Good afternoon. My name is Michael, and I will be your conference facilitator. At this time I would like to welcome everyone to the MDU Resources Group 2009 second quarter conference call. (Operator Instructions) This call will be available for replay beginning at 4:00 p.m. Eastern Time today through 11:59 p.m. Eastern Time on August 17th. The conference ID number for the replay is 14307858. Again, the conference ID number for the replay is 14307858. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. I would now like to turn the conference over to Vernon Raile, Executive Vice President, Treasurer and Chief Financial Officer of MDU Resources Group. Thank you, Mr. Raile. You may begin your conference.

Welcome to our earnings release conference call. 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. 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, Bill Schneider, President and CEO of Knife River Corporation, Dave Goodin, President and CEO of Montana Dakota Great Plans Natural Gas, Cascade Natural Gas and Intermountain Gas, John Harp, President and CEO of MDU Construction Services Group, and Doran Schwartz, Vice President and Chief Accounting Officer for MDU. With that, I'll turn the presentation over to Terry for his formal remarks. Terry?

Thank you, Vern. Good afternoon and thank you for joining us today. I'm pleased to say that our diversified business strategy and our aggressive cost management have helped us maintain a strong financial position. Despite the lower energy prices compared to the record high prices experienced mid-year 2008 and the current economic conditions, we continue with a strong cash flow from operations of $398 million year-to-date. And we've got a strong balance sheet, with equity of nearly 60% of the total capital. Consolidated earnings for the second quarter were $55.1 million or $0.30 per common share compared to $115.3 million or $0.63 per common share second quarter of 2008. Our natural gas and oil production business contributed $20.8 million in earnings compared to $71.7 million in 2008. These results reflect oil and natural gas prices which have declined significantly from last year's record highs, with 43% lower average realized natural gas prices and average realized oil prices that were 56% lower. The results also reflect an anticipated natural gas production decrease from normal declines given our reduced drilling activity. Oil production increased from a year ago. Our Bakken interest had encouraging results again this quarter, with a 36% production increase compared to the first quarter. Currently our net production is approximately 2,500 barrels of oil per day. We have one rig drilling in the more prolific southern block of our acreage in Mountrail County, where we're targeting the Bakken formation. The Sanish formation may provide additional future benefits for us. We're continuing our efforts to drive down lease operating costs. Our lease operating costs were $0.95 per thousand cubic feet this quarter compared to $1 in the first quarter. Our LOEs are down from the high experienced in the fourth quarter of 2008 of $1.14 per thousand cubic feet. We…

(Operator Instructions) Your first question comes from Paul Patterson - Glenrock Associates.

I wanted to touch base with you on two items. One was the pipeline litigation settlement - how much was that? And also you mentioned some nonrecurring integration expenses that happened in the quarter, if you could just give us a flavor for those things.

Sure. I'll let Steve address the pipeline settlement and then pass it over to Dave Goodin to talk about the one-time charges.

As Terry mentioned, we did resolve the litigation that we had outstanding regarding our outbasin storage field. As a result, we reversed previously recorded costs associated with some of the gas that had migrated outside of the storage field and the net of that was approximately $2 million for the quarter.

Okay. But the O&M seemed like it was lower than that. It looked like it was more like about $5.5 million lower.

I think there were some other items in there, Paul, partly. Some of that, we're postulating that some of that was related to some service work, so there's a little bit of cost of goods sold associated with that for some of the work at our energy services business.

I got you. And then the nonrecurring integration expenses?

Yes, Paul. This is Dave Goodin. Relative to our integration expenses, this last quarter we incurred approximately about $1.5 million in one-time expenses and on a year-to-date a little over $3 million of one-time expenses relative to our integration.

And those would probably be not there in 2010, correct?

That would be correct.

Okay. Now when we're thinking about cost savings and the efforts that you guys have made in the construction materials and other sides of the businesses, how much of that would you say is sustainable or would be sort of a deferral? Could you give us any flavor for that? I mean, in other words, is all these cost savings things that are just making things more efficient or are there some things that maybe you're delaying that you could do next year or when things are a little bit better economically?

The cost savings that we have generated thus far are sustainable. We think that what we've done to get the cost structure down in our corporation is going to continue, plus we're not done. We think we have some more efficiencies that we can gain as we go forward. The other thing is our vertical integration that you've heard about many times in the past has really proven to be a great strategy now, particularly with so much of this stimulus spending focusing on the asphalt oil, where we have the rock; we have in many cases the oil as well as the laydown and the construction end of it. So we think this is just not a one-quarter deal.

And then just finally, I noticed that your assumptions for oil prices have gone up and, of course, the price of oil has also gone up. But looking out forward, now I know it's a little bit early so I apologize, but going towards 2010 and what have you, how should we think about capital spending and particularly on the E&P side what we might see in terms of what expected growth would be? Has there been any change in that? Any thought about 2010 or the rest of 2009? Has there been any change in the CapEx outlook for 2009?

We're going to stay pretty disciplined in 2009 with our forecasted capital expenditures. The only change that we'd foresee on that is if the business units bring forth some good solid acquisition opportunities and then we would come out with that information for the Street. As far as 2010, we're early in the planning process there as far as all segments of the business. We always generate a lot of cash flow, a good solid cash flow, but we will be focused on our balance sheet as well.

Your next question comes from Paul Ridzon - KeyBanc Capital Markets.

You mentioned that you've got a potential transmission project but it's not in the backlog. Could you indicate what that could do the backlog from a magnitude standpoint?

The dollar amount that we're looking at on that project is somewhere between $150 to $160 million.

And what's your level of confidence that you can land that?

Well, you know, we've actually got an executed contract; the thing that we have been waiting for is the financing. And it was published here a couple of weeks ago in one of the trade magazines that they're currently negotiating there with [WAPA] to help finance that and that would be one of the shovel-ready projects that the administration is working on right now. So we're anticipating word on that any time. We've got about six months of pre-construction and engineering before construction would start, so we wouldn't get much benefit of it this year, but obviously if they made a decision here fairly quickly we should see some benefit in 2010.

That $150 to $160 million is the MDU component?

Yes, that's what the contract that we're looking at right now entails.

Is this the cross-border transmission project, the Latham line, or is this another one?

No, this is the one that goes across international lines.

This is the one we've talked about before, correct?

Correct.

And just on the O&M front, do you have any corporate-wide targets for O&M reductions? How far have you progressed along that curve?

Well, Paul, overall for the corporation I can just assure that you each one of the business segments have focused in on their O&M. We have at corporate as well. We continue to do so and look at that. We didn't go out and set a specific percent across the corporation, but we've been very aggressive on that front.

And then the lower DD&A and construction materials, is that purely volumetric or was there some sort of asset revaluation driving that?

Paul, we did sell a bunch of iron last year when we saw the market turning down about 18-plus months ago. We took a very hard look at our fleet and we went to auction last fall with a substantial amount of equipment. And it turned out the timing was excellent. We hit the auctions at the right time and got maximum value. Since that time auction values have dropped at least 30%, so we're not doing that much of a reduction in the fleet this year.

Your next question comes from Faisel Khan - Citigroup.

Just curious. I listened to your comments earlier about storage. Are we talking about storage being substantially up versus last year?

Yes, we're talking about storage for the pipeline business in their storage fields, and we're up significantly from last year, yes.

What was that number again? Sorry, I missed that.

I think our total throughput, Faisel, was up about 15%, largely related to gas moving to storage. If you look at gas in storage, we moved I think it's right around - for interruptible customers around 19 Bcf for the year and our balance for interruptible customers is up about 78% compared to last year at this time.

Where does that put you guys in terms of percent full for the year?

We've got a lot of additional storage capacity available with the Baker field; that's pretty large. So we're continuing to see quite a bit of gas being moved to the Baker field. At Elk Basin we anticipate that that will be full. We've kind of got it scheduled for the balance of they year. We'll continue to move gas, but that should be full at the end of the year as well.

On the oil price realization excluding the hedges of around 47 to 46 for the three months, what's going to happen here over the next year or so to get those prices to more closely match the actual WTI price?

It's difficult to say as that oil gets sold in different markets and included in there, Faisel, is some liquid that gets sold as well, so that would have some differential affects when you compare back to the NYMEX market.

Right now you guys don't expect any improvement in differentials over the next [inaudible]?

A lot of our oil right now is in the Rocky Mountain area in Montana and in North Dakota. There is an upgrade of embrague that is expected to be in place, I believe it's the first quarter of next year. They're adding 50,000 to 60,000 barrels a day of capacity. That has the potential to provide some narrowing of the differential, at least in North Dakota.

And how do you envision your oil production taking place over the next year or so versus your gas production? I would suspect that oil production would be flat to up and gas would kind of continue to trend down? Is that a fair statement?

Yes, I think so. Right now a lot of the capital dollars we're spending is being invested on the oil side. We're less so on the gas side, so I think we'd expect oil to increase with gas maybe staying flatter.

And then just on the aggregate side, the volumes were down sequentially pretty sharply it looks like quarter-over-quarter. Am I reading that right?

Yes.

Is that seasonality or what kind of drives that back up? Are we waiting for the stimulus money to kind of kick in?

The stimulus money is really starting to hit the streets more in this third quarter on a go forward basis. And matter of fact, Faisel, we think the benefit of the stimulus program's going to really fall more in 2010. But the other thing I want to mention, too, is several of the states - at least six or seven of the states that we operate in - have their own stimulus programs as well. So we think what we've seen in the first six months of this year we're going to see some bottoming out on those volumes and look more positive on a go forward basis.

And on the Construction Services side, the backlog, which includes [Mount Blue], I remember you guys talked about this before in terms of like the - you guys don't have as much working capital outstanding to this project. Is that still correct?

The last part you kind of cut out on me. I didn't quite hear you.

The working capital that you guys would kind of put up for this project in terms of receivables, payables, that sort of thing.

Yes. No, we're in very good shape with our working capital.

So I guess what would bring this project out of your backlog?

Well, if they wouldn't complete the building. Remember that this building is 63 stories high, 70% complete, and it's got over $2.5 billion invested in it. Obviously it's in bankruptcy right now, but the only way that this piece of property can get a return on invested capital is it's got to be completed and functioning. We know that there's activity right now with the potential owners walking the job site in the last month, so I think there's activity there for an outright purchase or to restructure and come out of bankruptcy.

On the Green Power Express project, can you a little bit more about potential timing on this project and scope and cost? I know it's early days but at least give us an idea of what are the major milestones we're looking for over the next couple of years?

As you know, this is a very large project. It crosses seven states. It's approximately 3,000 miles long and it's a 765 kV transmission line, so it's a very large project. There are some major hurdles here. The siting would be a major issue. The second thing is they need to finalize the cost allocation methodology. FERC has given approval on a formula rate on the project. It's 12.38% ROE with a very favorable structure. It's a 60% equity project. So we're excited about it. It seems to be moving along. It seems to be making progress. But these things take time. I guess we're watching it; we'll be monitoring it. As it goes forward we'll keep you updated on it.

Your next question comes from Becca Followill - Tudor, Pickering, Holt & Co., LLC. \ Becca Followill - Tudor, Pickering, Holt & Co., LLC: Two questions for you, one just following up on Green Power Express. When would you anticipate making your first capital investment? I know that permitting is an issue, cost allocation is an issue, but when would you anticipate starting to spend money on that?

Becca, probably it would be - the way we're looking at it right now it would be a couple years out before we'd make any substantial investment. One of the positives on this project - again, if it goes forward - is that there is a provision in there for construction work in progress which, again, is a very positive aspect of the project. But we'd say probably a couple years out. Becca Followill - Tudor, Pickering, Holt & Co., LLC: And would your Construction Services business have any priority or preference in building some of that?

You know, we've not identified that. Certainly during our discussions we have a very capable Construction Service group and we'd expect that they would be in there bidding on the project as well as some other folks would be. Becca Followill - Tudor, Pickering, Holt & Co., LLC: And then over to the E&P side, I know it's early for 2010 and the budget, but in looking at the strip on commodity prices, what regions are economic to drill at the current strip? We know that Bakken is at above 60, 65, but can you talk to some of the other regions and the number of rigs you currently have running, basically where you're drilling right now.

Becca, I think first and foremost Baker and Bedouin are economic in today's environment, even on the gas side. We're not doing a lot of drilling there. As you know, that's basically all held by production and we basically will look to take advantage of that in a little better price environment. I think you touched on Bakken. That's economic and certainly we're drilling there. We've got on rig that's operating. We plan to continue that rig for the balance of this year and expect to continue on next year. The other, down in South Texas and East Texas, it would be economic in today's price environment, but the returns are probably a bit below what we are looking for. We do get with some of that some pretty flush production. So today we probably wouldn't drill that, but as we see prices move up some we'd look to drill that. We do have a number of wells, I think, if I remember right, six or seven in East Texas and a few in South Texas, that have been drilled and we haven't spent a lot of money on completions, kind of waiting for a little better timing, a little better pricing, both on the commodity side as well as on the service side, and we have seen those costs come down. I would say that Coal Bed, nothing drilling there right now; certainly some very viable projects, but with the amount of infrastructure for both gathering as well as water we need to look for a little higher price environment than we are today. Big Horn is probably in that same boat, nothing drilling there at this point and are just kind of looking at that and kind of the various opportunities that we have there for recompletions and so forth going out into next. Becca Followill - Tudor, Pickering, Holt & Co., LLC: That $170 million of capital that you have for 2009, where's that being allocated by region?

Going back - this is a bit from memory - I think Bakken is certainly the largest portion of that. We're in the $70 million plus or minus range, so nearly half of it there. We had probably $12 to $15 million in East Texas, somewhere about in South Texas, if I remember right, we had $5 or $6 million in the Bedouin field. It was drilled kind of late last year and on into this year. Very minimal amounts in Big Horn and Coal Bed, and then we've got some dollars that are also being spent in Paradox, somewhere in the neighborhood of $15 million. Becca Followill - Tudor, Pickering, Holt & Co., LLC: And just going back, you said you had roughly six to seven East Texas wells which had not been completed and how many South Texas?

I believe there's two or three in South Texas.

(Operator Instructions) This call will be available for replay beginning at 4:00 p.m. Eastern Time today through 11:59 p.m. Eastern Time on August 17th. The conference ID number for the replay is 14307858. Again, the conference ID for the replay is 14307858. Your next question comes from James Bellessa - Davidson & Company. James Bellessa - Davidson & Company: On the Green Power Express investment that you're contemplating, what magnitude of ownership might you have?

Jim, right now they're looking at a project in the $10 to $12 billion range. Our ownership interest would be something less than 10%, probably 3% to 10% on that project. James Bellessa - Davidson & Company: And then in the press release and on the call you've also identified that there was milder weather in the Northwest and you say that's 16% warmer than during the same period last year. What reference point are you using? You have a couple markets now - Washington, Oregon and Idaho. Is that the Northwest? Is that how you define it?

What we referred to specifically was the Cascade service territory that we were 16% warmer year-over-year this year compared to last year. James Bellessa - Davidson & Company: And so when you say the Northwest you aren't including Intermountain Gas, then?

Well, we weren't this quarter because we didn't have Intermountain to compare with a year ago. And so year-over-year the valid comparison was customers we had last year and customers we have this year, and so that's why we chose Washington and Oregon with Cascade. James Bellessa - Davidson & Company: Do you know how you calculate the 16%? Do you take some type of ratio of your revenues from each one of your jurisdictions?

No, that was calculated strictly on degree days, so number of degrees off 65 each day. And so that's really a Weather Service-type statistic. And this year was 60% warmer than last year on a degree day basis. James Bellessa - Davidson & Company: But how do you weight it across Washington and Oregon?

It's weighted across all, I'd say, the weather points that we provide service to in those two states.

Your next question comes from Faisel Khan - Citigroup.

Just a quick follow up question on the asphalt volume and on the margins, can you just briefly describe what caused the margins to be stronger for liquid asphalt sales?

As we indicated, I think, earlier in a response to a question, Faisel, with our vertical integration we have liquid asphalt oil in several of our markets and, of course, having that vertical integration helps us out from a cost standpoint.

But was it more that integration [related to] timing or was it you had lower available seed stocks or was it pricing in certain in markets? I'm just trying to understand the margin.

Well, the pricing for the oil that we buy in the wintertime was favorable this past winter.

At this time there are no further questions. I would now like to turn the conference back over to management for closing remarks.

Thank you very much for participating on our call today. We're in the right businesses and our businesses are running well in spite of the difficult economy we're facing. Our balance sheet is strong, still producing good cash flows, and we have access to capital. All of our business units are looking for opportunities; we're looking for the right opportunities. We will continue to update you on the guidance as the year progresses and, again, we appreciate your participation on today's call. Thank you.

This concludes today's MDU Resources Group conference call. Thank you for your participation. You may now disconnect.