts the utility segment, resulting in demand erosion, higher bad-debt expenses, and political pressure to keep rates low.

Information regarding NFG's large Appalachian acreage position and estimated oil and gas reserves is spotty. Little is yet known of the Marcellus acreage.

Dividend-paying stocks like NFG are sensitive to interest rates. As interest rates go up, dividend-paying stocks often underperform the broader market.

Lasting turmoil in the credit markets would crimp management's plans to expand its exploration and production in Appalachia. Read more

Strategy

NFG is focused on its large Appalachian acreage, which includes about 720,000 net acres of the much-hyped Marcellus Shale. The company partnered with the more experienced EOG to explore for natural gas Read more

Management

Management has settled its dispute with activist shareholder New Mountain Vantage for now. The private-equity firm's plans to split the company apart now look unlikely to proceed, though NFG may still consider selling some of its noncore assets like Read more

Profile

National Fuel Gas is an integrated natural gas utility. It explores for, produces, stores, transmits, and distributes natural gas. The company's natural gas utility has Read more

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