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Chesapeake Utilities' (CPK) Arm Buys Propane Assets in Carolinas

Chesapeake Utilities' (CPK) unit takes over the propane operating assets of Diversified Energy Company, fortifying its footprint in North and South Carolina. The deal will boost CPK's earnings in 2022.

This story originally appeared on Zacks

Chesapeake Utilities Corporation’s CPK propane subsidiary Sharp Energy recently acquired Diversified Energy Company’s propane operating assets, thereby expanding its footprint in North and South Carolinas.

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Benefits of the Deal

The aforementioned transaction is likely to be accretive to Chesapeake Utilities' 2022 earnings, boosting gross margins by $11.3 million. The deal will add nearly 19,000 residential, commercial and agricultural customers apart from maintaining distributions at nearly 10 million gallons of propane, annually.

Sharp Energy has been expanding Chesapeake Utilities' propane wholesale, retail and AutoGas businesses for a while in the Mid-Atlantic and Southeast via organic and inorganic activities.

In 2020, Sharp Energy completed the buyout of Western Natural Gas Company in Jacksonville, FL, providing propane gas service to nearly 4,000 customers. This enabled the unit to extend its propane operations in Florida and build upon the existing propane footprint in the state. The latest transaction will further strengthen CPK’s position in the U.S. propane market.

The total value of acquisitions by CPK amounted to $4.3 million in the first nine months of 2021, significantly up from $0.4 million in the similar period of 2020. Chesapeake Utilities expects the same to amount $6.5 million in 2021, to which the aforementioned buyout will contribute favorably.

Peer Moves

Other gas utilities like ONE Gas OGS, ONEOK OKE and Atmos Energy ATO are also expanding their operations via valuable investments.

For instance, ONE Gas invested $515 million in 2020 and plans to invest $540 million in 2021. The increase is primarily inducedby extending its services to new customers. In the 2021-2025 time period, OGS aims to invest $3 billion in strengthening operations. Nearly 65-70% of the planned capital expenditure will be directed toward systems integrity and replacement projects.

The long-term earnings growth rate for OGS is pegged at 5%, while its dividend yield is 3.1%. Earnings surprise delivered by OGS in the last four quarters is 4.42%, on average.

ONEOK continues to invest in organic growth projects for expanding in the existing operating regions and providinga broad range of services to crude oil and natural gas producers plusthe end-use markets. Its capital expenditures are expected in the band of $525-$675 million for 2021. OKE will also benefit from the contribution of its organic projects completed in 2020.

The long-term earnings growth rate for OKE is pegged at 7.8%, while its dividend yield is 6.3%. Earnings surprise delivered by OKE in the last four quarters is 2.36%, on average.

Atmos Energy has a sturdy capital expenditure plan, helping it increase safety and reliability of its natural gas pipelines. ATO invested $2 billion in fiscal 2021, of which 88% was spent on increasing the safety and reliability of its operations. ATO is planning to invest in the range of $13-$14 billion from fiscal 2022 through 2026, of which more than 80% will be allocated to enhance the safety of itsexisting operations.

The long-term earnings growth rate for ATO is pegged at 7.2%, while its dividend yield is 2.8%. Earnings surprise delivered by ATO in the last four quarters is 6.46%, on average.

Zacks Rank & Price Performance

In the past six months, shares of this currently Zacks Rank #3 (Hold) stock have gained 19.5% against the industry’s fall of 0.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six Months Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

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