National Fuel Gas to split into two publicly traded companies

National Fuel Gas (NFG) rose 0.9% pre-market Wednesday after announcing a plan to separate the company into two independent, publicly traded companies through a tax-free spinoff of its Integrated Upstream and Gathering business.

The transaction will be effected through a tax-free distribution of at least 80.1% of IUG shares to National Fuel (NFG) shareholders, while National Fuel plans to retain up to 19.9% ownership in IUG after the spinoff, which it intends to dispose of in a tax-efficient manner.

The separation will create two companies: IUG, which will focus on Appalachian upstream and gathering natural gas assets, and National Fuel, which will become a fully regulated natural gas company with utility, interstate pipeline, and storage assets across Ohio, New York, and Pennsylvania.

Post-separation, National Fuel (NFG) will be a fully regulated natural gas business with nearly $5B of rate base and serving 1.1M customers across Ohio, New York, and Pennsylvania, and its FERC-regulated pipeline and storage business will provide nearly 5 Bcf/day of contracted natural gas transportation capacity and 77 Bcf of fully contracted natural gas storage services.

IUG will be a leading integrated, low-cost upstream natural gas business, with 1.2M total net acres in Appalachia and 1.1 Bcf/day of net natural gas production; its wholly owned gathering assets will transport the vast majority of its production.

"Following the recent closing of our Ohio gas utility acquisition, each business is now a scaled platform and post-separation is expected to have the financial strength to best capitalize on the long-term growth opportunities as independent companies," National Fuel Gas (NFG) President and CEO David Bauer said.