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MDU Resources Reports 2015 Earnings, Initiates Guidance for 2016

Feb 03, 2016

  • New wind facility increases utility generation capacity to 20% renewable energy
  • Construction materials reports record earnings
  • Sale of exploration & production assets nearing completion
  • Pipeline and midstream reports record transportation volumes for third consecutive year
  • Construction businesses enter 2016 with strong combined backlog of $984 million
  • New refinery operating in challenging commodity and market environment

MDU Resources Group, Inc. (NYSE:MDU) today reported 2015 consolidated adjusted earnings of $180.0 million, or 92 cents per share, compared to $205.5 million, or $1.07 per share in 2014. Consolidated adjusted earnings in the fourth quarter were $48.6 million, or 25 cents per share, compared to $67.8 million, or 35 cents per share in 2014.

On a Generally Accepted Accounting Principles (GAAP) basis, the company reported a loss for 2015 of $623.1 million, or $3.20 per share, compared to 2014 earnings of $297.5 million, or $1.55 per share. GAAP earnings for the fourth quarter of 2015 were $52.4 million, or 27 cents per share compared to $84.1 million, or 43 cents per share in the fourth quarter of 2014.

Consolidated adjusted earnings is 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.

“I am not satisfied with our overall earnings performance,” said David L. Goodin, president and CEO of MDU Resources Group. “However, we did have important successes such as record earnings at our construction materials business, good execution on a record capital budget at the utility and record throughput at our pipeline group.

“We also have nearly completed our strategic exit from the oil and gas exploration and production business. This will allow us to focus on above-average regulated growth with our capital expenditure forecast and construction opportunities at a lower business risk profile.

“In addition, the geographic diversity of our businesses and their markets is a strength that helps spread the impact of various regional economic drivers,” Goodin said. “Our construction materials business, which operates in 19 states, increased earnings last year in all of its regions. Customer growth continued at our utility group, and was spread across all eight states in which they operate.”

Business Unit Results

The construction materials business had record adjusted earnings of $90.6 million, a 51 percent increase from 2014, on 8 percent growth in revenue. GAAP earnings were $89.1 million. Earnings were higher than 2014 in all regions. Volumes and margins were up across all product lines, with aggregate and ready-mix volumes up 4 percent and asphalt volumes up 11 percent. This momentum is continuing into 2016 with a record year-end 2015 backlog of $491 million, an increase of 12 percent from $438 million at year-end 2014. The backlog does not include a $63.4 million contract awarded in January 2016 to reconstruct a portion of Interstate 29 in Sioux City, Iowa. This is the largest contract in Knife River’s history.

The construction services business reported adjusted earnings of $25.2 million, following two consecutive years of record earnings during which they completed several large, higher-margin projects. GAAP earnings were $23.8 million. Their 2015 focus on rebuilding work backlog was successful, ending the year at $493 million, an increase of 62 percent from $305 million at year-end 2014. This is the highest year-end level since 2008.

The utility business reported earnings of $59.5 million. Temperatures ranged from approximately 6 to 16 percent warmer than the previous year across the eight-state service territory, resulting in a $7.2 million earnings impact from lower natural gas retail sales and lower residential electric retail sales. That was partially offset by increased revenue from rate case proceedings that allowed recovery of investments made to serve the utility’s growing customer base, which increased by nearly 2 percent in 2015 to 1.05 million customers.

The utility added the Thunder Spirit Wind Farm to its electric generation fleet. The 43-turbine, 107.5-megawatt generation project in southwestern North Dakota was fully operational in late December. With this addition, 20 percent of the utility’s electric generation capacity is renewable energy. The utility also added 19 megawatts of natural gas-fired generation at the Lewis & Clark generation plant near Sidney, Montana, and completed installation of a $384 million air quality control system at the Big Stone, South Dakota, generating plant that is owned jointly with two partners.

The pipeline and midstream business had adjusted earnings of $23.9 million, driven by record transportation volumes for the third consecutive year. GAAP earnings were $13.3 million. Off-system transportation increased by 36 percent, due to a full year of service to a third-party natural gas processing plant that began operating in the third quarter of 2014. The business also was affected by lower processing revenue at the Pronghorn facility, partially offset by higher volumes; the company owns 50 percent of that facility.

The Dakota Prairie Refinery, in which the company has a 50 percent ownership interest, began commercial operations in May. The company’s share of 2015 refining results is an adjusted loss of $20.5 million, and a GAAP loss of $22.5 million, as a result of dramatic changes in the oil commodity market. The Bakken basis differential from West Texas Intermediate pricing has narrowed, which has increased the refinery’s cost for its oil feedstock. At the same time, reduced oilfield activity has decreased the demand for diesel fuel and a slowdown in Canadian tar sands development has reduced the demand for naphtha. The company continues to focus on operational improvements to the plant that could increase its daily processing capacity and profitability.

The company has nearly completed the sale of oil and natural gas assets held by its indirect subsidiary, Fidelity Exploration & Production Company. It has closed on four sale agreements and has signed a purchase and sale agreement for a fifth asset package; collectively these sales represent more than 93 percent of total production. The company continues to market one remaining asset package. Aggregate sale proceeds and related tax benefits are estimated to be approximately $450 million. Debt repayment is planned as the primary use of funds.

Initiating 2016 Guidance

The company has initiated 2016 adjusted earnings per share guidance in the range of $1.00 to $1.15. Adjusted earnings per share guidance includes results from the utility, pipeline and midstream, and construction businesses. GAAP earnings per share guidance, which includes results from the refinery, is expected to be in the range of 85 cents to $1.10.

Conference Call

The company will host a webcast at 10 a.m. EST Feb. 4 to discuss 2015 earnings results and 2016 guidance. 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 9233329.

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 midstream, construction materials and services and a diesel refinery. 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:
Rick Matteson, director of investor relations, 701-530-1057

Media:
Laura Lueder, corporate public relations manager, 701-530-1095