Good afternoon. My name is Carol and I'll be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group Year End 2007 Earnings Results 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 period. [Operator Instructions]. This call will be available for replay, beginning at 4 PM Eastern Time today through 11:59 PM Eastern Time on February 8. The conference ID number for the replay is 30212387. Again, the conference ID number for the replay is 30212387. The numbers you dial for the replay is 1800-642-1687 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 everyone to our earnings release conference call. Before I turn the presentation over to Terry Heldistad, 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 would like to view the slides, go to our website at www.mdu.com and follow the link to the conference call. 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 will be available to answer questions during the Q&A session, on the conference call today are Steve Bietz, President and CEO of WBI Holdings; Bill Schneider, President and CEO of Knife River Corporation; John Harp, President and CEO of MDU Construction and Services Group; Bruce Imsdahl, President and CEO of Montana-Dakota and Great Plains Natural Gas and CEO of Cascade Natural Gas. Last week Bruce Imsdahl announced his retirement effective June, 5th after 38 years of service with our company. He has done a tremendous job leading our legacy business' substantial growth. Also with us today is Dave Goodin current President of Cascade and Bruce' named successor for President's role at Montana-Dakota and Great Plains, effective March 1; and Doran Schwartz, Vice President and Chief Accounting Officer for MDU Resources. With that, I'll turn the presentation over to Terry for his formal remarks. Terry?

Thank you Vernon. Again, let me add my welcome to all of you, who have joined to review our 2007 results. I am excited to announce 2007 was nothing short of a dynamic year, producing record earnings for the fifth consecutive year. Our construction services, utility and pipeline, all ended the year with record earnings. And our natural gas and oil production group only had a slight decline from the record 2006 earnings. Although, our constructions materials business experienced a drop in volumes and margins, largely related to the decline in housing markets, our over all results continue to demonstrate the value of our business diversification strategy. Consolidated earnings were $431.4 million, compared to $315.1 million a year ago. Earnings per common share increased to $2.36 compared to $1.74 last year. Our earnings improvement in 2007 only begins to define our accomplishments. Through a number of growth initiatives, we have strengthened our portfolio of businesses. We completed and successfully integrated the largest acquisition in our history, with the addition of Cascade Natural Gas that doubled our natural gas customers and expanded our regulated utilities. Our utility also constructed a 20 megawatts wind farm adding additional electric generation. We created substantial shareholder value with the divestiture of our domestic independent power production assets, realizing a gain of $91.5 million. The funds generated from this sale have been utilized to find out additional growth opportunities for the corporation. In addition, we acquired five construction materials companies and one construction service company, further strengthening our market position. Our construction services group grew earnings 57%, improved margins and has an accumulated record backlog of $827 million. We completed a 41 million cubic foot expansion of our Grassland Natural Gas Pipeline. Our natural gas and oil production group increased production in reserves and as you…

[Operator Instructions]. Your first question comes from the line of Paul Patterson with Glenrock Associates.

Good afternoon guys

I wanted to just basic view on the acquisition I guess which is leading to the increase in production for 2008, the expectation point of 12% to 16% before it was about half of that, right. And I was wondering whether... does this move you guys higher, all things being equal in the earnings guidance range, or is there something that's offsetting that either in EMP or anywhere else in the business?

Paul with our earnings guidance range, $1.65 to a $1.90 includes the acquisitions that we have just announced. Certainly it will have a significant impact on the production as noted in our release.

Right. But I was wondering I mean all things being equal, should we think that range, you guys would be at the higher end of that range because of this increase in production, or is there something else since your call in December that's going to offset that, do you follow me? I mean has there any change to the downside since then?

There has not been a change to the downside Paul. Certainly this is a nice acquisition for us. It's got production online now and as we said, we will be drilling wells in this area so it's certainly a positive.

Okay, so there is... okay. So all things being equal, you guys must be at the higher end of the range than otherwise would be without this acquisition?

Paul, we have got a 25% range, and as we do each and every year, we will update you as the year progresses.

Okay. So I just wanted to clarify that thanks. And other thing I was just wondering is if you could update us on the regulatory approvals associated with the EMP, just for the timing and what we should be expect, and what you guys are expecting in terms of the timing receipt of those?

Steve Bietz, will take the shot at that.

Sure. I can do that Paul. This is Steve. As far as the supplemental EIS that's outstanding in the State of Montana, our most recent word from the BLM is they are looking to issue that supplemental EIS this summer with a record of decision by the end of the year. That is little bit of a slippage from where it had been earlier. I might just mention now that we are... with the in junction associated with and drilling federal coalbed wells and Montana being listed, we are working to look to drill some additional federal wells under the current District Court judges decision that does limit or does provides for limited development. And it's difficult to say what exactly where that's going to be at and we have not built that drilling into our guidance. If we are successful, we get those permits that would provide some upside in terms of drilling and production late in the year and certainly for next year.

Okay, great. Thanks a lot guys.

Thank you Paul.

Your next question comes from the line of Paul Ridzon with KeyBanc.

Good afternoon. Can you hear me?

Yes we can Paul. Good afternoon.

Good afternoon. A quick question, just what are you seeing on the non-residential side of construction materials? And I guess a follow-up is in this part of the cycle are there a lot of smaller players who are without the balance sheet that you have, who may not be able to weather the storm. Is that what's driving your view of great acquisition opportunities?

Hi Paul, Bill. We are starting to see that in terms of the companies that are going out of business. We just got word here in the last week or so, some of the competitors that we have in our markets, have announced that they are shutting their doors. And yes, without a doubt we have a lot of acquisition targets on our radar screen right now and we expect that number to grow. To your question about the non-residential Paul, one of the most exciting segments that we are participating in right now is the industrial energy side of the business; wind farms, geo-thermal, the refineries down in Texas for example, that market is really strong. So, we are very optimistic about that this year.

Would it be safe to say that so long as this dip in the cycle isn't too deeper too prolonged, that this could almost be an opportunity for you?

We're looking at that. As you indicated, some of the weaker players are going to fall by wayside and we'll see more of that depending on how long the residential market is down. So the good thing that we see is Paul, we've got great corporate development team and we have a great brand out there that is well recognized. In the old days, we used to have to call people or knock on their doors and what not and now that's reversed. A lot of people come to us and so, we see a very rich acquisition feel.

And then just a separate question, yesterday or the day before, North Western announced that they are going to be putting coal strip on the block. Is that... any interest in that asset?

Paul, we were aware that coal strip is going on the block. We've really not taken a close look at it, and I will say that we don't have the inner tide to get to our service area. And as you know, we are going forward with the Big Stone plant. So our initial thought on that is it wouldn't be of high interest.

Thank you very much.

Your next question comes from comes from the line of Becca Followill with Tudor, Pickering. Becca Followill - Tudor, Pickering, Holt & Co.: Good afternoon, following up on the construction material part of the business. Bruce, specifically in your sectors, are you seeing the declines in margins or they had... is it primarily residential or you also seeing it on the commercial side of business. Can you give us some more color?

Yes, Becca we don't talk by individual markets about our margins. But in general, the residential and market has been where we have seen the decline. Now I want to repeat what I have said at the previous conference calls is that, our exposure on the residential side is less than 30% and I think that's why we are doing, I think performing better than the market might indicate. Becca Followill - Tudor, Pickering, Holt & Co.: Have you... on the commercial sense of business have you seen any indicating that states are pulling back on their budgets or may be signs into out years, some of the business that they were looking at during and in 08?

Right now, in a public side, is the forecast is or the same kind of expenditures as 07 and one of the things that we really have emphasized and generally when we talk about public works, most peoples minds go through the roads and highway program. But beyond that Becca we have a very, very good niche in the airport and the port work. There probably we operate now on 17 states and I would say, I think in almost every one of those stases, we are doing airport work. And the reason why we like airport work, it's of course the demand is therefore the infrastructure upgrades. But it's very, very tough specification. So there is only a few contractors that can meet the specifications of paving in a Runway. And then if you take the port work for example as you know we are down in the ports of Long Beach in Los Angeles and they are just approved a $3 billion infrastructure fund. And so we think that the work for the next few years down and you are to handle all that containers traffic will be excellent. Becca Followill - Tudor, Pickering, Holt & Co.: Great and then one last question on this business. I just blanked so I'll also come back to that one. On the E&P side of the business, can you give us some more information on the Bakken well that you drilled, any follow rates yet. Are they indicative of some of the recent flow rates that we have seen which is... which had a lot of variations for flow rates, any additional information?

Becca this is Steve. You know Terry mentioned earlier, we are going to actually stimulate that well here sometimes towards the end of February. When you look at where we are at in kind of the generality, we are very encouraged by what we have seen, and I think you have probably read a fair amount about the Bakken area and you are right the rates do fluctuate. I guess to give you a little idea, we do have a few non-operated wells that we have participated in. We've seen those wells, have some on in between 500 barrels a day to upwards of 700 barrels a day. So we are encouraged by that. We are moving forward with drilling our second rig or second well. We added the second rig to start drilling very soon here and we're going to continue to look to kind of add some additional rigs, and depending on success as we go forward for the rest of the year. Becca Followill - Tudor, Pickering, Holt & Co.: Any thoughts on bringing on a partner?

Certainly with that... we will consider that, we've had a pretty good acreage spread. A lot of the wells that we have oil drilled, we don't have a 100% interest in, so we would be the operator and we would expect some of our acreage is going to get developed through non-operating positions we have with others. Becca Followill - Tudor, Pickering, Holt & Co.: Okay. One more quick question and I will get out of the queue and I will come back for some others. On the construction business, I wondered of that question now, you talk about margins being flat in 08 versus 07. I know that things are influx but any early thoughts on revenues?

We think it should be same as 2007 Becca. Now that may change, it may go up a little bit depending on the timing of these acquisitions that were pursuing. Becca Followill - Tudor, Pickering, Holt & Co.: Okay that would be an incredibly positive year than just to come in flat revenues and margins relative to the industry.

Yeah. Becca Followill - Tudor, Pickering, Holt & Co.: Thank you.

Thank you.

Your next comes from the line Faisel Khan with Citi Investment Research.

Good afternoon.

Hey Faisel, good afternoon.

Just going back to... part of the press release... guys you have in your earnings release said that you would had... you did complete a well in the Paradox Basin in November, any data yet on that well?

This is Steve again. Initial production from that well was in the 500 to 600 barrels a day range.

Okay.

And as time has gone here and pressures have remained pretty strong, we are pleased by the production we are seeing from that well and we move forward, we actually have got our second well in the Paradox Basin drilled, waiting on completion and have moved on to a third well.

Okay. What quality of crude is coming out of that well?

It's pretty high quality crude. Probably the one challenge from an operational perspective there is a bit of paraffin in the oil, very common for this area. And so, we need to take the well down periodically and kind of cut paraffin out of the... from the well.

Okay got you. And I know you have said here that you're trying to participate 30 or more well block in the Paradox. Is there a breakout of exactly how you want to do that? Is it a kind of 50:50, that's how you plan to... planning to drill.

It's kind of fluid plan right now. What we have assumed in the 30 wells, we have got 4 wells planned for the Bakken area this year and... I am sorry for the Paradox Basin area and then in the Bakken wells those are in Bakken, about half of those are operated, half are non-operated. But keep in mind that that continues to -- we will continue to change thought the year and we will kind of update you as our plans change.

Okay and then based on your proved reserves at the end of the year were 707 Bcf and it looks like including on additions and revision, you basically are a little bit -- you have replaced production by little more. Is that fair to say?

As we've said, I think there's about 110 Bcf equivalents that were added through the drill bed and improved recovery techniques and a negative revision of about 27, the balance of that would then be related to production.

Does any of you number is changing in the 3P side. I know you guys had given those numbers out of log, are you seeing those numbers change at all?

On our 3P side is that's what you asked?

That's right.

We have not updated those at this point. We will be working on that.

Okay got you. Going to that construction material side of business; I know you have said that 30% of your business or roughly 30% is resident... is supposed to be residential market. Is it fair to say that given the decline you have seen in volumes that, most of that business is, all but dried by this at this point of time?

No, I think that would be a overstating a little bit. If you look at the national statistics on residential building, we hit the annual peak of about 2 million housing starts a year back in 2005. And now, I think there was a last number that I saw was down to about 1.2 million starts on an annualized basis. So, there is till some activity going on in some of our markets although it's clearly, it's down. The question is this; where is the bottom and then how do you breakup the segment. And what I mean by that is that some of our markets are still somewhat immune to the downturn. For example, on the high-end residential or destination resorts, those markets are still doing fairly well. So no that the market has not dried up although it's a truly is down.

Okay. One thing on your... going back to E&P business for second, on hedging, 30% to 35% of your production hedged for 08, any desire to bear-on on a higher percentage of hedging at the rest of the year?

As we do every year as is... we'll look to continue to additional to our hedge position, as we bring out new well and production so forth we will look to do that and we are also just starting our program for 2009.

I understood. Okay, thank you very much.

Thanks.

Your next question comes from the line James Bellessa with D.A. Davidson & Company. James Bellessa - D.A. Davidson & Co: Good morning.

Good morning Jim. James Bellessa - D.A. Davidson & Co: When you initiated 2008 guidance in December of a $1.65 to $1.90. Did you know and did you anticipate the East Texas acquisition that you've announced in January?

That acquisition was not included our guidance at that time, Jim. James Bellessa - D.A. Davidson & Co: And when you made this announcement on the East Texas I believe you said you thought it was going to be accretive to earnings.

That's correct, Jim. James Bellessa - D.A. Davidson & Co: But you haven't changed the guidance range.

No we haven't. And Jim the guidance range is $0.25. So that's a big range. It's a little wider than what it was in previous year. James Bellessa - D.A. Davidson & Co: In the acquisition of Cascade Natural Gas you have incorporated that in the fourth quarter. But when I look at the income statement I see where O&M expenses are actually down from last years fourth quarter. How is that possible?

Good question Jim. Doran Schwartz will take a shot at that.

Hey Jim. In 2006 during the fourth quarter we made some immaterial changes to how the essentially non-regulated utility operations are presented. I focused on 2007 fourth quarter there as an indication of the run rate. James Bellessa - D.A. Davidson & Co: And through this... through the third quarter you were showing independent power segment and now there is no reference to independent power. I think you still have a small business there. And is that all folded into other now?

Yes Jim this is Doran again. It is if you to the others segment just this is the first time you will see other with remainder of the IPP in it. We have had other in the past and so as you take a look at the other segment, what I would do Jim is really trying to get a handle on where this is going. I'd focus on the fourth quarter of 2007. Noting that there are earnings in there from our investments in Brazil, there is also some more minor tax benefit that we reported associated with some favorable resolution of foreign tax issues. And if you just back off and take a look at our $50 million investments and apply a reasonable rate of return, I think it should give you good feel for what to expect in the other segment going forward. James Bellessa - D.A. Davidson & Co: $50 million is in Brazil?

Correct. James Bellessa - D.A. Davidson & Co: Thank you very much.

Thanks Jim.

Again [Operator Instructions]. Your next question is a follow-up from the line of Becca Followill with Tudor, Pickering Becca Followill - Tudor, Pickering, Holt & Co.: Hi, back on the acquisition, the East Texas acquisition. Couple of questions; one the roughly $100 million increase in EMP CapEx budget excluding the acquisition, how much of that is for East Texas and how much of it is for the accelerated drilling at Paradox and Bakken?

Becca, if you look at our increase in capital there probably about $40 million or so is associated with our East Texas property for ongoing development. The balance I would say is either for increased exploration activity both in Paradox and in Bakken as well as just higher costs that kind of inflationary type costs which would be a smaller component of that. Becca Followill - Tudor, Pickering, Holt & Co.: Thank you. And then on the acquisition, I don't think you guys have done any horizontal drilling in the past, any thoughts on doing any horizontal drilling in Tylo [ph]?

I think that's an opportunity for us. There's been some horizontal wells drilled in the Kan valley [ph] I mean in the same proximity as our acreage. We are looking at that, we've not built that into our plans, but we're certainly studying that and thing that could provide some upside. Becca Followill - Tudor, Pickering, Holt & Co.: Okay thank you very much.

Right.

Your next question comes from the line of Jeff Allan with Silvercrest Asset Management.

Hi good afternoon.

Hi Jeff.

Hi, I have a quick question for John Harp. John just trying to get a feel for how you can keep your good momentum going, when we talk about your business, we talk about Las Vegas a lot but I know you also do Electric transmission lines and distribution lines and, so my question would be how dependent are you on a healthy Las Vegas market and do you think the Las Vegas market is vulnerable to the downturn in the national economy that we seem to be looking at here?

We take the question. On the Las Vegas market historically have done better in recession periods, probably any market in the country and I think Terry mentioned the amount of billion of dollars adding additional 30,000 rooms in Las Vegas here in the next few years. So the Las Vegas market to me looks strong. But majority of our earnings quite frankly did not come from Las Vegas this past year. We don't normally break it out in regions, the markets, but I can tell you that, we've got other operations besides Las Vegas that have performed well and on the D&T side, we are looking at the transmission opportunities and the infrastructure build out and we recently acquired a very talented individual that we announced, he's got the great experience in the transmission business and we are carefully picking up specialized equipment and resources to enter that field very carefully and try to improve our margins and have some additional opportunity. So we look at that down the road as an opportunity this been discussions for years about this transmission build out and eventually its got a come and we are starting to see some signs of some projects coming online. But not all are eggs are in one basket, be in the Las Vegas or in the other regions. It's pretty well around the 40 states that we operate in.

I appreciate it. Thank you.

Your next question comes from the line of Jim Harmon with Lehman Brothers

Hi Jim.

Alright, two quick questions. One is I don't recall that you might have broken out a dollar value to move the 36 Bcfe of probable to PUDs, any idea what that might be?

I don't know that, up top of my head Jim.

Okay. Second question is on construction services. I can see that margins are down but the revenues and backlog continue to go up and so how much of that is a function of may be the market growing in the areas that you are serving and how much of that is a function of the market share gains that John and his crew are making are making?

Well I think there's, we had benefited in some areas where we've picked up additional market share in some areas. Jim why you don't repeat that question little bit more, I didn't quite follow it.

Yeah, no I know am sorry, how much of your growth is from the markets growing in and the regions that you serving and how much of it is from market share gains?

I have got areas where we continue to have growth in some markets and then the other areas again I think the reason why we have been fairly successful is, our real advantage is our people. Again I think I told you many times, that the only reason we have been successful is we've got good people, we mange our costs very well and we try to collect and retain good customers and so we, it's a combination of things that may be I have got as well wrap today, we are obviously looking at 08 as hopefully another good year. I mean our backlog looks good and we think that there are some challenges out there in the economy, but again we think we got the people and expertise to manage through those difficult times and we are upbeat going into 08.

Oh congratulations it's probably been one of most phenomenal turnarounds that I have ever seen in any business since I have been in the industry.

Well I appreciate that Jim, I'll let my people know that.

Thanks.

Your next question is a follow up from line Paul Ridzon with KeyBanc.

Does your E&P CapEx, or forecast which does not include any federal drilling in Montana?

I think it's true.

Hello?

Mr. Harp it appears the other line has disconnected, if you could please speak the question here.

What happened?

The main line has dropped sir.

Okay So I am off.

Can you hear me?

Mr. Harp I can hear you.

No I am talking.

This is Paul Ridzon of KeyBanc.

I don't what happened here.

Just one moment I am redialing.

Hello.

Yes sir we are redialing now to the lead at this time.

Thank you.

You are welcome. Paul I am going to release you until the lead will get back online.

Thank you.

You're welcome.You may resume the presentation.

Okay, Jim Harmon, are you there?

We actually have a new questioner and that questioner comes from Paul Ridzon.

Okay very good.

Does your E&P CapEx number include anything for drilling on the Federal lands in Montana?

Yes it includes the wells that we've have got planned in our concrete planning development. That's 23 wells. We've talked about that in the past, but no capital beyond that.

Thank you.

Your next question is a follow up from line of James Bellessa. James Bellessa - D.A. Davidson & Co: This is for John Harp and first in generality, when you do a project in Las Vegas, you are usually a subcontract on gas and so who pays it, does the project pay you or does it... is the general contractor?

Normally speaking, the general contractor pays us. But do have some work that we do in Las Vegas that we are directly paid by the projects. James Bellessa - D.A. Davidson & Co: Thank you very much.

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

Thank you. We had a great year in 2007. We expect 2008 will be another strong year. We have a number of growth opportunities that we've identified, potential acquisitions certainly is one example. Over the long term, our prospects are promising. We like the businesses we are in we are in the utility, energy and construction materials. These are all necessary businesses for our country and are solid businesses. So as we have in the past we will update as the year progresses and I'll look forward to talking to you at the end of the first quarter. Thank you for listening

This call will be available for replay beginning at 4 PM Eastern Time today, through 11.59 PM Eastern Time on February 8th. The conference ID number for the replay is 30212387. Again the conference ID for the replay is 30212387. This concludes today's MDU Resources Group conference call. Thanks for your participation you may now disconnect.