Chesapeake Utilities to Sell Natural Gas Marketing Business

Chesapeake Utilities Corporation CPK today declared that it is withdrawing from natural gas marketing business through the sale of majority of assets of Peninsula Energy Services Company, Inc. (“PESCO”) — its natural gas marketing subsidiary.

Till date, the company has made three separate transactions to sell PESCO's assets and contracts. PESCO's Florida retail operations will be sold to Gas South LLC. PESCO's other non-Florida retail operations and contracts were sold to United Energy Trading, LLC (UET). The subsidiary’s Mid-Atlantic wholesale contracts and Chesapeake Utilities' Delaware division, Maryland division and Sandpiper Energy Asset Management agreements were sold to NJR Energy Services Company (NJRES).

Reasons for the Sale

In the first half of 2019, revenues from PESCO fell 9.27% on a year-over-year basis from 2018 level of $130.4 Million. The company’s second-quarter earnings fell by 9 cents per share from the year-ago quarter’ level. The downside was caused by lower-than-expected contribution from PESCO.  

The operating income declined approximately $1.8 million for the three months ended Jun 30, 2019 from the year-ago period’s figure. The reduction was due to fall in PESCO's gross margin.

Long-Term Plans

As returns from PESCO are below expectations, the company has taken a decision to exit from the business and concentrate on its prospective core businesses.  

The company anticipates a gain from the sale of the assets in 2019 post the completion of the divestiture. Now, Chesapeake Utilities intends to focus on its core energy delivery businesses that will lower earnings volatility in the future and enable it to recover investments. The company has plans to invest $0.75 billion to $1 billion to strengthen operations during 2018-2022 time frame.

Price Performance

Shares of Chesapeake Utilities have returned 15.3% in the past 12 months compared with the industry’s growth of 11.2%.

Zacks Rank & Key Picks

Chesapeake Utilities currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks from the same space are MDU Resources Group, Inc MDU, Atmos Energy Corporation ATO and ONEOK, Inc OKE.

MDU Resources sports a Zacks Rank #1. The company pulled off an average positive earnings surprise of 1.64% in the last four quarters. The Zacks Consensus Estimate for the current year has inched up 0.67% in the past 90 days.

Atmos Energy has a Zacks Rank #2. The company delivered an average positive earnings surprise of 5.36% in the last four quarters. The Zacks Consensus Estimate for the current year has inched up 0.23% in the past 90 days.

ONEOK has a Zacks Rank #2. The company reported average positive earnings surprise of 4.58% in the last four quarters. The Zacks Consensus Estimate for the current year has moved up 1.3% in the past 90 days.

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