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JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation

Black Hills Corporation · Dec 11, 2013 · 62 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 1
    Nathan Woods, Black Hills Power Investor Meetings December 2013
  2. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 2
    Discussion Agenda Company Overview Financial Review Strategic Objectives Q&A Investor Meetings December 2013 3
  3. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 3
    Company Overview Pueblo Airport Generating Station near Pueblo, Colo. Investor Meetings December 2013 4
  4. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 4
    Black Hills Corporation Today Began serving electric customers in 44.5 million shares outstanding Deadwood, SD in 1883 Average 3 - month trading volume Black Hills Power incorporated 1941 approx. 183,952 shares daily Listed on NYSE…
  5. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 5
    Black Hills Corporation Overview A growth-oriented, vertically-integrated energy company with a tradition of exemplary service and a vision to be the energy partner of choice. Based in Rapid City, SD, the company serves 769,000 electric…
  6. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 6
    Electric and Gas Utilities Black Hills Power Cheyenne Nebraska Light Gas Iowa Cheyenne Black Hills Gas Light Power Colorado Gas Kansas Colorado Gas Electric Electric Utilities* Natural Gas Utilities* Generates, transmits…
  7. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 7
    Non-Regulated Energy Power Generation* Owns interests in three power generation facilities totaling 309 MW Wygen I - 69 MW of a 90 MW coal-fired facility in Gillette, WY CT II - 40 MW combustion turbine in Gillette, WY (will be sold…
  8. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 8
    Q3 2013 Highlights Business Environment Cooler weather in electric utility service territories compared to same period last year Utilities Black Hills Power received approval from South Dakota Public Utilities Commission for general…
  9. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 9
    Q3 2013 Highlights Utilities continued Gas utilities purchased one small municipal natural gas system; year-to-date four purchases have added approximately 900 customers Black Hills Power early October Winter Storm Atlas resulted in…
  10. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 10
    Q3 2013 Highlights Corporate Activities Moodys Investors Service raised its corporate credit rating on Black Hills Corp. to Baa2 from Baa3, with a positive outlook Standard & Poors Rating Services raised its corporate credit rating on…
  11. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 11
    Financial Update Stan Lindholm of Exploration & Production Investor Meetings December 2013 12
  12. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 12
    Earnings Per Share Analysis Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 YTD 2013 YTD 2012 Net income (loss) (GAAP) 0.52 0.69 0.97 0.70 0.78 2.18 1.15 Loss (income) from discontinued operations - - - - - - 0.16 Income (loss) from…
  13. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 13
    Income Statement Sept. YTD (In millions, except per share amounts) 2013 Actual 2012 Actual Comments Revenue 920.4 855.0 Gas Utilities up 19% Gross margin 581.5 571.8 Operating expense (291.0) (279.1) Higher labor and benefit costs…
  14. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 14
    YTD Sept. Revenue/Op Income 492.1 Total Revenue, as adjusted* Electric Util 463.9 (in millions) 373.4 920.4 Gas Util 855.0 314.3 63.8 Power Gen 60.5 YTD 2013 43.2 YTD 2012 Coal Mining 42.8 41.6 Oil & Gas 67.0 (93.7)…
  15. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 15
    Growth Operating Income and EPS, as Adjusted (in millions, except per share amount) 350 2.50 2009 2012 EPS CAGR = 14.8% 2.09 300 2.00 250 1.67 1.69 36.1 1.38 1.50 200 5.3 19.0 150 19.9 1.00 100 210.4 185.8 159.3…
  16. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 16
    Capital Structure (In millions, except for ratios) Sept. 30, Dec. 31, Sept. 30, 2013 2012 2012 Capitalization Short-term Debt 394.0 381.0 553.3 Long-term Debt 956.0 938.9 943.0 Total Debt 1350.0 1,319.9 1,496.3 Equity 1,290.9…
  17. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 17
    Financing Activities Completed debt offering of 525 million, 4.25% senior unsecured notes due Nov. 30, 2023 Called for redemption all of the outstanding 250 million, 9.0% senior unsecured notes due May 15, 2014 Prepaid Black Hills…
  18. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 18
    Strategic Overview Busch Ranch Wind Farm near Pueblo, Colo. Investor Meetings December 2013 19
  19. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 19
    Strategic Objectives Utility-centered energy company well positioned to build upon a track record of successful utility growth Achieve top-tier operational performance in a culture of continuous improvement Lead industry peers in…
  20. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 20
    Strategic Objective Operating Performance 2012 IEEE Reliability Benchmarking Study Safety Performance Total Annual Outage Minutes BHC 2013 data is YTD through Sept.; TCIR is defined as the average number of work- related…
  21. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 21
    Strategic Objective Operating Performance Power Plant Fleet Availability by Fuel Type Natural Gas Turbine Starting Reliability 100% 100% BHC Industry BHC Industry 96% 96% 92% 92% 88% 88% 84% 84% 80% 80% Coal (61%*) Gas…
  22. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 22
    Strategic Objectives Operating Performance Generation Capacity by Fuel Type Generation Capacity by Fuel Type 1,200 80% % of Generation by Fuel type 1,000 70% MW of Generation 60% 800 50% 600 40% 30% 400 20% 200 10% 0…
  23. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 23
    Strategic Objective Earnings Growth Historical and Forecasted Capital Expenditures (in millions)* 490 430 438 416 376 338 205 340 120 127 53 199 134 127 285 285 310 311 217 213 242 2009 2010 2011 2012 2013F 2014F 2015F…
  24. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 24
    Strategic Objective Earnings Growth Capital Investment by Segment (in millions) 2009 2010 2011 2012 2013F 2014F 2015F Generation 168 146 85 72 133 94 44 Transmission 21 28 20 38 62 57 36 Other 53 59 68 57 50 100 109 Subtotal…
  25. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 25
    Strategic Objective Earnings Growth Select Major Utility Projects Forecasted Capital Expenditures * Projected Excludes routine capital expenditures for maintenance of assets In-service 2016F (in millions) Date 2013F 2014F 2015F -…
  26. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 26
    Strategic Objective Earnings Growth Cheyenne Prairie Generating Station New Generation Helps Meet Growing Demand and New Environmental Regulations Overview: New 222 million, 132 MW generating plant jointly owned by Cheyenne Light and…
  27. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 27
    Strategic Objective Earnings Growth Utilities Regulatory Updates Black Hills Power South Dakota Public Utilities Commission approved rate case settlement on Sept. 18 authorizing 8.8 million, or 6.4%, increase in annual electric revenue,…
  28. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 28
    Strategic Objective Earnings Growth Utilities Regulatory Updates continued Colorado Electric Colorado Public Utilities Commission on Oct. 16 denied application for approval to acquire up to 30 MW of wind energy; commission stated…
  29. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 29
    Strategic Objective Value Upside Oil and Gas Growth Strategy Prove up and capture value of existing oil and gas properties Prove up probable and possible reserves Capture value through optionality Participate in limited exploration…
  30. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 30
    Strategic Objective Value Upside Oil and Gas Mancos Shale Strategy Three successful test wells drilled in 2011 affirmed potential in San Juan and Southern Piceance Basins; second Southern Piceance Basin test well produced condensate and…
  31. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 31
    Strategic Objective Credit Rating Moodys Investors Service raised its corporate credit rating on Black Hills Corp. to Baa2 from Baa3 in Sept. 2013; issued with a positive outlook Standard & Poors raised its corporate credit ratings on…
  32. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 32
    Strategic Objective Dividend Growth Dividend Increased for 43 Consecutive Years 1.55 Dividend yield was 3.0% on Nov. 19, 2013* 1.52 1.50 1.48 1.46 1.45 1.44 Annual Dividend 1.42 1.40 Per Share 1.40 1.35 1.30 1.25…
  33. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 33
    2013 Scorecard Strategy 2013 Progress and Future Initiatives UTILITIES + Acquire regulated utility properties in our geographic region Commence construction on Cheyenne Prairie Generating Station (CPGS) (Q2) + Construct additional cost…
  34. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 34
    Questions Harney Peak , Black Hills, SD Investor Meetings December 2013 35
  35. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 35
    Use of Non-GAAP Financial Measures Gross Margin Our financial information includes the financial measure Gross Margin, which is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a…
  36. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 36
    Use of Non-GAAP Financial Measures (continued) Segment Revenue, Operating Income, Income from Continuing Operations and EPS, as adjusted We have provided non-GAAP earnings data reflecting adjustments for special items as specified in the…
  37. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 37
    Use of Non-GAAP Financial Measures Revenue, as adjusted Electric Gas Power Coal Oil and YTD Sept. 30, 2013 Revenue, as adjusted Utilities Utilities Generation Mining Gas Corporate Total (in thousands) Revenue (GAAP) 482,222 373,440…
  38. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 38
    Use of Non-GAAP Financial Measures EBITDA, as adjusted Nine Months Ended (in thousands) 2013 2012 Income from continuing operations 96,839 57,571 Depreciation, depletion and amortization 106,068 121,398 Impairment of Oil and Gas…
  39. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 39
    Use of Non-GAAP Financial Measures Operating Income, as adjusted Use of non-GAAP Financial Measures Operating Income, as Adjusted YTD 31-Dec-09 Regulated non-Regulated Corporate Power (in thousands, pre-tax) Electric Utilities Gas…
  40. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 40
    Use of Non-GAAP Financial Measures Operating Income, as adjusted Use of non-GAAP Financial Measures Operating Income, as Adjusted YTD 31-Dec-11 Regulated non-Regulated Corporate Power (in thousands, pre-tax) Electric Utilities Gas…
  41. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 41
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power YTD Sept. 30, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Operating income (loss) (GAAP)…
  42. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 42
    Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Electric Power YTD Sept. 30, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Income (loss)…
  43. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 43
    Use of Non-GAAP Financial Measures DD&A, adjusted for Intercompany Capital Lease 31-Dec-12 Regulated Non-Regulated Corporate Electric Power Non- (in thousands) Utilities Gas Utilities Total Utilities Generation Coal Mining Oil and Gas…
  44. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 44
    Use of Non-GAAP Financial Measures EPS, as adjusted Earnings Per Share, as adjusted 2009 2010 2011 2012 Net income (GAAP) 2.11 1.76 1.24 1.85 Discontinued Operations (0.11) (0.14) (0.23) 0.16 Income from Cont. Ops., (GAAP) 2.00…
  45. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 45
    Appendix Natural gas line installation near White Creek, Neb. Investor Meetings December 2013 46
  46. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 46
    Black Hills Corporation History Originating company started in Deadwood in 1883 (130 years ago) Company was soon sold to new investors to introduce lights into all the towns and cities of the Hills and the name Black Hills Electric…
  47. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 47
    Black Hills Organizational Structure Investor Meetings December 2013 48
  48. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 48
    Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 95.8 97.6 Q3 2013 79 Q3 2013 95.5 (Total for all gas service* areas weighted by 96.0 Q2 2013 842 Q2 2013 Gas…
  49. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 49
    Siting Synergies Multiple generation sites with expansion potential along the Front Range Shared staff, facilities, land, infrastructure Each location has advantageous fuel supply logistics and/or wind potential Reduces asset…
  50. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 50
    Utility Regulatory Results Authorized Electric Effective Return on Rate Base Jurisdiction Or Gas Date Equity Capital Structure (in millions) BHP-SD Electric 6/16/2013 Global Settlement Global Settlement 440.2 BHP-WY Electric…
  51. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 51
    Mitigating Regulatory Recovery Risk Mechanisms reduce regulatory lag and the risk of non-recovery Electric Utility Cost Recovery Mechanisms Jurisdiction Environmental DSM/ Trans- Fuel Cost Trans- Purchased Fixed Cost Financing Cost…
  52. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 52
    Q3 2013 Non-Regulated Update IPP Generation Contract Availability (%) Coal Production Revenue and Expense per Ton Sold Coal-fired plants (Coal in millions of tons and overburden in millions (Units = tons sold plus cubic yards of…
  53. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 53
    Mine Sequence Stripping Ratios* 2.1 to 1 2.1 to 1 2.1 to 1 1.5 to 1 1.6 to 1 2.2 to 1 2.1 to 1 1.8 to 1 1.5 to 1 1.3 to 1 * The ratio of the volume of overburden required to be removed to the quantity of coal…
  54. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 54
    Coal Contracts Summary Approximately 50% of coal production sold under contracts that include price adjustments based on actual mining costs plus a return on mine capital investments Most of the remaining 50% of coal production sold…
  55. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 55
    Oil & Gas Exploration & Development Program Note: approximate areas of geologic basins does not reflect BHEP acreage Investor Meetings December 2013 56
  56. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 56
    Reserve Data and Net Present Value Reserve calculation at Dec. 31, 2012 Average Average Net Oil Net Gas Net Equiv PV10 Price Oil Price Nat Gas (MBO)** (BCF)** (BCFE)** (MM) Per BBL per MCF PDP* 3.9 54.1 77.5 140.7 85.39 2.25 PNP*…
  57. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 57
    Southern Piceance Basin Western Colorado Investor Meetings December 2013 58
  58. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 58
    Southern Piceance Basin Mancos Drilling Program 2013-2015 Investor Meetings December 2013 59
  59. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 59
    Southern Piceance Basin Mancos Production Piceance Basin Type Curve 10,000 10,000' Lateral Type Curve 9.5 BCFE GAS, Mcf/D 5,000' Lateral Type Curve 5.4 BCFE 1,000 100 1 11 21 31 41 51 61 MONTHS Note: Predicted…
  60. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 60
    San Juan Basin Mancos Shale 16 miles 45 miles Encana Five Mancos horizontal wells drilled. One reported completion 786 BOPD 838 MCFD Nine additional locations staked Investor Meetings December 2013 61
  61. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 61
    San Juan Basin Mancos Production Production Rates in Mcf/D 10,000 EUR 6.9 BCFE Gas Flow in Mcf/D 1,000 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 MONTHS WPX - Rosa Unit…
  62. JPMORGAN SMALL MIDCAP CONFERENCE – Black Hills Corporation – slide 62

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