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Press Releases
Black Hills Corporation Reports First Quarter 2006 Results
For Information Contact:
Mark T. Thies,
Executive Vice President and Chief Financial Officer;
Dale T. Jahr, Director,
Investor Relations
RAPID CITY, SD-May 4, 2006-Black Hills Corporation
(NYSE: BKH) today announced financial results for the
first quarter of 2006.
For the three months ended March 31, 2006,
net income was $26.2 million, or $0.78 per share, compared
to $15.7 million, or $0.48 per share for the same period
ended March 31, 2005. Net income for the first quarter
of 2006 reflected $7.6 million, or $0.23 per share, from
discontinued operations including an after-tax gain on
the sale of certain oil marketing and transportation assets
completed in March 2006.
Income from continuing operations for the
three months ended March 31, 2006 was $18.6 million, or
$0.55 per share, compared to $15.3 million, or $0.46 per
share, reported for the same period in 2005. Compared
to the first quarter of 2005, income from continuing operations
in the first quarter of 2006 was affected primarily by
the following factors:
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a $4.9 million, or $0.15 per share, increase
in energy marketing earnings;
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a $1.5 million, or $0.04 per share, increase
in retail services earnings;
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a $1.8 million, or $0.05 per share, decrease
in power generation earnings; and
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a $1.6 million, or $0.05 per share, increase
in corporate loss.
David R. Emery, Chairman and CEO of Black
Hills Corporation, said, "Income from continuing
operations on a per-share basis was up 20 percent on solid
results from our energy marketing operations and retail
services and steady results from oil and gas production
and coal mining. Energy marketing income from continuing
operations quadrupled on strong margins due to continued
market volatility and an increase in unrealized mark-to-market
gains. Both of our utilities increased earnings in the
first quarter. Our electric utility benefited from higher
revenues related primarily to increased retail sales,
offset in part by slightly higher operating expense, compared
to last year. Earnings from our electric and gas utility
(acquired January 21, 2005) increased due to higher revenues
from a full period of operations, and base rate increases,
offset in part by an increase in operating expenses and
general and administrative costs.
"Overall oil and gas production increased
1 percent on an equivalent basis in the first quarter,
with a 2 percent increase in natural gas production, offset
partially by a 6 percent decline in oil production,"
Emery said. "Our production growth target remains
10 percent, based on the Company's development program
in New Mexico, Colorado, Wyoming and Nebraska. With our
recent oil and gas acquisitions in Colorado, we expect
to increase reserves and production as we integrate the
new properties with our existing operation."
Emery said, "We have made significant
progress addressing the outages at our Las Vegas generation
complex. Las Vegas I was returned to service in April
after extensive upgrades and maintenance. Repair of the
Las Vegas II heat recovery units is in the final stages.
It is currently available in simple cycle mode at two-thirds
of its rated capacity. We expect Las Vegas II to be fully
operational later this month. In addition, our corporate
loss increased primarily due to expenses related to our
proposed combination with NorthWestern Corporation."
"We continue to focus on long-term
shareholder value as we proceed with several projects,"
Emery stated. "Construction of Wygen II, our latest
90 megawatt, coal-fired, mine-mouth power plant is ahead
of schedule after a relatively mild winter season and
we are progressing with the permitting process for a replicate
plant, Wygen III. Wygen II is expected to be a rate-based
asset, providing regulated returns to our investors and
stable, reasonably-priced energy for our Cheyenne Light
customers. In addition, each of these plants would burn
approximately 500,000 tons of coal annually from our coal
mine, further augmenting our future earnings profile."
NEW VICE PRESIDENT HIRED TO LEAD OIL & GAS OPERATIONS
Mr. Tim T. Hopkins was recently named Vice President and
General Manager of Black Hills Exploration and Production,
our oil and gas subsidiary, filling a position vacated
in December 2005. Mr. Hopkins has more than 27 years of
oil and gas production operations experience, and an extensive
record of management and professional accomplishments.
Hopkins' past responsibilities included engineering, planning,
operations management for both production and mid-stream
operations, regulatory affairs, and business unit management.
His career has been concentrated in the Rockies and the
West. Most recently he was CBM Business Unit Manager for
Western Gas Resources for the Powder River Basin.
CONSOLIDATED FINANCIAL RESULTS
Black Hills Corporation
(in thousands, except per share amounts)
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Three months ended March 31,
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2006
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2005
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Revenues:
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| Retail
Services (a) |
$
87,503 |
$
70,124 |
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Wholesale
Energy (a)
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84,371
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72,031
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Corporate
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16
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265
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-------
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-------
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$
171,890
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$
142,420
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Net income (loss)
available for common stock:
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Continuing operations
--
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Retail Services
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$ 6,296
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$ 4,834
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Wholesale Energy
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15,215
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11,762
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Corporate
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(2,950)
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(1,342)
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|
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------
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------
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Income
from continuing operations
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18,561
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15,254
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Discontinued
operations(b)
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7,590
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486
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------
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------
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Net income
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26,151
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15,740
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Less: preferred stock dividends
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-
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(79)
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------
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------
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$ 26,151
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$ 15,661
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| Weighted
average common shares outstanding: |
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| Basic
-- |
33,120 |
32,444 |
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| Diluted
-- |
33,460 |
33,009 |
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Earnings per
share:
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Basic --
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Continuing operations
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$ 0.56
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$ 0.46
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Discontinued operations
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0.23
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0.02
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Total
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$ 0.79
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$ 0.48
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Diluted --
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Continuing operations
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$ 0.55
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$ 0.46
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Discontinued operations
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0.23
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0.02
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Total
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$ 0.78
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$ 0.48
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(a) Presentation of our 2005 revenues
has changed to reflect the reclassification of the Company's
oil marketing and transportation business and Communications
segment financial results to discontinued operations.
(b) 2006 discontinued operations reflect the
after-tax results of operations at the Company's oil marketing
and transportation business. 2005 discontinued operations
reflect the after-tax results of operations of the crude
oil marketing and transportation business, the communications
segment, and the Pepperell power plant.
BUSINESS UNIT QUARTERLY PERFORMANCE SUMMARY
Retail Services Group
Income from continuing operations from the
Retail Services business group for the three-month period
ended March 31, 2006 was $6.3 million, compared to $4.8
million in 2005. Business segment results were as follows:
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Net income from the Electric utility business
segment for the three months ended March 31, 2006 was
$4.9 million, compared to $4.3 million in 2005. The increase
was primarily due to increased revenues, lower depreciation
expense and legal costs, offset in part by increased fuel
cost and general and administrative costs.
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Net income from the Electric and gas utility
segment for the three months ended March 31, 2006 was
$1.4 million, compared to $0.5 million for the period
from January 21 through March 31, 2005. The increase is
primarily due to an increase in base rates, effective
January 1, 2006 offset in part by increased operating
expenses and general and administrative costs.
The following tables provide certain Retail
Services operating statistics:
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Electric
Utility (Black Hills Power)
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Three months ended March 31,
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2006
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2005
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Retail sales-MWh
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410,473
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400,325
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Contracted wholesale sales-MWh
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162,251
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160,838
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Off-system sales-MWh
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180,163
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188,114
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------
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------
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752,887
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749,277
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Electric
and Gas Utility
(Cheyenne Light, Fuel & Power)
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Three months ended
March 31, 2006
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Jan. 21, 2005 to
March 31, 2005
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Electric sales - MWh
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232,827
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177,100
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Gas sales - Dekatherm (Dth)
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1,870,454
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1,412,101
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Wholesale Energy Group
Income from continuing operations from the Wholesale Energy
business group for the three-month period ended March 31,
2006 was $15.2 million, compared to $11.8 million in 2005.
Business segment results were as follows:
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Energy marketing income from continuing
operations quadrupled to $6.3 million, compared to income
of $1.4 million in 2005. Increased earnings were primarily
the result of higher gross margins offset in part by a
6 percent decrease in natural gas volumes marketed. The
higher margins resulted from opportunities to deliver
natural gas through transportation and storage strategies
during a period of market volatility. The unrealized mark-to-market
gain component of natural gas marketing margins was $2.7
million higher after tax than in the same period in 2005.
In March 2006, we completed the sale of the operating
assets of our oil marketing and transportation business,
which resulted in an after-tax gain on sale of approximately
$8.8 million, which is reported within "discontinued
operations." In April, we began crude oil marketing
at our Colorado-based energy marketing operations.
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Oil and gas income from continuing operations
was $5.4 million in 2006 and $5.0 million in 2005. Revenues
increased 32 percent primarily due to average prices received
(net of hedges) that were 30 percent higher for natural
gas and 38 percent higher for oil. Overall production
increased 1 percent on an equivalent basis, as gas production
increased 2 percent and oil production decreased 6 percent.
Total operating expenses increased 39 percent primarily
due to industry-wide higher field service costs, increased
depletion expense, an increase in revenue-based taxes,
and an increased number of producing wells. On a per Mcfe
basis, lease operating expense (LOE) increased 49 percent
to $1.19 per Mcfe. The increase in LOE is due primarily
to more work done in certain fields in the first quarter
due to milder weather as compared to the previous year.
Depletion costs per Mcfe increased 64 percent to $1.62,
due to higher capitalized costs, higher estimated future
development costs, and the addition of higher average-cost
reserves from recent acquisitions. Results were also impacted
by increased interest expense due to higher borrowings
to fund acquisition and development costs. In the first
quarter of 2006, we completed the acquisition of certain
assets of Koch Exploration, Inc. in the Piceance Basin
of Colorado. The purchase price for the 18,000 net acre
leasehold with approximately 63 wells and 40 billion cubic
feet equivalent proven developed and undeveloped reserves
was $51.4 million.
- Power generation income from continuing operations was
$2.1 million, compared to income of $3.9 million in 2005.
The 46 percent decline in earnings was primarily the result
of a 12 percent decrease in revenues due to outages at our
Las Vegas power plants and a planned one-week outage at
our Wygen I plant. Partially offsetting these factors was
an increase in revenues from our Harbor power plant. In
addition, operating expense decreased 9 percent, due to
lower variable operating costs related to the Las Vegas
outages, offset in part by an increase in repair and maintenance
costs. Plant availability of our contracted fleet was affected
by the planned maintenance at Las Vegas I and unplanned
outages at Las Vegas II. Excluding Las Vegas, the availability
of the remainder of our gas-fired fleet was approximately
99 percent. Availability of our Wygen I coal-fired plant
was approximately 92 percent. The Las Vegas I power plant
resumed operations in late April 2006, and the Las Vegas
II plant is expected to be fully operational in May 2006.
The total negative financial impact of this unplanned outage
is expected to be in the range of $0.05 to $0.08 per share.
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Coal mining income from continuing operations
was $1.4 million in 2006 compared to $1.5 million in 2005.
Results were affected by a 23 percent increase in mining
expense from higher taxes and royalties and higher transportation
and overburden removal costs, offset partially by increased
revenues due to higher average prices received and a 6
percent increase in production during the quarter.
The following tables contain certain Wholesale Energy operating
statistics:
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Three months ended March 31,
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2006
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2005
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Coal mining:
Tons of coal sold
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1,223
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1,153
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Oil and gas production:
Mcf equivalent sales
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3,501,860
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3,465,000
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Energy marketing
average daily volumes:
Natural gas physical -MMBtus
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1,275,900
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1,357,600
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Three months ended March 31,
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2006
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2005
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------
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Contracted fleet power
plant availability
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85.7%
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98.9%
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Corporate
Corporate loss for the three-month period ended March 31,
2006 increased to $3.0 million after tax, compared to $1.3
million for the same period in 2005. The increase was primarily
due to higher expenses related to corporate development,
including costs associated with an unsuccessful proposed
combination with NorthWestern Corporation.
POWER MARKETING ARBITRATION RULING ANTICIPATED
As previously disclosed in our public filings, the Company
has ongoing litigation with PPM Energy, Inc., relating to
a power marketing contract between PPM and our electric
utility. An arbitration proceeding was held in August 2005.
The arbitrator indicated that we can expect a decision in
the near term. Any decision delivered by the arbitrator
prior to issuance of our Quarterly Report on Form 10-Q in
May 2006 that has a material impact on our financial statements
will be recorded in our 2006 financial results, thereby
adjusting the results included in this release.
EARNINGS CONFERENCE CALL
The Company will conduct a conference call on Friday, May
5, 2006 beginning at 11:00 a.m. Eastern Standard Time to
discuss recent financial and operating performance. The
conference call will be open to the public. The call can
be accessed by dialing, toll-free, (800) 762-6067. 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 12,
2006 by dialing (800) 475-6701 (USA) or (320) 365-3844 (international).
The access code is 827802.
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 Item 1A of Part
I of our 2005 Annual Report on Form 10-K and in Item 1A
of Part II 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 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;
- The timing and extent of scheduled and unscheduled outages
of power generation facilities;
- Our ability to successfully combine with and profitably
operate any future acquisitions;
- Unfavorable rulings in the periodic applications to recover
costs for fuel and purchased power;
- 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 exist;
- Numerous uncertainties inherent in estimating quantities
of proved oil and gas reserves and actual future production
rates and associated costs;
- Changes in business and financial reporting practices
arising from the repeal of the Public Utility Holding Company
Act of 1935 and other provisions of the recently enacted
Energy Policy Act of 2005.
- 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 and availability 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;
- Our effective 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 and natural disasters or
responses to such actions and events;
- 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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