MDU Resources Group Inc.’s (MDU) is planning to bring online later this year a 21-mile, 12-inch diameter natural gas pipeline to serve a manufacturing facility in Gwinner, ND, and other nearby potential customers, CEO Dave Goodin said during a fourth quarter conference call.
The new pipeline comes as Bismarck, ND-based MDU transported a record volume of natural gas -- up 9.6% year/year -- through its system in 2017, partly because of completing two expansion projects that increased pipeline capacity by 62 Mcf/d, Goodin said last Wednesday.
The multi-state utility holding company expects to further boost its natural gas transportation capacity in 2018 to more than 1.8 Bcf/d after completing the 38-mile, 16-inch Valley Expansion projectand the 13-mile, 24-inch Line Section 27 expansion project. Construction on both projects, which are headed up by MDU’s WBI Energy subsidiary, is expected to begin this spring.
“This business segment continues to seek additional growth projects to increase transportation capacity, including a continued focus on the Bakken, which is currently producing record volumes of natural gas,” Goodin said.
Meanwhile, MDU expects to have a purchase agreement in place later this month for the Thunder Spirit Wind Farm expansion, Goodin said. The company received advance determination of prudence from the North Dakota Public Service Commission for the project in the fourth quarter 2017, and construction is “well underway,” Goodin said.
The expansion, expected to be online later this year, would bring total generating capacity at the wind farm up to 155 MW and expand the company’s electric generation portfolio to about 27% renewables.
Goodin also touted MDU’s joint venture with Otter Tail Power Co. for the Big Stone South Ellendale transmission line. The 345-kV transmission line, expected to be complete in 2019, would extend 163 miles from the Big Stone South substation near Big Stone City, SD, to the Ellendale, ND, substation. MDU’s portion of the project cost is estimated to be between $130 million and $150 million.
Including discontinued operations, MDU reported 2017 total earnings of $280.4 million ($1.43/share), compared with $63.7 million (33 cents) in 2016. In the fourth quarter of 2017, total earnings were $115.3 million (59 cents/share), compared with year-ago earnings of $65.5 million (33 cents).
The company reported 2017 earnings from continuing operations of $284.2 million ($1.45/share), compared to 2016 earnings from continuing operations of $232.4 million ($1.19/share). In 4Q2017, earnings from continuing operations were $115.4 million (59 cents/share), compared to $66.3 million (33 cents/share) in 4Q2016.
The company recorded a benefit in the fourth quarter of $39.5 million (20 cents/share) to its 2017 earnings attributable to the Tax Cuts and Job Act of 2017 (TCJA), which went into effect in December.
MDU’s electric and natural gas utility earned $81.6 million in 2017, compared to $69.3 million in 2016. Part of that growth can be attributed to the company selling 2% more electricity and 13% more natural gas than the previous year, primarily because its customer base grew by 2% and its service areas experienced colder weather, Goodin said. The 2017 results include a $6.4 million charge resulting from the TCJA.
The company’s pipeline and midstream business reported earnings of $20.5 million in 2017, a decline of $2.9 million from 2016. The 2017 earnings reflect a $200,000 charge related to tax reform and also reflect the sale in January 2017 of MDU’s Pronghorn natural gas processing assets to Tesoro Corp.'s master limited partnership, Tesoro Logistics LP.
MDU Resources expects earnings per share in the range of $1.25 to $1.45 in 2018, based on normal operating and weather conditions across all service areas; no significant acquisitions or divestitures; investing $628 million for capital projects; construction services revenues in the range of $1.45 billion to $1.60 billion; and construction materials revenues in the range of $1.8 billion to $1.9 billion, with margins comparable to 2017.
Goodin noted that while the earnings per share range expected in 2018 was a wider guidance range than what the company normally provides, it expects to revise the range “as we move through the year and better understand the impacts that tax reform will have on the economy as a whole and the associated impact to the industries in which we operate, and more specifically, to our businesses.”
The company, on a consolidated basis, anticipates 5% to 8% long-term compound annual growth on earnings per share.