Sprague Resources Arm To Buy Utilities Marketing Assets
On Sep 11, 2014, Sprague Operating Resources LLC, a fully-owned affiliate of downstream energy player Sprague Resources LP (SRLP - Snapshot Report), entered into a definitive agreement with Metromedia Gas & Power Inc and Metromedia Energy. Both Metromedia Gas & Power and Metromedia Energy market utilities like natural gas and electricity.
Per the deal, Sprague Operating Resources will purchase the entire business related to natural gas and electricity marketing of Metromedia Gas & Power and Metromedia Energy. For the acquisition, Sprague is expected to pay roughly $22 million in cash and assume certain liabilities. The transaction is anticipated to close within 30 days but is awaiting customary closing conditions.
We believe that the acquisition will help Sprague to diversify its business to a great extent as Metromedia Energy is one of the major marketers of electricity and natural gas in the Northeast and Mid-Atlantic regions. Every year, Metromedia Energy provides customers with 15 billion cubic feet of natural gas and 150 megawatts of power.
Currently, Metromedia Energy markets natural gas to more than 10,000 customers and gives electricity brokerage services to roughly 7,000 commercial and industrial customers. Hence, the closure of the acquisition will be immediately reflected in increased cash flows for Sprague Resources unitholders.
Portsmouth, NH-based Sprague Resources primarily involves in the storage and distribution of refined petroleum products and natural gas. Currently, Sprague Resources has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Cameron International Corp. (CAM - Analyst Report), Patterson-UTI Energy Inc. (PTEN - Analyst Report) and Pioneer Energy Services Corp. (PES - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).
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