FORM 10-K

59

MDU RESOURCES G ROUP, INC.

· For 2008, the Company has hedged approximately 35 percent to 40 percent of its estimated natural gas production and less than

5 percent of its estimated oil production. Of its estimated natural gas production, the Company has hedged approximately 15 percent

to 20 percent for 2009, and less than 5 percent for 2010 and 2011. The hedges that are in place as of February 14, 2008, are

summarized in the following chart:

Forward

Price Swap or

Notional

Costless Collar

Period

Volume

Floor-Ceiling

Commodity

Index*

Outstanding

(MMBtu/Bbl)

(Per MMBtu/Bbl)

Natural Gas

Ventura

1/08 ­ 3/08

910,000

$8.00 ­ $8.75

Natural Gas

Ventura

1/08 ­ 3/08

364,000

$9.01

Natural Gas

Ventura

1/08 ­ 3/08

910,000

$9.35

Natural Gas

CIG

1/08 ­ 3/08

910,000

$7.00 ­ $7.79

Natural Gas

CIG

1/08 ­ 3/08

910,000

$8.06

Natural Gas

Ventura

4/08 ­ 10/08

1,070,000

$7.00 ­ $8.05

Natural Gas

Ventura

4/08 ­ 10/08

1,070,000

$7.00 ­ $8.06

Natural Gas

Ventura

4/08 ­ 10/08

1,070,000

$7.45

Natural Gas

Ventura

4/08 ­ 10/08

1,070,000

$7.50 ­ $8.70

Natural Gas

Ventura

4/08 ­ 10/08

1,070,000

$8.005

Natural Gas

Ventura

4/08 ­ 10/08

749,000

$7.25 ­ $8.02

Natural Gas

CIG

4/08 ­ 10/08

749,000

$5.75 ­ $7.40

Natural Gas

Ventura

1/08 ­ 12/08

1,830,000

$7.00 ­ $8.45

Natural Gas

Ventura

1/08 ­ 12/08

1,830,000

$7.50 ­ $8.34

Natural Gas

Ventura

1/08 ­ 12/08

3,294,000

$8.55

Natural Gas

NYMEX

1/08 ­ 12/08

1,830,000

$7.50 ­ $10.15

Natural Gas

HSC

3/08 ­ 12/08

2,080,800

$7.91

Natural Gas

CIG

4/08 ­ 12/08

1,375,000

$6.75 ­ $7.04

Natural Gas

CIG

4/08 ­ 12/08

1,375,000

$6.35

Natural Gas

CIG

4/08 ­ 12/08

1,375,000

$6.41

Natural Gas

Ventura

11/08 ­ 12/08

427,000

$9.25

Natural Gas

Ventura

11/08 ­ 12/08

610,000

$8.85

Natural Gas

CIG

1/09 ­ 3/09

225,000

$8.45

Natural Gas

HSC

1/09 ­ 12/09

2,482,000

$8.16

Natural Gas

Ventura

1/09 ­ 12/09

1,460,000

$7.90 ­ $8.54

Natural Gas

Ventura

1/09 ­ 12/09

4,380,000

$8.25 ­ $8.92

Natural Gas

CIG

1/09 ­ 12/09

3,650,000

$6.50 ­ $7.20

Natural Gas

CIG

1/09 ­ 12/09

912,500

$7.27

Natural Gas

HSC

1/10 ­ 12/10

1,606,000

$8.08

Natural Gas

HSC

1/11 ­ 12/11

1,350,500

$8.00

Crude Oil

NYMEX

1/08 ­ 12/08

73,200

$67.50 ­ $78.70

* 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; HSC is the Houston Ship Channel hub in southeast Texas which connects to several pipelines.

Construction materials and contracting

· The slow down in the residential housing sector has adversely impacted operations. A greater emphasis on commercial, industrial, energy

and public works projects and cost containment should partially mitigate the effects.

NEW ACCOUNTING STANDARDS

For information regarding new accounting standards, see Item 8 -- Note 1, which is incorporated by reference.

CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

The Company has prepared its financial statements in conformity with accounting principles generally accepted in the United States of America.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of

assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements as well as the reported amounts of

revenues and expenses during the reporting period. The Company's significant accounting policies are discussed in Item 8 -- Note 1.

Estimates are used for items such as impairment testing of long-lived assets, goodwill and natural gas and oil properties; fair values of acquired

assets and liabilities under the purchase method of accounting; natural gas and oil reserves; aggregate reserves; property depreciable lives; tax

provisions; uncollectible accounts; environmental and other loss contingencies; accumulated provision for revenues subject to refund; costs on

construction contracts; unbilled revenues; actuarially determined benefit costs; asset retirement obligations; the valuation of stock-based

compensation; and the fair value of derivative instruments. The Company's critical accounting policies are subject to judgments and uncertainties

that affect the application of such policies. As discussed below, the Company's financial position or results of operations may be materially

different when reported under different conditions or when using different assumptions in the application of such policies.