MDU Resources Group, the diversified utility headquartered in Bismarck, ND, said it does not expect to meet its forecasts of $2.30-2.50 per earnings share for this year, and will see “significantly” lower earnings than the predicted $2.60 in 2002 because of the volatility in natural gas prices and a downturn in the economy. Still, MDU said it would stay the course on its long-term goal of an earnings per share growth of 10-12%, as well as a projected 30% increase in combined natural gas and oil production this year.

CEO Martin A. White said that the “tragic events” of Sept. 11’s terrorist attacks in the United States, along with “an economy that was already on a downturn,” have “resulted in significant uncertainty in the economy as a whole.” White said that “because of this uncertainty, and more specifically the extreme volatility in natural gas prices experienced this year,” the company expects a decrease in earnings.

Depending on whether natural gas prices continue to decline, White said that MDU may be required to take a noncash charge to earnings this year also, required under the Securities and Exchange Commission ceiling test for oil and gas properties.

White said MDU’s “customers will continue to demand the company’s products and services, which are essential for everyday living and for maintaining the infrastructure of America. The country relies on electricity, natural as, oil, roads, the power lines that move electricity, the cable that transmits information and many of the other products and services that MDU Resources provides.”

On the positive side, MDU reported that construction materials and utility services businesses have had a “good season,” with “solid demand for new highway and electric transmission infrastructure” and strong earnings growth. Its pipeline and energy services segments also have benefited from increased natural gas transportation and storage services, along with the pipeline and cable magnetization process and location services they provide. Its electric business also benefited from wholesale sales in the central United States.

“Opportunities for further growth through acquisitions and continuing operational consolidations are excellent,” White said. “Our natural gas and oil exploration and production group continues to develop coalbed natural gas production in Wyoming and Montana. We believe we will still achieve a combined natural gas and oil production increase of nearly 30% this year, over that for 2000. Production costs on this natural gas continue to be competitive with other sources.”

MDU has swap agreements and fixed price forward sales representing 30-35% of 2001 estimated annual natural gas production. Natural gas swap prices range from $4.57-5.39/Mcf based on Nymex and $4.04-4.44/Mcf for Rocky Mountain gas sales. It has swap agreements and fixed price forward sales on 10-15% of 2002 estimated annual natural gas production at an average Nymex price of $4.34/Mcf.

Its pipeline and energy services group also remains in the planning stages for the potential construction of a 250-mile pipe that would transport coalbed methane gas to market, and also use the company’s storage fields for markets beyond the pipeline’s traditional markets. The company said it expected to file for Federal Energy Regulatory Commission approval of the project later this year.

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