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MDU Resources Group's CEO Discusses Q2 2012 Results - Earnings Call Transcript

We also took a charge relating to the gathering assets in our coal bed area of $1.7 million after tax. Well absent these items, we delivered recurring earnings at the upper range of our guidance for the quarter at $0.19.

The E&P segment has continued it's impressive expansion of oil production. In fact, oil represented 44% of total production for the quarter. This was up from 30% for the same period a year ago.

While the utility group was affected by unseasonably warm weather, primarily in April, and higher income taxes, they experienced significant customer growth primarily in Western North Dakota.

In May, we announced our $66 million initial investment in oil and natural gas midstream assets by our pipeline group, and the construction group had a solid quarter and continues to see signs of recovery.

On a year-to-date basis, lower oil and natural gas prices affected our E&P group earnings by approximately $20 million compared to last year. And the weather challenges that are utility totaled approximately $7 million.

The strength of our diversified business model and the strong execution of our business plans as the operating company has allowed us to partially offset the combined year-to-day $27 million earnings effect coming from these largely uncontrollable factors. Based on our performance to-date, and our outlook for the remainder of the year, we've reaffirmed our guidance of $1.00 to $1.25 per share.

Now I'll move on to our individual operations and I'll begin with the E&P business. We continue to see significant oil production growth as a result of our increased drilling activity. Oil production increased 32% over the same period last year, and increased 13% from the first quarter. The jump in oil production was led primarily by the Bakken, where we saw a 59% increase in production over last year. Our Paradox and our Texas properties also contributed to the increase.

With continued success developing the Bakken and promising initial results from exploratory areas such as the Paradox, we've raised the midpoint for our oil production growth for the year.

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