MDU Resources Group, Inc. (MDU)

MDU 
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MDU Resources Group, Inc. (MDU)

Q2 2010 Earnings Call Transcript

August 3, 2010 1:00 pm ET

Executives

Doran Schwartz – VP and CFO

Terry Hildestad – President and CEO

Bill Schneider – President and CEO of Knife River Corporation

Dave Goodin – President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas

John Harp – President and CEO of MDU Construction Services Group

Analysts

Timm Schneider – Citigroup

Paul Ridzon – KeyBanc

Chris Ellinghaus – Wellington Shields

James Bellessa – D.A. Davidson & Co.

Presentation

Operator

Good afternoon. My name is Rejina and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2010 second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions)

This call will be available for replay beginning at 4 o’clock p.m. Eastern Time today through 11:59 p.m. Eastern Time on August 17. The conference ID number for the replay is 79585184. Again, the conference ID number for the replay is 79585184, the number to dial for the replay is 1800-642-1687 or 706-645-9291.

I would now like to turn the conference over to Doran Schwartz, Vice President and Chief Financial Officer of MDU Resources Group. Thank you Mr. Schwartz, you may begin your conference.

Doran Schwartz

Thank you. Good afternoon and welcome to our earnings release conference call. Before I turn the presentation over to Terry Hildestad, our President and Chief Executive Officer, I would like to mention that this conference call is being broadcast live to the public over the internet and slides will accompany our remarks.

If you'd like to view the slides, go to our website at www.mdu.com and follow the link to the conference call. Our earnings release is also available on our website. During the course of this presentation, we will make certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially. For a discussion of factors that may cause actual results to differ, refer to item 1A risk factors in our most recent Form 10-K, as well as our Form 10-Q and the risk factor section in our most recent Form 8-K.

Our format today will include formal remarks by Terry, followed by a Q&A session. Other members of our management team who will be available to answer questions during the Q&A session of the conference call today are Bill Schneider, President, CEO of Knife River Corporation, John Harp, President and CEO of MDU Construction Services Group, Steve Bietz, President and CEO of WBI Holdings, Dave Goodin, President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas and Nicole Kivisto, Vice President, Controller and Chief Accounting Officer for MDU Resources.

With that, I'll turn the presentation to Terry for his formal remarks. Terry?

Terry Hildestad

Thank you, Doran. Good afternoon. Thank you for joining us today to discuss the second quarter results. It was a good quarter for our company considering the challenging economic conditions our construction businesses faced. Even in this difficult market, our construction companies are creating good opportunities and building long-term potential.

We have continued to add new business to sustain and build backlog. Many of the opportunities will translate into cash and earnings for the company in 2011 and beyond. These businesses have a great value over the long haul because they operate in industries that are vital to support the country's significant infrastructure needs.

Also, the regulated companies continue to perform well, providing us with both growth opportunities and a significant base of stable, predictable earnings and cash flow. Our utility company had record earnings on a trailing six month and 12 month basis. Our pipeline business will have another strong year and anticipates reaching record levels of natural gas storage this year.

At our natural gas and oil business, our investment in the Bakken acreage helped boost oil production by 8%. Higher oil prices added to the 16% earnings increase over last year. We intend to continue building on our oil development with our recent acquisitions of 40,000 additional net acres in the Bakken and 80,000 net acres in the emerging and exciting Niobrara play.

Now more about our construction materials operations. This quarter we continued to contend with a highly competitive bidding environment. Limited private development and we experienced some wet weather conditions that delayed construction activity. However, we have many reasons to be optimistic, 59% of the federal stimulus funds allocated to our states, are yet to be spent. We continue to see additional bidding opportunities and we've recently added new large projects to our backlog.

For example, we have a significant reclamation project awarded in Montana, an LA Harbor deepening project and we picked up work providing infrastructure to the oil industry. We're providing aggregate materials to up to 60 drilling path sites for a producer in the Niobrara oil shale play. We have the opportunity for a number of large, longer term projects that are being led soon.

Just to name a few, project in the Long Beach harbor with the potential of roughly $150 million worth of work. We expect that to be bid later this fall. There's a Texas Army Base project and the Light Rail project planned for Hawaii, which is about a $5 billion project. This project will lead to additional opportunities as economic development is built out along the project's route.

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