Press Releases
Black Hills Corporation
Reports First Quarter 2005 Results
For Information Contact: Mark
T. Thies, Executive Vice President; Dale
T. Jahr, Director, Investor Relations
RAPID CITY, SD—May 9, 2005—Black
Hills Corporation (NYSE: BKH) today announced financial
results for the first quarter of 2005. For the three months
ended March 31, 2005, net income was $15.7 million, or $0.48
per share, compared to $9.7 million, or $0.30 per share
for the same period ended March 31, 2004.
Income from continuing operations for the three months ended
March 31, 2005 was $15.9 million, or $0.48
per share, compared to $10.0 million, or $0.30 per share
for the same period in 2004. Compared to the first quarter
of 2004, income from continuing operations in the first
quarter of 2005 was primarily affected by the following
factors:
· a $6.0 million,
or $0.18 per share, increase in power generation earnings;
· a $1.3 million,
or $0.04 per share, increase in oil and gas production earnings;
· a $0.9 million,
or $0.03 per share, improvement in the communications loss;
and
· a $1.0 million,
or $0.03 per share, decrease in energy marketing and transportation
earnings.
REVIEW OF RECENT ACTIVITY
David R. Emery, Chairman, President and Chief Executive
Officer of Black Hills Corporation, said, “The first
quarter of 2005 showed a continuation of a normalized, historical
earnings pattern from our business segments. Sales of oil
and natural gas production, on an equivalent basis, increased
about 13 percent in the first quarter, compared to the same
quarter in 2004. Combined with higher average product prices,
oil and gas earnings increased 35 percent.
Emery continued, “The dramatic improvement in power
generation results reflects the contracted status of the
Las Vegas Cogeneration II power plant, which ran merchant
in difficult market conditions during the first quarter
of 2004. Our fleet of independent power plants performed
well in the first quarter of 2005. Electric utility earnings
were down in 2005, due to increased purchased power and
other costs. The Wyodak plant experienced several unplanned
outages during the first quarter. The major maintenance
outage for the plant, originally scheduled for later this
year, has been deferred by PacifiCorp, the plant operator,
until the Spring of 2006.
“Energy marketing was affected by commodity price
increases late in the first quarter of 2005, resulting in
an unrealized $3.1 million mark-to-market accounting loss.
From an operational perspective, this business segment benefited
from increased realized gross marketing margins, partially
the result of a 13 percent increase in average daily physical
natural gas volumes marketed.
“We are very pleased with initial results from our
newest acquisition, Cheyenne Light, Fuel & Power,”
said Emery. “Recently, we filed a request for rate
increases effective January 1, 2006, which, if approved
by the Wyoming Public Service Commission (PSC), would increase
revenues at the electric and gas utility by approximately
$5 million. As part of our long-term power supply planning
for Cheyenne Light, we also filed an integrated resource
plan with the PSC, which proposes the construction of a
90 megawatt mine-mouth coal-fired power plant at our Wyodak
energy complex near Gillette, Wyoming. We would like to
begin construction this year.”
Emery said, “In April, we announced a definitive agreement
to sell our Communications business. Cash proceeds from
the $103 million sale are expected to be used for debt repayment
or for investments in energy projects. The transaction is
expected to be completed by the end of June 2005.”
Emery concluded, “In addition to our goal of commencing
construction on a new coal-fired power plant, we continue
to pursue other strategic goals, including sustaining the
production growth of our oil and gas operation, integrating
Cheyenne Light into Black Hills’ business operations
and corporate culture, and pursuing balanced, risk-managed
energy projects in the West.”
RECENT DIVIDEND DECLARATION
As previously disclosed, the Board of Directors recently
declared quarterly dividends on the common and preferred
stock. Common shareholders will receive 32 cents per share,
equivalent to an annual dividend rate of $1.28. Preferred
shareholders, whose holdings are related to a Company acquisition,
will receive $11.663 per share, an amount which represents
1 percent per annum computed on the basis of $1,000 per
share plus a common stock dividend equivalence. Dividends
will be payable June 1, 2005, to all shareholders of record
at the close of business on May 18, 2005.
CONSOLIDATED FINANCIAL RESULTS
Black Hills Corporation
(in thousands, except per share amounts)
|
|
Three months
ended March 31, |
|
|
2005 |
2004 |
| Revenues: |
|
|
| Wholesale
Energy Group |
$
225,630 |
$
223,937 |
|
Retail Services
Group |
79,790 |
50,081 |
|
Corporate |
265 |
310 |
|
|
------- |
------- |
|
|
$
305,685 |
$
274,328 |
| Net
income (loss) available for common stock: |
|
|
|
Continuing
operations -- |
|
|
|
Wholesale
Energy Group |
$ 13,260 |
$ 7,331 |
|
Retail
Energy Group |
3,947 |
3,253 |
|
Corporate
|
(1,342) |
(590) |
|
|
------ |
------ |
|
|
15,865 |
9,994 |
|
Discontinued
operations(a) |
(125) |
(208) |
| |
------ |
------ |
| Net
Income |
15,740 |
9,786 |
|
Less: preferred
stock dividends |
(79) |
(88) |
|
|
------ |
------ |
|
|
$ 15,661 |
$ 9,698 |
| Weighted
average common shares outstanding: |
|
|
| Basic
-- |
32,444 |
32,291
|
| Diluted
-- |
33,009 |
32,811 |
|
Earnings
per share: |
|
|
|
Basic -- |
|
|
|
Continuing
operations |
$ 0.48 |
$ 0.31 |
| Discontinued
operations |
- |
-
( 0.01) |
| |
------ |
------ |
|
Total |
$ 0.48 |
$ 0.30 |
|
Diluted -- |
|
|
| Continuing
operations |
$
0.48 |
$
0.30 |
|
Discontinued
operations |
- |
- |
| |
------ |
------ |
|
Total |
$ 0.48 |
$ 0.30 |
(a) 2005 reflects the after-tax
results of operations at the Company’s Pepperell
power plant.
2004 includes the
results of the Pepperell plant and a coal enhancement
plant sold in 2004.
BUSINESS UNIT PERFORMANCE SUMMARY
Wholesale Energy Group
Quarterly results. Income from continuing operations
from the Wholesale Energy business group for the three-month
period ended March 31, 2005 was $13.3 million, compared
to $7.3 million in 2004. Business segment results are:
- Power generation income from continuing operations was
$3.9 million, compared to a loss of ($2.1) million in 2004.
Earnings for 2005 were higher primarily due to increased
earnings at our Las Vegas Cogeneration II plant, which now
operates under a long-term tolling arrangement. In the first
quarter of 2004, Las Vegas II was not under contract and
operated as a merchant plant, selling power into the market
only when economic to do so.
- Oil and gas income from continuing operations was $5.0
million compared to $3.7 million in 2004. Higher earnings
were primarily the result of a 13 percent increase in volumes
sold at average hedged prices received that were
22 percent higher for oil and 4 percent higher for natural
gas. Operating expense increased 9 percent due to the increase
in production. However, on a per Mcf basis, lease operating
expense decreased 16 percent.
- Energy marketing income from continuing operations was
$2.9 million in 2005 compared to $4.0 million in 2004. The
decrease was primarily due to a $3.1 million unrealized
mark-to-market pretax loss for 2005, compared to a
$0.3 million unrealized pretax loss in 2004. Earnings benefited
from an increase in realized marketing gross margins in
part due to a 13 percent increase in natural gas physical
volumes marketed.
- Coal mining income from continuing operations was $1.5
million in 2005 compared to $1.8 million in 2004.
The decrease was primarily due to lower revenues, due to
unplanned outages at the Wyodak plant, our largest coal
customer. The decrease in revenues was partially offset
by lower taxes and production-related costs.
The following tables contain certain Wholesale Energy operating
statistics:
| |
Three months
ended March 31, |
|
|
2005 |
2004 |
| Coal
mining: |
|
|
|
Tons of coal
sold |
1,153,300 |
1,203,600 |
|
Oil
and gas production: |
|
|
|
Mcf equivalent
sales |
3,465,000 |
3,079,900 |
| Energy
marketing average daily volumes: |
|
|
|
Natural gas
physical - MMBtus |
1,357,600 |
1,201,000 |
| Natural gas
financial - MMBtus |
674,800 |
383,200 |
|
Crude oil -
barrels |
35,500 |
49,700 |
|
March
31, 2005 |
December
31, 2004 |
| Oil
and gas reserves: |
|
|
| Bcf
equivalent reserves |
172.2 |
173.4 |
| Reserves
reflect pricing of: |
March
31, 2005 |
December
31, 2004 |
| |
Oil |
Gas |
Oil |
Gas |
| NYMEX |
$
55.40 |
$
7.65 |
$
43.45 |
$
6.15 |
| Average
well-head |
$
53.14 |
$
7.13 |
$
41.19 |
$
5.55 |
| |
|
|
| |
March
31, |
|
| |
2005 |
2004 |
|
|
| IPP
nameplate net capacity, MW |
964 |
964 |
|
|
| Contracted
fleet plant availability |
98.9% |
98.5% |
|
|
Retail Services Group
Quarterly results. Income from continuing operations
from the Retail Services business group for the three-month
period ended March 31, 2005 was $3.9 million, compared
to $3.3 million in 2004. Business segment results are
as follows:
- Net income from the Electric utility business segment
for the three months ended March 31, 2005 was $4.3
million, compared to $5.0 million in 2004. Decreased
earnings in 2005 were the result of increased purchased
power expense due to unplanned outages at the Wyodak
plant, legal costs and health insurance expense, partially
offset by an increase in electric sales and a decrease
in interest expense.
- Net income from the Electric and gas utility segment
for the three months ended March 31, 2005 was $0.5
million. This utility was acquired on January 21,
2005.
- The Communications business segment reported a net
loss of ($0.9) million for the three month period
ended March 31, 2005, compared to a net loss of ($1.8)
million in 2004. Improved resultsreflect additional
revenues
due primarily to the expiration of certain customer
discounts in effect in 2004.
The following tables provide certain Retail Services
operating statistics:
|
Electric Utility |
Three months
ended March 31, |
|
|
2005 |
2004 |
| Firm
(system) sales - MWh |
517,962 |
513,234 |
|
Off-system sales
- MWh |
231,314 |
202,294 |
|
Communications |
March
31, |
December
31, |
|
|
2005 |
2004 |
| Residential
customers |
23,838 |
23,663 |
| Revenue
Generating Units(a) |
57,542 |
56,835 |
|
Business customers |
3,376 |
3,317 |
(a) Total Revenue Generating Units
(RGU) equal the total number of services to which residential
customers subscribe. Telephone, cable TV and Internet
access each represent an RGU.
Corporate
Quarterly results. Corporate results for the three-month
period ended March 31, 2005 increased to $1.3 million
after tax, compared to $0.6 million for the same period
in 2004. In 2004, corporate results benefited from a
$1.0 million pretax gain on the sale of certain assets.
2005 EARNINGS GUIDANCE INCREASED
The Company’s expectation for 2005 income from
continuing operations has been revised upward by $0.05
per share, to a range between $1.90 and $2.05 per share.
The change is due to two factors: the announced sale
of the communications business segment, whose 2005 financial
results would become reported as “discontinued
operations” effective for the second quarter of
2005; and the expected full-year availability of the
Wyodak power plant in 2005, as
a major maintenance outage scheduled for the Fall of
2005 has now been deferred to 2006. As stated in previous
2005 earnings guidance, the Company anticipates continued
earnings growth from increased oil and gas production;
modest accretion from the acquisition of Cheyenne Light,
Fuel & Power; an earnings increase from power generation,
due to a full year of contract revenues at the Las Vegas
Cogeneration II facility; and incremental cost savings
from ongoing business integration efforts. The Company
expects a small decrease in 2005 earnings from energy
marketing operations, which anticipate reduced oil marketing
and transportation revenues and narrower margins from
gas marketing.
FIVE-YEAR REVOLVING CREDIT FACILITY COMPLETED
The Company recently executed a $400 million, five-year
revolving credit facility. The facility expires May
4, 2010 and replaces two existing facilities totaling
$350 million, which were due to expire in 2005 and 2006.
EARNINGS CONFERENCE CALL
The Company will conduct a conference call Wednesday,
May 11, 2005 beginning at 11:00 a.m. Eastern Time to
discuss financial and operating performance. The conference
call will be open to the public. The call can be accessed
by dialing, toll-free, (800) 553-0349. When prompted,
indicate that you wish to participate in the “Black
Hills Quarterly Earnings Conference Call.” A replay
of the conference call will be available through May
18, 2005 by dialing (800) 475-6701 (USA) or (320) 365-3844
(international). The access code is 781071.
ABOUT BLACK HILLS CORPORATION
Black Hills Corporation is a diversified energy and
communications company. Black Hills Energy, the wholesale
energy unit, generates electricity, produces natural
gas, oil and coal, and markets energy. Our retail businesses
are Black Hills Power, an electric utility serving western
South Dakota, northeastern Wyoming and southeastern
Montana; Cheyenne Light, Fuel & Power, an electric
and gas distribution utility serving the Cheyenne, Wyoming
vicinity; and Black Hills FiberCom, a broadband communications
company. Our communications business is under a definitive
agreement to be sold on or before June 30, 2005. More
information is available at our Internet web site: www.blackhillscorp.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this release include “forward-looking
statements” as defined by the Securities and Exchange
Commission, or SEC. Black Hills Corporation makes these
forward-looking statements in reliance on the safe harbor
protections provided under the Private Securities Litigation
Reform Act of 1995. All statements, other than statements
of historical facts, included in this release that address
activities, events or developments that Black Hills
expects, believes or anticipates will or may occur in
the future are forward-looking statements. These forward-looking
statements are based on assumptions, which Black Hills
believes are reasonable based on current expectations
and projections about future events and industry conditions
and trends affecting Black Hills’ business. However,
whether actual results and developments will conform
to Black Hills’ expectations and predictions is
subject to a number of risks and uncertainties that
could cause actual results to differ materially from
those contained in the forward-looking statements, including,
among other things:
- The amount and timing of capital deployment in new investment
opportunities or for the repurchase of debt or stock;
- The volumes of our production from oil and gas development
properties, which may be dependent upon issuance by federal,
state, and tribal governments, or agencies thereof, of drilling,
environmental and other permits, and the availability of
specialized contractors, work force, and equipment;
- The extent of our success in connecting natural gas supplies
to gathering, processing and pipeline systems;
- Our ability to successfully integrate Cheyenne Light,
Fuel & Power (CLF&P) into our operations;
- Unfavorable rulings in the rate cases filed by CLF&P
with the Wyoming Public Service Commission and in the periodic
applications to recover costs for fuel and purchased power;
- Our compliance with orders of the SEC under PUHCA related
to our financing and investment authority, and related to
transactions and cost allocation among our affiliated companies;
- Our ability to complete the sale of Black Hills FiberSystems,
Inc., including the receipt of required approvals and consents
and the timing thereof;
- Our ability to remedy any deficiencies that may be identified
in the periodic review of our internal controls;
- The timing and extent of changes in energy-related and
commodity prices, interest rates, energy and commodity supply
or volume, the cost of transportation of commodities, and
demand for our services, all of which can affect our earnings,
liquidity position and the underlying value of our assets;
- The timing and extent of scheduled and unscheduled outages
of power generation facilities;
- General economic and political conditions, including
tax rates or policies and inflation rates;
- Our use of derivative financial instruments to hedge
commodity, currency exchange rate and interest rate risks;
- The creditworthiness of counterparties to trading and
other transactions, and defaults on amounts due from counterparties;
- The amount of collateral required to be posted from time
to time in our transactions;
- Changes in or compliance with laws and regulations, particularly
those relating to taxation, safety and protection of the
environment;
- Changes in state laws or regulations that could cause
us to curtail our independent power production;
- Weather and other natural phenomena;
- Industry and market changes, including the impact of
consolidations and changes in competition;
- The effect of accounting policies issued periodically
by accounting standard-setting bodies;
- The cost and effects on our business, including insurance,
resulting from terrorist actions or responses to such actions;
- Capital market conditions, which may affect our ability
to raise capital on favorable terms;
- Price risk due to marketable securities held as investments
in benefit plans;
- Obtaining adequate cost recovery for our retail operations
through regulatory proceedings; and
- Other factors discussed from time to time in our other
filings with the SEC.
New factors that could cause actual results to differ
materially from those described in forward-looking statements
emerge from time to time, and it is not possible for
us to predict all such factors, or the extent to which
any such factor or combination of factors may cause
actual results to differ from those contained in any
forward-looking statement. We assume no obligation to
update publicly any such forward-looking statements,
whether as a result of new information, future events,
or otherwise.
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Black Hills Corporation - Investor Relations
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