) entered into a deal with Canada's largest natural gas producer
Encana Oil & Gas (USA) Inc. to develop onshore natural gas
drilling program in the continental U.S. Nucor believes that the
drilling program will provide a reliable, low-cost supply of fuel
for more than 20 years.
Per the agreement, Nucor will share its part of costs and will
also shell out an additional amount for the drilling. The
agreement also has an option where either of the companies may
suspend drilling if the price of natural gas falls below a
predetermined threshold. Encana will provide expertise for
drilling and operating the wells.
The agreement will establish a reliable gas supply for the direct
reduced iron facility, which is currently under construction in
Convent, Louisiana where iron ore is turned into a concentrate.
The facility is expected to come online in mid 2013 and is
expected to increase Nucor's usage of natural gas. The recent
deal is an extension of the existing agreement between Nucor and
Encana that was signed in 2010.
As per Nucor, the deal can provide enough natural gas to offset
the fuel that is used at its U.S. mills and two gas-intensive
direct reduced iron facilities. Nucor believes that the deal will
improve its competitive position and will be beneficial for both
Last month, Nucor released its third quarter 2012 results. The
company reported adjusted (excluding special items) earnings of
45 cents per share in the third quarter of 2012, ahead of the
Zacks Consensus Estimate of 42 cents. The adjusted earnings
exclude cost associated with Skyline Steel buyout and loss on
divestiture of the assets of Nucor Wire Products Pennsylvania,
Profit (as reported) came in at $110.3 million or 35 cents a
share, down 39% from $181.5 million or 57 cents per share
reported a year ago. The bottom line was hurt by lower operating
profits at the company's steel mills, especially in sheet and
Revenues slid 8.6% year over year to $4,801 million, missing
the Zacks Consensus Estimate of $4,856 million. An 8% fall in
average sales price weighed on Nucor's revenues in the quarter.
Total tons shipped to outside customers dipped 0.3% year over
year to 5.8 million tons in the reported quarter and total mill
shipments decreased 1.7% to 5.0 million tons.
COMMERCIAL METL (CMC): Free Stock Analysis
NUCOR CORP (NUE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis
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The company, which competes with
Commercial Metals Co.
United States Steel Corp.
), maintains a Zacks #3 Rank, which translates into a short-term
(1 to 3 months) Hold rating. We currently have a long-term
Neutral recommendation on the shares of Nucor.