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MDU Resources Reports Third Quarter Earnings; Announces Evaluating Second Diesel Refinery and Marketing Its Fidelity Exploration & Production Company

Nov 03, 2014
  • Construction materials has record quarterly earnings, up 12 percent on 5 percent revenue growth.
  • Pipeline and energy services on schedule to bring Dakota Prairie diesel refinery on line by end of the year; announces evaluating second diesel refinery.
  • Utility continues record capital program with strong customer growth, 5 percent electric and 3 percent natural gas in Bakken.
  • Company to market Fidelity Exploration & Production business.

MDU Resources Group, Inc. (NYSE:MDU) today reported third quarter consolidated adjusted earnings of $84.9 million, or 44 cents per common share, compared to $92.3 million, or 49 cents per common share for the third quarter of 2013. Consolidated GAAP earnings were $103.0 million, or 53 cents per common share, compared to $84.3 million, or 44 cents per common share for the third quarter of 2013. For an explanation of non-GAAP earnings adjustments, see the Reconciliation of GAAP to Adjusted Earnings and the Use of Non-GAAP Financial Measures sections later in this press release.

Adjusted earnings for the nine months ended September 30 were $202.3 million, or $1.05 per share, compared to $199.6 million, or $1.05 per share a year ago. Consolidated year-to-date GAAP earnings were $213.5 million, or $1.11 per share, compared to $187.0 million, or 99 cents per share in 2013.

The company also announced that it plans to market its Fidelity Exploration & Production business. "Although we continue to see attractive investment opportunities at Fidelity, the capital required to effectively grow the business would compromise our ability to fund the substantial opportunities we are seeing at our other lines of business," said David L. Goodin, president and CEO of MDU Resources Group. "We expect to grow our utility, pipeline and construction business units in a more meaningful way and pursue that growth with a lower overall business-risk profile." The company has engaged Goldman Sachs as its financial advisor.

The company’s construction materials business had a record quarter, with earnings of $55.2 million. Construction workloads and margins, ready-mixed concrete margins and volumes and asphalt margins increased. Outside construction work was strong at the construction services group, which had earnings of $9.9 million. The construction services group earnings year-to-date are at a near-record pace.

"Our construction materials business has taken advantage of continuing improvements in the economy, and also is benefiting from favorable weather that is extending the final stages of the construction season," Goodin said. "Those conditions and outstanding performance turned this into the best quarter ever for that business."

The construction businesses are seeing strong bidding opportunities as regional economies improve.

Earnings of $9.2 million at the electric utility business were affected by a 3 percent decline in sales to residential customers, as cooler than normal weather lessened customer air conditioning usage. O&M expenses related to payroll and benefits increased, partially offset by rate recovery for environmental upgrades. The natural gas business experienced a normal seasonal loss of $12.3 million.

The utility group has a record capital program it is executing on including an $80 million investment in infrastructure in the Bakken this year and the completion in August of an 88-megawatt gas turbine in North Dakota. The electric group is planning for additional new generation with the potential for renewables to be added to the portfolio to meet its growing customer demand.

Earnings at the pipeline and energy services business totaled $5.1 million as its investment in the Pronghorn natural gas and oil midstream assets continued to produce good results on the strength of higher gathering and processing volumes and new rates were implemented related to a rate case settlement. Construction of a diesel refinery in western North Dakota is approximately 90 percent complete and remains on schedule for startup by the end of 2014.

In addition, WBI Energy is evaluating the construction of a second 20,000-barrel-per-day diesel topping plant to be located in the Bakken region of North Dakota. A preferred site has been identified and permitting work has begun. A spring 2015 construction start is planned should the evaluation warrant proceeding with a second plant.

The pipeline group is also working on plans for the Wind Ridge Pipeline project, a 95-mile natural gas pipeline designed to deliver approximately 90 million cubic feet per day to an announced fertilizer plant near Spiritwood, North Dakota.

Fidelity Exploration & Production had adjusted earnings of $16.6 million. Results were primarily driven by 12 percent lower average realized oil prices compared to last year as well as higher DD&A and lease operating expenses. Natural gas production was 27 percent lower largely the result of the sale of non-strategic natural gas assets in 2013. The company recently closed on the sales of certain Mountrail County and South Texas assets.

The company reaffirmed its 2014 annual earnings per share guidance in the range of $1.40 to $1.50.

"Our focus will continue to be on executing on organic opportunities as well as acquisition-related growth potential that exists at all of our remaining businesses," Goodin said. "We believe we are well positioned to succeed."

The company will host a webcast at 10 a.m. EST Tuesday, Nov. 4, to discuss earnings results. The event can be accessed at www.mdu.com. Webcast and audio replays will be available. The dial-in number for audio replay is (855) 859-2056, or (404) 537-3406 for international callers, conference ID 13274434.

About MDU Resources

MDU Resources Group, Inc., a member of the S&P MidCap 400 index, provides value-added natural resource products and related services that are essential to energy and transportation infrastructure, including regulated utilities and pipelines, exploration and production, and construction materials and services. For more information about MDU Resources, see the company's website at www.mdu.com or contact the Investor Relations Department at investor@mduresources.com.

Contacts
   Financials
     Phyllis A. Rittenbach, director - investor relations, (701) 530-1057

   Media:
     Rick Matteson, director of communications and public affairs, (701) 530-1700
     Laura Lueder, corporate public relations manager, (701) 530-1095