MDU Resources (MDU) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Treasurer - Brent Miller
• President and Chief Executive Officer - Nicole A. Kivisto
• Chief Financial Officer - Jason L. Vollmer

TAKEAWAYS

• Net Income -- $14 million, representing a decrease from $18.4 million in the third quarter of 2025 due to non-operating losses and higher expenses.
• Adjusted Earnings -- $16.6 million, excluding $2.1 million related to the Knott Landfill project termination and $0.5 million in Bakken East advisory costs.
• 2026 Guidance -- $0.93 to $1.00 per share, reaffirmed for the full year based on normal weather and successful capital execution.
• Electric Utility Earnings -- $26.5 million, representing a 23.3% increase driven by new rates and higher retail sales volumes.
• Electric Rate Revenue -- $7.1 million, resulting from approved rate increases in North Dakota, Montana, and Wyoming.
• Badger Wind Farm Contribution -- $3.2 million, supporting electric utility earnings growth following investment recovery.
• Retail Electric Sales Volume -- 9.3% increase, driven by warmer weather and demand across all customer classes.
• Data Center Sales Volume -- 18.4% increase, reflecting growing demand from large-load customers in the electric service territory.
• Natural Gas Distribution Loss -- $20.7 million, representing a seasonal loss deepened by higher payroll-related costs and a project termination loss.
• Natural Gas Rate Revenue -- $6.5 million, reflecting new rates approved in Idaho and Washington.
• Natural Gas Retail Volume -- 7.1% increase, supported by customer growth of 1.5% and higher consumption.
• Pipeline Segment Earnings -- $13.1 million, down from $16.8 million due to higher operation and maintenance expense and lower storage injections.
• Bakken East Investment Range -- $2.8 billion to $3.1 billion, narrowed from the previous estimate of $2.7 billion to $3.2 billion.
• Signed Data Center Load -- 1 gigawatt, secured under Electric Service Agreements to provide future growth opportunities.
• Online Data Center Capacity -- 280 megawatts, currently operational with additional volumes expected to ramp up over several years.
• North Dakota Interim Rates -- $26.3 million, implemented on Sept. 1 while the final electric rate case remains pending.
• Oregon Rate Settlement -- $12.2 million annual increase, with new rates becoming effective on Oct. 31.
• Minnesota Rate Request -- $4.5 million annual revenue increase, filed on Oct. 30 with a $3.9 million interim request.
• Nonqualified Benefit Plan Impact -- $0.015 per share reduction, resulting from lower investment returns compared to the third quarter of 2025.
• Long-Term Growth Objective -- 6% to 8%, representing the company target for annual earnings per share growth.
• Operating Income -- $47.6 million, increasing from $39.8 million due to growth projects and positive rate outcomes.
• Minot Industrial Project -- 90 miles of pipeline under development, with a cost recovery agreement currently extended through late 2026.
• Customer Rate Credits -- $45.4 million, returned to North Dakota customers since 2023 through cost causation regulatory mechanisms.

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RISKS

• Kivisto stated, "Due to continued increased development costs and changes enacted by rulemaking that have shifted the timing and reduced the volume of our need for the renewable natural gas," when explaining the $2.1 million loss from terminating the Knott Landfill project.
• Vollmer noted that lower returns on nonqualified benefit plan investments "reduced earnings by approximately $0.015 per share when compared to the third quarter of 25."
• Vollmer warned that pipeline results were negatively affected by "higher operation and maintenance expense, including payroll related and materials costs as well as advisory costs related to the Bakken East project and lower storage injections."

SUMMARY

MDU Resources Group, Inc. (NYSE:MDU) reported a decrease in quarterly net income to $14 million while reaffirming its full-year earnings guidance. Management noted that the company reached a positive final investment decision for the Bakken East Pipeline, a multibillion-dollar project designed to transport natural gas across North Dakota. The utility operations saw growth in sales volumes, particularly within the electric segment serving data center loads. The company stated it is following a disciplined capital allocation strategy, which included the decision to exit a renewable natural gas project in Oregon due to shifting regulatory requirements and rising costs.

• Regarding the Bakken East Pipeline, Kivisto stated, "We have narrowed our estimated capital investment range to between $2.8 and $3.1 billion and finalize the project design, which will include segments of 42-inch, 36-inch, and 30-inch diameter pipe."
• The Bakken East project is being constructed in two phases, with the first phase expected to be in service in late 2029 and the target completion for the second phase in late 2030.
• Management reported it has over 1 gigawatt of data center loads signed under Electric Service Agreements, with approximately 280 megawatts currently online.
• The company indicated that its approach to serving large-load customers has returned $45.4 million to North Dakota customers since 2023 by following the principle of cost causation.
• CEO Kivisto stated that the company expects to be filing about "3 to 5 rate cases annually" as it continues to deploy its capital plan.
• Management is evaluating financing options for the Bakken East project, including potential participation of financial and strategic investors, while intending to retain majority ownership and operational control.

INDUSTRY GLOSSARY

• ESA: Electric Service Agreement, a contract between a utility and a large-load customer defining service terms and cost responsibilities.
• FERC: Federal Energy Regulatory Commission, the United States federal agency that regulates the interstate transmission of electricity, natural gas, and oil.
• FID: Final Investment Decision, the stage in a capital project when the board of directors approves the commitment of funds to proceed with construction.
• Bakken region: A major rock formation in the northern United States and Canada that is a significant source of crude oil and natural gas.
• RNG: Renewable Natural Gas, a pipeline-quality gas produced from the decomposition of organic matter, such as landfill waste.
• Badger Wind Farm: A utility-scale wind energy generation facility located in North Dakota.
• Nonqualified benefit plan: An employer-sponsored retirement plan that does not meet the requirements of the Employee Retirement Income Security Act (ERISA).

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for joining us and welcome to the MDU Resources Group Inc. Q3 26 Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press 1 To raise your hand. I will now hand the conference over to Brent Miller, treasurer of MDU Resources Group. Brent, please go ahead.

Brent Miller: Thank you, Jen. And, again, welcome everyone to our third quarter 26 earnings conference call. Our earnings release and supporting materials for this call are available on our website at mdu.com under the Investors section. Leading today's call are Nicole A. Kivisto, President and Chief Executive Officer and Jason L. Vollmer, chief financial officer of MDU Resources Group. During today's call, we will make certain forward looking statements within the meaning of the federal securities laws. Please refer to our SEC filings for a discussion of risks and uncertainties that could cause actual results to differ. We may also refer to certain non GAAP information.

For a reconciliation of any non GAAP information to the appropriate GAAP metric, please refer to our earnings release. I will now turn the call over to Nicole for her prepared remarks. Nicole?

Nicole A. Kivisto: Thank you, Brent, and good afternoon, everyone. We appreciate you joining us today and for your continued interest in MDU Resources. This morning, we reported third quarter 26 earnings of $14 million or $0.07 per share. Our results reflected solid performance for the underlying businesses including strong performance at our Electric segment, benefiting from new rates, the Badger Wind Farm and higher retail sales volumes. We are also reporting adjusted earnings to reflect a couple of items not reflective of ongoing operations. At the Natural Gas Distribution segment, a decision was made to discontinue development of the Knot Landfill Renewable Natural Gas Project.

At our Pipeline segment, we incurred advisory costs associated With The Bakken East project that are not eligible to be capitalized as part of the project costs. Adjusted earnings, absent these items, were $16.6 million or $0.08 per share for the quarter. Jason will provide more detail on the quarterly results later during this call. The most significant milestone this quarter was our Board's positive final investment decision to proceed with WBI Energy's Bakken East Pipeline project. This decision reflects the customer commitments we have secured our confidence in the strategic importance of the project, and our belief in the long term economic opportunities it creates for MDU resources North Dakota, and the broader region.

We have narrowed our estimated capital investment range to between $2.8 and $3.1 billion and finalize the project design, which will include segments of 42-inch, 36-inch, and 30-inch diameter pipe. We also expect 4 new compressor stations along the 350-mile route, with additional compression at 2 existing facilities on our system. The project remains designed to transport 1.4 billion cubic feet per day of natural gas and will be constructed in 2 phases. With in-service dates of late 2029 and late 2030. We are still anticipating a Q4 date for our FERC 7C filing, and are also actively evaluating financing options.

Including potential participation of financial and strategic investors, while maintaining our expectation for WBI Energy to retain majority ownership and operational control. We also continue to see encouraging development activity across our service territory, including data center opportunities and broader infrastructure demand. As we have discussed previously, our approach to serving data centers and other large load customers is grounded in protecting existing customers while ensuring growth creates value for the communities we serve. We continue to follow the principle of cost causation, Customers that create costs are responsible for those costs through contracts, approved tariffs, and regulatory mechanisms.

This approach allows existing customers to benefit from broader utilization of our system, while supporting economic development opportunities within our service territory. And results in a reduction to customer bills. As an example, since 2023, we have returned $45.4 million to our North Dakota customers with this approach. We currently have over 1 gigawatt of data center loads signed, under ESAs, with approximately 280 megawatts currently online and additional volumes expected to ramp online over the next few years. As I did mention, during the quarter, we did make the decision to discontinue development of the Knot Landfill renewable natural gas project in Oregon.

Due to continued increased development costs and changes enacted by rulemaking that have shifted the timing and reduced the volume of our need for the renewable natural gas. In the state. We believe this decision reflects disciplined capital allocation and a continued focus on investments that are expected to provide the strongest long term value for customers and stockholders. This decision resulted in the recognition of an after tax loss of $2.1 million in the quarter. Moving on to regulatory matters. In North Dakota, interim electric rates of $26.3 million became effective September 1 subject to refund.

In Montana, interim electric rates of $10.4 million remain in effect subject to refund, while the settlement agreement of $10 million is still pending approval. At our Natural Gas Distribution segment, a $12.2 million annual revenue increase was approved in our Oregon rate case settlement with rates effective October 31. We also filed a Minnesota rate case on October 30 requesting an annual revenue increase of $4.5 million. An interim rate increase request of $3.9 million was also filed, and if approved, will be implemented on January 1, 2027. Our Washington multi year rate case filed in May remains pending. before the Commission.

At the pipeline segment, rates from the FERC rate case we filed in May will become effective December 1 subject to refund, and the outcome of hearing procedures if a settlement with our customers in FERC is not reached. We have made significant progress on the regulatory front, with continued deployment of our capital plan, we believe we will be filing about 3 to 5 rate cases annually. As we near the end of the year, we have delivered solid underlying business performance advanced regulatory initiatives, executed on a robust capital plan, and made a strategic decision to advance the Bakken East project.

Despite the negative weather impacts in the first quarter, we demonstrated solid performance on a year to date basis, putting us in a position to reaffirm our 2026 earnings per share guidance range of $0.93 to $1.00. This guidance continues to assume normal weather, economic and operating conditions, continued customer growth, successful execution of our capital investment plans, and constructive regulatory outcomes for the remainder of the year. Our long term earnings per share growth objective remains at 6% to 8%. We remain focused on disciplined execution of our capital program while advancing infrastructure investments that support growing energy demand throughout our service territories. As always, MDU Resources is committed to operating with integrity, and with a focus on safety.

We remain dedicated to delivering safe, reliable, cost effective, and environmentally responsible energy services while positioning the company for compelling, long term growth. I will now turn the call over to Jason for the financial update. Jason?

Jason L. Vollmer: Thank you, Nicole. This morning, we announced third quarter earnings of $14 million or $0.07 per share compared with $18.4 million or $0.09 per share in the third quarter of 25. Adjusted earnings for the quarter totaled $16.6 million or $0.08 per share. Year to date earnings were $116.1 million or $0.55 per share compared with $114.1 million or $0.56 per share through the first 9 months of last year. Adjusted year to date earnings totaled $119.4 million or $0.57 per share. We did experience lower returns on nonqualified benefit plan investments when compared to the same quarter last year, which impacted all of our business segments.

In total, this reduced earnings by approximately $0.015 per share when compared to the third quarter of 25. Operating income for the quarter was $47.6 million compared to $39.8 million in the third quarter of 25. On a year to date basis, operating income was $211.2 million compared to $183 million last time last year at the same time. This 15% increase in operating income highlights the strength of our operations and the meaningful impact that our growth projects and positive rate case outcomes have had over the last year. Now let's turn to our individual business segments. Our Electric Utility reported third quarter earnings of $26.5 million compared with $21.5 million in the third quarter of 25.

The increase was driven by $7.1 million in additional revenue from new rates approved in North Dakota, Montana, and Wyoming, $3.2 million in earnings from the Badger Wind Farm investment as well as higher retail sales volumes across all customer classes due to warmer weather. Total retail electric sales volumes increased 9.3% year over year data center sales volumes increased 18.4%. These favorable impacts were partially offset by higher operation and maintenance expense as well as lower returns on non qualified benefit plan investments. Our natural gas distribution segment reported a seasonal loss of $20.7 million compared with a seasonal loss of $18 million in the third quarter of 25.

This year over year decline reflects higher operational maintenance expense costs, including payroll related expenses and the $2.1 million after tax loss related to the Knot landfill project that Nicole previously discussed. Interest expense and lower returns on nonqualified benefit plan investments also contributed to the decrease. These impacts were partially offset by new rates, particularly in Idaho, Washington, and higher retail sales volumes across all of our customer classes. Pipeline segment earned $13.1 million during the quarter compared to $16.8 million in the prior period.

Results were impacted by higher operation and maintenance expense, including payroll related and materials costs as well as advisory costs related to the-- Bakken East project and lower storage injections and lower returns on nonqualified benefit plan investments. These impacts were partially offset by short term natural gas transportation contracts and contributions from previously completed growth projects. The other category reported a net loss of $4.9 million compared to a net loss of $1.7 million in the third quarter of 25. The decline was primarily related to higher claims experience within our captive insurance operations and higher income tax expense associated with adjustments related to the company's annualized effective tax rate.

We continue to maintain a strong balance sheet and ample access to working capital to finance our operations. That summarizes our financial highlights for the quarter. We appreciate your interest in MDU Resources and would ask that we now open the line for questions. Operator?

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press 1 To raise your hand. Please standby while we compile the Q&A roster. Your first question comes from the line of Aidan Kelly with JPMorgan. Your line is open. Please go ahead.

Aiden Kelly: Hey, guys. Afternoon. Thanks for the time today.

Nicole A. Kivisto: Good afternoon.

Aiden Kelly: Yeah. Maybe just pick up on Bakken East to start, the, you know, the elephant in the room. You know, how are you evaluating the trade offs between financial and partnerships as of now? I know you kinda mentioned, at least, you looked to kind of maintain that majority ownership structure. But just curious, you know, how we should think about also the potential to kind of mitigate external equity needs while kinda preserving the longer term earnings contribution, just any kind of in-depth color on how you think about the equity portion at this point in time?

Operator: Yeah, I will have Jason go ahead and talk about this.

Nicole A. Kivisto: But certainly, we are keeping the options open, as we did mention in the script as well as the news release. You know, our parameters are that we want to be the majority owner as well as the operator of the pipeline, but continue to evaluate the financing options. But Jason, want to provide additional detail there.

Jason L. Vollmer: Yeah, certainly. Brent question, Aidan. Appreciate the follow-up here. And as we know, high focus item for investors think about the size of an important project like this for our business. You know, our base capital plan that we have, you know, been working on here the last again, would have updated last year in November. We will probably update that here again towards the end of November. On the business as we look forward here. But have a sizable amount of capital investment that we are spending on this company, even outside of this Bakken East project. We are extremely excited about the Bakken East project and where this is gonna go.

But I think your point on balancing, you know, external financing needs along with the existing business plans here is very important. So as we look at longer term, what this project will do for the organization. Certainly, a very positive project to bring into the group. We wanna make sure that we are looking at overall at the investments we are making and making sure that we have got a good ability to finance this and provide solid returns for our investors into the long term. So Nicole's point, we are looking at all options, for how to finance this project. We are actively pursuing that as we speak here today.

We do not have a lot of updates for you at this point in time as we get into the new year and think about our fourth quarter call that we would have in February. I would expect we will have a lot more color on that likely as far as where we are at in the process of finalizing those opportunities. But it is a high focus item for us here internally, making sure that we balance the appropriate return for investors going forward with also looking at the impact of the ongoing business here and making sure we have got the right financing structures in place.

Aiden Kelly: Great. Thanks for the rundown on that, Jason. Sounds like to keep our eyes peeled for the 4Q plan refresh, I guess. Maybe just 1 other question on my end, kind of just turning to some of the disclosures on the project itself. It looks like you have narrowed the cost range slightly to $2.8 billion to $3.1 billion. So just curious if you could provide any detail on what gave you the confidence to kind of tighten the range at this point in time. And, you know, just any rationale behind the revised compressor station configuration whether that. there is any read through for, like, implications on project costs or future expansion capacity there?

Any detail there would be great.

Jason L. Vollmer: Yeah. Certainly. I can provide a little bit of detail on that? So as we think about, again, this project, as you know, we have been working on this for a long time, looking at different design routes, various items that would make sense here. The new item that we would have talked about now is we have finalized the pipe sizes with this really starting with 42-inch in the west going to 36- and then down to 30-inch pipe.

What that does do, and then specifically to your compressor station question, is it does allow us to operate this more efficiently with less compression needed from a larger pipe basis, which then offsets some need for additional compression, but also know, for our customers involved here, reduce fuel costs for them on a go forward basis as well. So we think that is the optimal structure based on what we have determined with, where we are at now. So that does change a little bit of the, calculus, I guess, on the overall cost.

So narrowing the range now I think what we have been able to do as we continue to progress and work on this project, you know, reaching FID in, the end of September was very important milestone for us. Now moving forward, we have been able to take some of the unknown we would have here and make them a bit more known as we have continued to work through. So, again, getting in front of the you know, finalizing the design, understanding what compressor items we need, getting orders made in certain areas, working on pipe design, pipe, you know, mill space, working with contractors.

Us a lot more clarity to be able to narrow it down and really kind of take in the bookends of that range and narrow it to something that we feel very comfortable with here now. Landing in this $2.8 billion to $3.1 billion range.

Nicole A. Kivisto: And the only thing I would highlight just highlight 1 more. Oh, go ahead. I am sorry. No, all you, Nicole. Thanks.

Jason L. Vollmer: Yeah.

Nicole A. Kivisto: I was just going to highlight 1 more item that you would note for CapEx as it relates to the pipeline. You would have seen an increase compared to last quarter. Basically, once we got to FID, we are bringing those into CapEx. But what that capex demonstrates is we are making some of these decisions that Jason alluded to. We have been working through this project for quite some time, but we are now able to kind of get to a decision point and lock some of these things in as we finish out the year. And that actually helped us then, to his point, narrow that range a bit.

Aiden Kelly: Got it. that is super clear. Well, appreciate all the color, and I will leave it there. See you guys soon.

Nicole A. Kivisto: Thank you.

Operator: Your next question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open. Please go ahead.

Brian Russo: Yeah. Hi. it is actually Brian Russo on for Julien. Good afternoon.

Nicole A. Kivisto: Good afternoon. Hey.

Brian Russo: It you mentioned a fourth-quarter kind of update. Is it at all possible to get some insight into who the partner might be or financing structure when you report the updated CapEx with your usual annual update, I guess, in November.

Nicole A. Kivisto: Yeah. Our normal cadence, I think, you are referring to is when we update and refresh our 5 year capital plan. We normally do that following EEI. But as Jason mentioned, I do not know that we will be in a position to be disclosing anything additional as it relates to financing. What he alluded to would be we would have more information at our year end call, which is more in the February time frame.

Brian Russo: Okay. Understood. And, you know, when we look into 2027, you have given the cases that have concluded for partial year contribution this year, full year next year, along with the interim rate filings. Do you think you can kind of move back up, you know, into the comfortably in the middle or the high end of that 6% to 8% long term range just based on rate relief?

Jason L. Vollmer: Yeah, I can take that 1, Brian. I think as we look ahead now, we certainly have not given guidance beyond 2026 at this point, right? We did update and reaffirm our guidance, I guess, for 2026 at this point. We feel comfortable with that range we have got now. As we look to 2027, certainly, the rate case activity that we have had along with some of the growth projects we have had here, I think, will continue to provide, benefit for us as we look forward. But do not wanna get ahead of, foreshadowing, any guidance for next year. We just have not given that yet. Typically a fourth quarter cadence for us as well.

So again, similar time frame with what Nicole just mentioned with our fourth quarter call.

Brian Russo: Okay. And then lastly, you know, we have seen some nonutility generation being developed you know, in the region to serve some of your data center, you know, customers, I believe. And I am just curious, have you been involved in any of those discussions and why MDU is not in a position you know, not only, you know, serve economic growth through the Bakken East pipeline, you know, but also through utility owned generation.

Nicole A. Kivisto: Yeah, I would just say as we think about the development that we are seeing, and as you know, Brian, it is been our practice to really talk about the where we are at with these once we have a signed ESA. But it is fair to say that we continue in conversation on various other opportunities. Now, saying that, I think you are really getting to the question of, are we willing to make investments to serve these types of loads? In the past, we have not done that, so that would be different. And what I would say is we are not opposed to that, looking at investment opportunities that make sense.

But we are going to want to make sure that, you know, we have got the right cost causation, similar to how we have treated these in the past, that the large load pays for that cost. And that it makes sense for our shareholders and customers as well. So, again, we will continue to evaluate these opportunities on a case by case basis. it is not that we are opposed to investment, but it is going to have to make sense for our shareholders.

Jason L. Vollmer: Yeah, and I would probably just add a little bit to this, too. When you think about the pipeline project and what this does for the state of North Dakota, again, getting this FID decision with Bakken East has been know, very instrumental, I think, not only for our company, but even for economic development across the state. You know, we do not serve the entire state of North Dakota, but North Dakota is a state that has had a lot of data center development going on.

So to your point, you are probably seeing others that are announcing generation projects, where we see the value of the business mix that we have today is our ability to potentially participate by serving data centers or large load customers of other sorts, if they are in our service territory. But, you know, alternatively, with our pipeline business, we certainly have the ability to serve other generation to serve whatever kind of load that would be, whether that is existing load growth that we may see customers have or whether that is large load customers in there. So we think we sit kind of in a unique position to be able to capitalize on both opportunities.

Brian Russo: Okay, great. Thank you very much.

Nicole A. Kivisto: Thank you.

Operator: A reminder. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We will hold for a moment to allow for questions. There are no further questions at this time. I will now turn the call back to Nicole A. Kivisto for closing remarks.

Nicole A. Kivisto: All right. I want to thank you all again for joining us today and for your thoughtful questions. We certainly appreciate your continued interest in and support of MDU Resources. As a reminder, we do plan to release our new 5 year capital expenditures forecast later this month, in line with our typical timing of releasing after the EEI conference. We look forward to seeing many of you at the conference. And finally, I do want to close by once again thanking our employees for their ongoing commitment to safety, reliability, operational excellence, and customer service. It is their dedication that enables us to continue delivering for our customers, while advancing opportunities for future growth.

With that, we look forward to staying engaged with you throughout the remainder of the year. Operator, you may now conclude the call.

Operator: Thank you. This concludes today's call. Thank you for attending. You may now disconnect.

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