Doran N. Schwartz - MDU Resources Group, Inc. David L. Goodin - MDU Resources Group, Inc.

Good morning. My name is Brent, and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2017 First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. This call will be available for replay beginning at 1:00 p.m. Eastern today through 11:59 p.m. Eastern on May 18. The conference ID number for the replay is 92678257. Again, the conference ID number for the replay is 92678257. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. I would now like to turn the conference over to Doran Schwartz, Vice President and Chief Financial Officer of MDU Resources Group. Thank you. Mr. Schwartz, you may begin your conference. Doran N. Schwartz - MDU Resources Group, Inc.: Thank you, and welcome to our first quarter earnings release conference call. This conference call is being broadcast live to the public over the Internet and slides will accompany our remarks. If you would like to view the slides, please go to our website at www.mdu.com and follow the link to the conference call. Our earnings release is also available on our website. During the course of this presentation, we will make certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially. For a discussion of factors that may cause actual results to differ, refer to Item 1A, Risk Factors, in our most recent Form 10-K. Our format today will include formal remarks from Dave Goodin, President and CEO of MDU Resources, followed by a Q&A session. Other members of our management team who will be available to answer questions during the Q&A session of the conference call today are, Dave Barney, President and CEO of Knife River Corporation; Jeff Thiede, President and CEO of MDU Construction Services Group; and Nicole Kivisto, President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas; Martin Fritz, President and CEO of WBI Energy; and Jason Vollmer, Vice President, Chief Accounting Officer and Treasurer for MDU Resources. And with that, I'll turn the presentation over to Dave for his formal remarks. Dave? David L. Goodin - MDU Resources Group, Inc.: Thank you, Doran, and good morning. We appreciate your interest in MDU Resources, and thank you for joining us today to discuss our first quarter results. We are pleased with our company's first quarter performance, and we're positive about the long-term growth potential of our two primary business lines, Regulated Energy Delivery and Construction Materials and Services. These businesses delivered strong results for the first quarter of 2017. Consolidated earnings from continuing operations were $35.5 million or $0.18 per share, a 12% increase compared to the $31.6 million or $0.16 per share for the first quarter of 2016. Including the discontinued operations of the exploration and production and refining businesses, we had earnings of $37.2 million or $0.19 per share. Now turning to our individual business unit performance. Starting with the Regulated Energy Delivery companies, our utility business reported earnings of $42.2 million for the quarter, up some 16% from the prior year. Here, our regulatory staff has been pursuing recovery of our investments which were made to safely serve our growing customer base. Since January 1 of 2015, the utility has implemented some $100.7 million in final and interim rate relief, which includes $39.1 million in interim rates. The electric utility earnings were $14.3 million this quarter, up $3.2 million or 29% from 2016. This was primarily due to higher retail sales margins, which includes recovery of investment in a MISO project, final and interim rate increases and increased retail sales volumes of 6% quarter-over-quarter. At our natural gas utility business, we had earnings of $27.9 million compared to $25.2 million in 2016. This earnings increase was largely the result of higher natural gas retail sales margins due to 21% higher natural gas retail sales volumes across all customer classes, customer growth and colder weather in those jurisdictions where decoupling and weather normalization mechanisms are not in place. Combined utility earnings were offset in part by higher operating and maintenance expense, largely related to higher payroll costs, along with timing of software maintenance costs. Over the next five years, the utility expects its 1.1 million customer base to grow by some 1% to 2% annually and plans to invest nearly $1.2 billion across its eight-state service territory. This results in rate-based growth of 4% compounded annually over the next five years. This business has many line-of-sight investment opportunities for long-term growth and we will continue our focus on providing safe and reliable service to our customers at economic rates, while obtaining timely rate recovery. The natural gas utility will continue to focus on pipeline projects to enhance system reliability, safety, along with deliverability. The electric utility plans to finish construction on the 160-mile, 345-kv line from Ellendale, North Dakota to Big Stone City, South Dakota by 2019. And the electric utility is in the process of completing its 2017 Electric Integrated Resource Plan and is evaluating its future generation and power supply portfolio options. This plan will be finalized and filed by mid this year. In December of 2016, the company signed a 25-year agreement to purchase the power from an expansion of the existing Thunder Spirit Wind farm. This agreement includes an option to buy the project at the close of the construction. Purchase of this expansion would increase the company's generation portfolio from roughly 22% renewables to 27%. Construction costs for the project are estimated to be approximately $85 million as well. Now, I'd like to turn to the pipeline and midstream business. Earnings at our pipeline and midstream business were at $3.9 million compared to last year's first quarter earnings of $5.3 million. This decrease, though, is largely driven by absences of our gathering and processing earnings from the Pronghorn assets, which resulted in approximately $100 million in proceeds to the company earlier this year. This decrease was offset partially by lower depreciation, depletion and amortization expense, along with lower interest expense. In addition, we continue to see strong utilization of our natural gas storage services. Storage balances were approximately 4% higher at the end of the first quarter compared to 2016. In October of 2016, the company received FERC approval on its pre-filing for the Valley Expansion Project. Again, this is a 38-mile pipeline that will deliver natural gas supply to eastern North Dakota and far western Minnesota. This project will connect the Viking Gas Transmission Company pipeline near Felton, Minnesota to the company's existing pipeline near Mapleton, North Dakota. And it is designed to transport 40 million cubic feet of natural gas per day. The cost of the expansion project is estimated to be approximately $55 million to $60 million. Our pipeline and midstream company filed its FERC certificate application for the Valley Expansion Project just Wednesday of last week. Following the receipt of necessary permits and regulatory approvals, the construction of this project is expected to begin in early 2018 with completion expected later that same year. The pipeline and midstream group is also currently working on Line Section 25 expansion project and our Charbonneau compression expansion projects, involving additional compression that will add a combined 62,000 dekatherms a day of capacity and both are scheduled for completion here in the second quarter of 2017. Now, let's move on to our construction businesses. Our construction service business reported an increase of 23% in earnings compared to the same quarter in 2016, on increased revenues of 17%. Here, higher electrical inside work and margins in the western and central regions, as well as higher industrial construction workloads and margins were positive for the business this first quarter. This business was able to pick up work through backlog during the quarter resulting in revenue growth and was able to win sufficient bids to hold backlog consistent with prior year of 2016 to now levels at $529 million. Construction services continues to be optimistic about their 2017 bidding environment and is focused on projects with strong margins. The Construction materials business was impacted by largely a cold, wet winter that delayed work in several markets. This business reported a seasonal loss of $19.9 million compared to a loss of $14.5 million in 2016. While the cold weather in the northern tier of the country was a positive for our utility business, it delayed the start to our construction season in those markets. In addition, heavy rains in California and other parts of the west pushed back the timing of when we could begin working in those markets as compared to earlier start that we saw last year. Backlog is down quarter-over-quarter, now standing at $725 million, and this is largely related to our North Central Region, where the impacts of lower energy prices are still being felt. In most regions, backlog has actually increased. One exception is Texas where good weather allowed the company to get a strong start to the construction season. Even though our backlog is lower when compared to a record backlog a year ago, Knife River is optimistic about the potential opportunities that may stem from infrastructure spending packages that have passed or being considered in many states where we operate. We anticipate more projects being bid from the FAST Act and we are well-positioned to take advantage of these opportunities. National construction indicators have remained largely positive from month-to-month driving improved markets. Although we are not including anything in our estimates related to potential incremental investment in infrastructure spending, we are certainly encouraged by the continued discussion by Congress and the new administration. We see this as being a positive for construction materials and services industries. These indicators, along with our low-cost structure and combined backlogs of now $1.3 billion have us optimistic about 2017. Overall, again, we are pleased with our solid first quarter results. As we look forward, each of our business lines has a bright future. Our electric and natural gas utility is working to safely serve an increasing base of customers, while earning a return on its $1.2 billion five-year capital program, driving 4% average annual growth in rate base. Our pipeline and midstream business continues to move forward with the Valley Expansion Project, again with the expected completion in late 2018. And our construction businesses had a combined backlog of $1.3 billion and are focused on adding high-margin projects through the infrastructure spending packages we have seen introduced in many of our states of operation, along with on a federal level. We're pleased about what we've returned to our shareholders in the past through stock price appreciation, along with dividend payments. Our one-year total shareholder return as of March 31 was 45%, substantially higher than the indices we compare ourselves to, as well as higher than our peer group. And we have paid a dividend for now 79 straight years, and increased it for the last 26 consecutive years. Based on our first quarter results and our forecast for the remainder of the year, we are reiterating earnings guidance in the range of $1.10 to $1.25 EPS for the year. We are off to a good start for the year and plan to build on this momentum throughout 2017. And we remain committed to operating with integrity and continue to focus on safety and creating superior shareholder value, while following our tagline of Building a Strong America. I appreciate your interest and commitment to MDU Resources, and ask that we open the lines to questions at this time. Operator?

This call will be available for replay beginning at 1:00 p.m. Eastern today through 11:59 p.m. Eastern on May 18. The conference ID number for the replay is 92678257. Again, the conference ID number for the replay is 92678257. And at this time, there are no further questions. I'd now like to turn the conference back over to management for closing remarks. David L. Goodin - MDU Resources Group, Inc.: Thank you, Brent. As noted earlier in my comments, our continuing operations delivered strong results for the first quarter of 2017. We're committed to building a strong America, and are optimistic about our opportunities in 2017 and beyond. We appreciate your participation on the call today, and we'll keep you posted as we progress throughout the year. Thank you again for your continued interest in MDU Resources. With that, I'll turn it back to you, Brent.

Thank you. This concludes today's MDU Resources Group conference call. Thank you for your participation. You may now disconnect.