Enbridge Inc. (ENB) has announced the successful completion of its acquisition of Questar Gas Company and its associated Wexpro companies from Dominion Energy, Inc. D. This strategic move marks a major expansion of Enbridge's Gas Distribution and Storage Business Unit.
Expanding Horizons
The Questar Gas utility, which will now operate under the names Enbridge Gas Utah, Enbridge Gas Wyoming, and Enbridge Gas Idaho in their respective states, already services approximately 1.2 million customers across Utah, southwestern Wyoming, and southeastern Idaho. These regions are noted for their rapidly growing economies and populations, enhancing the value and potential of the acquisition.
Questar Gas' extensive asset portfolio includes more than 21,000 miles (33,500 km) of natural gas distribution and transmission pipelines, a liquefied natural gas storage facility for improved system reliability and numerous interconnections to major interstate natural gas pipelines. The company also benefits from a cost-of-service supply agreement with Wexpro, ensuring reliability and affordability for its customers.
Strategic Growth and Stability
Michele Harradence, Enbridge's executive vice president and president of Gas Distribution and Storage Unit, conveyed her enthusiasm for the acquisition, highlighting its benefits. She emphasized that Questar Gas and Wexpro should expand the scale and scope of Enbridge's low-risk utility business model, supporting long-term dividend growth with stable cash flows. She also welcomed Questar Gas and Wexpro employees to the Enbridge family, emphasizing the company's commitment to building long-term, productive relationships with stakeholders in Utah, Wyoming and Idaho.
Prospects
Enbridge's acquisition strategy continues with the anticipated purchase of the Public Service Company of North Carolina, Incorporated (“PSNC”), pending regulatory approvals. The acquisition of PSNC, expected to close in 2024, along with the previously completed acquisition of The East Ohio Gas Company (now Enbridge Gas Ohio), should significantly bolster Enbridge's portfolio. Questar, Enbridge Gas Ohio and PSNC (in unison) are projected to contribute approximately 80% to the total annualized EBITDA from the trio of gas utilities acquired from Dominion.
Conclusion
This acquisition is a strategic move for Enbridge, enhancing its footprint in the natural gas distribution sector and promising long-term benefits for the company and its stakeholders. With a strong focus on stability and growth, Enbridge is poised to strengthen its presence and service capabilities across multiple states, ensuring reliable and affordable natural gas supply for its expanding customer base.
Zacks Rank & Key Picks
Currently, both Enbridge and Dominion carry a Zack Rank #3 (Hold).
Investors interested in the energy sector may look at a couple of better-ranked stocks like Archrock Inc. AROC and SM Energy Company SM, sporting a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
The Zacks Consensus Estimate for AROC’s 2024 EPS is pegged at $1.07. The company has a Zacks Style Score of A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term value for shareholders.
The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.63. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 in the past 30 days.
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