MDU Resources Group, Inc. (MDU)

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MDU Resources Group, Inc. (MDU)

Q2 2011 Earnings Conference Call

August 2, 2011 11:00 ET

Executives

Doran Schwartz – Vice President and Chief Financial Officer

Terry Hildestad – President and Chief Executive Officer

Analysts

Steve Maresca – Morgan Stanley

Timm Schneider – Citi

Monroe Helm – Barrow, Hanley

Stephen Huang – Carlson Capital

Chris Ellinghaus – Williams Capital

James Bellessa – DA Davidson

Presentation

Operator

Good morning. My name is (Christie) and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group Second Quarter 2011 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 2:00 PM Eastern Time today through 11:59 PM Eastern Time on August 16. The conference ID number for the replay is 73996248. Again, the conference ID number for the replay is 73996248. The number to dial for the replay is 1-800-642-1687 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 – Vice President and Chief Financial Officer

Thank you. Good morning 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 the 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 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; John Harp, President and CEO of MDU Construction Services Group; Bill Schneider, President and CEO of Knife River Corporation; Kent Wells, President and CEO of Fidelity Exploration and Production; and Nicole Kivisto, Vice President, Controller and Chief Accounting Officer of MDU Resources.

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

Terry Hildestad – President and Chief Executive Officer

Thank you, Doran. Good morning. Thank you for joining us today to discuss second quarter results. Earnings for the quarter were $44.9 million or $0.24 per common share. We’re pleased with our performance in light of the difficult weather that impacted many of our operations this year. I thank all of our employees for their outstanding efforts to fight historic flooding conditions and restoring normal operations as quickly as possible. Each of our business units has been affected by the extraordinarily wet conditions or the high river levels.

Drilling and production activity was stalled at our E&P operations as well as some delay on our pipeline projects. Our utility shut off service for 5,000 natural gas customers in Minot, North Dakota and had to build up shoreline close to one of our generating stations.

Our construction employees worked round the clock calling sand, clay and rip-rap materials. Many of our employees volunteer their time to sand bake to save company structures and assets. While others to sand bake their employee’s homes or simply to lend a hand to strangers generosity in carrying of our employees demonstrates the true spirit of this corporation. I’m proud of their efforts.

Now, moving on to our individual operating results, weather conditions at the E&P operations were less than ideal during the quarter. As we indicated in an earlier release, harsh winter conditions lingered into our spring months followed by extreme wet conditions as snow melted and rain followed. Road closures and weight restrictions limited access to producing wells and cause short-term production and drilling delays. Despite the inclement weather, Bakken oil production is up 10% for the quarter over last year and we’re excited about the growth plans as a part of our multi-year capital investment program. We have two rigs operating in Mountrail County and are very pleased with results of our most recent wells in the area.

The Hill 31-30H was drilled to a total major depth of 19,750 feet with 9,535 foot lateral. It was completed with a 30-stage sliding sleeve. It was brought on to production July 6 with a five day rate of 1633 gross barrels of oil equivalent per day. The Behr 16-21H is a Bakken in-fill well on a 1280 acre spacing unit was also completed using 30 stages. It had a 30 day rate of 1216 gross barrels of oil equivalent per day. The major depth of this well was 19,500 feet with a 9,600 foot lateral. We have three additional wells waiting completion in Mountrail County. We plan to move one of the rigs back to our Stark County acreage to begin drilling the Warner well targeting the Three Forks formation in Stark County.

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