Zacks Industry Outlook Highlights: AGL Resources, Atmos Energy, Southwest Gas, Questar and Sempra Energy

Oct 18, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Oct. 18, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Utilities, including AGL Resources Inc. (NYSE: GAS-Free Report), Atmos Energy Corporation (NYSE: ATO-Free Report), Southwest Gas Corporation (NYSE: SWX-Free Report), Questar Corp. (NYSE: STR-Free Report),Sempra Energy (NYSE: SRE-Free Report).


Industry: Utilities


Among the utility services, natural gas usage is increasing due to its abundance, cheap price and clean-burning nature. The EIA forecasts the use of natural gas in the U.S. to increase from 24.37 trillion cubic feet in 2011 to 29.54 trillion cubic feet in 2040, increasing at an average annual rate of 0.7%.

New fracking technology has multiplied natural gas production from rock and rock structures previously considered uncommercial.  A study from pointed out that the natural gas reserve in the U.S. increased by 39% from 2006 levels, thanks to the implementation of new exploration techniques.

The natural gas utilities are not only expected to benefit from the steady increase in domestic demand but also from exports that are expected to rise significantly. The new techniques used to drill natural gas will enable natural gas operators to export large volumes after meeting domestic demand.

The positive dynamics are going to benefit natural gas utilities like AGL Resources Inc. (NYSE: GAS-Free Report), Atmos Energy Corporation (NYSE: ATO-Free Report), Southwest Gas Corporation (NYSE: SWX-Free Report), Questar Corp. (NYSE: STR-Free Report), Sempra Energy(NYSE: SRE-Free Report), among others. As per an EIA release, for the week ending Oct 9, 2013, U.S. natural gas hub prices grew moderately over the one-week period. The Henry Hub spot price closed at $3.70 per million British thermal units (MMBtu), on Oct 9, up 9 cents per MMBtu from the beginning of the report week.

The recovery in natural gas prices will benefit the numerous operators in the sector. With more than 71 million domestic natural gas customers, the industry has enough room for nearly 1,200 natural gas utilities presently operating in the country.

In addition, the U.S. Department of Energy ("DOE") nod for LNG exports will open up new market opportunity for the U.S. gas utilities. The DOE is being cautious in granting permission for LNG exports. At present 21 applications are pending with the regulator for LNG export permission. Given the huge natural gas reserve in the U.S. and ever increasing global demand for natural gas, the natural gas export permission will help to unlock greater value of this natural resource. This could be a potential game changer for the natural gas sector.

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