MDU Resources Group, Inc. (MDU)

MDU 
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MDU Resources Group (MDU)

Q4 2012 Earnings Call

February 05, 2013 11:00 AM ET

Executives

Doran Schwartz - VP and CFO

Dave Goodin - President and CEO

Nicole Kivisto - VP and CAO

Kent Wells - Vice Chairman

John Harp - CEO, Knife River Corporation and MDU Construction Services Group

Steve Bietz - President and CEO, WBI Holdings, Inc.

Frank Morehouse - President and CEO, Montana-Dakota Utilities Co., Great Plains Natural Gas Co. and CEO, Cascade Natural Gas Corporation and Intermountain Gas Company.

Analysts

Timm Schneider - Citigroup

Chris Ellinghaus - Williams Capital

Paul Patterson - Glenrock Associates

Rosemarie Tableau - Tableau Associates

Paul Ridzon - KeyBanc

James Heckler - Levin Capital Strategies

Presentation

Operator

Good morning. My name is Christy and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2012 year end and 2013 Guidance 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 2 pm Eastern Time today through 11.59 pm Eastern Time on February 19th. The conference ID number for the replay is 85150168. Again, the conference ID number for the replay is 85150168. The number to dial for the replay is 1-855-859-2056 or 404-537-3406.

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 and welcome to our earnings release conference call. Before I turn the presentation over to Dave Goodin, our President and Chief Executive Officer, I'd 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 our 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, and the Risk Factors section in our most recent Form 8-K.

Our format today will include formal remarks by Dave Goodin, the new President and CEO of MDU Resources effective January 4th, 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; Steve Bietz, President and CEO of WBI Energy; John Harp, CEO of Knife River Corporation and MDU Construction Services; Frank Morehouse, President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas; Kent Wells, President and CEO of Fidelity Exploration & Production; Bill Schneider, Executive Vice President of Bakken Development and MDU Resources; and Nicole Kivisto, Vice President, Controller and Chief Accounting Officer for MDU Resources.

And with that I’ll turn the presentation over to Dave for his formal remarks, Dave.

Dave Goodin

Thank you, Doran, and good morning. Thank you for your interest in MDU Resources and for taking the time today to join us and discuss our results for 2012 along with our 2013 outlook. It is both the privilege and honor for me to be speaking with you today of course as I am new to this role but I am not new to this company. I have had the opportunity to meet and talk with number of you over my 30 years with the company and certainly I’ll look forward to our continued dialogue.

As I reflect in 2012, it was a year field with many achievements. Our construction businesses grew combined earnings by 47% with higher revenues and margin levels. They are well positioned for 2013 entering the year with higher backlog levels and strengthening across many of our local markets.

The E&P business was able to largely mitigate the effects of lower natural gas prices by continuing to execute their strategy to grow liquids production and reserves. In the fourth quarter alone, our oil production was 59% higher than the fourth quarter in 2011 and 36% higher for the full year.

Our electric utility grew its earnings year-over-year driven by strong customer and sales growth largely in North Dakota where electric customer accounts grew by 9% in the Bakken region and we are on back for an ambitious capital program that will significantly grow rate base over the next five years.

Our natural gas and distribution earnings were affected by warmer weather in 2012 when we compared it with 2011; however, our markets continued to grow near and long term investment opportunities do exist to invest and expand and for 2013 whereon to a great start with favorable weather thus far in January.

And we’re also pleased that our pipeline and energy services businesses, their ability to execute its strategy by diversifying and complementing what was really our historic strategy of focusing and dry natural gas gathering, transporting and storage with expansion into our liquid base opportunities right in our backyard.

Our midyear acquisition of a 50% interest in the Pronghorn natural gas processing facility is performing very well and positions us for a strong 2013 in this business.

We are also excited about the progress we are making on our diesel topping plant refinery in Western North Dakota as well. This project has really great potential for all of our investors.

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