Doran Schwartz - VP & CFO David Goodin - President & CEO Nathan Ring - Vice President, Controller & Chief Accounting Officer Kent Wells - Vice Chairman & CEO, Fidelity Exploration and Production Company Steve Bietz - President & CEO, WBI Energy Dave Barney - President & CEO, Knife River Corporation Nicole Kivisto - President & CEO, Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Natural Gas Jeff Thiede - President & CEO, MDU Construction Services Group Steve Bietz - President & CEO, WBI Energy.

Paul Patterson - Glenrock Associates Chris Ellinghaus - Williams Capital Matt Tucker - KeyBanc Capital Markets Timm Schneider - Evercore ISI Brent Thielman - D.A. Davidson Dave Parker - Robert W. Baird Sarah Akers - Wells Fargo.

Good morning. My name is Jennifer, and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group’s 2014 Year End Earnings and 2015 Guidance Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will a question-and-answer period.

[Operator Instructions] This call will be available for replay beginning at 1:00 pm Eastern today through 11:59 pm Eastern on February 17th. The conference ID number for the replay is 58359497. Again, the conference ID number for the replay is 58359497. The number to dial for the replay is 1-855-859-2056 or 404-537-3406.

I would now like to turn the conference over to Doran Schwartz, Vice President and Chief Financial Officer of MDU Resources Group. Thank you. Mr. Schwartz, you may begin your conference..

Thank you, and welcome to our earnings release conference call. This conference call is being broadcast live to the public over the Internet and slides will accompany our remarks. If you would like to view the slides, go to our website at www.mdu.com and follow the link to the conference call. Our earnings release is also available on our website.

During the course of this presentation, we will make certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially.

For a discussion on factors that may cause actual results to differ, refer to Item 1A Risk Factors in our most recent Form 10-K and Form 10 and the Risk Factors section in our most recent Form 8-K. Our format today will include formal remarks from David Goodin, President and CEO of MDU Resources followed by a Q&A session.

Other members of our management team who will be available to answer questions during the Q&A session of the conference call today are - Dave Barney, President and CEO of Knife River Corporation; Steve Bietz, President and CEO of WBI Energy; Nicole Kivisto, President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Natural Gas; Pat O’Bryan, President of Fidelity Exploration & Production and named President and CEO of Fidelity effective March 1 upon Kent Wells’ retirement; Jeff Thiede, President and CEO of MDU Construction Services Group; and Kent Wells, Vice Chairman of the Corporation and CEO of Fidelity Exploration & Production; and Nathan Ring, Vice President, Controller and Chief Accounting Officer for MDU Resources.

And with that, I'll turn the presentation over to Dave for his formal remarks.

Dave?.

Well, thank you, Doran, and good morning. We appreciate you joining us today to discuss our year-end results as well as guidance for this year.

We had solid business performance from all of our units in 2014 which is a testament to our management team and the employees’ ability to execute even in light of challenges presented by lower commodity prices and unfavorable weather impacts.

Consolidated GAAP earnings for the year totaled $297.5 million or $1.55 per share compared to $278.2 million or $1.47 per share in 2013. Our construction services businesses reported a second consecutive year of record earnings of $54.5 million.

And that our construction materials business, earnings also improved with a GAAP earnings of $51.5 million and adjusted earnings of $59.9 million. On an adjusted basis, construction materials earnings were its highest ever for the first, second half of the year. Adjusted earnings were 18% higher on 3% revenue growth.

Our construction businesses combined adjusted earnings for the year are at their highest level since 2007 and continue a trend of four consecutive years of stronger combined earnings year-over-year. Asphalt margins increased as well as ready-mix concrete in aggregate volumes and margins.

Earnings were also higher because of our ability to execute on key contracts at our outside and industrial construction service operations. Our utility business reported earnings of $67.2 million with electric earnings increasing 5% as a result of a 4% increase in electric retail sales as well as rate recovery.

Natural gas earnings declined, including a $4.3 million unfavorable weather impact along with some higher O&M expenses.

At our pipeline group, earnings were substantially higher at $22.6 million with higher transportation rates primarily related to the partial year effects of a rate case settlement back on May 1st along with strong results from our 50% ownership in the Pronghorn natural gas and oil gathering and processing facility.

Earnings from exploration and production business were $96.8 million on a GAAP basis and $82.1 million after adjusting for unrealized share value changes in derivatives.

Oil production increased slightly, led by 25% increase in the Paradox basin and production from the purchase of the Powder River basin assets partially offset by a sale earlier in the year of some of our Bakken assets. Natural gas and natural gas liquids production decreased as a result of asset divestments.

So we had a solid 2014 and as we look forward, we’re focused on execution of our business plans and investment opportunities at our utility, pipeline and energy services and construction businesses. We are proactively managing our businesses to address recent oil price volatility.

Recall that we recently announced the decision to delay the marketing of our Fidelity E&P business. Until such time that we sell Fidelity, we are focused on maximizing its value. For example, we are focused on lowering our capital cost structure. We have already reduced general and administrative cost by over 25%.

And we’ve laid down our rigs and look to further reduce our cost structure before we begin to drill again later this year. Another step to managing our business in the current commodity price environment is reflected in an updated to our capital expenditure forecast.

Net capital expenditures for 2015 are now estimated at $692 million, reflecting a shift from some capital primarily to 2016. Specifically, capital expenditures associated with a potential second refinery and acquisition capital at the construction businesses have been delayed.

We’ve also updated our capital expenditure plans for the E&P business to reflect a full year of capital expenditures in 2015 where before we were estimating only partial year for that business. Our E&P group expects to be self-funding and operate at or below the cash flows that it generates.

We have determined that our E&P business does not yet qualify for discontinued operations accounting status. We will keep you posted on that.

However, in the interest of providing you with a comparable look-forward with greater clarity as to how MDU Resources will look after the sale of the E&P business, we have provided consolidated adjusted earnings including our utility, pipeline and energy service and construction companies and excluding our E&P earnings.

As reported, 2014 adjusted earnings on this basis were $206 million or $1.07 per share. That compares to adjusted earnings per share of $1.01 per share in 2013. We’ve also initiated 2015 adjusted earnings per share guidance in the range of $1.05 to $1.20. Our all-in GAAP guidance including the E&P business is at $0.80 to $0.95.

Now turning to operational updates, our construction companies continue to take advantage of improvements in the economy. Our construction materials business has operations in 17 states with $438 million in backlog as of the end of the year. They are focused on continued volume and margin improvements.

Our construction services group is licensed to operate in 44 states and is focused on optimizing their national presence and securing good quality projects. Here, our end of the year backlog totaled $305 million. And we continue to pursue both organic and M&A growth opportunities at each of these businesses.

We have delayed acquisition capital originally forecasted to 2015 and assumed it now moving into 2016. However, if we identify the right opportunities this year, we will pursue them. We continue to see positive momentum at our construction businesses.

And with our lower cost structure, improving economies and our interest in resuming acquisition activity in the construction space, we are optimistic that we’ll continue to see long-term growth for our construction businesses. Moving our discussion now on to our utility group. Earlier, Doran introduced Nicole Kivisto who now joins us today.

Nicole was recently named as President and CEO of our utility group.

She has a 20-year history with our company, most recently as Vice President of Operations for Montana-Dakota Utilities and Great Plains Natural Gas, a role, which included oversight of the Bakken region, one of the most challenging utility regions in the country from a labor, resource and infrastructure standpoint.

Prior to that, she was Vice President, Controller and Chief Accounting Officer for MDU Resources. So she certainly has a broad financial expertise as well. Nicole is an outstanding leader who is widely respected across our utility group’s management team and is ideally suited to lead the group’s continuing growth.

The utility group has a five-year capital program that’s a record nature across the eight states with plan investments now totaling $1.8 billion, projecting a rate base growth of approximately 11% annually on a compounded basis. Investments are planned in new generation, transmission and distribution to serve a growing customer demand.

An agreement was recently signed to purchase the Thunder Spirit Wind project. This is a 107.5-megawatt wind farm that will be built this year in North Dakota at a cost of approximately $200 million. We have filed for advance determination of prudence with the North Dakota Public Service Commission on this project.

We expect to complete a $360 million upgrade to the Big Stone Generating Plant this year, of which our share will be $90 million. And we also have plans to construct 19 megawatts of natural gas-fired generation near our Lewis & Clark station at Sidney, Montana. And we expect this to be online later yet this year.

In addition, we’re working on the $340 million 345-kV transmission line that is a MISO multi-value project, expect to be completed by 2019. And our share of this would be one-half investment.

Although, a prolonged period of lower commodity prices may slow utility Bakken region growth into the future, we’re still seeing good customer growth rates of 5% for electric and over 3% for natural gas. We expect to invest another $60 million in this area in 2015 alone.

Our utility is in a great position, focused on execution, the substantial identified projects and timeliness of related regulatory recovery on our planned investments. Now moving to our pipeline and energy services group. Here we have a five-year record CapEx plan totaling $1.1 billion.

On the near-term horizon, we expect to begin commercial production of our diesel fuel and other products coming out of our Dakota Prairie Refinery here in the second quarter of 2015. EBITDA for the first full year of production is projected to be in the range of $60 million to $80 million with our share being one-half.

Demand for diesel in North Dakota continues to be well above local supply levels. We’re also evaluating the potential development of a second refinery within the state. We’ve identified a potential site and have started some of the preliminary permitting work.

We’re continuing work on acquiring right of way and easements as well as filing for applicable permits for the approximately $120 million Wind Ridge Pipeline project in eastern North Dakota.

This project is designed to make gas off the northern border system and deliver it near Spiritwood, North Dakota, where an announced fertilizer facility will be built. The plan is for a 95-mile pipeline to deliver 90 million cubic feet per day with a potential expansion opportunities to serve communities in growing markets in eastern North Dakota.

Our projected in-service state for the Wind Ridge project is in 2017. In addition, our pipeline group recently entered into an agreement with an anchor shipper to construct pipeline and to connect the Demicks Lakes gas processing plant in northwestern North Dakota to deliver natural gas enter a new interconnect with the northern border pipeline.

Project costs are estimated in the $50 million to $60 million range. We are encouraged by the growth potential we see for our pipeline group as it continues to pursue new opportunities and expansion of existing facilities and services offered to its customers.

Before we move into an operational discussion of our E&P business, Kent Wells who joins us on the call today has announced he will retire on February 28th from his positions as Fidelity CEO along with Vice Chairman of the corporation.

We appreciate the role Ken displayed in leading Fidelity’s transition from a gas-centric business to a very much balanced production portfolio. As Vice Chairman of MDU, he’s also played a key role in our corporate strategy and success planning processes and were well-positioned to have a smooth transition in direction and leadership at Fidelity.

Pat O’Bryan who joins us today on the call has been president of Fidelity since last July and in addition, he was recently named to succeed Kent as Chief Executive Officer for Fidelity upon Kent’s retirement. Pat joined Fidelity in 2011 as Vice President of Drilling and Completions.

He has 26 years of experience in the oil and gas business including executive and asset general management. Drilling, engineering and technology management and production and reservoir engineering supervision as well.

Pat’s leadership and deep industry experience will be very important during the pause on our plans to market Fidelity and we’ll contribute to the success of marketing in the business when the timing is appropriate. At Fidelity, we expect to spend approximately $111 million in growth capital expenditures here in 2015.

We expect to minimize investments in the first half of the year as we work to lower our capital cash structure to better align with lower commodity price environment. As I mentioned earlier, we allowed our two operated rigs to expire in December.

On our non-operated, Powder River Basin acreage, one rig has expired and the second rig is set to expire soon. We have flexibility on the timing of our capital investments this year. We anticipate commencing drilling in the second half for the year as long as our return thresholds are met.

In the Paradox basins, we recently completed the Cane Creek Unit 28-3 well in mid-December. This well will slowly ramp up to about 600 barrels per day utilizing an 11 64-inch choke, and flowing tubing pressure of approximately 2,600 psi. The production rate has held relatively constant for the last three weeks.

This early indication shows this well to be a strong producer. We also did a very small frack on the Cane Creek unit, 32-1 well in the fourth quarter and it is flowing approximately 150 barrels of oil per day with a flowing tubing pressure of 1,800 psi. We find this very encouraging.

This production level is more than double the pre-frack rate of the well after it was originally drilled without fracking completion techniques.

Our plans in the Paradox Basin for 2015 include commissioning and startup of the gas gathering and gas processing facilities and drilling of new wells and recompleting some existing wells for production enhancement. In the Powder River Basin, we expect to work on completion of backlog wells as well.

In the East Texas Cotton Valley, we recently completed our first horizontal well, the Poovey Mark Poovey 1H well. Here, the initial production rate peaked at 11 million cubic feet per day, declining to recent rates of 9 million cubic feet per day. We expect to drills and complete additional horizontal wells in East Texas this year.

This year in the Bakken, we will look to work on the completion of our 2014 activity in a carryover mode. Again, the focus of Fidelity is on maximizing the value of the assets to ultimately market the business for sale including lowering our cost structure.

So to wrap things up as we think about 2014 and into the future, we’re excited about the future of MDU Resources Group. We expect to grow our utility, pipeline and construction business units and to pursue growth with a lower overall risk profile as well.

We have substantial investment opportunities that underlie a record $3.9 billion, five-year capital plan investment program. Our financing strategy for 2015 includes $778 million in growth capital expenditures that will be funded in large part with cash flows from operations.

We are committed to a strong balance sheet as we do plan to use some debt financing largely at our utility group to fund growth projects which I discussed earlier like the wind project and that are included in our capital expenditure estimates.

And as we do each year, we will continue to review our portfolio of assets and execute asset sales where it makes sense. Based on our current forecast, we are not projecting the need for equity issuance as part of our financing plans for 2015. We are in a very good financial position.

Our balance sheet is strong, our credit ratings are solid at BBB+ and stable and our liquidity position from our various credit lines that back our low cost commercial paper programs is extensive as well.

And we have continued our track record of dividends, now paying one for 77 straight years and increasing it for 24 straight years, one of only a handful of companies that can say the same.

I am confident that we are well-positioned to produce significant long-term value as we execute on our business plans and the opportunities we have in front of us for the benefit of our shareholders and achieve that while operating with a lower overall business risk profile.

I appreciate your interest and commitment to our MDU Resources organization and would be happy to open the lines to questions at this time.

Operator?.

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

Hello?.

Good morning, Paul..

Hi. I wanted to ask you about the beneficial tax impact in the fourth quarter.

Could you tell us what caused that and how much it was?.

Thank you, Paul. I’m going to ask Nathan Ring, our Chief Accounting Officer, to answer that.

Nathan?.

Good morning. Thank you for the question. The impact in the fourth quarter which also relates to the annual impact was actually [ph] probably the most significant item relates to favorable resolution of the 2007 to 2009 IRS audit.

So there, as in past years, in accordance with the accounting rules, namely FIN 48, we established reserves for that audit associated with uncertain tax positions. As we closed those open years in 2014, many of the tax positions reversed the previously established reserve.

This was approximately $7 million of which the majority related to the exploration and production business unit. We also had some higher tax deductions which relate to our Section 199 deduction from our non-regulated business units.

Those two make up the majority of the variants in the fourth quarter and for the year related to our effective tax rate..

So the total amount was $111 [ph] million, is that correct?.

For the IRS audit, that’s correct..

And what about for the other?.

For the higher benefits, that’s approximately - for the Section 199, that’s about $5 million..

Okay.

And that’s after tax?.

Those are all after tax numbers..

Okay.

And then, is there any benefit in 2015 from tax activities such as this?.

Say that again, please..

Is there any continuing tax benefit that we should be projecting in 2015 or beyond -.

Yes, so the items that I referenced up, for example, the higher benefit to the Section 199, those are items - credit deductions that we have on an ongoing basis each year dependent upon our qualifying production income which we’ll have from our non-regulated businesses. The FIN 48 activity, in prior years, we’ve had some accruals.

As we’ve had those on certain tax positions, in future years, we likely will have some other accruals and reversals that relate to those. As we will look beyond -.

Do you have an -.

Sorry, go ahead..

- amount?.

We don’t have an estimated amount for those but they’ll likely be in the same range as we’ve had in the past. So during the fourth or in 2014, our effective rate was about 30%. In prior years, we’ve been around, call it, 33%. We anticipate being within that range on a go-forward basis..

Okay. And then the unrealized gain in 2014 at the E&P business, is there any projection for unrealized gains in 2015 in that long -.

Paul, you’re referring to the unrealized hedge position that we have at Fidelity?.

Yes. I mean, I believe that the 2014 numbers included unrealized gain and I was wondering if there was a similar expectation or loss expectation associated with the $40 million to $50 million excluding the ceiling test exams..

Yes, Paul, this is Kent. Of course the - when we changed from hedge accounting, that created this unrealized hedge value that we take out of our adjusted earnings. And we only have hedges in 2015, so there won’t be that - there will be during the years some perhaps unrealized but by the end of the year, those should all cancel out..

Okay. And then just when we look at, Steve, the CapEx numbers, the E&P looks like $111 million and it sounded like that was sort of a run rate associated with what you guys were going to be generating in terms of cash. And then in 2016, you guys don’t provide any numbers.

How should we think about the disposition of that business? And just in general, and if you weren’t to dispose of it, would you still be basically spending in terms of what the cash flow would be driving or would there be something else we should think about?.

Yes, Paul, I’ll start and then maybe Kent or Pat can add some color. But as we noted in the release, our plans at present do not include a sale of Fidelity in 2015 and basically beyond that period. So that’s why we wanted to provide more clarity as to a full year of run rate of capital at Fidelity.

In 2015, prior - the $111 million versus the - we said $116 million was our partial year of CapEx when we announced the potential sale of the business back in early November.

So beyond that, we will continue to monitor market conditions until we feel the timing is appropriate for the selling of the business, which is why we provided greater clarity into ’15. But beyond that, we’ll continue to update the market as the timing of marketing the business.

And that’s why we chose not to extend into 2016 capital expenditure forecast. It would be my expectation that we’d operate that business within cash flows on a go-forward basis..

Okay.

And then just finally, I’ll let other people ask questions, but just the tension of the one-timer, what caused that? Could you just explain what that withdrawal - the pension withdrawal thing actually means?.

Sure, Paul. I’ll ask Doran Schwartz to address that one..

Yes, thanks, Paul. So on our multiemployer pension plans, first, we do give a bit more information in our Form 10-K on the various multiemployer pension plans that we do participate in. These are union plans. They’re not company-sponsored plans. We contribute into them based on how we negotiate with the unions on generally an hourly type rate.

We’ll pay an X amount per hour and then those become managed by union and their representations on behalf of the union employees that we utilize at our various construction companies. And so that’s kind of the background on it.

This particular plan was perhaps a bit unique in that the number of employers in their multiemployer pension plans, so there’s multiple employers contributing into the plan. But this particular plan, the number of employers participating became very low over time.

And so really, to reduce our risk, we made the decision to withdraw from the plan and essentially fix our liability. We participate in other plans. Some are well-funded, some are under-funded but the number of participating employers tends to be much larger so the liabilities are spread across a bigger base of participants.

So a little bit unique as it relates to this one plan where we saw the risk profile being higher because of a limited number of employers. And obviously, our risk would go up the fewer the employers that participate. So we took the proactive step to lock in the withdrawal liability to fix our liability..

Great. Thanks a lot..

Yes..

Thank you, Paul..

Your next question comes from the line of Chris Ellinghaus with Williams Capital..

Hey, guys.

How are you?.

Hey, Chris.

Doing good, how are you?.

I’m good. A couple of questions.

The Thunder Spirit Wind farm, can you give us a little color on your expected approval timing?.

Yes. This is Nicole. I’ll go ahead and take that. At this point, we would anticipate mid-year to see in terms of the advance determination of prudence. So some time mid-year, probably for sure by July..

Then that gives you - you expect that gives you enough time to complete construction for the year?.

Yes, we’re anticipating construction by the end of the year, yes..

Okay.

Have you guys got any thoughts on Obama’s infrastructure budget proposals and how that might affect construction businesses?.

Chris, that’s a pretty wide ranging question. I think we would look at it more on a market-by-market basis when we think about our construction activities. For instance, I mean we are tied to some of the energy-rich states.

For instance, Texas and North Dakota, Wyoming, Montana and we watch very closely - well, not only the Federal but obviously the state budgets and what they’re looking at from a state budget funding mechanism. So I think we would also not only look from a federal level, but also from a state level in that regard.

And so I guess I would say, we’d look at that, but at the same time, I mean we’d like to look for a longer extension to Federal Highway, MAP-21 funding, beyond what we currently see today too. But we’re also very focused on state DOT budgets..

Okay.

So you’re not particularly excited by the president’s proposal so far?.

I’ll ask Dave Barney to maybe discuss this business in a little more detail as it relates to that..

We are excited about it. But to get it passed, I think, it’s going to be really tough to get through any of the houses or Congress. So we’d like to see it passed, but it’s going to be tough to get a gas taxed or - I think they’re looking on his proposal on a corporate tax for overseas. And I think that’s going to be a tough thing to get passed.

So yes, we’d be excited to see that passed, absolutely..

Okay.

Can you give us any color into your thought process on the Fidelity marketing in what you’re - do you have any asset figure [ph] targets for oil prices or just what’s your thought process, sir?.

Hey Chris, it’s Kent. Obviously, our goal is to make sure we market it to maximize the value for our shareholders. And while it was relatively obvious and easy to make the decision to differ our marketing process, it will be a little more challenging to decide exactly when to start the market again.

But what we’re doing is we’re taking advantage of this time to do some things that will position it better. We’re clearly focused on getting our cost structure down to be competitive in a $50 to $65 world. We’ve already made the adjustments to our G&A or overhead.

We’re working very diligently on our operating cost and most importantly on our capital structure. We dropped a rig at the end of last year and we expect that by the second half of the year we’ll be able to get the capital structure in place that we can get back to making profitable economic investments going forward.

Those things will all be important in driving the maximum value of Fidelity. Now the other important part is picking the right business environment to sell into. And we’re monitoring a number of different things.

And we haven’t pegged in oil price, but we’re looking for a number of different things to make us believe that that would be a good investment environment for potential buyers. And so we’re monitoring a lot of things.

And when we get our cost structure on the right place and we see that business environment, that’s when we’ll look to put it back on the market..

Okay. Thanks for the color, guys..

Thank you, Chris..

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

Hey, good morning..

Good morning, Matt..

My first question is a fairly broad one.

If oil prices do average about $50 this year as you’re assuming in your E&P guidance, can you talk about how that would impact your growth expectations for your non-E&P businesses?.

Sure. I’ll start with that, Matt, and then I may call on our business heads to add some further color. We are taking that into account even as we think about our EPS guidance range for this coming year because commodity prices and energy activities has differing effects across our business lines.

And so as I think about our utility business, it was noted in my comments that we’ve got quite a backlog of projects there from a momentum perspective. And so we may see a small slowdown in customer connects in the Bakken area in particular.

But as we think about our eight state region, the CapEx budget we have this coming year and over the next five years really are at record levels. And those are recovered through a regulatory process. So I mean there’s obvious slowdown in a few customers potentially.

But some of that I almost see offset by some of the industrial loads that we’re seeing on, for instance, like a refinery in Western North Dakota. We factored some of that in in our construction businesses. We see probably near-term, probably not a big slowdown in infrastructure because there’s a backlog of that in particularly the Bakken area.

And we’re quite between our materials group. It’s quite active out there, I mean like completing our largest project ever, Watford City bypass, very successful. We’re watching the state legislature here in North Dakota.

While they haven’t come out with the final bill yet, there seems to be a strong appetite for some surge infrastructure funding to catch up on some projects there. And when we think about our construction services group, while we’ve got some ties into more energy producing states, we operate and license in 44 different states.

So we’re probably more tied to the economy in general there. And so some of the potential consumer discretionary spend that we see, that may come from this may actually benefit some of our markets potentially even in like Las Vegas where there hasn’t been much construction activity for the last several years and we’re quite tied to that market.

So we see it, there’s some pros and cons tied to that without getting in the great specific. Pipeline business, thinking about Steve’s business. He talked about as we think about some of the producer-driven projects. We could see that potentially being pushed off somewhat and somewhat comment on that.

On the flip side, I think some lower energy prices for a sustained period of time only probably help those consumer-driven projects where someone’s looking for low-cost energy over an extended period of time, like a fertilizer plant, probably only helps that kind of a project.

So those probably weren’t real, Matt, would maybe put on a bore [ph] into a certain business. I’d be glad to - but that was a broad question with a broad answer..

It was great color. Thank you.

Also in a recent past, you’ve talked about long-term target of 7% to 10% EPS CAGR, is that still your expectation and is that value excluding E&P?.

Matt, the short answer to that is yes. And I would do it as you think about the utility, pipeline and energy service, construction materials and construction services group for 2015 in the guidance range we provided. That would be, I’ll say, a reset to our base year and 7 to 10 would be built upon that as we forecast going ahead..

Got you. Thanks. And then just to drill in on one business in particular in the construction services, your backlog ending the year was down fairly notably year-over-year. And your mid-point of revenue guidance implies some growth this year.

So can you help us understand what’s given you the confidence in seeing growth in that business this year?.

Thanks, Matt. This is Jeff. I’m very confident in our ability to get work. Nevertheless, we’ve seen a decrease in large projects being built. And we need to stay disciplined to make sure we can hold our margins and through execution and operational excellence, we like our position.

We have some pending projects that are really exciting that will and should hit our backlog. We’re not overly concerned about it, but we’ve got a very focused group of people looking at opportunities that are going to help us be successful..

Thanks a lot, guys. I’ll jump back in the queue..

Okay. Thank you, Matt..

Your next question comes from the line of Timm Schneider with Evercore ISI..

Hey, good morning. I just had a couple of questions on Fidelity.

The first one, is this something - is Fidelity something against your looking to sell as an entire business unit or is that something that you would consider piecemealing in terms of the different asset bases?.

Yes. Timm, this is Dave. We’ve said in past calls - and I would only reinforce it on this call that certainly, it’s our plan and desire to sell Fidelity as an entire entity and that it’s got a nice portfolio, balanced portfolio of oil and along with gas assets and some associated NGLs. I mean clearly, that’s our intent to sell it as an ongoing entity.

We’ve got a talent pool there and a group of employees that know how to manage and kind of maximize the value there. That’s certainly our intent. Would we exclude and preclude any offers for pieces and parts of it, I think we have to think of the shareholder there. But clearly, our intent is to sell it as an entire entity..

Got it. And then the other question I had is, decision to delay the marketing of Fidelity, was that more of a preemptive strike in terms of proprietorial [ph] oil prices rebound? Or was that actually you guys going out testing the market and there was just a big disconnect between kind of a bid and ask..

Timm, I would say it’s more the first part of your question and answer, then the latter part in that our view was there was quite a bit of instability and volatility in the world market for oil.

And we just felt it wasn’t an appropriate time to put what we feel is a very valued business up for sale in a, I’ll say, an unstable and volatile environment. And so until we see some stability in that, that would be one of the factors that - Kent mentioned we’re looking at a number of factors.

As the timing of the asset and the business, that would be one of the net - really was a very unstable time. And until we see that levelizing and stabilizing, that’s the time we’d look to commence the marketing process..

Got it. And then just I guess an accounting question for me.

At what point can the E&P business be included in discontinued ops just once you guys have - once the marketing process starts up again or once an actual sales data stood out of the org [ph]?.

Yes, Timm, this is Doran. There’s eight specific criteria that are out there as it relates to meeting the requirements of being discontinued operations yet meet all eight. And so we’ve concluded we don’t meet all eight of those as of year-end.

I mean, on an ongoing basis, we’ll continue to work with the external auditors that we have and make that determination going forward. Of the eight, certainly the marketing process would be one of those factors. But you have to meet all eight. So I think we’ll just keep you updated here as we go through the year..

All right, thank you..

Thank you, Timm..

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

Hi, good morning..

Good morning, Brent..

Yes, and historically you guys have been very consistent with the dividend and in good times and bad.

But just in light of your outlook for 2015 and kind of the near term challenges out there with E&P, can you just remind us of any covenants or restrictions on the regulatory side or elsewhere to be aware of as it relates to kind of ongoing dividend payment?.

I would start as an overall statement, Brent, in that we noted in my formal comments about the 77 years of uninterrupted dividends and increasing over the last 24. We certainly view that as an important part of shareholder value and a means in which returning some of that investment back to our shareholders.

And we view that as very important on our shareholder base. As it relates to certain covenants or financing arrangements, I’m looking to Doran here to see if he could add some color to that. But I think as a backdrop, I think that should be your main takeaway is we believe that long-standing and commitment to dividends is very important..

Got it, okay..

Yes..

Okay. And then just as a follow-up on questions around backlog and services, I had a similar question. In the material side, obviously you’re projecting some growth here into 2015. I haven’t seen significant pickup in backlog there.

Is it existing state DOT budgets and kind of the pipeline quotation levels you’re seeing right now that gives you the confidence in that or is it kind of an embedded sort of macro outlook?.

Brent, I’ll ask Dave Barney to add some specific color there.

But when you think about year-over-year backlog in a nutshell, if you actually took out on a, I’ll say, a pro rata basis our single largest project, our Watford City bypass, we’re actually probably net add or depending on the timing of the project, our backlogs are as strong as they were a year ago when we think about our construction materials.

But maybe Dave could add some color on a state-by-state basis.

Is that what you’re thinking about or asking about, Brent?.

Oh, no. I’m just trying to get a sense beyond the backlog what kind of gives you the confidence in the growth there just based on what you think -.

When you talk about growing - you’re talking about revenue growth in that we’ve increased our forecast to now $1.7 billion to $1.9 billion where we came in last year about $1.765 billion?.

Correct..

Correct, okay..

No, Brent, I - this is Dave. I believe most of our earnings - our revenue growth will be coming from the DOTs. We have very strong DOT budgets out there. Even with the oil markets down, most of the DOT budgets have been set already.

Texas is strong, we’re going to see a very strong bid letting [ph] coming out here in North Dakota, Alaska is looking good, California is recovering. We are concerned with the oil prices and the markets we’re in [ph].

But we think the DOT budgets will be very strong for us this year and that’s where the earnings - the revenue growth will be coming from..

Great, thank you..

Thank you, Brent..

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

A couple of quick questions, maybe just for a little more color on just year-over-year growth.

And thanks for answering the question on long-term growth objectives, but when I look at ’15 guidance versus ’14 and I add in your EBITDA contribution from the diesel topping plant, that would seem like that would move the needle enough just to get us year-over-year growth, yet the outlook for construction seems to be pretty strong that we’re at clearly heightened CapEx investment at the utility.

So I’m wondering what - maybe the utility, is there regulatory lag in ’15 until we get the CapEx into the revenues and therefore the earnings contribution at the electric and gas group, so is that kind of a soft year-over-year earnings there? Or am I missing something else at some of the other businesses?.

Hi, Dave. This is Dave. I’ll try to shape up how we think about the - we call it the upside and downside to our guidance range.

And I think there’s a number of factors, I’ll say, more spread across the business units that as we think about our $1.05 to our $1.20 range for the four remaining businesses, oil prices can both be an upside and a downside to our business.

And certainly, lower energy prices can help the economy, I mentioned that earlier, and may result in more construction activity. In certain markets, increase in oil prices could likely support continued energy development which helps our businesses benefit from oil shale development.

It also can be a factor in the timing of when we begin the marketing of the Fidelity business. Certainly, you mentioned the refinery. I think that’s one of the things we think about, it’s got the potential for a strong earnings impact in 2015 versus some of our base case assumptions.

And so our guidance depends on what happens with the price of not only the refined products coming from that but also the inputs of the crude oil which in certain - we’ve seen some very favorable input pricing here as of late so that that crack spread is held in there.

Overall, the economy is a consideration as we think some of our construction businesses are tied to it. We did have weather as a factor in 2014. We planned for normal weather at our utility throughout the year.

We indicated some of the earnings decline from a weather effect was about $4.3 million as a negative to our natural gas business notwithstanding some of the, I’ll say, normalization that we’ve got in three of our eight states. But that comes into play as we think about our guidance range.

We’ll continue to update our guidance throughout the year as our business results come in. Critical here is really execution with whether it’s the refinery in as we now expect it in the second quarter getting out into the field appropriately with our construction businesses is very important.

And as we think about just the overall project management and managing those margins on construction is important too. So that’s probably a long answer, Dave, that kind of say we look at it across the businesses and there’s a variety of factors.

So that $1.05 to $1.20, it’s based on a number of assumptions that we’ll continue to update throughout the year..

All right, thanks. That provides a lot of good, helpful insight. I noticed that just rough back of the envelope kind of calculations on earned returns on my guess for your rate base, looks like we’ve gone from kind of double-digit returns on rate base to single-digit and I see you’ve got a very active regulatory schedule this year.

So I imply that that regulatory activity this year is to try to get earned returns closer to authorized levels.

Is that a fair assumption?.

Yes, Dave. Nicole will take that one..

Yes, that would be fair. As you saw in the news release, we are looking at multiple rate cases in terms of 2015 and getting those executed, so fair statement, Dave..

Great.

And my last question, on capital structure and potential changes for planning going forward, I know with a little bit more cyclical business in E&P and at Fidelity with the potentially changing mix there, any thoughts on what your long-term kind of capital structure may look like post ’15 or ’16?.

Yes, Dave, this is Doran. I think one of the things that we are certainly thinking about is moving forward, post sale of an E&P type business is the overall business risk profile is going to be different. No doubt we’ve heard some of that feedback from our credit rating agencies.

But I think that one of the great things about that, too, is that even at maybe a lower overall business risk profile, we still have this opportunity to continue to invest and grow at again at - hopefully at least 7% to 10% growth rates long-term as we talked about before. So I think it’s a great story from that perspective.

I think in terms of the cap structure on our lower business risk profiles, we invest into the utility and grow. We had it at 11% per year. We grow the pipeline business with some of the FERC regulated projects that we have there like the wind ridge announced project.

And we grow our rate base that only adds to the solidification of the base of earnings and cash flows from a regulated source. That serves well also to help support the dividend that Dave talked about over time, too, that we’ve increased now for 24 straight years.

I would say from a cap structure perspective, certainly we are committed to a strong balance sheet, Dave. We have been forever. I think that’s one of the big reasons why we were able to come through the great recession stronger coming out of it than we did when we went into it.

And I think that positioned us well to take advantage of a lot of the opportunities in the late 2000s and early 2010, ’11 timeframe, So we’re committed to a strong balance. We’re not going to over belabor, but I would say certainly we would have opportunities to use our balance sheet in relation to operating under lower business risk profile.

But utility is pretty much a 50-50 cap structure. Has been, that’s kind of our target; we’ll be going forward. The largely non-regulated business on the non-utility side, historically we targeted 30% to 35% debt to cap. We might operate a little higher than that, but again, committed to a strong balance sheet..

Perfect. Thanks, Doran. Great answers, I appreciate it..

Yes, yes. Thanks, Dave..

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

In terms of pushing out the refinery CapEx, is that more of a function of the pre-construction process taking longer than expected or is it just a discretionary move to preserve capital this year?.

Sarah, this is Steve Bietz, basically our focus today is to get the refinery up and operational. So we want to get that completed before we really dive deep into our second refinery. Again, that’s planned for the second quarter.

We also planned to take some time to think about things that went well and things that we’re challenged with our first refiner and use those. Lessons learned to really put together our plan here for the second refinery with some of the changes in the oil market as well, I guess a little better breathing room to do that.

So that’s really what’s driven our decision to slide that out..

Got it. And then if the EMP sale isn’t realistic again in ’16, do you expect CapEx will be pushed out again? Or is this just a one year delay in construction with strength been [ph]..

Sarah Akers:.

Sarah, I would say it’s too early to tell at this point because we put together five-year plans. And it’s a continuous rolling five-year plan that’s refreshed every year. Clearly today, we view that there would not be expected sale to business in ’15. It would be beyond that.

And so the current CapEx forecast would be with the expectation that we’d look for a sale sometime in ’16. But again, we’d have to kind of readdress that as time went on based on market conditions, et cetera. So again, that’s how we forecast and that’s how we look at things.

But we continue to refresh that forecast based on the timing and the marketing process..

Got it.

Is the goal there to avoid needing to go to the equity markets or is that not necessarily the consideration?.

I would say the primary goal there is to maximize shareholder value for that business in the right, I’ll say, commodity, oil price forecast, futures environment..

Got it. Thanks a lot..

Okay. Thank you, Sarah..

This marks the last call for questions. [Operator Instructions] This call will be available for replay beginning at 1 pm eastern time today through 11:59 eastern on February 17th. The conference ID number for the replay is 58359497. Again, the conference ID number for the replay is 58359497.

And we do have a follow-up question from the line of Timm Schneider with Evercore ISI..

Yes. Just quick follow up for me.

How should we think about the debt that’s deep into the business [ph] whereas differently, once you sell that business should we expect then any changes to interest expense as a result of potential debt pay down from the proceeds?.

Timm, it’s Doran. So here’s how I would think about the debt. Out of - we’ve got a couple of billion dollars I think [ph] in the Press Release, just under $2.1 billion of debt.

Largely half of that - roughly half of that are regulated operations; the rest is across the unregulated businesses that we have at the non-utility business and pipeline business. And so we don’t necessarily break that out by BU.

But what I would say is as we take a look at Fidelity; they have a mix right now of short-term commercial paper and longer-term maturities. Some of those maturities come due in 2015 and ’16. We will look to basically refinance those with essentially shorter-term financing which could include commercial paper of some type of term loan with the bank.

And then the longer-term maturities with Fidelity as other maturities come due at other business units, we might look to redeploy some of that debt elsewhere within the corporation and we would finance that with lower cost options as well.

And then that gives us optionality upon the actual sale to either repay that debt or redeploy the fund somewhere else in the corporation. Again, we’d have to take a look at the balance sheet at that point in time, make our decision about whether we’d want to repay or redeploy the funds. First preference again is to commit to a strong balance sheet.

So we’d take a hard look at that. But that’s our plan to finance the debt associated with Fidelity as we think about leading up to the sale..

Okay. Thank you..

Thank you, Timm..

Timm Schneider:.

At this time, there are no further questions. I would now like to turn the conference back over to management for closing remarks..

Well, thank you. And as we’ve noted earlier and discussed on the call, we will pursue the marketing and potential sale of Fidelity both with tactful and a deliberate approach at the appropriate time. We do believe our utility. Our pipeline and construction businesses are very well-positioned for growth.

And we intend to continue to develop them to their full potential. We expect to create greater longer-term value for MDU Resources shareholders by focusing on the successful growth businesses. And above all, we appreciate your participation on our call today. We want to thank you for your continued interest in MDU Resources Group. Thanks for tuning in..

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