Natural Gas Price Volatility Affects MDU Resources' Earnings.Business Editors
BISMARCK, N.D.--(BUSINESS WIRE)--Sept. 20, 2001
MDU (1) (Multiple Dwelling Unit) A commercial or residential building with multiple offices or apartments. See BLEC.
(2) (Multiply-Divide Unit) A high-speed circuit that performs multiplication and division within the CPU. Resources Group, Inc.'s (NYSE NYSE
See: New York Stock Exchange :MDU) chairman of the board, president and chief executive officer, Martin A. White, stated, "Our company shares the feelings of our entire country - the feelings of great loss and shock that were created by the terrorist events last week. We join with all Americans in extending our sympathies to the victims' families and friends. We will do our part to help rebuild this great nation."
White noted that these tragic events, coupled with an economy that was already on a downturn, have resulted in significant uncertainty in the economy as a whole. Because of this uncertainty, and more specifically the extreme volatility in natural gas prices experienced this year, due in part to the state of the economy, the company expects a decrease in earnings per common share for the year 2001 from its prior guidance of $2.30 to $2.50. In addition, depending on the continuation of this dramatic decline in natural gas prices, the company may be required to take a noncash charge Noncash charge
A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow. That is, this is treated as an accounting expense -- not a real expense that demands cash. to earnings this year. This may be required under the Securities and Exchange Commission ceiling test for oil and gas properties. Current natural gas prices as reflected on the NYMEX See New York Mercantile Exchange.
See New York Mercantile Exchange (NYM). are approximately one-third less than their historical five-year average and nearly 80 percent less than those experienced this January.
Given the current natural gas prices, next year's earnings are expected to be significantly lower than the 2002 earnings per common share consensus estimate per Zacks Investor Relations Investor relations
The process by which the corporation communicates with its investors. Services of $2.61.
Despite the economic downturn, the company remains optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op about its long-term growth objectives. The long-term goal continues to be to grow earnings per common share in the 10 percent to 12 percent range annually excluding the effects of short-term, year-to-year volatility. Customers will continue to demand the company's products and services, which are essential for every day living and for maintaining the infrastructure of America. "The country relies on electricity, natural gas, oil, roads, the power lines that move electricity, the cable that transmits information and many of the other products and services that MDU Resources provides," White said.
Even though the general economy has weakened weak·en
tr. & intr.v. weak·ened, weak·en·ing, weak·ens
To make or become weak or weaker.
weaken·er n. , a number of positive events have taken place at the company. The construction materials and utility services businesses are both experiencing a good construction season with solid demand for new highway and electric transmission infrastructure. These businesses are expected to experience strong earnings growth well into the future. In addition, the pipeline and energy services segment is benefiting not only from increased natural gas transportation and storage services, but also from the pipeline and cable magnetization process and location services See mobile positioning. it now provides. The electric business, while not directly influenced by the situation in California, has benefited from the demand for wholesale sales in the central United States The Central United States is sometimes conceived as between the Eastern United States and Western United States as part of a three-region model, roughly coincident with the Midwestern United States plus the western and central portions of the Southern United States; the term is .
"Opportunities for further growth through acquisitions and continuing operational consolidations are excellent," White observed. "Our natural gas and oil exploration and production group continues to develop coalbed natural gas production in Wyoming and Montana. We believe we will still achieve a combined natural gas and oil production increase of nearly 30 percent this year over that for 2000. Production costs on this natural gas continue to be competitive with other sources." The overall financial performance of this business segment will depend in significant part on natural gas and oil pricing.
The company has entered into swap agreements and fixed price forward sales forward sales npl → ventas fpl a término representing approximately 30 to 35 percent of 2001 estimated annual natural gas production. Natural gas swap prices range from $4.57 to $5.39 per Mcf based on NYMEX and $4.04 to $4.44 per Mcf for Rocky Mountain gas sales. In addition, approximately 30 to 35 percent of 2001 estimated annual oil production is hedged at NYMEX prices ranging from $27.51 to $29.22 per barrel. For 2002 the company has entered into oil swap agreements with average NYMEX prices in the range of $24.80 to $25.25 per barrel, representing approximately 20 to 25 percent of the company's estimated annual oil production. The company also has entered into a swap agreement and fixed price forward sales representing approximately 10 to 15 percent of 2002 estimated annual natural gas production. The 2002 natural gas swap is at an average NYMEX price of $4.34 per Mcf.
In addition, the company's pipeline and energy services group is in the planning stages for the potential construction of a 250-mile pipeline which would not only transport coalbed gas to market, but would allow use of the company's vast storage fields by markets beyond the pipeline's traditional markets. The company expects to file for Federal Energy Regulatory Commission The Federal Energy Regulatory Commission (FERC) is the United States federal agency with jurisdiction over electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. approval of this project later this year.
White announced the recent formation of an independent power production division within MDU Resources to develop electric generation for targeted markets outside its traditional service territory. The company is also pursuing electric generation opportunities in Brazil. This project which requires a very modest $25 million equity investment, is being pursued with a respected Brazilian partner.
"Our approach on these projects is no different than the approach we have taken in executing our successful overall growth strategy," he said. "Projects must meet targeted returns commensurate com·men·su·rate
1. Of the same size, extent, or duration as another.
2. Corresponding in size or degree; proportionate: a salary commensurate with my performance.
3. with the associated risk. We are disciplined in our approach and we will not do a deal unless it makes economic sense for our stockholders. In fact, these projects are targeted toward a niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector.
By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. where we are providing energy on a contract basis so that the risk should be minimal. Our balance sheet is strong and we continue to evaluate prospects for further growth in every line of our business."
The company will host a webcast September 21, 2001, beginning at 10 a.m. EDT EDT
Eastern Daylight Time
EDT Eastern Daylight Time
EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York
EDT . The event can be accessed at 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. The webcast postview replay will also be available beginning at 3 p.m. EDT on September 21 through October 5.
The information in this release includes certain forward-looking statements forward-looking statement
A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including statements by the chairman of the board, president and chief executive officer of MDU Resources, regarding earnings per share guidance, growth and efficiency strategies, business opportunities and production increases, 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 to differ materially from those in the forward-looking statements include natural gas and oil commodity prices and 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 and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions, population growth rates Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.
Remember, historically high growth rates don't always mean a high rate of growth looking into the future. 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 Operating expenses
The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. or capital expenditures, labor negotiations or disputes, changes in credit ratings or capital market conditions, inflation rates, inability of the various counterparties Counterparties
The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. 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 All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , and the ability to effectively integrate the operations of acquired companies. For further discussion refer to the company's most recent Form 10-Q Form 10-Q
See 10-Q. at Item 2 - Management's Discussion and Analysis Management's discussion and analysis (MD&A)
A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial - Safe Harbor Safe Harbor
1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated.
2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. 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 email@example.com.