MDU Resources Group, Inc. (MDU)

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MDU Resources Group Inc. (MDU)

Q3 2012 Results Earnings Call

November 1, 2012 11:00 AM ET

Executives

Doran Schwartz - Vice President and CFO

Terry Hildestad - President and CEO

Steve Bietz - President and CEO, WBI Energy

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

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

Kent Wells - President and CEO, Fidelity Exploration & Production

Bill Schneider - Executive Vice President, Bakken Development

Nicole Kivisto - Vice President, Controller and CAO

Analysts

Chris Ellinghaus - Williams Capital

Paul Ridzon - KeyBanc

Presentation

Operator

Good morning. My name is Eva and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group Third Quarter 2012 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 p.m. ET today, through 11:59 p.m. ET on November 15. The conference ID number for the replay is 34753792, again the conference ID number for the replay is 34753792. The number to dial-in for the replay is 1855-859-2056 or 404-537-3406.

I would now like to turn the conference over the 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. For those of you who are dealing with the aftermath of storm Sandy our sincerest thoughts are with you for a return to some normalcy in the days ahead. And before I turn the presentation over the 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 or remarks. If you’d would 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. Now during the course of this presentation. We will make certain forward-looking statements within the meaning of section 21 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 therefore refer to item 1A Risk Factors in our most recent Form 10-K and a Risk Factors 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 & CEO, WBI Energy, Dave Goodin, President & CEO of Montana Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas; John Harp, CEO of Knife River Corporation and MDU Construction Services; Kent Wells, President & CEO of Fidelity Exploration & Production; Bill Schneider, Executive Vice President of Bakken Development and Nicole Kivisto, Vice President, Controller & Chief Accounting Officer for MDU Resources.

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

Terry Hildestad

Thank you, Doran, and good morning. Thank you for joining us today to discuss third quarter results. We had a good quarter with a strength of our diversified group of companies we were able to generate solid earnings growth for the quarter, even though we realize lower natural gas and oil prices in the prior year.

Our construction businesses continued to experience upward momentum and our utility business had another solid quarter driven by further growth in the Bakken. We experienced some delays in planned drilling during the third quarter, however, we’re seeing strong results from wells coming on line late in the quarter, and so far in the fourth quarter.

Absent the non-cash charged earnings per share increased 12% compared to the last year. We reported consolidated earnings of $71.1 million or $0.38 per share compared the earnings of $63.8 million or $0.34 per share last year. We have revised our annual 2012 earnings guidance to a range of $1.05 to $1.20 and this is from $1.00 to $1.25 previously. This range excludes the effects of this quarter’s non-cash charges as well as the arbitration charge reversal from the second quarter this year.

Now moving on to our individual operations, I’ll start with our construction materials and service companies, we’re very pleased with the results of this group in the third quarter. Combined earnings for the Group were $51.8 million that’s a 36% increase over the last year, on 6% revenue growth. We experienced higher construction workloads and margins as well as improved volumes and margins in our asphalt, oil and ready-mix concrete product lines.

Our specialty equipment manufacturing sales, and rental division had another solid quarter with an increased earnings contribution. In addition our SG&A costs were down for our combined construction businesses. The Bakken is at the heart of what continues to feel more and more like an uptick for our Construction Group. We continue to grow our operations in the region, in August we began production for our new ready-mix plants in both Dickenson and Watford City North Dakota. This is in the Bakken area.

Backlog in the area is approximately $50 million which we believe is a good backlog heading into the winter season. The North West is home to much of the quality insight electrical work our Service Group has been performing this year where we’ve been engaged on a substantial project. Further development in the region by our major tech company should provide opportunities going forward from both our materials and our service business.

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