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MDU Resources Reports Third Quarter Earnings, Announces Sale of Exploration and Production Assets

Nov 02, 2015
  • Utility earnings increase, driven by 7 percent higher electric retail sales volumes; has several rate cases pending.
  • Pipeline and energy services affected by historically low commodity price environment partially offset by higher transportation volumes.
  • Construction materials reports record quarter, with 25 percent earnings gain; has higher backlog than last year of $533 million.
  • Construction services backlog 32 percent higher than last year, positioning for stronger 2016.
  • Fidelity Exploration & Production Company closes sale of one property and executes four additional purchase and sale agreements.           

MDU Resources Group, Inc. (NYSE:MDU) today reported third quarter consolidated adjusted earnings of $74.9 million, or 38 cents per share, compared to $68.2 million, or 35 cents per share for the third quarter of 2014. On a Generally Accepted Accounting Principles basis the company reported a loss of $139.6 million, or 72 cents per share, compared to third quarter 2014 earnings of $103.0 million, or 53 cents per share.

Adjusted earnings for the nine months ended Sept. 30 were $131.4 million, or 67 cents per share, compared to $137.7 million, or 72 cents per share a year ago. On a GAAP basis the company reported a loss of $675.5 million, or $3.47 per share, compared to earnings of $213.5 million, or $1.11 per share in 2014.

The company also announced that it recently entered into five purchase and sale agreements and closed on one of the agreements in October, for the sale of the oil and natural gas assets held by its indirect subsidiary, Fidelity Exploration & Production Company. The other four sale agreements are expected to close before year-end. The aggregate sale proceeds from the five agreements and estimated tax benefits are expected to be approximately $450 million. Debt repayment is planned as the primary use of funds. The company has one remaining property that it continues to market, which represents less than 10 percent of total year-to-date production. 

"We are pleased to be nearly complete with the sale process for our oil and natural gas assets," said David L. Goodin, president and CEO of MDU Resources. "The sale prices are in line with current and prospective market conditions, and exiting the exploration and production business will allow us to focus more fully on our remaining businesses.

"Our consolidated adjusted earnings per share for the quarter were 9 percent higher than last year. Our electric utility had a good quarter with 7 percent sales growth, partially offset by a normal seasonal loss for our natural gas business, and at our pipeline and energy services group we continued to see commodity price challenges. Our construction materials business had record earnings that were 25 percent higher on 4 percent revenue growth with operating income improving across all regions. While our construction services business had lower workloads in the quarter, backlog additions were strong."

Because of the company’s strategic decision to market the exploration and production business, adjusted earnings in this release are defined as results from its utility, pipeline and energy services, and construction businesses. Adjusted earnings exclude results for its exploration and production business. GAAP earnings are all-in. Consolidated adjusted earnings are a non-GAAP measure. 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 in this press release.

Business Unit Results

Electric utility operations reported earnings of $12.6 million, driven by an increase in electric sales spread across all customer classes. The utility also benefited from a generation rider in North Dakota that took effect in January, as well as increased allowance for funds used during construction. The natural gas business experienced a normal seasonal loss.

The pipeline and energy services business posted an adjusted loss of $1.2 million, compared to adjusted earnings of $5.1 million a year ago. Earnings were impacted by the operating results of the refinery, which began commercial operations in May. The company's after-tax portion of the refinery's loss was $5.8 million for the quarter the result of challenging market conditions including low diesel and naphtha prices along with historically narrow local Bakken basis differentials. A year ago the company had a loss of $700,000 related to the refinery. Earnings also were impacted by lower realized prices on its percentage of proceeds contract and volumes at the Pronghorn facility. These impacts were partially offset by 19 percent higher transportation volumes.

The construction materials business had record earnings for the quarter of $68.8 million. Margins increased across all product lines. Backlog at Sept. 30 was $533 million compared to $476 million a year ago. The construction services group experienced decreased workloads compared to 2014 due to completing several higher-margin large projects a year ago. The business continues to rebuild backlog, which at the end of the quarter totaled $458 million compared to $348 million in 2014.

2015 Guidance

The company reaffirmed its 2015 guidance for adjusted earnings in the range of 85 cents to $1.00 per share. Adjusted earnings per share guidance includes results from the company's utility, pipeline and energy services, and construction businesses and excludes results for its exploration and production business as well as other adjustments noted in the earnings reconciliation table in this release. Updated GAAP guidance, which is all-in, is expected to be a loss per share in the range of $3.15 to $3.30.

Conference Call

The company will host a webcast at 10 a.m. EST Nov. 3, to discuss third quarter 2015 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 57967847.

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, pipeline and energy services, 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

Financial:
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