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MDU Resources to Expand Natural Gas Transportation System

MDU Resources Group, Inc.'s MDU announced plans of expanding its Line Section 27 natural gas transportation system. The work will be carried out by its subsidiary, WBI Energy, Inc., in the Bakken producing area in northwestern North Dakota.

This expansion project’s expenditure amounts to about $27–$30 million. Per the terms, the company will construct approximately 13 miles of 24-inch diameter pipeline and associated facilities. With the completion of this project the expansion capacity of WBI Energy is expected to be more than 600,000 dekatherms per day.

The project will be in service by the fall of 2018, which coincides with the completion of WBI Energy’s $55–$60 million Valley Expansion project near Fargo, ND.

MDU Resources’ Capex Plan

MDU Resources announced its long-term plan for capital investment back in Nov, 2016. The company announced an expected capital expenditure of nearly $2.2 billion over period of 2017–2021, which is higher than its previous 5 year (2012–2016) expenditure plan of $2.16 billion. (Read more: MDU Resources 5-Year Capital Plan Ups Regulated Spending)

Out of the total amount, the company wants to invest more than 70% towards strengthening its existing regulated operations. Per this capital expenditure strategy, MDU Resources plans to invest $659 million in its Natural gas distribution, $582 million in its Electric business and $382 million in its Pipeline and midstream operations.

Position of Natural Gas in U.S.

According to U.S. Energy Information Administration (EIA), in 2016, natural gas contributed 34% of total electricity generation surpassing coal. Since 2005, natural gas generation took a front seat as an energy resource, primarily due to its continued cost competitiveness as compared to coal.

Major utility service providers are now shifting their focus from coal-powered plants to renewables to bring down their carbon footprint. Therefore, as a low emission fuel, natural gas is gaining popularity with each passing day. We believe this latest move by MDU Resources reflects the company’s attempt to gain substantial shares in the expanding market for natural gas.

Price Movement

Shares of MDU Resources have gained 8.6% in the last twelve months outperforming Zacks categorized Utility - Gas Distribution industry’s gain of 1.8%.


This outperformance might have been driven by the systematic and planned investments along with growth focus measure adopted by the company over the time.

Zacks Rank and Key Picks

MDU Resources has a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space are Atmos Energy Corporation ATO, ONE Gas, Inc. OGS and Clean Energy Fuels Corp. CLNE. While Atmos Energy and ONE Gas carry a Zacks Rank #2 (Buy), Clean Energy has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atmos Energy’s 2017 Zacks Consensus Estimate grew 1.1% to $3.58 over the last 60 days. The company’s long EPS growth is expected to be 7%.

ONE Gas 2017 Zacks Consensus Estimate grew 0.3% to $2.98 over the last 60 days. The company’s long EPS growth is expected to be 5.53%.

Clean Energy Fuels Corp.’s 2017 Zacks Consensus Estimate moved from a loss of 51 cents to an earnings of 4 cents over the last 60 days. The company’s long EPS growth is expected to be 25%.

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Atmos Energy Corporation (ATO): Free Stock Analysis Report
 
Clean Energy Fuels Corp. (CLNE): Free Stock Analysis Report
 
MDU Resources Group, Inc. (MDU): Free Stock Analysis Report
 
ONE Gas, Inc. (OGS): Free Stock Analysis Report
 
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