FORM 10-K

58

MDU RESOURCES G ROUP, INC.

PART II

Natural gas distribution

· This business continues to pursue expansion of energy-related services and expects continued strong customer growth in Washington

and Oregon.

Construction services

· The Company anticipates margins in 2008 to be slightly lower than 2007.

· The Company continues to focus on costs and efficiencies to enhance margins.

Pipeline and energy services

· Based on anticipated demand, incremental expansions to the Grasslands Pipeline are forecasted over the next few years. Through

additional compression, the pipeline firm capacity could ultimately reach 200,000 Mcf per day, an increase from the current firm capacity

of 138,000 Mcf per day.

· In 2008, total gathering and transportation throughput is expected to be slightly higher than 2007 record levels.

Natural gas and oil production

· The Company expects a combined natural gas and oil production increase in 2008 in the range of 12 percent to 16 percent over 2007

levels, including the effects of the acquisition of natural gas production assets in East Texas. Meeting these targets will depend on the

timely receipt of regulatory approvals and the success of exploration activities.

· The Company expects to participate in more than 375 wells in 2008. Specifically, in the Rocky Mountain Region, the Company expects to

drill approximately 240 operated wells (approximately 195 net wells) in the Baker, Bowdoin, Powder River Basin and Big Horn Basin areas,

and to participate in 30 or more wells in the Bakken and Paradox Basin areas, dependent upon success. Also included in the 375 wells

are 25 wells to further develop the properties associated with the acquisition of natural gas production assets in East Texas.

· Currently, this segment's net combined natural gas and oil production is approximately 225,000 Mcf equivalents to 240,000 Mcf

equivalents per day, which includes the recently acquired East Texas properties.

· The Company is pursuing exploratory drilling in the Bakken play in North Dakota and the Paradox Basin in Utah. Its acreage position

in the Bakken play includes approximately 75,000 net acres in Mountrail and Burke counties. The first of its operated wells in the

Bakken play is scheduled for completion in February. The Company's first well in the Paradox Basin began producing in mid-November.

The Company owns approximately 57,000 net acres in the Paradox Basin.

· The Company is pursuing continued reserve growth through the further exploitation of its existing properties, exploratory drilling and

acquisitions of properties.

· Earnings guidance reflects estimated natural gas prices for February through December 2008 as follows:

Index*

Price Per Mcf

Ventura

$ 6.75 to $7.25

NYMEX

$ 7.25 to $7.75

CIG

$5.50 to $6.00

* Ventura is an index pricing point related to Northern Natural Gas Co.'s system; CIG is an index pricing point related

to Colorado Interstate Gas Co.'s system.

During 2007, more than three-fourths of natural gas production was priced at non-NYMEX prices, the majority of which was at

Ventura pricing.

· Earnings guidance reflects estimated NYMEX crude oil prices for February through December in the range of $75 to $80 per barrel.