MDU Resources Group, Inc. (MDU)

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MDU Resources Group Inc (MDU)

Q4 2011 Earnings Call

February 2, 2012 9:30 am ET

Executives

Doran N. Schwartz – Vice President and Chief Financial Officer

Terry D. HildestadPresident and Chief Executive Officer

Steven L. BietzPresident and Chief Executive Officer,WBI Holdings

Dave GoodinPresident and Chief Executive Officer, Montana-Dakota Utilities, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas

John HarpChief Executive Officer, MDU Construction Services Group and Knife River Corporation

J. Kent WellsPresident and Chief Executive Officer, Fidelity Exploration and Production

Nicole KivistoVice President, Controller and Chief Accounting Officer, MDU Resources

Analysts

Paul Patterson – Glenrock Associates

Paul Ridzon – KeyBanc

Timm Schneider – Citigroup

James Bellessa – D.A. Davidson & Co

Rosemary Tevelow – Tevelow Associates

Presentation

Operator

Good morning. My name is Tanisha and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2011 Year-End and 2012 Guidance Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

This call will be available for replay beginning at 2:00 PM Eastern today through 11:59 PM Eastern on February 16. The conference ID number for the replay is 40840208. Again, the conference ID number for the replay is 40840208. 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.

Doran N. 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’d 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.

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 Factor section of 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 today during the Q&A session of the conference call, 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; John Harp, CEO of MDU Construction Services and Knife River Corporation; Kent Wells, President and CEO of Fidelity Exploration & Production; Nicole Kivisto, Vice President, Controller and Chief Accounting Officer for MDU Resources.

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

Terry D. Hildestad

Thank you, Doran. Good morning. Thank you for joining us today to discuss the results for 2011 and our 2012 outlook. I’m pleased with our performance in 2011, earning $225.2 million or $1.19 per share from continuing operations. Our businesses finished the year strong. We made substantial progress in preparing the company for future growth. We successfully completed the first stage of a multi-year capital investment effort that we believe will increase our profitability. We also increased our dividend for the 21st consecutive year.

Moving on to our operating companies, I’ll start with our E&P operations. I’m excited about how this group has built up a solid momentum in its business. We increased our oil production 12% in the fourth quarter and 7% for the full-year compared to one year ago. This was largely the result of record production levels in our Bakken position, where we saw a 16% increase over the prior year.

We now have eight rigs drilling across our properties focused on oil rich plays. That’s up from two rigs one year ago. We have continued to focus on a more balanced commodity mix, with oil production now representing 32% of our overall production. This is double what oil represented five years ago. We’ve also continued to focus on pursuing additional leaseholds. Our Bakken position is now up to 95,000 net leasehold acres, that’s up from 66,000 net acres last year.

This includes our Mountrail and Stark Counties in North Dakota and Richland County in Montana Holdings. We have plans to drill nearly 30 operated wells in the Bakken this year. On our 65,000 net leasehold acres in the Niobrara, we have drilled our first test well and are awaiting results. We are finishing the drilling of our second well and expect to drill a total of four operated wells this year as well as participate on various non-operated wells. Additionally, we have recently spud a well in the Paradox basin where we expect to drill four wells this year on our 75,000 net acres.

We have continued our drilling efforts in Texas with 20 wells planned throughout the year. In addition, our first well was recently spud on our 90,000 net acres in the Heath Shale; we have plans to drill up to four wells on this acreage this year. By mid year we expect to have completed much of the appraisal process on our exploratory acreage, so we’ll be in better position to talk about initial results at that time.

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