Exhibit 99
MDU Resources Announces Second Quarter Earnings
BISMARCK, ND - July 24, 2002 - MDU Resources Group, Inc. (NYSE:MDU)
announced financial results for the three months ended June 30, 2002,
showing consolidated earnings of $24.7 million compared to $43.2
million for the same period last year. Earnings per common share,
diluted, totaled 35 cents, compared to 63 cents per common share,
diluted, for the second quarter of 2001. The effects of a one-time
gain from the sale of coal properties were included in the 2001
quarterly earnings. Excluding the effects of the coal property sale,
2001 second quarter earnings per common share, diluted, were 54 cents.
Earnings for the six months ended June 30, 2002, totaled $48.2 million
or 68 cents per common share, diluted, including the effects of a
compromise agreement resulting in a $16.6 million after-tax
nonrecurring gain realized in the first quarter. This compares to
earnings for the first six months of 2001 of $75.7 million or $1.13
per common share, diluted, including the gain on the sale of the coal
properties.
"Second quarter results are lower when compared with last year's
results, however, last year's second quarter earnings per share,
excluding the effects of the sale of the coal properties, reflected a
54 percent increase in earnings over those of 2000," said Martin A.
White, chairman of the board, president and chief executive officer of
MDU Resources. "We were fortunate a year ago to experience phenomenal
growth and avoid the effects of a soft economy in most of our business
segments. Today that soft economy is affecting our company and we are
not seeing the recovery we had expected in many of the areas in which
the company operates. Despite results that are below what we had
anticipated, we still expect 2002 to provide good earnings because of
our fundamental earnings base of hard assets and a strong management
and operations team. The substantial aggregate reserves held by our
construction materials segment and the natural gas and oil reserves
held by our natural gas and oil production segment will continue to
benefit our shareholders for many years into the future. I am
confident that with our market position and the necessary products and
services our company provides, we will be among the first to regain
strength in each of our business segments. The diversity of the
products and services we provide are building a strong America and are
vital to the nation's infrastructure."
"As a result of the soft market in the utility services industry,
combined with the delay in the commercial production of half the 200-
megawatt electric generating facility in Brazil and the effect of low
wholesale electric sales margins, we are revising our guidance for
2002 earnings per common share, diluted, to $1.80 to $2.00. Excluding
the benefit of the compromise agreement discussed earlier, 2002
earnings per common share from operations are projected to be $1.60
to $1.80," White said.
"While the company has grown at a compound annual earnings per share
growth rate of 17 percent over the last five years, the reality of the
business environment today indicates we cannot maintain this pace. We
are reviewing the long-term earnings per share growth goals of
10 percent to 12 percent and will adjust them accordingly. I do
however, believe in the long-term strategy and strengths of this
company and believe this company will continue to grow," said White.
QUARTERLY PERFORMANCE SUMMARY
Electric
Electric segment earnings for the three months ended June 30, 2002,
totaled $1.7 million compared to 2001 earnings of $2.1 million for the
same period. The decrease was largely the result of significantly
lower average realized wholesale electric prices, and increased
operation and maintenance expenses. These decreases were somewhat
offset by lower demand charges resulting from the absence of a 2001
extended maintenance outage at an electric supplier's generating
station.
Natural Gas Distribution
For the second quarter, the natural gas distribution segment
experienced a normal seasonal loss. The loss of $0.8 million in 2002
was only about half that of the second quarter last year as a result
of the unseasonably cold spring weather this year.
Natural gas rate cases have been filed in North Dakota, Wyoming and
Montana that would result in higher natural gas rates if approved.
Utility Services
Earnings from the company's utility services segment decreased $3.1
million for the second quarter 2002, compared to earnings for the same
period in 2001. The decrease was largely due to a slowdown in fiber
optic work resulting in lower construction margins in the Rocky
Mountain area. Lower construction margins in the Central region were
due to a more competitive bidding environment for inside electrical
work. Receivables associated with a company in the telecommunications
industry were also written off during the period. Earnings from new
acquisitions partially offset these decreases. The results at this
business segment reflect lower spending by the utility and
telecommunications industries.
Pipeline and Energy Services
Pipeline and energy services segment earnings totaled $2.8 million for
the second quarter 2002. The pipeline reported higher gathering
volumes at higher average rates and higher volumes transported into
storage. The earnings from these activities were somewhat offset by
higher operation and maintenance expenses, related to expansion of the
gathering system to accommodate increasing natural gas volumes, and
lower technology services revenues at one of the company's energy
services operations, largely due to the previously mentioned depressed
telecommunications market.
More than offsetting the above improvements at the pipeline and energy
services companies were delays in commercial production of power from
the natural gas fired electric generation project in Brazil. The first
100 megawatts of this project began production July 7, however, the
operation of the second 100 megawatts was postponed due to delays in
the third party delivery of the full gas supply needed to operate all
turbines. The second phase is scheduled to begin commercial production
in early 2003.
Natural Gas and Oil Production
Earnings at the natural gas and oil production segment were $9.3
million, compared to $17.9 million in the second quarter of 2001. The
company's combined natural gas and oil production increased 8 percent,
largely as a result of increased natural gas production in the Rocky
Mountain area. This increase was more than offset by realized natural
gas prices that were 29 percent lower than the same period last year
and realized oil prices that were 13 percent lower.
Construction Materials and Mining
Excluding the one-time gain in 2001 from the sale of the coal
properties, earnings for the second quarter of 2002 were essentially
unchanged from last year at $10.9 million. Earnings from companies
acquired since the comparable period last year offset earnings
decreases that were the result of a late construction season start in
Montana due to cold and wet spring weather. As a result of the delayed
construction season, the construction backlog has increased over that
for the same time last year and will provide for an unusually busy
construction season well into the fall.
Corporate News
Plans are proceeding to construct a 113-megawatt coal-fired electric
generation station in Montana. The company has purchased plant
equipment and has obtained all permits necessary to begin
construction. NorthWestern Energy has terminated the power purchase
agreement for the energy from this plant; however, the company
believes there are other markets for the energy and is studying its
options regarding this project. The company is also continuing to
obtain the necessary regulatory approvals to build a 247-mile pipeline
that would transport additional natural gas to market and would also
enhance use of the company's natural gas storage facilities in Montana
and Wyoming.
The company's construction materials subsidiary recently completed
acquisitions in central Minnesota and southwestern Montana. The newly
acquired companies have combined annual revenues of approximately $27
million.
The company will host a webcast on July 24, 2002, beginning at 12:00
noon CDT to discuss second quarter results and updated earnings
guidance for the year. The event can be accessed at
http://www.mdu.com. Listeners should go to the Web site up to 15
minutes before the event to register and download any necessary audio
software. An on-line replay will be available beginning at 4:00 PM CDT
on July 24 through August 7, 2002. An audio postview replay is also
available beginning at 4:00 PM CDT on July 24 through July 31, 2002.
The dial in number for postview is (719) 457-0820; reservation number
694382.
OUTLOOK
The following information highlights the key growth strategies,
projections and certain assumptions for the company over the next few
years and other matters for each of its six business segments. Many of
these highlighted points are "forward-looking statements." There is no
assurance that the company's projections, including estimates for
growth and increases in revenues and 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 "Safe Harbor for Forward-looking
Statements." Changes in such assumptions and factors could cause
actual future results to differ materially from the company's targeted
growth, revenue and earnings projections.
MDU Resources Group, Inc.
- - Earnings per share, diluted, for 2002 are projected in the $1.80
to $2.00 range. Excluding the benefit of the compromise agreement
previously mentioned, 2002 earnings per share from operations are
projected to be in the approximate range of $1.60 to $1.80.
- - Weighted average diluted common shares outstanding for the twelve
months ended December 31, 2001, were 67.9 million. The company
anticipates a 3 percent to 7 percent increase in weighted average
diluted shares outstanding by 2002 year end.
- - The company expects the percentage of 2002 earnings per share
from operations, excluding the benefit of the compromise agreement,
by quarter to be in the following approximate ranges:
o Third Quarter - 40 percent to 45 percent
o Fourth Quarter - 29 percent to 34 percent
- - The company will examine issuing equity from time to time to keep
its debt at the nonregulated businesses at no more than 40 percent of
total capitalization.
- - The company anticipates investing approximately $400 million in
capital expenditures during 2002, including potential future
acquisitions.
- - The company estimates that the benefit resulting solely from the
discontinuance of goodwill amortization would be 5 to 6 cents per
common share in 2002.
Electric
- - Due to growing electric demand, a 40-megawatt natural gas turbine
power plant may be added in the two to five year planning horizon.
- - Currently, the company is working with the state of North Dakota
to determine the feasibility of constructing a 500-megawatt lignite-
fired power plant in western North Dakota. The first preliminary
decision is expected in December 2002.
- - An appeal has been filed in District Court on the North Dakota
Public Service Commission's April 24, 2002, electric rate reduction
order. The PSC order required Montana-Dakota to reduce its electric
rates by $4.3 million annually. The filing also asked for a stay of
the effectiveness of the order. The company was granted a partial stay
for $3.5 million of the reduction that it challenged. The balance of
the reduction has been put into effect and the company is placing the
stayed amount in reserve.
Natural Gas Distribution
- - Annual natural gas throughput for 2002 is expected to be
approximately 56 million decatherms, with about 40 million decatherms
from sales and 16 million decatherms from transportation, which
compares to 37 million decatherms from sales and 14 million decatherms
from transportation in 2001.
- - In April, the natural gas distribution segment filed with the
North Dakota Public Service Commission for a natural gas rate
increase. The company is requesting a total of $2.8 million or 4.1
percent above current rates. In May, a natural gas rate case was filed
with the Montana Public Service Commission. The company is requesting
a total of $3.6 million or 6.5 percent above current rates. A natural
gas rate case was filed with the Wyoming Public Service Commission in
June. The company is requesting a 5.6 percent increase above current
rates or a total of $662,000. The last rate cases in these states were
filed in the mid-1990s.
Utility Services
- - Revenues for this segment are expected to approximate $500
million in 2002.
- - Earnings for 2002, compared to 2001, are expected to increase by
approximately 10 percent.
Pipeline and Energy Services
- - In 2002, natural gas throughput from this segment, including both
transportation and gathering, is expected to increase by approximately
5 percent over the 2001 record level throughput.
- - A 247-mile pipeline to transport additional natural gas to market
and enhance the use of the company's storage facilities is currently
under regulatory review. Depending upon the timing of the receipt of
the necessary regulatory approval, completion of construction could
occur as early as late 2003.
- - The company continues to pursue electric generation opportunities
in Brazil. These projects are targeted toward a niche market where we
will provide energy on a contractual basis in order to reduce risk.
The first 100 megawatts have begun commercial production and the
second 100 megawatts are scheduled to begin commercial production
early in 2003.
Natural Gas and Oil Production
- - Due to delays caused by weather, regulatory hurdles and
environmental objections to discharge of water, the company now
anticipates combined natural gas and oil production at this segment in
2002 to be approximately 10 percent to 15 percent higher than in 2001.
To help mitigate the water issues, the company is implementing new
water management practices and policies.
- - Due to the aforementioned reasons, this segment now expects to
drill approximately 250 wells in 2002.
- - Natural gas prices in the Rocky Mountain Region for July through
December 2002 reflected in the company's 2002 earnings guidance are in
the range of $2.00 to $2.50 per Mcf. The company's estimates for
natural gas prices on the NYMEX for July through December 2002
reflected in the company's 2002 earnings guidance are in the range of
$3.25 to $3.75 per Mcf. During 2001, more than half of this segment's
natural gas production was priced using Rocky Mountain or other non-
NYMEX prices.
- - NYMEX crude oil prices for July through December 2002 reflected
in the company's 2002 earnings guidance are in the range of $24 to $27
per barrel.
- - This segment has hedged a portion of its 2002 production. The
company has entered into swap agreements and fixed price forward sales
representing approximately 35 percent to 40 percent of 2002 estimated
annual natural gas production. These natural gas swaps are at various
indices and range from a low CIG index of $2.73 to a high NYMEX price
of $4.34. The company has also entered into oil swap agreements at
average NYMEX prices in the range of $24.80 to $25.90 per barrel,
representing approximately 30 percent to 35 percent of the company's
2002 estimated annual oil production.
- - In addition to these 2002 hedges, the company has hedged a
portion of its 2003 production. The company has entered into costless
collars and fixed price forward sales, representing approximately 5
percent to 10 percent of 2003 estimated annual natural gas production.
The costless collars range from approximately $3.15 to $4.25 per Mcf.
Construction Materials and Mining
- - Excluding the effects of potential future acquisitions, aggregate
volumes are expected to increase by approximately 18 percent to 23
percent in 2002 and asphalt and ready-mixed concrete volumes are
expected to increase by 15 percent to 20 percent and 5 percent to
10 percent, respectively in 2002.
- - Revenues for this segment are expected to exceed $900 million in
2002.
Safe Harbor for Forward-looking Statements
The information in this release includes certain forward-looking
statements, including earnings per share guidance, growth strategies,
business opportunities, sales, transportation, gathering and
production volume increases and natural gas and oil commodity price
estimates and statements by the chairman of the board, president and
chief executive officer 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. Important factors
that could cause actual results or outcomes for the company to differ
materially from those in the forward-looking statements include
natural gas and oil commodity prices, prevailing governmental policies
and regulatory actions with respect to allowed rates of return,
financings, or industry and rate structures, acquisition and disposal
of assets or facilities, operation and construction of plant
facilities, recovery of purchased power and purchased gas costs,
present or prospective generation and availability of economic
supplies of natural gas. Other important factors include the level of
governmental expenditures on public projects and the timing of such
projects, changes in anticipated tourism levels, the effects of
competition (including but not limited to electric retail wheeling and
transmission costs and prices of alternate fuels and system
deliverability costs), drilling successes in natural gas and oil
operations, the ability to contract for or to secure necessary
drilling rig contracts and to retain employees to drill for and
develop reserves, ability to acquire natural gas and oil properties,
the availability of economic expansion or development opportunities,
political, regulatory and economic conditions and changes in currency
rates in foreign countries where the company does business, political
and economic risks, economic disruptions caused by terrorist
activities, changes in and compliance with environmental and safety
laws and policies, weather conditions, population growth rates and
demographic patterns, market demand for energy from plants or
facilities, changes in tax rates or policies, unanticipated project
delays or changes in project costs, unanticipated changes in operating
expenses or capital expenditures, labor negotiations or disputes,
changes in credit ratings or capital market conditions, inflation
rates, inability of the various counterparties to meet their
contractual obligations, changes in accounting principles and/or the
application of such principles to the company, changes in technology
and legal proceedings, and the ability to effectively integrate the
operations of acquired companies. For further discussion, refer to the
company's most recent Form 10-Q at Item 2 - Management's Discussion
and Analysis - Safe Harbor for Forward-looking Statements.
MDU Resources Group, Inc. provides energy, value-added natural
resource products and related services that are essential to our
country's energy, transportation and communication infrastructure. MDU
Resources includes electric and natural gas utilities, a natural gas
pipeline, utility services, natural gas and oil production,
construction materials and mining, and energy services. For more
information about MDU Resources, see the company's Web site at
www.mdu.com or contact the investor relations department at
investor@mduresources.com.
* * * * * * * *
Contacts:
Warren L. Robinson - Executive Vice President, Treasurer and Chief
Financial Officer
(701) 222-7991 or
Cathi Christopherson - Vice President, Corporate Communications
(701) 222-7959
MDU RESOURCES GROUP, INC.
COMPARATIVE HIGHLIGHTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenues (in millions):
Electric $ 36.3 $ 38.0 $ 76.4 $ 81.0
Natural gas distribution 34.1 41.3 105.9 182.1
Utility services 116.3 77.2 224.6 144.5
Pipeline and energy services 45.4 154.5 87.9 424.2
Natural gas and oil production 43.8 55.4 106.2 127.0
Construction materials and mining 229.6 202.3 322.9 295.0
Intersegment eliminations (25.3) (22.3) (61.7) (66.1)
---------- ---------- ---------- ----------
Total $ 480.2 $ 546.4 $ 862.2 $ 1,187.7
========== ========== ========== ==========
Operating Income (in millions):
Electric $ 5.0 $ 5.8 $ 12.8 $ 16.3
Natural gas distribution (1.1) (2.1) 6.2 3.4
Utility services 2.0 7.0 5.1 11.5
Pipeline and energy services 8.8 8.6 14.6 14.7
Natural gas and oil production 15.6 29.4 50.4 76.0
Construction materials and mining 20.9 21.6 7.9 12.0
---------- ---------- ---------- ----------
Total $ 51.2 $ 70.3 $ 97.0 $ 133.9
========== ========== ========== ==========
Net Income (in millions) $ 24.9 $ 43.4 $ 48.6 $ 76.1
========== ========== ========== ==========
Earnings on Common Stock
(in millions):
Electric $ 1.7 $ 2.1 $ 5.2 $ 7.0
Natural gas distribution (.8) (1.5) 3.7 1.1
Utility services .8 3.9 2.2 5.9
Pipeline and energy services 2.8 3.3 5.6 5.8
Natural gas and oil production 9.3 17.9 30.4 45.9
Construction materials and mining 10.9 17.5 1.1 10.0
---------- ---------- ---------- ----------
Total $ 24.7 $ 43.2 $ 48.2 $ 75.7
========== ========== ========== ==========
Earnings Per Common Share:
Basic $ .35 $ .64 $ .69 $ 1.14
Diluted $ .35 $ .63 $ .68 $ 1.13
Weighted Average Common Shares
Outstanding (in millions):
Basic 70.5 67.3 70.0 66.3
Diluted 71.0 68.4 70.5 67.2
Electric (thousand kWh):
Retail sales 500,887 493,459 1,059,715 1,043,101
Sales for resale 199,792 180,364 426,389 448,002
Natural Gas Distribution (Mdk):
Sales 6,534 5,367 23,086 21,582
Transportation 2,733 2,760 6,374 6,940
Pipeline and Energy Services (Mdk):
Transportation 28,714 26,191 47,103 45,130
Gathering 16,702 14,233 33,629 28,796
Natural Gas and Oil Production:
Natural gas (MMcf) 10,949 10,031 22,352 19,720
Oil (000's of barrels) 502 488 983 982
Construction Materials and Mining
(000's):
Aggregates (tons) 8,869 6,239 12,445 8,928
Asphalt (tons) 1,820 1,298 1,987 1,422
Ready-mixed concrete (cubic yards) 793 721 1,194 1,112
* * * * * * * * *