UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549

                                FORM 10-Q



          X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

            FOR THE QUARTERLY PERIOD ENDED June 30, 2004

                                   OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

   For the Transition Period from _____________ to ______________

                      Commission file number 1-3480

                        MDU Resources Group, Inc.

         (Exact name of registrant as specified in its charter)


            Delaware                       41-0423660
(State or other jurisdiction of        (I.R.S. Employer
 incorporation or organization)       Identification No.)

                         Schuchart Building
                       918 East Divide Avenue
                            P.O. Box 5650
                  Bismarck, North Dakota 58506-5650
                (Address of principal executive offices)
                               (Zip Code)

                             (701) 222-7900
          (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes X.  No.

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).  Yes X.  No.

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 30, 2004:  117,492,838 shares.


                            INTRODUCTION

This Form 10-Q contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are all statements other than statements
of historical fact, including without limitation, those statements
that are identified by the words "anticipates," "estimates,"
"expects," "intends," "plans," "predicts" and similar expressions.
In addition to the risk factors and cautionary statements included
in this Form 10-Q at Item 2 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations - Risk Factors and
Cautionary Statements that May Affect Future Results, the following
are some other factors that should be considered for a better
understanding of the financial condition of MDU Resources Group,
Inc. (Company).  These other factors may impact the Company's
financial results in future periods.

  -  Acquisition, disposal and impairment of assets or facilities
  -  Changes in operation, performance and construction of plant
     facilities or other assets
  -  Changes in present or prospective generation
  -  Changes in anticipated tourism levels
  -  The availability of economic expansion or development
     opportunities
  -  Population growth rates and demographic patterns
  -  Market demand for, and/or available supplies of, energy
     products and services
  -  Changes in tax rates or policies
  -  Unanticipated project delays or changes in project costs
  -  Unanticipated changes in operating expenses or capital
     expenditures
  -  Labor negotiations or disputes
  -  Inflation rates
  -  Inability of the various contract counterparties to meet their
     contractual obligations
  -  Changes in accounting principles and/or the application of such
     principles to the Company
  -  Changes in technology
  -  Changes in legal proceedings
  -  The ability to effectively integrate the operations of acquired
     companies
  -  Fluctuations in natural gas and crude oil prices
  -  Decline in general economic environment
  -  Changes in governmental regulation
  -  Changes in currency exchange rates
  -  Unanticipated increases in competition
  -  Variations in weather

The Company is a diversified natural resource company which was
incorporated under the laws of the state of Delaware in 1924.  Its
principal executive offices are at the Schuchart Building, 918 East
Divide Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650,
telephone (701) 222-7900.

Montana-Dakota Utilities Co. (Montana-Dakota), a public utility
division of the Company, through the electric and natural gas
distribution segments, generates, transmits and distributes
electricity and distributes natural gas in the northern Great
Plains.  Great Plains Natural Gas Co. (Great Plains), another public
utility division of the Company, distributes natural gas in
southeastern North Dakota and western Minnesota.  These operations
also supply related value-added products and services in the
northern Great Plains.

The Company, through its wholly owned subsidiary, Centennial Energy
Holdings, Inc. (Centennial), owns WBI Holdings, Inc. (WBI Holdings),
Knife River Corporation (Knife River), Utility Services, Inc.
(Utility Services), Centennial Energy Resources LLC (Centennial
Resources) and Centennial Holdings Capital LLC (Centennial Capital).

    WBI Holdings is comprised of the pipeline and energy
    services and the natural gas and oil production segments.
    The pipeline and energy services segment provides natural
    gas transportation, underground storage and gathering
    services through regulated and nonregulated pipeline
    systems primarily in the Rocky Mountain and northern Great
    Plains regions of the United States.  The pipeline and
    energy services segment also provides energy-related
    management services, including cable and pipeline
    magnetization and locating.  The natural gas and oil
    production segment is engaged in natural gas and oil
    acquisition, exploration, development and production
    activities, primarily in the Rocky Mountain region of the
    United States and in and around the Gulf of Mexico.

    Knife River mines aggregates and markets crushed stone,
    sand, gravel and related construction materials, including
    ready-mixed concrete, cement, asphalt and other value-added
    products, as well as performs integrated construction
    services, in the central and western United States and in
    the states of Alaska and Hawaii.

    Utility Services specializes in electrical line
    construction, pipeline construction, inside electrical
    wiring and cabling and the manufacture and distribution of
    specialty equipment.

    Centennial Resources owns electric generating facilities in
    the United States and has investments in electric generating
    facilities in Brazil and The Republic of Trinidad and Tobago
    (Trinidad and Tobago).  Electric capacity and energy
    produced at the power plants are sold primarily under long-
    term contracts to nonaffiliated entities.  Centennial
    Resources also provides analysis, design, construction,
    refurbishment, and operation and maintenance services to
    independent power producers.  These operations also include
    investments not directly being pursued by the Company's
    other businesses.  These activities are reflected in this
    Form 10-Q under independent power production and other.

    Centennial Capital insures various types of risks as a
    captive insurer for certain of the Company's subsidiaries.
    The function of the captive insurer is to fund the
    deductible layers of the insured companies' general
    liability and automobile liability coverages.  Centennial
    Capital also owns certain real and personal property and
    contract rights.  These activities are reflected in this
    Form 10-Q under independent power production and other.

     On August 14, 2003, the Company's Board of Directors approved a
three-for-two common stock split.  For more information on the
common stock split, see Note 3 of Notes to Consolidated Financial
Statements.


                                INDEX


Part I -- Financial Information

  Consolidated Statements of Income --
    Three and Six Months Ended June 30, 2004 and 2003

  Consolidated Balance Sheets --
    June 30, 2004 and 2003, and December 31, 2003

  Consolidated Statements of Cash Flows --
    Six Months Ended June 30, 2004 and 2003

  Notes to Consolidated Financial Statements

  Management's Discussion and Analysis of Financial
    Condition and Results of Operations

  Quantitative and Qualitative Disclosures About Market Risk

  Controls and Procedures

Part II -- Other Information

  Legal Proceedings

  Changes in Securities and Use of Proceeds

  Exhibits and Reports on Form 8-K

Signatures

Exhibit Index

Exhibits


                   PART I -- FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

                      MDU RESOURCES GROUP, INC.
                  CONSOLIDATED STATEMENTS OF INCOME
                             (Unaudited)

                                           Three Months       Six Months
                                               Ended             Ended
                                              June 30,           June 30,
                                           2004     2003      2004      2003
                                       (In thousands, except per share amounts)

Operating revenues:
  Electric, natural gas distribution
    and pipeline and energy services   $159,368  $128,175 $  391,215 $  324,045
  Utility services, natural gas and oil
    production, construction materials
    and mining and other                493,933   420,044    777,545    691,928
                                        653,301   548,219  1,168,760  1,015,973

Operating expenses:
  Fuel and purchased power               16,370    13,262     33,095     28,669
  Purchased natural gas sold             39,534    27,625    134,278    103,731
  Operation and maintenance:
    Electric, natural gas distribution
      and pipeline and energy services   38,329    34,313     80,530     71,478
    Utility services, natural gas and oil
      production, construction materials
      and mining and other              397,084   332,003    643,454    554,383
  Depreciation, depletion and
    amortization                         51,787    46,911    101,298     90,976
  Taxes, other than income               25,466    19,420     47,351     39,103
                                        568,570   473,534  1,040,006    888,340

Operating income                         84,731    74,685    128,754    127,633

Other income -- net                       9,570     4,949     14,364      8,632

Interest expense                         15,653    12,820     29,499     25,679

Income before income taxes               78,648    66,814    113,619    110,586

Income taxes                             20,018    23,341     31,410     39,416

Income before cumulative effect of
  accounting change                      58,630    43,473     82,209     71,170

Cumulative effect of accounting
  change (Note 14)                          ---       ---        ---     (7,589)

Net income                               58,630    43,473     82,209     63,581

Dividends on preferred stocks               172       188        342        375

Earnings on common stock               $ 58,458  $ 43,285 $   81,867 $   63,206

Earnings per common share -- basic:
  Earnings before cumulative effect
    of accounting change               $    .50  $    .39 $      .71 $      .64
  Cumulative effect of accounting
    change                                  ---       ---        ---       (.07)
  Earnings per common share -- basic   $    .50  $    .39 $      .71 $      .57

Earnings per common share -- diluted:
  Earnings before cumulative effect of
    accounting change                  $    .50  $    .39 $      .70 $      .64
  Cumulative effect of accounting change    ---       ---        ---       (.07)
  Earnings per common share -- diluted $    .50  $    .39 $      .70 $      .57

Dividends per common share             $    .17  $    .16 $      .34 $      .32

Weighted average common shares
  outstanding -- basic                  116,559   110,602    115,609    110,461

Weighted average common shares
  outstanding -- diluted                117,567   111,532    116,632    111,283

Pro forma amounts assuming retroactive
  application of accounting change:
  Net income                           $ 58,630  $ 43,473 $   82,209 $   71,170
  Earnings per common share -- basic   $    .50  $    .39 $      .71 $      .64
  Earnings per common share -- diluted $    .50  $    .39 $      .70 $      .64


The accompanying notes are an integral part of these consolidated financial
statements.


                       MDU RESOURCES GROUP, INC.
                     CONSOLIDATED BALANCE SHEETS
                             (Unaudited)


                                         June 30,    June 30,   December 31,
                                           2004        2003         2003
                                             (In thousands, except shares
                                                and per share amounts)
ASSETS
Current assets:
 Cash and cash equivalents              $  132,476  $   66,342   $   86,341
 Receivables, net                          421,653     348,209      357,677
 Inventories                               121,920      97,490      114,051
 Deferred income taxes                       5,457       7,585        3,104
 Prepayments and other current assets       62,304      54,929       52,367
                                           743,810     574,555      613,540
Investments                                 78,067      42,112       44,975
Property, plant and equipment            3,744,146   3,375,456    3,584,038
 Less accumulated depreciation,
   depletion and amortization            1,267,014   1,111,628    1,187,105
                                         2,477,132   2,263,828    2,396,933
Deferred charges and other assets:
 Goodwill                                  200,553     196,394      199,427
 Other intangible assets, net               21,105      20,577       18,814
 Other                                      91,941     103,352      106,903
                                           313,599     320,323      325,144
                                        $3,612,608  $3,200,818   $3,380,592

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Short-term borrowings                  $      ---  $    5,500   $      ---
 Long-term debt and preferred
  stock due within one year                 93,249      17,938       27,646
 Accounts payable                          183,097     163,033      150,316
 Taxes payable                              23,031      12,999       15,358
 Dividends payable                          20,139      18,005       19,442
 Other accrued liabilities                 132,866     104,667      101,299
                                           452,382     322,142      314,061
Long-term debt                             887,721     938,609      939,450
Deferred credits and other liabilities:
 Deferred income taxes                     467,376     379,608      444,779
 Other liabilities                         232,464     231,624      231,666
                                           699,840     611,232      676,445
Preferred stock subject to mandatory
 redemption                                    ---       1,200          ---
Commitments and contingencies
Stockholders' equity:
 Preferred stocks                           15,000      15,000       15,000
 Common stockholders' equity:
  Common stock (Note 3)
   Shares issued -- $1.00 par value
   117,829,664 at June 30, 2004,
   74,479,251 at June 30, 2003 and
   113,716,632 at December 31, 2003        117,830      74,479      113,717
  Other paid-in capital                    843,658     755,017      757,787
  Retained earnings                        617,222     502,403      575,287
  Accumulated other comprehensive loss     (17,419)    (15,638)      (7,529)
  Treasury stock at cost - 359,281
   shares at June 30, 2004 and
   December 31, 2003, and 239,521
   shares at June 30, 2003                  (3,626)     (3,626)      (3,626)
   Total common stockholders' equity     1,557,665   1,312,635    1,435,636
  Total stockholders' equity             1,572,665   1,327,635    1,450,636
                                        $3,612,608  $3,200,818   $3,380,592


The accompanying notes are an integral part of these consolidated financial
statements.


                      MDU RESOURCES GROUP, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Unaudited)


                                                         Six Months Ended
                                                             June 30,
                                                          2004       2003
                                                           (In thousands)
Operating activities:
 Net income                                              $ 82,209  $ 63,581
 Cumulative effect of accounting change                       ---     7,589
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation, depletion and amortization                101,298    90,976
  Earnings, net of distributions, from equity
    method investments                                    (10,455)     (943)
  Deferred income taxes                                    10,141    11,547
  Changes in current assets and liabilities, net
    of acquisitions:
    Receivables                                           (45,143)  (20,769)
    Inventories                                            (2,863)   (1,399)
    Other current assets                                  (11,508)  (17,284)
    Accounts payable                                       24,026    24,399
    Other current liabilities                              23,814     3,024
  Other noncurrent changes                                    809     3,247

 Net cash provided by operating activities                172,328   163,968

Investing activities:
 Capital expenditures                                    (141,868) (130,780)
 Acquisitions, net of cash acquired                       (22,006) (115,246)
 Net proceeds from sale or disposition of property         10,001     6,984
 Investments                                              (22,684)    2,420
 Proceeds from notes receivable                            22,000     7,812

 Net cash used in investing activities                   (154,557) (228,810)

Financing activities:
 Net change in short-term borrowings                          ---   (14,500)
 Issuance of long-term debt                                55,115   214,084
 Repayment of long-term debt                              (42,202) (100,168)
 Proceeds from issuance of common stock, net               54,917       188
 Dividends paid                                           (39,466)  (35,976)

 Net cash provided by financing activities                 28,364    63,628

Increase (decrease) in cash and cash equivalents           46,135    (1,214)
Cash and cash equivalents -- beginning of year             86,341    67,556

Cash and cash equivalents -- end of period               $132,476   $66,342


The accompanying notes are an integral part of these consolidated financial
statements.


                      MDU RESOURCES GROUP, INC.
                        NOTES TO CONSOLIDATED
                        FINANCIAL STATEMENTS

                       June 30, 2004 and 2003
                             (Unaudited)

 1.  Basis of presentation

     The accompanying consolidated interim financial statements were
     prepared in conformity with the basis of presentation reflected
     in the consolidated financial statements included in the Annual
     Report to Stockholders for the year ended December 31, 2003
     (2003 Annual Report), and the standards of accounting
     measurement set forth in Accounting Principles Board (APB)
     Opinion No. 28 and any amendments thereto adopted by the
     Financial Accounting Standards Board (FASB).  Interim financial
     statements do not include all disclosures provided in annual
     financial statements and, accordingly, these financial
     statements should be read in conjunction with those appearing
     in the Company's 2003 Annual Report.  The information is
     unaudited but includes all adjustments that are, in the opinion
     of management, necessary for a fair presentation of the
     accompanying consolidated interim financial statements.

 2.  Seasonality of operations

     Some of the Company's operations are highly seasonal and
     revenues from, and certain expenses for, such operations may
     fluctuate significantly among quarterly periods.  Accordingly,
     the interim results for particular businesses, and for the
     Company as a whole, may not be indicative of results for the
     full fiscal year.

3.   Common stock split

     On August 14, 2003, the Company's Board of Directors approved a
     three-for-two common stock split to be effected in the form of
     a 50 percent common stock dividend.  The additional shares of
     common stock were distributed on October 29, 2003, to common
     stockholders of record on October 10, 2003.  Common stock
     information appearing in the accompanying consolidated
     financial statements has been restated to give retroactive
     effect to the stock split.  Additionally, preference share
     purchase rights have been appropriately adjusted to reflect the
     effects of the split.

 4.  Allowance for doubtful accounts

     The Company's allowance for doubtful accounts as of June 30,
     2004 and 2003, and December 31, 2003, was $8.0 million,
     $8.3 million and $8.1 million, respectively.

 5.  Earnings per common share

     Basic earnings per common share were computed by dividing
     earnings on common stock by the weighted average number of
     shares of common stock outstanding during the applicable
     period.  Diluted earnings per common share were computed by
     dividing earnings on common stock by the total of the weighted
     average number of shares of common stock outstanding during the
     applicable period, plus the effect of outstanding stock
     options, restricted stock grants and performance share awards.
     For the three and six months ended June 30, 2004, 205,305
     shares, with an average exercise price of $24.54, attributable
     to the exercise of outstanding stock options, were excluded
     from the calculation of diluted earnings per share because
     their effect was antidilutive.  For the three and six months
     ended June 30, 2003, 209,805 shares and 3,500,220 shares,
     respectively, with an average exercise price of $24.56 and
     $20.10, respectively, attributable to the exercise of
     outstanding stock options, were excluded from the calculation
     of diluted earnings per share because their effect was
     antidilutive.  For the three and six months ended June 30, 2004
     and 2003, no adjustments were made to reported earnings in the
     computation of earnings per share.  Common stock outstanding
     includes issued shares less shares held in treasury.

 6.  Stock-based compensation

     The Company has stock option plans for directors, key employees
     and employees.  In the third quarter of 2003, the Company
     adopted the fair value recognition provisions of Statement of
     Financial Accounting Standards (SFAS) No. 123, "Accounting for
     Stock-Based Compensation," and began expensing the fair market
     value of stock options for all awards granted on or after
     January 1, 2003.  Compensation expense recognized for awards
     granted on or after January 1, 2003, for the three and six
     months ended June 30, 2004, was $2,000 and $5,000, respectively
     (after tax).

     As permitted by SFAS No. 148, "Accounting for Stock-Based
     Compensation - Transition and Disclosure - an amendment of SFAS
     No. 123," the Company accounts for stock options granted prior
     to January 1, 2003, under APB Opinion No. 25, "Accounting for
     Stock Issued to Employees."  No compensation expense has been
     recognized for stock options granted prior to January 1, 2003,
     as the options granted had an exercise price equal to the
     market value of the underlying common stock on the date of the
     grant.

     Since the Company adopted SFAS No. 123 effective January 1,
     2003, for newly granted options only, the following table
     illustrates the effect on earnings and earnings per common
     share for the three and six months ended June 30, 2004 and
     2003, as if the Company had applied SFAS No. 123 and recognized
     compensation expense for all outstanding and unvested stock
     options based on the fair value at the date of grant:

                                                Three Months Ended
                                                     June 30,
                                                 2004        2003
                                                (In thousands, except
                                                  per share amounts)
     Earnings on common stock, as
       reported                                $ 58,458   $ 43,285
     Stock-based compensation expense
       included in reported earnings,
       net of related tax effects                     2        ---
     Total stock-based compensation
       expense determined under fair
       value method for all awards,
       net of related tax effects                   (79)      (717)
     Pro forma earnings on common stock        $ 58,381   $ 42,568

     Earnings per common share -- basic --
       as reported                             $    .50   $    .39

     Earnings per common share -- basic --
       pro forma                               $    .50   $    .38

     Earnings per common share -- diluted --
       as reported                             $    .50   $    .39

     Earnings per common share -- diluted --
       pro forma                               $    .50   $    .38


                                                 Six Months Ended
                                                     June 30,
                                                 2004        2003
                                                (In thousands, except
                                                  per share amounts)
     Earnings on common stock, as
       reported                                $ 81,867   $ 63,206
     Stock-based compensation expense
       included in reported earnings,
       net of related tax effects                     5        ---
     Total stock-based compensation
       expense determined under fair
       value method for all awards,
       net of related tax effects                  (172)    (1,307)
     Pro forma earnings on common stock        $ 81,700   $ 61,899

     Earnings per common share -- basic --
       as reported:
       Earnings before cumulative effect
         of accounting change                  $    .71   $    .64
       Cumulative effect of accounting
         change                                     ---       (.07)
     Earnings per common share -- basic        $    .71   $    .57

     Earnings per common share -- basic --
       pro forma:
       Earnings before cumulative effect
         of accounting change                  $    .71   $    .63
      Cumulative effect of accounting
         change                                     ---       (.07)
     Earnings per common share -- basic        $    .71   $    .56

     Earnings per common share -- diluted
       -- as reported:
       Earnings before cumulative effect
         of accounting change                  $    .70   $    .64
      Cumulative effect of accounting
        change                                      ---       (.07)
     Earnings per common share --
       diluted                                 $    .70   $    .57

     Earnings per common share -- diluted
       -- pro forma:
       Earnings before cumulative effect
        of accounting change                   $    .70   $    .63
      Cumulative effect of accounting
         change                                     ---       (.07)
     Earnings per common share --
       diluted                                 $    .70   $    .56

 7.  Cash flow information

     Cash expenditures for interest and income taxes were as
     follows:
                                                 Six Months Ended
                                                     June 30,
                                                 2004       2003
                                                 (In thousands)

     Interest, net of amount capitalized       $26,269    $23,316
     Income taxes paid, net                    $21,295    $31,263

 8.  Reclassifications

     Certain reclassifications have been made in the financial
     statements for the prior year to conform to the current
     presentation.  Such reclassifications had no effect on net
     income or stockholders' equity as previously reported.

 9.  New accounting standards

     In December 2003, the FASB issued FASB Interpretation No. 46
     (revised December 2003), "Consolidation of Variable Interest
     Entities" (FIN 46 (revised)), which replaced FASB
     Interpretation No. 46, "Consolidation of Variable Interest
     Entities" (FIN 46).  FIN 46 (revised) clarifies the application
     of Accounting Research Bulletin No. 51, "Consolidated Financial
     Statements," to certain entities in which equity investors do
     not have the characteristics of a controlling financial
     interest or do not have sufficient equity at risk for the
     entity to finance its activities without additional
     subordinated support.  An enterprise shall consolidate a
     variable interest entity if that enterprise is the primary
     beneficiary.  An enterprise is considered the primary
     beneficiary if it has a variable interest that will absorb a
     majority of the entity's expected losses, receive a majority of
     the entity's expected residual returns or both.  FIN 46
     (revised) shall be applied to all entities subject to FIN 46
     (revised) no later than the end of the first reporting period
     that ends after March 15, 2004.

     The Company evaluated the provisions of FIN 46 (revised) and
     determined that the Company does not have any controlling
     financial interests in any variable interest entities and,
     therefore, is not required to consolidate any variable interest
     entities in its financial statements.  The adoption of FIN 46
     (revised) did not have an effect on the Company's financial
     position or results of operations.

     In January 2004, the FASB issued FASB Staff Position No. FAS
     106-1, "Accounting and Disclosure Requirements Related to the
     Medicare Prescription Drug, Improvement and Modernization Act
     of 2003" (FSP No. FAS 106-1).  FSP No. FAS 106-1 permits a
     sponsor of a postretirement health care plan that provides a
     prescription drug benefit to make a one-time election to defer
     accounting for the effects of the Medicare Prescription Drug,
     Improvement and Modernization Act of 2003 (2003 Medicare Act).

     In May 2004, the FASB issued FASB Staff Position No. FAS 106-2,
     "Accounting and Disclosure Requirements Related to the Medicare
     Prescription Drug, Improvement and Modernization Act of 2003
     (FSP No. FAS 106-2).  FSP No. FAS 106-2 requires (a) that the
     effects of the federal subsidy be considered an actuarial gain
     and recognized in the same manner as other actuarial gains and
     losses and (b) certain disclosures for employers that sponsor
     postretirement health care plans that provide prescription drug
     benefits.

     The Company provides prescription drug benefits to certain
     eligible employees.  The Company elected the one-time deferral
     of accounting for the effects of the 2003 Medicare Act in the
     quarter ending March 31, 2004, the first period in which the
     plan's accounting for the effects of the 2003 Medicare Act
     normally would have been reflected in the Company's financial
     statements.

     During the second quarter of 2004, the Company adopted FSP No.
     FAS 106-2 retroactive to the beginning of the year.  The
     Company and its actuarial advisors determined that benefits
     provided to certain participants are expected to be at least
     actuarially equivalent to Medicare Part D (the federal
     prescription drug benefit), and, accordingly, the Company
     expects to be entitled to a federal subsidy.  The expected
     federal subsidy reduced the accumulated postretirement benefit
     obligation (APBO) at January 1, 2004, by approximately $3.2
     million, and net periodic benefit cost for 2004 by
     approximately $285,000 (as compared with the amount calculated
     without considering the effects of the subsidy).  In addition,
     the Company expects a reduction in future participation in the
     postretirement plans, which further reduced the APBO at January
     1, 2004, by approximately $12.7 million and net periodic
     benefit cost for 2004 by approximately $1.3 million.

     See Note 17 for the components of net periodic benefit cost.
     The net periodic benefit cost for the three and six months
     ended June 30, 2004, was reduced by approximately $767,000 to
     reflect the effects of the 2003 Medicare Act.

     SFAS No. 142, "Goodwill and Other Intangible Assets,"
     discontinues the practice of amortizing goodwill and indefinite
     lived intangible assets and initiates an annual review for
     impairment.  Intangible assets with a determinable useful life
     will continue to be amortized over that period.  The
     amortization provisions apply to goodwill and intangible assets
     acquired after June 30, 2001.  SFAS No. 141, "Business
     Combinations," and SFAS No. 142 clarify that more assets should
     be distinguished and classified between tangible and
     intangible.  The Company did not change or reclassify
     contractual mineral rights included in property, plant and
     equipment related to its natural gas and oil production
     business upon adoption of SFAS No. 142.  The Company has
     included such mineral rights as part of property, plant and
     equipment under the full-cost method of accounting for natural
     gas and oil properties.  An issue has arisen within the natural
     gas and oil industry as to whether contractual mineral rights
     under SFAS No. 142 should be classified as intangible rather
     than as part of property, plant and equipment.  Recently, the
     FASB Staff issued proposed FASB Staff Position No. FAS 142-b,
     "Application of FASB Statement No. 142, Goodwill and Other
     Intangible Assets, to Oil- and Gas-Producing Entities," which
     indicates that the exception in SFAS No. 142 does not change
     the accounting prescribed in SFAS No. 19, "Financial Accounting
     and Reporting by Oil and Gas Producing Companies," including
     the balance sheet classification of drilling and mineral rights
     of oil and gas producing entities and, as a result, the
     contractual mineral rights should continue to be classified as
     part of property, plant and equipment.  The anticipated
     resolution of this matter is not expected to have an effect on
     the Company's financial position, results of operations or cash
     flows.

     In April 2004, the FASB issued FASB Staff Position Nos. FAS 141-
     1 and FAS 142-1, "Interaction of FASB Statements No. 141,
     'Business Combinations,' and No. 142, 'Goodwill and Other
     Intangible Assets,' and EITF Issue No. 04-2, 'Whether Mineral
     Rights are Tangible or Intangible Assets,'" (FSP Nos. FAS 141-1
     and FAS 142-1).  FSP Nos. FAS 141-1 and FAS 142-1 amend SFAS
     No. 141 and SFAS No. 142 to clarify that certain mineral rights
     held by mining entities that are not within the scope of SFAS
     No. 19 be classified as tangible assets rather than intangible
     assets.  FSP Nos. FAS 141-1 and FAS 142-1 shall be applied to
     the first reporting period beginning after April 29, 2004.  FSP
     Nos. FAS 141-1 and FAS 142-1 required reclassification of the
     Company's leasehold rights at its construction materials and
     mining operations from other intangible assets, net to
     property, plant and equipment, as well as changes to Notes to
     Consolidated Financial Statements.  FSP Nos. FAS 141-1 and FAS
     142-1 affected the asset classification in the consolidated
     balance sheet and associated footnote disclosure only, so the
     reclassifications did not affect the Company's stockholders'
     equity, cash flows or results of operations.

10.  Comprehensive income

     Comprehensive income is the sum of net income as reported and
     other comprehensive loss.  The Company's other comprehensive
     loss resulted from losses on derivative instruments qualifying
     as hedges, minimum pension liability adjustments and foreign
     currency translation adjustments.

     Comprehensive income, and the components of other comprehensive
     loss and related tax effects, was as follows:

                                                Three Months Ended
                                                     June 30,
                                                 2004       2003
                                                 (In thousands)

     Net income                                $ 58,630   $ 43,473
       Other comprehensive loss:
         Net unrealized loss on derivative
          instruments qualifying as hedges:
          Net unrealized loss on derivative
           instruments arising during the
           period, net of tax of $3,711 and
           $2,241 in 2004 and 2003,
           respectively                          (5,804)    (3,587)
          Less: Reclassification adjustment
           for loss on derivative instruments
           included in net income, net of tax
           of $1,473 and $1,871 in 2004 and
           2003, respectively                    (2,304)    (2,926)
         Net unrealized loss on derivative
           instruments qualifying as hedges      (3,500)      (661)
         Foreign currency translation
          adjustment                               (377)      (475)
                                                 (3,877)    (1,136)
     Comprehensive income                      $ 54,753    $42,337

                                                 Six Months Ended
                                                     June 30,
                                                 2004       2003
                                                 (In thousands)

     Net income                                $ 82,209   $ 63,581
       Other comprehensive loss:
         Net unrealized loss on derivative
          instruments qualifying as hedges:
          Net unrealized loss on derivative
           instruments arising during the
           period, net of tax of $6,424 and
           $4,635 in 2004 and 2003,
           respectively                         (10,047)    (7,331)
          Less: Reclassification adjustment
           for loss on derivative instruments
           included in net income, net of tax
           of $1,020 and $1,440 in 2004 and
           2003, respectively                    (1,595)    (2,252)
         Net unrealized loss on derivative
          instruments qualifying as hedges       (8,452)    (5,079)
         Foreign currency translation
          adjustment                             (1,438)      (755)
                                                 (9,890)    (5,834)
     Comprehensive income                      $ 72,319   $ 57,747

11.  Equity method investments

     The Company has a number of equity method investments,
     including MPX Participacoes, Ltda. (MPX) and Carib Power
     Management LLC (Carib Power).  The Company assesses its equity
     method investments for impairment whenever events or changes in
     circumstances indicate that such carrying values may not be
     recoverable.  None of the Company's equity method investments
     have been impaired and, accordingly, no impairment losses have
     been recorded in the accompanying consolidated financial
     statements or related equity method investment balances.

     MPX was formed in August 2001 when MDU Brasil Ltda. (MDU
     Brasil), an indirect wholly owned Brazilian subsidiary of the
     Company, entered into a joint venture agreement with a
     Brazilian firm.  MDU Brasil has a 49 percent interest in MPX.
     MPX, through a wholly owned subsidiary, owns and operates a 220-
     megawatt natural gas-fired electric generating facility (Brazil
     Generating Facility) in the Brazilian state of Ceara.
     Petrobras, the Brazilian state-controlled energy company, has
     agreed to purchase all of the capacity and market all of the
     Brazil Generating Facility's energy.  The power purchase
     agreement with Petrobras expires in May 2008.  Petrobras also
     is under contract to supply natural gas to the Brazil
     Generating Facility during the term of the power purchase
     agreement.  This natural gas supply contract is renewable by a
     wholly owned subsidiary of MPX for an additional 13 years.  The
     Brazil Generating Facility generates energy based upon economic
     dispatch and available gas supplies.  Under current conditions,
     including, in particular, existing constraints in the region's
     gas supply infrastructure, the Company does not expect the
     facility to generate a significant amount of energy at least
     through 2006.

     The functional currency for the Brazil Generating Facility is
     the Brazilian real.  The power purchase agreement with
     Petrobras contains an embedded derivative, which derives its
     value from an annual adjustment factor, which largely indexes
     the contract capacity payments to the U.S. dollar.  The
     Company's 49 percent share of the gain from the change in the
     fair value of the embedded derivative in the power purchase
     agreement was $4.1 million (after tax) for the three and six
     months ended June 30, 2004.  The Company's 49 percent share of
     the loss from the change in the fair value of the embedded
     derivative in the power purchase agreement was $4.5 million
     (after tax) and $6.0 million (after tax) for the three and six
     months ended June 30, 2003, respectively.  The Company's 49
     percent share of the foreign currency loss resulting from a
     decrease in value of the Brazilian real versus the U.S. dollar
     was $1.8 million (after tax) and $2.0 million (after tax) for
     the three and six months ended June 30, 2004, respectively.
     The Company's 49 percent share of the foreign currency gains
     resulting from the increase in value of the Brazilian real
     versus the U.S. dollar was $2.2 million (after tax) and $3.1
     million (after tax) for the three and six months ended June 30,
     2003, respectively.

     In February 2004, Centennial Energy Resources International,
     Inc. (Centennial International), an indirect wholly owned
     subsidiary of the Company, acquired 49.9 percent of Carib
     Power.  Carib Power, through a wholly owned subsidiary, owns a
     225-megawatt natural gas-fired electric generating facility
     located in Trinidad and Tobago (Trinidad and Tobago Generating
     Facility).  The functional currency for the Trinidad and Tobago
     Generating Facility is the U.S. dollar.

     At June 30, 2004, MPX and Carib Power had total assets of
     $202.8 million and long-term debt of $158.0 million.  The
     Company's investment in the Brazil and Trinidad and Tobago
     Generating Facilities was approximately $26.0 million,
     including undistributed earnings of $14.8 million at June 30,
     2004.  The Company's investment in the Brazil Generating
     Facility was approximately $20.6 million at June 30, 2003, and
     $25.2 million, including undistributed earnings of $4.6 million
     at December 31, 2003.

     The Company's share of income from its equity method
     investments was $7.7 million and $11.1 million for the three
     and six months ended June 30, 2004, respectively, and was
     included in other income - net.  The Company's share of income
     from its equity method investments, including MPX, was $1.3
     million and $2.3 million for the three and six months ended
     June 30, 2003, respectively, and was included in other income -
     net.

12.  Goodwill and other intangible assets

     The changes in the carrying amount of goodwill were as follows:

                               Balance      Goodwill      Balance
                                as of       Acquired       as of
     Six Months               January 1,     During       June 30,
     Ended June 30, 2004        2004       the Year*        2004
                                         (In thousands)

     Electric                 $     ---    $    ---      $     ---
     Natural gas
       distribution                 ---         ---            ---
     Utility services            62,604          28         62,632
     Pipeline and energy
       services                   9,494         ---          9,494
     Natural gas and oil
       production                   ---         ---            ---
     Construction materials
       and mining               120,198      (2,668)       117,530
     Independent power
       production and other       7,131       3,766         10,897
     Total                    $ 199,427    $  1,126      $ 200,553
      __________________
     * Includes purchase price adjustments related to acquisitions
       acquired in a prior period.

                               Balance      Goodwill      Balance
                                as of       Acquired       as of
     Six Months               January 1,     During       June 30,
     Ended June 30, 2003        2003       the Year*        2003
                                        (In thousands)

     Electric                 $     ---    $    ---      $     ---
     Natural gas
       distribution                 ---         ---            ---
     Utility services            62,487         127         62,614
     Pipeline and energy
       services                   9,494         ---          9,494
     Natural gas and oil
       production                   ---         ---            ---
     Construction materials
       and mining               111,887       5,268        117,155
     Independent power
       production and other       7,131         ---          7,131
     Total                    $ 190,999    $  5,395      $ 196,394
      __________________
     * Includes purchase price adjustments related to acquisitions
       acquired in a prior period.

                               Balance      Goodwill      Balance
                                as of       Acquired       as of
     Year Ended               January 1,     During     December 31,
     December 31, 2003          2003       the Year*        2003
                                        (In thousands)

     Electric                 $     ---    $    ---      $     ---
     Natural gas
       distribution                 ---         ---            ---
     Utility services            62,487         117         62,604
     Pipeline and energy
       services                   9,494         ---          9,494
     Natural gas and oil
       production                   ---         ---            ---
     Construction materials
       and mining               111,887       8,311        120,198
     Independent power
       production and other       7,131         ---          7,131
     Total                    $ 190,999    $  8,428      $ 199,427
       __________________
     * Includes purchase price adjustments related to acquisitions
       acquired in a prior period.

     As discussed in Note 9, the Company reclassified its leasehold
     rights at its construction materials and mining operations from
     other intangible assets, net to property, plant and equipment.

     Other intangible assets were as follows:

                                    June 30,   June 30,   December 31,
                                     2004        2003        2003
                                            (In thousands)
     Amortizable intangible assets:
       Noncompete agreements       $  10,275   $ 12,075     $ 12,075
       Accumulated amortization       (8,024)    (9,552)      (9,690)
                                       2,251      2,523        2,385

       Other                          21,292     17,719       17,734
       Accumulated amortization       (3,398)    (1,268)      (2,265)
                                      17,894     16,451       15,469
     Unamortizable intangible
       assets                            960      1,603          960
     Total                         $  21,105   $ 20,577     $ 18,814

     The unamortizable intangible assets were recognized in
     accordance with SFAS No. 87, "Employers' Accounting for
     Pensions," which requires that if an additional minimum
     liability is recognized an equal amount shall be recognized as
     an intangible asset, provided that the asset recognized shall
     not exceed the amount of unrecognized prior service cost.  The
     unamortizable intangible asset will be eliminated or adjusted
     as necessary upon a new determination of the amount of
     additional liability.

     Amortization expense for amortizable intangible assets for the
     three and six months ended June 30, 2004, was $702,000 and $1.3
     million, respectively.  Amortization expense for amortizable
     intangible assets for the three and six months ended June 30,
     2003, and for the year ended December 31, 2003, was $630,000,
     $1.1 million and $2.2 million, respectively.  Estimated
     amortization expense for amortizable intangible assets is $3.0
     million in 2004, $2.4 million in 2005, $1.8 million in 2006,
     $1.7 million in 2007, $1.7 million in 2008 and $10.8 million
     thereafter.

13.  Derivative instruments

     From time to time, the Company utilizes derivative instruments
     as part of an overall energy price, foreign currency and
     interest rate risk management program to efficiently manage and
     minimize commodity price, foreign currency and interest rate
     risk.  The following information should be read in conjunction
     with Notes 1 and 5 in the Company's Notes to Consolidated
     Financial Statements in the 2003 Annual Report.

     As of June 30, 2004, Fidelity Exploration & Production Company
     (Fidelity), an indirect wholly owned subsidiary of the Company,
     held derivative instruments designated as cash flow hedging
     instruments.

     Hedging activities

     Fidelity utilizes natural gas and oil price swap and collar
     agreements to manage a portion of the market risk associated
     with fluctuations in the price of natural gas and oil on its
     forecasted sales of natural gas and oil production.  Each of
     the natural gas and oil price swap and collar agreements was
     designated as a hedge of the forecasted sale of natural gas and
     oil production.

     For the three and six months ended June 30, 2004 and 2003, the
     amount of hedge ineffectiveness recognized, which was included
     in operating revenues, was immaterial.  For the three and six
     months ended June 30, 2004 and 2003, Fidelity did not exclude
     any components of the derivative instruments' gain or loss from
     the assessment of hedge effectiveness and there were no
     reclassifications into earnings as a result of the
     discontinuance of hedges.

     Gains and losses on derivative instruments that are
     reclassified from accumulated other comprehensive income (loss)
     to current-period earnings are included in the line item in
     which the hedged item is recorded.  As of June 30, 2004, the
     maximum term of Fidelity's swap and collar agreements, in which
     it is hedging its exposure to the variability in future cash
     flows for forecasted transactions, is 18 months.  Fidelity
     estimates that over the next 12 months net losses of
     approximately $9.2 million will be reclassified from
     accumulated other comprehensive loss into earnings, subject to
     changes in natural gas and oil market prices, as the hedged
     transactions affect earnings.

14.  Asset retirement obligations

     The Company adopted SFAS No. 143, "Accounting for Asset
     Retirement Obligations," on January 1, 2003.  The Company
     recorded obligations related to the plugging and abandonment of
     natural gas and oil wells, decommissioning of certain electric
     generating facilities, reclamation of certain aggregate
     properties and certain other obligations associated with leased
     properties.  Removal costs associated with certain natural gas
     distribution, transmission, storage and gathering facilities
     have not been recognized as these facilities have been
     determined to have indeterminate useful lives.

     Upon adoption of SFAS No. 143, the Company recorded an
     additional discounted liability of $22.5 million and a
     regulatory asset of $493,000, increased net property, plant and
     equipment by $9.6 million and recognized a one-time cumulative
     effect charge of $7.6 million (net of deferred income tax
     benefits of $4.8 million).  The Company believes that any
     expenses under SFAS No. 143 as they relate to regulated
     operations will be recovered in rates over time and
     accordingly, deferred such expenses as a regulatory asset upon
     adoption.  The Company will continue to defer those SFAS
     No. 143 expenses that it believes will be recovered in rates
     over time.  In addition to the $22.5 million liability recorded
     upon the adoption of SFAS No. 143, the Company had previously
     recorded a $7.5 million liability related to retirement
     obligations.

15.  Business segment data

     The Company's reportable segments are those that are based on
     the Company's method of internal reporting, which generally
     segregates the strategic business units due to differences in
     products, services and regulation.  The Company has six
     reportable segments consisting of electric, natural gas
     distribution, utility services, pipeline and energy services,
     natural gas and oil production, and construction materials and
     mining.  The independent power production and other operations
     do not individually meet the criteria to be considered a
     reportable segment.

     The vast majority of the Company's operations are located
     within the United States.  The Company also has investments in
     foreign countries, which largely consist of investments in
     natural gas-fired electric generating facilities in Brazil and
     Trinidad and Tobago, as discussed in Note 11.  The electric
     segment generates, transmits and distributes electricity, and
     the natural gas distribution segment distributes natural gas.
     These operations also supply related value-added products and
     services in the northern Great Plains.  The utility services
     segment specializes in electrical line construction, pipeline
     construction, inside electrical wiring and cabling and the
     manufacture and distribution of specialty equipment.  The
     pipeline and energy services segment provides natural gas
     transportation, underground storage and gathering services
     through regulated and nonregulated pipeline systems primarily
     in the Rocky Mountain and northern Great Plains regions of the
     United States.  The pipeline and energy services segment also
     provides energy-related management services, including cable
     and pipeline magnetization and locating.  The natural gas and
     oil production segment is engaged in natural gas and oil
     acquisition, exploration, development and production
     activities, primarily in the Rocky Mountain region of the
     United States and in and around the Gulf of Mexico.  The
     construction materials and mining segment mines aggregates and
     markets crushed stone, sand, gravel and related construction
     materials, including ready-mixed concrete, cement, asphalt and
     other value-added products, as well as performs integrated
     construction services, in the central and western United States
     and in the states of Alaska and Hawaii.  The independent power
     production and other operations own electric generating
     facilities in the United States and have investments in
     electric generating facilities in Brazil and Trinidad and
     Tobago.  Electric capacity and energy produced at the power
     plants are sold primarily under long-term contracts to
     nonaffiliated entities.  Centennial Resources also provides
     analysis, design, construction, refurbishment, and operation
     and maintenance services to independent power producers.  These
     operations also include investments not directly being pursued
     by the Company's other businesses.  The information below
     follows the same accounting policies as described in Note 1 of
     the Company's 2003 Annual Report.  Information on the Company's
     businesses was as follows:

                                               Inter-
                                External      segment      Earnings
                                Operating    Operating     on Common
                                Revenues     Revenues       Stock
                                           (In thousands)
     Three Months
     Ended June 30, 2004

     Electric                  $ 39,834      $    ---       $    735
     Natural gas distribution    47,461           ---         (1,097)
     Pipeline and energy
       services                  72,073        13,423          4,434
                                159,368        13,423          4,072
     Utility services            97,226           ---         (2,294)
     Natural gas and oil
       production                39,038        45,181         26,136
     Construction materials
       and mining               347,026           200         20,345
     Independent power
       production and other      10,643           919         10,199
                                493,933        46,300         54,386
     Intersegment eliminations      ---       (59,723)           ---
     Total                     $653,301      $    ---       $ 58,458

                                               Inter-
                                External      segment      Earnings
                                Operating    Operating     on Common
                                Revenues     Revenues       Stock
                                          (In thousands)
     Three Months
     Ended June 30, 2003

     Electric                  $ 38,049      $    ---       $  1,766
     Natural gas distribution    42,409           ---         (1,291)
     Pipeline and energy
       services                  47,717         8,508          5,083
                                128,175         8,508          5,558
     Utility services           108,928           ---          1,515
     Natural gas and oil
       production                36,746        27,912         17,866
     Construction materials
       and mining               264,129           ---         12,803
     Independent power
       production and other      10,241           740          5,543
                                420,044        28,652         37,727
     Intersegment eliminations      ---       (37,160)           ---
     Total                     $548,219      $    ---       $ 43,285

                                               Inter-
                                 External     segment      Earnings
                                Operating    Operating     on Common
                                 Revenues    Revenues        Stock
                                          (In thousands)
     Six Months
     Ended June 30, 2004

     Electric                  $   86,824    $     ---      $  4,143
     Natural gas distribution     175,779          ---         1,228
     Pipeline and energy
       services                   128,612       41,036         7,117
                                  391,215       41,036        12,488
     Utility services             197,477          ---        (4,195)
     Natural gas and oil
       production                  76,544       88,644        51,395
     Construction materials
       and mining                 486,473          200         8,464
     Independent power
       production and other        17,051        1,837        13,715
                                  777,545       90,681        69,379
     Intersegment eliminations        ---     (131,717)          ---
     Total                     $1,168,760    $     ---      $ 81,867


                                               Inter-
                                External      segment      Earnings
                                Operating    Operating     on Common
                                Revenues     Revenues       Stock
                                          (In thousands)
     Six Months
     Ended June 30, 2003

     Electric                  $   83,720    $     ---      $  6,583
     Natural gas distribution     153,397          ---         2,954
     Pipeline and energy
       services                    86,928       30,427         9,394
                                  324,045       30,427        18,931
     Utility services             212,591          ---         2,625
     Natural gas and oil
       production                  77,865       55,816        29,532
     Construction materials
       and mining                 384,882          ---         5,363
     Independent power
       production and other        16,590        1,481         6,755
                                  691,928       57,297        44,275
     Intersegment eliminations        ---      (87,724)          ---
     Total                     $1,015,973    $     ---      $ 63,206

     Earnings from electric, natural gas distribution and pipeline
     and energy services are substantially all from regulated
     operations.  Earnings from utility services, natural gas and
     oil production, construction materials and mining, and
     independent power production and other are all from
     nonregulated operations.

16.  Acquisitions

     During the first six months of 2004, the Company acquired a
     number of businesses, none of which was individually material,
     including construction materials and mining businesses in Idaho,
     Iowa and Minnesota and an independent power production operating
     and development company in Colorado.  The total purchase
     consideration for these businesses and purchase price
     adjustments with respect to certain other acquisitions acquired
     prior to 2004, including the Company's common stock and cash,
     was $54.6 million.

     The above acquisitions were accounted for under the purchase
     method of accounting and, accordingly, the acquired assets and
     liabilities assumed have been preliminarily recorded at their
     respective fair values as of the date of acquisition.  Final
     fair market values are pending the completion of the review of
     the relevant assets, liabilities and issues identified as of the
     acquisition date.  The results of operations of the acquired
     businesses are included in the financial statements since the
     date of each acquisition.  Pro forma financial amounts
     reflecting the effects of the above acquisitions are not
     presented, as such acquisitions were not material to the
     Company's financial position or results of operations.

17.  Employee benefit plans

     The Company has noncontributory defined benefit pension plans
     and other postretirement benefit plans for certain eligible
     employees.  As discussed in Note 9, the Company recognized the
     effects of the 2003 Medicare Act during the second quarter of
     2004.  The net periodic benefit cost (income) for 2004 reflects
     the effects of the 2003 Medicare Act.  Components of net
     periodic benefit cost (income) for the Company's pension and
     other postretirement benefit plans were as follows:

                                                         Other
                                     Pension         Postretirement
     Three Months                    Benefits           Benefits
     Ended June 30                2004      2003     2004    2003
                                            (In thousands)

     Components of net periodic
       benefit cost (income):
       Service cost              $ 1,984  $ 1,432   $   312  $   442
       Interest cost               4,011    3,794       850    1,247
       Expected return on
         assets                   (5,100)  (5,225)     (979)    (981)
       Amortization of prior
         service cost                283      285        72      ---
       Recognized net actuarial
         (gain) loss                  (8)     (68)      (27)    (130)
       Amortization of net
         transition obligation
         (asset)                     (62)    (237)      550      538
     Net periodic benefit cost
       (income)                    1,108      (19)      778    1,116
     Less amount capitalized         117      (37)       80      128
     Net periodic benefit cost
       (income)                  $   991  $    18   $   698  $   988

                                                         Other
                                     Pension         Postretirement
     Six Months                      Benefits           Benefits
     Ended June 30                2004      2003     2004    2003
                                            (In thousands)

     Components of net periodic
       benefit cost (income):
       Service cost              $ 3,833  $ 2,864   $   896  $   884
       Interest cost               7,952    7,588     2,173    2,493
       Expected return on
         assets                  (10,187) (10,450)   (1,972)  (1,962)
       Amortization of prior
         service cost                561      570        72      ---
       Recognized net actuarial
         (gain) loss                 239     (136)      (82)    (259)
       Amortization of net
         transition obligation
         (asset)                    (125)    (474)    1,076    1,076
     Net periodic benefit cost
       (income)                    2,273      (38)    2,163    2,232
     Less amount capitalized         191      (48)      182      208
     Net periodic benefit cost
       (income)                  $ 2,082  $    10   $ 1,981  $ 2,024

     As of June 30, 2004, approximately $900,000 has been
     contributed to the defined benefit pension plans and
     approximately $2.4 million has been contributed to the
     postretirement benefit plans.  The Company presently
     anticipates contributing an additional $400,000 to its pension
     plans in 2004 for a total of $1.3 million for the year.  The
     Company presently anticipates contributing an additional $1.3
     million to its postretirement benefit plans for a total of $3.7
     million for the year.

     In addition to the qualified plan defined pension benefits
     reflected in the tables above, the Company also has an
     unfunded, nonqualified benefit plan for executive officers and
     certain key management employees that provides for defined
     benefit payments at age 65 following the employee's retirement
     or to the beneficiaries upon death for a 15-year period.  The
     Company's net periodic benefit cost for this plan for the three
     and six months ended June 30, 2004, was $2.3 million and $3.8
     million, respectively. The Company's net periodic benefit cost
     for this plan for the three and six months ended June 30, 2003,
     was $1.2 million and $2.4 million, respectively.

18.  Regulatory matters and revenues subject to refund

     On June 7, 2004, Montana-Dakota filed an application with the
     South Dakota Public Utilities Commission (SDPUC) for a natural
     gas rate increase for the Black Hills service area.  Montana-
     Dakota requested a total of $1.3 million annually or 2.2
     percent above current rates.  A final order from the SDPUC is
     due December 7, 2004.

     On April 1, 2004, Montana-Dakota filed an application with the
     Montana Public Service Commission (MTPSC) for a natural gas
     rate increase.  Montana-Dakota requested a total of $1.5
     million annually or 1.8 percent above current rates.  Montana-
     Dakota requested an interim increase of $500,000 annually to be
     effective within 30 days of the filing of the natural gas rate
     increase.  A final order from the MTPSC is due January 1, 2005.

     On March 3, 2004, Montana-Dakota filed an application with the
     North Dakota Public Service Commission (NDPSC) for a natural
     gas rate increase.  Montana-Dakota requested a total of $3.3
     million annually or 2.8 percent above current rates.  The
     natural gas rate increase application included an interim
     increase of $1.9 million annually to be effective within 60
     days of the filing of the natural gas rate increase.  On April
     26, 2004, Montana-Dakota filed an amendment to its request for
     interim rate increase requesting an interim increase of $1.7
     million annually.  On April 27, 2004, the NDPSC issued an Order
     approving Montana-Dakota's interim rate increase of $1.7
     million annually effective for service rendered on or after May
     3, 2004.  Montana-Dakota began collecting such rates effective
     May 3, 2004, subject to refund until the NDPSC issues a final
     order.  A final order from the NDPSC is due October 3, 2004.

     In December 1999, Williston Basin Interstate Pipeline Company
     (Williston Basin), an indirect wholly owned subsidiary of the
     Company, filed a general natural gas rate change application
     with the Federal Energy Regulatory Commission (FERC).
     Williston Basin began collecting such rates effective June 1,
     2000, subject to refund.  In May 2001, the Administrative Law
     Judge (ALJ) issued an Initial Decision on Williston Basin's
     natural gas rate change application.  The Initial Decision
     addressed numerous issues relating to the rate change
     application, including matters relating to allowable levels of
     rate base, return on common equity, and cost of service, as
     well as volumes established for purposes of cost recovery, and
     cost allocation and rate design.  In July 2003, the FERC issued
     its Order on Initial Decision.  The Order on Initial Decision
     affirmed the ALJ's Initial Decision on many of the issues
     including rate base and certain cost of service items as well
     as volumes to be used for purposes of cost recovery, and cost
     allocation and rate design.  However, there are other issues as
     to which the FERC differed with the ALJ including return on
     common equity and the correct level of corporate overhead
     expense.  In August 2003, Williston Basin requested rehearing
     of a number of issues including determinations associated with
     cost of service, throughput, and cost allocation and rate
     design, as discussed in the FERC's Order on Initial Decision.
     On May 11, 2004, the FERC issued an Order on Rehearing and
     Compliance and Remanding Certain Issues for Hearing (Order on
     Rehearing).  The Order on Rehearing denied rehearing on all of
     the issues addressed by Williston Basin in its August 2003
     request for rehearing except for the issue of the proper rate
     to utilize for transmission system negative salvage expenses.
     In addition, the FERC remanded the issues regarding certain
     service and annual demand quantity restrictions to an ALJ for
     resolution.  On June 14, 2004, Williston Basin requested
     clarification of a few of the issues addressed in the May 11,
     2004, Order on Rehearing including determinations associated
     with cost of service and cost allocation, as discussed in the
     FERC's Order on Rehearing.  On June 14, 2004, Williston Basin
     also made its filing to comply with the requirements of the
     various FERC orders in this proceeding.  Williston Basin is
     awaiting a decision from the FERC on Williston Basin's
     compliance filing and clarification request but is unable to
     predict the timing of the FERC's decision.

     Reserves have been provided for a portion of the revenues that
     have been collected subject to refund with respect to Williston
     Basin's pending regulatory proceeding.  Williston Basin
     believes that such reserves are adequate based on its
     assessment of the ultimate outcome of the proceeding.

19.  Contingencies

     Litigation

     In June 1997, Jack J. Grynberg (Grynberg) filed a Federal False
     Claims Act Suit against Williston Basin and Montana-Dakota and
     filed over 70 similar suits against natural gas transmission
     companies and producers, gatherers, and processors of natural
     gas.  Grynberg, acting on behalf of the United States under the
     Federal False Claims Act, alleged improper measurement of the
     heating content and volume of natural gas purchased by the
     defendants resulting in the underpayment of royalties to the
     United States.  In April 1999, the United States Department of
     Justice decided not to intervene in these cases.  In response
     to a motion filed by Grynberg, the Judicial Panel on
     Multidistrict Litigation consolidated all of these cases in the
     Federal District Court of Wyoming.

     On June 4, 2004, following preliminary discovery, Williston
     Basin and Montana-Dakota joined with other defendants and filed
     a Motion to Dismiss on the grounds that the information upon
     which Grynberg bases his complaint was publicly disclosed prior
     to the filing of his complaint and further, that he is not the
     original source of such information.  The Motion to Dismiss is
     additionally based on the grounds that Grynberg disclosed the
     filing of the complaint prior to the entry of a court order
     allowing such disclosure.

     In the event the Motion to Dismiss is not granted, it is
     expected that further discovery will follow.  Williston Basin
     and Montana-Dakota believe Grynberg will not prevail in the
     suit or recover damages from Williston Basin and/or Montana-
     Dakota because insufficient facts exist to support the
     allegations.  Williston Basin and Montana-Dakota believe
     Grynberg's claims are without merit and intend to vigorously
     contest this suit.

     Grynberg has not specified the amount he seeks to recover.
     Williston Basin and Montana-Dakota are unable to estimate their
     potential exposure and will be unable to do so until discovery
     is completed.

     Fidelity has been named as a defendant in, and/or certain of
     its operations are the subject of, over a dozen lawsuits filed
     in connection with its coalbed natural gas development in the
     Powder River Basin in Montana and Wyoming.  These lawsuits were
     filed in federal and state courts in Montana between June 2000
     and May 2004 by a number of environmental organizations,
     including the Northern Plains Resource Council and the Montana
     Environmental Information Center as well as the Tongue River
     Water Users' Association and the Northern Cheyenne Tribe.
     Portions of two of the lawsuits have been transferred to
     Federal District Court in Wyoming.  The lawsuits involve
     allegations that Fidelity and/or various government agencies
     are in violation of state and/or federal law, including the
     Federal Clean Water Act and the National Environmental Policy
     Act.  The lawsuits seek injunctive relief, invalidation of
     various permits and unspecified damages.  Fidelity is unable to
     quantify the damages sought in any of these cases, and will be
     unable to do so until after completion of discovery in the
     separate cases.  Fidelity is vigorously defending all coalbed-
     related lawsuits in which it is involved.  If the plaintiffs
     are successful in these lawsuits, the ultimate outcome of the
     actions could have a material effect on Fidelity's existing
     coalbed natural gas operations and/or the future development of
     its coalbed natural gas properties.

     Montana-Dakota has joined with two electric generators in
     appealing a finding by the North Dakota Department of Health
     (Department) in September 2003 that the Department may
     unilaterally revise operating permits previously issued to
     electric generating plants.  Although it is doubtful that any
     revision of Montana-Dakota's operating permits by the
     Department would reduce the amount of electricity its plants
     could generate, the finding, if allowed to stand, could
     increase costs for sulfur dioxide removal and/or limit Montana-
     Dakota's ability to modify or expand operations at its North
     Dakota generation sites.  Montana-Dakota and the other electric
     generators filed their appeal of the order in October 2003, in
     the Burleigh County District Court in Bismarck, North Dakota.
     Proceedings have been stayed pending discussions with the
     United States Environmental Protection Agency (EPA), the
     Department and the other electric generators.

     In a related case, the Dakota Resource Council filed an action
     in Federal District Court in Denver, Colorado, in September
     2003, to require the EPA to enforce certain air quality
     standards in North Dakota.  If successful, the action could
     require the curtailment of discharges of sulfur dioxide into
     the atmosphere by existing electric generating facilities and
     could preclude or hinder the construction of future generating
     facilities in North Dakota.  The Company had filed a Motion to
     Intervene in the lawsuit and had joined in a brief supporting a
     Motion to Dismiss filed by the EPA.  The EPA Motion to Dismiss
     was granted on April 1, 2004.

     The Company cannot predict the outcome of the Department or
     Dakota Resource Council matters or their ultimate impact on its
     operations.

     The Company is also involved in other legal actions in the
     ordinary course of its business.  Although the outcomes of any
     such legal actions cannot be predicted, management believes
     that the outcomes with respect to these other legal proceedings
     will not have a material adverse effect upon the Company's
     financial position or results of operations.

     Environmental matters

     In December 2000, Morse Bros., Inc. (MBI), an indirect wholly
     owned subsidiary of the Company, was named by the EPA as a
     Potentially Responsible Party in connection with the cleanup of
     a commercial property site, acquired by MBI in 1999, and part
     of the Portland, Oregon, Harbor Superfund Site.  Sixty-eight
     other parties were also named in this administrative action.
     The EPA wants responsible parties to share in the cleanup of
     sediment contamination in the Willamette River.  To date, costs
     of the overall remedial investigation of the harbor site for
     both the EPA and the Oregon State Department of Environmental
     Quality (DEQ) are being recorded, and initially paid, through
     an administrative consent order by the Lower Willamette Group
     (LWG), a group of 10 entities which does not include MBI.  The
     LWG estimates the overall remedial investigation and
     feasibility study will cost approximately $10 million.  It is
     not possible to estimate the cost of a corrective action plan
     until the remedial investigation and feasibility study has been
     completed, the EPA has decided on a strategy, and a record of
     decision has been published.  While the remedial investigation
     and feasibility study for the harbor site has commenced, it is
     expected to take several years to complete.  The development of
     a proposed plan and record of decision on the harbor site is
     not anticipated to occur until 2006, after which a cleanup plan
     will be undertaken.

     Based upon a review of the Portland Harbor sediment
     contamination evaluation by the DEQ and other information
     available, MBI does not believe it is a Responsible Party.  In
     addition, MBI has notified Georgia-Pacific West, Inc., the
     seller of the commercial property site to MBI, that it intends
     to seek indemnity for any and all liabilities incurred in
     relation to the above matters, pursuant to the terms of their
     sale agreement.

     The Company believes it is not probable that it will incur any
     material environmental remediation costs or damages in relation
     to the above administrative action.

     Guarantees

     Centennial has unconditionally guaranteed a portion of certain
     bank borrowings of MPX in connection with the Company's equity
     method investment in the Brazil Generating Facility, as
     discussed in Note 11.  The Company, through MDU Brasil, owns 49
     percent of MPX.  The main business purpose of Centennial
     extending the guarantee to MPX's creditors is to enable MPX to
     obtain lower borrowing costs.  At June 30, 2004, the aggregate
     amount of borrowings outstanding subject to these guarantees
     was $40.1 million and the scheduled repayment of these
     borrowings is $5.6 million in 2004, $10.7 million in 2005,
     2006, and 2007 and $2.4 million in 2008.  The individual
     investor (who through EBX Empreendimentos Ltda. (EBX), a
     Brazilian company, owns 51 percent of MPX) has also guaranteed
     these loans.  In the event MPX defaults under its obligation,
     Centennial and the individual investor would be required to
     make payments under their guarantees, which are joint and
     several obligations.  Centennial and the individual investor
     have entered into reimbursement agreements under which they
     have agreed to reimburse each other to the extent they may be
     required to make any guarantee payments in excess of their
     proportionate ownership share in MPX.  These guarantees are not
     reflected on the Consolidated Balance Sheets.

     In addition, WBI Holdings has guaranteed certain of its
     subsidiary's natural gas and oil price swap and collar
     agreement obligations.  The amount of the subsidiary's
     obligation at June 30, 2004, was $4.0 million.  There is no
     fixed maximum amount guaranteed in relation to the natural gas
     and oil price swap and collar agreements, as the amount of the
     obligation is dependent upon natural gas and oil commodity
     prices.  The amount of hedging activity entered into by the
     subsidiary is limited by corporate policy.  The guarantees of
     the natural gas and oil price swap and collar agreements at
     June 30, 2004, expire in 2004 and 2005; however, the subsidiary
     continues to enter into additional hedging activities and, as a
     result, WBI Holdings from time to time may issue additional
     guarantees on these hedging obligations.  At June 30, 2004, the
     amount outstanding was reflected on the Consolidated Balance
     Sheets.  In the event the above subsidiary defaults under its
     obligations, WBI Holdings would be required to make payments
     under its guarantees.

     Certain subsidiaries of the Company have outstanding guarantees
     to third parties that guarantee the performance of other
     subsidiaries of the Company.  These guarantees are related to
     natural gas transportation and sales agreements, electric power
     supply agreements, insurance policies and certain other
     guarantees.  At June 30, 2004, the fixed maximum amounts
     guaranteed under these agreements aggregated $74.8 million.
     The amounts of scheduled expiration of the maximum amounts
     guaranteed under these agreements aggregate $9.6 million in
     2004; $31.3 million in 2005; $3.9 million in 2006; $549,000 in
     2007; $911,000 in 2009; $13.0 million in 2010; $12.0 million in
     2012; $500,000, which is subject to expiration 30 days after
     the receipt of written notice; and $3.0 million, which has no
     scheduled maturity date.  The amount outstanding by
     subsidiaries of the Company under the above guarantees was
     $349,000 and was reflected on the Consolidated Balance Sheets
     at June 30, 2004.  In the event of default under these
     guarantee obligations, the subsidiary issuing the guarantee for
     that particular obligation would be required to make payments
     under its guarantee.

     Fidelity and WBI Holdings have outstanding guarantees to
     Williston Basin.  These guarantees are related to natural gas
     transportation and storage agreements that guarantee the
     performance of Prairielands Energy Marketing, Inc.
     (Prairielands), an indirect wholly owned subsidiary of the
     Company.  At June 30, 2004, the fixed maximum amounts
     guaranteed under these agreements aggregated $22.9 million.
     Scheduled expiration of the maximum amounts guaranteed under
     these agreements aggregate $2.9 million in 2005 and $20.0
     million in 2009.  In the event of Prairielands' default in its
     payment obligations, the entity issuing the guarantee for that
     particular obligation would be required to make payments under
     its guarantee.  The amount outstanding by Prairielands under
     the above guarantees was $1.2 million, which was not reflected
     on the Consolidated Balance Sheets at June 30, 2004, because
     these intercompany transactions are eliminated in
     consolidation.

     In addition, Centennial has issued guarantees to third parties
     related to the Company's routine purchase of maintenance items
     for which no fixed maximum amounts have been specified.  These
     guarantees have no scheduled maturity date.  In the event a
     subsidiary of the Company defaults under its obligation in
     relation to the purchase of certain maintenance items,
     Centennial would be required to make payments under these
     guarantees.  Any amounts outstanding by subsidiaries of the
     Company for these maintenance items were reflected on the
     Consolidated Balance Sheets at June 30, 2004.

     As of June 30, 2004, Centennial was contingently liable for
     performance of certain of its subsidiaries under approximately
     $290 million of surety bonds.  These bonds are principally for
     construction contracts and reclamation obligations of these
     subsidiaries entered into in the normal course of business.
     Centennial indemnifies the respective surety bond companies
     against any exposure under the bonds.  The purpose of
     Centennial's indemnification is to allow the subsidiaries to
     obtain bonding at competitive rates.  In the event a subsidiary
     of the Company does not fulfill its obligations in relation to
     its bonded contract or obligation, Centennial may be required
     to make payments under its indemnification.  A large portion of
     these contingent commitments is expected to expire within the
     next 12 months; however, Centennial will likely continue to
     enter into surety bonds for its subsidiaries in the future.
     The surety bonds were not reflected on the Consolidated Balance
     Sheets.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

Overview

This subsection of Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations (Management's
Discussion and Analysis) is a brief overview of the important
factors that management focuses on in evaluating the Company's
businesses, the Company's financial condition and operating
performance, the Company's overall business strategy and the
earnings of the Company for the period covered by this report.  This
subsection is not intended to be a substitute for reading the entire
Management's Discussion and Analysis section.  Reference is made to
the various important factors listed under the heading Risk Factors
and Cautionary Statements that May Affect Future Results, as well as
other factors that are listed in the Introduction in relation to any
forward-looking statement.

Business and Strategy Overview

The Company has six reportable segments consisting of electric,
natural gas distribution, utility services, pipeline and energy
services, natural gas and oil production, and construction materials
and mining.  The independent power production and other operations
do not individually meet the criteria to be considered a reportable
segment.

The electric segment includes the electric generation, transmission
and distribution operations of Montana-Dakota.  The natural gas
distribution segment includes the natural gas distribution
operations of Montana-Dakota and Great Plains Natural Gas Co.  The
electric and natural gas distribution segments also supply related
value-added products and services in the northern Great Plains.  The
utility services segment includes all the operations of Utility
Services, Inc., which specializes in electrical line construction,
pipeline construction, inside electrical wiring and cabling and the
manufacture and distribution of specialty equipment.  The pipeline
and energy services segment includes WBI Holdings' natural gas
transportation, underground storage and gathering services through
regulated and nonregulated pipeline systems primarily in the Rocky
Mountain and northern Great Plains regions of the United States.
The pipeline and energy services segment also provides energy-
related management services, including cable and pipeline
magnetization and locating.  The natural gas and oil production
segment includes the natural gas and oil acquisition, exploration,
development and production operations, primarily in the Rocky
Mountain region of the United States and in and around the Gulf of
Mexico, of WBI Holdings.  The construction materials and mining
segment includes the results of Knife River, which mines aggregates
and markets crushed stone, sand, gravel and related construction
materials, including ready-mixed concrete, cement, asphalt and other
value-added products, as well as performs integrated construction
services, in the central and western United States and in the states
of Alaska and Hawaii.  The independent power production and other
operations own electric generating facilities in the United States
and have investments in electric generating facilities in Brazil and
Trinidad and Tobago.  Electric capacity and energy produced at the
power plants are sold primarily under long-term contracts to
nonaffiliated entities.  Centennial Resources also provides
analysis, design, construction, refurbishment, and operation and
maintenance services to independent power producers.  These
operations also include investments not directly being pursued by
the Company's other businesses.

Earnings from electric, natural gas distribution, and pipeline and
energy services are substantially all from regulated operations.
Earnings from utility services, natural gas and oil production,
construction materials and mining, and independent power production
and other are all from nonregulated operations.

On August 14, 2003, the Company's Board of Directors approved a
three-for-two common stock split.  For more information on the
common stock split, see Note 3 of Notes to Consolidated Financial
Statements.

The Company's strategy is to apply its expertise in energy and
transportation infrastructure industries to increase market share
through internal growth along with acquisition of well-managed
companies and development of projects that enhance shareholder value
and are accretive to earnings per share and returns on invested
capital.

The Company has capabilities to fund its growth and operations
through various sources, including internally generated funds,
commercial paper credit facilities and through the issuance of long-
term debt and the Company's equity securities.  Net capital
expenditures are estimated to be approximately $450 million for
2004.

The Company faces certain challenges and risks as it pursues its
growth strategies, including, but not limited to the following:

  -  The natural gas and oil production business experiences
     fluctuations in average natural gas and oil prices.  These prices
     are volatile and subject to significant change at any time.  The
     Company hedges a portion of its natural gas and oil production in
     order to mitigate price volatility.

  -  The uncertain economic environment and the depressed
     telecommunications market have been challenging, particularly for
     the Company's utility services business, which has been subjected to
     lower margins and decreased workloads.  These economic factors have
     also negatively affected the Company's energy services business.

  -  Fidelity continues to seek additional reserve and production
     growth through acquisition, exploration, development and production
     of natural gas and oil resources, including the development and
     production of its coalbed natural gas properties.  Future growth is
     dependent upon success in these endeavors.  Fidelity has been named
     as a defendant in, and/or certain of its operations are the subject
     of, over a dozen lawsuits filed in connection with its coalbed
     natural gas development in the Powder River Basin in Montana and
     Wyoming.  If the plaintiffs are successful in these lawsuits, the
     ultimate outcome of the actions could have a material effect on
     Fidelity's existing coalbed natural gas operations and/or the future
     development of its coalbed natural gas properties.

For further information on certain factors that should be considered
for a better understanding of the Company's financial condition, see
the various important factors listed under the heading Risk Factors
and Cautionary Statements that May Affect Future Results, as well as
other factors that are listed in the Introduction.

For information pertinent to various commitments and contingencies,
see Notes to Consolidated Financial Statements.

Earnings Overview

The following table (dollars in millions, where applicable)
summarizes the contribution to consolidated earnings by each of
the Company's businesses.

                                    Three Months     Six Months
                                       Ended           Ended
                                      June 30,        June 30,
                                    2004    2003    2004    2003
Electric                           $  .7  $  1.8  $  4.2   $ 6.6
Natural gas distribution            (1.1)   (1.3)    1.2     2.9
Utility services                    (2.3)    1.5    (4.2)    2.6
Pipeline and energy services         4.4     5.1     7.1     9.4
Natural gas and oil production      26.2    17.9    51.4    29.5
Construction materials and mining   20.4    12.8     8.5     5.4
Independent power production
  and other                         10.2     5.5    13.7     6.8
Earnings on common stock           $58.5  $ 43.3  $ 81.9   $63.2

Earnings per common
  share - basic                    $ .50  $  .39  $  .71   $ .57

Earnings per common
  share - diluted                  $ .50  $  .39  $  .70   $ .57

Return on average common equity
  for the 12 months ended                          13.3%   13.0%
________________________________

Three Months Ended June 30, 2004 and 2003

Consolidated earnings for the quarter ended June 30, 2004,
increased $15.2 million from the comparable prior period due
to higher earnings at the natural gas and oil production,
construction materials and mining, independent power
production and other, and natural gas distribution
businesses.  Decreased earnings at the utility services,
electric and pipeline and energy services businesses
partially offset the earnings increase.

In 2004, the Company resolved federal and related state
income tax matters for the 1998 through 2000 tax years.  The
Company reflected the effects of this tax resolution and, in
addition, reversed reserves that had previously been
provided and were deemed to be no longer required, which
resulted in a benefit of $5.9 million (after-tax), including
interest, for the three months ended June 30, 2004.

Natural gas and oil production earnings increased $8.3
million due to higher average realized natural gas and oil
prices, increased natural gas production and a favorable
resolution of federal and related state income tax matters,
partially offset by higher depreciation, depletion and
amortization expense and higher operating expenses.

The increase in construction materials and mining earnings
of $7.6 million, which was largely from existing operations,
reflects higher aggregate, asphalt and ready-mixed concrete
volumes and margins, and increased construction activity.  A
favorable resolution of federal and related state income tax
matters and earnings from companies acquired since the
comparable prior period also added to the earnings increase.

Earnings increased $4.7 million at the independent power
production and other businesses due to the increased value
of the embedded derivative in the Brazilian electric power
purchase agreement, lower financing costs, and acquisitions
made since the comparable prior period, partially offset by
foreign currency changes.

The natural gas distribution business experienced a slightly
lower normal seasonal loss of $200,000 as a result of a
favorable resolution of federal and related state income tax
matters and higher retail sales prices, partially offset by
higher operation and maintenance expenses.

Utility services experienced a $2.3 million loss compared to
$1.5 million of earnings for the comparable prior period due
primarily to decreased inside electrical margins, largely
due to lower than expected results on certain large jobs
that are nearly complete.

Electric earnings decreased $1.1 million as a result of
lower retail sales margins and higher operation and
maintenance expense, partially offset by a favorable
resolution of federal and related state income tax matters
and higher sales for resale volumes.

Earnings decreased $700,000 at the pipeline and energy
services business due to higher operating expenses, lower
storage revenues and lower revenues from traditional off-
system transportation services.  Partially offsetting the
decrease in earnings were a favorable resolution of federal
and related state income tax matters and an increase in
natural gas transportation volumes and firm services as a
result of the Grasslands Pipeline.

Six Months Ended June 30, 2004 and 2003

Consolidated earnings for the six months ended June 30,
2004, increased $18.7 million from the comparable prior
period due to higher earnings at the natural gas and oil
production, independent power production and other, and
construction materials and mining businesses.  Decreased
earnings at the utility services, electric, pipeline and
energy services, and natural gas distribution businesses
partially offset the earnings increase.

In 2004, the Company resolved federal and related state
income tax matters for the 1998 through 2000 tax years.  The
Company reflected the effects of this tax resolution and, in
addition, reversed reserves that had previously been
provided and were deemed to be no longer required, which
resulted in a benefit of $5.9 million (after-tax), including
interest, for the six months ended June 30, 2004.

Natural gas and oil production earnings increased $21.9
million due to higher average realized natural gas and oil
prices and the absence in 2004 of a $12.7 million ($7.7
million after tax) noncash transition charge in 2003,
reflecting the cumulative effect of an accounting change, as
discussed in Note 14 of Notes to Consolidated Financial
Statements.  Higher natural gas production and a favorable
resolution of federal and related state income tax matters
also contributed to the increase in earnings.  Higher
depreciation, depletion and amortization expense; higher
operation and maintenance expense, largely increased general
and administrative costs; and higher interest expense
partially offset the earnings increase.

Earnings increased $6.9 million at the independent power
production and other businesses due to the increased value
of the embedded derivative in the Brazilian power purchase
agreement and lower financing costs, partially offset by
foreign currency changes.

Earnings at the construction materials and mining business
increased $3.1 million as a result of higher asphalt and
ready-mixed concrete volumes and margins, increased
construction activity and a favorable resolution of federal
and related state income tax matters.  Partially offsetting
the earnings increase were higher operation and maintenance
expense, including increased general and administrative
expenses; and lower aggregate volumes at a large harbor-
deepening project in southern California compared to the
prior period, which project is now substantially complete.

Utility services experienced a $4.2 million loss compared to
$2.6 million of earnings for the comparable prior period due
primarily to decreased inside electrical margins, largely
due to lower than expected results on certain large jobs
that are nearly complete.

Electric earnings decreased $2.4 million as a result of
higher operation and maintenance expense, higher fuel and
purchased power-related costs and higher interest expense.
A favorable resolution of federal and related state income
tax matters and higher average sales for resale prices
partially offset the decrease in earnings.

Earnings decreased $2.3 million at the pipeline and energy
services business due to higher operating expenses, lower
storage revenues and lower revenues from traditional off-
system transportation services.  Partially offsetting the
decrease in earnings were a favorable resolution of federal
and related state income tax matters and an increase in
natural gas transportation volumes and firm services as a
result of the Grasslands Pipeline.

Natural gas distribution earnings decreased $1.7 million due
to higher operation and maintenance expense, lower retail
sales volumes and decreased service and repair margins.  A
favorable resolution of federal and related state income tax
matters and higher retail sales prices partially offset the
decrease in earnings.

Financial and operating data

The following tables (dollars in millions, where applicable) are key
financial and operating statistics for each of the Company's
businesses.

Electric
                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003

Operating revenues               $  39.8 $  38.1  $   86.8  $   83.7

Operating expenses:
  Fuel and purchased power          16.4    13.3      33.1      28.7
  Operation and maintenance         14.6    12.9      29.6      26.2
  Depreciation, depletion and
    amortization                     5.0     5.0      10.0       9.9
  Taxes, other than income           2.0     1.8       4.2       3.9
                                    38.0    33.0      76.9      68.7

Operating income                 $   1.8 $   5.1  $    9.9  $   15.0

Retail sales (million kWh)         505.3   529.8   1,126.5   1,129.9
Sales for resale (million kWh)     170.0   122.9     397.2     374.3
Average cost of fuel and
  purchased power per kWh        $  .022 $  .020  $   .020  $   .018


Natural Gas Distribution
                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003
Operating revenues:
  Sales                          $  46.5 $  41.4  $  173.5  $  151.4
  Transportation and other           1.0     1.0       2.3       2.0
                                    47.5    42.4     175.8     153.4
Operating expenses:
  Purchased natural gas sold        35.4    30.4     141.0     118.5
  Operation and maintenance         11.3    10.0      25.1      21.6
  Depreciation, depletion and
    amortization                     2.3     2.5       4.7       5.1
  Taxes, other than income           1.4     1.3       2.9       2.7
                                    50.4    44.2     173.7     147.9

Operating income (loss)          $  (2.9)$  (1.8) $    2.1  $    5.5

Volumes (MMdk):
  Sales                              5.4     5.3      21.7      22.8
  Transportation                     2.6     3.0       6.5       6.1
Total throughput                     8.0     8.3      28.2      28.9

Degree days (% of normal)*           98%     91%       96%      100%
Average cost of natural gas,
  including transportation
  thereon, per dk                $  6.58 $  5.69  $   6.49  $   5.20
_____________________
 * Degree days are a measure of the daily temperature-related demand
   for energy for heating.


Utility Services

                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003

Operating revenues               $  97.2 $ 108.9  $  197.5  $  212.6

Operating expenses:
  Operation and maintenance         93.5    99.8     188.9     194.0
  Depreciation, depletion
    and amortization                 2.5     2.7       5.2       5.1
  Taxes, other than income           3.7     3.3       8.5       7.7
                                    99.7   105.8     202.6     206.8

Operating income (loss)          $  (2.5)$   3.1  $   (5.1) $    5.8


Pipeline and Energy Services

                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003
Operating revenues:
  Pipeline                       $  22.7 $  25.1  $   45.7  $   50.5
  Energy services                   62.8    31.1     123.9      66.8
                                    85.5    56.2     169.6     117.3

Operating expenses:
  Purchased natural gas sold        59.2    30.3     116.5      64.8
  Operation and maintenance         12.5    11.4      25.9      23.7
  Depreciation, depletion
    and amortization                 4.7     3.7       9.2       7.4
  Taxes, other than income           1.9     1.4       3.8       2.9
                                    78.3    46.8     155.4      98.8

Operating income                 $   7.2 $   9.4  $   14.2  $   18.5

Transportation volumes (MMdk):
  Montana-Dakota                     7.6     8.0      15.9      16.4
  Other                             20.4    18.1      34.5      30.6
                                    28.0    26.1      50.4      47.0

Gathering volumes (MMdk)            19.8    18.6      39.3      37.5


Natural Gas and Oil Production

                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003
Operating revenues:
  Natural gas                    $  68.5 $  52.6  $  134.9  $  107.8
  Oil                               14.9    12.0      29.1      25.8
  Other                               .8      .1       1.2        .1
                                    84.2    64.7     165.2     133.7
Operating expenses:
  Purchased natural gas sold          .7     ---       1.1        .1
  Operation and maintenance:
    Lease operating costs            8.6     6.4      16.8      14.5
    Gathering and
      transportation                 2.7     3.7       5.2       7.0
    Other                            5.9     3.9      11.9       8.9
  Depreciation, depletion
    and amortization                17.9    15.2      34.5      29.4
  Taxes, other than income:
    Production and property
      taxes                          5.7     5.0      10.4      10.6
    Other                             .1      .2        .3        .3
                                    41.6    34.4      80.2      70.8

Operating income                 $  42.6 $  30.3  $   85.0  $   62.9

Production:
  Natural gas (MMcf)              14,796  13,258    29,302    26,897
  Oil (000's of barrels)             450     453       907       927

Average realized prices
  (including hedges):
   Natural gas (per Mcf)         $  4.63 $  3.97  $   4.60  $   4.01
   Oil (per barrel)              $ 33.09 $ 26.52  $  32.12  $  27.79

Average realized prices
  (excluding hedges):
   Natural gas (per Mcf)         $  4.78 $  4.31  $   4.73  $   4.50
   Oil (per barrel)              $ 35.75 $ 26.98  $  34.03  $  29.06

Production costs, including
  taxes, per net equivalent Mcf:
    Lease operating costs        $   .49 $   .40  $    .48  $    .45
    Gathering and
      transportation                 .15     .23       .15       .22
    Production and property
      taxes                          .33     .32       .30       .32
                                 $   .97 $   .95  $    .93  $    .99


Construction Materials and Mining

                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003

Operating revenues               $ 347.2 $ 264.1  $  486.7  $  384.9

Operating expenses:
  Operation and maintenance        286.6   219.2     419.7     330.7
  Depreciation, depletion
    and amortization                17.0    15.6      33.2      30.2
  Taxes, other than income           9.6     6.4      16.1      11.0
                                   313.2   241.2     469.0     371.9

Operating income                 $  34.0 $  22.9  $   17.7  $   13.0

Sales (000's):
  Aggregates (tons)               11,187   9,592    15,994    14,619
  Asphalt (tons)                   2,346   1,701     2,648     1,863
  Ready-mixed concrete
    (cubic yards)                  1,239     912     1,813     1,427


Independent Power Production and Other

                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003

Operating revenues               $  11.6 $  11.0  $   18.9  $   18.1

Operating expenses:
  Operation and maintenance          3.6     3.1       8.3       7.3
  Depreciation, depletion and
    amortization                     2.4     2.2       4.5       3.9
  Taxes, other than income           1.1     ---       1.1       ---
                                     7.1     5.3      13.9      11.2

Operating income                 $   4.5 $   5.7  $    5.0  $    6.9

Net generation capacity - kW*    279,600 279,600   279,600   279,600
Electricity produced and sold
  (thousand kWh)*                 84,148  89,694   115,503   138,594
_____________________
* Reflects domestic independent power production operations.
NOTE:  The earnings from the Company's equity method investments in
Brazil and Trinidad and Tobago were included in other income - net
and, thus, are not reflected in the above table.

Amounts presented in the preceding tables for operating revenues,
purchased natural gas sold and operation and maintenance expense
will not agree with the Consolidated Statements of Income due to
the elimination of intersegment transactions.  The amounts (dollars
in millions) relating to the elimination of intersegment
transactions were as follows:
                                    Three Months        Six Months
                                       Ended              Ended
                                      June 30,           June 30,
                                    2004    2003      2004      2003

Operating revenues               $  59.7 $  37.2  $  131.7  $   87.7
Purchased natural gas sold          55.8    33.1     124.3      79.7
Operation and maintenance            3.9     4.1       7.4       8.0

For further information on intersegment eliminations, see Note 15
of Notes to Consolidated Financial Statements.

Three Months Ended June 30, 2004 and 2003

Electric

Electric earnings decreased $1.1 million as a result of lower retail
sales margins, largely due to higher fuel and purchased power-
related costs, including higher demand charges resulting from a
scheduled outage at an electric supplier's generating station; and a
5 percent decrease in retail sales volumes.  Higher operation and
maintenance expense, including increased payroll-related costs and
company-owned generation facility subcontract expenses, along with
increased interest expense, also contributed to the earnings
decrease.  Partially offsetting the decrease in earnings were a
favorable resolution of federal and related state income tax matters
and higher sales for resale volumes of 38 percent due to stronger
sales for resale markets.

Natural Gas Distribution

Normal seasonal losses at the natural gas distribution business
decreased $200,000 due to a favorable resolution of federal and
related state income tax matters and higher retail sales prices
primarily due to a rate increase effective in South Dakota,
partially offset by higher operation and maintenance expense,
including increased payroll-related costs and higher subcontract
costs.

Utility Services

Utility services experienced a $2.3 million loss for the second
quarter, compared to $1.5 million in earnings for the comparable
prior period.  The decrease in earnings was due to lower inside
electrical margins, largely due to lower than expected results on
certain large jobs that are nearly complete, and higher general and
administrative expenses.  Increased line construction margins in the
Southwest, Central and Rocky Mountain regions partially offset the
earnings decrease.

Pipeline and Energy Services

Earnings at the pipeline and energy services business decreased
$700,000 as a result of higher operating expenses, which were
partially the result of increased costs associated with last year's
expansion of pipeline and gathering operations and higher payroll-
related costs.  Lower storage service revenues and lower revenues
from traditional off-system transportation services also contributed
to the earnings decrease.  Partially offsetting the decrease in
earnings were a favorable resolution of federal and related state
income tax matters and an increase in natural gas transportation
volumes and firm services as a result of the Grasslands Pipeline,
which began providing natural gas transmission service late in 2003.
The increase in energy services revenues and the related increase in
purchased natural gas sold includes the effect of increases in
natural gas prices and volumes since the comparable prior period.

Natural Gas and Oil Production

Natural gas and oil production earnings increased $8.3 million due
to higher average realized natural gas prices of 17 percent due in
part to the Company's ability to access higher-priced markets for
much of its operated natural gas production through the Grasslands
Pipeline, completed late last year; increased natural gas production
of 12 percent; and higher average realized oil prices of 25 percent.
A favorable resolution of federal and related state income tax
matters also contributed to the increase in earnings.  Partially
offsetting the earnings increase were higher depreciation, depletion
and amortization expense due to higher rates and higher natural gas
production volumes; higher operation and maintenance expense,
primarily higher lease operating expenses and increased general and
administrative costs; and higher interest expense.

Construction Materials and Mining

The increase in construction materials and mining earnings of $7.6
million, which was largely from existing operations, reflects
increased aggregate, asphalt and ready-mixed concrete volumes and
margins, and increased construction activity.  A favorable
resolution of federal and related state income tax matters and
earnings from companies acquired since the comparable prior period
also added to the earnings increase.  Partially offsetting the
earnings increase were lower aggregate volumes at a large harbor-
deepening project in southern California compared to the prior
period, which project is now substantially complete and higher
operation and maintenance expense, including higher general and
administrative expenses.

Independent Power Production and Other

Earnings for the independent power production and other businesses
increased $4.7 million largely due to higher net income of $5.5
million from the Company's share of its equity investment in Brazil.
The higher net income was due primarily to the increased value of
the embedded derivative in the electric power purchase agreement
combined with lower financing costs, largely the result of obtaining
low-cost, long-term financing for the operation in mid-2003,
partially offset by foreign currency changes.  Domestic and
international acquisitions made since the comparable prior period
also added to the increase in earnings.  Lower revenues from
existing domestic operations, due in part to lower sales volumes,
partially offset the earnings increase.

Six Months Ended June 30, 2004 and 2003

Electric

Electric earnings decreased $2.4 million as a result of higher
operation and maintenance expense, including increased payroll-
related costs, pension expense and company-owned generation facility
subcontract expenses; higher fuel and purchased power-related costs,
as previously discussed; and higher interest expense.  Partially
offsetting the decrease in earnings were a favorable resolution of
federal and related state income tax matters and higher average
sales for resale prices of 26 percent.

Natural Gas Distribution

Earnings at the natural gas distribution business decreased $1.7
million due to higher operation and maintenance expense, including
increased payroll-related costs, pension expense and subcontract
costs; a 5 percent decrease in retail sales volumes due to weather
that was 3 percent warmer than last year; and decreased service and
repair margins.  Partially offsetting the earnings decrease were a
favorable resolution of federal and related state income tax matters
and higher retail sales prices, primarily due to a rate increase
effective in South Dakota.

Utility Services

Utility services experienced a $4.2 million loss for the first six
months of 2004, compared to $2.6 million in earnings for the
comparable prior period.  The decrease in earnings was due to lower
inside electrical margins, largely due to lower than expected
results on certain large jobs that are nearly complete; decreased
line construction margins in the Central and Rocky Mountain regions;
and higher general and administrative expenses.  Increased line
construction margins in the Southwest and Northwest regions
partially offset the earnings decrease.

Pipeline and Energy Services

Earnings at the pipeline and energy services business decreased $2.3
million as a result of higher operating expenses, which were
partially the result of increased costs associated with last year's
expansion of pipeline and gathering operations and higher payroll-
related costs.  Also contributing to the earnings decrease were
lower storage service revenues and lower revenues from traditional
off-system transportation services.  Partially offsetting the
decrease in earnings were a favorable resolution of federal and
related state income tax matters and an increase in natural gas
transportation volumes and firm services as a result of the
Grasslands Pipeline, which began providing natural gas transmission
service late in 2003.  The increase in energy services revenues and
the related increase in purchased natural gas sold includes the
effect of increases in natural gas prices and volumes compared to
the prior period.

Natural Gas and Oil Production

Natural gas and oil production earnings increased $21.9 million due
to higher average realized natural gas prices of 15 percent due in
part to the Company's ability to access higher-priced markets for
much of its operated natural gas production through the recently
constructed Grasslands Pipeline and the absence in 2004 of a 2003
noncash transition charge, as previously discussed.  Higher natural
gas production of 9 percent, higher average realized oil prices of
16 percent and a favorable resolution of federal and related state
income tax matters also contributed to the increase in earnings.
Partially offsetting the earnings increase were higher depreciation,
depletion and amortization expense due to higher rates and higher
natural gas production volumes; higher operation and maintenance
expense, largely increased general and administrative costs; and
higher interest expense.

Construction Materials and Mining

The increase in construction materials and mining earnings of $3.1
million reflects higher asphalt and ready-mixed concrete volumes and
margins and increased construction activity, all at existing
operations.  A favorable resolution of federal and related state
income tax matters also added to the earnings increase.  Partially
offsetting the increase in earnings were higher operation and
maintenance expense, including increased general and administrative
expenses; and lower aggregate volumes at a large harbor-deepening
project in southern California from the prior period, which project
is now substantially complete.  The increase in revenues and the
related increase in operating expense resulted largely from
businesses acquired since the comparable prior period.

Independent Power Production and Other

Earnings for the independent power production and other businesses
increased $6.9 million largely due to higher net income of $8.2
million from the Company's share of its equity investment in Brazil.
The higher net income was due primarily to the increased value of
the embedded derivative in the power purchase agreement combined
with lower financing costs, largely the result of obtaining low-
cost, long-term financing for the operation in mid-2003, partially
offset by foreign currency changes.  Domestic and international
acquisitions made since the comparable prior period also added to
the increase in earnings.  Lower revenues from existing domestic
operations, due in part to lower sales volumes, partially offset the
earnings increase.

Risk Factors and Cautionary Statements that May Affect Future
Results

The Company is including the following factors and cautionary
statements in this Form 10-Q to make applicable and to take
advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statements
made by, or on behalf of, the Company.  Forward-looking statements
include statements concerning plans, objectives, goals, strategies,
future events or performance, and underlying assumptions (many of
which are based, in turn, upon further assumptions) and other
statements that are other than statements of historical facts.  From
time to time, the Company may publish or otherwise make available
forward-looking statements of this nature, including statements
contained within Prospective Information.  All these subsequent
forward-looking statements, whether written or oral and whether made
by or on behalf of the Company, are also expressly qualified by
these factors and cautionary statements.

Forward-looking statements involve risks and uncertainties, which
could cause actual results or outcomes to differ materially from
those expressed.  The Company's expectations, beliefs and
projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitation,
management's examination of historical operating trends, data
contained in the Company's records and other data available from
third parties.  Nonetheless, the Company's expectations, beliefs or
projections may not be achieved or accomplished.

Any forward-looking statement contained in this document speaks only
as of the date on which the statement is made, and the Company
undertakes no obligation to update any forward-looking statement or
statements to reflect events or circumstances that occur after the
date on which the statement is made or to reflect the occurrence of
unanticipated events.  New factors emerge from time to time, and it
is not possible for management to predict all of the factors, nor
can it assess the effect of each factor on the Company's business or
the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statement.

Following are some specific factors that should be considered for a
better understanding of the Company's financial condition.  These
factors and the other matters discussed herein are important factors
that could cause actual results or outcomes for the Company to
differ materially from those discussed in the forward-looking
statements included elsewhere in this document.

Economic Risks

The Company's natural gas and oil production business is dependent
on factors, including commodity prices, which cannot be predicted or
controlled.

These factors include:  price fluctuations in natural gas and crude
oil prices; availability of economic supplies of natural gas;
drilling successes in natural gas and oil operations; the ability to
contract for or to secure necessary drilling rig contracts and to
retain employees to drill for and develop reserves; the ability to
acquire natural gas and oil properties; the timely receipt of
necessary permits and approvals; and other risks incidental to the
operations of natural gas and oil wells.  Significant changes in
these factors could negatively affect the results of operations and
financial condition of the Company's natural gas and oil production
business.

The construction and operation of power generation facilities may
involve unanticipated changes or delays which could negatively
impact the Company's business and its results of operations.

The construction and operation of power generation facilities
involves many risks, including start-up risks, breakdown or failure
of equipment, competition, inability to obtain required governmental
permits and approvals, and inability to negotiate acceptable
acquisition, construction, fuel supply, off-take, transmission or
other material agreements, as well as the risk of performance below
expected levels of output or efficiency.  Such unanticipated events
could negatively impact the Company's business and its results of
operations.

The uncertain economic environment and depressed telecommunications
market may have a general negative impact on the Company's future
revenues and may result in a goodwill impairment for Innovatum, Inc.
(Innovatum), an indirect wholly owned subsidiary of the Company.

In response to the ongoing war against terrorism by the United
States and the bankruptcy of several large energy and
telecommunications companies and other large enterprises, the
financial markets have been volatile.  A soft economy could
negatively affect the level of public and private expenditures on
projects and the timing of these projects which, in turn, would
negatively affect the demand for the Company's products and
services.

Innovatum, which specializes in cable and pipeline magnetization and
locating, is subject to the economic conditions within the
telecommunications and energy industries.  Innovatum has also
developed a hand-held locating device that can detect both magnetic
and plastic materials.  Innovatum could face a future goodwill
impairment if there is a continued downturn in the
telecommunications and energy industries or if it cannot find a
successful market for the hand-held locating device.  At June 30,
2004, the goodwill amount at Innovatum was approximately
$8.3 million.  The determination of whether an impairment will occur
is dependent on a number of factors, including the level of spending
in the telecommunications and energy industries, the success of the
hand-held locating device at Innovatum, rapid changes in technology,
competitors and potential new customers.

The Company relies on financing sources and capital markets.  If the
Company is unable to obtain financing in the future, the Company's
ability to execute its business plans, make capital expenditures or
pursue acquisitions that the Company may otherwise rely on for
future growth could be impaired.

The Company relies on access to both short-term borrowings,
including the issuance of commercial paper, and long-term capital
markets as a source of liquidity for capital requirements not
satisfied by its cash flow from operations.  If the Company is not
able to access capital at competitive rates, the ability to
implement its business plans may be adversely affected.  Market
disruptions or a downgrade of the Company's credit ratings may
increase the cost of borrowing or adversely affect its ability to
access one or more financial markets.  Such disruptions could
include:

  -  A severe prolonged economic downturn
  -  The bankruptcy of unrelated industry leaders in the same line
     of business
  -  Capital market conditions generally
  -  Volatility in commodity prices
  -  Terrorist attacks
  -  Global events

Environmental and Regulatory Risks

Some of the Company's operations are subject to extensive
environmental laws and regulations that may increase costs of
operations, impact or limit business plans, or expose the Company to
environmental liabilities.  One of the Company's subsidiaries is
subject to litigation in connection with its coalbed natural gas
development activities.

The Company is subject to extensive environmental laws and
regulations affecting many aspects of its present and future
operations including air quality, water quality, waste management
and other environmental considerations.  These laws and regulations
can result in increased capital, operating and other costs, and
delays as a result of compliance, remediation, containment and
monitoring obligations, particularly with regard to laws relating to
power plant emissions and coalbed natural gas development.  These
laws and regulations generally require the Company to obtain and
comply with a wide variety of environmental licenses, permits,
inspections and other approvals.  Public officials and entities, as
well as private individuals and organizations, may seek to enforce
applicable environmental laws and regulations.  The Company cannot
predict the outcome (financial or operational) of any related
litigation that may arise.

Existing environmental regulations may be revised and new
regulations seeking to protect the environment may be adopted or
become applicable to the Company.  Revised or additional
regulations, which result in increased compliance costs or
additional operating restrictions, particularly if those costs are
not fully recoverable from customers, could have a material effect
on the Company's results of operations.

Fidelity has been named as a defendant in, and/or certain of its
operations are the subject of, over a dozen lawsuits filed in
connection with its coalbed natural gas development in the Powder
River Basin in Montana and Wyoming.  If the plaintiffs are
successful in these lawsuits, the ultimate outcome of the actions
could have a material effect on Fidelity's existing coalbed natural
gas operations and/or the future development of its coalbed natural
gas properties.

The Company is subject to extensive government regulations that may
have a negative impact on its business and its results of
operations.

The Company is subject to regulation by federal, state and local
regulatory agencies with respect to, among other things, allowed
rates of return, financings, industry rate structures, and recovery
of purchased power and purchased gas costs.  These governmental
regulations significantly influence the Company's operating
environment and may affect its ability to recover costs from its
customers.  The Company is unable to predict the impact on operating
results from the future regulatory activities of any of these
agencies.

Changes in regulations or the imposition of additional regulations
could have an adverse impact on the Company's results of operations.

Risks Relating to Foreign Operations

The value of the Company's investments in foreign operations may
diminish due to political, regulatory and economic conditions and
changes in currency exchange rates in countries where the Company
does business.

The Company is subject to political, regulatory and economic
conditions and changes in currency exchange rates in foreign
countries where the Company does business.  Significant changes in
the political, regulatory or economic environment in these countries
could negatively affect the value of the Company's investments
located in these countries.  Also, since the Company is unable to
predict the fluctuations in the foreign currency exchange rates,
these fluctuations may have an adverse impact on the Company's
results of operations.

The Company's 49 percent equity method investment in a 220-megawatt
natural gas-fired electric generation project in Brazil includes a
power purchase agreement that contains an embedded derivative.  This
embedded derivative derives its value from an annual adjustment
factor that largely indexes the contract capacity payments to the
U.S. dollar.  In addition, from time to time, other derivative
instruments may be utilized.  The valuation of these financial
instruments, including the embedded derivative, can involve
judgments, uncertainties and the use of estimates.  As a result,
changes in the underlying assumptions could affect the reported fair
value of these instruments.  These instruments could recognize
financial losses as a result of volatility in the underlying fair
values, or if a counterparty fails to perform.

Other Risks

Competition is increasing in all of the Company's businesses.

All of the Company's businesses are subject to increased
competition.  The independent power industry includes numerous
strong and capable competitors, many of which have greater resources
and more experience in the operation, acquisition and development of
power generation facilities.  Utility services' competition is based
primarily on price and reputation for quality, safety and
reliability.  The construction materials products are marketed under
highly competitive conditions and are subject to such competitive
forces as price, service, delivery time and proximity to the
customer.  The electric utility and natural gas industries are also
experiencing increased competitive pressures as a result of consumer
demands, technological advances, deregulation, greater availability
of natural gas-fired generation and other factors.  Pipeline and
energy services competes with several pipelines for access to
natural gas supplies and gathering, transportation and storage
business.  The natural gas and oil production business is subject to
competition in the acquisition and development of natural gas and
oil properties as well as in the sale of its production output.  The
increase in competition could negatively affect the Company's
results of operations and financial condition.

Weather conditions can adversely affect the Company's operations and
revenues.

The Company's results of operations can be affected by changes in
the weather.  Weather conditions directly influence the demand for
electricity and natural gas, affect the wind-powered operation at
the independent power production business, affect the price of
energy commodities, affect the ability to perform services at the
utility services and construction materials and mining businesses
and affect ongoing operation and maintenance and construction and
drilling activities for the pipeline and energy services and natural
gas and oil production businesses.  In addition, severe weather can
be destructive, causing outages and/or property damage, which could
require additional costs to be incurred.  As a result, adverse
weather conditions could negatively affect the Company's results of
operations and financial condition.

Prospective Information

The following information includes highlights of the key growth
strategies, projections and certain assumptions for the Company and
its subsidiaries over the next few years and other matters for each
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 increases
in revenues and earnings, will in fact be achieved.  Reference is
made to assumptions contained in this section, as well as the
various important factors listed under the heading Risk Factors and
Cautionary Statements that May Affect Future Results, and other
factors that are listed in the Introduction.  Changes in such
assumptions and factors could cause actual future results to differ
materially from targeted growth, revenue and earnings projections.

MDU Resources Group, Inc.

- - Earnings per common share for 2004, diluted, are projected in
  the range of $1.75 to $1.90, an increase from prior guidance of
  $1.60 to $1.75.

- - The Company expects the percentage of 2004 earnings per common
  share, diluted, by quarter to be in the following approximate
  ranges:

  -  Third quarter - 35 percent to 40 percent
  -  Fourth quarter - 23 percent to 28 percent

- - The Company's long-term compound annual growth goals on
  earnings per share from operations are in the range of 6 percent to
  9 percent.

- - The Company will consider issuing equity from time to time to
  keep debt at the nonregulated businesses at no more than 40 percent
  of total capitalization.

Electric

- - Montana-Dakota has obtained and holds valid and existing
  franchises authorizing it to conduct its electric operations in all
  of the municipalities it serves where such franchises are required.
  As franchises expire, Montana-Dakota may face increasing competition
  in its service areas, particularly its service to smaller towns,
  from rural electric cooperatives.  Montana-Dakota intends to protect
  its service area and seek renewal of all expiring franchises and
  will continue to take steps to effectively operate in an
  increasingly competitive environment.

- - The expected return for this segment in 2004 is anticipated to
  be generally consistent with overall authorized levels.

- - In mid-May, the Company submitted an air quality permit
  application to construct a 175-megawatt coal-fired plant at
  Gascoyne, North Dakota.  The air permit application is now under
  review at the North Dakota Department of Health, and the Company is
  confident the new facility will provide it with the opportunity to
  replace capacity associated with expiring contracts and help it meet
  its growing needs into the future.  As an alternative for the
  capacity needs, this segment is also involved in a coalition with
  four other utilities to study the feasibility of building a coal-
  based facility, possibly combined with a wind energy facility, at
  potential sites in North Dakota, South Dakota and Iowa.  The costs
  of building and/or acquiring the additional generating capacity
  needed by the utility are expected to be recovered in rates.

- - On January 9, 2004, Montana-Dakota entered into a firm capacity
  contract with a Midwest utility to purchase 5 megawatts of capacity
  during the period May 1, 2004 to October 31, 2004, 15 megawatts
  during the period May 1, 2005 to October 31, 2005 and 25 megawatts
  during the period May 1, 2006 to October 31, 2006.  In addition, on
  January 9, 2004, Montana-Dakota entered into a firm power contract
  with the same Midwest utility to purchase 70 megawatts of power
  during the period November 1, 2006 to December 31, 2006, 80
  megawatts during the period January 1, 2007 to December 31, 2007, 90
  megawatts during the period January 1, 2008 to December 31, 2008 and
  100 megawatts during the period January 1, 2009 to December 31,
  2010.  All capacity and power purchases from these contracts are
  contingent upon the parties securing transmission service for the
  delivery of capacity and power to Montana-Dakota's customer load.
  Transmission service has not yet been secured.  On July 15, 2004,
  Montana-Dakota entered into a firm capacity contract to purchase 15
  megawatts of capacity and associated energy for the summer of 2005
  and 25 megawatts of capacity and associated energy for the summer of
  2006 from a neighboring utility.

Natural gas distribution

- - Montana-Dakota and Great Plains have obtained and hold valid
  and existing franchises authorizing them to conduct their natural
  gas operations in all of the municipalities they serve where such
  franchises are required.  As franchises expire, Montana-Dakota and
  Great Plains may face increasing competition in their service areas.
  Montana-Dakota and Great Plains intend to protect their service
  areas and seek renewal of all expiring franchises and will continue
  to take steps to effectively operate in an increasingly competitive
  environment.

- - Annual natural gas throughput for 2004 is expected to be
  approximately 51 million decatherms.

- - The Company expects to seek natural gas rate increases from
  time to time to offset higher expected operating costs.

- - Montana-Dakota has filed applications with state regulatory
  authorities in three states (Montana, North Dakota and South Dakota)
  seeking increases in natural gas retail rates that are in the range
  of $1.3 million to $3.3 million annually or 1.8 percent to 2.8
  percent above current rates.  While Montana-Dakota believes that it
  should be authorized to increase retail rates in the amounts
  requested, there is no assurance that the increases ultimately
  allowed will be for the full amount requested in each jurisdiction.
  For further information on the natural gas rate increase
  applications, see Note 18 of Notes to Consolidated Financial
  Statements.

Utility services

- - Revenues for this segment are expected to be in the range of
  $400 million to $450 million in 2004.

- - This segment anticipates margins for 2004 to be lower than 2003
  levels.  However, margins for the second half of 2004 should improve
  over those experienced in the first half of 2004.

- - This segment's work backlog as of June 30, 2004, was
  approximately $217 million compared to $150 million at June 30,
  2003.

Pipeline and energy services

- - In 2004, total natural gas throughput is expected to increase
  approximately 15 percent to 20 percent over 2003 levels largely due
  to the Grasslands Pipeline, which began providing natural gas
  transmission service on December 23, 2003.

- - Firm capacity for the Grasslands Pipeline is currently 90
  million cubic feet per day with expansion possible to 200 million
  cubic feet per day.

- - Transportation rates are expected to decline in 2004 from 2003
  levels due to the estimated effects of a FERC rate order received in
  July 2003 and order on rehearing received in May 2004.

- - Innovatum could face a future goodwill impairment based on
  certain economic conditions, as previously discussed in Risk Factors
  and Cautionary Statements that May Affect Future Results.  Innovatum
  recently developed a hand-held locating device that can detect both
  magnetic and plastic materials.  One of the possible uses for this
  product would be in the detection of unexploded ordnance.  Innovatum
  is in the preliminary stages of working with and demonstrating the
  device to a Department of Defense contractor and has met with
  individuals from the Department of Defense.

Natural gas and oil production

- - In 2004, the Company believes a combined production increase of
  approximately 10 percent over 2003 levels remains possible.  A
  portion of this increase is predicated on the timely receipt of
  various regulatory approvals, which is affecting producers
  throughout the Rocky Mountain region.  The Company is confident that
  it will receive such permits, but forecasting the timing of such
  receipt is difficult.  Also affecting the forecasted production
  increase is the timely installation of infrastructure. Currently,
  this segment's gross operated natural gas production is
  approximately 140,000 Mcf to 150,000 Mcf per day.

- - Natural gas production from operated properties was 73 percent
  of total natural gas production for the six months ended June 30,
  2004.

- - This segment expects to drill more than 400 wells in 2004.

- - Natural gas prices in the Rocky Mountain region for August
  through December 2004, reflected in the Company's 2004 earnings
  guidance, are in the range of $4.50 to $5.00 per Mcf.  The Company's
  estimates for natural gas prices on the NYMEX for August through
  December 2004, reflected in the Company's 2004 earnings guidance,
  are in the range of $5.50 to $6.00 per Mcf.  During 2003, more than
  two-thirds of this segment's natural gas production was priced using
  Rocky Mountain or other non-NYMEX prices.

- - NYMEX crude oil prices for July through December 2004,
  reflected in the Company's 2004 earnings guidance, are in the range
  of $33 to $37 per barrel.

- - The Company has hedged a portion of its 2004 natural gas
  production.  The Company has entered into agreements representing
  approximately 30 percent to 35 percent of 2004 estimated annual
  natural gas production.  The agreements are at various indices and
  range from a low CIG index of $3.75 to a high NYMEX index of $6.11
  per Mcf.  CIG is an index pricing point related to Colorado
  Interstate Gas Co.'s system.

- - This segment has hedged a portion of its 2004 oil production.
  The Company has entered into agreements at NYMEX prices with a low
  of $28.84 and a high of $30.28, representing approximately 25
  percent to 30 percent of 2004 estimated annual oil production.

- - The Company has hedged a portion of its 2005 estimated natural
  gas production.  The Company has entered into agreements
  representing approximately 15 percent to 20 percent of its 2005
  estimated annual natural gas production.  The agreements are at a
  Ventura index with a low of $4.75 and a high of $5.87 per Mcf.
  Ventura is an index pricing point related to Northern Natural Gas
  Co.'s system.

- - This segment has hedged a portion of its 2005 oil production.
  The Company has entered into agreements at NYMEX prices with a low
  of $30.70 and a high of $36.50 representing approximately 20 percent
  to 25 percent of its 2005 estimated annual oil production.

Construction materials and mining

- - Aggregate volumes in 2004 are expected to be comparable to 2003
  levels.  Ready-mixed concrete volumes are expected to increase by 18
  percent to 23 percent, while asphalt volumes are expected to
  increase 10 percent to 15 percent over 2003.

- - Revenues in 2004 are expected to increase by approximately 13
  percent to 18 percent over 2003 levels.

- - The Company is confident that the replacement funding
  legislation for the Transportation Equity Act for the 21st Century
  (TEA-21) will be equal to or higher than previous funding levels.

- - As of mid-July, this segment had $545 million in work backlog
  compared to $497 million in mid-July of 2003.

- - The four labor contracts that Knife River was negotiating, as
  reported in Items 1 and 2 -- Business and Properties - General in
  the Company's 2003 Form 10-K, have been ratified and signed.  The
  Company considers its relations with its employees to be
  satisfactory.

Independent power production and other

- - Earnings projections for independent power production and other
  operations are expected to be in the range of $18 million to $23
  million in 2004.

- - The Company is constructing a 116-megawatt coal-fired electric
  generating project near Hardin, Montana.  A power sales agreement
  with Powerex Corp., a subsidiary of BC Hydro, has been secured for
  the entire output of the plant for a three-year term with an option
  for a two-year extension.  The projected on-line date for this plant
  is late 2005.

- - On July 20, 2004, an indirect wholly owned subsidiary of the
  Company signed an agreement to acquire a 50 percent ownership
  interest in a 310-megawatt natural gas-fired electric generating
  facility in Georgia.  The transaction is subject to receipt of
  certain third-party consents and approval from the FERC.  The
  acquisition is anticipated to close in late third quarter or early
  fourth quarter 2004.

New Accounting Standards

In December 2003, the FASB issued FASB Interpretation No. 46
(revised December 2003), "Consolidation of Variable Interest
Entities" (FIN 46 (revised)), which replaced FASB Interpretation No.
46, "Consolidation of Variable Interest Entities" (FIN 46).  FIN 46
(revised) shall be applied to all entities subject to FIN 46
(revised) no later than the end of the first reporting period that
ends after March 15, 2004.  The adoption of FIN 46 (revised) did not
have an effect on the Company's financial position or results of
operations.

In January 2004, the FASB issued FASB Staff Position No. FAS 106-1,
"Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003" (FSP
No. FAS 106-1).  FSP No. FAS 106-1 permits a sponsor of a
postretirement health care plan that provides a prescription drug
benefit to make a one-time election to defer accounting for the
effects of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (2003 Medicare Act).  In May 2004, the
FASB issued FASB Staff Position No. FAS 106-2, "Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003" (FSP No. FAS 106-2).  The
Company provides prescription drug benefits to certain eligible
employees.  The Company elected the one-time deferral of accounting
for the effects of the 2003 Medicare Act in the quarter ending March
31, 2004, the first period in which the plan's accounting for the
effects of the 2003 Medicare Act normally would have been reflected
in the Company's financial statements.  During the second quarter of
2004, the Company adopted FSP No. FAS 106-2 retroactive to the
beginning of the year.  The Company and its actuarial advisors
determined that benefits provided to certain participants are
expected to be at least actuarially equivalent to Medicare Part D
(the federal prescription drug benefit), and, accordingly, the
Company expects to be entitled to some federal subsidy.  The
expected federal subsidy reduces the accumulated postretirement
benefit obligation (APBO) at January 1, 2004, by approximately $3.2
million, and net periodic benefit cost for 2004 by approximately
$285,000 (as compared with the amount calculated without considering
the effects of the subsidy).  In addition, the Company expects a
reduction in future participation in the postretirement plans, which
further reduced the APBO at January 1, 2004, by approximately $12.7
million and net periodic benefit cost for 2004 by approximately $1.3
million.

SFAS No. 142, "Goodwill and Other Intangible Assets," discontinues
the practice of amortizing goodwill and indefinite lived intangible
assets and initiates an annual review for impairment.  Intangible
assets with a determinable useful life will continue to be amortized
over that period.  The amortization provisions apply to goodwill and
intangible assets acquired after June 30, 2001.  SFAS No. 141,
"Business Combinations," and SFAS No. 142 clarify that more assets
should be distinguished and classified between tangible and
intangible.  An issue has arisen within the natural gas and oil
industry as to whether contractual mineral rights under SFAS No. 142
should be classified as intangible rather than as part of property,
plant and equipment.  The anticipated resolution of this matter is
not expected to have an effect on the Company's financial position,
results of operations or cash flows.

In April 2004, the FASB issued FASB Staff Position Nos. FAS 141-1
and FAS 142-1, "Interaction of FASB Statements No. 141, 'Business
Combinations,' and No. 142, 'Goodwill and Other Intangible Assets,'
and EITF Issue No. 04-2, 'Whether Mineral Rights are Tangible or
Intangible Assets,'" (FSP Nos. FAS 141-1 and FAS 142-1).  FSP Nos.
FAS 141-1 and FAS 142-1 shall be applied to the first reporting
period beginning after April 29, 2004.  FSP Nos. FAS 141-1 and FAS
142-1 required reclassification of the Company's leasehold rights at
its construction materials and mining operations from other
intangible assets, net to property, plant and equipment, as well as
changes to Notes to Consolidated Financial Statements.  FSP Nos. FAS
141-1 and FAS 142-1 affected the asset classification in the
consolidated balance sheet and associated footnote disclosure only,
so the reclassifications did not affect the Company's stockholders'
equity, cash flows or results of operations.

For further information on FIN 46 (revised), FSP Nos. FAS 106-1 and
106-2, SFAS Nos. 142 and 141, and FSP Nos. FAS 141-1 and FAS 142-1,
see Note 9 of Notes to Consolidated Financial Statements.

Critical Accounting Policies Involving Significant Estimates

The Company's critical accounting policies involving significant
estimates include impairment testing of long-lived assets and
intangibles, impairment testing of natural gas and oil production
properties, revenue recognition, purchase accounting, asset
retirement obligations, and pension and other postretirement
benefits.  There were no material changes in the Company's critical
accounting policies involving significant estimates from those
reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.  For more information on critical
accounting policies involving significant estimates, see Part II,
Item 7 in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.

Liquidity and Capital Commitments

Cash flows

Operating activities --

Cash flows provided by operating activities in the first six months
of 2004 increased $8.4 million from the comparable 2003 period, the
result of an increase in net income of $18.6 million and higher
depreciation, depletion and amortization expense of $10.3 million,
resulting largely from increased property, plant and equipment
balances and higher mineral production rates and volumes.  Partially
offsetting the increase in cash flows from operating activities were
an increase in earnings, net of distributions, from equity method
investments of $9.5 million and the absence in 2004 of the 2003
cumulative effect of an accounting change of $7.6 million.

Investing activities --

Cash flows used in investing activities in the first six months of
2004 decreased $74.3 million compared to the comparable 2003 period,
the result of a decrease in net capital expenditures (capital
expenditures; acquisitions, net of cash acquired; and net proceeds
from the sale or disposition of property) of $85.2 million and an
increase in proceeds from notes receivable of $14.2 million, offset
in part by an increase in investments of $25.1 million.  Net capital
expenditures exclude the noncash transactions related to
acquisitions, including the issuance of the Company's equity
securities.  The noncash transactions were $32.6 million and $4.9
million for the first six months of 2004 and 2003, respectively.

Financing activities --

Cash flows provided by financing activities in the first six months
of 2004 decreased $35.3 million compared to the comparable 2003
period, primarily the result of a decrease in the issuance of long-
term debt of $159.0 million.  A decrease in repayment of long-term
debt of $58.0 million and an increase in the issuance of common
stock of $54.7 million, primarily due to net proceeds received from
an underwritten public offering, partially offset the decrease in
cash provided by financing activities.

Defined benefit pension plans

The Company has qualified noncontributory defined benefit pension
plans (Pension Plans) for certain employees.  Plan assets consist of
investments in equity and fixed income securities.  Various
actuarial assumptions are used in calculating the benefit expense
(income) and liability (asset) related to the Pension Plans.
Actuarial assumptions include assumptions about the discount rate,
expected return on plan assets and rate of future compensation
increases as determined by the Company within certain guidelines.
At December 31, 2003, certain Pension Plans' accumulated benefit
obligations exceeded these plans' assets by approximately
$4.3 million.  Pretax pension expense (income) reflected in the
years ended December 31, 2003, 2002 and 2001, was $153,000, ($2.4)
million and ($4.4) million, respectively.  The Company's pension
expense is currently projected to be approximately $4.0 million to
$5.0 million in 2004.  A reduction in the Company's assumed discount
rate for Pension Plans along with declines in the equity markets
experienced in 2002 and 2001 have combined to largely produce the
increase in these costs.  Funding for the Pension Plans is
actuarially determined.  The minimum required contributions for
2003, 2002 and 2001 were approximately $1.6 million, $1.2 million
and $442,000, respectively.  For further information on the
Company's Pension Plans, see Note 17 of Notes to Consolidated
Financial Statements.

Capital expenditures

Net capital expenditures, including the issuance of the Company's
equity securities in connection with acquisitions, for the first six
months of 2004 were $186.5 million and are estimated to be
approximately $450 million for the year 2004.  Estimated capital
expenditures include those for:

  -  Completed acquisitions
  -  System upgrades
  -  Routine replacements
  -  Service extensions
  -  Routine equipment maintenance and replacements
  -  Land and building improvements
  -  Pipeline and gathering expansion projects
  -  Further enhancement of natural gas and oil production and
     reserve growth
  -  Power generation opportunities, including certain construction
     costs for a 116-megawatt coal-fired development project, as
     previously discussed
  -  Other growth opportunities

Approximately 15 percent of estimated 2004 net capital expenditures
are for completed acquisitions.  The Company continues to evaluate
potential future acquisitions and other growth opportunities;
however, they are dependent upon the availability of economic
opportunities and, as a result, capital expenditures may vary
significantly from the estimated 2004 capital expenditures referred
to above.  It is anticipated that all of the funds required for
capital expenditures will be met from various sources.  These
sources include internally generated funds; commercial paper credit
facilities at Centennial and MDU Resources Group, Inc., as described
below; and through the issuance of long-term debt and the Company's
equity securities.

The estimated 2004 capital expenditures referred to above include
completed 2004 acquisitions involving construction materials and
mining businesses in Idaho, Iowa and Minnesota and an independent
power production operating and development company in Colorado.  Pro
forma financial amounts reflecting the effects of the above
acquisitions are not presented as such acquisitions were not
material to the Company's financial position or results of
operations.

Capital resources

Certain debt instruments of the Company and its subsidiaries,
including those discussed below, contain restrictive covenants, all
of which the Company and its subsidiaries were in compliance with at
June 30, 2004.

MDU Resources Group, Inc.

The Company has a revolving credit agreement with various banks
totaling $90 million at June 30, 2004.  There were no amounts
outstanding under the credit agreement at June 30, 2004.  The credit
agreement supports the Company's $75 million commercial paper
program.  There were no amounts outstanding under the Company's
commercial paper program at June 30, 2004.  The credit agreement
expires on July 18, 2006.

The Company's goal is to maintain acceptable credit ratings
in order to access the capital markets through the issuance
of commercial paper.  If the Company were to experience a
minor downgrade of its credit ratings, it would not
anticipate any change in its ability to access the capital
markets.  However, in such event, the Company would expect a
nominal basis point increase in overall interest rates with
respect to its cost of borrowings.  If the Company were to
experience a significant downgrade of its credit ratings,
which it does not currently anticipate, it may need to
borrow under its credit agreement.

To the extent the Company needs to borrow under its credit
agreement, it would be expected to incur increased
annualized interest expense on its variable rate debt.  This
was not applicable at June 30, 2004, as there were no
variable rate borrowings at such time.

Prior to the maturity of the credit agreement, the Company
plans to negotiate the extension or replacement of this
agreement that provides credit support to access the capital
markets.  In the event the Company is unable to successfully
negotiate the credit agreement, or in the event the fees on
this facility became too expensive, which it does not
currently anticipate, the Company would seek alternative
funding.  One source of alternative funding might involve
the securitization of certain Company assets.

In order to borrow under the Company's credit agreement, the
Company must be in compliance with the applicable covenants
and certain other conditions.  The significant covenants
include maximum leverage ratios, minimum interest coverage
ratio, limitation on sale of assets and limitation on
investments.  The Company was in compliance with these
covenants and met the required conditions at June 30, 2004.
In the event the Company does not comply with the applicable
covenants and other conditions, alternative sources of
funding may need to be pursued, as previously described.

There are no credit facilities that contain cross-default
provisions between the Company and any of its subsidiaries.

The Company's issuance of first mortgage debt is subject to
certain restrictions imposed under the terms and conditions
of its Indenture of Mortgage.  Generally, those restrictions
require the Company to fund $1.43 of unfunded property or
use $1.00 of refunded bonds for each dollar of indebtedness
incurred under the Indenture and, in some cases, to certify
to the trustee that annual earnings (pretax and before
interest charges), as defined in the Indenture, equal at
least two times its annualized first mortgage bond interest
costs.  Under the more restrictive of the tests, as of June
30, 2004, the Company could have issued approximately $318
million of additional first mortgage bonds.

The Company's coverage of fixed charges including preferred
dividends was 4.7 times for the twelve months ended June 30,
2004 and December 31, 2003.  Additionally, the Company's
first mortgage bond interest coverage was 6.8 times and 7.4
times for the twelve months ended June 30, 2004 and December
31, 2003, respectively.  Common stockholders' equity as a
percent of total capitalization (net of long-term debt and
preferred stock due within one year) was 63 percent and 60
percent at June 30, 2004 and December 31, 2003,
respectively.

Centennial Energy Holdings, Inc.

Centennial has three revolving credit agreements with
various banks and institutions that support $300 million of
Centennial's $350 million commercial paper program.  There
were no outstanding borrowings under the Centennial credit
agreements at June 30, 2004. Under the Centennial commercial
paper program, $85.5 million was outstanding at June 30,
2004.  The Centennial commercial paper borrowings are
classified as long-term debt as Centennial intends to
refinance these borrowings on a long-term basis through
continued Centennial commercial paper borrowings and as
further supported by the Centennial credit agreements.  One
of these credit agreements is for $137.5 million and expires
on September 3, 2004, and allows for subsequent borrowings
up to a term of one year.  Another credit agreement is for
$137.5 million and expires on September 5, 2006.  The other
credit agreement is for $25 million and expires on April 30,
2007.  Centennial intends to negotiate the extension or
replacement of these agreements prior to their maturities.

Centennial has an uncommitted long-term master shelf
agreement that allows for borrowings of up to $400
million.  Under the terms of the master shelf agreement,
$384.0 million was outstanding at June 30, 2004.  To meet
potential future financing needs, Centennial may pursue
other financing arrangements, including private and/or
public financing.

Centennial's goal is to maintain acceptable credit ratings
in order to access the capital markets through the issuance
of commercial paper.  If Centennial were to experience a
minor downgrade of its credit ratings, it would not
anticipate any change in its ability to access the capital
markets.  However, in such event, Centennial would expect a
nominal basis point increase in overall interest rates with
respect to its cost of borrowings.  If Centennial were to
experience a significant downgrade of its credit ratings,
which it does not currently anticipate, it may need to
borrow under its committed bank lines.

To the extent Centennial needs to borrow under its committed
bank lines, it would be expected to incur increased
annualized interest expense on its variable rate debt of
approximately $128,000 (after tax) based on June 30, 2004,
variable rate borrowings.  Based on Centennial's overall
interest rate exposure at June 30, 2004, this change would
not have a material effect on the Company's results of
operations or cash flows.

Prior to the maturity of the Centennial credit agreements,
Centennial plans to negotiate the extension or replacement
of these agreements that provide credit support to access
the capital markets.  In the event Centennial was unable to
successfully negotiate these agreements, or in the event the
fees on such facilities became too expensive, which
Centennial does not currently anticipate, it would seek
alternative funding.  One source of alternative funding
might involve the securitization of certain Centennial
assets.

In order to borrow under Centennial's credit agreements and
the Centennial uncommitted long-term master shelf agreement,
Centennial and certain of its subsidiaries must be in
compliance with the applicable covenants and certain other
conditions.  The significant covenants include maximum
capitalization ratios, minimum interest coverage ratios,
minimum consolidated net worth, limitation on priority debt,
limitation on sale of assets and limitation on loans and
investments.  Centennial and such subsidiaries were in
compliance with these covenants and met the required
conditions at June 30, 2004.  In the event Centennial or
such subsidiaries do not comply with the applicable
covenants and other conditions, alternative sources of
funding may need to be pursued as previously described.

Certain of Centennial's financing agreements contain cross-
default provisions.  These provisions state that if
Centennial or any subsidiary of Centennial fails to make any
payment with respect to any indebtedness or contingent
obligation, in excess of a specified amount, under any
agreement that causes such indebtedness to be due prior to
its stated maturity or the contingent obligation to become
payable, the applicable agreements will be in default.
Certain of Centennial's financing agreements and
Centennial's practice limit the amount of subsidiary
indebtedness.

Williston Basin Interstate Pipeline Company

Williston Basin has an uncommitted long-term master shelf
agreement that allows for borrowings of up to $100 million.
Under the terms of the master shelf agreement, $55.0 million
was outstanding at June 30, 2004.

In order to borrow under Williston Basin's uncommitted long-
term master shelf agreement, it must be in compliance with
the applicable covenants and certain other conditions.  The
significant covenants include limitation on consolidated
indebtedness, limitation on priority debt, limitation on
sale of assets and limitation on investments.  Williston
Basin was in compliance with these covenants and met the
required conditions at June 30, 2004.  In the event
Williston Basin does not comply with the applicable
covenants and other conditions, alternative sources of
funding may need to be pursued.

Off balance sheet arrangements

Centennial has unconditionally guaranteed a portion of certain bank
borrowings of MPX in connection with the Company's equity method
investment in the Brazil Generating Facility, as discussed in Note
11 of Notes to Consolidated Financial Statements.  The Company,
through MDU Brasil, owns 49 percent of MPX.  The main business
purpose of Centennial extending the guarantee to MPX's creditors is
to enable MPX to obtain lower borrowing costs.  At June 30, 2004,
the aggregate amount of borrowings outstanding subject to these
guarantees was $40.1 million and the scheduled repayment of these
borrowings is $5.6 million in 2004, $10.7 million in 2005, 2006, and
2007 and $2.4 million in 2008.  The individual investor (who through
EBX, a Brazilian company, owns 51 percent of MPX) has also
guaranteed these loans.  In the event MPX defaults under its
obligation, Centennial and the individual investor would be required
to make payments under their guarantees, which are joint and several
obligations.  Centennial and the individual investor have entered
into reimbursement agreements under which they have agreed to
reimburse each other to the extent they may be required to make any
guarantee payments in excess of their proportionate ownership share
in MPX.  These guarantees are not reflected on the Consolidated
Balance Sheets.

As of June 30, 2004, Centennial was contingently liable for
performance of certain of its subsidiaries under approximately $290
million of surety bonds.  These bonds are principally for
construction contracts and reclamation obligations of these
subsidiaries entered into in the normal course of business.
Centennial indemnifies the respective surety bond companies against
any exposure under the bonds.  The purpose of Centennial's
indemnification is to allow the subsidiaries to obtain bonding at
competitive rates.  In the event a subsidiary of the Company does
not fulfill its obligations in relation to its bonded contract or
obligation, Centennial may be required to make payments under its
indemnification.  A large portion of these contingent commitments is
expected to expire within the next 12 months; however, Centennial
will likely continue to enter into surety bonds for its subsidiaries
in the future.  The surety bonds were not reflected on the
Consolidated Balance Sheets.

Contractual obligations and commercial commitments

There are no material changes in the Company's contractual
obligations on long-term debt and operating leases from those
reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.

The Company's contractual obligations on purchase commitments at
June 30, 2004, increased $117.6 million or 24 percent from December
31, 2003, primarily due to an increase in commitments for electric
generation construction contracts.  At June 30, 2004, the Company's
contractual obligations on purchase commitments for the twelve
months ended June 30, were as follows:

                  2005   2006   2007   2008   2009  Thereafter    Total
                            (In millions)

Purchase
  commitments   $257.8  $88.8  $55.0  $36.2  $32.6      $139.9   $610.3

For more information on contractual obligations and commercial
commitments, see Part II, Item 7 in the Company's Annual Report on
Form 10-K for the year ended December 31, 2003.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of market fluctuations
associated with commodity prices, interest rates and foreign
currency.  The Company has policies and procedures to assist in
controlling these market risks and utilizes derivatives to manage a
portion of its risk.

Commodity price risk --

Fidelity utilizes natural gas and oil price swap and collar
agreements to manage a portion of the market risk associated with
fluctuations in the price of natural gas and oil on its forecasted
sales of natural gas and oil production.  For more information on
commodity price risk, see Part II, Item 7A in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003, and Note
13 of Notes to Consolidated Financial Statements.

The  following  table summarizes hedge agreements  entered  into  by
Fidelity as of June 30, 2004.  These agreements call for Fidelity to
receive fixed prices and pay variable prices.

                       (Notional amount and fair value in thousands)

                             Weighted
                             Average      Notional
                           Fixed Price     Amount
                           (Per MMBtu)  (In MMBtu's)   Fair Value

   Natural gas swap
    agreements maturing
    in 2004                $    5.14        5,520      $ (5,008)

   Natural gas swap
    agreements maturing
    in 2005                $    5.32        7,300      $ (4,164)


                             Weighted
                             Average
                          Floor/Ceiling   Notional
                              Price        Amount
                           (Per MMBtu)  (In MMBtu's)   Fair Value

   Natural gas collar
    agreements maturing
    in 2004                $4.62/$5.28      4,878      $ (4,040)

   Natural gas collar
    agreement maturing
    in 2005                $4.92/$5.66      5,475      $ (3,256)


                             Weighted
                             Average      Notional
                           Fixed Price     Amount
                           (Per barrel) (In barrels)   Fair Value

   Oil swap agreements
    maturing in 2004       $   29.59          276      $ (1,977)

   Oil swap agreement
    maturing in 2005       $   30.70          183      $   (757)


                             Weighted
                             Average
                          Floor/Ceiling   Notional
                              Price        Amount
                           (Per barrel) (In barrels)   Fair Value

   Oil collar agreement
    maturing in 2005       $32.00/$36.50      164      $   (120)

Interest rate risk --

There were no material changes to interest rate risk faced
by the Company from those reported in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003.
For more information on interest rate risk, see Part II,
Item 7A in the Company's Annual Report on Form 10-K for the
year ended December 31, 2003.

Foreign currency risk --

MDU Brasil has a 49 percent equity investment in a 220-
megawatt natural gas-fired electric generating facility in
Brazil, which has a portion of its borrowings and payables
denominated in U.S. dollars.  MDU Brasil has exposure to
currency exchange risk as a result of fluctuations in
currency exchange rates between the U.S. dollar and the
Brazilian real.  The functional currency for the Brazil
Generating Facility is the Brazilian real.  For further
information on this investment, see Note 11 of Notes to
Consolidated Financial Statements.

MDU Brasil's equity income from this Brazilian investment is
impacted by fluctuations in currency exchange rates on
transactions denominated in a currency other than the
Brazilian real, including the effects of changes in currency
exchange rates with respect to the Brazil Generating
Facility's U.S. dollar denominated obligations.  At June 30,
2004, these U.S. dollar denominated obligations approximated
$80.4 million.  If, for example, the value of the Brazilian
real decreased in relation to the U.S. dollar by 10 percent,
MDU Brasil, with respect to its interest in the Brazil
Generating Facility, would record a foreign currency loss in
net income of approximately $3.6 million (after tax) based
on the above U.S. dollar denominated obligations at June 30,
2004.

The investment of Centennial International in the Brazil
Generating Facility at June 30, 2004, was approximately
$13.8 million.

A portion of the Brazil Generating Facility's foreign
currency exchange risk is being managed through contractual
provisions, which are largely indexed to the U.S. dollar,
contained in the Brazil Generating Facility's power purchase
agreement with Petrobras.  The Brazil Generating Facility
has also historically used derivative instruments to manage
a portion of its foreign currency risk and may utilize such
instruments in the future.

ITEM 4. CONTROLS AND PROCEDURES

The following information includes the evaluation of
disclosure controls and procedures by the Company's chief
executive officer and the chief financial officer, along
with any significant changes in internal controls of the
Company.

Evaluation of disclosure controls and procedures

The term "disclosure controls and procedures" is defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934 (Exchange Act).  These rules refer to the controls
and other procedures of a company that are designed to
ensure that information required to be disclosed by a
company in the reports it files under the Exchange Act is
recorded, processed, summarized and reported within required
time periods.  The Company's chief executive officer and
chief financial officer have evaluated the effectiveness of
the Company's disclosure controls and procedures and they
have concluded that, as of the end of the period covered by
this report, such controls and procedures were effective to
accomplish those tasks.

Changes in internal control over financial reporting

The Company maintains a system of internal accounting
controls designed to provide reasonable assurance that the
Company's transactions are properly authorized, the
Company's assets are safeguarded against unauthorized or
improper use, and the Company's transactions are properly
recorded and reported to permit preparation of the Company's
financial statements in conformity with generally accepted
accounting principles in the United States of America.
There were no changes in the Company's internal control over
financial reporting that occurred during the period covered
by this report that have materially affected, or are
reasonably likely to materially affect, the Company's
internal control over financial reporting.

                    PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On June 4, 2004, following preliminary discovery, Williston Basin
and Montana-Dakota joined with other defendants and filed a Motion
to Dismiss in the Grynberg case.

For more information on the above legal action, see Note 19 of Notes
to Consolidated Financial Statements, which is incorporated by
reference.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

Between April 1, 2004 and June 30, 2004, the Company issued 663,768
shares of Common Stock, $1.00 par value, and the Preference Share
Purchase Rights appurtenant thereto, as part of the consideration
paid by the Company for all of the issued and outstanding capital
stock with respect to businesses acquired during this period.  The
Common Stock and Rights issued by the Company in these transactions
were issued in a private transaction exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) thereof, Rule
506 promulgated thereunder, or both.  The classes of persons to whom
these securities were sold were either accredited investors or other
persons to whom such securities were permitted to be offered under
the applicable exemption.

The following table includes information with respect to the
Issuer's purchase of equity securities:

                          (a)      (b)         (c)             (d)


                                                              Maximum Number (or
                       Total               Total Number of   Approximate Dollar
                     Number of  Average   Shares (or Units) Value) of Shares (or
                      Shares     Price    Purchased as Part  Units) that May Yet
                     (or Units)   Paid       of Publicly     Be Purchased Under
                     Purchased  per Share  Announced Plans      the Plans or
    Period              (1)     (or Unit)  or Programs (2)      Programs (2)

January 1 to
January 31, 2004

February 1 to
February 29, 2004     29,662        $23.72

March 1 to
March 31, 2004         1,863        $23.78

April 1 to
April 30, 2004

May 1 to
May 31, 2004

June 1 to
June 30, 2004         12,333        $22.81

 Total                43,858

(1) Represents shares of common stock withheld by the Company at the
request of its executive officers and employees to pay taxes
pursuant to officer and employee compensation plans.

(2) Not applicable.  The Company does not currently have in place
any publicly announced plans or programs to purchase equity
securities.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

   10(a)  Change of Control Employment Agreement between the
          Company and Paul Gatzemeier

   10(b)  Change of Control Employment Agreement between the
          Company and Mary B. Hager

   10(c)  Change of Control Employment Agreement between the
          Company and Bruce T. Imsdahl

   10(d)  Change of Control Employment Agreement between the
          Company and Cindy C. Redding

   10(e)  Change of Control Employment Agreement between the
          Company and Paul K. Sandness

   10(f)  Change of Control Employment Agreement between the
          Company and Daryl A. Splichal

   10(g)  Change of Control Employment Agreement between the
          Company and Floyd E. Wilson

   10(h)  Non-Employee Director Stock Compensation Plan, as amended

   12     Computation of Ratio of Earnings to Fixed Charges and
          Combined Fixed Charges and Preferred Stock Dividends

   31(a)  Certification of Chief Executive Officer filed pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002

   31(b)  Certification of Chief Financial Officer filed pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002

   32     Certification of Chief Executive Officer and Chief
          Financial Officer furnished pursuant to 18 U.S.C. Section
          1350, as adopted pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002

b) Reports on Form 8-K

   Form 8-K was filed on April 20, 2004.  Under Item 12 -- Results
   of Operations and Financial Condition, the Company reported the
   press release issued April 20, 2004, regarding earnings for the
   quarter ended March 31, 2004.


                             SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.


                               MDU RESOURCES GROUP, INC.




DATE:  August 6, 2004          BY:  /s/ Warren L. Robinson
                                   Warren L. Robinson
                                   Executive Vice President
                                     and Chief Financial Officer



                               BY: /s/ Vernon A. Raile
                                   Vernon A. Raile
                                   Senior Vice President
                                     and Chief Accounting Officer


                            EXHIBIT INDEX

Exhibit No.

10(a)   Change of Control Employment Agreement between the Company
        and Paul Gatzemeier

10(b)   Change of Control Employment Agreement between the Company
        and Mary B. Hager

10(c)   Change of Control Employment Agreement between the Company
        and Bruce T. Imsdahl

10(d)   Change of Control Employment Agreement between the Company
        and Cindy C. Redding

10(e)   Change of Control Employment Agreement between the Company
        and Paul K. Sandness

10(f)   Change of Control Employment Agreement between the Company
        and Daryl A. Splichal

10(g)   Change of Control Employment Agreement between the Company
        and Floyd E. Wilson

10(h)   Non-Employee Director Stock Compensation Plan, as amended

12      Computation of Ratio of Earnings to Fixed Charges
        and Combined Fixed Charges and Preferred Stock
        Dividends

31(a)   Certification of Chief Executive Officer filed pursuant to
        Section 302 of the Sarbanes-Oxley Act of 2002

31(b)   Certification of Chief Financial Officer filed pursuant to
        Section 302 of the Sarbanes-Oxley Act of 2002

32      Certification of Chief Executive Officer and Chief Financial
        Officer furnished pursuant to 18 U.S.C. Section 1350, as
        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002