Good afternoon. At this time, I would like to welcome everyone to the MDU Resources Group 2008 year-end earnings results and 2009 guidance conference call. (Operator Instructions) I would now like to turn the conference over to Vernon Raile, Executive Vice President, Treasurer, and Chief Financial Officer of MDU Resources Group.

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 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 be making certain forward-looking statements within the meaning of Section 21E of the Securities and 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 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; Dave Goodin, President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas; John Harp, President and CEO of MDU Construction Services Group; Bill Schneider, President and CEO of Knife River Corporation; 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.

Thank you Vernon, good afternoon and thank you for joining us today. The year 2008 was a solid year for MDU Resources particularly considering the state of the nation’s economy. Absent the noncash charge 2008 would have been our sixth consecutive year of records earnings from continuing operations with earnings totaling $377.2 million or $2.05 per common share representing a 16% increase in earnings per share. We surpassed $5 billion in revenues and our record operating cash flows of approximately $785 million allowed us to continue our growth by investing $1.3 billion into our businesses without needing to raise equity in the public markets. Like many other natural gas and oil companies we recorded an $84.2 million after-tax noncash charge in the fourth quarter. This is based on a single point in time spot price and is only an accounting entry. The charge had no significant effect on our strong financial position. As we look forward I am confident that we have the ability to continue to perform well during this cycle for several reasons. We have a proven track record of highly responsible physical management, our diversified combination of businesses offers strong advantages, MDU is an asset-based business, and we have highly skilled an exceptionally committed workforce. Our fundamental approach of consistent and long-term financial conservatism has positioned us well with limited fixed maturities, a strong balance sheet, and access to capital and being a low cost producer allows us to react quickly to continue to manage our costs. With our diversified business model we are able to offset some of the lower commodity price and housing market impacts. Our growing utilities business serves as a solid base of predictable and reliable earnings and cash flow. We own highly strategic and substantial natural gas, oil, and aggregate reserves, generation…

(Operator Instructions) Your first question comes from the line of Paul Patterson - Glenrock Associates

The ceiling test write-off how should we expect that to impact DD&A going forward?

As far as the DD&A rate on a go forward basis, if you look at the write-off it should reduce our DD&A rate I think its about $0.16 per Mcf equivalent on a go forward basis.

The reduction in the drilling in the Bakken, what’s causing that, if you could just elaborate a bit on that.

We’re going to be adjusting our rigs that are working the field to one rig here shortly and look to drill with that for the balance of 2009. Part of the driver there, we’re looking to maximize the value of our acreage in the areas that are most prolific so we think that with that rig working we’ll be able to really maximize that value of that Southern acreage before any of our lease terms would expire there.

Is there any change in the outlook in terms of what the production coming our of the Bakken is or—

I guess our guidance includes the effects of the increased production from Bakken for next year.

But does the property seem, do you have the same assessment of the property that you had previously?

We’re still very encouraged by the property particularly the Southern acreage, we’re going to dedicate a fair amount of capital to its development this year and on into the future. We’re just recognizing there is a pretty low oil price right now so we’re kind of pushing some of that drilling out as well.

The other sector, O&M was a benefit of about $6 million in the quarter, what was that? Is that sort of an abnormal thing or it is a normal thing? The delta between 2007 and 2008--

Basically the primary reason behind that is each year annually we have a review of our cap of insurance company and the insurance programs that are included in that company and due to the favorable experience that we’re having with those programs, it reduced our O&M expense.

What’s causing that? Is that something that is going to be continuing in 2009 or how do we think about that?

Part of the reason for that is our safety program at all the business units. We have as you know, that’s been a heavy focus on the corporation overall. Our numbers are going down and we think it will continue to trend. That is one of our key focuses. We had great results and we were able to adjust our accrual for Workers’ Comp costs and things such as that.

The opportunities that you said you might be seeing out there in the market because of the economic distress that’s out there, what segments, or just a bit more of a flavor as to what you might be seeing there.

Certainly as we talked about in the narration of the script, we want to live within our cash flows but we also have the ability to raise capital and we’re seeing growth opportunities really in every one of our business lines. However as we look at those opportunities we want to be reflective of the current economic conditions so we’re going to take a go slow approach, very thoughtful disciplined approach but I’d have to say that each one of the businesses are seeing opportunities out there during this challenging economic time.

The gas price forecast that you have for NYMEX, what’s that based on? Is that what you’re internally seeing or that just sort of a historical, I think that might be a little bit on the higher side then what I’m seeing right now for 2009. What should we, I know that not all of that much of the stuff is priced off of NYMEX but sort of, what’s your feeling behind that .

If you look at the forward strip, actually our forecast kind of brackets the forward strip as it exists today so that’s—

The 7% to 10% growth is that off of 2008 that you expect that to happen? Is that because basically you see the price of commodity coming back here as we see going forward in 2010 and 2011? I’m referring to the entire 7% to 10% growth that you feel that the company is going to be earning, obviously not in 2009, but the longer-term growth rate that you are seeing there. What we should think about in terms your expectations for the economy or is it just simply if you look at the forward curve it looks like it does improve at least in the gas area in future years.

If you look at the growth of our company over the last 10 years, we’ve grown it at 18% compounded annually over the last 10 years. We’ve ended this period of growth with a strong balance sheet, we invested $1.3 million in growth last year, we have opportunities in growth in the utility segment, rate based growth. We believe that construction materials will have opportunities for growth. The construction service group certainly there are opportunities out there right now. And we’ve grown the E&P business so really the industries that we are in are strong industries and we think we’re positioned well. We’re entering a real tough economic time with a strong balance sheet and that positions us better then a lot of companies. The long-term, that’s a good number for us.

Your next question comes from the line of Paul Ridzon - KeyBanc Capital Markets

You said that construction services should be comparable in 2009 versus 2008 would the 218-mile transmission line that’s not yet financed, would that be upside to that outlook?

By the time we, the finance is in place and get our notice to proceed we’ll be active in the engineering side so that actual construction of that would probably ideally would start to late in the fourth quarter so that would probably lay more over into 2010.

What’s your production growth target of [D&P]?

Long-term we’re targeting 7% to 10% but as we said for 2009 we’re looking to approximately match the production from 2008.

The way we’ve seen the gyrations in the commodities markets, is there any consideration to rethinking your hedging philosophy?

We certainly talk about that a fair amount. If you look at our position for 2009 we are pretty attractive position. We’ve got about 40% to 45% of our natural gas hedged. I guess as we go forward we’re looking at 2010 but right now looking for some prices higher then what the current market offers.

I guess if we saw oil prices go over $100 with hindsight 20/20 do you think you’d really get more aggressive?

One of the challenges we’ve had with oil is that a lot of our oil is really not correlated with the NYMEX prices. If you look at some of the regional differentials that we’ve seen, they seem to fluctuate quite a bit so that’s really the cause or the driver of why we’ve not done more on the oil side.

What’s your 2009 oil hedge position? How much oil do you have hedged in 2009?

Right now we don’t have any oil hedged for 2009.

Your next question comes from the line of James Bellessa - DA Davidson

A year ago at this time you acquired the East Texas property and your guidance for production was up in the mid teens, but this year you just reported that your production only increased 7%, can you explain the variance of why you didn’t meet expectations?

We’ve been talking about that throughout the year, there’s been a number of things that have occurred during the year. First of all some of our activity down in South Texas has fallen short of what we had originally expected. We did see some delays in some of our drilling. When we go to the offshore area, the hurricanes had a negative effect on us.

There were a number of these lag things and we kept hearing those excuses and then this year’s guidance is only for flat, I would have thought you would have caught up in 2009 with some of the things that were lagging you last year. Why aren’t you catching up with more then a flat production increase?

A couple of things, one part of our growth that we talked about came from our East Texas acquisition. We had that in our 2008 results for basically the entire year and the driver here is we’ve reduced our capital expenditures or adjusted our capital expenditures to kind of more match with our expected operating cash flows and with the level of drilling that we are anticipating for next year and we’re looking to basically keep production comparable to this year’s levels.

You’ve called out an activity that you’re involved with possibly called the highline pipeline, could you characterize what that is, where it is, who your partner might be?

That’s in the CSG Group, that’s a transmission line that we’ve got a contract signed. We’re still waiting on the financing so we haven’t been able to book it and I can’t announce the owner of the highline until we get the notice to proceed and then we’ll announce it.

And the location of that property?

Its in the Western United States.

Your next question comes from the line of Faisel Khan - Citigroup

In terms of the reserve additions that you had for this year, what were the sources of those reserve additions beside the acquisition, where else did you grow reserves.

We booked additional reserves in a number of our properties, one area that, kind of our traditional area was Baker and Bedouin we booked some additional reserves. We did book some additional reserves with the East Texas beyond what we had originally acquired. We added reserves in our coal bed areas. South Texas on our operated properties was another area that we added some pretty good-sized reserves. All of that through the drillbit.

Anything in the Bakken, any resources there?

Yes, Bakken and Paradox were both contributors to the reserve additions as well.

It was pretty diversified across your entire portfolio?

Yes it was.

What would be the notional value of this 218-mile project, I assume something of that length would be almost $2 billion, I’m just guessing. Would your contract be for the entire, would it be like a turnkey contract for the entire project or would it be something else.

There are portions of it, there are items that the owner is going to purchase so not all of it, some of the steel prices and some of the commodity prices, the uncertainty of the market when we were negotiating this in August and September we kind of carved those out. So some of that is being picked up by the owner and the remainder is picked up by us, parts of the material, the engineering, the right of way, and obviously the construction.

On the Big Stone II plant you said that if that doesn’t go through or if you don’t get the final permit for that you would head for a place that plant, a future plant with a natural gas fire plant, would the natural gas fire plant be of the same size and scope as Big Stone or would it be something smaller?

We would most likely look at a natural gas facility that we would wholly own and operate somewhere within our own system that would I’d say approximate what we would anticipate off our share of Big Stone.

How many MW is that?

We have a range on Big Stone through our prudency of 116 to 131 MW.

So you’d be looking for a combined cycle facility or a [peaking] plant?

We would make certain we looked at the valuations of those, it would be based solely on economics at the time.

Your next question comes from the line of Becca Followill - Tudor, Pickering, Holt

What kind of differentials are you realizing the Bakken on your oil and what is the magnitude of the cost declines that you’ve incorporated into your [E&P] budget for 2009?

The differentials in the Bakken area, they have widened out some during the latter part of 2008. Currently we’re probably somewhere between $12 and $15 per barrel off of NYMEX. Regarding the cost savings in our 2009 capital budget we’ve incorporated, we haven’t really incorporated a whole lot there. When we put together our budgets its difficult to estimate how much some of those costs might adjust and so we haven’t really reflected a whole lot in our expected capital expenditures.

Have you assumed that the Bakken bases differentials remain throughout the year, is that incorporated into your guidance?

We’ve kept those differentials fairly consistent, hopefully there’s a pipeline expansion project that’s expected to be in service early part of 2010 and would hope to see those differentials narrow some at that time.

And which pipeline is that?

It would be Ambridge.

Your next question comes from the line of [John Hanson – Price Cities] [John Hanson – Price Cities]: Often times you do some acquisitions, smaller acquisitions during a quarter did you do any of those during the quarter in any of your business lines?

Have we forecasted those in our plans for 2009, no we have not. We might see some opportunities there. We have not included those in our plans. This past year we did pick up some small bolt on acquisitions that we noted in the script, picked a small one up in Alaska, a small one in Idaho, California, and Texas, all quite small. We also as you know added in our mountain which was a significant acquisition for us in the utility side this past year.

Your next question comes from the line of Andrew Levy – Incremental Capital Andrew Levy – Incremental Capital : I just wanted to get an idea, as far as gas prices, looking at the forecast for 2009 you’re 40% hedged, is that correct?

That’s correct. Andrew Levy – Incremental Capital : That’s in a range of what $7 to $9 depending on the hedge?

And its actually 40% to 45% hedged. Andrew Levy – Incremental Capital : And then in 2010, you’re 5% hedged, right?

Yes, approximately 5%. Andrew Levy – Incremental Capital : So obviously there’s tremendous either downside or upside in your earning depending on where gas prices are going to go, is there any type of sensitivity that you could give us if you kind of would see gas prices where they are today relative to your 40% hedged, is there any type of sensitivity you can give us as far as earnings.

I don’t have a sensitivity here on that. So I don’t have anything to share. Andrew Levy – Incremental Capital : Would there be, if there was a reduction in that price, earnings would decline, would there be an issue as far as funding at the [E&P] company as far as being able to fund the operation if gas was to stay at $4, $4.50, $5?

We’re certainly going to keep our activity pretty flexible as we go through the year, if we see changes in prices and cash flows we’ll work through that and determine if we need to make some adjustments during the year or continue with our original plans. Andrew Levy – Incremental Capital : Is there a price, or break-even or anything like that, is there a price that becomes unattractive for you to fund part of your business?

I think what we’re focused on this year is really looking to get as we invest our capital get the maximize value for what we’re investing. So we’ve looked at the economics of the various areas and so forth and tried to rank those. We’ve looked at lease terms and various other parameters to try to direct where we’re going to deploy capital for this year. We don’t really have a price that we’re going to stop drilling entirely but we may look to manage and move capital around depending on what the prices are in the different regions in which we operate and that’s one of the advantages if you look at the diversity of our portfolio. We do have access to a number of different gas markets.

Your next question comes from the line of Dave Parker – Robert W. Baird Dave Parker – Robert W. Baird : When you look at or proposals you’ve seen as far as economic stimulus Bills any guess or forecast you may have or that you’ve seen on what kind of revenue that could infuse into the aggregate business in the next 18 months and then maybe also as far as the transmission opportunities, what that could do the industry here in the next 18 months.

The House Bill that’s already passed has got $30 billion for highways but the good news in the last few days is the Senate version is going to be increased. There’s amendment by Senator [Feinstein] and Murray that is going to peg the highway of funding at $43 billion. And in addition to that some of the other work in the infrastructure arena on ports, water projects, etc. Those numbers are projected to go up as well. So we’re very encouraged about that. We think that of course probably the final number will be somewhere in between the House and the Senate version. And then the other thing is we think that the economic situation is going to be an advantage in terms of the funding level for the next six-year highway Bill. Representative Jim [Overstar] who chairs the House Committee that will get that Bill started has indicated that he would like to have the funding for the six years be at $500 billion. Now that compares to the last Bill that was at $284 so probably won’t get the full $500 but still that’s also very encouraging in addition to the stimulus Bill. Dave Parker – Robert W. Baird : I guess $43 billion, or somewhere between $30 and $43 billion, how does that stack up when you look at what the SAFETEA-LU Bills provide to the industry on an annual basis.

Typically this SAFETEA-LU is right around $34 billion a year. Dave Parker – Robert W. Baird : Any guess on electric transmission projects that—

Two weeks ago the President announced one of his initiatives was on the renewables and the green jobs and in that press release he related to a 3000 miles of transmission lines that he’d want built in the country. And as the country really looks to get away from carbon and turn to renewables and the green jobs that the President is advocating, the only way that can become a reality is we have to change our perspective on transmission lines and how they’re being built. Recently we were back in Washington, DC, meeting with Senator [Reid] talking about what we think is the best strategy for transmission and the comment we made was its kind of like Eisenhower’s interstate program in the early 50’s. It has to be a national priority where we get the federal government, the BLM, and the federal lands to understand the importance of the transmission lines and if we truly want to get away from carbon and go green.

Your next question comes from the line of Jim Harmon - Barclays Capital

In terms of your backlog being exposed to projects that maybe were on the drawing board but never given the green light, is there any way to quantify what your potential increase in backlog could be if all the stars were in alignment, maybe over the next 12 to 24 months.

Right now in our backlog only about 20% is on the private side. So we think that our exposure to those projects not being funded or financed, we think that’s relatively low and the one other thing I want to mention too, is in addition to the federal Bill which of course has got all the front page coverage, there are several states that we operate in that are doing their own economic stimulus Bills or passing large [bonding] measures. For example Oregon has just passed one at $176 million, Idaho has one, Alaska has just passed a $300 million bond issue as well. So there’s some good things happening at the state level.

Is there any, can you quantify what your diesel cost savings would be in 2009 versus 2008?

We have really been locking up, we’re at 35% plus now under fixed contracts for our diesel use for the year and we’ll continue to increase that as the prices remain low so last year we weren’t able to do that. We didn’t see the normal dip in prices in the winter as you all know and consequently we kept on waiting for that dip to lock in and of course it never happened so we did take a haircut last year but we’re not going to repeat that in 2009.

How are you managing staff levels in the current environment, how easily is it to dial up and dial down what you need to have on hand versus having any excess over at [OMM]?

We’ve got great elasticity, I’ll just tell you that the end of the year our workforce was down 40% from a year ago so we’re making sure as we go through the slow months that we’re keeping our costs to an absolute minimum.

On our part we try to stay very nimble to the market and respond and we watch our SG&A, our overhead, and our cost on a monthly basis so we’re not going to have something sneak up and bite us.

Your next question is a follow-up from the line of Paul Ridzon - KeyBanc Capital Markets

Can you give more clarity in your guidance, what have you assumed about stimulus spending and SAFETEA-LU increases?

When we put this together and all of our budgets, we haven’t added a significant amount of stimulus package in there, they’re just recently talking about it. So until that comes in it would be hard for us to estimate.

You said that transmission project was geographically, you narrowed it down to the western hemisphere?

I was a little more accurate then that, I said the Western United States.

When we finalize that financing, we’ll come out and give you some data on that but right now we’ve got a confidentiality in place and can’t do that.

Your next question comes from the line of [Chris Ellinghouse – Shield & Company] [Chris Ellinghouse – Shield & Company] : Can you tell us what kind of expectations you have for diesel gallons for 2009?

I would say that we’ll probably be somewhere in the neighborhood consumption wise between 25 and 30 million gallons. [Chris Ellinghouse – Shield & Company] : Can you give us any insights into the pricing differential for 2008 versus 2009?

Right now we’ve been locking in diesel prices with now because this state tax has varied quite a bit, we’ve been locking in our diesel prices without taxes anywhere from maybe $1.90 to $2.10 and if you recall the middle of last summer we saw prices that were close to $5. [Chris Ellinghouse – Shield & Company] : Can I infer from your sort of earnings expectations that you’re expecting flattish margins and maybe flattish revenues.

We’re anticipating margins to stay the same. We’re going to have some headwinds when it comes to our revenue number.

Your next question is a follow-up from the line of James Bellessa - DA Davidson

Perhaps six months ago you were talking about the possible sales from transmission assets in Brazil, did that go away with the contagion around the world?

Actually, we’re still discussing the sale. We have an interested party to purchase it. Its moved slowly. Those assets certainly are valuable assets. They’re generating good cash flow. So we’re anticipating that could happen sometime in the first half of the year but again its never over until its over.

And is it built into your guidance or excluded from it?

We really haven’t added any gain on the sale of those assets in our guidance where that’s earnings neutral.

Your next question comes from the line of Rosemary Tevelow – Tevelow Associates Rosemary Tevelow – Tevelow Associates : I have a question with regard to the issue of maintaining leases while trying to keep expenditures down to the capital generation internally, you referred to the Southern Bakken as being a lot more attractive and I’m wondering whether you’re on the cusp of possibly having to give up leases somewhere because you’re not drilling there. You mentioned that you’re watching that particular balance, what’s the most attractive area to produce then as currently appears versus issues of leases and I wonder if you could be a little clearer, particularly I’m wondering about the costs in the Bakken to you versus what you’re getting there.

First of all if you look at, we’re focused on drilling and kind of maintaining those leases in the Southern area and based on our drilling plans and going into next year we don’t see that we would jeopardize any amount of our leasehold positions down in the Southern acreage. Some of the acreage in the North we have had less positive results in terms of production and reserves per well and so those are continuing to be evaluated. And probably when we start to face some lease terms that would start to expire probably some time in 2010 and moving on through the next several years after that. Rosemary Tevelow – Tevelow Associates : Did you extend this discussion to your other areas as well in Texas, the same question.

The other area that we’ve been involved exploration wise here has been the Paradox basis area. There we have longer lease terms, a lot of that acreage is held by production today. So that’s not a concern or challenge as we look into the next couple of years. If you look at our other properties, by and large most of that is held by production so there aren’t any challenges associated with leases in the majority of the other areas.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Thank you very much. We’re really operating in essential industries now that have opportunities going forward whether it be for growth through acquisition or through the stimulus package. Certainly our reserves are valuable in both the aggregate and oil and gas and so we’re in sound industries. Our strategy is a proven and effective strategy, our cash flows are good and our balance sheet is strong. We’re entering a very difficult time in pretty good shape and looking forward to the year. We will update you as the year progresses on our guidance as we normally do. Thank you very much for your time today and for listening in.