My interests and passions for investment have always resided in the tech sector and that's where I spend the majority of my time searching for great investment opportunities. However, the deteriorating U.S and global economy have prompted me to share a solid idea for those having a greater need for income and safety.
MDU Resources Group (MDU) is a diversified company providing gas and electric utility service, oil and natural gas exploration and production, construction services, basic materials production, pipeline services and much more. The company has a solid balance sheet, strong management, offers a safe 3% dividend and offers better long-term capital growth potential than most utility investments. I'll touch more on that later. The company's vast business diversification provides nice revenue and earnings stability for its investors. The following is a breakdown of the operations areas MDU Resources Group does business in through its wholly owned subsidiaries such as, Williston Basin Interstate Pipeline Company, Fidelity Exploration & Production Company, and Knife River Corporation just to name a few.
Natural Gas and Electricity
The company's utility group (MDU, Great Plains Natural Gas, Intermountain Gas & Cascade Natural Gas) generates, transmits and distributes electricity and / or natural gas in Montana, North Dakota, South Dakota, Wyoming, Idaho, Minnesota, Oregon, and Washington. These operations also supply related value-added services to its customers.
The pipeline and energy services segment provides natural gas transportation, underground storage and gathering services through regulated and non-regulated pipeline systems primarily in the Rocky Mountain and northern Great Plains regions of the United States.
Oil & Gas Exploration
The company is engaged in oil and natural gas acquisition, exploration, development and production activities in the Rocky Mountain and Mid-Continent regions of the United States and in and around the Gulf of Mexico.
The construction materials and contracting segment mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mixed concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated contracting services. This segment operates in the central, southern and western United States and Alaska and Hawaii.
The construction services segment specializes in constructing and maintaining electric and communication lines, gas pipelines, fire suppression systems, and external lighting and traffic signalization equipment. This segment also provides utility excavation services and inside electrical wiring, cabling and mechanical services, sells and distributes electrical materials, and manufactures and distributes specialty equipment.
MDU Resource's Bakken Play
Investing in a well diversified utility and basic materials company that provides a 3% dividend is a good and relatively safe investment in these harsh economic times. However, the investment proposition for MDU Resources Group gets better.
Currently, the company owns a total of approximately 124,000 net acres of leaseholds in the Bakken region. It is producing oil from its current wells in place and has plans to drill 29 more wells in the region in 2012. From the March 31st 2012 10Q:
The company expects to spend approximately $400 million in capital expenditures in 2012. The company continues its focus on returns by allocating the majority of its capital investment into the production of oil in the current commodity price environment. Its capital program reflects further exploitation of existing properties, acquisition of additional leasehold acreage, and exploratory drilling. The 2012 planned capital expenditure total does not include potential acquisitions of producing properties.
For 2012, the company expects a 20 percent to 30 percent increase in oil production and a 12 percent to 20 percent decrease in natural gas production. The projected decline in natural gas production is primarily the result of the divestment and/or curtailment of certain natural gas properties and the deferral of certain natural gas development activity because of sustained low natural gas prices.
For investors looking for a safe haven for their capital in these uncertain economic times MDU Resources Group offers a protected harbor. The company business is well diversified, has good management, a good balance sheet, provides a 3% dividend and should provide solid revenue and earnings growth in the years to come through its increasing investment in its Bakken oil properties. Also of interest is that the CFO bought 1,000 shares on the open market as recently as May 24th. As always, do your own thorough research when investing in any stock.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MDU over the next 72 hours.