Ferrellgas Partners LP (FGP) announced that it has acquired Wise Choice Propane (“Wise Choice”) for an undisclosed amount. This is the partnership’s sixth retail propane acquisition in fiscal year 2014, taking the tally to about 248 to date.
Mount Vernon, OH-based Wise Choice, an independently owned propane retailer, provides propane to residential, commercial, and agricultural customers. Wise Choice has operations in several parts of the state of Ohio, including Mount Vernon, Utica and some other places.
We view the latest acquisition as a positive move for Ferrellgas Partners’ future growth. A steady population growth in Ohio and economic development backed by a stable production in the Utica Shale region will likely act as catalyst for higher propane demand.
Ferrellgas Partners pursues a systematic acquisition strategy to expand its operations. The partnership usually acquires assets having the similar lines of business, which are immediately accretive. On Jun 17, 2014, Ferrellgas Partners acquired Topeka, KS-based Kaw Valley Propane, a unit of Kaw Valley Electric Cooperative.
Ferrellgas Partners continues to efficiently reap benefits from its acquired assets. In the first nine months ended Apr 30, 2014, the acquisitions contributed around $1.5 million to the partnership’s financials.
Ferrellgas Partners also acquires non-core assets to diversify its product offering. The partnership is currently forming its midstream division by entering into salt water disposal (SWD) services domain. On May 1, 2014, Ferrellgas Partners acquired fluid logistics provider, Sable Environmental, LLC, with operations in the Eagle Ford Shale region of south Texas. The upstream players are active in the mineral-rich Eagle Ford area to unlock the huge reserves. The demand for SWD services is expected to increase in future, which will subsequently enable Ferrellgas Partners to receive more contracts.
Ferrellgas Partners maintained a favorable liquidity position backed by a steady cash generation capacity. In the first nine months of 2014, the partnership’s operating cash flow was $103.9 million. A stable financial position supports the partnership’s disciplined investments in inorganic projects.
Ferrellgas Partners currently has a Zacks Rank #1 (Strong Buy). Some stocks in the same industry looking equally good include Sprague Resources LP (SRLP), CVR Energy, Inc. (CVI) and Global Partners LP (GLP). Sprague Resources carries a Zacks Rank #1 (Strong Buy) while CVR Energy and Global Partners hold a Zacks Rank #2 (Buy).
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