Good morning. My name is Angela, and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group First Quarter 2015 Conference Call. [Operator Instructions] This call will be available for replay beginning at 1:00 p.m. Eastern today through 11:59 p.m. Eastern on May 19. The conference ID number for the replay is 12424597. 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.

Thank you, and good morning. Welcome to our 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, 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 and Form 10-Q, and the Risk Factors section in our most recent Form 8-K. Our format today will include formal remarks by 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; Steve Bietz, President and CEO of WBI Energy; Nicole Kivisto, President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas; Pat O’Bryan, President and CEO of Fidelity Exploration and Production; Jeff Thiede, President and CEO of MDU Construction Services Group; and Nathan Ring, Vice President, Controller and Chief Accounting Officer for MDU Resources. And with that, I'll turn the presentation over to Dave for his formal remarks. Dave?

Thank you, Doran, and good morning, everyone. We appreciate you joining us today to discuss our first quarter results. We are positive about our long-term growth potential despite challenges we experienced during this first quarter. We have record capital investment opportunities at our Utility and Pipeline businesses, a refinery that is now in production, and clear momentum at our construction materials business as well, along with increasing bidding opportunities at our construction service business with a combined backlog between both construction materials and services now approaching $1 billion. Several factors negatively affected our results for this quarter. Some of the warmest winter weather on record affected utility earnings by approximately $6.6 million. Although the pipeline group did benefit from last year's rate case, the company incurred higher start-up costs for our Dakota Prairie Refinery as the time neared to commencing operations impacting this year's first quarter by about $1.9 million. The construction services group sold underperforming nonstrategic assets in the first quarter, recording an expense of $1.4 million. And our construction materials group had a true-up of a multi-employer pension plan withdraw liability of $1.5 million related to the same plan for which an estimate was recorded in the fourth quarter of 2014. These items on a combined basis totaled $11.4 million or $0.06 per share of a negative impact to the first quarter earnings compared with last year. So including these items, consolidated adjusted earnings for the first quarter totaled $22.8 million or $0.12 per share compared with $35.6 million or $0.19 per share in 2014. On a consolidated GAAP basis, which includes our Exploration and Production business, we reported a loss of $306.1 million or $1.57 per share, reflecting a $315.3 million after-tax noncash write-down of oil and natural gas properties pertaining to the quarterly ceiling test. Turning…

[Operator Instructions] Your first question comes from the line of Matt Tucker with KeyBanc Capital.

Congrats on the refinery start-up. I wanted to ask, is the guidance for the refinery -- should we look at that as being based on current market conditions? Or is that more of a long-term average run rate?

Matt, I'll take shot at that. Steve's in the room here as well. I appreciate the congratulations. It's been quite a project and effort. In just 25 months we're able to complete that project from groundbreaking to now start-up, so I want to provide also a hats-off to Steve and the team over there. I would say it's more long-term as we look at differentials, as we gave that guidance of about $60 million to $80 million in EBITDA. We know differentials widen and they will narrow. But we're going to be very transportation advantaged with the sizing and the -- or the location of this plant given we'll capture that crude price going out and being processed out-of-state and then refined product being brought in. And so again, I would look at it over the longer term, and it's not a point in time.

And should we assume that there's some ramp-up period here before you can kind of get to the full run rate?

Yes, Matt, this is Steve. As we sit here today and as we kind of designed our start-up, we've been right around 10,000 barrels a day. And I think as you think about a refinery, typically, you would look to ramp that up to the maximum in a fairly short period of time and kind of a matter of days. Given this is newly commissioned equipment and facility, we're doing that on a more measured approach, ensuring safety and just kind of bringing things up as we go. As I think about it, our objective here is to continue to move that up and expect that if there's not any big issues as we go, we would be up to our 20,000 barrels a day, say, by the end of this month, somewhere around there.

Great. And then, just with respect to a potential second refinery, you've indicated you'll probably spend most of this year analyzing that. Is -- on paper, based on the cost and the guidance for the first one and the supply/demand situation, it would seem like it makes sense. So could you just talk a little bit more about what factors that you have to consider? Or any other -- anything else that prevents you from moving ahead more quickly with that?

Well, I think, Project A was to get a -- get the first one up and running, so that was really where our focus was at. So we've put this on the shelf a little better and at least on the back burner. We have been doing some work associated with the second refinery from a citing perspective as well as some of the engineering work. So we're making some progress there. I know we've got some meetings planned over the next couple of months relative to some of the equipment and so forth. For a second refinery we want to understand also the market -- the crude oil acquisition market where we're buying crude and the market for diesel in this other location. So those are all factors that we're studying. I guess, I think, the good news here is that we've got our first one up and running and can now shift our attention over to spend more time on the second one and certainly apply the lessons learned, if you will, from the construction of the first one where there's opportunities to do a better job, to reduce costs and make a second plant actually more efficient so...

And then just one -- shifting gears to the potential sale of Fidelity. I know you don’t want to show your hand too much, but is there any more color you can give us in terms of what you're looking for in order to start marketing that? Have you had any conversations? Any sense you could give us for potential timing? Or what you're looking for from oil prices before you'd begin that process?

Sure. Yes, Matt, I'll take that one. We're going to certainly pursue the marketing and sale of our E&P to maximize shareholder value, as you might expect. I noted in my comments, we are encouraged by the stabilized oil pricing environment that we're seeing as -- and we look at other various factors, rig counts, supply/demand, what's happening internationally, how much M&A activity is there, what's happening on what might be some acquirers, balance sheet so far as debt and equity. So we kind of roll that all in and will make the decision at the appropriate time. I think you answered your own question at the onset of your question. We won't play a lot of cards here. But we are encouraged, I will say, by some local indicators -- more recent indicators, I'll say.

Your next question comes from the line of Brent Thielman with D.A. Davidson.

One more on the refinery. Is the guidance embedding a similar level of start-up costs into Q2 or is that mostly behind you at this stage?

Yes, Brent. As you think about the start-up costs, those are some, I'll say, typical expenses that we've got at the refinery. We've got north of 70 employees out there. And while some of those costs we're able to capitalize, many of those costs we've got to expense, so we've got leases for rail and different things. So those are more typical expenses, if you will. And as you think about going forward -- or in the first quarter, we didn't have revenues to really offset those. So as we go forward, you're going to see revenues coming in, and some of the costs certainly that were capitalized will move over to the O&M side.

Got it. And then, Dave, we're starting to see some other construction materials suppliers out there showing some really solid pricing momentum. And I know you don't break it out and your geographic footprint's a little different from others, but can you talk to your expectations and initiatives for materials pricing for Knife River?

Yes, Brent, we continue to get margin improvements on materials and our construction backlog. And as we continue to see this housing recovery, we expect that trend to continue in the near future. So yes, it's definitely positive and our volumes continue to grow. As our volumes continue to grow, we expect margins to continue to follow that trend.

Your next question comes from Paul Patterson with Glenrock Associates.

Just on the construction business, the favorable weather. Does that take -- does that impact the earnings in the other quarters? Does it take any business from other quarters or is it just additive?

Paul, is your question more of did we work ahead some work as opposed to a wet spring or is -- how does it impact the backlog? Is that more where you're going with the question.

Yes, that's what -- yes, you got it. So does it pull any work from future periods?

Definitely, it's going to -- Paul, this is Dave Barney. It definitely is going to pull a little bit of work from, probably April we might see a little low. But we have a good backlog. We picked up quite a bit of work in April, and we expect the volumes to continue to increase. And like I said, the margins continue to increase. We don't see a big drop-off for the rest of the year.

Okay, great. And then, on the pension expense. I think you guys had this last quarter and is that -- is it sort of a catch-up or sort of fine-tuning it? Or is there something else going on?

Paul, this is Doran. I think you characterized it the right way. We made an estimate at the end of the year. We had some new information that allowed us to true up that estimate here in the first quarter, so that's essentially what you're seeing.

Okay, great. My other questions have been asked and answered.

Your next question comes from the line of Matt Tucker with KeyBanc Capital.

I've got a couple of follow-ups. I noticed you saw pretty nice customer growth on a year-over-year basis in the Bakken region. Can you comment on kind of the more recent trends? Are you continuing to see growth on maybe a quarter-over-quarter, month-over-month basis? If you can just provide kind of an update on how you view the economy in that region?

Certainly, Matt. This is Nicole. I'll answer your question. As Dave alluded to in his remarks, we did see electric customer growth in the Bakken at 4.4% quarter-over-quarter. On the gas side, we saw a 3% -- 3.6% growth rate. Really, when you look at year-over-year, we added around 20,000 customers, and about 3,400 of those came from the Bakken. So you can see that although the Bakken activity is clearly exceeding national averages in terms of growth rates, we're seeing growth across really our entire system. On an overall basis, we had customer growth around 2%. And then if you're getting to the question on what's the run rate going forward, that's really hard to predict. It has come up a little bit from the historic levels, but we still anticipate strong growth out there in the Bakken and quite frankly, across our entire territory.

Okay, great. And then, I just wanted to ask. On the construction services side, could you provide a little more color on the nonstrategic underperforming assets that you sold in -- you have -- do you expect to continue with that type of activity this year?

Matt, thanks for the question. This is Jeff. We sold our Electrical Supply and Distribution business, which is based in Las Vegas, had offices in New Mexico, Texas and North Dakota. This was not a strategic part of our business, and we do not anticipate any other moves like that. In fact, we're looking -- or actively looking at strategic acquisitions across the country.

[Operator Instructions] This call will be available for replay beginning at 1:00 p.m. Eastern today through 11:59 p.m. Eastern on May 19. The conference ID number for the replay is 12424597. At this time, there are no further questions. I would now like to turn the conference back over to management for closing remarks.

Thank you, operator. In closing, I'd like to make sure everyone understands that we believe our utility pipeline and construction businesses are really very well positioned for growth, and we intend to continue develop them to maximize shareholder value. We expect to create greater long-term value for MDU Resource shareholders by focusing on these successful growth businesses. And when I think about our utility group, the $1.8 billion of investment over the next 5 years, Nicole noted the higher than national average growth in customer. When I think of our pipeline and refining group now, we can call it a refining group now that we have a refinery online, the first one in America in almost 40 years. And you heard between our construction businesses having about $1 billion in backlog between materials and services. I think we're well positioned as we think about this year and beyond. And as noted earlier, we will pursue the marketing and sale of Fidelity when we believe the time is appropriate. We appreciate your participation on our call today. And again, thank you for your interest in MDU Resources. Operator?

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