MDU Resources Group, Inc. (MDU) Q4 2015 Earnings Report, Transcript and Summary

Good morning. My name is Brent, and I'll be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2015 Yearend Results and 2016 Guidance 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 February 18. The conference ID number for the replay is 9233329. Again, the conference ID number for the replay is 9233329. The number to dial for the replay is 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 - Chief Financial Officer & Vice President: Thank you, good morning everybody. 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 those 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 the 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 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; 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; 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? David L. Goodin - President, Chief Executive Officer & Director: Thank you, Doran, and good morning. We appreciate you joining us today to discuss our 2015 yearend results as well as guidance for this year. Our businesses had some notable successes last year, including record earnings at our construction materials business. Our utility group executed well on a record capital budget and continued to experience good customer growth. Our pipeline group had record throughput for the third consecutive year and we made good progress on the sale of Fidelity's assets and each of our businesses is carrying good momentum into 2016. However, I am not satisfied with our overall earnings performance in 2015. Consolidated adjusted earnings for the year totaled $180 million or $0.92 per share compared with $205.5 million or $1.07 per share in 2014. On a GAAP basis, we had a loss of $623.1 million or $3.20 per share compared to 2014 earnings of $297.5 million or $1.55 per share. Most of that loss occurred in the first three quarters of 2015 and is largely associated with our oil and gas business Fidelity and our decision to exit that business. I am pleased to report that we have nearly completed the sale of Fidelity's oil and gas assets. We have closed on the sale of four asset packages and we have signed a purchase and sale agreement on a fifth asset package as well. These five sales represent more than 93% of Fidelity's 2014 production. We are continuing to market the one remaining asset package. As we reported previously, aggregate sale proceeds from related tax benefits for the five sales are estimated to be approximately $450 million. We plan to use these proceeds primarily for debt repayment. And this strategic shift will allow us to move forward with a lower business risk profile which we expect will include above average regulated capital expenditure growth at the utility. Now, let's take a look at how our businesses performed last year. The first order of business is to say congratulations to Dave Barney and his team at Knife River. Our construction materials business had record adjusted earnings last year of $90.6 million. Adjusted earnings rose by 51% on 8% growth in revenue. So, they are doing an excellent job of managing costs and margins. Aggregate and ready-mix volumes increased by 4% and asphalt volumes were up 11% and margins were up across all product lines. The earnings growth has spread across every one of Knife River's regional operations. Knife River had a record yearend backlog also of $491 million, which is 12% higher than the 2014 yearend backlog of $438 million. This backlog does not include a $63.4 million contract awarded to Knife in January here in 2016 to reconstruct a portion of Interstate I-29 near Sioux City, Iowa. This will be the largest contract in Knife River's history. This is a great start to the year and we are optimistic about additional opportunities now that Congress has passed the $305 billion five-year federal highway bill. Our construction services business reported adjusted earnings of $25.2 million. A priority in 2015 was rebuilding workload commitments after completing several higher margin projects in 2014. That helped them achieve two consecutive years of record earnings. That effort was successful. Their backlog at yearend now stands at $493 million, about 62% higher than the $305 million at yearend in 2014. This is their highest yearend backlog since 2008. Our total construction backlog now is more than $1 billion, so these businesses had a great start to the year. And margins at both businesses are expected to be slightly higher this year as well. To provide some additional clarity in guidance, we are now adding EBITDA ranges for each business segment in addition to what we have provided in the past. Here we have projected 2016 EBITDA between $215 million and $235 million for construction materials and $65 million to $85 million for construction services. Now turning to our utility business, our utility business reported earnings of $59.5 million. Weather during the heating season was warmer than prior year across our eight-state service region, resulting in a $7.2 million earnings impact from lower natural gas sales and lower residential electric retail sales. Other factors included higher O&M expense, higher depreciation, depletion and amortization expense due to increased plant additions, which is included in rate cases for potential recovery. This was partially offset by natural gas and electric rate increases in several jurisdictions. Our utility group is coming off a record year of $464 million in capital investments last year. These include the Thunder Spirit Wind generation facility that began operating here in late December, completion of a new air quality control system at the Big Stone plant and infrastructure improvements in our natural gas business. The customer base continues to grow across utilities' eight-state service territory. The total customer count is now at about 1.05 million, an increase of about 2% over 2014. The utilities also have been working hard to recover their investments along with a reasonable return. Since the beginning of 2015, the utility has implemented $28.5 million in final rates and $20.8 million in interim rates. Pending cases total an additional $38.9 million along with request to finalize the interim rates that have been implemented. The utility expects to grow its $1.8 billion rate base by approximately 7% compounded annually over the next five years. Projected 2016 EBITDA for the utility group is between $245 million and $265 million. Turning to our pipeline and midstream segment, here we had adjusted earnings of $23.9 million and these reflect lower processing revenue at our Pronghorn facility, lower natural gas gathering volumes and lower storage service revenues due to lower interruptible storage withdrawals. These decreases were partially offset by higher transportation rates and record transportation volumes for the third consecutive year. The pipeline and midstream continues to grow its traditional northern Rockies base and its two 2016 expansion projects underway. The North Badlands and Northwest North Dakota projects will connect third-party processing facilities to interstate pipes and add approximately 88,000 dekatherms per day of capacity. At the same time, the business is also evaluating expansion opportunities in other basins and these will come primarily through acquisitions. At WBI Energy, our projected 2016 EBITDA for the pipeline and midstream business stands at between $60 million and $70 million. Our refining segment includes the company's 50% interest in the Dakota Prairie Refinery which began commercial operations just in May of last year. Our share of 2015 refining results is an adjusted loss of $20.5 million. Earnings were impacted by unplanned outages in October and November due to equipment problems that have since been repaired. Economics have also been affected by historically low Bakken differentials from the West Texas Intermediate pricing, which has reduced the discount for our oil feedstock. In addition, reduced oilfield activity in the Bakken has decreased the demand for diesel fuel along with the slowdown in Canadian tar sands development has also reduced the demand for naphtha. Our share of projected 2016 EBITDA is at a minus $25 million to zero. As we talk about our overall guidance for 2016, you will see that refining has been moved from the pipeline business to a separate segment. This will provide investors with transparency both on the refinery and the value of our regulated pipeline business. We're excluding it from adjusted guidance because the refining industry tends not to give earnings guidance due to the volatility and unpredictable nature of the key commodity assumptions supporting its financial results. We believe this approach to adjusted EPS allows for a narrower, more meaningful range for investors, while still providing sufficient guidance for investors to evaluate the refining segment. We are initiating 2016 adjusted guidance in the range of $1 to $1.15 per share. Adjusted earnings guidance includes results from the utility, pipeline, and midstream and construction businesses. GAAP earnings per share guidance, which includes results from the refinery, is expected to be in the range of $0.85 to $1.10 per share. So to wrap things up, I would like to key on several points. We are firmly focused on improving our financial performance and growing our businesses. We are positive about the future of MDU Resources along with our five-year CapEx plan of $2.3 billion. This reflects our confidence in our opportunities to grow and execute our business plans. This plan includes $342 million in 2016; we do not plan to issue equity to fund these expenditures, but instead expect to fund them from operating cash flows. And I would be remiss if I didn't note that we remain committed to our common stock dividend. We are proud of our rich dividend history, which includes 78 years of uninterrupted dividends and 25 consecutive years of dividend increases. I appreciate your interest and commitment to MDU Resources and would be happy to open up the lines to questions at this time. Operator?

Your first question comes from the line of Matt Tucker with KeyBanc Capital Markets. Please go ahead.

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

Dave, I think you kind of pre-answered my first question a little bit. I was curious if you'd be willing to share some of your commodity price assumptions underlying the refinery guidance for the year? David L. Goodin - President, Chief Executive Officer & Director: Well, we can give you some ranges there, Matt, but again there are only going to be some ranges involved here. And so I will turn it over to Martin to give you maybe just a little color what we are thinking about the plant in general and maybe touch on the commodity side. Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Hey, Matt, obviously we want to control the stuff we can control in the operational, and pricing just to give you an idea of magnitude, probably the biggest thing as you are aware of the fact that it is the Bakken basis. So basically, every dollar move in Bakken basis moves at about $7.5 million roughly rounded in the direction. Where we are in Bakken basis historically is it's been in the $8 to $10 range. Recently, we've been seeing it in the $3 to $5 range mark, as recently in January and February it's actually been ticking up a little bit. My gut is in the forecast over this year that's kind of the range we are expecting with it coming back over the longer term in terms of the basis for what the cost of transportation either rail to the East or West Coast which runs about $10 or piping down to Houston which runs into that $8 to $10 range once you stack the various rates, so hopefully that gives you a little bit of flavor.

That's helpful and I guess it would also be helpful to get your current thoughts kind of longer term strategically thinking about how the refinery fits in with your longer term plans? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Yeah, obviously longer term – short-term, we are working on optimizing where the plant is at. Longer-term, you know this is a business you have to get in on scale, not just one refinery, you have to have several or else you would exit. Obviously, we may not be the right long-term owner but at this point that decision hasn't been made.

Got it, thanks. And then you discussed back in the fall an arctic diesel product that you were hoping would fetch a premium, how has the traction been with that and I guess – I mean, I assume it is pretty mild fourth quarter and did that kind of impact your ability to get that premium? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Yes, absolutely. The combination of mild plus our outage related to our hydrogen plant impacted that. What we are seeing on cold days right now, is we are seeing sort of an $0.08 to $0.10 premium; on the warm days, it's basically selling for number-two diesel, so we are seeing it fluctuate in there. We are expecting next year probably to come back. We did have somebody earlier in the year approach us for a deal to sign a bunch of it at $0.10 premium, obviously we did not take at this point, but longer run we think over the time period that we think it will – the margin sort of in that $0.10 to $0.20 probably range of premium.

Great, thanks. And then shifting gears to the utilities, given all the rate activity that you've recently completed and have pending and the overall weather headwinds you experienced in 2015, and I guess, I was surprised the utility guidance wasn't a little bit higher. Can you maybe just discuss how you are baking in pending rate decisions into the guidance and maybe also give us a sense for what you are assuming in terms of customer growth in O&M?

Sure Matt, this is Nicole. As we look ahead, you've got pretty clear line of sight in terms of the regulatory activity we have in our case. I know particularly you are probably wondering okay, we've requested this much, what will we receive of those requests? A couple of things to keep in mind as you think about 2016. One is several of these cases we do have hearing dates scheduled, but for instance, if you look at Washington, that case will not be implemented, that's we are thinking that will be late in 2016. So, you kind of have to go down by state to determine at what point we'd actually get the release in the 2016 plan. So again that's kind of a staggered approach depending on the state. We do have hearings set in most of these cases and where we can get interim we have implemented interim rates as you saw in the news release as well. So, I guess with all of our capital and the record capital that we executed on here in 2015 and the pending rate cases we do anticipate as you saw in the news release upside to our 2016 earnings. So does that help give you a flavor in terms of, I mean, each state is going to be a little bit different. I could comment on what we've gotten historically, we've executed on some natural gas cases in North Dakota, South Dakota and – North Dakota, Wyoming and Montana and in those cases we got about 70% of our request.

Okay, that's very helpful, Nicole. And I guess, apologies if I missed this but where did you finish up 2015 in terms of customer growth? And I guess, what are you kind of expecting going forward, can you comment on – I'm sure you may be seeing some slowdown in North Dakota given what's going on with the Bakken activities, and maybe if you could just comment on what you are seeing there?

Yes, on an overall basis we ended 2015 up about 2% on customers as it relates to the Bakken, Matt. We actually still saw some pretty good increases in the Bakken area. Our electric Bakken growth was up 5.5% on the customer side and gas was up 2.3%. If you compare those Bakken growth rates to last year, they are actually pretty consistent, down a little bit on the gas side. Of course, the question we're getting is, 'well, why is that with all the slowdown?' As a reminder, we are not serving the wells and rigs. We are serving the communities. And what we think is happening in terms of that growth still being steady for us in 2015 here is that folks are moving from temporary to permanent housing in the communities in which we serve. We do expect, as you would as well, that that would slow down here a little bit in 2016. We're projecting around 1.5% to 2% growth across our territories, and as I always remind people, I know that Bakken gets a lot of the focus, but we do operate in eight states and we see growth across all of our eight states going forward.

Great. Thanks, Nicole. And then I just wanted to ask on Construction Services, your backlog for the quarter is the highest it's been in several years. Your revenue guidance suggests pretty nice growth, but still maybe not as high as couple years back. Just curious what you're seeing? Are you assuming or seeing some kind of slowdown entering the year? Maybe just kind of comment on those assumptions.

Okay, Matt. This is Jeff. Thanks for your question. Those two years were record years for us, 2013 and 2014, and we obviously didn't experience that in 2015. We were working on our backlog. Our backlog dropped in 2015 and it did impact us in 2015. So we have secured $493 million of backlog. It's the highest it's been in 2008. Primarily we're seeing some growth opportunities in the outside transmission market where we picked up a 130-mile transmission project in the Midwest. We've got a project with the Department of Homeland Security in the Midwest as well, and we're also starting to see some increases in the healthcare work and mission-critical work. And last but not least, our solar renewables group we have two projects underway and we're getting ready to start a 50-megawatt solar facility in the Southwest where we're designing, we're constructing, we're also the owner of that plant. So most of these projects are contributors to that backlog number. We look at 2016 as a positive year going forward. And couple the backlog with the work that we have, the higher margin work that's never in our backlog, we're looking positive at 2016.

Okay, great. I had a couple more, but I'll give others a chance. Thanks. David L. Goodin - President, Chief Executive Officer & Director: Okay. Thank you, Matt.

Your next question comes from the line of Brent Thielman with D.A. Davidson. Please go ahead. 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.: On the refinery, I know market conditions have been tough there. There seemed to be lot of moving parts, though, this quarter, and in terms of the unplanned outages, is there a way we can think about the drag on earnings this quarter for that segment? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Yes. Brent, we were down almost approximately a month. It was all related to the hydrogen plant and we are past that. We're probably going to have some issues with our vendor on that plant, but ultimately we think we've got that handle. So, on a go-forward basis we're really happy with where operations are in terms of operating the plant day-to-day. I would characterize what we put out there as a 90% target in terms of about 21 days maybe for the year outage, and so that's the guidance. I hope that helps. Brent Edward Thielman - D.A. Davidson & Co.: Okay, and then a follow up, and excuse me if this sounds like a stupid question, but you mentioned the guidance includes an expectation for 90% utilization in 2016. I guess that just seems high to me given kind of the demand outlook. I guess why would you expect it to run at these levels or why does it make sense to continue running at these levels if we're going to continue to see losses? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Well, there is still a margin on diesel. It's not as robust as it was. So ultimately that is – as long as there is a margin we will continue to operate at a percentage. If we don't see it, we would obviously take it down. Our marketing group has also been having some success taking some diesel out of the basin also. So we think that over the whole year period, we think we'll probably be able to attain those levels, but obviously one of the things you see in our guidance is we have given a range based on pricing because that's one thing we've learned over the years we can't control, and so you've got to operate as well as you can and react to when it's there. So, obviously, if we are having negative pricing, we would turn down the plant. Brent Edward Thielman - D.A. Davidson & Co.: Got it. That's helpful. Appreciate that. And then any guesses on when the federal transportation bill starts to kind of have a broader impact on state lettings or your business overall? David L. Goodin - President, Chief Executive Officer & Director: Yes, Brent, I'll ask Dave Barney to comment on that. It directly affects his business in a positive way. Dave? David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: Hey, Brent. Brent Edward Thielman - D.A. Davidson & Co.: Hey, Dave. David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: We're excited about the (25:55) long-term transportation bill finally passed, it's definitely going to be a positive impact for our industry, but we don't expect much to come out of it in 2016. We're excited about the potential of bringing 2017 and beyond, but 2016 we don't see much movement. Brent Edward Thielman - D.A. Davidson & Co.: Okay, very good. Thank you. David L. Goodin - President, Chief Executive Officer & Director: Thank you, Brent.

Your next question comes from the line of Sarah Akers with Wells Fargo. Please go ahead.

Hey, good morning. David L. Goodin - President, Chief Executive Officer & Director: Morning, Sarah.

So just looking at 2015, if we add back the $0.03 to $0.04 of weather and then exclude the refinery loss comparing that to the midpoint of 2016 guidance, it looks like the growth there is less than 1% or so. So can you just help us understand looking at the various segments why you're not seeing much underlying growth into 2016? David L. Goodin - President, Chief Executive Officer & Director: So, if you compare year-over-year, as you neutralized out there, when we think of 2015, when we think of even at the Construction Services business, Jeff already talked about the margin and the backlog that we had in the 2015 really a reloading year looking at that differently given our point in time now with year-end backlog here starting 2016. So believe that to be a positive. We do see at our Pipeline and Midstream business where we talk about commodity exposure that we have at the refinery, there is still some commodity exposure we have within some of our processing that we have particularly in western North Dakota, so that would be some exposure that we'd have there. I think some offsets to that year-over-year certainly would be Dave Barney's business with the strong backlogs. Dave touched on that. We've got some federal highway funding, may not be a large influence we believe in 2016 but actually be beyond that. And then as we think about the utility business, while that record capital of $464 million last year invested in the business was a record on top of the record year before that. Nicole and her regulatory team have very extensive outline of all the regulatory activity. She touched on the timing of completing those cases based within statutory requirements very state by state, some are six months, some are out to 11 months to 12 months, and so we've factored that in so far as recovery of those investments. So I know it's a longer answer, Sarah, but there's really separate drivers for each business. And if you'd like to get into more detail by each, I'd be happy to do so. Doran N. Schwartz - Chief Financial Officer & Vice President: Yes, and Sarah this is Doran. We did try and give a bit more transparency and guidance as it relates to each business unit from 2015 going into 2016. If you go back in the press release to each of the business unit sections and take a look at operating income and add back depreciation, that's pretty close to what you'll find for EBITDA for 2015, and then we are giving the EBITDA ranges, so for example at the utility if you were to add that up, it's about call it $215 million and then we've provided our guidance range for 2016 at $245 million to $265 million. And so if you do that by business unit, it gives you a feel I think for some of the growth that we're anticipating at least on an EBITDA basis to try and help you modeling 2016 versus 2015.

Okay. And then on the construction business, it looks like in Q4 results were down 30%, earnings were down 30% and the press release talks about lower aggregate margins and lower equipment sales and rental margins. Can you comment on those trends and whether you expect that will persist into 2016, or if it was something unique about Q4? David L. Goodin - President, Chief Executive Officer & Director: Yes, thank you, Sarah. We'll answer that separately. I'll ask Dave Barney here and then after Dave talks about the materials group, we'll then have Jeff Thiede talk about services, because each had separate drivers there. Dave Barney? David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: Hi, Sarah.

Hi. David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: First, in the fourth quarter, Sarah, weather had a significant impact on our earnings. We had quite a bit of rain in our Northwest region and the California region and even in Texas. So we had weather impact for us in the fourth quarter of 2015.

Okay, got it. David L. Goodin - President, Chief Executive Officer & Director: Jeff.

Yes, and Sarah, this is Jeff. Our fourth quarter was the highest quarter for us last year. So we've built some momentum into 2016 with our backlog increase. We think that's going to be a positive for us going forward. That should translate into a better year.

Got you. And then one last one shifting to the utility, I see the 7% rate base growth is unchanged from the November update. Does that reflect the impact of bonus depreciation? David L. Goodin - President, Chief Executive Officer & Director: Sarah you broke up a little bit on the call here. I got part of that, but if you could repeat your question I want to make sure we get it?

Sure. So the 7% rate base growth is unchanged from the November updates and since then we've had the extension of bonus depreciation. So just wondering if that 7% rate base growth already reflects the impact of bonus through 2019? Doran N. Schwartz - Chief Financial Officer & Vice President: Sarah, this is Doran. No, it does not. We are evaluating whether or not to elect bonus depreciation. One of the factors there, as you know, we had significant net operating losses generated from Fidelity in 2015. And that could potentially impact us in terms of our ability to realize certain credits in part of the utility and some of the other business units. And so we're evaluating whether or not it makes more economic sense to not lose perms for the benefit of the temporary differences and then as to an election or not an election of bonus depreciation with the recent extension. So we haven't quite made that decision yet, but it does not reflect bonus depreciation at this point.

Got it. Thanks a lot. David L. Goodin - President, Chief Executive Officer & Director: Okay. Thank you, Sarah.

Your next question comes from the line of Timm Schneider with Evercore. Please go ahead.

Hey, guys. Just one quick follow up on the refineries. How much of the, I guess, shortfall versus guidance or initial guidance is tied to the volume declines versus just margin? David L. Goodin - President, Chief Executive Officer & Director: Can you repeat that? I'm sorry.

Yes, so I'd like to know how much of the impact is there in like volume declines, less trucks in the Bakken or what not versus margin impact? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: The majority right now is the margin impact. It's on where our base has moved and where diesel pricing has moved.

Great. Got it. Thank you. David L. Goodin - President, Chief Executive Officer & Director: Thank you, Timm.

Your next question comes from the line of Paul Patterson with Glenrock Associates. Please go ahead.

A lot of my questions have been answered, but I wanted to follow up on Sarah's question about bonus depreciation and whether or not you will take it. Isn't it sort of a question of, I guess, do you have the discretion as to whether or not to take it with respect to the regulatory jurisdictions that you are in? Doran N. Schwartz - Chief Financial Officer & Vice President: Well, so basically, Paul, the decision point there with the regulators is what's the better deal for the customer, and so that is what will drive the decision. And if we lose certain credits because we've built up a significant tax loss, which impacts our ability to take those credits, if that results in a worse deal for the rate payer, then the case can be made not to elect bonus depreciation. But those are the conversations we're having with regulators currently to evaluate what's the better option for the rate payer.

Can you defer any of these? So in other words, you've got tax assets that have to be used or – they can't be deferred. Is that where we're at this point that even if you need deferral of these if you were to elect bonus depreciation, you couldn't defer any of those?

Yes, this is Nicole and I'll just weigh in to echo what Doran was saying. Really what we're doing is evaluating that at the corporate level in terms of the election just as he said. The other thing I would add on to that, though, is on our wind assets, we are still getting the PTCs and accelerated depreciation. So we'll monitor the overall benefit or not of bonus depreciation basically on a year-by-year basis here and do what's the best for the customer.

Okay. I guess what that would sort of suggest though to Sarah's question though is meaning – the rate base impact one would think would be somewhat factored in one way or the other, I guess, and that's why I'm a little bit confused by. We can talk about this I guess offline, I don't want to – maybe it's too complicated to get into right now. But let me ask you this, with respect to the Montana rejecting the interim increase, and the sort of statements that were made by the commissioners et cetera, could you just give us a little bit of a flavor as to what you're encountering just generally speaking with the substantial CapEx that you guys have, with the regulatory and economic environment that you're encountering particularly in the Bakken related areas, if there's any change in terms of your outlook in terms of growth in general at the utilities?

Yeah, I guess what we've got in the news release really reflects the growth we're currently anticipating. So from a rate base perspective, we are still comfortable with that 7% CAGR that we're publishing. Now that is lower than what we've previously stated, and of course one of the main reasons is we just finished, as Dave mentioned, two record years of capital. And so you're building up a much larger base. So when you look at our rate base, the projects that are in there, are really identifiable line of sight projects. In terms of the capital outlay in the Bakken, we did note in the news release that certainly that has come down, but even as of last year we were projecting that in the out years of our forecast that capital outlay in the Bakken was going to range in that $25 million-ish per year. And so when you look at that over all the capital we have certainly that's only a very small piece of the capital that we have in place. So that kind of gives you a perspective, and I commented earlier on the customer side, we are looking at the 1.5% and 2% growth on the customer side. In terms of the regulatory arena, the additional commentary I'd give you there, Montana, you specifically asked on the denial of interim. There were couple of factors I think that came into play there; one, we were pretty close to our hearing date, and so I think the commission said let this play out at the hearing. And in terms of some of the commentary in the marketplace on the Bakken and the slowdown, when you look at what we built out, we have really the assets that we're seeking to recover, the large ones are environmental or capacity additions. On the environmental side, really those dollars – the question has come up around the Clean Power Plan, and noting that, should we be putting these investments in our coal facility. When you look at the investments we made at the time that Clean Power Plan was not in place, but even so, we had modeled those over much shorter lives and really said even if this coal facility is on a shorter timetable would this still be the best investment for our customer, and the answer was yes, so we did proceed with those investments. On the generation side in terms of the capacity needs and the build out that we did in the Bakken even with what we've put in place, we still are projecting capacity shortfall here in 2017. So I guess, I believe that these were prudent investments. To the extent that we could, we did seek ADP in the states that we could for these investments and we were granted ADP, so far none of those projects have been denied and in the cases that we've completed. So does that answer the question?

Yes, you've covered the – yes, thank you very much. And then in terms of just in the construction material business, given the large amount of public – of the backlog that's been public as opposed to private, just in general I mean from a GDP economic cycle perspective, how sensitive should we think of that business being to a potential economic slowdown that some people might be worried about going forward? And then were you guys more resistant perhaps to what economic cycle because of your public exposure than other one. David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: Yeah, Paul, right now with the DOT budgets that we see out there the long term transportation bill just getting passed, we're not too concerned, but obviously if we have a slowdown in the economy, it definitely will affect us.

Sure, but it'll be probably less than – because it is public.... David C. Barney - President & Chief Executive Officer, Knife River Corporation, MDU Resources Group, Inc.: Obviously less than what we saw in 2008-2009.

Okay, great. Thanks a lot. Nathan W. Ring - Chief Accounting Officer, VP & Controller: Paul, excuse me, this is Nathan, just to go back to help clarify the bonus depreciation question that you had earlier, the election of bonus depreciation specific to the utility and I think you alluded to this a little bit, it may defer the use of some of those credits to later years which then could possibly expire. So what we are analyzing is this bonus depreciation play out compared to the expiration of those credits and whichever one is better for the utility that's one that we'll elect and so that's the decision process that we are going through.

Okay. Thanks so much. David L. Goodin - President, Chief Executive Officer & Director: Okay, thank you, Paul.

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

Hey, I just had one follow-up left, maybe this is for Martin. Back at the Analyst Day and then in the materials today you commented on examining the potential expansions of the midstream business outside of the Bakken region. Could you comment on kind of where you are looking, what's looking attractive in terms of what type of assets and regions, whether you are looking at organic expansions versus acquisitions and maybe how far down that path are you at this point? Martin A. Fritz - President & Chief Executive Officer, WBI Holdings, Inc., MDU Resources Group, Inc.: Hey Matt, thanks, good question. To give you a little background, we recently just brought on Keith Crawford as the Vice President of Business Development. Keith was formerly with Energy Transfer and Regency Partners to get us set up for this. We see within the next year or two in my opinion, I think there is going to be a lot of acquisition opportunities in the midstream space. What we would like to do is we've got a great engineering and back office and construction team and they are very good in the flat and rolling hills area, so we'd like to take them and apply it to other areas. Obviously I am agnostic, it's everything at a price, right, where the deal is, because typically the area is obviously like where we've got a strong gas strength. So obviously Marcellus Utica come to mind, it's one of the few places where they've adapted to the lower pricing and you can continue to – some producers produce profitably in natural gas space. Things like the Permian is probably a little over bought but some of the other Texas basins, those type of areas is what we would be looking at. Yes, we do try to sell organically outside, but it's really hard without a sort of step-in (42:33) acquisition. So the vision would be to get an acquisition in one of these areas and then from that build off organically from there on, so I hope that helps.

Very helpful, thanks Martin. David L. Goodin - President, Chief Executive Officer & Director: Thank you, Matt.

This call will be available for replay beginning at 1:00 PM Eastern today through 11:59 PM Eastern on February 18. The conference ID number for the replay is 9233329. Again, the conference ID number for the replay is 9233329. And at this time, there are no further questions. I would like to turn the conference back over to management for closing remarks. David L. Goodin - President, Chief Executive Officer & Director: Thank you, operator. As we noted earlier, we believe our utility, pipeline, midstream and construction businesses are well positioned for growth and we intend to continue to develop them to their full potential. We expect to create greater long-term value for our MDU Resources shareholders by focusing on the successful growth businesses. We also appreciate your participation on the call here today and thank you for your continued interest in MDU Resources. Thanks again.

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