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Friday, 08/15/2003

Mining for Gold
By Nich Sheldon
MDU - MDU Resources Group Inc

Company Description

MDU Resources Group, Inc. provides energy, value-added natural resource products and related services that are essential to our country's energy, transportation and communication infrastructure. MDU Resources includes natural gas and oil production, construction materials and mining, a natural gas pipeline, electric and natural gas utilities, utility services, energy services and domestic and international independent power production.

[Source: Company Press Release]

Reasons to Invest:

When I was a kid, I always fancied watching those old time western movies that depicted cowboys in the mountains making a living off of mining gold. It was not that I necessarily wanted to be a cowboy, or even be in a western movie. Heck, I don't even think that I liked the movies because it showed the lifestyle of miners during the gold rush. What it all comes down to is this, I enjoyed the idea or rather the utopia like perception these film directors created, when they painted a life of people getting rich off of simply dipping buckets into a stream. Well, I am much older now, and wiser (I would assume), I know that I am going to have to work for a living and that my bucket of dreams won't turn to gold with one swift swoop through a stream. So this week I figured why not bring the gold to you. Why not highlight a company that truly does mine for a living. Well, they may not mine for gold, but we here at feel that this is a golden opportunity in an industry that is going to be around for a long time.

With power going out all over New York, New Jersey, Toledo, Cleveland, Stamford and Toronto, what better DRIP is there to pick than one that focuses on improving the possibility of this sort of black out not occurring again? MDU Resources Group has seven different segments in their portfolio: Natural Gas and Oil Production, Construction Materials and Mining, Independent Power Production and Other, Utility Services, Electric, Natural Gas Distribution and Pipeline and Energy Services.

After thoroughly reading through MDU's second quarter statistics and company news, I have found that earnings for each of these different segments of MDU have all risen in comparison with the same quarter in 2002.

Natural gas and Oil Production earnings for MDU were $17.9 million for the second quarter of 2003, compared to $9.3 million for the second quarter of 2002. This is an increase in earnings by $8.6 million over the course of one year. Construction Materials and Mining increased by $1.9 million over one year. Independent Power Production and Other had a net earnings of $5.5 million for the quarter, in comparison to a loss of $1.9 million just a year ago. This turn from negative figures to positive figures is a good sign for this segment of MDU. Utility Services Increased nearly $0.7 million. MDU's Electric segment rose $0.1 million, while their Natural gas Distribution segment rose over half a million dollars. Last but not least MDU reported an $0.4 million increase in their Pipeline and energy Services Segment for the second quarter.

What I find noteworthy about this is the fact that they have seven different segments, or branches if you will, and all of these segments have increased earnings. The company's outlook is also positive as they expect this trend of increased earnings to continue in the next few quarters.

A quick note is due for their first quarter results as MDU's revenues rose 22% to $467.8 million. Their net income before account change applicable to common rose 17% to $27.5 million. These results are a direct reflection of higher revenues from Pipeline services, which are partially offset by higher fuel costs.

In respects with news on MDU Resources Group, the company's construction materials subsidiary acquired a large privately held construction materials and services company, which serves East Central Texas. The company they acquired makes highways, materials for subdivisions and a variety of other projects in 27 Central Texas counties. It's annual revenues before being bought out by MDU was $87 million. This is predicted to be accretive to earnings per share.

The Federal Energy Regulatory Commission (FERC) gave MDU a certificate of public convenience and necessity for a 253-mile Grassland Pipeline project. Construction has already begun on a new compressor station in addition to the existing one. Pipeline construction is expected to begin by the end of this summer. The company is estimating the pipeline will be in service by November 1st, 2003. On top of that, the pipeline will be capable of delivering 80 million cubic feet of natural gas per day on a steady basis. This should relieve pipeline capacity constraints in the Rocky Mountain region, as well as, provide natural gas production in Wyoming and Montana better admittance to Midwestern markets.

In late May of this year, a new 40-megawatt, natural gas-fueled combustion turbine near Glendive, Montana became operational. This new plant will help MDU's utility subsidiary provide peak period electrical energy to their customers on its integrated system in North Dakota, South Dakota and Montana. Furthermore, this allows MDU to reach its peak load obligation with the regional power pool.

Moreover, during yesterday's trading session (Thursday, August 14th, 2003), MDU Resources Group Inc's, Board of Directors declared a 3-for-2 stock split of its common shares. The stock split will be payable on October 29th, 2003 to shareholders on record as of October 10th. Fractional Shares will be paid in cash as of market close on October 10th.

If this is not exciting enough I am sure you DRIP investors can appreciate MDU announcing a 6.3% increase in its quarterly dividend, increasing from $0.24 per share to $0.255 cents per share. This measures out to be an annualized $0.06 increase per share. The payable date for this dividend is October 1st, 2003 to shareholders on record as of September 11th. I mean who would not like to take home an additional $0.06 per year per share that you own? Imagine the profit margins if you owned a few contracts for several years.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy:      2
Buy:             3
Hold:            5
Sell:            0
Strong Sell:     0

Total:          10

DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $50 to $5,000/month

Reinvestment Fees - 
Dividend investment fees: None
Cash investment fees: None
Auto reinvestment fees: None

Transfer Agent:
Wells Fargo Bank

Corporate Headquarters:
Schuchart Building
918 East Divide Avenue
Bismarck, ND 58506 
Phone: (701) 222-7900
Fax: (701) 222-7607


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