MDU Resources Group, Inc.
Q2 2008 Earnings Call Transcript

Published: 4 Aug 2008

[Operator:]

Good afternoon. My name is Ashley and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group Second Quarter 2008 Earnings Results 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. [Operator Instructions]. This call will be available for replay beginning at 4 PM Eastern Time today through 11

[Vernon A. Raile:]

Welcome to our earnings release conference call. Before I turn the presentation over to Terry Hildestad, our President and Chief Executive Officer, I'd like to mention that 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, go to our website at www.mdu.com and follow the link to the conference call. 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 Form 10-K as well as our Form 10-Q and the risk factors section in our most recent Form 8-K. Our format today will include formal remarks by Terry 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

[Terry D. Hildestad:]

Thank you, Vern. I am pleased that you have joined us to review MDU Resources' outstanding second quarter results. Consolidated earnings from continuing operations for the second quarter 2008 were $115.3 million, a $33.5 million increase from 2007. Earnings per common share from continuing operations increased 40% to $0.63. Our growth strategy, which is based on a combination of growing our existing operations and making successful acquisitions, is delivering positive results. Our natural gas and oil production, construction services and utility businesses had record quarters. In spite of the economic pressures being experienced at the construction materials business, our strategy of operating a diversified group of core businesses has allowed for outstanding performance over the long term. Now moving on to discussions of the individual operating results. Our natural gas and oil production business had an excellent quarter, reporting record quarterly earnings of $71.7 million, more than doubling the $35.2 million earned in the second quarter of 2007. The increase was the result of 35% higher average realized natural gas prices. Average realized oil prices were 97% higher than 2007 and a combined natural gas and oil production increase of 11%. Increased production was driven primarily by our East Texas producing properties along with successful oil exploration efforts in North Dakota's Bakken area and in Utah's Paradox Basin. The Bakken play is a very prolific resource play, and our initial results have been encouraging. We have spud a total of 15 operated wells to date in the Bakken area. We have 11 operated wells, producing approximately 3000 barrels of oil per day on a gross basis and 1300 barrels of oil per day on a net basis. In addition, we have approximately 200 barrels per day of non-operated production. Our remaining 4 operated wells are in various stages of drilling and completion. The average estimated ultimate recovery for the operated wells in our southern block, which have been on production for approximately 90 days is in the range of 250,000 to 450,000 barrels of oil equivalent. Last week, we announced initial results from our first well in the Three Forks/Sanish formation, the Domaskin 11-29H well. Production for the five day period after fracture stimulation averaged 634 barrels of oil per day. We have a 58% working interest in this well. If the Three Forks/Sanish formation proves to be a separate reservoir from the middle Bakken, this will provide additional opportunities to grow reserves and production within our exciting leasehold position. As we discussed last quarter, the continued success and economics of the Bakken area prompted us to seek opportunities to accelerate drilling to capitalize on our leasehold position. We finalized an agreement with Oasis Petroleum to partner with us on a portion of the Bakken acreage. In exchange for varying interest in portions of our acreage, we received cash in a multi-well drilling commitment from Oasis. Oasis brings considerable expertise and will manage additional rigs, which will allow us to accelerate drilling activity to develop our leasehold position. As of June 30th, our acreage position in the Bakken area after the Oasis deal and after other acreage acquisitions was over 65,000 net acres. We expect to participate in 50 to 60 wells this year in the Bakken, about one-half of which will be operated wells. We continue to have an interest in adding a fourth drilling rig. In the Paradox Basin of Utah, we now have two wells that we brought on line. These wells are producing a total of approximately 300 net barrels of oil per day. We have an additional six producing wells that we... were acquired. The total daily production from the Paradox Basin for the eight producing wells is approximately 450 barrels of oil per day on a net basis. We have three other wells that continue to be analyzed and are in various stages of completion. Success in the Paradox region led us to sign a couple of agreements to acquire additional acreage in the area. Since December 31st, we have added approximately 35,000 net acres. This brings our total position in the basin to approximately 90,000 net acres. In addition to the excitement surrounding the Bakken and the Paradox Basin, we are pleased with the recently acquired East Texas properties and our ongoing drilling activity. We expect to drill a total of 25 operated wells this year in East Texas, 14 have been drilled as of June 30th. We currently have 2 rigs running in this area. On a shorter term basis, we have adjusted our projection for the production for this year. We now expect combined natural gas and oil production increase in 2008 in the range of 10% to 14% over to 2007 levels. Our previous estimate was in the range of 12% to 16%. This change is the result of lower production related to reduced drilling activity from our non-operated areas where we do not have as much control over the drilling and delays experienced in water-related infrastructure placement in our Powder River Basin coalbed area. With respect to reserves, we plan to provide an update on our probable and possible reserves in the near term. We are looking forward to an exciting second half of the year for this group. We will continue our plans to maximize our potential in all of our acreage, continue our active drilling programs in our development and exploratory plays and pursue additional opportunities to increase reserves and production. Next our pipeline and energy services group. It reported earnings of $6.8 million in the second quarter of 2008. That compares to $6.2 million in the second quarter of '07. Contributing to the increases were higher average rates for storage and gathering services and increased gathering volumes of 14%. Decreased volumes transported to storage largely offset the gain and the gathering volume increase. We are excited about the growth opportunities at this business. Increased natural gas production in the Powder River Basin and the need for additional pipeline capacity created an opportunity to expand the Grasslands Pipeline again. Incremental expansion now planned for 2009 is expected to be in the range of 40 million cubic feet per day or more based on indications from the recent open season. Once precedent agreements are received, the company will move forward with the project. The company is also pursuing the development of the Bakken Pipeline, which is designed to transport rich, high-Btu natural gas out of the Bakken play to the growing Midwest and Eastern markets. The proposed pipeline will consist of approximately 100 miles of 16-inch diameter pipeline with initial capacity of 100 million cubic feet per day and ultimate design capacity of 200 million cubic feet per day. The company continues to solicit customer commitment to this project. In addition, we have started construction to expand our pipeline system 32 million cubic feet per day later this year through the construction of a new compressor station at Fort Buford, North Dakota. This system has ultimate expansion capacities to approximately 60 million cubic feet per day. In our existent... our current expansion occurring in Eastern North Dakota is on target. It's set to be completed later this year. Now moving on to the construction materials and contracting business, they experienced a significant decline in quarter-over-quarter earnings. The economic slowdown, combined with reduction in private construction, steep inflationary pressures and unfavorable weather conditions in most regions contributed. It drove lower construction work loads and margins and product volumes. Higher diesel fuel costs were a factor again this quarter. Despite these results, our markets in Hawaii, Alaska and Texas continue to be solid as well as our liquid asphalt businesses. On the acquisition front, we have recently acquired two companies

[Operator:]

[Operator Instructions]. Our first question comes from the line of Paul Patterson with Glenrock Associates.

[Paul Patterson:]

Good afternoon.

[Terry D. Hildestad:]

Hi Paul.

[Paul Patterson:]

Hey. The reserves update you said that I think going to happen in the near term, could you give us a little bit more of a flavor for that?

[Terry D. Hildestad:]

Yes, Paul. We're working on the probable and possible reserve update as we did last year. We disclosed about midway through the year, and we're having actually an outside third party review a portion of that that we've not had reviewed by an outside party before. That we're targeting for the end of this month. And we would come out shortly thereafter with an update on our 3p [ph] reserves.

[Paul Patterson:]

Okay. You want to give us a bit of a preview or--?

[Terry D. Hildestad:]

No. We can't do that.

[Paul Patterson:]

Okay. Let me ask you this. With the construction materials fall off, could you give us a little bit of a flavor as to the... how the economy, the three things that you talked about, the diesel and the weather, how those broke down in terms of the impact that they had?

[William E. Schneider:]

Paul, this is Bill Schneider. We're not going to give you each individual impact. But asphalt oil prices, Paul, have just shot through the roof over the last 12 months. Of course, diesel prices were up $1.80 to $2 a gallon over the same time a year ago. And because we have a lot of operations in the Northern climates, this really wet weather that we had in the spring really hurt us getting out of the box. The more specific example was the flooding that we had down in our Iowa operations due to the heavy rain. So all three of those areas had the impact.

[Paul Patterson:]

Okay, what region are you seeing the most trouble in economically?

[William E. Schneider:]

The biggest fall for us has been in the residential market, Paul, and our Northwest area really has seen the slowdown. They were one of the last areas for our markets to go in to the decline, and it has been a very steep decline.

[Paul Patterson:]

Okay. And then the Construction Services, when you are going out a little bit further, I mean you guys have seemed to manage to do pretty well with the economy doing badly. I know you are doing... taking steps for the transmission stuff. Do you think that the economy will catch up with you, or do you think you guys will be able to sort of sidestep and maneuver well enough to sort of keep the results going the way they have been going?

[William E. Schneider:]

I think we'd be naïve to think that we're going to be immune to the economic downturn. Our challenge will be just to manage our costs, be disciplined in our bidding procedures and look for opportunities down the road though. We've been through some tough cycles before. It shouldn't be news to anybody in the construction business, you go through these business cycles. And our job is to be prepared for it, and ultimately, we still think we have the best people in the industry to get us through those tough times.

[Paul Patterson:]

Okay. And then finally with the gas management business that you guys sold, what was that contributing... or what did that contribute to Cascade in the past? And what caused you to sell it?

[David L. Goodin:]

Paul, this is Dave Goodin. What we have seen in the recent years, last several years with the gas management business was on the order of about $1 million a year per margin. And what caused us to sell that is we had a complaint and the subsequent settlement of that complaint with the WTUC. And as part of that the settlement, we agreed to exit that business and then spilt the proceeds between our shareholders as well as our customers.

[Paul Patterson:]

Okay. And the $4.4 million represents your portion, is that right?

[David L. Goodin:]

That's correct.

[Paul Patterson:]

Okay. And then when you say $1 million per mar, I mean just give us a flavor as to what was the earnings impact.

[David L. Goodin:]

Well, that would on a pre-tax basis, Paul, and what we see as really an offset to that is our continued growth in the Pacific Northwest.

[Paul Patterson:]

Okay. Thanks a lot.

[Terry D. Hildestad:]

Thanks Paul.

[Operator:]

Your next question comes from the line of Dave Parker with Robert W. Baird.

[David E. Parker:]

Congratulations on a great quarter. Just a couple of questions. Maybe to start with Construction Services. I noticed in the news that there was a cancellation or may be a postponement of the casino project. Was that a project that was in your backlog, John?

[John G. Harp:]

Yes, you are talking about the Echelon project. Boyd Gaming made the announcement on Friday that they were halting construction on that project. Although we didn't have any work directly with Boyd Gaming, we did have a project that was tied to the central plant for the casino. And currently, with this being so new, we're talking to the owner of the central plant, trying to figure out exactly what they are going to do with that piece of the project, both our electrical and mechanical had work on the central plant. And I just talked to some people in Vegas this morning and first and foremost we've got to secure the location. And I think there is still going to be some work being done there to secure the plant, equipment and different things. And luckily, we have some work in other places in Vegas, so we're able to move our workforce to other locations. But as far as Echelon itself, the project we were bidding on work... on the project, but had not been awarded anything and the work that currently was... have been awarded with other competitors. So that's as much information as I've got right now David.

[David E. Parker:]

Okay. Before we leave your group, John, Terry mentioned that he is looking forward to a strong second half of the year. Can you give us a little color on what you got going for the second half?

[John G. Harp:]

Well, we are going to try and make a buck, and we're always looking for opportunities. I mean I think with the headwinds that we're facing with the economy, I think we're pleased with the results that our people have been able to provide in the first six months and we continue to be focused on our costs and look for opportunities. But we are going to be very disciplined in our bidding approaches and managing our costs. And if the market turns down, we've just got to be prepared to manage through that and hopefully we be successful. Again, I think our best weapon against tough times is our people, keeping them motivated and taking care of our customers. So that's going to be our key to success.

[David E. Parker:]

Also, Terry talked a little bit about in his comments about transmission... electric transmission and that potentially being an opportunity. What are the maybe barriers to entry and is it a competitive landscape? Maybe you can give us a little color there too.

[John G. Harp:]

Well, our approach is going to be much different than our competitors as far as making a large acquisition and putting a lot of money on goodwill. We're going to develop ours by getting the right people and the skill sets to enter the transmission market but in a much smaller basis and try to build it from an organic standpoint with one of our current companies as the platform. And we're going to be very selective in where we go out and pick up some of that work. And we have picked up a little work and we see other opportunities in the future. But we're not going to be on the front page of the Wall Street Journal.

[David E. Parker:]

Thanks John. Maybe construction materials and mining, maybe Bill, the diesel fuel increasing is obviously not a new problem and you've been adopting some new maybe strategies to try to pass those increasing costs along. So we could... you can revisit that. And then secondly, my recollection is second quarter is not a big quarter for you anyway, and obviously we saw a big reduction in operating margin at your segment. And I know most analysts are going to try to think al right, third quarter, fourth quarter, am I going to look for a 40% reduction as well or is... maybe more normalized operations allow you to not see as much pressure on the bottom line?

[William E. Schneider:]

Yes, let's take your first question, Dave, on the diesel side. Yes, this has been an issue for the last 24 months. And we've got a variety of different things that we're working on. Some of them have to do with a fixed contracts, we'll go and in, and for example, we'll bid a construction project that's going to take 50,000 gallons for example. We'll do a wet contract and buy it at today's rate. Of course, take all the inflation risk out of it. But what's been a little bit more challenging, for example, in some of our day-to-day operations, for example, trucking our rock, asphalt, ready-mix, we've gotten some of that covered, but in some markets we're not allowed, for competitive reasons, to capture the whole thing. Other things we have going on is we have installed computers in our trucks that automatically shut down the engines if they've idled for a certain of period of time. So we're doing everything we can. We're looking at additives to increase fuel efficiency. We've got a promising development that's happened in that area. And so we're looking at several things. As far as the second question, Dave, the balance of the year, we have a strong backlog, and like John, we've put our management team up against anybody. We're out marketing, we're out hustling. The energy market is a bright spot for us. So we were just out visiting some of our wind farm projects last week. We are working on refineries, we're working on geotherm plants. And so it's... the market challenges are still going to be difficult for the second half of the year, but I think we're going to outperform what the market will give us.

[David E. Parker:]

Maybe Steve Bietz can sell you some oil at a reasonable margin.

[William E. Schneider:]

We have asked for a discount and the guy's pretty much a tightwad, he hasn't given us anything.

[David E. Parker:]

Yes, I figured the answer. And I guess... yes, that's probably... I had about a question just I think but... I mean, I'll hop back in the queue if I remember it. Thanks very much for your comments.

[Unidentified Company Representative:]

Thank you, Dave.

[Operator:]

Our next question comes from the line of Paul Ridzon with KeyBanc.

[Paul Ridzon:]

year-to-date construction materials, is that a loss? Can you just talk about the seasonality of that and do you expect the segment to post a loss for the entire year?

[William E. Schneider:]

The second part of your question is no, we don't. We'll make money this year. We did, as Terry mentioned and I mentioned one of the previous questions, the wet weather really impacted the Northern states. We've got to come out of the chute with good weather to open up our projects and get going. And Minnesota and Iowa, for example, with the heavy rains and the flooding, we just couldn't get started. So that's what's given us the loss for the first six months and several other Northern states as well. But we're up and we're running in and hitting it hard and hopefully, we will have some good weather where we can push our season into the fall and do well. We are going to be down for the year, no question about that, but we expect to make money.

[Paul Ridzon:]

And can you talk about the kinds of margin embedded in your backlog?

[William E. Schneider:]

The margins are not as strong as they were a year ago. And the reason for that is like just about everybody in this industry is as we've switched more of our business from private to public, and the public work does not enjoy as high a margin and because the residential commercial work is slow, we've seen an increase in the number of bidders in that project, which has of course put an additional squeeze on the margin. So our margins and our backlog are down from where they were a year ago.

[Paul Ridzon:]

And lastly, what is Brazil earning and do you expect that to be an accretive transaction when you close it?

[Terry D. Hildestad:]

Yes Paul, Brazil is in a significant contributor right now. There earnings it generates cash flow and earnings. But we expect that's a very valuable asset and we've seen a lot of interest in it. So we expect that there could be some upside with our Brazil sale. Again, it's early in the process.

[Paul Ridzon:]

And then just with the cash flow from E&P and then the Brazil sale, can we pretty much conclude there will be no meaningful equity at all necessary.

[Vernon A. Raile:]

Vern Raile here, Paul, I guess at this point in time, we are still evaluating that and obviously whether we issue any external equity is going to depend on a couple of factors that Terry had thrown out earlier in terms of oil and gas pricing environment, whether or not we do an acquisition. But it's going to be a lot less. To the extent we have any equity needs, it's going to be a lot less than that 150 million we threw out back in early July when we announced the Intermountain acquisition.

[Paul Ridzon:]

Terry, did you give comments on equity contemplates of the Brazil sale?

[Terry D. Hildestad:]

Pardon.

[Paul Ridzon:]

When you indicated very little equity needed, were assuming that Brazil got done or would that be even a further improvement on the outlook?

[Terry D. Hildestad:]

Well, no. I mean we're taking a number of different factors. I mean the sale hasn't happened yet. Hopefully, it will happen later this year, but there's a number of moving parts there. So we're going to take all of this into account when we finally make a decision later this year.

[Paul Ridzon:]

Okay. Thank you very much.

[Terry D. Hildestad:]

Thanks Paul.

[Operator:]

Our next question comes from the line of James Bellessa with DA Davidson & Company.

[James Bellessa:]

Good morning.

[Terry D. Hildestad:]

Good morning, Jim.

[James Bellessa:]

The Brazil sale that could be completed by the fourth quarter; is that built into your guidance range?

[Terry D. Hildestad:]

No, it's not Jim.

[James Bellessa:]

You indicated that you had an interest in adding a fourth drilling well or drilling rig and at the same time, you mentioned that you had partnered up with Oasis Petroleum and that they were bringing rigs to the party. So is the fourth one their rig or is this fourth one your own rig that you'd bring on?

[Steven L. Bietz:]

Jim, this is Steve Bietz, and the fourth rig would be a rig that we would bring out and we would operate in addition to what Oasis brings on.

[James Bellessa:]

And you indicated that you had given up about... well, I am not sure you said this on the call, but it looked like you had given up about 10,000 net acres probably to Oasis and then give... and exchanged some cash from them. Is that what happened?

[Steven L. Bietz:]

There is I guess the acreage that Terry talked about. On a net basis, we're down about 10,000 acres. That reflects the transaction with Oasis as well as some additional acreage that we've picked up. There's some acreage, a block that we picked up that added to our position as well as just some scattered acreage throughout our properties. The transaction with them is they had to deal with, Jim, is they provided some cash as well as drilling commitment. So they are bringing rigs as well as management of those rigs as part of the transaction. And certainly, we kept an interest in all of the acreage in which we are now joint partners with them.

[James Bellessa:]

And when did this start and how has it performed to date?

[Steven L. Bietz:]

It started actually... Oasis started their drilling activities I believe last week. They got their first rig on site and started drilling last week. So we're pleased about that.

[James Bellessa:]

And when did the partnership or the joint venture start?

[Steven L. Bietz:]

Jim, it was sometime in the second quarter. I don't remember the date exactly.

[James Bellessa:]

And then on the commentary today you added, since the end of the quarter, 35,000 additional net acres. Did I hear correctly? And where are those properties?

[Steven L. Bietz:]

We've added 35,000 acres since December 31 of last year. That would be down in our Paradox Basin area. That acreage, probably a portion of that is kind of in the area that we're currently operating. But a larger portion of it would be north of our existing Cane Creek unit. That acreage gets up into some of the properties in which Delta Petroleum has been active. Some people are calling it kind of the Greentown area, so we've got some acreage up in that area as well as kind of funneling down to our Cane Creek area.

[James Bellessa:]

And I'm looking at the table about hedges, and there wasn't a large number of hedges added in the last three months. I would have thought with high prices that were being leeched in the last three months, you may have added some more. What happened or why wouldn't you've added more hedges?

[Unidentified Company Representative:]

Jim, we're just continuing along our hedging strategy. Look to add positions as we go throughout the year. And that's what we would look to do as we see favorable pricing as the balance of the year, we'd look to add some additional hedges.

[James Bellessa:]

The Cascade Natural Gas acquisition had a profit exing out the gain on the sale of the management services business. Is that normally going to be a profitable second quarter for you in that territory?

[David L. Goodin:]

Jim, this is Dave Goodin. Well, typically, as you well know, Jim, the second and third quarters in the gas business are probably breakeven to a slight loss quarters. Given we had a colder than normal Northwest was some of the contributing factor to us earning that second quarter in addition to the sale of the business. So I would say typically, we would see... it would not be a banner quarter the second and third quarters for us. It's the first and fourth quarters in the gas business.

[James Bellessa:]

Thank you very much.

[Terry D. Hildestad:]

Thanks Jim.

[Operator:]

[Operator Instructions]. Our next question comes from the line of Becca Followill with Tudor, Pickering & Company.

[Becca Followill:]

Good afternoon. Going back to the Bakken and the relationship with Oasis, can you guys tell us on the acreage, on what you've seen so far variability in the Bakken? Are there sweet spots? Are there areas? Right now, it looks like your wells are scattered all over the place. Are you going to try to test the extent of the acreage? Kind of what is your drilling plan there?

[Steven L. Bietz:]

Becca, this Steve. Certainly, the quality of the Bakken varies up there. Maybe to give you a little bit of sense and realize we've got kind of limited history here. But down in our Southern acreage kind of what we call our Little Knife [ph] area, we've seen initial production somewhere in the neighborhood... and I am referring to probably four wells that we have had online for a while... we have seen probably initial production in the neighborhood of 800 barrels per day. That will be decline off. We'll put the well on pump over say a 30 to 40 day period. You will see production go back up, and look at kind of roughly that next 60 day period or so, we have been in that 325 to 350 barrels per day. If you go to some of our Northern wells, here we've only got a couple of wells that have on for a bit of time. Initial production is considerably less. We are putting on pump sooner and we are seeing kind of average production in the 225 range. So it certainly is going to vary. Our strategy here is to kind of scatter our wells and get a better understanding of our acreage, kind of let our technical group kind of focus on the different areas to help direct our drilling as we go forward.

[Becca Followill:]

And what are well costs running?

[Steven L. Bietz:]

Pardon me?

[Becca Followill:]

What are well costs running?

[Steven L. Bietz:]

Right now, we're still in that probably $5.5 million to $6 million range with our Bakken wells.

[Becca Followill:]

Do you anticipate that that's going to come down over time or do you feel like that's kind of stagnant? And then same thing on rates, do you guys have a completion technology that you feel like you are going to stick with or you still have some experimenting to do?

[Steven L. Bietz:]

First of all, in terms of the costs, I think there continue to be upward pressure on costs. And even things like steel, casing and that, we've seen some pretty significant increases just from the first of the year. Some of that's almost doubled. So it's pushing the costs up. I think we are also getting somewhat more efficient, more experienced with our drilling. That helps to... kind of why we've been able to keep our cost kind of where we started out at the beginning of the year. In terms of our completion techniques, I would say we are still experimenting there. We've more recently have been doing say 8 or 9 staged completions on those wells. We are doing some work, doing 12 in some areas right now. So we're still kind of working on that to see where the most economic place to be in terms of the completions are.

[Becca Followill:]

Great, thank you. And then on the construction materials and construction services side, have you guys, given the economic downturn, have you guys started to lay off people?

[William E. Schneider:]

Becca, this is Bill. I'll tell you right now, we're down about 15% in the total workforce. We also had a reduction in force in our headquarters office here of about a third of our people. We won't realize the full benefit of those cost savings because of severance costs until next year, but, yes... and we're going to probably see a continuation of that downward trend.

[Becca Followill:]

So was that severance charges... were those in the second quarter?

[William E. Schneider:]

Yes, they were.

[Becca Followill:]

Okay. How significant was that to EBIT?

[William E. Schneider:]

Not huge.

[Becca Followill:]

Okay. What about construction services?

[Unidentified Company Representative:]

Well, actually, our revenues grew by 23% quarter-over-quarter. So we're in a little different cycle right now than Knife River, although we see the same headwinds. So actually our unemployment numbers have held, or in fact probably increased in the first six months of the year.

[Becca Followill:]

Great, thank you.

[Terry D. Hildestad:]

Thanks Becca.

[Operator:]

[Operator Instructions]. This call will be available for reply beginning at 4 PM Eastern Time today through 11

[Terry D. Hildestad:]

Okay, thank you. And obviously, we're pleased with the results so far and our strategy certainly is working. Year-to-date EPS growth... on a year-to-date basis is up 51% from continuing operations. We're committed to maintaining a strong balance sheet. As we typically do, we'll update you again at the end of the third quarter as the year develops. We appreciate your interest in our company. We'll talk to you later. Thank you.

[Operator:]

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