MDU Resources Provides 2003 and 2004 Earnings Guidance
BISMARCK, ND -- September 9, 2003 - MDU Resources Group, Inc.
(NYSE:MDU) announced that the company is maintaining its 2003
earnings per share guidance. Projected earnings per common
share, diluted, for 2003, are expected to be in the range of
$2.10 to $2.35, including the previously announced $7.6 million
after-tax noncash transition charge to earnings reflecting the
cumulative effect of the change in accounting for asset
retirement obligations as required by the adoption of Statement
of Financial Accounting Standards No. 143. Earnings per common
share, diluted, for 2003, before the cumulative effect of the
accounting change are expected to be in the range of $2.20 to
$2.45. Current projections on earnings per common share, diluted,
for 2004 are in the range of $2.25 to $2.45.
Chairman of the Board, President and Chief Executive Officer
Martin A. White said, "We continue to realize the benefits of our
disciplined growth strategy. Through employee innovation, a
strong focus on low cost and high quality products and services,
operational efficiencies and attractive acquisitions, we have
grown our businesses to be substantial contributors in helping
meet America's infrastructure needs.
"In 2004, we expect to see continued strength in the market for
our construction materials operations and the benefits of
expanded natural gas production and transportation. Further
improvements in the economic environment should benefit our
utility services business. However, we expect natural gas and oil
prices to decline somewhat from the lofty levels seen in 2003."
CORPORATE NEWS
In August 2003, the MDU Resources Board of Directors declared a
quarterly common stock dividend of 25.5 cents per share, a 6.3
percent increase from the previously stated quarterly dividend of
24 cents. This is the 13th year of consecutive increases. The
company has paid consecutive quarterly dividends since 1937.
The Board also voted to split the common stock of the company on
a three-for-two basis subject to obtaining the approval of the
appropriate regulatory agencies. The stock split will be effected
in the form of a 50 percent stock dividend. It is expected that
the necessary regulatory approvals can be obtained so the split
can be effective on October 29, 2003, for shareholders of record
on October 10, 2003.
The company will host a webcast on September 10, 2003, beginning
at 12:30 p.m. EDT. The event can be accessed at www.mdu.com. The
webcast replay will be available beginning at 3:30 p.m. EDT on
September 10.
OUTLOOK
The following information highlights the key growth strategies,
projections and certain assumptions for the company and its
subsidiaries over the next few years 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
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 "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 the company's targeted growth, revenue and earnings
projections.
MDU Resources Group, Inc.
- 2003 earnings per common share, diluted, before the
cumulative effect of the change in accounting for asset
retirement obligations as required by the adoption of Statement
of Financial Accounting Standards No. 143, are projected in the
range of $2.20 to $2.45. Including the $7.6 million after-tax
cumulative effect of the accounting change, 2003 earnings per
common share, diluted, are projected to be in the range of $2.10
to $2.35.
- 2004 earnings per common share, diluted, are projected in
the range of $2.25 to $2.45.
- The company expects the percentage of 2003 earnings per
common share, diluted, after the cumulative effect of an
accounting change by quarter to be in the following approximate
ranges:
- Third Quarter - 35 percent to 40 percent
- Fourth Quarter - 22 percent to 27 percent
- The company will consider issuing equity from time to time
to keep debt at the nonregulated businesses at no more than 40
percent of total capitalization.
- The company anticipates investing approximately $525 million
and $330 million in capital expenditures during 2003 and 2004,
respectively, excluding potential future acquisitions of
businesses.
- The company's long-term compound annual growth goals on
earnings per share from operations are in the range of 6 percent
to 9 percent.
Electric
- In May 2003, an electric rate case was filed with the North
Dakota Public Service Commission requesting an increase of $7.8
million annually, or 9.1 percent. A final order on this case is
expected in January 2004.
- In August 2003, an electric rate case was filed with the
Montana Public Service Commission requesting an increase of $3.3
million annually, or 10.7 percent. A final order on this case is
expected in May 2004.
- Regulatory approval has been received from the North Dakota
Public Service Commission and the South Dakota Public Utilities
Commission on the company's plans to purchase energy from a 20-
megawatt wind energy farm in North Dakota. This wind energy farm
is expected to be on line by late 2003 or early 2004.
- The company expects to build an additional 80 megawatts of
peaking capacity by 2007. The costs of these projects are
expected to be recovered in rates and will be used to meet the
utility's need for additional generating capacity.
- The company is working with the state of North Dakota to
determine the feasibility of constructing a 250-megawatt to 500-
megawatt lignite-fired power plant in western North Dakota. The
next preliminary decision on this matter is expected in late
2003.
Natural Gas Distribution
- Annual natural gas throughput for 2003 and 2004 is expected
to be approximately 52 million decatherms per year.
- In December 2002, a natural gas rate case was filed with the
South Dakota Public Utilities Commission requesting an increase
of $2.2 million annually, or 5.8 percent. A final order is
expected in late 2003. The last rate case filed in South Dakota
was filed in the mid-1990s. A natural gas rate case was filed in
October 2002 with the Minnesota Public Utilities Commission. The
requested increase was $1.6 million annually, or 6.9 percent
above current rates. An interim increase was implemented in
December 2002 for $1.4 million annually. A settlement calling for
an annual increase of $1.1 million is now pending Commission
action. A final order is due by October 2003. The last rate case
filed in Minnesota was filed in the mid-1980s.
Utility Services
- Revenues for this segment are expected to be in the range of
$425 million to $475 million in 2003 and $475 million to $525
million in 2004.
- During 2002, a number of factors affected earnings,
including the write-off of certain receivables and restructuring
of this segment's engineering function which amounts totaled
approximately $5.2 million after-tax.
- The company anticipates margins in 2003 to decrease from
2002 levels; however, margins are anticipated to increase from
2003 to 2004.
- This segment's work backlog as of July 31, 2003, was
approximately $157 million.
Pipeline and Energy Services
- In 2003, natural gas throughput from this segment, including
both transportation and gathering, is expected to increase
slightly over the 2002 record levels. In 2004, total throughput
is expected to increase approximately 20 percent over projected
2003 record levels, although transportation rates are expected to
decline due to the estimated effects of a Federal Energy
Regulatory Commission rate order received in July 2003.
- Pipeline construction began in mid-August on the 253-mile
Grasslands Pipeline project. Due to governmental delays, the in-
service date for this project is expected to be in the mid-
November to December 1, 2003, timeframe.
Natural Gas and Oil Production
- In 2003, this segment expects a combined natural gas and oil
production increase of approximately 15 percent over 2002 record
levels. In 2004, the company expects a combined production
increase of approximately 10 percent over projected 2003 levels.
- This segment expects to drill more than 400 wells in 2003
and approximately 400 wells in 2004.
- Estimates for natural gas prices in the Rocky Mountain
region for October through December 2003, reflected in the
company's 2003 earnings guidance, are in the range of $3.00 to
$3.50 per Mcf. The company's estimates for natural gas prices on
the NYMEX for October through December 2003, reflected in the
company's 2003 earnings guidance, are in the range of $4.25 to
$4.75 per Mcf. During 2002, more than half of this segment's
natural gas production was priced using Rocky Mountain or other
non-NYMEX prices.
- For 2004, the company's estimate for natural gas prices in
the Rocky Mountain region are in the range of $2.75 to $3.25 per
Mcf, and estimates for natural gas prices on the NYMEX are in the
range of $3.75 to $4.25 per Mcf.
- Estimates of NYMEX crude oil prices for September through
December 2003, reflected in the company's 2003 earnings guidance,
are in the range of $22 to $27 per barrel. Estimates of NYMEX
crude oil prices for 2004 are projected in the range of $22 to
$27 per barrel.
- The company has hedged a portion of its 2003 production
primarily using collars that establish both a floor and a cap.
The company has entered into agreements representing
approximately 45 percent to 50 percent of 2003 estimated annual
natural gas production. The agreements are at various indices and
range from a low CIG index of $2.94 to a high Ventura index of
$4.76 per Mcf. CIG is an index pricing point related to Colorado
Interstate Gas Co.'s system and Ventura is an index pricing point
related to Northern Natural Gas Co.'s system.
- The company has hedged a portion of its 2003 oil production.
The company has entered into agreements at NYMEX prices with
floors of $24.50 and caps as high as $28.12, representing
approximately 30 percent to 35 percent of 2003 estimated annual
oil production.
- The company has begun hedging a portion of its 2004
estimated annual natural gas production. The company has entered
into agreements representing approximately 10 percent to 15
percent of 2004 estimated annual natural gas production. The
agreements are at various indices and range from a low CIG index
of $3.75 to a high NYMEX index of $5.20 per Mcf.
Construction Materials and Mining
- Excluding the effects of potential future acquisitions,
aggregate and ready-mixed concrete volumes in 2003 are expected
to increase over record levels achieved in 2002, while asphalt
volumes are expected to be comparable to 2002 levels. 2004
aggregate and ready-mixed concrete volumes are expected to be
comparable to projected 2003 levels, while asphalt volumes are
expected to increase over those projected for 2003.
- Revenues for this segment in 2003 are expected to increase
by approximately 10 percent as compared to 2002 record levels.
2004 revenues are expected to increase by approximately 5 percent
over projected 2003 levels.
- As of early September 2003, this segment had $488 million in
work backlog.
Independent Power Production and Other
- 2003 and 2004 earnings projections for independent power
production and other operations include the estimated results
from the wind-powered electric generation facility in California,
the natural gas-fired generating facilities in Colorado, and the
company's 49-percent ownership in a 220-megawatt natural gas-
fired generation project in Brazil. Earnings are expected to be
in the range of $9 million to $14 million in 2003 and $19 million
to $24 million in 2004.
- The company had previously suspended construction of a 113-
megawatt coal-fired development project except for those items of
a critical nature. The company is in the process of accessing
markets previously unavailable to this project. Construction is
planned to resume in the near future to the extent access to such
markets has been secured.
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 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. 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 recent events leading to the current adverse economic
environment may have a general negative impact on the company's
future revenues and may result in a goodwill impairment for
Innovatum, Inc., an indirect wholly owned subsidiary of the
company. At June 30, 2003, the goodwill amount at Innovatum was
approximately $8.3 million.
- The company relies on financing sources and capital markets.
The company's inability to access financing may impair its
ability to execute the company's business plans, make capital
expenditures or pursue acquisitions that the company may
otherwise rely on for future growth.
- The company's natural gas and oil production business is
dependent on factors, including commodity prices, which cannot be
predicted or controlled.
- Some of the company's operations are subject to extensive
environmental laws and regulations that may increase its costs of
operations, impact or limit its business plans, or expose the
company to environmental liabilities. One of the company's
subsidiaries has been sued in connection with its coalbed natural
gas development activities.
- The company is subject to extensive government regulations
that may have a negative impact on its business and its results
of operations.
- There are risks involved with the growth strategies of the
company's independent power production business. If the company
is unable to access markets previously unavailable to a proposed
113-megawatt coal-fired electric generation station in Montana,
it may not complete construction or commence operations of that
facility. At June 30, 2003, the company's investment in this
project was approximately $29.6 million. If it is not
economically feasible for the company to construct and operate
this facility or if alternate markets cannot be identified, an
asset impairment may occur.
- The value of the company's investment in foreign operations
may diminish due to political, regulatory and economic conditions
and changes in currency exchange rates in countries where the
company does business.
- Competition is increasing in all of the company's
businesses.
- Weather conditions can adversely affect the company's
operations and revenues.
- Other important factors that could cause actual results or
outcomes for the company to differ materially from those
discussed in forward-looking statements include:
- Acquisition and disposal of assets or facilities
- Changes in operation and construction of plant facilities
- Changes in present or prospective generation
- Changes in anticipated tourism levels
- The availability of economic expansion or development
opportunities
- 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
- 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
- The ability to effectively integrate the operations of
acquired companies
For a further discussion of these risk factors and cautionary
statements, refer to the Introduction of the company's most
recent Form 10-Q and to Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk
Factors and Cautionary Statements that May Affect Future Results.
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 natural gas and oil
production, construction materials and mining, a natural gas
pipeline, electric and natural gas utilities, utility services,
energy services and domestic and international independent power
production. 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.
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Contact:
Vernon A. Raile - Senior Vice President and Chief Accounting Officer
701-222-7623
Linda Donlin - Corporate Communications Director
701-222-7896