BISMARCK, ND–(Marketwired – February 03, 2016) – MDU Resources Group, Inc. (NYSE: MDU)
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.
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.
Adjusted Earnings by Segment
Business Line |
Fourth Quarter 2015 Adjusted Earnings |
Fourth Quarter 2014 Adjusted Earnings |
2015 Adjusted Earnings |
2014 Adjusted Earnings |
||||||||
(In millions) | ||||||||||||
Utility | $ | 28.9 | $ | 28.7 | $ | 59.5 | $ | 67.2 | ||||
Pipeline and midstream | 6.7 | 7.8 | 23.9 | 24.7 | ||||||||
Construction | 22.0 | 31.4 | 115.8 | 114.4 | ||||||||
Refining | (9.7 | ) | (.4 | ) | (20.5 | ) | (2.1 | ) | ||||
Other and eliminations | .7 | .3 | 1.3 | 1.3 | ||||||||
Adjusted earnings* | $ | 48.6 | $ | 67.8 | $ | 180.0 | $ | 205.5 | ||||
* Excludes exploration and production business as well as other adjustments as noted below. |
Reconciliation of GAAP to Adjusted Earnings
Fourth Quarter 2015 Earnings |
Fourth Quarter 2014 Earnings |
2015 Earnings |
2014 Earnings |
|||||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||||||||
Earnings (loss) per share | $ | .27 | $ | .43 | $ | (3.20 | ) | $ | 1.55 | |||||||||||||
Earnings (loss) on common stock | $ | 52.4 | $ | 84.1 | $ | (623.1 | ) | $ | 297.5 | |||||||||||||
Adjustments net of tax: | ||||||||||||||||||||||
Exploration and production business | (2.9 | ) | (22.0 | ) | 787.6 | (97.3 | ) | |||||||||||||||
Other adjustments | (.9 | ) | (a) | 5.7 | (b) | 15.5 | (c) | 5.3 | (d) | |||||||||||||
Adjusted earnings | $ | 48.6 | $ | 67.8 | $ | 180.0 | $ | 205.5 | ||||||||||||||
Adjusted earnings per share | $ | .25 | $ | .35 | $ | .92 | $ | 1.07 |
(a) | Reflects the company’s portion of Dakota Prairie Refinery-related start-up costs. | |
(b) | Reflects fourth quarter 2014 multiemployer pension plan withdrawal liability of $8.4 million after tax and earnings from discontinued operations of $2.7 million related to other operations. | |
(c) | Reflects year-to-date impairments of natural gas gathering assets of $10.6 million after tax, the company’s year-to-date portion of additional start-up costs at Dakota Prairie Refinery of $2.0 million after tax, first quarter 2015 multiemployer pension plan liability of $1.5 million after tax, and first quarter 2015 underperforming non-strategic asset loss of $1.4 million after tax. | |
(d) | Reflects fourth quarter 2014 multiemployer pension plan withdrawal liability of $8.4 million after tax and earnings from discontinued operations of $3.1 million related to other operations. |
On a consolidated basis, the following information highlights the key growth strategies, projections and certain assumptions for the company:
Initial 2016 Guidance |
||||||||
February 3, 2016 | ||||||||
Low | High | |||||||
Adjusted earnings per share | $ | 1.00 | $ | 1.15 | ||||
Adjustments: | ||||||||
Refining | (.14 | ) | (.06 | ) | ||||
Discontinued operations | (.01 | ) | .01 | |||||
GAAP earnings per share | $ | .85 | $ | 1.10 |
Capital expenditures for 2015 and estimated capital expenditures for 2016 through 2020 are noted in the following table:
Capital Expenditures | |||||||||||||||||
Business Line |
2015 Actual |
2016 Estimated |
2017 Estimated |
2018 Estimated |
2016 – 2020 Total Estimated |
||||||||||||
(In millions) | |||||||||||||||||
Utility | |||||||||||||||||
Electric | $ | 333 | $ | 122 | $ | 196 | $ | 202 | $ | 817 | |||||||
Natural gas distribution | 131 | 145 | 164 | 135 | 669 | ||||||||||||
Pipeline and midstream | 18 | 27 | 73 | 94 | 387 | ||||||||||||
Construction | |||||||||||||||||
Construction materials and contracting | 48 | 35 | 99 | 76 | 350 | ||||||||||||
Construction services | 38 | 9 | 12 | 13 | 61 | ||||||||||||
Refining* | 22 | 3 | 4 | 3 | 19 | ||||||||||||
Other | 4 | 4 | 3 | 2 | 13 | ||||||||||||
Net proceeds and other** | (64 | ) | (3 | ) | (5 | ) | (6 | ) | (27 | ) | |||||||
Total capital expenditures | $ | 530 | $ | 342 | $ | 546 | $ | 519 | $ | 2,289 |
* Capital expenditure projections represent the company’s proportionate share of Dakota Prairie Refining. | ||||||||||||||
** Excludes capital expenditures for discontinued operations and sale proceeds for the exploration and production business. |
Based on the current level of capital expenditures and other key assumptions in the 2016 financial forecast, the company is not planning to issue equity this year. Estimated operating cash flows from operations are $425 million to $475 million.
Utility | |||||||||||||||||
Electric | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Dollars in millions, where applicable) | |||||||||||||||||
Operating revenues | $ | 70.0 | $ | 70.2 | $ | 280.6 | $ | 277.9 | |||||||||
Operating expenses: | |||||||||||||||||
Fuel and purchased power | 22.5 | 22.5 | 86.2 | 89.3 | |||||||||||||
Operation and maintenance | 22.6 | 20.8 | 87.7 | 81.1 | |||||||||||||
Depreciation, depletion and amortization | 9.5 | 9.1 | 37.6 | 35.0 | |||||||||||||
Taxes, other than income | 2.0 | 2.7 | 11.1 | 11.1 | |||||||||||||
56.6 | 55.1 | 222.6 | 216.5 | ||||||||||||||
Operating income | 13.4 | 15.1 | 58.0 | 61.4 | |||||||||||||
Earnings | $ | 9.1 | $ | 8.7 | $ | 35.9 | $ | 36.7 | |||||||||
Retail sales (million kWh) | 840.2 | 888.4 | 3,316.0 | 3,308.4 | |||||||||||||
Average cost of fuel and purchased power per kWh | $ | .025 | $ | .024 | $ | .024 | $ | .025 | |||||||||
Natural Gas Distribution | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Dollars in millions) | |||||||||||||||||
Operating revenues | $ | 264.4 | $ | 305.5 | $ | 817.4 | $ | 922.0 | |||||||||
Operating expenses: | |||||||||||||||||
Purchased natural gas sold | 162.5 | 206.8 | 499.0 | 603.2 | |||||||||||||
Operation and maintenance | 40.0 | 38.4 | 153.5 | 150.2 | |||||||||||||
Depreciation, depletion and amortization | 20.5 | 14.2 | 64.8 | 54.7 | |||||||||||||
Taxes, other than income | 12.3 | 12.9 | 46.3 | 48.3 | |||||||||||||
235.3 | 272.3 | 763.6 | 856.4 | ||||||||||||||
Operating income | 29.1 | 33.2 | 53.8 | 65.6 | |||||||||||||
Earnings | $ | 19.8 | $ | 20.0 | $ | 23.6 | $ | 30.5 | |||||||||
Volumes (MMdk): | |||||||||||||||||
Sales | 35.2 | 35.5 | 95.6 | 104.3 | |||||||||||||
Transportation | 45.1 | 39.8 | 154.2 | 145.9 | |||||||||||||
Total throughput | 80.3 | 75.3 | 249.8 | 250.2 | |||||||||||||
Degree days (% of normal)* | |||||||||||||||||
Montana-Dakota/Great Plains | 88 | % | 96 | % | 88 | % | 103 | % | |||||||||
Cascade | 89 | % | 86 | % | 83 | % | 89 | % | |||||||||
Intermountain | 95 | % | 93 | % | 89 | % | 95 | % | |||||||||
* Degree days are a measure of the daily temperature-related demand for energy for heating. |
The combined utility businesses reported earnings of $59.5 million, compared to $67.2 million in 2014. This decrease reflects warmer weather effects of $7.2 million from lower natural gas and residential electric retail sales volumes. Also contributing were higher operation and maintenance expense, largely related to higher benefit-related costs and higher contract services, and higher depreciation, depletion and amortization expense due to increased plant additions which is included in rate cases for potential recovery. Partially offsetting these decreases were natural gas retail rate increases effective in 2015 and electric rate increases, primarily due to rate recovery of new generation.
Fourth quarter combined utility earnings were $28.9 million, compared to $28.7 million in 2014. The increase in earnings reflects higher natural gas retail margins, largely related to rate increases, and higher other income, primarily allowance for funds used during construction. Partially offsetting these increases were higher operation and maintenance expense, largely related to higher benefit-related costs and higher contract services, and higher depreciation, depletion and amortization expense due to increased plant additions which is included in rate cases for potential recovery.
The following information highlights the key growth strategies, projections and certain assumptions for this segment:
Pipeline and Midstream | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Operating revenues | $ | 37.1 | $ | 42.5 | $ | 156.2 | $ | 157.4 | ||||||||
Operating expenses: | ||||||||||||||||
Purchased natural gas sold | .2 | – | 1.2 | – | ||||||||||||
Operation and maintenance | 15.8 | 18.8 | 84.8 | 68.1 | ||||||||||||
Depreciation, depletion and amortization | 6.2 | 8.2 | 28.0 | 29.8 | ||||||||||||
Taxes, other than income | 2.6 | 3.3 | 12.2 | 12.8 | ||||||||||||
24.8 | 30.3 | 126.2 | 110.7 | |||||||||||||
Operating income | 12.3 | 12.2 | 30.0 | 46.7 | ||||||||||||
Earnings | $ | 6.7 | $ | 7.8 | $ | 13.3 | $ | 24.7 | ||||||||
Adjustment net of tax* | – | – | 10.6 | – | ||||||||||||
Adjusted earnings | $ | 6.7 | $ | 7.8 | $ | 23.9 | $ | 24.7 | ||||||||
Transportation volumes (MMdk) | 79.7 | 67.2 | 290.5 | 233.5 | ||||||||||||
Natural gas gathering volumes (MMdk) | 6.8 | 9.7 | 33.4 | 38.4 | ||||||||||||
Customer natural gas storage balance (MMdk): | ||||||||||||||||
Beginning of period | 19.3 | 18.4 | 14.9 | 26.7 | ||||||||||||
Net injection (withdrawal) | (2.7 | ) | (3.5 | ) | 1.7 | (11.8 | ) | |||||||||
End of period | 16.6 | 14.9 | 16.6 | 14.9 | ||||||||||||
* See Reconciliation of GAAP to Adjusted Earnings in this release. |
Adjusted earnings at the pipeline and midstream segment were $23.9 million, compared to $24.7 million in 2014. The earnings decrease reflects lower processing revenue resulting from lower realized prices, lower natural gas gathering volumes and lower storage services revenues, primarily due to lower interruptible storage withdrawals. These decreases were partially offset by higher transportation rates, primarily resulting from a rate case settlement effective in May 2014, and higher transportation volumes. GAAP earnings were $13.3 million in 2015, compared to $24.7 million in 2014.
Fourth quarter GAAP earnings were $6.7 million, compared to $7.8 million in 2014. The earnings decrease reflects lower gathering and processing revenue. The decrease is partially offset by lower operation and maintenance expense, largely related to lower payroll-related costs and contract services.
The following information highlights the key growth strategies, projections and certain assumptions for this segment:
Construction | |||||||||||||
Construction Materials and Contracting | |||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Dollars in millions) | |||||||||||||
Operating revenues | $ | 426.3 | $ | 407.5 | $ | 1,904.3 | $ | 1,765.3 | |||||
Operating expenses: | |||||||||||||
Operation and maintenance | 385.8 | 374.5 | 1,652.3 | 1,571.5 | |||||||||
Depreciation, depletion and amortization | 16.9 | 16.5 | 65.9 | 68.6 | |||||||||
Taxes, other than income | 7.9 | 8.1 | 40.1 | 38.8 | |||||||||
410.6 | 399.1 | 1,758.3 | 1,678.9 | ||||||||||
Operating income | 15.7 | 8.4 | 146.0 | 86.4 | |||||||||
Earnings | $ | 14.8 | $ | 9.3 | $ | 89.1 | $ | 51.5 | |||||
Adjustments net of tax* | – | 8.4 | 1.5 | 8.4 | |||||||||
Adjusted earnings | $ | 14.8 | $ | 17.7 | $ | 90.6 | $ | 59.9 | |||||
Sales (000’s): | |||||||||||||
Aggregates (tons) | 6,213 | 5,861 | 26,959 | 25,827 | |||||||||
Asphalt (tons) | 1,238 | 1,204 | 6,705 | 6,070 | |||||||||
Ready-mixed concrete (cubic yards) | 869 | 823 | 3,592 | 3,460 | |||||||||
* See Reconciliation of GAAP to Adjusted Earnings in this release. | |||||||||||||
Construction Services | |||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(In millions) | |||||||||||||
Operating revenues | $ | 238.5 | $ | 276.8 | $ | 926.4 | $ | 1,119.5 | |||||
Operating expenses: | |||||||||||||
Operation and maintenance | 214.5 | 251.5 | 838.5 | 990.7 | |||||||||
Depreciation, depletion and amortization | 3.5 | 3.3 | 13.4 | 12.9 | |||||||||
Taxes, other than income | 7.1 | 7.1 | 31.1 | 33.6 | |||||||||
225.1 | 261.9 | 883.0 | 1,037.2 | ||||||||||
Operating income | 13.4 | 14.9 | 43.4 | 82.3 | |||||||||
Earnings | $ | 7.2 | $ | 13.7 | $ | 23.8 | $ | 54.5 | |||||
Adjustment net of tax* | – | – | 1.4 | – | |||||||||
Adjusted earnings | $ | 7.2 | $ | 13.7 | $ | 25.2 | $ | 54.5 | |||||
* See Reconciliation of GAAP to Adjusted Earnings in this release. |
Adjusted earnings for the combined construction businesses were $115.8 million for 2015, compared to $114.4 million in 2014. The earnings increase reflects record earnings at the materials group with higher margins and volumes across all product lines and higher construction revenues and margins. Partially offsetting these increases were lower margins and workloads at the services group. GAAP earnings were $112.9 million in 2015, compared to $106.0 million in 2014.
Fourth quarter adjusted earnings for the combined construction businesses were $22.0 million, compared to $31.4 million in 2014. The earnings decrease reflects lower aggregate margins at the materials group, lower equipment sales and rental margins at the services group. Partially offsetting these decreases were higher ready-mix concrete margins and volumes at the materials group. GAAP earnings were $22.0 million in fourth quarter 2015, compared to $23.0 million in the same period last year.
The following information highlights the key growth strategies, projections and certain assumptions for the construction segments:
Refining | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Dollars in millions) | |||||||||||||||||
Operating revenues | $ | 45.8 | $ | – | $ | 178.3 | $ | – | |||||||||
Operating expenses: | |||||||||||||||||
Cost of crude oil | 43.6 | – | 159.8 | – | |||||||||||||
Operation and maintenance | 23.1 | 2.7 | 69.2 | 7.6 | |||||||||||||
Depreciation, depletion and amortization | 5.9 | .7 | 16.5 | .9 | |||||||||||||
Taxes, other than income | .3 | .1 | 1.7 | .6 | |||||||||||||
72.9 | 3.5 | 247.2 | 9.1 | ||||||||||||||
Operating loss | (27.1 | ) | (3.5 | ) | (68.9 | ) | (9.1 | ) | |||||||||
Loss attributable to the company | $ | (8.8 | ) | $ | (.4 | ) | $ | (22.5 | ) | $ | (2.1 | ) | |||||
Adjustments net of tax* | (.9 | ) | – | 2.0 | – | ||||||||||||
Adjusted loss attributable to the company | $ | (9.7 | ) | $ | (.4 | ) | $ | (20.5 | ) | $ | (2.1 | ) | |||||
Refined product sales (MBbls) | |||||||||||||||||
Diesel fuel | 274 | – | 1,072 | – | |||||||||||||
Naphtha | 287 | – | 996 | – | |||||||||||||
Atmospheric tower bottoms and other | 287 | – | 884 | – | |||||||||||||
Total refined product sales | 848 | – | 2,952 | – | |||||||||||||
* See Reconciliation of GAAP to Adjusted Earnings in this release. |
The earnings variances discussed are the company’s proportionate share while the table includes the noncontrolling interest’s portion of revenues, expenses, operating loss and refined product sales.
Adjusted loss at the refining segment was $20.5 million, compared to a loss of $2.1 million in 2014, with commencement of operations of Dakota Prairie Refinery occurring in May 2015. The refinery was negatively impacted by unplanned outages in October and November due to equipment failures in the hydrogen unit. The higher loss reflects higher operation and maintenance expense, largely related to higher rail-related costs and higher contract services, and higher depreciation, depletion and amortization. These decreases are partially offset by refined product sales gross margin. Gross margin was negatively impacted by the outages and market conditions, including lower diesel and naphtha prices along with historically narrow local Bakken basis differentials. This segment recorded a GAAP loss of $22.5 million in 2015, compared to a loss of $2.1 million in 2014.
Fourth quarter adjusted loss was $9.7 million, compared to a loss of $400,000 in 2014. The higher loss reflects higher operation and maintenance expense, largely related to higher rail-related costs and higher contract services, and higher depreciation, depletion and amortization. These decreases are partially offset by refined product sales gross margin. This segment recorded a GAAP loss of $8.8 million in 2015, compared to $400,000 in 2014.
The following information highlights the key growth strategies, projections and certain assumptions for this segment:
Other | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In millions) | |||||||||||||||||
Operating revenues | $ | 2.1 | $ | 2.0 | $ | 9.2 | $ | 9.4 | |||||||||
Operating expenses: | |||||||||||||||||
Operation and maintenance | 3.2 | 2.1 | 12.7 | 11.0 | |||||||||||||
Depreciation, depletion and amortization | .5 | .6 | 2.1 | 2.2 | |||||||||||||
Taxes, other than income | – | .1 | .1 | .2 | |||||||||||||
3.7 | 2.8 | 14.9 | 13.4 | ||||||||||||||
Operating loss | (1.6 | ) | (.8 | ) | (5.7 | ) | (4.0 | ) | |||||||||
Earnings (loss) | $ | (2.8 | ) | $ | .3 | $ | (12.4 | ) | $ | (7.2 | ) |
The loss increased $5.2 million in 2015, primarily due to higher operation and maintenance expense, largely a corporate asset impairment, the absence of prior year income tax benefits, as well as a foreign currency translation loss including effects of the sale of the company’s remaining interest in the Brazilian Transmission Lines.
Fourth quarter loss was $2.8 million in 2015, compared to earnings of $300,000 in 2014. The decrease resulted from the absence of prior-year income tax benefits and higher operation and maintenance expense, largely a corporate asset impairment.
Included in Other are operation and maintenance expense and interest expense previously allocated to the exploration and production business that do not meet the criteria for income (loss) from discontinued operations.
Discontinued Operations | |||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(In millions) | |||||||||||||
Income (loss) from discontinued operations before intercompany eliminations, net of tax | $ | 4.2 | $ | 27.6 | $ | (774.7 | ) | $ | 114.6 | ||||
Intercompany eliminations | 2.1 | .1 | 2.3 | .5 | |||||||||
Income (loss) from discontinued operations, net of tax | $ | 6.3 | $ | 27.7 | $ | (772.4 | ) | $ | 115.1 |
The results of operations for the company’s exploration and production business, except certain general and administrative costs and interest expense that do not meet the criteria for income (loss) from discontinued operations (recorded in “Other”), along with a benefit related to the vacation of an arbitration award in 2014 related to Centennial Resources, are included in the earnings (loss) from discontinued operations.
The company’s discontinued operations reported a loss of $772.4 million for 2015, compared to earnings of $115.1 million in 2014. This decrease reflects fair value impairments of the company’s assets held for sale, a noncash write-down of oil and gas properties, lower average realized commodity prices and lower production due to the marketing and sale of exploration and production assets. These decreases were offset in part by lower depreciation, depletion and amortization expense and lower lease operating expense.
The company’s discontinued operations reported earnings of $6.3 million in fourth quarter 2015, compared to $27.7 million in 2014. The decrease reflects lower average realized commodity prices, lower realized and unrealized gains/losses on commodity derivatives compared to the prior period and lower production due to the marketing and sale of exploration and production assets. These decreases were offset in part by lower depreciation, depletion and amortization expense.
The following table provides additional information on the company’s discontinued operations:
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(Dollars in millions, where applicable) | |||||||||||||||
Operating revenues | $ | 28.8 | $ | 114.6 | $ | 184.9 | $ | 547.6 | |||||||
Operating expenses | 29.0 | 79.6 | 1,423.1 | 378.9 | |||||||||||
Operating income (loss) | (.2 | ) | 35.0 | (1,238.2 | ) | 168.7 | |||||||||
Income (loss) from discontinued operations, net of tax | $ | 6.3 | $ | 27.7 | $ | (772.4 | ) | $ | 115.1 | ||||||
Production: | |||||||||||||||
Oil (MBbls) | 614 | 1,022 | 3,286 | 4,919 | |||||||||||
Natural gas liquids (MBbls) | 64 | 108 | 393 | 609 | |||||||||||
Natural gas (MMcf) | 2,050 | 4,453 | 16,747 | 20,822 | |||||||||||
Total production (MBOE) | 1,020 | 1,872 | 6,471 | 8,998 | |||||||||||
Average realized prices (excluding realized and unrealized commodity derivatives gain/loss): | |||||||||||||||
Oil (per barrel) | $ | 36.25 | $ | 61.37 | $ | 41.17 | $ | 83.33 | |||||||
Natural gas liquids (per barrel) | $ | 13.26 | $ | 24.54 | $ | 16.14 | $ | 36.06 | |||||||
Natural gas (per Mcf) | $ | 1.63 | $ | 3.45 | $ | 1.76 | $ | 4.02 | |||||||
Average realized prices (including realized commodity derivatives gain/loss): | |||||||||||||||
Oil (per barrel) | $ | 51.02 | $ | 87.70 | $ | 48.58 | $ | 85.96 | |||||||
Natural gas liquids (per barrel) | $ | 13.26 | $ | 24.54 | $ | 16.14 | $ | 36.06 | |||||||
Natural gas (per Mcf) | $ | 2.54 | $ | 3.54 | $ | 2.22 | $ | 3.81 | |||||||
Production costs, including taxes, per BOE: | |||||||||||||||
Lease operating costs | $ | 8.91 | $ | 9.74 | $ | 7.76 | $ | 9.80 | |||||||
Gathering and transportation | 2.03 | 2.13 | 1.59 | 1.38 | |||||||||||
Production and property taxes | 1.31 | 3.90 | 2.41 | 5.12 | |||||||||||
$ | 12.25 | $ | 15.77 | $ | 11.76 | $ | 16.30 | ||||||||
Notes: | |||||||||||||||
• Oil includes crude oil and condensate; natural gas liquids are reflected separately. | |||||||||||||||
• Results are reported in barrel of oil equivalents based on a 6:1 ratio. |
Use of Non-GAAP Financial Measures
The company, in addition to presenting its earnings information in conformity with GAAP, has provided non-GAAP earnings data that reflect adjustments to exclude:
Three Months Ended December 31, 2015 and 2014:
Twelve Months Ended December 31, 2015 and 2014:
The company, in addition to presenting its earnings guidance information in conformity with GAAP, has provided non-GAAP earnings guidance that reflects an adjustment to exclude the refining segment. The refining segment has not been included due to the volatility and unpredictable nature of the key commodity assumptions supporting its financial results. The company has excluded losses per share of 14 cents and 6 cents for the low and high, respectively, of the earnings guidance range for refining in the initial 2016 adjusted earnings per share guidance.
The company believes that these non-GAAP financial measures are useful to investors because the items excluded are not indicative of the company’s continuing operating results. Also, the company’s management uses these non-GAAP financial measures as indicators for planning and forecasting future periods. The presentation of this additional information is not meant to be considered a substitute for financial measures prepared in accordance with GAAP.
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.
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 | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Operating revenues | $ | 1,062.5 | $ | 1,048.3 | $ | 4,191.5 | $ | 4,114.9 | |||||||||
Operating expenses: | |||||||||||||||||
Fuel and purchased power | 22.5 | 22.5 | 86.2 | 89.3 | |||||||||||||
Purchased natural gas sold | 144.8 | 189.9 | 450.1 | 558.4 | |||||||||||||
Cost of crude oil | 43.6 | – | 159.8 | – | |||||||||||||
Operation and maintenance | 701.2 | 674.4 | 2,870.9 | 2,798.3 | |||||||||||||
Depreciation, depletion and amortization | 62.8 | 52.6 | 227.8 | 204.1 | |||||||||||||
Taxes, other than income | 32.2 | 34.3 | 142.6 | 145.4 | |||||||||||||
1,007.1 | 973.7 | 3,937.4 | 3,795.5 | ||||||||||||||
Operating income | 55.4 | 74.6 | 254.1 | 319.4 | |||||||||||||
Other income | 13.0 | 2.7 | 19.3 | 10.0 | |||||||||||||
Interest expense | 23.2 | 22.1 | 93.1 | 86.9 | |||||||||||||
Income before income taxes | 45.2 | 55.2 | 180.3 | 242.5 | |||||||||||||
Income taxes | 13.1 | .1 | 65.6 | 63.3 | |||||||||||||
Income from continuing operations | 32.1 | 55.1 | 114.7 | 179.2 | |||||||||||||
Income (loss) from discontinued operations, net of tax | 6.3 | 27.7 | (772.4 | ) | 115.1 | ||||||||||||
Net income (loss) | 38.4 | 82.8 | (657.7 | ) | 294.3 | ||||||||||||
Net loss attributable to noncontrolling interest | (14.2 | ) | (1.5 | ) | (35.3 | ) | (3.9 | ) | |||||||||
Dividends declared on preferred stocks | .2 | .2 | .7 | .7 | |||||||||||||
Earnings (loss) on common stock | $ | 52.4 | $ | 84.1 | $ | (623.1 | ) | $ | 297.5 | ||||||||
Earnings (loss) per common share – basic: | |||||||||||||||||
Earnings before discontinued operations | $ | .24 | $ | .29 | $ | .77 | $ | .95 | |||||||||
Discontinued operations, net of tax | .03 | .14 | (3.97 | ) | .60 | ||||||||||||
Earnings (loss) per common share – basic | $ | .27 | $ | .43 | $ | (3.20 | ) | $ | 1.55 | ||||||||
Earnings (loss) per common share – diluted: | |||||||||||||||||
Earnings before discontinued operations | $ | .24 | $ | .29 | $ | .77 | $ | .95 | |||||||||
Discontinued operations, net of tax | .03 | .14 | (3.97 | ) | .60 | ||||||||||||
Earnings (loss) per common share – diluted | $ | .27 | $ | .43 | $ | (3.20 | ) | $ | 1.55 | ||||||||
Dividends declared per common share | $ | .1875 | $ | .1825 | $ | .7350 | $ | .7150 | |||||||||
Weighted average common shares outstanding – basic | 195.3 | 194.1 | 194.9 | 192.5 | |||||||||||||
Weighted average common shares outstanding – diluted | 195.3 | 194.2 | 195.0 | 192.6 |
December 31, | |||||||||
2015 | 2014 | ||||||||
(Unaudited) | |||||||||
Other Financial Data | |||||||||
Book value per common share | $ | 12.83 | $ | 16.66 | |||||
Market price per common share | $ | 18.32 | $ | 23.50 | |||||
Dividend yield (indicated annual rate) | 4.1 | % | 3.1 | % | |||||
Price/earnings from continuing operations ratio (12 months ended) | 23.8x | 24.7x | |||||||
Market value as a percent of book value | 142.8 | % | 141.1 | % | |||||
Net operating cash flow (12 months ended)* | $ | 641 | $ | 604 | |||||
Total assets* | $ | 6,628 | $ | 7,832 | |||||
Total equity* | $ | 2,521 | $ | 3,250 | |||||
Total debt* | $ | 1,917 | $ | 2,094 | |||||
Capitalization ratios:** | |||||||||
Total equity | 56.8 | % | 60.8 | % | |||||
Total debt | 43.2 | 39.2 | |||||||
100.0 | % | 100.0 | % |
* In millions
** Includes noncontrolling interest
Contacts
Financial:
Rick Matteson
director of investor relations
701-530-1057
Media:
Laura Lueder
corporate public relations manager
701-530-1095