BISMARCK, N.D., Nov. 2, 2016 /PRNewswire/ --
- Construction materials business has record third quarter
earnings; backlog up 9 percent.
- Construction services earnings up 53 percent; backlog up 13
percent.
- Pipeline proceeding with Valley Expansion project.
- Electric and natural gas utilities continue infrastructure
investments and associated rate recovery.
- 2016 earnings per share guidance from continuing operations
narrowed to $1.05 to $1.15; including
discontinued operations, EPS narrowed to 20
cents to 30 cents.
MDU Resources Group, Inc. (NYSE: MDU) today reported third
quarter earnings from continuing operations of $88.2 million, or 45
cents per common share, compared to earnings from continuing
operations of $73.7 million, or
38 cents per common share, for the
third quarter of 2015. Including discontinued operations, primarily
the exploration and production and refining businesses, the company
reported earnings of $82.8 million, or 42
cents per common share, for third quarter 2016, compared to
a loss of $139.6 million, or
72 cents per share, for third quarter
2015.
For the nine months ended Sept.
30, MDU Resources reported earnings from continuing
operations of $166.0 million, or
85 cents per common share, compared
to $120.0 million, or 62 cents per share, for the first nine months of
2015. Including discontinued operations, the company had a loss of
$1.8 million, or 1 cent per share, for the nine months ended
Sept. 30, compared to a loss of
$675.5 million, or $3.47 per share, in 2015.
"We have streamlined our company and our two primary business
lines, construction materials and services and regulated energy
delivery, are providing solid results," said David L. Goodin, president and CEO of MDU
Resources. "Our construction businesses continue to experience
strong momentum as the country turns more attention to needed
infrastructure improvements. Our construction materials segment
achieved record third quarter earnings for the second consecutive
year, and our construction services business improved earnings by
53 percent.
"Our regulated energy delivery businesses are focused on growth,
including pipeline expansion projects, utility system upgrades and
expanding infrastructure," Goodin said. "The Valley Expansion
project in eastern North Dakota
and far western Minnesota is
proceeding, and construction continues on the 345-kilovolt
transmission line from Ellendale, North
Dakota, to Big Stone City, South
Dakota."
Business Unit Results
Construction Materials and
Services
The construction materials business reported record
third quarter earnings of $69.5
million, up from record third quarter 2015 earnings of
$68.8 million. This business saw
higher construction margins with increased construction activity in
the Pacific and northwestern areas of the U.S. and lower selling,
general and administrative expense. Backlog at construction
materials is $580 million, which is
up 9 percent from last year.
Third quarter earnings at the construction services business
were $7.2 million, up $2.5 million from third quarter 2015, with higher
workloads and margins on inside electrical and outside work in the
western area of the U.S. The construction services backlog of
$518 million, which is up 13 percent
from last year, includes projects from a broad variety of service
areas and across geographic regions.
Regulated Energy Delivery
Earnings at the pipeline and
midstream business were $6.7 million,
compared to a loss of $3.2 million
for third quarter 2015. The pipeline and midstream business reduced
its operating costs and benefited from the absence of an
$8.7 million after-tax impairment on
certain natural gas gathering assets that was recorded in third
quarter 2015. Utilization of natural gas storage services continues
to be higher than a year ago. The pipeline business in October
received Federal Energy Regulatory Commission approval on its
pre-filing for the Valley Expansion project. The company is
proceeding with survey work and expects to begin construction in
early 2018 on the project, which initially is designed to deliver
40 million cubic feet of natural gas per day to eastern
North Dakota and far western
Minnesota.
The electric and natural gas utility earnings for third quarter
were virtually unchanged from the same period in 2015. The electric
utility earned $12.7 million, with
rate recovery offset by higher operating expenses and depreciation.
The natural gas utility had a normal seasonal loss of $12.5 million for the third quarter. Rate relief
and higher sales volumes in certain areas were offset by increased
operating expenses and depreciation. The utility continues to seek
regulatory recovery for costs associated with upgrading and
expanding infrastructure to meet current and future customer
demands, including anticipated 1 to 2 percent customer growth.
2016 Guidance
MDU Resources is narrowing 2016 earnings
guidance from continuing operations to $1.05
to $1.15 per common share. Including discontinued
operations, the company expects 2016 earnings of 20 cents to 30 cents per share.
The results of MDU Resources' exploration and production and
refining businesses have been reported as discontinued operations.
Any continuing results from MDU Resources' exploration and
production and refining businesses, such as general and
administrative expenses, have been included in the "other"
category. To reflect this change, MDU Resources is providing
guidance in two formats that meet generally accepted accounting
principles: one guidance range reflects continuing operations and
the other includes discontinued operations. The continuing
operations range is similar to the company's previously reported
"adjusted earnings" guidance in that they both exclude results from
the exploration and production and refining businesses. The
discontinued operations guidance range includes the results from
the exploration and production and refining businesses, as well as
associated impairments.
Conference Call
The company will host a webcast at
10 a.m. EDT Nov. 3 to discuss third quarter 2016 results. The
event can be accessed at www.mdu.com. Webcast and audio replays
will be available through Nov. 17.
The dial-in number for audio replay is 855-859-2056, or
404-537-3406 for international callers, conference ID 86987581.
About MDU Resources
MDU Resources Group, Inc., a
member of the S&P MidCap 400 index, provides essential products
and services through its regulated energy delivery and construction
materials and services businesses. 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: Janelle Steiner, assistant treasurer,
701-530-1031
Media: Laura Lueder, manager
of communications and public relations, 701-530-1095
Performance Summary and Future Outlook
The following information highlights the key growth
strategies, projections and certain assumptions for the company and
its subsidiaries and other matters for each of the company's
businesses. Many of these highlighted points are "forward-looking
statements." There is no assurance that the company's projections,
including estimates for growth and changes in earnings, will in
fact be achieved. Please refer to assumptions contained in this
section, as well as the various important factors listed at the end
of this document under the heading "Risk Factors and Cautionary
Statements that May Affect Future Results." Changes in such
assumptions and factors could cause actual future results to differ
materially from growth and earnings projections.
GAAP Earnings
Business
Line
|
Third
Quarter
2016
Earnings
|
Third
Quarter
2015
Earnings
|
YTD
Sept. 30,
2016
Earnings
|
YTD
Sept. 30,
2015
Earnings
|
|
(In
millions)
|
Construction
materials and services
|
$
|
76.7
|
|
$
|
73.5
|
|
$
|
109.0
|
|
$
|
90.8
|
|
Regulated energy
delivery
|
6.9
|
|
(2.9)
|
|
55.0
|
|
37.2
|
|
Other and
eliminations*
|
4.6
|
|
3.1
|
|
2.0
|
|
(8.0)
|
|
Earnings from
continuing operations
|
88.2
|
|
73.7
|
|
166.0
|
|
120.0
|
|
Loss from
discontinued operations, net of tax
|
(5.4)
|
|
(223.1)
|
|
(299.5)
|
|
(816.5)
|
|
Loss from
discontinued operations attributable to noncontrolling
interest
|
—
|
|
(9.8)
|
|
(131.7)
|
|
(21.0)
|
|
Earnings (loss) on
common stock
|
$
|
82.8
|
|
$
|
(139.6)
|
|
$
|
(1.8)
|
|
$
|
(675.5)
|
|
Earnings (loss) per
share:
|
|
|
|
|
Earnings from
continuing operations
|
$
|
.45
|
|
$
|
.38
|
|
$
|
.85
|
|
$
|
.62
|
|
Discontinued
operations attributable to the company, net of tax
|
(.03)
|
|
(1.10)
|
|
(.86)
|
|
(4.09)
|
|
Earnings (loss) per
share
|
$
|
.42
|
|
$
|
(.72)
|
|
$
|
(.01)
|
|
$
|
(3.47)
|
|
* Includes
eliminations for the presentation of income tax adjustments between
continuing and discontinued operations.
|
On a consolidated basis, the following information highlights
the key strategies, projections and certain assumptions for the
company:
- Earnings per share from continuing operations for 2016 are
projected to be in the range of $1.05 to
$1.15. Including discontinued operations, earnings per share
for 2016 are expected to be in the range of 20 cents to 30 cents.
- Reflecting the company's divestiture of its exploration and
production and refining businesses, the company's long-term
compound annual growth goal on earnings per share from continuing
operations is 5 to 8 percent.
- The company continually seeks opportunities to expand through
organic growth opportunities and strategic acquisitions.
- Estimated capital expenditures for 2016 are noted in the
following table. An updated five-year forecast will be provided in
late November to include the years 2017 through 2021.
Capital
Expenditures
|
Business
Line
|
2016
Estimated
|
|
(In
millions)
|
Construction
materials and services
|
|
Construction
materials and contracting
|
$
|
38
|
|
Construction
services
|
32
|
|
Regulated energy
delivery
|
|
Electric
|
127
|
|
Natural gas
distribution
|
134
|
|
Pipeline and
midstream
|
40
|
|
Other
|
3
|
|
Net proceeds and
other*
|
(20)
|
|
Total capital
expenditures
|
$
|
354
|
|
* Excludes capital
expenditures for discontinued operations and sale
proceeds for the exploration and production and
refining businesses.
|
Construction
Materials and Services
|
|
|
|
Construction
Materials and Contracting
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Dollars in
millions)
|
Operating
revenues
|
$
|
724.7
|
|
$
|
774.5
|
|
$
|
1,476.0
|
|
$
|
1,478.0
|
|
Operating
expenses:
|
|
|
|
|
Operation and
maintenance
|
582.2
|
|
631.6
|
|
1,243.4
|
|
1,266.4
|
|
Depreciation, depletion
and amortization
|
14.4
|
|
16.4
|
|
44.3
|
|
49.1
|
|
Taxes, other than
income
|
12.2
|
|
12.0
|
|
33.7
|
|
32.1
|
|
|
608.8
|
|
660.0
|
|
1,321.4
|
|
1,347.6
|
|
Operating
income
|
115.9
|
|
114.5
|
|
154.6
|
|
130.4
|
|
Earnings
|
$
|
69.5
|
|
$
|
68.8
|
|
$
|
88.8
|
|
$
|
74.3
|
|
Sales
(000's):
|
|
|
|
|
Aggregates
(tons)
|
9,997
|
|
10,240
|
|
21,281
|
|
20,746
|
|
Asphalt
(tons)
|
3,507
|
|
3,508
|
|
5,959
|
|
5,467
|
|
Ready-mixed concrete
(cubic yards)
|
1,146
|
|
1,159
|
|
2,840
|
|
2,723
|
|
Construction
Services
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In
millions)
|
Operating
revenues
|
$
|
280.8
|
|
$
|
225.8
|
|
$
|
822.8
|
|
$
|
687.9
|
|
Operating
expenses:
|
|
|
|
|
Operation and
maintenance
|
255.8
|
|
207.2
|
|
750.1
|
|
624.0
|
|
Depreciation, depletion
and amortization
|
3.9
|
|
3.3
|
|
11.4
|
|
10.0
|
|
Taxes, other than
income
|
9.3
|
|
6.7
|
|
29.7
|
|
24.0
|
|
|
269.0
|
|
217.2
|
|
791.2
|
|
658.0
|
|
Operating
income
|
11.8
|
|
8.6
|
|
31.6
|
|
29.9
|
|
Earnings
|
$
|
7.2
|
|
$
|
4.7
|
|
$
|
20.2
|
|
$
|
16.5
|
|
The combined construction materials and services businesses
reported earnings of $76.7 million in the third quarter of 2016,
compared to $73.5 million in
2015. The increase reflects higher inside electrical and outside
workloads and margins in the western region at the services
business and record third quarter earnings at the materials
business with higher construction margins. Partially offsetting
these increases was higher selling, general and administrative
expense, primarily higher payroll-related costs. Also offsetting
the increases were lower asphalt, ready-mixed concrete and other
product line margins at the materials business and lower equipment
sales and rental margins at the services business.
The following information highlights the key growth strategies,
projections and certain assumptions for the construction
segments:
- Projected earnings included in 2016 guidance for construction
materials are $95 million to $105
million and for construction services are $25 million to $35 million.
- The construction materials work backlog at Sept. 30 was $580
million, compared to $533
million a year ago. Private work represents 10 percent of
construction backlog and public work represents 90 percent.
- The construction services work backlog at Sept. 30 was $518
million, compared to $458
million a year ago. The construction services backlog
includes transmission, distribution, substation, industrial,
petrochemical, mission critical, solar energy renewables, research
and development, higher education, government, transportation,
health care, hospitality, gaming, commercial, institutional and
service work.
- Projected revenues included in the company's 2016 earnings
guidance are in the range of $1.85 billion
to $1.95 billion for construction materials and $1.0 billion to $1.1 billion for construction
services.
- The company anticipates margins in 2016 to be slightly higher
at construction materials and slightly lower at construction
services compared to 2015 margins.
- In December 2015, Congress
passed, and the president signed, a $305
billion, five-year highway bill for funding of
transportation infrastructure projects that are a key part of the
construction materials market.
- The construction services business continues to pursue
opportunities for expansion in energy projects, such as
petrochemical, transmission, substations, utility services and
renewables. Initiatives are aimed at capturing additional market
share and expanding into new markets.
- As the country's fifth-largest sand and gravel producer,
construction materials will continue to strategically manage its 1
billion tons of aggregate reserves in all its markets, as well as
take further advantage of being vertically integrated.
- As the 13th-largest specialty contractor, as ranked on
Engineering News-Record's 2016 Top 600 Specialty Contractors list,
construction services continues to pursue opportunities for
expansion and execute initiatives in current and new markets that
align with the company's expertise, resources and strategic growth
plan.
Regulated Energy
Delivery
|
|
|
|
|
|
Pipeline and
Midstream
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Dollars
in millions)
|
Operating
revenues
|
$
|
36.0
|
|
$
|
39.7
|
|
$
|
105.8
|
|
$
|
118.0
|
|
Operating
expenses:
|
|
|
|
|
Operation and
maintenance
|
14.1
|
|
32.3
|
|
43.1
|
|
69.0
|
|
Depreciation,
depletion and amortization
|
6.2
|
|
7.0
|
|
18.5
|
|
21.7
|
|
Taxes, other than
income
|
3.0
|
|
3.2
|
|
8.9
|
|
9.6
|
|
|
23.3
|
|
42.5
|
|
70.5
|
|
100.3
|
|
Operating income
(loss)
|
12.7
|
|
(2.8)
|
|
35.3
|
|
17.7
|
|
Earnings
(loss)
|
$
|
6.7
|
|
$
|
(3.2)
|
|
$
|
18.3
|
|
$
|
6.6
|
|
Transportation
volumes (MMdk)
|
67.7
|
|
71.8
|
|
217.1
|
|
210.8
|
|
Natural gas
gathering volumes (MMdk)
|
5.1
|
|
8.4
|
|
15.0
|
|
26.7
|
|
Customer natural
gas storage balance (MMdk):
|
|
|
|
|
Beginning of
period
|
28.1
|
|
11.8
|
|
16.6
|
|
14.9
|
|
Net
injection
|
7.2
|
|
7.5
|
|
18.7
|
|
4.4
|
|
End of
period
|
35.3
|
|
19.3
|
|
35.3
|
|
19.3
|
|
The pipeline and midstream segment reported earnings of
$6.7 million in the third
quarter of 2016, compared to a loss of $3.2 million for the same period in 2015.
The increase reflects lower operation and maintenance expense,
primarily the absence in 2016 of an impairment of natural gas
gathering assets, lower material costs and lower contract services;
lower depreciation, depletion and amortization expense, largely due
to the sale of certain non-strategic natural gas gathering assets
in the fourth quarter of 2015; as well as higher storage services
earnings. Partially offsetting these increases were declines in
natural gas gathering volumes, primarily due to the sale of certain
non-strategic natural gas gathering assets.
The following information highlights the key growth strategies,
projections and certain assumptions for this segment:
- Projected earnings included in 2016 guidance for pipeline and
midstream are $19 million to $23
million.
- In September 2016, the company
secured sufficient capacity commitments and started survey work on
a 38-mile pipeline that will deliver natural gas supply to eastern
North Dakota and far western
Minnesota. The Valley Expansion
project will connect the Viking Gas Transmission Company pipeline
near Felton, Minnesota, to the
company's existing pipeline near Mapleton, North Dakota. Cost of the expansion
is estimated at $55 million to $60
million. The project, which is designed to transport 40
million cubic feet of natural gas per day, is under the
jurisdiction of the FERC. In October, the company received FERC
approval on its pre-filing for the Valley Expansion project. With
minor enhancements, the pipeline will be able to transport
significantly more volume if required, based on capacity requested
or as needed in the future as the region's demand grows. Following
receipt of necessary permits and regulatory approvals, construction
is expected to begin in early 2018 with completion expected late
that same year.
- The company signed agreements to complete expansion projects,
including the Charbonneau and Line Section 25 expansion project.
The Charbonneau and Line Section 25 expansion project will include
a new compression station as well as other compression
modifications and is expected to be in service in the second
quarter of 2017. In addition, the company completed the North
Badlands project, which includes a 4-mile loop of the Garden Creek
pipeline segment and other ancillary facilities, and it was placed
in service on Aug. 1, 2016. The
Northwest North Dakota project,
which includes modification of existing compression, a new
compression unit and re-cylindering, was put into service in
June 2016.
- The company has seen strong interruptible storage service
injections through the first and second quarters due to wider
seasonal spreads and lower natural gas prices. Seasonal spreads
narrowed in the third quarter and injections slowed as
expected.
- The company has an agreement with an anchor shipper to
construct a pipeline to connect the Demicks Lake gas processing
plant in northwestern North Dakota
to deliver natural gas into a new interconnect with the Northern
Border Pipeline. Project costs are estimated to be $50 million to $60 million. The project is
currently delayed by the plant owner.
- The company continues to target profitable growth by means of
both organic growth projects in areas of existing operations and by
looking for potential acquisitions that fit existing expertise and
capabilities.
- The company is focused on continually improving existing
operations and growing to become the leading pipeline company and
midstream provider in all areas in which it operates.
Electric
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Dollars in millions,
where applicable)
|
Operating
revenues
|
$
|
82.2
|
|
$
|
74.6
|
|
$
|
238.9
|
|
$
|
210.7
|
|
Operating
expenses:
|
|
|
|
|
Fuel and purchased
power
|
16.8
|
|
20.6
|
|
54.7
|
|
63.8
|
|
Operation and
maintenance
|
28.9
|
|
21.5
|
|
84.7
|
|
65.1
|
|
Depreciation,
depletion and amortization
|
12.5
|
|
9.5
|
|
37.8
|
|
28.1
|
|
Taxes, other than
income
|
3.6
|
|
3.0
|
|
10.2
|
|
9.1
|
|
|
61.8
|
|
54.6
|
|
187.4
|
|
166.1
|
|
Operating
income
|
20.4
|
|
20.0
|
|
51.5
|
|
44.6
|
|
Earnings
|
$
|
12.7
|
|
$
|
12.6
|
|
$
|
31.8
|
|
$
|
26.8
|
|
Retail sales
(million kWh)
|
799.2
|
|
823.1
|
|
2,393.6
|
|
2,475.8
|
|
Average cost of
fuel and purchased power per kWh
|
$
|
.019
|
|
$
|
.024
|
|
$
|
.021
|
|
$
|
.024
|
|
|
|
|
|
|
Natural Gas
Distribution
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Dollars in
millions)
|
Operating
revenues
|
$
|
87.9
|
|
$
|
89.5
|
|
$
|
500.1
|
|
$
|
553.1
|
|
Operating
expenses:
|
|
|
|
|
Purchased natural gas
sold
|
37.6
|
|
41.3
|
|
273.7
|
|
336.5
|
|
Operation and
maintenance
|
39.5
|
|
37.7
|
|
116.6
|
|
113.6
|
|
Depreciation,
depletion and amortization
|
16.6
|
|
15.0
|
|
49.6
|
|
44.3
|
|
Taxes, other than
income
|
8.0
|
|
7.4
|
|
34.3
|
|
34.0
|
|
|
101.7
|
|
101.4
|
|
474.2
|
|
528.4
|
|
Operating income
(loss)
|
(13.8)
|
|
(11.9)
|
|
25.9
|
|
24.7
|
|
Earnings
(loss)
|
$
|
(12.5)
|
|
$
|
(12.3)
|
|
$
|
4.9
|
|
$
|
3.8
|
|
Volumes
(MMdk):
|
|
|
|
|
Sales
|
8.5
|
|
7.8
|
|
61.7
|
|
60.4
|
|
Transportation
|
37.6
|
|
39.0
|
|
109.4
|
|
109.1
|
|
Total
throughput
|
46.1
|
|
46.8
|
|
171.1
|
|
169.5
|
|
Degree days (% of
normal)*
|
|
|
|
|
Montana-Dakota/Great
Plains
|
174%
|
|
98%
|
|
84%
|
|
88%
|
|
Cascade
|
93%
|
|
116%
|
|
80%
|
|
80%
|
|
Intermountain
|
147%
|
|
86%
|
|
94%
|
|
85%
|
|
* Degree days are a
measure of the daily temperature-related demand for energy for
heating.
|
The combined utility businesses reported earnings of
$200,000 in the third quarter of
2016, compared to $300,000 for the
same period in 2015. This decrease reflects higher operation and
maintenance expense, largely higher payroll-related costs and
higher contract services. Also contributing to the decrease were
higher depreciation, depletion and amortization expense due to
increased plant additions, which is either largely being recovered
in rates or included in rate cases for potential recovery; lower
other income, largely lower allowance for funds used during
construction; and higher interest expense. These decreases were
partially offset by higher electric retail sales margins due to
approved rate recovery, reduced in part by decreased electric sales
volumes to all customer classes. Also offsetting the decreases were
higher natural gas retail sales margins resulting from final and
interim rate increases and increased retail sales volumes.
The following information highlights the key growth strategies,
projections and certain assumptions for the utility segments:
- Projected earnings included in 2016 guidance for the utility
are $62 million to $72 million.
- Organic growth opportunities are expected to result in
substantial growth of the rate base, which at year-end was
$1.8 billion. An updated rate base
growth projection and capital investment program will be provided
in late November.
- The company expects its customer base to grow by 1 to 2 percent
per year.
- Investments of approximately $55
million were made in 2015 to serve growth in the electric
and natural gas customer base associated with the Bakken oil
development. Due to sustained lower commodity prices, investments
of approximately $35 million are
expected in 2016.
- In June 2016, the company, along
with a partner, began to build a 345-kilovolt transmission line
from Ellendale, North Dakota, to
Big Stone City, South Dakota,
about 160 miles. The project has been approved as a Midcontinent
Independent System Operator multivalue project. More than 95
percent of the necessary easements have been secured. The company
expects the project to be completed in 2019.
- The company is in the process of completing its 2017 Integrated
Resource Plan and is evaluating its future generation and power
supply portfolio options, including a large-scale resource. The
Plan will be finalized in and filed by mid-2017.
- The company is involved with a number of pipeline projects to
enhance the reliability and deliverability of its system.
- The company is focused on organic growth, while monitoring
potential merger and acquisition opportunities.
- The company is evaluating the final Clean Power Plan rule
published by the Environmental Protection Agency in October 2015, which requires existing fossil
fuel-fired electric generation facilities to reduce carbon dioxide
emissions. It is unknown at this time what each state will require
for emissions limits or reductions from each of the company's owned
and jointly owned fossil fuel-fired electric generating units. In
February 2016, the U.S. Supreme Court
granted an application for a stay of the Clean Power Plan pending
the outcome of legal challenges. The company has not included
capital expenditures in its five-year forecast for the potential
compliance requirements of the Clean Power Plan.
- Regulatory actions
Completed Cases:
Since Jan. 1, 2015, the company has
implemented final rate increases totaling $45.6 million in annual revenue. This includes
electric rate proceedings in Montana, North
Dakota, South Dakota and
before the FERC, and natural gas proceedings in Minnesota, Montana, North
Dakota, Oregon,
South Dakota, Washington and Wyoming. Cases recently completed were:
- On Sept. 30, 2015, the company
filed an application with the Minnesota Public Utilities Commission
for a natural gas rate increase of approximately $1.6 million annually, or 6.4 percent
above current rates. The requested increase includes rate recovery
for increased operating expenses along with increased investment in
facilities, including related depreciation expense and taxes. An
interim increase of $1.5 million, subject to refund, was
implemented Jan. 1, 2016. The MNPUC
issued an order Sept. 6, 2016, authorizing an increase of
approximately $1.1 million annually,
or approximately 5.2 percent above current rates, with the
requirement that the company submit a compliance filing within 30
days. On Sept. 22, 2016, the company
submitted the required compliance filing, which included a refund
plan to return the amount of interim revenues collected above the
final rates. The final rates will be implemented upon approval of
the compliance filing by the MNPUC.
- On June 1, 2016, the company
filed an application with the Washington Utilities and
Transportation Commission for an annual pipeline replacement cost
recovery mechanism requesting $4.6
million annually, including $2.4
million associated with incremental pipeline replacement
investments and $2.2 million for
an alternative recovery request of incremental operation and
maintenance costs associated with a maximum allowable operating
pressure validation plan. On Oct. 17,
2016, the company filed an update to the application that
reduced the incremental pipeline replacement investment to
$1.9 million and removed the
operation and maintenance costs associated with a maximum allowable
operating pressure validation plan. On Oct.
27, 2016, the WUTC allowed the pipeline replacement cost
recovery mechanism to become effective Nov. 1, 2016.
Pending Cases:
The company is requesting rate increases totaling $59.2 million in annual revenue, which includes
$31.6 million in implemented interim
rates. Cases pending are:
- On Oct. 26, 2015, the company
filed an application with the North Dakota Public Service
Commission requesting a renewable resource cost adjustment rider
for the recovery of the Thunder Spirit Wind project. On
Jan. 5, 2016, the NDPSC approved the
rider to be effective Jan. 7, 2016,
resulting in an annual increase on an interim basis, subject to
refund, of $15.1 million based upon a
10.5 percent return on equity. The interim rate is pending the
determination of the return on equity in the general rate case
application filed on Oct. 14,
2016.
- On Oct. 26, 2015, the company
filed an application with the NDPSC for an update to the electric
generation resource recovery rider. On March
9, 2016, the NDPSC approved the rider to be effective with
service rendered on and after March 15,
2016, which resulted in interim rates, subject to refund, of
$9.7 million based upon a 10.5
percent return on equity. The interim rates include recovery of the
company's investment in the 88-megawatt simple-cycle natural gas
turbine and associated facilities near Mandan, North Dakota, and the 19 MW of new
generation from natural gas-fired internal combustion engines and
associated facilities near Sidney,
Montana. The net investment authorized for the natural
gas-fired internal combustion engines and the return on equity on
both investments are pending in the general rate case application
filed Oct. 14, 2016.
- On Nov. 25, 2015, the company
filed an application with the NDPSC for an update of its
transmission cost adjustment rider for recovery of MISO-related
charges and two transmission projects located in North Dakota. On Feb.
10, 2016, the NDPSC approved the transmission cost
adjustment effective with service rendered on and after
Feb. 12, 2016, resulting in an annual
increase on an interim basis, subject to refund, of $6.8 million based upon a 10.5 percent return on
equity. The interim rate is pending the determination of the return
on equity in the general rate case application filed Oct. 14, 2016.
- On April 29, 2016, the company
filed an application with the Oregon Public Utility Commission for
a natural gas rate increase of approximately $1.9 million annually, or 2.8 percent above
current rates. The request includes rate recovery associated with
pipeline replacement and improvement projects to ensure the
integrity of the company's system. On Oct.
6, 2016, the company, staff of the OPUC and the interveners
in the case filed a stipulation and settlement agreement reflecting
an annual rate increase of approximately $754,000 to be effective March 1, 2017. This matter is pending before the
OPUC.
- On June 10, 2016, the company
filed an application with the Wyoming Public Service Commission for
an electric rate increase of approximately $3.2 million annually, or 13.1 percent above
current rates. The request includes rate recovery associated with
an increased investment in facilities along with additional
depreciation, operation and maintenance expenses including
increased fuel costs, and taxes associated with the increases in
investment. A hearing has been scheduled for Jan. 18-19, 2017. This matter is pending before
the WYPSC.
- On Aug. 12, 2016, the company
filed an application with the Idaho Public Utilities Commission for
a natural gas rate increase of approximately $10.2 million annually, or approximately 4.1
percent above current rates. The request includes rate recovery
associated with increased investment in facilities and increased
operating expenses. This is the first general rate case filing by
the company in Idaho since 1985. A
hearing has been scheduled for March 1-2,
2017. This matter is pending before the IPUC.
- On Oct. 14, 2016, the company
filed an application with the NDPSC for an electric rate increase
of approximately $13.4 million
annually, or 6.6 percent above current rates. The request includes
rate recovery associated with increased investment in facilities,
along with the related depreciation, operation and maintenance
expenses and taxes. The company requested an interim increase of
approximately $13.0 million, subject
to refund, to be effective within 60 days of the filing. This
matter is pending before the NDPSC.
Other
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In
millions)
|
Operating
revenues
|
$
|
2.7
|
|
$
|
2.8
|
|
$
|
6.7
|
|
$
|
7.1
|
|
Operating
expenses:
|
|
|
|
|
Operation and
maintenance
|
2.4
|
|
2.6
|
|
6.3
|
|
11.9
|
|
Depreciation,
depletion and amortization
|
.5
|
|
.6
|
|
1.6
|
|
1.5
|
|
Taxes, other than
income
|
.1
|
|
—
|
|
.1
|
|
.2
|
|
|
3.0
|
|
3.2
|
|
8.0
|
|
13.6
|
|
Operating
loss
|
(.3)
|
|
(.4)
|
|
(1.3)
|
|
(6.5)
|
|
Loss
|
$
|
(1.0)
|
|
$
|
(2.1)
|
|
$
|
(3.6)
|
|
$
|
(11.6)
|
|
Included in Other are operation and maintenance expense and
interest expense previously allocated to the exploration and
production and refining businesses that do not meet the criteria
for income (loss) from discontinued operations. Other loss
decreased $1.1 million,
primarily the result of lower interest expense due to the repayment
of long-term debt associated with the exploration and production
business.
Discontinued
Operations
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In
millions)
|
Income (loss) from
discontinued operations before intercompany eliminations, net of
tax
|
$
|
.2
|
|
$
|
(217.9)
|
|
$
|
(303.0)
|
|
$
|
(811.5)
|
|
Intercompany
eliminations*
|
(5.6)
|
|
(5.2)
|
|
3.5
|
|
(5.0)
|
|
Loss from
discontinued operations, net of tax
|
(5.4)
|
|
(223.1)
|
|
(299.5)
|
|
(816.5)
|
|
Loss from
discontinued operations attributable to
noncontrolling interest
|
—
|
|
(9.8)
|
|
(131.7)
|
|
(21.0)
|
|
Loss from
discontinued operations attributable to the
company, net of tax
|
$
|
(5.4)
|
|
$
|
(213.3)
|
|
$
|
(167.8)
|
|
$
|
(795.5)
|
|
* Includes
eliminations for the presentation of income tax adjustments between
continuing and discontinued operations.
|
The results of operations for the exploration and production and
refining businesses, except certain general and administrative
costs and interest expense that do not meet the criteria for income
(loss) from discontinued operations, are included in income (loss)
from discontinued operations.
The company's discontinued operations reported a loss of
$5.4 million in the third
quarter of 2016, compared to a loss of $213.3 million in third quarter 2015. The
company's decreased loss is primarily due to the sale of the
company's exploration and production and refining businesses, which
includes the absence in 2016 of a $224.4 million after-tax fair value
impairment of the exploration and production company's assets held
for sale in the second quarter of 2015.
Risk Factors and Cautionary Statements That May Affect Future
Results
The information in this release includes certain
forward-looking statements, including earnings per share guidance
and statements by the president and CEO of MDU Resources, within
the meaning of Section 21E of the Securities Exchange Act of 1934.
Although the company believes that its expectations are based on
reasonable assumptions, actual results may differ materially.
Following are important factors that could cause actual results or
outcomes for the company to differ materially from those discussed
in forward-looking statements.
- The company's pipeline and midstream business is dependent on
factors, including commodity prices and commodity price basis
differentials, that are subject to various external influences that
cannot be controlled.
- The regulatory approval, permitting, construction, startup
and/or operation of power generation facilities and pipelines may
involve unanticipated events or delays that could negatively impact
the company's business and its results of operations and cash
flows.
- Economic volatility, including volatility in North Dakota's Bakken region, affects the
company's operations, as well as the demand for its products and
services and the value of its investments and investment returns
including its pension and other postretirement benefit plans, and
may have a negative impact on the company's future revenues and
cash flows.
- The company relies on financing sources and capital markets.
Access to these markets may be adversely affected by factors beyond
the company's control. If the company is unable to obtain economic
financing in the future, the company's ability to execute its
business plans, make capital expenditures or pursue acquisitions
that the company may otherwise rely on for future growth could be
impaired. As a result, the market value of the company's common
stock may be adversely affected. If the company issues a
substantial amount of common stock it could have a dilutive effect
on its existing shareholders.
- The company is exposed to credit risk and the risk of loss
resulting from the nonpayment and/or nonperformance by the
company's customers and counterparties.
- The backlogs at the company's construction materials and
contracting and construction services businesses are subject to
delay or cancellation and may not be realized.
- The company's operations are subject to environmental laws and
regulations that may increase costs of operations, impact or limit
business plans, or expose the company to environmental
liabilities.
- Initiatives to reduce greenhouse gas emissions could adversely
impact the company's operations.
- The company's natural gas transmission and distribution
operations involve risks that may result in accidents and safety
regulation costs that could adversely affect the company's business
and its results of operations and cash flows.
- The company is subject to government regulations that may delay
and/or have a negative impact on its business and its results of
operations and cash flows. Statutory and regulatory requirements
also may limit another party's ability to acquire the company or
impose conditions on an acquisition of or by the company.
- Weather conditions can adversely affect the company's
operations, and revenues and cash flows.
- Competition exists in all of the company's businesses.
- The company could be subject to limitations on its ability to
pay dividends.
- Costs related to obligations under multiemployer pension plans
could have a material negative effect on the company's results of
operations and cash flows.
- The company's operations may be negatively impacted by cyber
attacks or acts of terrorism.
- While the company has completed the sale of all of its
exploration and production business marketed oil and natural gas
assets, the exploration and production business is subject to
potential liabilities relating to the sold assets, primarily
arising from events prior to sale.
- While the company has completed the sale of its membership
interests in its refining business, the company is subject to
potential liabilities relating to the business arising from events
prior to sale.
- Other factors that could cause actual results or outcomes for
the company to differ materially from those discussed in
forward-looking statements include:
- Acquisition, disposal and impairments of assets or
facilities.
- Changes in operation, performance and construction of plant
facilities or other assets.
- Changes in present or prospective generation.
- The ability to obtain adequate and timely cost recovery for the
company's regulated operations through regulatory proceedings.
- The availability of economic expansion or development
opportunities.
- Population growth rates and demographic patterns.
- Market demand for, available supplies of, and/or costs of
energy- and construction-related products and services.
- The cyclical nature of large construction projects at certain
operations.
- Changes in tax rates or policies.
- Unanticipated project delays or changes in project costs,
including related energy costs.
- Unanticipated changes in operating expenses or capital
expenditures.
- Labor negotiations or disputes.
- Inability of the contract counterparties to meet their
contractual obligations.
- Changes in accounting principles and/or the application of such
principles to the company.
- Changes in technology.
- Changes in legal or regulatory proceedings.
- The ability to effectively integrate the operations and the
internal controls of acquired companies.
- The ability to attract and retain skilled labor and key
personnel.
- Increases in employee and retiree benefit costs and funding
requirements.
For a further discussion of these risk factors and cautionary
statements, refer to Item 1A – Risk Factors in the company's most
recent Form 10-K and Form 10-Q.
MDU Resources
Group, Inc.
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(In millions, except
per share amounts)
|
|
(Unaudited)
|
Operating
revenues
|
$
|
1,208.6
|
|
$
|
1,198.3
|
|
$
|
3,112.7
|
|
$
|
2,997.2
|
|
Operating
expenses:
|
|
|
|
|
Fuel and purchased
power
|
16.8
|
|
20.6
|
|
54.7
|
|
63.8
|
|
Purchased natural gas
sold
|
34.3
|
|
37.6
|
|
242.8
|
|
305.3
|
|
Operation and
maintenance
|
920.5
|
|
928.2
|
|
2,237.5
|
|
2,126.6
|
|
Depreciation,
depletion and amortization
|
54.1
|
|
51.8
|
|
163.2
|
|
154.7
|
|
Taxes, other than
income
|
36.2
|
|
32.3
|
|
116.9
|
|
109.0
|
|
|
1,061.9
|
|
1,070.5
|
|
2,815.1
|
|
2,759.4
|
|
Operating
income
|
146.7
|
|
127.8
|
|
297.6
|
|
237.8
|
|
Other
income
|
1.7
|
|
3.3
|
|
3.7
|
|
5.7
|
|
Interest
expense
|
22.3
|
|
22.4
|
|
67.4
|
|
68.9
|
|
Income before
income taxes
|
126.1
|
|
108.7
|
|
233.9
|
|
174.6
|
|
Income
taxes
|
37.7
|
|
34.8
|
|
67.4
|
|
54.1
|
|
Income from
continuing operations
|
88.4
|
|
73.9
|
|
166.5
|
|
120.5
|
|
Loss from
discontinued operations, net of tax
|
(5.4)
|
|
(223.1)
|
|
(299.5)
|
|
(816.5)
|
|
Net income
(loss)
|
83.0
|
|
(149.2)
|
|
(133.0)
|
|
(696.0)
|
|
Loss from
discontinued operations attributable to noncontrolling
interest
|
—
|
|
(9.8)
|
|
(131.7)
|
|
(21.0)
|
|
Dividends declared
on preferred stocks
|
.2
|
|
.2
|
|
.5
|
|
.5
|
|
Earnings (loss) on
common stock
|
$
|
82.8
|
|
$
|
(139.6)
|
|
$
|
(1.8)
|
|
$
|
(675.5)
|
|
Earnings (loss)
per common share – basic:
|
|
|
|
|
Earnings before
discontinued operations
|
$
|
.45
|
|
$
|
.38
|
|
$
|
.85
|
|
$
|
.62
|
|
Discontinued
operations attributable to the company, net of tax
|
(.03)
|
|
(1.10)
|
|
(.86)
|
|
(4.09)
|
|
Earnings (loss)
per common share – basic
|
$
|
.42
|
|
$
|
(.72)
|
|
$
|
(.01)
|
|
$
|
(3.47)
|
|
Earnings (loss)
per common share – diluted:
|
|
|
|
|
Earnings before
discontinued operations
|
$
|
.45
|
|
$
|
.38
|
|
$
|
.85
|
|
$
|
.62
|
|
Discontinued
operations attributable to the company, net of tax
|
(.03)
|
|
(1.10)
|
|
(.86)
|
|
(4.09)
|
|
Earnings (loss)
per common share – diluted
|
$
|
.42
|
|
$
|
(.72)
|
|
$
|
(.01)
|
|
$
|
(3.47)
|
|
Dividends declared
per common share
|
$
|
.1875
|
|
$
|
.1825
|
|
$
|
.5625
|
|
$
|
.5475
|
|
Weighted average
common shares outstanding – basic
|
195.3
|
|
195.2
|
|
195.3
|
|
194.8
|
|
Weighted average
common shares outstanding – diluted
|
195.8
|
|
195.2
|
|
195.8
|
|
194.8
|
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
Other Financial
Data
|
|
|
|
|
Book value per common
share
|
$
|
11.62
|
|
|
$
|
12.80
|
|
|
Market price per
common share
|
$
|
25.44
|
|
|
$
|
17.20
|
|
|
Dividend yield
(indicated annual rate)
|
2.9%
|
|
|
4.2%
|
|
|
Price/earnings from
continuing operations ratio (12 months ended)
|
22.5x
|
|
|
18.9x
|
|
|
Market value as a
percent of book value
|
218.9%
|
|
|
134.4%
|
|
|
Net operating cash
flow (year to date)*
|
$
|
276
|
|
|
$
|
404
|
|
|
Total
assets*
|
$
|
6,353
|
|
|
$
|
6,976
|
|
|
Total
equity*
|
$
|
2,285
|
|
|
$
|
2,515
|
|
|
Total
debt*
|
$
|
1,902
|
|
|
$
|
2,201
|
|
|
Capitalization
ratios:
|
|
|
|
|
Total
equity
|
54.6%
|
|
|
53.3%
|
**
|
|
Total debt
|
45.4
|
|
|
46.7
|
**
|
|
|
100.0%
|
|
|
100.0%
|
|
|
* In
millions
|
** Includes
noncontrolling interest
|
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SOURCE MDU Resources Group, Inc.