MDU Resources Group, Inc. (MDU) Q3 2015 Earnings Report, Transcript and Summary

Good morning. My name is Kelly, and I'll be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group Third Quarter 2015 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 PM Eastern Time today through 11:59 PM Eastern Time on November 17. The conference ID number for the replay is 57967847. Again, the conference ID number for the replay is 57967847. The number to dial for the replay is 1-855-859-2056 or 404-537-3406. I would now like to turn the conference call 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 - Chief Financial Officer & Vice President: Thank you and 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'd 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 are available to answer questions during the Q&A session of the conference call today are; 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 Holdings; Dave Barney, President and CEO of Knife River Corporation; Jeff Thiede, President and CEO of MDU Construction Services Group; Pat O'Bryan, President and CEO of Fidelity Exploration & Production; 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? David L. Goodin - President, Chief Executive Officer & Director: Thank you, Doran, and good morning, and welcome, everyone. Thank you for taking the time to join us today. First, before we review third quarter earnings, I did want to discuss the divestment of Fidelity Exploration & Production assets. We are pleased to be nearly complete with the sale process. We have entered into five separate purchase and sale agreements and closed on one of the agreements in October. The remaining four sale agreements are expected to close before year-end. The aggregate sale proceeds from the five agreements and estimated tax benefits is expected to be approximately $450 million. The sale prices are in line with current and prospective market conditions and commodity price expectations and we believe are fair when compared with recent oil and natural gas asset sales closed by other companies. Debt repayment is planned as the primary use of the funds. Under the agreements in place today, by year-end, we would have executed on the sale of assets representing more than 90% of our year-to-date production. We do have one remaining small property that we continue to market, that is our Cedar Creek net profits interest asset. Closure on the sale of these assets allows us to focus our capital allocation on the growth at our utility, pipeline and energy services along with our construction businesses. Now, moving on to the quarterly results. For the third quarter, our consolidated adjusted earnings totaled $74.9 million, or $0.38 per share, compared to $68.2 million or $0.35 per share in 2014, an increase in earnings per share of 9% over last year. Our electric utility had a good quarter with 7% sales growth along with recording a new system peak, partially offset by a normal seasonal loss for our natural gas business. And at our pipeline and energy service group, we continue to see commodity price challenges directly affecting our refineries economics. Our pipeline business though is solid with transport volumes up some 19%. Our construction materials business had record earnings that were 25% higher on only 4% revenue growth, with operating income improving across all regions. While our construction services business had lower workloads this quarter, backlog additions were very strong. Now, I'd like to move on to the individual business units. At our utility business, we reported combined earnings of $300,000 for the quarter. Our electric business had a record quarter with $12.6 million of earnings. Our natural gas business had a normal seasonal loss offsetting the effects of lower volumes and a decrease in operation and maintenance expense. We continued to experience good customer growth this quarter, with overall annual growth of 4.7% for electric and 1.8% for natural gas. In the Bakken area, electric customer counts were 6.9% higher and natural gas counts increased 3.7% compared with last year. Our utility group is focused on a number of organic growth opportunities which are expected to lead to substantial rate base growth. The Thunder Spirit Wind farm which includes 43 wind turbines totaling 107.5 megawatts is well underway. Currently, there are 35 wind turbines constructed and six producing electricity with the project expected to be fully complete by year's end. The total cost is estimated at $220 million and we recently filed with North Dakota for a renewable resource recovery rider to recover the investment. And as a reminder, previously, we did receive advanced determination of prudency on this project earlier this year. Our Big Stone South to Ellendale, that's at 345 kV joint venture transmission line, now has more than 90% of its easements secured. This project has an expected completion in 2019 and our share of the cost is estimated to be at $205 million. We've recently filed with MISO on revenue requirements for recovery of the cost for this project. In addition, the 19 megawatt natural gas fired generation near our Lewis & Clark Station in Sidney, Montana is well under way and expected to be in service yet this year. And we are receiving potential future generation options. We're reviewing future potential generation options for larger scale resource that we have now included in our Integrated Resource Plan filing just this past July. This filing indicates a 200 megawatt resource addition to our fleet needed by the 2020 timeframe. Our utility group remains focused on regulatory recovery where we have obtained approval and implemented some $18.9 million in annual revenue increases to this point this year. In addition to the MISO filing that I mentioned earlier, in the third quarter, we filed an application with the Minnesota PUC for a natural gas rate increase of approximately $1.6 million, and we filed an application with the North Dakota PUC for an update to the generation resource recovery rider along with the renewable resource cost adjustment rider for Thunder Spirit mentioned earlier. This is a total request of $25.3 million. The generation rider covers investments in Heskett III brought into service just August of 2014 and the Lewis & Clark addition that we again plan to have on yet this year. Our current pending regulatory recovery filings now total $55.2 million. We also expect to file a natural gas case in Washington yet this year and an electric case in Wyoming in early 2016. Our utility has many line of sight opportunities for long-term growth and continues to focus on providing safe and reliable service to our customers at economic rates while obtaining timely rate recovery. Now moving on to our pipeline and energy service group. We had an adjusted loss of $1.2 million for the quarter. Earnings were impacted by operating results of the refinery and lower realized prices at the Pronghorn facility. Partially offsetting this were the regulated transportation pipeline volumes that were up 19% year-over-year. Our after-tax portion of the refinery's loss was $5.8 million for the quarter, the result of challenging market conditions including low diesel and naphtha prices along with historically narrow local Bakken basis differentials, which affected the crude acquisition pricing. In the long run, we expect market conditions for the refinery to recover. As planned, we did have the unit down for a couple of weeks in the quarter for some optimization projects and recently for a couple of days for some repairs to the hydrogen plant. Otherwise, we're generally pleased with the plant performance. We currently have a couple of expansion projects that we're focused on within the pipeline group. The North Badlands expansion includes a 4-mile loop of Garden Creek II pipeline and measurement and associated facilities, expected to be in service in the fall of 2016. The Northwest North Dakota expansion project includes modification of existing compression, a new unit and re-cylindering. The project should be complete by next summer. As we look forward, we are encouraged by the potential we see for our pipeline and energy services group. We are focused on improving existing operations as well as accelerating growth. It is our goal to become the leading pipeline company and midstream provider in our operational areas including expanding existing facilities and services. We're also evaluating expansion into other basins. Next, I'd like to move onto our construction businesses where on a combined basis we reported higher earnings totaling $73.5 million, up from $65.1 million last year. On a 12 trailing month basis, our combined construction businesses had adjusted earnings of $125 million exceeding our peak annual earnings from the pre-recession year of 2007, when these businesses earned a total of $120.8 million. Specifically, the construction material segment had their best quarter on record. Earnings for the quarter were $68.8 million, up 25% compared with last year. Margins were higher across all product lines and volumes were higher for all products with the exception of ready-mix along with higher construction revenue and margins. The construction materials worked up a lot of backlog this part quarter; however, they are positioned well with currently $533 million in backlog as of September 30. This is 11% higher than what we saw last year. Our construction materials team has done a great job of focusing on maintaining an efficient cost structure and growing profit margins and are well positioned for continued growth with our substantially strategic located 1.1 billion tons of aggregate reserves. At our construction services business, earnings were $4.7 million compared to $9.9 million last year, primarily due to the completion of several stronger margin large projects that we had in 2014. We have focused on replacing those jobs; however, the timing of new project awards has not allowed us to replace last year's workloads. Yet we have continued to add to the backlog this quarter with backlog now standing at $458 million at the end of the quarter. This is up some 32% from a year ago and it's the third consecutive quarter of backlog growth. So to highlight a few areas, we would like to – we have increased backlog substantially in our Northwest region with commercial and high tech projects. Our industrial division has seen increased levels of maintenance work and we're optimistic of our potential opportunities in the Gulf Coast region. And we have continued in pre-construction phase on a couple of large projects with construction phase expected to be awarded by early in 2016. We have pending project opportunities in all our regions and believe these projects and others that we're pursuing will have a significant positive impact to the backlog revenue and margin going forward. And with our lower cost structure and our highly skilled operation teams in our construction group, we continue to be optimistic about the long-term growth for our construction businesses. So now to conclude, we have faced a number of challenges this year. With the sale of our exploration and production business nearly complete and the opportunities we have at our utility, pipeline and energy services and construction business units, I am confident that MDU Resources is positioned for long-term growth. We expect to fund our approximately $583 million in planned gross CapEx this year largely with cash flows from operations along with some debt and proceeds from non-strategic divestitures. We are currently working on an updated five-year CapEx forecast to include the years 2016 through 2020 and expect to provide that information a couple of weeks from now. We have continued to maintain a strong balance sheet, solid credit ratings and a good liquidity position. And for 78 years, we have continued to provide a competitive dividend to our shareholders. And as always, we are committed to operating with integrity and our top priorities are to operate safely and create superior long-term value. Thank you for your time and attention today. We'd be happy to open the lines and answer any questions at this time. Operator?

Your first question will come from the line of Matt Tucker with KeyBanc Capital.

Hi, good morning. David L. Goodin - President, Chief Executive Officer & Director: Good morning, Matt.

Congrats on the E&P sale announcements. I guess first question, can you just provide any more color on the Cedar Creek property, why that seems to have been more challenging to sell so far and the level of interest you see in it and your level of optimism or kind of your expectation on finding a buyer for that? David L. Goodin - President, Chief Executive Officer & Director: Sure. Matt, I'll ask Pat O'Bryan. He is here in the room today to address that. Patrick L. O’Bryan - President and CEO, Fidelity Exploration & Production Company, MDU Resources Group, Inc.: Yeah, Matt, thanks for the question. We did have interest in our Cedar Creek net profits interest project asset there. And when we looked at the offers versus what we felt the value of the asset is, we just felt like that we should continue marketing particularly given the fact that what we get is a monthly check which is our net proceeds from the asset. There are no operations or engineering capability requirements and there is no capital investment needed. So we are continuing to market it, and when we get the appropriate – a good price for it, then we'll move forward with that.

Great. Thanks, Pat. And is there anything you can tell us about the buyers on your other side of the five other sales? And if you don't want to name names, can you at least give us a sense of kind of what type of buyers those are? Patrick L. O’Bryan - President and CEO, Fidelity Exploration & Production Company, MDU Resources Group, Inc.: Yeah. Sure, Matt. Obviously, we have confidentiality clauses in all of the purchase sales agreements, but I can – so won't be able to disclose the names of the companies, but I can tell you they are all private E&P companies.

Great. Thanks. Shifting gears. I noticed in the press release and your commentary, you kind of changed the language in terms of the expected utility rate base growth. Could you talk a little bit about why that change?

Yeah, Matt. This is Nicole. I can answer that question. We are currently, as Dave indicated in his talking points, in the process of developing our long range capital corporate-wide, and we will be releasing that over the next two weeks. And so, one comment that I would provide as the utility looks at its capital with the recent release of the Clean Power Plan, we are currently evaluating what that means for us. And in terms of the capital, we do not expect at this point to have anything in that capital forecast related to the cost of compliance. It's just a little bit too uncertain at this point, but we will be coming out with our new capital numbers here in a couple of weeks.

Got it. David L. Goodin - President, Chief Executive Officer & Director: And Matt...

Okay. Thanks. Sorry? Doran N. Schwartz - Chief Financial Officer & Vice President: No, I was just going to say, Matt – this is Doran – the one thing that I'd highlight too around the capital forecast that you'll see, it will be more line of sight as it relates to capital over the five-year forecast, fewer placeholders. We had some of those in last year, and they are making any necessary changes for some of those projects that didn't materialize over the course of 2015, obviously that will be reflected in the 2015 forecast as well, so just again the highlight as you see that forecast coming out here in the next couple of weeks, would be much more line of sight than the last year's five-year forecast.

Thanks, Doran. And then I guess, as a follow-up to that, you talked about kind of some level of the utility CapEx, the prior plan being at risk and have a prolonged Bakken E&P downturn scenario. Are you starting to lean more towards that – I mean lower for longer camp where you might kind of take some of that out of the next five-year plan or does that still look kind of needed at this point?

Yeah. I believe in the past, as we've got that question, Matt. When we look at 2015 – I guess just to give you a little perspective in 2015 – we expect to spend still around that $60 million of capital in the Bakken region. As we've been asking folks to compile forecast over the next five years, looking to next year, we do expect that number to come down a little bit, and as we look out into the years beyond 2016 as I've indicated previously, we believe that number is still going to be in that $20 million to $25 million range. However, when you take that in the mix of the entire capital program for the utility, again, I would just echo the comments that that is a pretty small share of our overall capital program. So we do anticipate that the capital will come down slightly in the Bakken area over the forecast period as we would expect our customer growth rates as well. But I would highlight that we do continue to benefit across the States from a higher customer growth rate than the average. So hopefully, that provides you a little commentary around the Bakken area. We do expect the capital and customers to come off, however, are still focused on the remaining capital we have across our entire service territory.

Make sense. Thanks, Nicole. I had a few more, but I will jump back in the queue. David L. Goodin - President, Chief Executive Officer & Director: Okay. Thank you, Matt.

Next question will come from the line of Paul Patterson with Glenrock Associates.

Good morning. David L. Goodin - President, Chief Executive Officer & Director: Good morning, Paul.

I was wondering if you could tell us what the weather impact was year-to-date and for the quarter, versus normal? David L. Goodin - President, Chief Executive Officer & Director: You want us to walk through each of the business lines, Paul, giving weather impacts?

No. Maybe a few of the more major ones, but no – I was just speaking just in general. David L. Goodin - President, Chief Executive Officer & Director: I'll take first shot at that. I'd say weather at utility was more of a normal third quarter when we think year-over-year more of a normal quarter there, where we did hit some air conditioning loads but offset by some cooler attempts, so somewhat normal. I think we had a very favorable weather when we think about our construction businesses provided Mr. Barney and his team, a lot of opportunities to be out in the field and putting – laying down product, that was certainly helpful. But I would say weather wasn't kind of one move or one way or the other for the quarter, kind of somewhat normal not really what (22:33) we expected.

Okay. That's great. And then you guys mentioned M&A opportunity at the utility business. I was just wondering if you could sort of comment on some of the valuations that we have been seeing in the sector and how you guys might feel about – I mean, we've seen some recent announcements. And how should we think about your approach to his potential opportunity?

Yeah. This is Nicole. I'll take that. We do continue to look at our business obviously and beyond just the organic growth. One of the positives that we've focused on in the past and we'll continue to focus on is just what we can deliver from an organic perspective. Our rate-based growth is above what you see and a lot of utilities and so our primary focus, of course, is executing on that organic growth. Now over time, and even as recently, we continue to monitor the M&A market just like you're commenting on. Certainly, the valuations have been higher than we've seen in the past. And we also have seen the pace of that acquisition environment pick up. We will continue to monitor that but at the same token, maintain what we believe is our financial discipline on any execution of a transaction there. So I guess, to leave you with the takeaways, we've got great organic growth within our existing businesses, but we will continue to monitor the M&A market.

Okay. And so when you look at those valuations, could you see yourself doing a transaction at those levels?

I guess, what we'll have to do in each particular case is continue to monitor where we're at corporate wide in terms of the utilities position within the overall corporation. So that is something we'll continue to monitor. I think you can't never say never I guess. We'll continue to monitor those things, but I will tell you that as a corporation, we do maintain a financial discipline when evaluating prospective deals.

Okay. And then... David L. Goodin - President, Chief Executive Officer & Director: Paul, I can add just maybe just a little more color to that in the fact that clearly, we watch what multiples are being offered into the market and the pace at which the recent deals have really come about. Nicole did mention our financial discipline, that's very important to us as well. And so while we look at that, I think you really have to look at this on a case-by-case basis, so that's what we've seen from – as we watch some of the more regional consolidation going on, that's really what it looks like, and we still think that that opportunity still presents itself more in our neck of the woods over the longer term.

Okay. And then in terms of the refinery outlook and stuff, you guys mentioned some initiatives that you guys have been undertaking, what have you, and I was wondering if you could share with us sort of the outlook this quarter in terms of turning the situation around at the refinery in the near-term. Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Hey, Paul. This is Martin. How we sort of think about it is I with (25:38) the team is there are things we can control and things we can. Obviously, we would be unaffected by the pricing in terms of the bases in the Bakken and in terms of diesel and naphtha sale prices have been down though they are starting to climb back. So things that we can control is we've just started marketing a winter diesel product that's good to 40 degrees below. Depending on the weather, we think we could get anywhere from $0.10 to $0.20 premium. And we're also in the process of – we don't use biofuels and blend because of where we're financially, we're actually going to file for a potential refund of a couple of million dollars. And then with the start-up and sort of break in process, we have a lot of contractors we've been using to keep things up to speed. We see that leveling off and becoming a little more lean and mean on that side. And then also we're in the process of working through debottlenecking. Our crude tower can do 30,000 barrels per day. It's going to take us couple of years to work our way through, but we're going to continue to work on that and currently obviously we're at 20,000 barrels per day.

Okay. And then just finally on the E&P sales, can we assume these are cash sales? Are there any contingencies or any financing situation where MDU's going to be financing it for some period of time, or what have you? Are these basically cash sales? Doran N. Schwartz - Chief Financial Officer & Vice President: Yeah. Paul, this is Doran. I'll just give you some flavor I think as we think about the Fidelity sale. As it relates to the PSAs, those are our cash deals. But as we think about the deals in the broader context from a strategy standpoint, impact on the stock, we feel like it's good to clear an overhang of uncertainty around the stock and allow us as Dave mentioned to focus our capital allocation on the remaining business units. We think the value is fair if not better to recently announced deals. From a use of proceeds perspective, as we announced, $450 million. About $325 million of that is in the cash proceeds; $125 million relates to net operating loss, refunds or carryforwards due to selling certain assets below the tax basis. So we would anticipate as we announced use of proceeds to repay debt essentially at Fidelity, allocated debt. And a lot of that will happen here in 2015, about $300 million and then the remaining $125 million will happen probably into 2016, potentially 2017, but primarily 2016 as we monetize those NOLs on future tax returns. And I'd just also say as it relates to the balance sheet, we do like the stronger credit profile that we have, credit rating of BBB plus and stable, and post Fidelity, we view that as even stronger going forward. So a little bit of color commentary on our view on the sale.

Okay. Great. Thanks a lot. David L. Goodin - President, Chief Executive Officer & Director: Thank you, Paul.

Your next question will come from the line of Christopher Varga with Evercore.

Hey, guys. It's Timm. Everything has been answered. Thank you. David L. Goodin - President, Chief Executive Officer & Director: Thank you, Timm.

Your next question will come from the line of Mike Hacke with Barclays.

Hey, guys. Good morning. David L. Goodin - President, Chief Executive Officer & Director: Good morning, Mike.

So I just wanted to go back to the balance sheet really quickly. Understanding that you'll take some of the proceeds or all the proceeds to reduce debt in the near-term, I mean how much flexibility do you think you would have to run with a little bit higher debt now that E&P is out of the mix and to what extent do you think you'd be taking advantage of that on a go-forward basis? Doran N. Schwartz - Chief Financial Officer & Vice President: Yeah, Mike, good question. That is a conversation obviously that we need to have with the rating agencies both that follow us, have us at a BBB-plus stable outlook. Clearly, the business risk profile is stronger by reducing our exposure to commodity prices going forward. I think what we've said in the past is our primary funding mechanism is using operating cash flows. We do utilize the balance sheet going forward too, using debt. And I think that will continue. I think one of the things you will see though, Mike, is our debt to cap ratio for example has risen. It's higher this year than last year. And there is some – a couple of primary reasons for that. One is obviously the write-downs that we've had at Fidelity this year, but again, that will reverse itself a bit as we get refunds or cash proceeds in from the transaction and repay the debt. The other thing too, Mike, is I think just by definition as we invest in our businesses going forward, a lot of our capital is at the utility, that by definition will require more debt, because we fund that at a 50-50 debt to cap target. So as we invest in that strong investment program, that will pull up the debt to cap ratio just due to that and still in our view maintain a strong balance sheet. So we're willing to use the balance sheet, Mike, but still committed to maintaining a strong balance sheet as well.

Great. That's all for me. Thank you. David L. Goodin - President, Chief Executive Officer & Director: Thank you, Mike.

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

Hey, follow-up for Doran. Can you tell us how much debt is allocated to Fidelity? And would you be able to tell us expected interest savings from the paydown with the Fidelity proceeds or maybe just at least the weighted average interest rate on the Fidelity debt? Doran N. Schwartz - Chief Financial Officer & Vice President: Yeah. I certainly can, Matt. The amount of debt at Fidelity, and it's allocated debt, is $425 million at the end of September and roughly $300 million of that is short-term debt and $125 million of that is longer term debt that we would deal with after 2015. Interest expense so far on a year-to-date basis through September at Fidelity on an allocated basis is roughly $11 million, and again, we'd anticipate the majority of that to go away as we repay debt here by the end of 2015. There will be some in 2016, but substantially taken care of by the end of 2016.

Great. Thank you. And then maybe one for Martin, in terms of expanding into additional basins, Martin could you comment on how you're thinking about organically doing that versus via M&A? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Matt, I would – obviously, we want to be financially disciplined. I think we're in a great position in the Williston Basin and the Bakken region to grow organically. Obviously, things are slowing down, but because of our pipes here, we have an opportunity just like the two projects you saw where we're adding additional compression or looping pipelines. And we're in the position where we've actually done the tail gas piping for other midstream providers because our folks get it in very effectively. We've got a good engineering department and a great internal construction team. Obviously, they're strong in, what I would call, the flat areas over the hills but probably not the big mountains. So as we look around, we would probably look to get a beach head in some of the other similar basins that would have similar topography. We could try to grow organically there and we do focus, but it's hard to get into basins, if you don't have a foothold folks tend to dismiss you especially in a down-market. So I think you will see us actively looking. I think that's one of the silver linings in this slowdown. There are a lot of midstreams out there that are starting to feel pain, as you know they tend to run a year or two years behind the production company pains, especially a lot of – there's a lot of folks out there backed by private equity, who've got essentially acreage dedication contracts. And I think in the year ahead you're going to continue to see some of those folks have to put things up for sale. So I think obviously, it's on a case-by-case basis for us and if it's at right price and we'll have to be financially disciplined. And we're actively out looking and that's our plan.

Thanks, Martin. That's very helpful. And then final question from me, is it still a plan to announce the new five-year CapEx plan in a couple of weeks but to wait to announce 2016 guidance and your financing plan until the fourth quarter call? David L. Goodin - President, Chief Executive Officer & Director: Yes, Matt, that would be correct. We have our board meeting actually just next week. That's a major topic for our board to review and act upon. It would be our five-year CapEx. And so on the heels of that, we would look to release that five-year CapEx plan. Again, as Doran mentioned earlier, more of a line of sight CapEx plan certainly in the early years of that, just to set some expectations there as we think about that. And then, overall guidance for 2016 would be – with fourth quarter release on or about February 1.

Sounds good. Thanks and I'll... David L. Goodin - President, Chief Executive Officer & Director: Okay.

...see you at EEI. David L. Goodin - President, Chief Executive Officer & Director: All right. Thanks, Matt.

Your next question will come from the line of Brent Thielman with D.A. Davidson. Brent Edward Thielman - D.A. Davidson & Co.: Hi. Good morning. David L. Goodin - President, Chief Executive Officer & Director: Morning, Brent. Brent Edward Thielman - D.A. Davidson & Co.: Hey, Dave or Jeff, it seems like you have heard a bit more around labor challenges in the construction market. Are you seeing similar challenges on your end? David L. Goodin - President, Chief Executive Officer & Director: Yeah. Brent, your question was – questioning about labor challenges at each of the construction business, was that your question? Brent Edward Thielman - D.A. Davidson & Co.: That's correct. David L. Goodin - President, Chief Executive Officer & Director: Okay. Maybe we'll start with Mr. Barney and then move on to Mr. Thiede. David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: Hey, Brent. Brent Edward Thielman - D.A. Davidson & Co.: Hey. David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: We've seen labor challenges in certain areas, especially North Dakota even though it's starting to settle down a little bit now with a little bit of slowdown in the energy market. We're getting a few more good employees there. Overall, we are having more of a labor challenge with drivers than anything else. We're having hard time filling our trucks, but our team's doing a good job of getting them into seat, but we do definitely have some inexperienced people out there in that. But, yeah, overall, it's starting to improve.

Yeah. Brent, this is Jeff. We're seeing some pressure on competition for employees in our labor area. Our outside business is getting alignment into the trade and also up through the ranks. It has been one of our challenges we're seeing at nationwide. But also where we've expanded our equipment business, we are increasing our labor force there. So we have connected with continuing education, organization within the local area in addition to being involved in the apprenticeship training to be able to provide some outreach into the high schools to be able to get people into the trades and provide a good carrier in our industry. Brent Edward Thielman - D.A. Davidson & Co.: And Jeff as you see that labor market tightening, does that tends to help your margins over time?

Well, it can. It's a supply and demand situation. So it does. At the same time, we have to deliver our services for our customers. So the challenges for us is to be able to attract people into our industry, confident people, get them trained, and get them to operate safe and productively to be able to address the work demand that we're seeing in our business. Brent Edward Thielman - D.A. Davidson & Co.: Okay. And then maybe back to Dave, year-to-date revenue growth has been real solid for the materials and contracting but it was a little bit slower this period. Do you think you pulled in some work into the first half or are you walking away from a little more business that doesn't meet your margin requirements? David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: We definitely are more disciplined on our margin requirements on our construction backlog. As you know, we had a record backlog in May of this year of $833 million. When you have a nice backlog, Brent, you can be a little more picky on what's you're going after. And with the market improvement and with the momentum we're seeing in our industry, you can definitely continue to raise your margins and be able to more picky about what work you're going to take. Brent Edward Thielman - D.A. Davidson & Co.: Okay. Thanks, guys. David L. Goodin - President, Chief Executive Officer & Director: Okay. Thanks, Brent.

This marks the last call for questions. This call will be available for replay beginning at 1:00 PM Eastern Time today through 11:59 PM Eastern Time on November 17. The conference ID number for the replay is 57967847. Again, the conference ID number for the replay is 57967847.