Black Hills Benefits from Harsh Weather, Lower Costs in 2014, Expects $450 Million Capex in 2014

Researched by Industrial Info Resources (Sugar Land, Texas)--Black Hills Corporation (NYSE:BKH) (Rapid City, South Dakota), a diversified energy company that services Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming, saw mostly positive results in 2013 from earnings growth in its natural gas utilities and Coal Mining segment, and benefited from colder-than-expected weather in the fourth quarter. Net income was reported to be $114.9 million for full-year 2013, a 40.98% increase from 2012, and $18.1 million for the fourth quarter, a 41.04% decrease from fourth-quarter 2012.

Total revenues stood at $1.28 billion for full-year 2013, an 8.69% increase from 2012, and $355.4 million for the fourth quarter, an 11.45% increase from fourth-quarter 2012. The Electric and Gas utilities benefited from substantial increased in heating-degree days, which boosted volumes. Black Hills also benefited from a non-cash, after-tax gain from mark-to-market adjustments on interest rate swaps of $20 million. The Coal Mining segment suffered a 9% drop in the average price per ton for coal sold by contract, but benefited from lower operational and maintenance costs, as well as lower depreciation expenses.

However, the Oil & Gas segment reported a net loss after a dip in production from natural gas wells; a decline in average prices for natural gas sold; and a sharp decline in volumes sold following the sale of the company's Williston Basin assets in 2012.

Capital expenditures were reported to be $380 million for 2013, compared with $347 million in 2012.

Industrial Info is tracking more than $457 million in active projects involving Black Hills, including the $237 million construction of the 137-megawatt Cheyenne Prairie Generating Station in Cheyenne, Wyoming. The natural gas-fired plant will consist of a 40-megawatt (MW) General Electric LM6000 simple-cycle combustion turbine; two 40-MW General Electric LM6000 combustion turbines with two Nooter Eriksen heat-recovery steam generators; and a 30-MW Siemens steam turbine generator. The Industrial Company (Casper, Wyoming) is serving as the engineering, procurement and construction contractor.

"During the quarter and all year, we continued our efforts to acquire small utilities, primarily municipals, near our existing service territories," said David Emery, the chairman and chief executive officer of Black Hills, in a conference call. "We were successful in doing several of those during the year, adding about 900 customers. In January of this year, we announced a small gas distribution system in northeastern Wyoming, adding another 400 customers. Not a huge needle mover, but great acquisitions nonetheless--they're very easy to integrate and operate."

In addition to the Cheyenne Prairie Generating Station, which is slated to begin commercial operations in the fourth quarter of 2014, Black Hills expects to gain $22 million from the sale of its 40-MW CTII natural gas-fired unit in Gillette, Wyoming, after the deal closes in August. The Colorado Public Utilities Commission recently approved the construction of a 40-MW, natural gas-fired combustion turbine to replace the W.N. Clark coal-fired power plant in Canon City, Colorado, which was retired on December 31.

"For our 2014 drilling program, we intend to drill and complete up to six horizontal wells in the Mancos Shale and the Piceance Basin, and then continue our selective oil well exploration program as well," Emery said in the conference call.

Capital expenditures are expected to be about $450 million for full-year 2014.

For more information, visit Industrial Info's North American Power Project Database.

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