National Fuel Gas Co. (0.5%) (NFG – $69.53 – NYSE) is a diversified natural gas company. NFG owns a regulated gas utility serving the region around Buffalo, New York, gas pipelines that move gas between the Midwest and Canada and from the Marcellus to the Northeast, gathering and processing systems, and an oil and gas exploration and production business. NFG’s regulated utility and pipeline businesses, as well as its California oil production business, provide stable earnings and cash flows to support the dividend, while the natural gas production business offers significant upside potential. NFG’s ownership of 800,000 acres in the Marcellus shale, including 745,000 acres in the shale fairway of Pennsylvania, holds enormous natural gas reserve potential, and we believe the position could be worth $3.5 billion based on recent comparable transactions. We continue to expect above average long term earnings and cash flow growth from rapidly growing gas production and expansion of the strategically located pipeline network. The company has increased its dividend for over forty consecutive years. In addition, NFG is considering corporate restructuring alternatives, such as a master limited partnership (MLP) of its midstream assets.
From Mario Gabelli (Trades, Portfolio)’s Asset Fund Q4 2014 Commentary.
