Black Hills Corporation To Acquire
Additional Colorado Oil & Gas Assets
For Information Contact:
Mark T. Thies, Executive
Vice President; Dale
T. Jahr, Director, Investor Relations
RAPID
CITY, SD—March 9, 2006—Black Hills Corporation
(NYSE: BKH) today announced the signing of a definitive
agreement to acquire certain oil and gas assets of Koch
Exploration Company, LLC, in the Piceance Basin in western
Colorado. The transaction, for which the purchase price
was not disclosed, is contingent on the completion of remaining
due diligence and is expected to be completed
in the first quarter of 2006.
The
Koch Exploration assets include approximately 40 billion
cubic feet of proven gas reserves. The associated acreage
position is comprised of leases covering more than 31,000
gross and 18,000 net acres, of which more than 48 percent
of the lands are presently undeveloped. The acquisition
includes
63 producing wells, of which 58 are operated by Koch Exploration,
and majority interests in midstream and gathering assets,
including a compressor and treatment facility currently
awaiting final regulatory approvals for expansion through
the addition of an amine processing plant. In 2005, production
from Koch Exploration’s interests was approximately
0.7 billion cubic feet equivalent. The acquisition, when
completed, would increase the Company’s natural gas
and oil proven reserve position by approximately 24 percent
and increase the Company’s average daily production
by approximately 5 percent.
David
R. Emery, Chairman, President and CEO of Black Hills Corporation,
said “This acquisition is well-suited for our exploration
and production operations, both strategically and geographically.
The addition of Koch Exploration’s Piceance Basin
properties, adjacent to existing Black Hills operated properties,
nearly doubles our acreage position in the basin to about
60,000 gross and 36,000 net acres. About 40,000 gross and
26,000 net acres require delineation and further development.
We expect to increase production and reserves by commencing
a multi-year recompletion and drilling program later this
year. The program represents a low-risk gas play targeting
shallow, long-lived wells with multiple producing zones
in a region where we’ve experienced success for several
years.”
Emery
continued, “We intend to improve operational efficiency
by integrating our Colorado-based corporate and field staff
resources. In addition, we expect to benefit from the marketing
and gathering/processing expertise of Enserco Energy, our
energy marketing arm located in Golden, Colorado.”
ABOUT
BLACK HILLS CORPORATION
Black Hills Corporation is a diversified energy company.
Black Hills Energy, the wholesale energy business 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; and Cheyenne Light, Fuel &
Power, an electric and gas distribution utility serving
the Cheyenne, Wyoming vicinity. More information is available
at our Internet web site: www.blackhillscorp.com.
CAUTION
REGARDING FORWARD-LOOKING STATEMENTS
This news release includes “forward-looking statements”
as defined by the Securities and Exchange Commission, or
SEC. We make 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 we expect, believe or anticipate will or may occur
in the future are forward-looking statements. These forward-looking
statements are based on assumptions which we believe are
reasonable based on current expectations and projections
about future events and industry conditions and trends affecting
our business. However, whether actual results and developments
will conform to our expectations and predictions is subject
to a number of risks and uncertainties that, among other
things, could cause actual results to differ materially
from those contained in the forward-looking statements,
including the risk factors described in Items 1 and 2 of
our 2004 Annual Report on Form 10-K and in Item 2 of Part
I of our quarterly reports on Form 10-Q filed with the SEC,
and the following:
• The amount and timing of capital deployment in new
investment opportunities;
• 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;
• Numerous uncertainties inherent in estimating quantities
of proved oil and gas reserves and actual future production
rates and associated costs;
• The extent of our success in connecting natural
gas supplies to gathering, processing and pipeline systems;
• The possibility that we may be required to take
impairment charges to reduce the carrying value of some
of our long-lived assets when indicators of impairment emerge;
• Our ability to successfully integrate new acquisitions
into our operations;
• 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;
• General economic and political conditions, including
tax rates or policies and inflation rates;
• 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;
• 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 and natural
disasters or responses to such actions and events;
• Capital market conditions, which may affect our
ability to raise capital on favorable terms;
• 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.
