With first half earnings for 2003 up nearly 50% over a year ago, Bismarck, ND-based MDU Resources Group, Inc. announced last Thursday it would be splitting its common stock on a three-for-two basis, if regulators approve. The stock split — in the form of a 50% stock dividend — is expected to be effective on Oct. 29 for shareholders of record on Oct. 10.

The split will improve liquidity, and the lower market price per share should help broaden the distribution for the predominantly energy company, MDU Resources Chairman, President and CEO Martin A. White said. The action evidences “the board of directors’ [belief] in the long-term growth potential of the company.”

The stock split announcement came two weeks after MDU reported “a fantastic quarter,” according to White, that produced consolidated earnings of $43.3 million for 2Q 2003, compared to $24.7 million for the same period last year. Earnings for the first half totaled $63.2 million or 85 cents per common share, diluted, compared to last year’s $48.2 million or 68 cents per common share, diluted. Full year earnings without the effect of an accounting change are projected to be $2.20 to $2.45.per common share.

Higher prices and increased production, primarily in the Rocky Mountain area, added up to earnings from MDU’s natural gas and oil production segment of $17.9 million for the quarter, compared to $9.3 million in the second quarter of 2002. Realized natural gas prices were 35% higher and realized oil prices were 14% higher than the same period last year, while combined production was up 14%.

The second half of the year could be even better, at least on the exploration and production side where “we have a huge number of wells drilling,” a company official said in an earnings conference call. Wet weather this spring pushed the drilling schedule back about a month, so more wells will be brought online in the second half. Also, the company expects to receive permits from the state of Montana and the federal Bureau of Land Management in time to start drilling additional prospects by Sept. 1. MDU expects to drill more than 400 wells in 2003.

For purposes of its earnings guidance MDU estimates natural gas prices at Ventura and Colorado Interstate Gas where it delivers gas in the range of $3.00 to $3.50/Mcf for August through December 2003. This is based on a Henry Hub price between $4.25 and $4.75 and a conservative differential. Storage in the West is in better shape than in the East, company officials said. MDU has about 50% of its gas hedged for 2003 and is working to lock up about the same percentage in 2004. The company used “lots of collars this year,” and probably will do the same next year.

MDU is focused “on grass roots kind of projects,” the company’s CEO said. It recently acquired a large interest in a largely untested 400,000 acre project, and it is continuing to look for properties.

The company’s pipeline and energy services segment earnings totaled $5.1 million for the second quarter of 2003 compared to $4.7 million in the second quarter of 2002. This segment reported a 12% increase in gathering volumes, mainly from increased gathering in the Powder River Basin. Transportation volumes decreased, primarily the result of lower volumes to storage; however, transportation revenues improved due to an increase in firm services.

The company’s 253-mile Grasslands Pipeline project has a targeted in-service date of Nov. 1, 2003, and will have the capacity to deliver 80 MMcf/d on a firm basis into Northern Border Pipeline headed for Midwest markets.

MDU’s other large business division, construction materials and mining, also reported a good quarter with earnings of $12.8 million, compared to $10.9 million for the same period last year.

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