MDU Resources closes on Powder River Basin acquisition

MDU Resources Group Inc.

MDU Resources Group Inc. (NYSE:MDU) reports that its indirect wholly owned subsidiary, Fidelity Exploration & Production Co., has closed on the purchase of oil and natural gas production assets in Converse County, Wyoming, in the southern Powder River Basin, with an effective date of Oct. 1, 2013. The purchase price was approximately $183 million plus accounting and purchase price adjustments customary with acquisitions of this type and is expected to be accretive to 2014 earnings per share.

The acquisition consists primarily of non-operated undeveloped mineral leasehold positions of approximately 42,100 gross acres and 24,500 net acres. In January, the properties had existing net production of more than 1,100 barrels of oil equivalent per day, 80% of which is oil. Plans for 2014 include a two-rig seasonal drilling program targeting the heart of the prolific Frontier play.

With the acquisition, the company’s consolidated capital expenditures forecast for 2014 is $1.189 billion, an increase from the estimate of $959 million included in the company’s press release dated Feb. 3. Forecasted equity requirements for the year are now $250 million to $300 million. Equity issuance levels are dependent, in part, on cash generated from sales of non-strategic assets. The equity will be used to fund accretive projects that provide long-term growth potential. These investments include rate base growth opportunities at the company’s utility segment, a diesel refinery project at the pipeline segment, and the addition of a second rig in the Paradox Basin coupled with acquisition capital requirements at the exploration and production segment.

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