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MDU Resources Reports Second Quarter Earnings, Reaffirms 2012 Earnings Guidance

MDU Resources Group, Inc. (NYSE:MDU) today reported second quarter consolidated earnings of $53.9 million, or 29 cents per common share, compared to $44.9 million, or 24 cents per common share for the second quarter of 2011. 2012 earnings reflect a benefit from the reversal of an arbitration charge of $15.0 million, or 8 cents per share, as a result of a favorable court ruling and $5.1 million of earnings, or 3 cents per share, from discontinued operations.

“We continued to deliver earnings at the upper range of our quarterly guidance, even before the benefit from reversing the arbitration charge and earnings from discontinued operations,” said Terry D. Hildestad, president and chief executive officer of MDU Resources. “Our investment in our exploration and production business continues to deliver impressive increases in oil production, and our construction businesses are seeing some signs of market improvements.”

Oil production increased by 32 percent compared to the same quarter last year and increased 13 percent from the first quarter, with three fourths of the growth coming from the company's Bakken acreage, where five of its rigs currently are drilling.

“Through the first half of the year Fidelity Exploration & Production has grown total oil production by 26 percent, and we are confident that we will achieve our original full-year production target. In fact, we have moved up the low end of our projected oil production growth and now expect a 25 percent to 30 percent increase over 2011,” Hildestad said. He noted that lower average realized oil prices and continuing low natural gas prices for the quarter impacted Fidelity's earnings, along with a strategic shift away from natural gas production until prices increase.

The pipeline and energy services business also felt the effect of low natural gas prices, as production decreases significantly impacted gathering. However, the business reported good progress in its effort to expand its midstream business. In May, the company announced it purchased a 50 percent undivided interest in natural gas and oil midstream assets near Belfield, N.D. serving the Bakken area. The facilities include a newly constructed, state-of-the-industry natural gas processing plant that has an inlet processing capacity of 35 million cubic feet per day, oil terminal, natural gas and oil gathering systems and related facilities. In addition, engineering and design work, along with final economic analysis, are continuing on a diesel topping plant proposed by the company's pipeline and energy services group and Calumet Refining, LLC. The facility would be able to process up to 20,000 barrels per day of Bakken oil.

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