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Flooding Sinks MDU Resources' Production Forecast

Extensive rain and flooding have hampered MDU Resources Group Inc.'s operations and delayed growth activity in key producing states in the Rocky Mountain region, including the Bakken Shale, to such an extent that the company is lowering its 2011 natural gas and oil production forecasts.

The impact of the severe weather, combined with sustained low gas prices, have prompted MDU to forecast an 8-12% decrease for natural gas production in 2011, down from its previously released guidance of a 4-8% decrease compared with 2010. The Bismarck, ND-based company also forecast a 1-5% increase in oil production, down from the previously released guidance of a 5-10% increase compared with 2010.

At the same time, MDU reaffirmed its 2011 earnings guidance of $1.05-1.30/share and said its long-term capital expenditure forecast for the exploration and production business remains unchanged at $2.1 billion over five years, including approximately $300 million in 2011.

MDU, which is pursuing a strategy of increasing oil as a percentage of its overall production, said it has acquired 20,000 additional acres of leasehold in Richland County, MT, in the Bakken oil play. The company now holds a total of approximately 90,000 net acres of leasehold in the Bakken.

"We are optimistic about the long-term potential of our Bakken acreage," said CEO Terry D. Hildestad. "This adds to our existing drilling inventory in the Bakken area and complements our positions in other areas including the Niobrara, Heath Shale and Paradox Basin."

In October MDU's Fidelity Exploration & Production Co. sold JD Rockies Resources Ltd., a U.S. subsidiary of ITOCHU, a 25% working interest in 88,000 net acres in the Niobrara play (see Shale Daily, Oct. 18, 2010). That deal made ITOCHU the first Japanese company to participate in a shale oil project in the United States, according to MDU.

Last near MDU's Williston Basin Interstate Pipeline Co. said it would expand its natural gas pipeline capacity by approximately 33% in the Bakken production area in northwestern North Dakota, adding up to 30 MMcf/d of capacity for delivery to Northern Border Pipeline (see Daily GPI, May 20, 2010). The Bakken area is an oil-weighted play, but producers need to move their associated gas production, the company said.

Over the weekend Midwest floodwaters also threatened the 500 MW Fort Calhoun nuclear power plant near Omaha, NE. A supplemental protective berm built to protect the plant from the rising Missouri River collapsed on Sunday, but the plant remained in safe mode, according to the Nuclear Regulatory Commission. Omaha Public Power District, which operates the plant, said the facility is secure and its fuel cooling systems have not been lost at any point during the flooding.

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