National Fuel Gas is exploring strategic options for its natural gas production and midstream business, including Seneca Resources, in a potential transaction valued at around $5 billion.
(Reuters) — U.S. energy firm National Fuel Gas is exploring strategic options for its integrated natural gas production business, with any deal set to value the unit at around $5 billion, five people familiar with the matter said.
The Williamsville, New York-based company is working with advisers including investment bankers at Goldman Sachs to study a range of scenarios for the business, which consists of natural gas producer Seneca Resources and pipeline operator National Fuel Gas Midstream Company.
Among the options being considered are a full or partial sale, a merger with another publicly listed U.S. producer, or a spinoff into a separate publicly listed company, the sources said.
The sources cautioned that no transaction involving the natural gas business may ultimately materialize and spoke on condition of anonymity to discuss private deliberations.
National Fuel, which has a market capitalization of around $7.6 billion, declined to comment, as did Goldman Sachs.
The review was prompted in part by an unsolicited expression of interest in the natural gas production business earlier this year, three of the sources said. They declined to disclose the bidder’s identity or the extent of the sale discussions.
SENECA RESOURCES
Seneca Resources is a Houston-based exploration and production company focused on natural gas, with operations across the Marcellus and Utica shale formations in Appalachia. It produces around 1.1 Bcf/d of natural gas, according to National Fuel’s July earnings presentation.
National Fuel Gas Midstream supports Seneca by transporting gas from well sites to larger pipelines that carry it to end users.
Seneca and the associated infrastructure account for around 69% of National Fuel’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA), according to the July presentation. Any divestment would therefore have to be weighed carefully to ensure it does not undermine National Fuel’s remaining business, the sources said.
A divestment could provide National Fuel with cash to expand its regulated utility business as U.S. power demand grows amid data center development and broader industrial electrification.
National Fuel provides natural gas utility services to around 756,000 customers in New York and Pennsylvania. It is also working to close its $2.62 billion acquisition of CenterPoint Energy’s Ohio natural gas utility business, which will add another 335,000 customers. The deal is slated to close Oct. 1.
