OVERVIEW
The Company's strategy is to apply its expertise in energy and transportation infrastructure industries to increase market share, increase profitability and enhance shareholder value through:

· Organic growth as well as a continued disciplined approach to the acquisition of well-managed companies and properties

· The elimination of system-wide cost redundancies through increased focus on integration of operations and standardization and consolidation of various support services and functions across companies within the organization

· The development of projects that are accretive to earnings per share and return on invested capital

The Company has capabilities to fund its growth and operations through various sources, including internally generated funds, commercial paper facilities and the issuance from time to time of debt securities and the Company's equity securities. Although volatility and disruptions in the capital markets have increased significantly, the Company continues to issue commercial paper to meet its current needs. If access to the commercial paper markets were to become unavailable, the Company may need to borrow under its credit agreements. At that time, accessing the long-term debt market may be more challenging and result in significantly higher interest rates, which have resulted in an increased focus on the use of operating cash flows for capital expenditure purposes. For more information on the Company's net capital expenditures, see Liquidity and Capital Commitments.

The key strategies for each of the Company's business segments and certain related business challenges are summarized below. For a summary of the Company's business segments, see Note 15.

Key Strategies and Challenges
Electric and Natural Gas Distribution
Strategy Provide competitively priced energy to customers while working with them to ensure efficient usage. Both the electric and natural gas distribution segments continually seek opportunities for growth and expansion of their customer base through extensions of existing operations and through selected acquisitions of companies and properties at prices that will provide stable cash flows and an opportunity for the Company to earn a competitive return on investment.

Challenges Both segments are subject to extensive regulation in the state jurisdictions where they conduct operations with respect to costs and permitted returns on investment as well as subject to certain operational regulations at the federal level. The ability of these segments to grow through acquisitions is subject to significant competition from other energy providers. In addition, the ability of both segments to grow service territory and customer base is affected by the economic environment of the markets served and significant competition from other energy providers, including rural electric cooperatives. The construction of electric generating facilities and transmission lines are subject to increasing cost and lead time, as well as extensive permitting procedures.

Construction Services
Strategy Provide a competitive return on investment while operating in a competitive industry by: building new and strengthening existing customer relationships; effectively controlling costs; retaining, developing and recruiting talented employees; focusing business development efforts on

project areas that will permit higher margins; and properly managing risk. This segment continuously seeks opportunities to expand through strategic acquisitions.

Challenges This segment operates in highly competitive markets with many jobs subject to competitive bidding. Maintenance of effective operational and cost controls, retention of key personnel and managing through downturns in the economy are ongoing challenges.

Pipeline and Energy Services
Strategy Utilize the segment's existing expertise in energy infrastructure and related services to increase market share and profitability through optimization of existing operations, internal growth, and acquisitions of energy-related assets and companies. Incremental and new growth opportunities include: access to new sources of natural gas for storage, gathering and transportation services; expansion of existing gathering and transmission facilities; and incremental expansion of pipeline capacity to allow customers access to more liquid and higher-priced markets.

Challenges Challenges for this segment include: energy price volatility; natural gas basis differentials; regulatory requirements; ongoing litigation; recruitment and retention of a skilled workforce; and competition from other natural gas pipeline and gathering companies.

Natural Gas and Oil Production
Strategy Apply technology and utilize existing exploration and production expertise, with a focus on operated properties, to increase production and reserves from existing leaseholds, and to seek additional reserves and production opportunities in new areas to further diversify the segment's asset base. By optimizing existing operations and taking advantage of new and incremental growth opportunities, this segment's goal is to increase both production and reserves over the long term so as to generate competitive returns on investment.

Challenges Volatility in natural gas and oil prices; ongoing environmental litigation and administrative proceedings; timely receipt of necessary permits and approvals; recruitment and retention of a skilled workforce; availability of drilling rigs, materials and auxiliary equipment, and industry-related field services, all primarily in a higher price environment; inflationary pressure on development and operating costs; and competition from other natural gas and oil companies are ongoing challenges for this segment.

Construction Materials and Contracting
Strategy Focus on high-growth strategic markets located near major transportation corridors and desirable mid-sized metropolitan areas; strengthen long-term, strategic aggregate reserve position through purchase and/or lease opportunities; enhance profitability through cost containment, margin discipline and vertical integration of the segment's operations; and continue growth through organic and acquisition opportunities. Ongoing efforts to increase margin are being pursued through the implementation of a variety of continuous improvement programs, including corporate purchasing of equipment, parts and commodities (liquid asphalt, diesel fuel, cement and other materials), and negotiation of contract price escalation provisions. Vertical integration allows the segment to manage operations from aggregate mining to final lay-down of concrete and asphalt, with control of and access to adequate quantities of permitted aggregate reserves being significant. A key element of the Company's long-term strategy for this business is to further expand its presence, through acquisition, in the higher-margin materials business (rock, sand, gravel, liquid asphalt, ready-mixed concrete and related products), complementing and expanding on the Company's expertise.

Challenges The economic downturn has adversely impacted operations, particularly in the private market. This business unit expects to continue cost containment efforts and a greater emphasis on industrial, energy and public works projects. Significant volatility in the cost of raw materials such as diesel, gasoline, liquid asphalt, cement and steel continue to be a concern. Increased competition in certain construction markets has also lowered margins.

For further information on the risks and challenges the Company faces as it pursues its growth strategies and other factors that should be considered for a better understanding of the Company's financial condition, see Part II, Item 1A
- Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2008 Annual Report. For further information on each segment's key growth strategies, projections and certain assumptions, see Prospective Information. For information pertinent to various commitments and contingencies, see Notes to Consolidated Financial Statements.

Earnings Overview
The following table summarizes the contribution to consolidated earnings by each
of the Company's businesses.

                                                              Three Months Ended
                                                                   March 31,
                                                                  2009         2008
                                            (Dollars in millions, where applicable)
  Electric                                                  $      5.1      $   5.5
  Natural gas distribution                                        23.9         16.4
  Construction services                                            8.6         10.8
  Pipeline and energy services                                     6.4          7.2
  Natural gas and oil production                                (373.3 )       50.6
  Construction materials and contracting                         (15.7 )      (21.1 )
  Other                                                            1.0          1.5
  Earnings (loss) on common stock                           $   (344.0 )    $  70.9
  Earnings (loss) per common share - basic                  $    (1.87 )    $   .39
  Earnings (loss) per common share - diluted                $    (1.87 )    $   .39
  Return on average common equity for the 12 months ended         (4.5 )%      18.9 %

Three Months Ended March 31, 2009 and 2008 Consolidated earnings for the quarter ended March 31, 2009, decreased $414.9 million from the comparable prior period largely due to:

· A $384.4 million after-tax noncash write-down of natural gas and oil properties as well as lower average realized natural gas and oil prices and decreased natural gas production

· Lower construction workloads at the construction services business

Partially offsetting these decreases were increased earnings at the natural gas distribution business largely due to the October 1, 2008, acquisition of Intermountain and lower selling, general and administrative expense at the construction materials and contracting business.

FINANCIAL AND OPERATING DATA
Below are key financial and operating data for each of the Company's businesses.

Electric
                                                           Three Months Ended
                                                                March 31,
                                                               2009         2008
                                         (Dollars in millions, where applicable)
      Operating revenues                                 $     51.2      $  52.3
      Operating expenses:
      Fuel and purchased power                                 18.7         18.8
      Operation and maintenance                                15.6         15.0
      Depreciation, depletion and amortization                  6.1          6.0
      Taxes, other than income                                  2.4          2.3
                                                               42.8         42.1
      Operating income                                          8.4         10.2
      Earnings                                           $      5.1      $   5.5
      Retail sales (million kWh)                              724.9        707.8
      Sales for resale (million kWh)                            9.6         48.4
      Average cost of fuel and purchased power per kWh   $     .024      $  .023

Three Months Ended March 31, 2009 and 2008 Electric earnings decreased $400,000 (8 percent) due to:

· Decreased sales for resale margins due to lower average rates of 42 percent and decreased volumes of 80 percent due to decreased plant generation, the result of lower rates

· Higher operation and maintenance expense of $300,000 (after-tax), largely payroll-related costs

Partially offsetting these decreases were higher electric retail sales margins due to increased retail sales volumes of 2 percent.

Natural Gas Distribution
                                                                    Three Months Ended
                                                                        March 31,
                                                                       2009           2008
                                                   (Dollars in millions, where applicable)
Operating revenues                                              $     483.2      $   362.1
Operating expenses:
Purchased natural gas sold                                            365.9          282.6
Operation and maintenance                                              38.1           27.0
Depreciation, depletion and amortization                               10.7            7.2
Taxes, other than income                                               22.9           14.5
                                                                      437.6          331.3
Operating income                                                       45.6           30.8
Earnings                                                        $      23.9      $    16.4
Volumes (MMdk):
Sales                                                                  43.6           31.1
Transportation                                                         34.0           26.6
Total throughput                                                       77.6           57.7
Degree days (% of normal)*
Montana-Dakota                                                          103 %          101 %
Cascade                                                                 107 %          107 %
Intermountain                                                           106 %          ---
Average cost of natural gas, including transportation, per
dk**                                                            $      8.39      $    7.72

Three Months Ended March 31, 2009 and 2008 Earnings at the natural gas distribution business increased $7.5 million (46 percent) due to earnings from Intermountain, which was acquired on October 1, 2008.

Construction Services
                                                       Three Months Ended
                                                            March 31,
                                                           2009         2008
                                                          (In millions)
          Operating revenues                         $    244.8      $ 307.4
          Operating expenses:
          Operation and maintenance                       217.3        274.0
          Depreciation, depletion and amortization          3.4          3.4
          Taxes, other than income                          9.5         11.8
                                                          230.2        289.2
          Operating income                                 14.6         18.2
          Earnings                                   $      8.6      $  10.8

Three Months Ended March 31, 2009 and 2008 Construction services earnings decreased $2.2 million (20 percent) due to lower construction workloads, largely in the Southwest region. Partially offsetting this decrease were higher construction margins in certain regions, as well as lower general and administrative expense of $700,000 (after tax), largely payroll-related.

Pipeline and Energy Services
                                                       Three Months Ended
                                                           March 31,
                                                          2009           2008
                                                     (Dollars in millions)
        Operating revenues                         $      85.1        $ 133.8
        Operating expenses:
        Purchased natural gas sold                        46.1           94.1
        Operation and maintenance                         17.6           17.6
        Depreciation, depletion and amortization           6.2            5.6
        Taxes, other than income                           2.9            2.8
                                                          72.8          120.1
        Operating income                                  12.3           13.7
        Earnings                                   $       6.4        $   7.2
        Transportation volumes (MMdk):
        Montana-Dakota                                     8.3            8.3
        Other                                             28.8           21.4
                                                          37.1           29.7
        Gathering volumes (MMdk)                          24.2           24.0

Three Months Ended March 31, 2009 and 2008 Pipeline and energy services earnings decreased $800,000 (11 percent) due to:

· Lower storage services revenues of $1.6 million (after tax), resulting from lower storage balances and withdrawals as well as lower rates

· Higher operation and maintenance expense largely related to the natural gas storage litigation and payroll-related costs. For further information regarding natural gas storage litigation, see Note 18. The above table also reflects lower operation and maintenance expense and revenues related to energy-related service projects.

Partially offsetting the earnings decrease were:

· Increased transportation volumes of $1.4 million (after tax), largely transportation to storage and off-system transportation volumes

· Higher gathering rates of $500,000 (after tax)

Results also reflect lower operating revenues, as well as lower purchased natural gas sold related to lower natural gas prices.

Natural Gas and Oil Production
                                                                  Three Months Ended
                                                                      March 31,
                                                                     2009          2008
                                                (Dollars in millions, where applicable)
Operating revenues:
Natural gas                                                    $     81.7     $   117.5
Oil                                                                  24.4          52.1
                                                                    106.1         169.6
Operating expenses:
Operation and maintenance:
Lease operating costs                                                20.0          18.3
Gathering and transportation                                          6.1           5.7
Other                                                                10.3           8.8
Depreciation, depletion and amortization                             42.6          39.3
Taxes, other than income:
Production and property taxes                                         7.5          13.7
Other                                                                  .2            .2
Write-down of natural gas and oil properties                        620.0           ---
                                                                    706.7          86.0
Operating income (loss)                                            (600.6 )        83.6
Earnings (loss)                                                $   (373.3 )   $    50.6
Production:
Natural gas (MMcf)                                                 15,401        16,561
Oil (MBbls)                                                           742           621
Total Production (MMcf equivalent)                                 19,852        20,288
Average realized prices (including hedges):
Natural gas (per Mcf)                                          $     5.31     $    7.10
Oil (per Bbl)                                                  $    32.86     $   83.79
Average realized prices (excluding hedges):
Natural gas (per Mcf)                                          $     3.63     $    6.91
Oil (per Bbl)                                                  $    32.86     $   84.35
Average depreciation, depletion and amortization rate, per
equivalent Mcf                                                 $     2.07     $    1.88
Production costs, including taxes, per net equivalent Mcf:
Lease operating costs                                          $     1.00     $     .90
Gathering and transportation                                          .31           .28
Production and property taxes                                         .38           .67
                                                               $     1.69     $    1.85

Three Months Ended March 31, 2009 and 2008 Natural gas and oil production experienced a decrease in earnings of $423.9 million due to:

· A noncash write-down of natural gas and oil properties of $384.4 million (after tax), as discussed in Note 6

· Lower average realized oil prices of 61 percent and lower average realized natural gas prices of 25 percent

· Decreased natural gas production of 7 percent, largely related to normal production declines at certain properties

· Higher depreciation, depletion and amortization expense of $2.0 million (after tax), due to higher depletion rates, partially offset by decreased combined production

· Increased lease operating costs of $1.0 million (after tax)

Partially offsetting these decreases were:

· Lower production taxes of $3.8 million (after tax) associated largely with lower average prices

· Increased oil production of 19 percent, largely related to drilling activity in the Bakken area as well as higher production from the East Texas properties

Construction Materials and Contracting
                                                       Three Months Ended
                                                           March 31,
                                                            2009         2008
                                                     (Dollars in millions)
        Operating revenues                         $       183.5      $ 201.3
        Operating expenses:
        Operation and maintenance                          172.4        195.2
        Depreciation, depletion and amortization            23.9         25.4
        Taxes, other than income                             7.5          9.1
                                                           203.8        229.7
        Operating loss                                     (20.3 )      (28.4 )
        Loss                                       $       (15.7 )    $ (21.1 )
        Sales (000's):
        Aggregates (tons)                                  3,185        4,241
        Asphalt (tons)                                       188          196
        Ready-mixed concrete (cubic yards)                   509          611

Three Months Ended March 31, 2009 and 2008 Construction materials and contracting experienced a seasonal first quarter loss of $15.7 million. The loss decreased by $5.4 million (26 percent) from the $21.1 million loss in 2008. The decreased loss was due to:

· Lower selling, general and administrative expense (largely lower payroll and benefit-related costs) as well as lower maintenance costs, totaling $5.7 million (after tax)

· Higher construction workloads and margins

· Lower depreciation, depletion and amortization expense of $900,000 (after tax), largely the result of lower property, plant and equipment balances

Partially offsetting the decreased loss were lower product volumes as a result of the continuing economic downturn.

Other and Intersegment Transactions
Amounts presented in the preceding tables will not agree with the Consolidated
Statements of Income due to the Company's other operations and the elimination
of intersegment transactions. The amounts relating to these items are as
follows:

                                                       Three Months Ended
                                                            March 31,
                                                          2009          2008
                                                          (In millions)
          Other:
          Operating revenues                         $     2.7       $   2.6
          Operation and maintenance                        3.2           2.7
          Depreciation, depletion and amortization          .3            .3
          Taxes, other than income                          .1            .1
          Intersegment transactions:
          Operating revenues                         $    62.6       $ 107.2
          Purchased natural gas sold                      55.5         100.1
          Operation and maintenance                        7.1           7.1

For further information on intersegment eliminations, see Note 15.

PROSPECTIVE INFORMATION
The following information highlights the key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters for certain of the Company's businesses. Many of these highlighted points are "forward-looking statements." There is no assurance that the Company's projections, including estimates for growth and changes in earnings, will in fact be achieved. Please refer to assumptions contained in this section, as well as the various important factors listed in Part II, Item 1A - Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2008 Annual Report. Changes in such assumptions and factors could cause actual future results to differ materially from the Company's growth and earnings projections.

MDU Resources Group, Inc.
· Earnings per common share for 2009, diluted, are projected in the range of $1.05 to $1.30 excluding a $384.4 million, or $2.09 per common share after-tax noncash charge related to low natural gas and oil prices. (Including the noncash charge, guidance for 2009 is a loss of $.79 to $1.04 per common share.)

· The Company expects the percentage of 2009 earnings per common share by quarter, excluding the noncash charge, to be in the following approximate ranges:

o Second quarter - 15 percent to 20 percent

o Third quarter - 35 percent to 40 percent

o Fourth quarter - 20 percent to 25 percent

· While 2009 earnings per share are projected to decline compared to 2008 earnings, long-term compound annual growth goals on earnings per share from operations are in the range of 7 percent to 10 percent.

· In April 2009, the Company purchased a 25 MW ownership interest in the Wygen III power generation facility which is under construction near Gillette, Wyoming. This rate-based generation will replace a portion of the purchased power for the Wyoming system. The plant is expected to be online June 2010.

. . .