Ferrellgas Partners L.P. FGP announced that its subsidiary Bridger Logistics will sell Bridger Energy, LLC to an undisclosed buyer. The financial consideration is yet to be revealed. The primary objective of this deal is to lower the overall debt level of the partnership.
The decision to sell Bridger Energy will lower annual interest burden by nearly $4.5 million and reduce its obligation from its current credit facility by $80 million. The decision does not come as a surprise as the performance of these assets was lower than expected.
Cold Weather Can Help
Ferrellgas Partners has been adversely impacted by warm winter weather in 2016 and 2017, which affected the sale of propane. Propane is generally used for heating, and mild winter in the past two seasons negatively impacted its volumes.
However, the present cold spell in the United States is likely to increase demand for propane.
High Debts a Concern
Long-term debts of Ferrellgas Partners at the end of first-quarter fiscal 2018 (ending Oct 31, 2017) was nearly $1.8 billion and interest expenses at the end the quarter were $40.8 million. The partnership will need to arrange for funds to service its debts, and shedding its non-core assets is a positive step in that direction.
However, monetization of non-core assets might not be enough for Ferrellgas Partners and its management might also consider the option of lowering its cash distribution level to improve liquidity.
Primarily due to the lower-than-expected performance in the last four quarters, Ferrellgas Partners’ stock has lost 50% in the same period, much wider than the decline of 4.8% of the industry it belongs to.
Ferrellgas Partners has a Zacks Rank #5 (Strong Sell). Few better-ranked in the sector are Marathon Petroleum Corporation MPC, Delek US Holdings Inc. DK and Galp Energia SGPS SA GLPEY. Marathon Petroleum sports a Zacks Rank #1(Strong Buy), while the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Petroleum’s long-term expected earnings growth rate is 11.02%. Its 2018 Zacks Consensus Estimate has moved up 16.8% in last 30 days to $4.39.
Delek US Holdings’ long-term expected earnings growth rate is 10.0%. Its 2018 Zacks Consensus Estimate has moved up 8.1% in last 30 days to $2.00.
Galp Energia SGPS SA’s long-term expected earnings growth rate is 3.0%. Its 2018 Zacks Consensus Estimate has moved up 25.0% in last 30 days to 45 cents.
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