MDU Earnings Conference Call -- 3Q12

Link here to SeekingAlpha.com.

MDU was one of the first companies I ever invested in; held it for years. Sold it some years ago. I've commented numerous times in the past regarding MDU and the Bakken.

This earnings conference call is particularly interesting and reminds me why I invested in MDU in the first place (many years ago). It looks like after a challenging few years, MDU is turning the corner.

When I get caught up, I will come back and fill out some data points from the conference call.

From the conference call:

• 3Q12 earnings: 38 cents vs 34 cents last year
• 2012 guidance: $1.05 - $1.20 (previous: $1.00 to $1.25) 

Construction materials and service companies: 36% increase over last year; 6% revenue growth; it's all about the Bakken; began production of new ready-mix plants in both Dickinson and Watford City; backlog of $50 million going into the winter season.

Teaser/cryptic: "...quality insight electrical work...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." -- but doesn't mention the project.

Transmission work represents a growing percentage of MDU's services backlog; also, helping with recovery work in the greater New York area. MDU deployed about 85 linemen to that area.

Seeing a shift to more private work for MDU's Materials Group.

MDU noted that Congress passed a new two-year highway bill (MAP-21); maintaining current funding level and allows states to move forward on larger and long-term projects.

Utility business earnings were up 32 percents over same period last year; mostly due to growth in the Bakken, but also lower operation and maintenance expenses.

In the Bakken: 8% electric customer growth and a 7% natural gas customer growth.

"The Bakken is truly a needle-mover for our electric business..."

Bad news: pipeline and energy service group -- earnings of $3.3 million vs $5.2 million same period last year; producers cut back on natural gas production;

Reminder: MDU acquired 50% interest in Pronghorn natural gas oil mid-stream assets near Belfield.

MDU doubled its natural gas takeaway capacity in the Bakken in 2011; and will nearly double it again this year.

On the natural gas side, it’s important to understand that we have strategically and voluntarily curtailed natural gas production in a sustained low price environment. This is driving our natural gas production decline. The curtailment focused on dry gas wells that were providing minimum margin in lower natural gas price environments. We plan to bring these wells back on production rather quickly when natural gas prices recover to an economic level. 

Oil production up but earnings down.

Key growth areas:

• the Bakken; 5 rigs; oil production up 46% over last year;
• identified a sweet spot in Stark County
• Richland County, MT: initially targeting the Three Forks, and then this: "... significant upside potential in the Upper Bakken Shale on this acreage. While IPs are not as high as some of our other middle Bakken and Three Forks wells, it appears that the decline rates are shallower and can provide good economic returns.
• the Paradox Basin: could be a game changer for MDU
• encouraging results in the Montana Heath shale play, but production issues cloudign decision to move forward