X
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|
|
|
THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
|
Delaware
|
|
41-0423660
|
(State
or other jurisdiction of incorporation
or organization)
|
|
(I.R.S.
Employer Identification
No.)
|
2006
Annual Report
|
Company's
Annual Report on Form 10-K for the year ended December 31,
2006
|
ALJ
|
Administrative
Law Judge
|
Anadarko
|
Anadarko
Petroleum Corporation
|
APB
|
Accounting
Principles Board
|
APB
Opinion No. 28
|
Interim
Financial Reporting
|
Badger
Hills Project
|
Tongue
River-Badger Hills Project
|
Bbl
|
Barrel
of oil or other liquid hydrocarbons
|
Bcf
|
Billion
cubic feet
|
BER
|
Montana
Board of Environmental Review
|
Big
Stone Station
|
450-MW
coal-fired electric generating facility located near Big Stone City,
South
Dakota (22.7 percent ownership)
|
Big
Stone II
|
Proposed
600-MW coal-fired electric generating facility located near Big Stone
City, South Dakota (19.33 percent ownership)
|
BLM
|
Bureau
of Land Management
|
Brazilian
Transmission Lines
|
Company’s
equity method investment in companies owning ECTE, ENTE and
ERTE
|
Btu
|
British
thermal unit
|
Carib
Power
|
Carib
Power Management LLC
|
Cascade
|
Cascade
Natural Gas Corporation
|
CBNG
|
Coalbed
natural gas
|
CEM
|
Colorado
Energy Management, LLC, a direct wholly owned subsidiary of Centennial
Resources
|
Centennial
|
Centennial
Energy Holdings, Inc., a direct wholly owned subsidiary of the
Company
|
Centennial
Capital
|
Centennial
Holdings Capital LLC, a direct wholly owned subsidiary of
Centennial
|
Centennial
International
|
Centennial
Energy Resources International, Inc., a direct wholly owned subsidiary
of
Centennial Resources
|
Centennial
Power
|
Centennial
Power, Inc., a direct wholly owned subsidiary of Centennial
Resources
|
Centennial
Resources
|
Centennial
Energy Resources LLC, a direct wholly owned subsidiary of
Centennial
|
Clean
Air Act
|
Federal
Clean Air Act
|
Clean
Water Act
|
Federal
Clean Water Act
|
Colorado
Federal District Court
|
U.S.
District Court for the District of Colorado
|
Company
|
MDU
Resources Group, Inc.
|
D.C.
Appeals Court
|
U.S.
Court of Appeals for the District of Columbia Circuit
|
dk
|
Decatherm
|
DRC
|
Dakota
Resource Council
|
EBSR
|
Elk
Basin Storage Reservoir, one of Williston Basin's natural gas storage
reservoirs, which is located in Montana and Wyoming
|
ECTE
|
Empresa
Catarinense de Transmissão de Energia S.A.
|
EIS
|
Environmental
Impact Statement
|
ENTE
|
Empresa
Norte de Transmissão de Energia S.A.
|
EPA
|
U.S.
Environmental Protection Agency
|
ERTE
|
Empresa
Regional de Transmissão de Energia S.A.
|
Exchange
Act
|
Securities
Exchange Act of 1934, as amended
|
FASB
|
Financial
Accounting Standards Board
|
FERC
|
Federal
Energy Regulatory Commission
|
Fidelity
|
Fidelity
Exploration & Production Company, a direct wholly owned subsidiary of
WBI Holdings
|
FIN
|
FASB
Interpretation No.
|
FIN
48
|
Accounting
for Uncertainty in Income Taxes
|
Great
Plains
|
Great
Plains Natural Gas Co., a public utility division of the
Company
|
Grynberg
|
Jack
J. Grynberg
|
Hardin
Generating Facility
|
116-MW
coal-fired electric generating facility near Hardin,
Montana
|
Hartwell
|
Hartwell
Energy Limited Partnership
|
Howell
|
Howell
Petroleum Corporation, a wholly owned subsidiary of
Anadarko
|
Indenture
|
Indenture
dated as of December 15, 2003, as supplemented, from the Company
to The
Bank of New York, as Trustee
|
Innovatum
|
Innovatum
Inc., a former indirect wholly owned subsidiary of WBI Holdings (the
stock
and a portion of Innovatum’s assets were sold during the fourth quarter of
2006)
|
Knife
River
|
Knife
River Corporation, a direct wholly owned subsidiary of
Centennial
|
kW
|
Kilowatt
|
kWh
|
Kilowatt-hour
|
LWG
|
Lower
Willamette Group
|
MBbls
|
Thousand
barrels of oil or other liquid hydrocarbons
|
MBI
|
Morse
Bros., Inc., an indirect wholly owned subsidiary of Knife
River
|
Mcf
|
Thousand
cubic feet
|
MDU
Brasil
|
MDU
Brasil Ltda., an indirect wholly owned subsidiary of Centennial
International
|
MDU
Construction Services
|
MDU
Construction Services Group, Inc., a direct wholly owned subsidiary
of
Centennial
|
MMBtu
|
Million
Btu
|
MMcf
|
Million
cubic feet
|
MMdk
|
Million
decatherms
|
Montana-Dakota
|
Montana-Dakota
Utilities Co., a public utility division of the Company
|
Montana
DEQ
|
Montana
State Department of Environmental Quality
|
Montana
Federal District Court
|
U.S.
District Court for the District of Montana
|
Mortgage
|
Indenture
of Mortgage dated May 1, 1939, as supplemented, amended and restated,
from
the Company to The Bank of New York and Douglas J. MacInnes, successor
trustees
|
MPX
|
MPX
Termoceara Ltda. (49 percent ownership, sold in June
2005)
|
MTPSC
|
Montana
Public Service Commission
|
MW
|
Megawatt
|
ND
Health Department
|
North
Dakota Department of Health
|
NDPSC
|
North
Dakota Public Service Commission
|
NEPA
|
National
Environmental Policy Act
|
NHPA
|
National
Historic Preservation Act
|
Ninth
Circuit
|
U.S.
Ninth Circuit Court of Appeals
|
NPRC
|
Northern
Plains Resource Council
|
Order
on Rehearing
|
Order
on Rehearing and Compliance and Remanding Certain Issues for
Hearing
|
Oregon
DEQ
|
Oregon
State Department of Environmental Quality
|
Prairielands
|
Prairielands
Energy Marketing, Inc., an indirect wholly owned subsidiary of WBI
Holdings
|
SEC
|
U.S.
Securities and Exchange Commission
|
SEIS
|
Supplemental
Environmental Impact Statement
|
SFAS
|
Statement
of Financial Accounting Standards
|
SFAS
No. 87
|
Employers’
Accounting for Pensions
|
SFAS
No. 109
|
Accounting
for Income Taxes
|
SFAS
No. 142
|
Goodwill
and Other Intangible Assets
|
SFAS
No. 144
|
Accounting
for the Impairment or Disposal of Long-Lived Assets
|
SFAS
No. 157
|
Fair
Value Measurements
|
SFAS
No. 159
|
The
Fair Value Option for Financial Assets and Financial
Liabilities
|
SIP
|
State
Implementation Plan
|
TRWUA
|
Tongue
River Water Users’ Association
|
WBI
Holdings
|
WBI
Holdings, Inc., a direct wholly owned subsidiary of
Centennial
|
Williston
Basin
|
Williston
Basin Interstate Pipeline Company, an indirect wholly owned subsidiary
of
WBI Holdings
|
Wyoming
Federal District Court
|
U.S.
District Court for the District of
Wyoming
|
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
|
(In
thousands, except per share amounts)
|
||||||||||||
Operating
revenues:
|
|
|
|
|
|||||||||
Electric,
natural gas distribution and pipeline and energy services
|
$
|
195,488
|
$
|
170,589
|
$
|
463,500
|
$
|
461,640
|
|||||
Construction
services, natural gas and oil production, construction materials
and
mining, and other
|
786,877
|
790,846
|
1,306,356
|
1,303,313
|
|||||||||
|
982,365
|
961,435
|
1,769,856
|
1,764,953
|
|||||||||
Operating
expenses:
|
|||||||||||||
Fuel
and purchased power
|
15,489
|
15,940
|
32,607
|
32,075
|
|||||||||
Purchased
natural gas sold
|
40,294
|
39,361
|
139,129
|
166,321
|
|||||||||
Operation
and maintenance:
|
|||||||||||||
Electric,
natural gas distribution and pipeline and energy services
|
46,659
|
42,816
|
91,315
|
80,102
|
|||||||||
Construction
services, natural gas and oil production, construction materials
and
mining, independent power production and other
|
629,782
|
644,272
|
1,075,631
|
1,083,121
|
|||||||||
Depreciation,
depletion and amortization
|
70,044
|
64,840
|
139,846
|
125,821
|
|||||||||
Taxes,
other than income
|
37,312
|
31,976
|
69,574
|
64,216
|
|||||||||
|
839,580
|
839,205
|
1,548,102
|
1,551,656
|
|||||||||
|
|||||||||||||
Operating
income
|
142,785
|
122,230
|
221,754
|
213,297
|
|||||||||
Earnings
from equity method investments
|
4,030
|
2,900
|
6,084
|
6,102
|
|||||||||
|
|||||||||||||
Other
income
|
883
|
2,881
|
2,215
|
5,263
|
|||||||||
|
|||||||||||||
Interest
expense
|
17,478
|
19,110
|
34,854
|
33,162
|
|||||||||
|
|||||||||||||
Income
before income taxes
|
130,220
|
108,901
|
195,199
|
191,500
|
|||||||||
|
|||||||||||||
Income
taxes
|
48,184
|
40,450
|
71,756
|
70,603
|
|||||||||
|
|||||||||||||
Income
from continuing operations
|
82,036
|
68,451
|
123,443
|
120,897
|
|||||||||
Income
from discontinued operations, net of
tax
(Note
3)
|
7,439
|
2,991
|
12,694
|
3,792
|
|||||||||
Net
income
|
89,475
|
71,442
|
136,137
|
124,689
|
|||||||||
|
|||||||||||||
Dividends
on preferred stocks
|
171
|
171
|
343
|
343
|
|||||||||
|
|||||||||||||
Earnings
on common stock
|
$
|
89,304
|
$
|
71,271
|
$
|
135,794
|
$
|
124,346
|
Earnings
per common share -- basic
|
|||||||||||||
Earnings
before discontinued operations
|
$
|
.45
|
$
|
.38
|
$
|
.68
|
$
|
.67
|
|||||
Discontinued
operations, net of tax
|
.04
|
.02
|
.07
|
.02
|
|||||||||
Earnings
per common share -- basic
|
$
|
.49
|
$
|
.40
|
$
|
.75
|
$
|
.69
|
|||||
Earnings
per common share -- diluted
|
|||||||||||||
Earnings
before discontinued operations
|
$
|
.45
|
$
|
.38
|
$
|
.67
|
$
|
.67
|
|||||
Discontinued
operations, net of tax
|
.04
|
.01
|
.07
|
.02
|
|||||||||
Earnings
per common share -- diluted
|
$
|
.49
|
$
|
.39
|
$
|
.74
|
$
|
.69
|
|||||
Dividends
per common share
|
$
|
.1350
|
$
|
.1267
|
$
|
.2700
|
$
|
.2534
|
|||||
Weighted
average common shares outstanding -- basic
|
181,847
|
179,911
|
181,595
|
179,867
|
|||||||||
Weighted
average common shares outstanding -- diluted
|
182,746
|
181,107
|
182,469
|
181,050
|
|||||||||
|
|
|
June
30,
2007
|
|
June
30,
2006
|
|
December
31,
2006
|
|||||
(In
thousands, except shares and per share amounts)
|
|||||||||||
ASSETS
|
|
|
|
|
|
|
|||||
Current
assets:
|
|
|
|
|
|
|
|||||
Cash
and cash equivalents
|
|
$
|
68,134
|
|
$
|
114,787
|
$
|
73,078
|
|
||
Receivables,
net
|
|
|
642,559
|
|
|
643,439
|
|
622,478
|
|
||
Inventories
|
|
|
221,179
|
|
|
206,682
|
|
204,440
|
|
||
Deferred
income taxes
|
|
|
---
|
|
|
11,637
|
|
---
|
|
||
Prepayments
and other current assets
|
95,235
|
90,898
|
81,083
|
||||||||
Current
assets held for sale and related to discontinued operations
|
|
|
69,662
|
|
|
13,033
|
|
12,656
|
|
||
|
|
|
1,096,769
|
|
|
1,080,476
|
|
993,735
|
|
||
Investments
|
|
|
136,585
|
|
|
106,226
|
|
155,111
|
|
||
Property,
plant and equipment
|
|
|
4,953,171
|
|
|
4,502,534
|
|
4,727,725
|
|
||
Less
accumulated depreciation, depletion and amortization
|
|
|
1,851,825
|
|
|
1,627,887
|
|
1,735,302
|
|
||
|
|
|
3,101,346
|
|
|
2,874,647
|
|
2,992,423
|
|
||
Deferred
charges and other assets:
|
|
|
|
|
|
|
|||||
Goodwill
|
|
|
227,029
|
|
|
227,483
|
|
224,298
|
|
||
Other
intangible assets, net
|
17,150
|
17,787
|
22,802
|
|
|||||||
Other
|
|
|
113,193
|
|
|
100,785
|
|
103,840
|
|||
Noncurrent
assets held for sale and related to discontinued operations
|
|
|
410,662
|
|
|
422,025
|
|
411,265
|
|
||
|
|
|
768,034
|
|
|
768,080
|
|
762,205
|
|
||
|
|
$
|
5,102,734
|
|
$
|
4,829,429
|
$
|
4,903,474
|
|
||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|||
Current
liabilities:
|
|
|
|
|
|
|
|
|
|||
Long-term
debt due within one year
|
|
$
|
131,661
|
|
$
|
159,168
|
$
|
84,034
|
|
||
Accounts
payable
|
|
|
284,208
|
|
|
290,166
|
|
289,836
|
|
||
Taxes
payable
|
|
|
38,769
|
|
|
31,248
|
|
54,290
|
|
||
Deferred
income taxes
|
1,396
|
---
|
5,969
|
||||||||
Dividends
payable
|
24,725
|
22,967
|
24,606
|
|
|||||||
Other
accrued liabilities
|
|
|
155,890
|
|
|
154,908
|
|
180,327
|
|||
Current
liabilities held for sale and related to discontinued operations
|
|
|
14,156
|
|
|
7,986
|
|
14,900
|
|
||
|
|
|
650,805
|
|
|
666,443
|
|
653,962
|
|
||
Long-term
debt
|
|
|
1,224,286
|
|
|
1,299,175
|
|
1,170,548
|
|
||
Deferred
credits and other liabilities:
|
|
|
|
|
|
|
|||||
Deferred
income taxes
|
|
|
570,590
|
|
|
543,278
|
|
546,602
|
|
||
Other
liabilities
|
349,895
|
279,617
|
336,916
|
||||||||
Noncurrent
liabilities held for sale and related to discontinued operations
|
|
|
35,488
|
|
|
30,466
|
|
30,533
|
|
||
|
|
|
955,973
|
|
|
853,361
|
|
914,051
|
|
||
Commitments
and contingencies
|
|
|
|
|
|
|
|||||
Stockholders’
equity:
|
|
|
|
|
|
|
|||||
Preferred
stocks
|
|
|
15,000
|
|
|
15,000
|
|
15,000
|
|
||
Common
stockholders’ equity:
|
|
|
|
|
|
|
|
||||
Common
stock
|
|
|
|
|
|
|
|||||
Shares
issued -- $1.00 par value, 182,416,029 at June 30, 2007, 180,515,943
at
June 30, 2006 and 181,557,543 at December 31, 2006
|
|
|
182,416
|
|
180,516
|
|
181,558
|
||||
Other
paid-in capital
|
|
|
895,838
|
|
856,366
|
|
874,253
|
||||
Retained
earnings
|
|
|
1,190,935
|
|
963,194
|
|
1,104,210
|
||||
Accumulated
other comprehensive loss
|
|
|
(8,893
|
)
|
|
(1,000
|
)
|
|
(6,482
|
)
|
|
Treasury
stock at cost - 538,921 shares
at
June 30, 2007, June 30, 2006 and December 31, 2006
|
|
|
(3,626
|
)
|
|
(3,626
|
)
|
|
(3,626
|
)
|
|
Total
common stockholders’ equity
|
|
|
2,256,670
|
|
1,995,450
|
|
2,149,913
|
||||
Total
stockholders’ equity
|
|
|
2,271,670
|
|
2,010,450
|
|
2,164,913
|
||||
|
|
$
|
5,102,734
|
$
|
4,829,429
|
$
|
4,903,474
|
|
Six
Months Ended
June
30,
|
||||||
|
2007
|
2006
|
|||||
|
(In
thousands)
|
||||||
Operating
activities:
|
|||||||
Net
income
|
$
|
136,137
|
$
|
124,689
|
|||
Income
from discontinued operations, net of tax
|
12,694
|
3,792
|
|||||
Income
from continuing operations
|
123,443
|
120,897
|
|||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation,
depletion and amortization
|
139,846
|
125,821
|
|||||
Earnings,
net of distributions, from equity method investments
|
(722
|
)
|
(3,107
|
)
|
|||
Deferred
income taxes
|
24,756
|
15,942
|
|||||
Changes
in current assets and liabilities, net of acquisitions:
|
|||||||
Receivables
|
(14,083
|
)
|
(31,563
|
)
|
|||
Inventories
|
(16,690
|
)
|
(33,173
|
)
|
|||
Other
current assets
|
(25,259
|
)
|
(37,513
|
)
|
|||
Accounts
payable
|
(11,644
|
)
|
29,003
|
||||
Other
current liabilities
|
(38,040
|
)
|
(10,866
|
)
|
|||
Other
noncurrent changes
|
(1,107
|
)
|
5,792
|
||||
Net
cash provided by continuing operations
|
180,500
|
181,233
|
|||||
Net
cash provided by (used in) discontinued operations
|
(41,884
|
)
|
10,234
|
||||
Net
cash provided by operating activities
|
138,616
|
191,467
|
|||||
|
|||||||
Investing
activities:
|
|||||||
Capital
expenditures
|
(242,729
|
)
|
(240,606
|
)
|
|||
Acquisitions,
net of cash acquired
|
(329
|
)
|
(109,250
|
)
|
|||
Net
proceeds from sale or disposition of property
|
10,848
|
14,878
|
|||||
Investments
|
17,309
|
(5,184
|
)
|
||||
Net
cash used in continuing operations
|
(214,901
|
)
|
(340,162
|
)
|
|||
Net
cash used in discontinued operations
|
(1,379
|
)
|
(38,119
|
)
|
|||
Net
cash used in investing activities
|
(216,280
|
)
|
(378,281
|
)
|
|||
|
|||||||
Financing
activities:
|
|||||||
Issuance
of long-term debt
|
186,578
|
335,653
|
|||||
Repayment
of long-term debt
|
(85,028
|
)
|
(97,158
|
)
|
|||
Proceeds
from issuance of common stock
|
15,775
|
2,709
|
|||||
Dividends
paid
|
(49,300
|
)
|
(45,914
|
)
|
|||
Tax
benefit on stock-based compensation
|
4,505
|
3,167
|
|||||
Net
cash provided by continuing operations
|
72,530
|
198,457
|
|||||
Net
cash provided by discontinued operations
|
---
|
---
|
|||||
Net
cash provided by financing activities
|
72,530
|
198,457
|
|||||
Effect
of exchange rate changes on cash and cash
equivalents
|
190
|
(2,354
|
)
|
||||
Increase
(decrease) in cash and cash equivalents
|
(4,944
|
)
|
9,289
|
||||
Cash
and cash equivalents -- beginning of year
|
73,078
|
105,498
|
|||||
Cash
and cash equivalents -- end of period
|
$
|
68,134
|
$
|
114,787
|
|
Three
Months
Ended
June
30,
|
Six
Months
Ended
June
30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
|
(In
thousands)
|
||||||||||||
Operating
revenues
|
$
|
439
|
$
|
632
|
$
|
689
|
$
|
1,142
|
|||||
Income
(loss) from discontinued operations before income tax expense
(benefit)
|
104
|
(389
|
)
|
28
|
(862
|
)
|
|||||||
Income
tax expense (benefit)
|
15
|
(116
|
)
|
(29
|
)
|
(265
|
)
|
||||||
Income
(loss) from discontinued operations, net of tax
|
$
|
89
|
$
|
(273
|
)
|
$
|
57
|
$
|
(597
|
)
|
|
Three
Months
Ended
June
30,
|
Six
Months
Ended
June
30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
|
(In
thousands)
|
||||||||||||
Operating
revenues
|
$
|
64,291
|
$
|
11,716
|
$
|
98,887
|
$
|
22,982
|
|||||
Income
from discontinued operations before income tax expense
(benefit)
|
9,532
|
2,540
|
16,923
|
3,031
|
|||||||||
Income
tax expense (benefit)
|
2,182
|
(724
|
)
|
4,286
|
(1,358
|
)
|
|||||||
Income
from discontinued operations, net of tax
|
$
|
7,350
|
$
|
3,264
|
$
|
12,637
|
$
|
4,389
|
June
30,
2007
|
June
30,
2006
|
December
31, 2006
|
||||||||
(In
thousands)
|
||||||||||
Cash
and cash equivalents
|
$
|
1,575
|
$
|
1,911
|
$
|
1,878
|
||||
Receivables,
net
|
7,878
|
7,753
|
8,307
|
|||||||
Inventories
|
555
|
1,064
|
490
|
|||||||
Prepayments
and other current assets
|
59,654
|
2,305
|
1,981
|
|||||||
Total
current assets held for sale and related
to
discontinued
operations
|
$
|
69,662
|
$
|
13,033
|
$
|
12,656
|
||||
Net
property, plant and equipment
|
$
|
391,708
|
$
|
396,434
|
$
|
390,679
|
||||
Goodwill
|
11,167
|
15,472
|
11,167
|
|||||||
Other
intangible assets, net
|
7,241
|
7,763
|
7,162
|
|||||||
Other
|
546
|
2,356
|
2,257
|
|||||||
Total
noncurrent assets held for sale and related
to
discontinued
operations
|
$
|
410,662
|
$
|
422,025
|
$
|
411,265
|
||||
Accounts
payable
|
$
|
7,264
|
$
|
4,785
|
$
|
11,557
|
||||
Other
accrued liabilities
|
6,892
|
3,201
|
3,343
|
|||||||
Total
current liabilities held for sale and related
to
discontinued
operations
|
$
|
14,156
|
$
|
7,986
|
$
|
14,900
|
||||
Deferred
income taxes
|
$
|
32,888
|
$
|
28,149
|
$
|
27,956
|
||||
Other
liabilities
|
2,600
|
2,317
|
2,577
|
|||||||
Total
noncurrent liabilities held for sale and
related to
discontinued
operations
|
$
|
35,488
|
$
|
30,466
|
$
|
30,533
|
|
|
Six
Months Ended
June
30,
|
|||||||||
|
|
2007
|
|
2006
|
|
||||||
|
(In
thousands)
|
||||||||||
Interest,
net of amount capitalized
|
$
|
35,028
|
$
|
27,988
|
|||||||
Income
taxes
|
$
|
113,919
|
$ |
78,382
|
|
Three
Months Ended
June
30,
|
|||||
|
2007
|
|
2006
|
|||
(In
thousands)
|
||||||
Net
income
|
$ |
89,475
|
$
|
71,442
|
||
Other
comprehensive income:
|
||||||
Net
unrealized gain on derivative instruments qualifying as
hedges:
|
||||||
Net
unrealized gain on derivative instruments arising during the period,
net
of tax of $6,096 and $4,051 in 2007 and 2006, respectively
|
9,739
|
6,471
|
||||
Less:
Reclassification adjustment for gain on derivative instruments included
in
net income, net of tax of $1,509 and $1,033 in 2007 and 2006,
respectively
|
2,411
|
1,650
|
||||
Net
unrealized gain on derivative instruments qualifying as
hedges
|
7,328
|
4,821
|
||||
Foreign
currency translation adjustment
|
3,576
|
(2,176
|
)
|
|||
10,904
|
2,645
|
|||||
Comprehensive
income
|
$ |
100,379
|
$
|
74,087
|
|
Six
Months Ended
June
30,
|
|||||
|
2007
|
|
2006
|
|||
(In
thousands)
|
||||||
Net
income
|
$ |
136,137
|
$
|
124,689
|
||
Other
comprehensive income (loss):
|
||||||
Net
unrealized gain (loss) on derivative instruments qualifying as
hedges:
|
||||||
Net
unrealized gain on derivative instruments arising during the period,
net
of tax of $1,204 and $17,652 in 2007 and 2006, respectively
|
1,923
|
28,197
|
||||
Less:
Reclassification adjustment for gain (loss) on derivative instruments
included in net income, net of tax of $6,272 and $4,254 in 2007 and
2006,
respectively
|
10,018
|
(6,796
|
) | |||
Net
unrealized gain (loss) on derivative instruments qualifying as
hedges
|
(8,095
|
) |
34,993
|
|||
Foreign
currency translation adjustment
|
5,684
|
(2,177
|
) | |||
(2,411
|
) |
32,816
|
||||
Comprehensive
income
|
$ |
133,726
|
$
|
157,505
|
|
Balance
|
Goodwill
|
Balance
|
|||||||
|
as
of
|
Acquired
|
as
of
|
|||||||
Six
Months Ended
|
January
1,
|
During
|
June
30,
|
|||||||
June
30, 2007
|
2007
|
the
Year*
|
2007
|
|||||||
|
(In
thousands)
|
|||||||||
Electric
|
$ |
---
|
$ |
---
|
$ |
---
|
||||
Natural
gas distribution
|
---
|
---
|
---
|
|||||||
Construction
services
|
86,942
|
3,596
|
90,538
|
|||||||
Pipeline
and energy services
|
1,159
|
---
|
1,159
|
|||||||
Natural
gas and oil production
|
---
|
---
|
---
|
|||||||
Construction
materials and mining
|
136,197
|
(865)
|
135,332
|
|||||||
Independent
power production
|
---
|
---
|
---
|
|||||||
Other
|
---
|
---
|
---
|
|||||||
Total
|
$ |
224,298
|
$ |
2,731
|
$ |
227,029
|
||||
* Includes purchase price adjustments that were not material related to acquisitions in a prior period. | ||||||||||
|
||||||||||
|
Balance
|
Goodwill
|
Balance
|
|||||||
|
as
of
|
Acquired
|
as
of
|
|||||||
Six
Months Ended
|
January
1,
|
During
|
June
30,
|
|||||||
June
30, 2006
|
2006
|
the
Year*
|
2006
|
|||||||
(In
thousands)
|
||||||||||
Electric
|
$
|
---
|
$
|
---
|
$
|
---
|
||||
Natural
gas distribution
|
---
|
---
|
---
|
|||||||
Construction
services
|
80,970
|
5,981
|
86,951
|
|||||||
Pipeline
and energy services
|
1,159
|
---
|
1,159
|
|||||||
Natural
gas and oil production
|
---
|
---
|
---
|
|||||||
Construction
materials and mining
|
133,264
|
6,109
|
139,373
|
|||||||
Independent
power production
|
---
|
---
|
---
|
|||||||
Other
|
---
|
---
|
---
|
|||||||
Total
|
$
|
215,393
|
$
|
12,090
|
$
|
227,483
|
||||
* Includes
purchase price adjustments that were not material related to acquisitions
in a prior period.
|
Year
Ended
December
31, 2006
|
Balance
as
of
January 1,
2006
|
Goodwill
Acquired
During
the Year*
|
Balance
as
of
December
31, 2006
|
|||||||
(In
thousands)
|
||||||||||
Electric
|
$
|
---
|
$
|
---
|
$
|
---
|
||||
Natural
gas distribution
|
---
|
---
|
---
|
|||||||
Construction
services
|
80,970
|
5,972
|
86,942
|
|||||||
Pipeline
and energy services
|
1,159
|
---
|
1,159
|
|||||||
Natural
gas and oil production
|
---
|
---
|
---
|
|||||||
Construction
materials and mining
|
133,264
|
2,933
|
136,197
|
|||||||
Independent
power production
|
---
|
---
|
---
|
|||||||
Other
|
---
|
---
|
---
|
|||||||
Total
|
$
|
215,393
|
$
|
8,905
|
$
|
224,298
|
*
|
Includes
purchase price adjustments that were not material related to acquisitions
in a prior period.
|
|
June
30,
2007
|
June
30,
2006
|
December
31,
2006
|
||||||||||
|
(In
thousands)
|
||||||||||||
Amortizable
intangible assets:
|
|
||||||||||||
Customer
relationships
|
$
|
13,959
|
$
|
6,900
|
$
|
13,030
|
|||||||
Accumulated
amortization
|
(3,234
|
)
|
(855
|
)
|
(1,890
|
)
|
|||||||
10,725
|
6,045
|
11,140
|
|||||||||||
Noncompete
agreements
|
7,434
|
11,984
|
12,886
|
||||||||||
Accumulated
amortization
|
(2,926
|
)
|
(8,900
|
)
|
(8,540
|
)
|
|||||||
|
4,508
|
3,084
|
4,346
|
||||||||||
Acquired
contracts
|
1,186
|
8,164
|
8,307
|
||||||||||
Accumulated
amortization
|
(1,156
|
)
|
(3,802
|
)
|
(4,646
|
)
|
|||||||
|
30
|
4,362
|
3,661
|
||||||||||
Other
|
2,559
|
4,662
|
5,062
|
||||||||||
Accumulated
amortization
|
(672
|
)
|
(890
|
)
|
(1,407
|
)
|
|||||||
|
1,887
|
3,772
|
3,655
|
||||||||||
Unamortizable
intangible assets
|
---
|
524
|
---
|
||||||||||
Total
|
$
|
17,150
|
$
|
17,787
|
$
|
22,802
|
15.
|
Uncertainty
in income taxes
|
|
Inter-
|
|||||||||
Three
Months
|
External
Operating
|
segment
Operating
|
Earnings
on Common
|
|||||||
Ended
June 30, 2007
|
Revenues
|
Revenues
|
Stock
|
|||||||
|
(In
thousands)
|
|||||||||
Electric
|
$
|
44,591
|
$
|
---
|
$
|
3,568
|
||||
Natural
gas distribution
|
53,403
|
---
|
(559
|
)
|
||||||
Pipeline
and energy services
|
97,494
|
14,660
|
6,228
|
|||||||
|
195,488
|
14,660
|
9,237
|
|||||||
Construction
services
|
263,483
|
349
|
13,026
|
|||||||
Natural
gas and oil production
|
67,924
|
59,471
|
35,166
|
|||||||
Construction
materials and mining
|
455,470
|
---
|
25,541
|
|||||||
Independent
power production
|
---
|
---
|
5,971
|
|||||||
Other
|
---
|
2,440
|
363
|
|||||||
786,877
|
62,260
|
80,067
|
||||||||
Intersegment
eliminations
|
---
|
(76,920
|
)
|
---
|
||||||
Total
|
$
|
982,365
|
$
|
---
|
$
|
89,304
|
|
|
Inter-
|
|
|||||||
|
External
|
segment
|
Earnings
|
|||||||
Three
Months
|
Operating
|
Operating
|
on
Common
|
|||||||
Ended
June 30, 2006
|
Revenues
|
Revenues
|
Stock
|
|||||||
|
(In
thousands)
|
|||||||||
Electric
|
$
|
40,875
|
$
|
---
|
$
|
509
|
||||
Natural
gas distribution
|
45,845
|
---
|
(2,530
|
)
|
||||||
Pipeline
and energy services
|
83,869
|
18,568
|
5,580
|
|||||||
|
170,589
|
18,568
|
3,559
|
|||||||
Construction
services
|
243,062
|
136
|
9,679
|
|||||||
Natural
gas and oil production
|
62,906
|
51,206
|
30,979
|
|||||||
Construction
materials and mining
|
484,878
|
---
|
25,311
|
|||||||
Independent
power production
|
---
|
---
|
1,504
|
|||||||
Other
|
---
|
2,318
|
239
|
|||||||
|
790,846
|
53,660
|
67,712
|
|||||||
Intersegment
eliminations
|
---
|
(72,228
|
)
|
---
|
||||||
Total
|
$
|
961,435
|
$
|
---
|
$
|
71,271
|
|
Inter-
|
|||||||||
Six
Months
|
External
Operating
|
segment
Operating
|
Earnings
on Common
|
|||||||
Ended
June 30, 2007
|
Revenues
|
Revenues
|
Stock
|
|||||||
|
(In
thousands)
|
|||||||||
Electric
|
$
|
91,695
|
$
|
---
|
$
|
7,353
|
||||
Natural
gas distribution
|
189,465
|
---
|
5,584
|
|||||||
Pipeline
and energy services
|
182,340
|
42,952
|
11,938
|
|||||||
|
463,500
|
42,952
|
24,875
|
|||||||
Construction
services
|
500,120
|
474
|
20,260
|
|||||||
Natural
gas and oil production
|
123,193
|
122,781
|
65,787
|
|||||||
Construction
materials and mining
|
683,043
|
---
|
15,745
|
|||||||
Independent
power production
|
---
|
---
|
8,488
|
|||||||
Other
|
---
|
4,880
|
639
|
|||||||
1,306,356
|
128,135
|
110,919
|
||||||||
Intersegment
eliminations
|
---
|
(171,087
|
)
|
---
|
||||||
Total
|
$
|
1,769,856
|
$
|
---
|
$
|
135,794
|
|
|
Inter-
|
|
|||||||
|
External
|
segment
|
Earnings
|
|||||||
Six
Months
|
Operating
|
Operating
|
on
Common
|
|||||||
Ended
June 30, 2006
|
Revenues
|
Revenues
|
Stock
|
|||||||
|
(In
thousands)
|
|||||||||
Electric
|
$
|
85,905
|
$
|
---
|
$
|
4,305
|
||||
Natural
gas distribution
|
198,124
|
---
|
2,793
|
|||||||
Pipeline
and energy services
|
177,611
|
51,374
|
10,149
|
|||||||
|
461,640
|
51,374
|
17,247
|
|||||||
Construction
services
|
466,747
|
246
|
15,077
|
|||||||
Natural
gas and oil production
|
118,004
|
124,498
|
72,237
|
|||||||
Construction
materials and mining
|
718,562
|
---
|
16,437
|
|||||||
Independent
power production
|
---
|
---
|
2,846
|
|||||||
Other
|
---
|
4,087
|
502
|
|||||||
|
1,303,313
|
128,831
|
107,099
|
|||||||
Intersegment
eliminations
|
---
|
(180,205
|
)
|
---
|
||||||
Total
|
$
|
1,764,953
|
$
|
---
|
$
|
124,346
|
Three
Months
|
Pension
Benefits
|
Other
Postretirement
Benefits
|
||||||||||||||||||||
Ended
June 30,
|
2007
|
2006
|
2007
|
2006
|
||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||
Components
of net periodic benefit cost:
|
|
|
|
|||||||||||||||||||
Service
cost
|
$
|
2,011
|
$
|
2,301
|
$
|
447
|
$
|
472
|
||||||||||||||
Interest
cost
|
4,222
|
4,074
|
1,180
|
928
|
||||||||||||||||||
Expected
return on assets
|
(5,094
|
)
|
(4,718
|
)
|
(1,279
|
)
|
(926
|
)
|
||||||||||||||
Amortization
of prior service cost
|
207
|
257
|
14
|
12
|
||||||||||||||||||
Recognized
net actuarial (gain) loss
|
426
|
509
|
164
|
(85
|
)
|
|||||||||||||||||
Amortization
of net transition obligation (asset)
|
---
|
(1
|
)
|
635
|
531
|
|||||||||||||||||
Net
periodic benefit cost, including amount capitalized
|
1,772
|
2,422
|
1,161
|
932
|
||||||||||||||||||
Less
amount capitalized
|
217
|
225
|
90
|
79
|
||||||||||||||||||
Net
periodic benefit cost
|
$
|
1,555
|
$
|
2,197
|
$
|
1,071
|
$
|
853
|
Six
Months
|
Pension
Benefits
|
Other
Postretirement
Benefits
|
|||||||||||
Ended
June 30,
|
2007
|
2006
|
2007
|
2006
|
|||||||||
(In
thousands)
|
|||||||||||||
Components
of net periodic benefit cost:
|
|||||||||||||
Service
cost
|
$
|
4,261
|
$
|
4,602
|
$
|
980
|
$
|
943
|
|||||
Interest
cost
|
8,363
|
8,148
|
2,118
|
1,857
|
|||||||||
Expected
return on assets
|
(10,164
|
)
|
(9,436
|
)
|
(2,372
|
)
|
(1,851
|
)
|
|||||
Amortization
of prior service cost
|
416
|
513
|
25
|
23
|
|||||||||
Recognized
net actuarial (gain) loss
|
500
|
1,018
|
(149
|
)
|
(169
|
)
|
|||||||
Amortization
of net transition obligation (asset)
|
---
|
(2
|
)
|
1,166
|
1,062
|
||||||||
Net
periodic benefit cost, including amount capitalized
|
3,376
|
4,843
|
1,768
|
1,865
|
|||||||||
Less
amount capitalized
|
368
|
381
|
141
|
125
|
|||||||||
Net
periodic benefit cost
|
$
|
3,008
|
$
|
4,462
|
$
|
1,627
|
$
|
1,740
|
20.
|
Subsequent
events
|
AND
RESULTS OF OPERATIONS
|
· |
Organic
growth as well as a continued disciplined approach to the acquisition
of
well-managed companies and
properties
|
· |
The
elimination of system-wide cost redundancies through increased focus
on
integration of operations and standardization and consolidation of
various
support services and functions across companies within the
organization
|
· |
The
development of projects that are accretive to earnings per share
and
return on invested capital
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2007
|
|
2006
|
|
2007
|
|
2006
|
||||||||||
(Dollars
in millions, where applicable)
|
||||||||||||||||
Electric
|
$
|
3.6
|
$
|
.5
|
$
|
7.4
|
$ |
4.3
|
||||||||
Natural
gas distribution
|
(.6
|
)
|
(2.5
|
)
|
5.6
|
2.8
|
||||||||||
Construction
services
|
13.0
|
9.7
|
20.3
|
15.1
|
||||||||||||
Pipeline
and energy services
|
6.1
|
5.9
|
11.8
|
10.8
|
||||||||||||
Natural
gas and oil production
|
35.2
|
31.0
|
65.8
|
72.2
|
||||||||||||
Construction
materials and mining
|
25.5
|
25.3
|
15.7
|
16.4
|
||||||||||||
Independent
power production
|
(1.4
|
)
|
(1.8
|
)
|
(4.1
|
)
|
(1.6)
|
|||||||||
Other
|
.4
|
.2
|
.6
|
.5
|
||||||||||||
Earnings
before discontinued operations
|
81.8
|
68.3
|
123.1
|
120.5
|
||||||||||||
Income
from discontinued operations, net of tax
|
7.5
|
3.0
|
12.7
|
3.8
|
||||||||||||
Earnings
on common stock
|
$
|
89.3
|
$
|
71.3
|
$
|
135.8
|
$ |
124.3
|
||||||||
Earnings
per common share - basic:
|
||||||||||||||||
Earnings
before discontinued operations
|
$
|
.45
|
$
|
.38
|
$
|
.68
|
$ |
.67
|
||||||||
Discontinued
operations, net of tax
|
.04
|
.02
|
.07
|
.02
|
||||||||||||
Earnings
per common share - basic
|
$
|
.49
|
$
|
.40
|
$
|
.75
|
$ |
.69
|
||||||||
Earnings
per common share - diluted:
|
||||||||||||||||
Earnings
before discontinued operations
|
$
|
.45
|
$
|
.38
|
$
|
.67
|
$ |
.67
|
||||||||
Discontinued
operations, net of tax
|
.04
|
.01
|
.07
|
.02
|
||||||||||||
Earnings
per common share - diluted
|
$
|
.49
|
$
|
.39
|
$
|
.74
|
$ |
.69
|
||||||||
Return
on average common equity for the 12 months ended
|
15.2
|
%
|
15.1%
|
· |
Increased
combined natural gas and oil production of 4 percent, partially offset
by
higher depreciation, depletion and amortization expense at the natural
gas
and oil production business
|
· |
Increased
income from discontinued operations, net of tax, largely the absence
in
2007 of depreciation expense related to assets held for sale and
earnings
related to an electric generating facility construction project at
the
independent power production
business
|
· |
Higher
earnings from increased retail sales volumes and margins and decreased
operation and maintenance expense at the electric
business
|
· |
Higher
earnings from increased construction margins and equipment sales
and
rentals at the construction services
business
|
· |
Increased
income from discontinued operations, net of tax, largely the absence
in
2007 of depreciation expense related to assets held for sale, earnings
related to an electric generating facility construction project and
higher
earnings from the Hardin Generating Station at the independent power
production business
|
· |
Higher
earnings from construction services business, as previously
discussed
|
· |
Higher
earnings from increased retail sales volumes and margins at the electric
business
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
|
2006
|
|
2007
|
|
2006
|
|||||||
(Dollars
in millions, where applicable)
|
|||||||||||||
Operating
revenues
|
$
|
44.6
|
$
|
40.9
|
$
|
91.7
|
$
|
85.9
|
|||||
Operating
expenses:
|
|||||||||||||
Fuel
and purchased power
|
15.5
|
16.0
|
32.6
|
32.0
|
|||||||||
Operation
and maintenance
|
14.5
|
15.7
|
29.5
|
29.7
|
|||||||||
Depreciation,
depletion and amortization
|
5.6
|
5.3
|
11.2
|
10.6
|
|||||||||
Taxes,
other than income
|
2.1
|
2.0
|
4.3
|
4.3
|
|||||||||
|
37.7
|
39.0
|
77.6
|
76.6
|
|||||||||
Operating
income
|
6.9
|
1.9
|
14.1
|
9.3
|
|||||||||
Earnings
|
$
|
3.6
|
$
|
.5
|
$
|
7.4
|
$
|
4.3
|
|||||
Retail
sales (million kWh)
|
596.3
|
563.0
|
1,242.0
|
1,175.9
|
|||||||||
Sales
for resale (million kWh)
|
47.0
|
85.3
|
91.2
|
251.7
|
|||||||||
Average
cost of fuel and purchased power per kWh
|
$
|
.024
|
$
|
.024
|
$
|
.024
|
$
|
.022
|
· |
Higher
retail sales volumes and margins
|
· |
Decreased
operation and maintenance expense of $800,000 (after tax), largely
due to
lower maintenance expense at certain electric generating
stations
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(Dollars
in millions, where applicable)
|
|||||||||||||
Operating
revenues
|
$
|
53.4
|
$
|
45.8
|
$
|
189.5
|
$
|
198.1
|
|||||
Operating
expenses:
|
|||||||||||||
Purchased
natural gas sold
|
34.3
|
33.4
|
140.5
|
161.8
|
|||||||||
Operation
and maintenance
|
15.6
|
13.0
|
31.2
|
24.8
|
|||||||||
Depreciation,
depletion and amortization
|
2.5
|
2.4
|
5.0
|
4.8
|
|||||||||
Taxes,
other than income
|
1.5
|
1.5
|
3.2
|
3.0
|
|||||||||
|
53.9
|
50.3
|
179.9
|
194.4
|
|||||||||
Operating
income (loss)
|
(.5
|
)
|
(4.5
|
)
|
9.6
|
3.7
|
|||||||
Earnings
(loss)
|
$
|
(.6
|
)
|
$
|
(2.5
|
)
|
$
|
5.6
|
$
|
2.8
|
|||
Volumes
(MMdk):
|
|||||||||||||
Sales
|
5.3
|
4.6
|
21.2
|
18.8
|
|||||||||
Transportation
|
2.9
|
2.8
|
6.3
|
7.2
|
|||||||||
Total
throughput
|
8.2
|
7.4
|
27.5
|
26.0
|
|||||||||
Degree
days (% of normal)*
|
94
|
%
|
68
|
%
|
94
|
%
|
82
|
%
|
|||||
Average
cost of natural gas, including transportation, per
dk
|
$
|
6.44
|
$
|
7.29
|
$
|
6.64
|
$
|
8.59
|
· |
Decreased
payroll and benefit-related costs of $1.0 million (after tax), including
the absence in 2007 of the 2006 early retirement program
costs
|
· |
Increased
retail sales volumes, resulting from 39 percent colder weather than
last
year
|
· |
Higher
nonregulated energy-related services contributed to the earnings
increase
as well as to the increase in revenues and operation and maintenance
expense
|
· |
Decreased
payroll and benefit-related costs of $1.1 million (after tax), including
the absence in 2007 of the 2006 early retirement program
costs
|
· |
Increased
retail sales volumes, resulting from 14 percent colder weather than
last
year
|
· |
Higher
nonregulated energy-related services
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(In
millions)
|
|||||||||||||
Operating
revenues
|
$
|
263.8
|
$
|
243.2
|
$
|
500.6
|
$
|
467.0
|
|||||
Operating
expenses:
|
|||||||||||||
Operation
and maintenance
|
230.6
|
216.5
|
442.4
|
419.3
|
|||||||||
Depreciation,
depletion and amortization
|
3.4
|
3.9
|
6.9
|
7.4
|
|||||||||
Taxes,
other than income
|
7.5
|
5.5
|
16.2
|
12.9
|
|||||||||
|
241.5
|
225.9
|
465.5
|
439.6
|
|||||||||
Operating
income
|
22.3
|
17.3
|
35.1
|
27.4
|
|||||||||
Earnings
|
$
|
13.0
|
$
|
9.7
|
$
|
20.3
|
$
|
15.1
|
· |
Higher
construction margins of $2.7 million (after tax), including
industrial-related work
|
· |
Increased
equipment sales and rentals
|
· |
Higher
construction margins of $4.4 million (after tax) in all regions,
including
industrial-related work
|
· |
Increased
equipment sales and rentals
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(Dollars
in millions)
|
|||||||||||||
Operating
revenues:
|
|||||||||||||
Pipeline
|
$
|
28.6
|
$
|
26.1
|
$
|
54.5
|
$
|
46.8
|
|||||
Energy
services
|
83.6
|
76.4
|
170.8
|
182.2
|
|||||||||
|
112.2
|
102.5
|
225.3
|
229.0
|
|||||||||
Operating
expenses:
|
|||||||||||||
Purchased
natural gas sold
|
75.8
|
69.3
|
155.4
|
167.1
|
|||||||||
Operation
and maintenance
|
16.6
|
14.1
|
30.6
|
25.7
|
|||||||||
Depreciation,
depletion and amortization
|
5.2
|
5.1
|
10.6
|
10.0
|
|||||||||
Taxes,
other than income
|
2.7
|
2.6
|
5.5
|
5.1
|
|||||||||
|
100.3
|
91.1
|
202.1
|
207.9
|
|||||||||
Operating
income
|
11.9
|
11.4
|
23.2
|
21.1
|
|||||||||
Income
from continuing operations
|
6.1
|
5.9
|
11.8
|
10.8
|
|||||||||
Income
(loss) from discontinued operations, net of tax
|
.1
|
(.3
|
)
|
.1
|
(.6
|
)
|
|||||||
Earnings
|
$
|
6.2
|
$
|
5.6
|
$
|
11.9
|
$
|
10.2
|
|||||
Transportation
volumes (MMdk):
|
|||||||||||||
Montana-Dakota
|
7.1
|
7.1
|
15.1
|
15.1
|
|||||||||
Other
|
29.7
|
28.0
|
50.2
|
46.2
|
|||||||||
36.8
|
35.1
|
65.3
|
61.3
|
||||||||||
Gathering
volumes (MMdk)
|
22.5
|
21.2
|
44.7
|
42.9
|
· |
Higher
transportation and gathering volumes of $900,000 (after
tax)
|
· |
Higher
gathering rates of $400,000 (after
tax)
|
· |
Higher
storage services revenue of $300,000 (after
tax)
|
· |
Higher
storage services revenue of $2.2 million (after
tax)
|
· |
Higher
transportation and gathering volumes of $1.9 million (after
tax)
|
· |
Higher
gathering rates of $800,000 (after
tax)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(Dollars
in millions, where applicable)
|
|||||||||||||
Operating
revenues:
|
|||||||||||||
Natural
gas
|
$
|
96.1
|
$
|
87.2
|
$
|
190.0
|
$
|
192.5
|
|||||
Oil
|
31.2
|
25.4
|
55.8
|
46.5
|
|||||||||
Other
|
.1
|
1.5
|
.2
|
3.5
|
|||||||||
|
127.4
|
114.1
|
246.0
|
242.5
|
|||||||||
Operating
expenses:
|
|||||||||||||
Purchased
natural gas sold
|
---
|
1.7
|
.3
|
3.7
|
|||||||||
Operation
and maintenance:
|
|||||||||||||
Lease
operating costs
|
15.6
|
12.3
|
31.1
|
24.2
|
|||||||||
Gathering
and transportation
|
5.0
|
4.7
|
9.5
|
9.4
|
|||||||||
Other
|
9.1
|
9.4
|
17.5
|
16.8
|
|||||||||
Depreciation,
depletion and amortization
|
29.8
|
25.8
|
59.6
|
50.3
|
|||||||||
Taxes,
other than income:
|
|||||||||||||
Production
and property taxes
|
9.3
|
8.0
|
18.2
|
18.0
|
|||||||||
Other
|
.3
|
.4
|
.5
|
.5
|
|||||||||
|
69.1
|
62.3
|
136.7
|
122.9
|
|||||||||
Operating
income
|
58.3
|
51.8
|
109.3
|
119.6
|
|||||||||
Earnings
|
$
|
35.2
|
$
|
31.0
|
$
|
65.8
|
$
|
72.2
|
|||||
Production:
|
|||||||||||||
Natural
gas (MMcf)
|
15,231
|
15,242
|
30,671
|
30,604
|
|||||||||
Oil
(MBbls)
|
589
|
471
|
1,145
|
921
|
|||||||||
Average
realized prices (including hedges):
|
|||||||||||||
Natural
gas (per Mcf)
|
$
|
6.31
|
$
|
5.72
|
$
|
6.20
|
$
|
6.29
|
|||||
Oil
(per barrel)
|
$
|
52.83
|
$
|
54.00
|
$
|
48.71
|
$
|
50.43
|
|||||
Average
realized prices (excluding hedges):
|
|||||||||||||
Natural
gas (per Mcf)
|
$
|
5.82
|
$
|
5.15
|
$
|
5.78
|
$
|
6.03
|
|||||
Oil
(per barrel)
|
$
|
52.83
|
$
|
55.71
|
$
|
48.71
|
$
|
51.77
|
|||||
Production
costs, including taxes, per net equivalent Mcf:
|
|||||||||||||
Lease
operating costs
|
$
|
.83
|
$
|
.68
|
$
|
.83
|
$
|
.67
|
|||||
Gathering
and transportation
|
.27
|
.26
|
.25
|
.26
|
|||||||||
Production
and property taxes
|
.50
|
.45
|
.49
|
.50
|
|||||||||
$
|
1.60
|
$
|
1.39
|
$
|
1.57
|
$
|
1.43
|
· |
Higher
average realized gas prices of 10
percent
|
· |
Increased
combined natural gas and oil production of 4 percent, largely due
to
increased production at the South Texas properties, as well as from
the
May 2006 Big Horn acquisition
|
· |
Higher
depreciation, depletion and amortization expense of $2.5 million
(after
tax) due to higher depletion rates and increased
production
|
· |
Higher
lease operating expense of $2.2 million (after tax), largely CBNG
and
acquisition- related costs
|
· |
Lower
average realized oil prices of 2
percent
|
· |
Higher
depreciation, depletion and amortization expense of $5.7 million
(after
tax), as previously discussed
|
· |
Higher
lease operating expense of $4.3 million (after tax), as previously
discussed
|
· |
Lower
average realized gas prices of 1 percent and lower average realized
oil
prices of 3 percent
|
· |
Increased
general and administrative expense of $1.0 million (after tax), primarily
due to higher payroll-related costs
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(Dollars
in millions)
|
|||||||||||||
Operating
revenues
|
$
|
455.5
|
$
|
484.9
|
$
|
683.0
|
$
|
718.6
|
|||||
Operating
expenses:
|
|||||||||||||
Operation
and maintenance
|
372.8
|
404.5
|
581.6
|
620.2
|
|||||||||
Depreciation,
depletion and amortization
|
23.2
|
22.1
|
45.8
|
42.2
|
|||||||||
Taxes,
other than income
|
13.9
|
11.9
|
21.6
|
20.3
|
|||||||||
|
409.9
|
438.5
|
649.0
|
682.7
|
|||||||||
Operating
income
|
45.6
|
46.4
|
34.0
|
35.9
|
|||||||||
Earnings
|
$
|
25.5
|
$
|
25.3
|
$
|
15.7
|
$
|
16.4
|
|||||
Sales
(000's):
|
|||||||||||||
Aggregates
(tons)
|
10,339
|
13,341
|
15,896
|
19,425
|
|||||||||
Asphalt
(tons)
|
1,769
|
2,356
|
2,105
|
2,689
|
|||||||||
Ready-mixed
concrete (cubic yards)
|
1,092
|
1,260
|
1,718
|
1,971
|
· |
Higher
earnings of $1.7 million (after tax) from asphalt operations, largely
due
to higher realized prices, partially offset by lower
volumes
|
· |
Increased
earnings realized from this segment’s liquid asphalt materials business of
$1.6 million (after tax), largely due to higher realized oil prices
|
· |
Earnings
from companies acquired since the comparable prior period which
contributed 4 percent to earnings
|
· |
Lower
earnings of $2.1 million (after tax) from aggregate and ready-mixed
concrete operations, largely due to lower volumes, partially offset
by
higher realized prices
|
· |
Higher
depreciation, depletion and amortization of $500,000 (after tax),
primarily due to higher plant and equipment
balances
|
· |
Lower
earnings of $2.6 million (after tax) from ready-mixed concrete operations,
due to lower margins and volumes
|
· |
Lower
earnings of $1.3 million (after tax) from aggregate operations, largely
due to lower volumes, partially offset by higher realized
prices
|
· |
Higher
depreciation, depletion and amortization of $1.8 million (after tax),
as
previously discussed
|
· |
Higher
earnings from construction, largely due to strong demand in the Northwest
region
|
· |
Increased
earnings from asphalt operations of $1.9 million (after tax), largely
due
to higher prices, partially offset by lower
volumes
|
· |
Increased
earnings realized from this segment’s liquid asphalt materials business of
$1.6 million (after tax), largely due to higher realized oil
prices
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(Dollars
in millions)
|
|||||||||||||
Operating
revenues
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
|||||
Operating
expenses:
|
|||||||||||||
Operation
and maintenance
|
1.9
|
2.3
|
3.6
|
4.0
|
|||||||||
Depreciation,
depletion and amortization
|
.1
|
.1
|
.2
|
.1
|
|||||||||
Taxes,
other than income
|
---
|
---
|
.1
|
.1
|
|||||||||
|
2.0
|
2.4
|
3.9
|
4.2
|
|||||||||
Operating
loss
|
(2.0
|
)
|
(2.4
|
)
|
(3.9
|
)
|
(4.2
|
)
|
|||||
Loss
from continuing operations
|
(1.4
|
)
|
(1.8
|
)
|
(4.1
|
)
|
(1.6
|
)
|
|||||
Income from discontinued operations, net of tax
|
7.4
|
3.3
|
12.6
|
4.4
|
|||||||||
Earnings
|
$
|
6.0
|
$
|
1.5
|
$
|
8.5
|
$
|
2.8
|
|||||
Net
generation capacity (kW)*
|
437,600
|
437,600
|
437,600
|
437,600
|
|||||||||
Electricity produced and sold (thousand kWh)*
|
277,347
|
202,778
|
515,358
|
291,275
|
· |
The
absence in 2007 of depreciation expense related to assets held for
sale
|
· |
Earnings
related to an electric generating facility construction project in
Hobbs,
New Mexico
|
· |
The
absence in 2007 of depreciation expense related to assets held for
sale
|
· |
Earnings
related to an electric generating facility construction project in
Hobbs,
New Mexico
|
· |
Higher
income at the Hardin Generating Station which was placed into service
in
March of 2006
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
(In
millions)
|
|||||||||||||
Other:
|
|||||||||||||
Operating
revenues
|
$
|
2.4
|
$
|
2.3
|
$
|
4.9
|
$
|
4.1
|
|||||
Operation
and maintenance
|
1.8
|
1.8
|
3.9
|
3.0
|
|||||||||
Depreciation,
depletion and amortization
|
.3
|
.2
|
.6
|
.5
|
|||||||||
Taxes,
other than income
|
---
|
.1
|
---
|
.1
|
|||||||||
Intersegment
transactions:
|
|||||||||||||
Operating
revenues
|
$
|
76.9
|
$
|
72.2
|
$
|
171.1
|
$
|
180.2
|
|||||
Purchased
natural gas sold
|
69.8
|
65.0
|
157.1
|
166.3
|
|||||||||
Operation
and maintenance
|
7.1
|
7.2
|
14.0
|
13.9
|
· |
Earnings
per common share for 2007, diluted, are projected in the range of
$2.15 to
$2.35. This
earnings per share guidance range includes the estimated third quarter
gain of approximately $90 million (after tax) on the sale of the
domestic independent power production assets and earnings from
discontinued operations. Excluding the estimated gain, earnings per
share guidance for 2007 has been increased to a range of $1.65 to
$1.85,
an increase from prior guidance of $1.55 to $1.75.
|
· |
The
Company expects the percentage of 2007 earnings per common share,
diluted,
by quarter, including the gain on the sale of the domestic independent
power production assets, to be in the following approximate
ranges:
|
o |
Third
quarter - 45 percent to 50 percent
|
o |
Fourth
quarter - 15 percent to 20 percent
|
· |
Long-term
compound annual growth goals on earnings per share from operations
are in
the range of 7 percent to 10
percent.
|
· |
The
Company is analyzing potential projects for accommodating load growth
and
replacing an expired purchased power contract with company-owned
generation which will add to base-load capacity and rate base. A
filing in
North Dakota for prudence approval of Big Stone II was made in November
2006, with an order expected by September 2007. The Company would
own
approximately 116 MW of Big Stone II. The plant is projected to be
on line
in 2012. A final decision on the project will be made once major
permits
are issued, which
is expected to occur in early 2008.
|
· |
The
Company is in the process of constructing approximately 20 MW of
wind-powered electric generation near Baker, Montana. The project
includes
13, 1.5-MW wind turbines at a project cost of approximately $37 million.
The project is expected to be rate based and on line in late
2007.
|
· |
On
July 12, 2007, Montana-Dakota filed an electric rate case with the
MTPSC,
as discussed in Note 18.
|
· |
This
business continues to pursue expansion of energy-related services
and
expects continuing strong customer growth in Washington and
Oregon.
|
· |
For
more information on the acquisition of Cascade, see Note
20.
|
· |
The
Company anticipates higher average margins in 2007 as compared to
2006,
and continues to focus on costs and efficiencies to improve
margins.
|
· |
Work
backlog as of June 30, 2007, was approximately $765 million compared
to
$523 million at June 30,
2006.
|
· |
Based
on anticipated demand, additional incremental expansions to the Grasslands
Pipeline are forecasted over the next few years. The next expansion,
to
138,000 Mcf per day, is scheduled for completion in late 2007. Through
additional compression, the pipeline capacity could ultimately reach
200,000 Mcf per day.
|
· |
In
2007, total gathering and transportation throughput is expected to
increase approximately 5 percent over 2006 record
levels.
|
· |
Long-term
compound annual growth goals for production are in the range of 7
percent
to 10 percent.
|
· |
In
2007, the Company expects a combined natural gas and oil production
increase in the range of 5 percent to 7 percent. The updated guidance
reflects delayed infrastructure installation in the Company’s Powder River
coalbed and South Texas operations, spring weather conditions which
delayed completion and work over activities, and longer dewatering
time
required on the coalbed wells drilled in
2006.
|
· |
The
Company expects to drill approximately 250 wells in 2007, dependent
on the
timely receipt of regulatory approvals. Previous guidance assumed
the
drilling of one coalbed well for each coal seam targeted. Revised
guidance is based on the commingling of multiple coal seams into
a single
well bore, reducing the number of wells required to be drilled while
accessing the same reserve potential. Currently, this segment’s net
combined natural gas and oil production is approximately 200,000
Mcf
equivalent to 210,000 Mcf equivalent per
day.
|
· |
Earnings
guidance reflects estimated natural gas prices for August through
December
2007 as follows:
|
Index*
|
Price
Per Mcf
|
Ventura
|
$6.25
to $6.75
|
NYMEX
|
$6.75
to $7.25
|
CIG
|
$4.00
to $4.50
|
*
Ventura is an index pricing point related to Northern Natural Gas
Co.’s
system; CIG is an index pricing point related to Colorado Interstate
Gas
Co.’s system.
|
During
2006, more than three-fourths of natural gas production was priced
at
non-NYMEX prices, the majority of which was at Ventura pricing.
|
· |
Earnings
guidance reflects estimated NYMEX crude oil prices for July through
December 2007 in the range of $63 to $68 per barrel.
|
· |
The
Company has hedged approximately 35 percent to 40 percent of its
estimated
natural gas production and less than five percent of its estimated
oil
production for the last six months of 2007. For 2008, the Company
has
hedged approximately 25 percent to 30 percent of its estimated natural
gas
production and less than five percent of its estimated oil production.
The
hedges that are in place as of August 3, 2007, are summarized in
the
following chart:
|
Commodity
|
Index*
|
Period
Outstanding
|
Forward
Notional Volume
(MMBtu)(Bbl)
|
Price
Swap or
Costless
Collar
Floor-Ceiling
(Per
MMBtu/Bbl)
|
Natural
Gas
|
Ventura
|
7/07
- 10/07
|
922,500
|
$7.16
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
920,000
|
$8.00-$11.91
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
460,000
|
$8.00-$11.80
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
460,000
|
$8.00-$11.75
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
920,000
|
$7.50-$10.55
|
Natural
Gas
|
CIG
|
7/07
- 12/07
|
920,000
|
$7.40
|
Natural
Gas
|
CIG
|
7/07
- 12/07
|
920,000
|
$7.405
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
736,000
|
$8.25-$10.80
|
Natural
Gas
|
CIG
|
7/07
- 12/07
|
460,000
|
$7.50-$9.12
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
920,000
|
$8.29
|
Natural
Gas
|
Ventura
|
7/07
- 12/07
|
920,000
|
$7.85-$9.70
|
Natural
Gas
|
Ventura
|
7/07
-
12/07
|
1,840,000
|
$7.67
|
Natural
Gas
|
NYMEX
|
7/07
- 12/07
|
920,000
|
$7.50-$8.50
|
Natural
Gas
|
Ventura
|
11/07
- 3/08
|
1,520,000
|
$8.00-$8.75
|
Natural
Gas
|
Ventura
|
11/07
- 3/08
|
608,000
|
$9.01
|
Natural
Gas
|
Ventura
|
1/08
- 3/08
|
910,000
|
$9.35
|
Natural
Gas
|
CIG
|
1/08
- 3/08
|
910,000
|
$7.00-$7.79
|
Natural
Gas
|
CIG
|
1/08
- 3/08
|
910,000
|
$8.06
|
Natural
Gas
|
Ventura
|
4/08
- 10/08
|
1,070,000
|
$7.00-$8.05
|
Natural
Gas
|
Ventura
|
4/08
- 10/08
|
1,070,000
|
$7.00-$8.06
|
Natural
Gas
|
Ventura
|
4/08
- 10/08
|
1,070,000
|
$7.45
|
Natural
Gas
|
Ventura
|
4/08
- 10/08
|
1,070,000
|
$7.50-$8.70
|
Natural
Gas
|
Ventura
|
4/08
- 10/08
|
1,070,000
|
$8.005
|
Natural
Gas
|
Ventura
|
1/08
- 12/08
|
1,830,000
|
$7.00-$8.45
|
Natural
Gas
|
Ventura
|
1/08
- 12/08
|
1,830,000
|
$7.50-$8.34
|
Natural
Gas
|
Ventura
|
1/08
- 12/08
|
3,294,000
|
$8.55
|
Natural
Gas
|
Ventura
|
11/08
- 12/08
|
610,000
|
$8.85
|
Crude
Oil
|
NYMEX
|
9/07
- 12/07
|
51,850
|
$75.25
|
Crude
Oil
|
NYMEX
|
1/08
- 12/08
|
73,200
|
$67.50-$78.70
|
*
Ventura is an index pricing point related to Northern Natural Gas
Co.’s
system; CIG is
an index pricing point related to Colorado Interstate Gas Co.’s
system.
|
· |
The
Company has 1.2 billion tons of strategically located aggregate reserves,
a key element of its vertical integration
strategy.
|
· |
The
Company anticipates margins in 2007 to be comparable to 2006.
|
· |
Work
backlog as of June 30, 2007, of approximately $662 million includes
a
higher expected average margin than the backlog of $763 million at
June 30, 2006.
|
· |
For
information regarding the sale of the domestic independent power
production assets, see Note 20.
|
· |
Lower
accounts payable, largely at the construction services and construction
materials and mining businesses
|
· |
The
timing of natural gas costs recoverable through rate adjustments
at the
natural gas distribution business
|
· |
Decreased
receivables at the construction services and construction materials
and
mining businesses, partially offset by higher receivables at the
natural
gas distribution and natural gas and oil production businesses, due
to
fluctuations in natural gas prices
|
· |
Higher
depreciation, depletion and amortization expense of $14.0 million
and
higher deferred income taxes of $8.8
million
|
· |
A
decrease in cash flows used for acquisitions of $108.9 million, largely
at
the natural gas and oil production
business
|
· |
Decreased
cash used in investing activities from discontinued operations of
$36.7
million, largely the result of lower capital expenditures related
to the
Hardin Generating Facility and a decrease in cash flows used for
acquisitions, both of which are related to the independent power
production business
|
· |
Lower
investments of $22.5 million, primarily the result of the sale of
the
Trinity Generating Facility during the first quarter of
2007
|
· |
Completed
acquisitions
|
· |
System
upgrades
|
· |
Routine
replacements
|
· |
Service
extensions
|
· |
Routine
equipment maintenance and
replacements
|
· |
Buildings,
land and building improvements
|
· |
Pipeline
and gathering projects
|
· |
Further
enhancement of natural gas and oil production and reserve
growth
|
· |
Power
generation opportunities, including certain costs for additional
electric
generating capacity
|
· |
Other
growth opportunities
|
|
|
Weighted
Average
Fixed
Price
(Per
MMBtu)
|
|
Forward
Notional
Volume
(In
MMBtu's)
|
|
Fair
Value
|
|
||||
Natural
gas swap agreements maturing in 2007
|
|
$7.66
|
5,767
|
$9,263
|
|||||||
Natural
gas swap agreements maturing in 2008
|
|
$8.41
|
8,228
|
$3,265
|
|
|
Weighted
Average
Floor/Ceiling
Price
(Per
MMBtu)
|
|
Forward
Notional
Volume
(In
MMBtu's)
|
|
Fair
Value
|
|
||||
Natural
gas collar agreements maturing in 2007
|
|
$7.83/$10.26
|
6,406
|
|
$
7,578
|
||||||
Natural
gas collar agreements maturing in 2008
|
|
$7.27/$8.32
|
8,690
|
|
$(1,194)
|
Period
|
(a)
Total
Number of Shares
(or
Units) Purchased (1)
|
(b)
Average
Price Paid
per
Share
(or
Unit)
|
(c)
Total
Number of Shares (or Units) Purchased as Part of Publicly Announced
Plans
or Programs (2)
|
(d)
Maximum
Number (or Approximate Dollar Value) of Shares (or Units) that May
Yet Be
Purchased Under the Plans or Programs (2)
|
April
1 through April 30, 2007
|
36,668
|
$31.05
|
||
May
1 through May 31, 2007
|
||||
June
1 through June 30, 2007
|
||||
Total
|
36,668
|
|
|
MDU
RESOURCES GROUP, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DATE:
August
8, 2007
|
|
BY:
|
/s/
Vernon A. Raile
|
|
|
|
Vernon
A. Raile
|
|
|
Executive
Vice President, Treasurer
|
|
|
|
|
and
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/
Doran N. Schwartz
|
|
|
|
Doran
N. Schwartz
|
|
|
|
Vice
President and Chief Accounting
Officer
|
4
|
MDU
Resources Group, Inc. Term Loan Agreement, dated June 29, 2007, among
MDU
Resources Group, Inc., Wells Fargo Bank, National Association, as
Administrative Agent, and The Other Financial Institutions party
thereto
|
+10
|
Consulting
Agreement, dated July 2, 2007, by and between Williston Basin Interstate
Pipeline Company and John K. Castleberry
|
12
|
Computation
of Ratio of Earnings to Fixed Charges and Combined Fixed Charges
and
Preferred Stock Dividends
|
31(a)
|
Certification
of Chief Executive Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
31(b)
|
Certification
of Chief Financial Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer furnished
pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002
|