MDU Resources Group, Inc. (MDU)

MDU 
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MDU Resources Group Inc. (MDU)

Q4 2010 Earnings Call

February 3, 2011; 11:00am ET

Executives

Terry Hildestad - President & Chief Executive Officer

Doran Schwartz - Vice President & Chief Financial Officer

Steve Bietz - President & CEO of WBI Holdings

Dave Goodin - President & CEO of Montana-Dakota Great Dakota Plains Natural Gas Cascade Natural Gas, and Intermountain Gas

Bill Schneider - President & CEO of Knife River Corporation

John Harp - President & CEO of MDU Construction Services Group

Nicole Kivisto, Vice President, Controller & Chief Accounting Officer for MDU Resources

Analysts

Christopher Ellinghaus - Willington Shields

Holly Stewart - Howard Weil

Tim Snyder - Citigroup

Paul Ridzon - KeyBanc

Monroe Helm - Barrow Hanley

John Henson - Unidentified Company

James Bellessa - D.A. Davidson & Co.

Jim Harmon - Barclays

Presentation

Operator

Good morning. My name is Sarah, and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2010 year-end and 2011 guidance conference call. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

This call will be available for replay beginning at 2:00 pm Eastern Time today, through 11:59 pm Eastern Time on February 17. The conference ID number for the replay is 1-800-642-1687 or 706-645-9291. The conference ID number for the replay is 344-80-118. Again the conference ID number for the replay is 344-80-118.

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

Doran Schwartz

Thank you, and welcome to our earnings release conference call. And before I turn the presentation over to Terry Hildestad, our President and Chief Executive Officer, I would like to mention that this conference call is being broadcast live to the public over the Internet and slides will accompany our remarks. If you’d like to view 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.

Now, 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 of factors that may cause actual results to differ, refer to Item 1A Risk Factors in our most recent Form 10-K, as well as our Form 10-Q and the risk factors section in our most recent Form 8-K.

Our format today will include formal remarks by Terry, 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; Steve Bietz, President and CEO of WBI Holdings; Dave Goodin, President and CEO of Montana-Dakota Great Plains Natural Gas, Cascade Natural Gas, and Intermountain Gas; Bill Schneider, President, CEO of Knife River Corporation; John Harp, President and CEO of MDU Construction Services Group; and Nicole Kivisto, Vice President, Controller, and Chief Accounting Officer for MDU Resources.

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

Terry Hildestad

Thank you, Doran, and good morning. Thank you for joining us today to discuss our results for 2010 and our 2011 outlook. I’m pleased with the performance of our business units this year. Our business unit Presidents and their teams delivered in a tough environment.

In addition to generating consolidated earnings of $240 million or $1.27 per share, we accomplished several key strategic initiatives in 2010, including positioning ourselves for future growth through the entry into exciting, exploratory including the Stark County acreage in North Dakota’s Bakken, the Niobrara in Wyoming. We also added natural gas properties in the Green River Basin.

We generated approximately $700 million in cash from operations and asset sales, including de-risking our investment in the Niobrara properties while maintaining a significant operated interest in that acreage. Our pipeline set another record for natural gas storage balances. We had record earnings and continued customer growth at our utility.

The disciplined approach to cost controls and project bidding at our construction operations continued. We strengthened our balance sheet and continued to have access to significant liquidity, and we increased our dividend for the 20th consecutive year this past November. As we transition from 2010 into 2011, we are well positioned for, and we are focused on growth in all of our business units.

I’ll start with the natural gas and oil operations; they produced solid financial results for the year. We deployed approximately 356 million into this business in 2010 including the Green River Basin, our Stark County acquisition and our Niobrara acquisition. Oil production grew 5% over 2009 levels, now represents 28% of our overall production.

In today’s commodity price environment our strategy is to maximize returns for our shareholders by increasing our oil and liquids production. This will occur even more in 2011. In the near future, the Stark County, the Niobrara and the Health Shale oil prospects will compliment this strategy as we develop these plays.

In the Bakken area, we drilled eight wells on our Mountrail County acreage last year. Production increased 41% over 2009 levels with production averaging approximately 3700 net barrels per day. We are pleased with these results; we’ve identified over 50 future middle Bakken in-fill and Three Forks well sites in our Mountrail County acreage. This year, we expect to drill 13 operated wells and participate in various non-operated wells investing about $52 million in this Mountrail County acreage.

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