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Q1 2015 EARNINGS CALL – Black Hills Corporation

Black Hills Corporation · May 5, 2015 · 69 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. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 1
    First Quarter Earnings May 5, 2015
  2. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 2
    Discussion Agenda First Quarter Review David Emery Chairman, President and Chief Executive Officer Financial Update Richard Kinzley Senior Vice President and Chief Financial Officer Strategic Overview David Emery Chairman,…
  3. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 3
    Q1 Review Cheyenne Prairie Generating Station Cheyenne, Wyoming 2015 First Quarter Review - May 5, 2015 4
  4. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 4
    Q1 2015 Highlights Business Environment Moderate weather in utility service territories compared to colder weather in same period last year tempered natural gas and electric utilities results Utilities Black Hills Power received an…
  5. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 5
    Q1 2015 Highlights Non-Regulated Oil and Gas accelerated its Mancos Shale drilling program in southern Piceance Basin: Three horizontal gas wells placed on production in early 2015; strong production results to date Recently…
  6. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 6
    Q1 2015 Financial Highlights Net Income, as adjusted* Key Earnings Drivers (in millions) (per share) New rates for Cheyenne Prairie 48 48 1.08 Generating Station 1.07 Higher commercial and industrial MWh sold Higher COE…
  7. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 7
    Q1 2015 Financial Highlights Change in Net Income, as adjusted*, from Prior Year Q1 2015 47.9 4.3 Electric Utilities (2.5) Gas Utilities 0.2 Power Generation 0.5 Coal Mining (3.0) Oil & Gas 0.3 Corporate Q1 2014 48.1…
  8. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 8
    Financial Update Elmo Bailey & Ebi Kazemi prepare for pole line installation in the mountains near Victor, Colorado 2015 First Quarter Review - May 5, 2015 9
  9. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 9
    Earnings Per Share Analysis Q1-2015 Q4-2014 Q3-2014 Q2-2014 Q1-2014 Net Income (GAAP) 1.07 0.76 0.60 0.44 1.08 Add back unique loss/subtract (gain) items (Non-GAAP) - - - - - 1.07 0.76 0.60 0.44 1.08 Net Income, as adjusted…
  10. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 10
    Q1 Revenue/Op Income Total Revenue, as adjusted* (in millions) Total Operating Income, as adjusted* (in millions) 442 460 92.0 89.6 Q1 2015 Q1 2014 Q1 2015 Q1 2014 186 45.8 Electric Util Electric Util 182 36.0 238 39.0…
  11. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 11
    Income Statement (in millions, except earnings per share) 1st Qtr 2015 2014 Revenue 442.0 460.2 Gross Margin 236.6 229.7 Operating Expenses (105.1) (104.0) DD&A (39.5) (36.1) Operating income 92.0 89.6 Interest expense (19.0)…
  12. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 12
    Q1 Utilities Gross Margin/Op Income Electric Utilities (in millions) Gas Utilities (in millions) 107.5 Q1 2015 94.4 Q1 2015 84.8 Q1 2014 Q1 2014 81.5 45.8 42.9 36.0 39.0 Gross Margin, as Operating Income, as Gross Margin…
  13. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 13
    Q1 Non-Regulated - Revenue/Op Income Power Generation (in millions) Coal Mining (in millions) 23.2 22.9 Q1 2015 15.9 15.5 Q1 2015 Q1 2014 Q1 2014 11.2 10.7 3.5 2.7 Revenue, as adjusted* Operating Income, as Revenue Operating…
  14. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 14
    Q1 Non-Regulated - Revenue/Op Income Oil & Gas (in millions) 14.9 Q1 2015 11.2 Q1 2014 (7.7) (2.9) Revenue Operating Income Higher volumes sold Lower production and ad valorem taxes Lower average prices for natural…
  15. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 15
    Capital Structure (In millions, except for ratios) March 31, Dec. 31, Sept. 30, June 30, March 31, 2015 2014 2014 2014 2014 Capitalization Short-term Debt 103 350 459 408 100 Long-term Debt 1,543 1,268 1,108 1,122 1,397 Total Debt…
  16. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 16
    Earnings Guidance* Black Hills reaffirms its guidance for 2015 earnings, as adjusted, to be in the range of 2.80 to 3.00 per share as most recently issued on Feb. 2, 2015 * See Appendix for complete list of assumptions 2015 First…
  17. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 17
    Creating Shareholder Value Operating Income and EPS, as Adjusted 400 3.20 2.89 2009 2015 EPS CAGR = 13.2% 2.90 ** 350 2.80 2.45 300 2.40 2.09 250 2.00 36.1 35.9 (in millions) 1.67 1.69 36.2 (per share) 200 1.60 1.38…
  18. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 18
    Strategic Overview Busch Ranch Wind Farm near Pueblo, Colorado 2015 First Quarter Review - May 5, 2015 19
  19. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 19
    Strategic Objectives Utility-centered energy company well positioned to build upon a track record of successful utility growth EARNINGS: Lead industry peers in CUSTOMER: Provide quality OPERATIONAL PERFORMANCE: ENGAGEMENT: Achieve…
  20. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 20
    Capital Investment by Segment (in millions) 2011 2012 2013 2014 2015F 2016F 2017F Generation 85 72 130 75 62 72 32 Transmission 20 38 32 31 68 41 33 Distribution 44 44 48 87 49 60 44 Other 24 13 12 0 51 52 25 Subtotal Electric…
  21. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 21
    Utility Growth Opportunity Cost of service gas program - potential for direct investment in natural gas reserves provides longer-term price stability for customers, while providing opportunities for increased earnings Continuing…
  22. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 22
    Oil and Gas Strategy Complete 2014 and 2015 Mancos Shale appraisal program in southern Piceance Basin Drill and complete approximately 12 horizontal gas wells; decided to drill and case one additional well Placed three horizontal…
  23. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 23
    Southern Piceance - Mancos Shale 2013-2015 Drilling Program Status Total First 30-days' Production Measured Lateral Number Sand per Completed Recoverable F&D Frac Lateral Ft Well Cost Reserves * 1 Date of First Depth Length Costs2…
  24. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 24
    Southern Piceance Mancos Shale Drilling Program Map 2015 First Quarter Review - May 5, 2015 25
  25. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 25
    Southern Piceance Mancos Shale Well Production Lateral Lengths 7000' Daily Niobrara / Mancos Shale Production 10,000 WHF 208,712' (BHEP) Federal 36-1H7,884' (ECA) KM DH5A-32 9,787' (ECA) Gross Gas, Mcf/D WHF 198,115'…
  26. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 26
    Mancos Shale Daily Well Production Homer Deep Pad 9-41 100,000 Daily Production 10,000 MCFD, Casing Pressure Production Rate Casing Pressures 1,000 1 11 21 31 41 51 Producing Days 9-41AH (2/3/15) 9-41BH…
  27. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 27
    Mancos Shale Drilling Optimization Measured Depth versus Capital Cost Before Completion 0 2,000 4,000 2011 6,000 Depth (MD in feet) 8,000 10,000 5.64MM 12,000 6.78MM 6.60MM 14,000 3.54MM 16,000 5.81MM 18,000…
  28. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 28
    Mancos Shale - Well Optimization Gross Finding and Development Costs (Total completed well costs divided by EUR) 5.00 4.50 4.00 Gross F&D Costs (/mcfe) 3.50 3.00 2.50 2.00 1.50 1.00 0.50 - JIC…
  29. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 29
    Dividend Growth Dividend Increased for 45 Consecutive Years Dividend yield 3.3% on May 1, 2015 1.65 1.62 1.60 1.56 1.55 Annual Dividend 1.52 Per Share 1.50 1.48 1.46 1.45 1.44 1.42 1.40 1.35 1.30 2009 2010…
  30. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 30
    Credit Rating All three credit ratings agencies have their credit ratings issued with stable outlooks Black Hills Corporation S&P Moodys Fitch Corporate Credit Rating BBB Baa1 BBB+ Senior Unsecured BBB Baa1 BBB+ Outlook Stable…
  31. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 31
    Operational Excellence Recognition Safety Performance In January our Colorado operations were named Denver Post Top Workplaces Workplace Achievers Power Plant Fleet Availability Natural Gas Turbine Starting Reliability by…
  32. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 32
    2015 Scorecard Strategy Construct cost effective rate-base Construct additional utility Achieve top-tier operational Be the safest company in the energy generation and transmission to serve infrastructure that supports growing…
  33. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 33
    Questions Pueblo Airport Generating Station near Pueblo, Colorado 2015 First Quarter Review - May 5, 2015 34
  34. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 34
    Appendix Dory Batka and Jerry Likewise monitor the energy supply at our Neil Simpson Complex in Gillette, Wyoming 2015 First Quarter Review - May 5, 2015 35
  35. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 35
    Appendix Table of Contents Overview Map Guidance Assumptions Capital Expenditures Utilities Non-Regulated Oil & Gas Non-GAAP slides 2015 First Quarter Review - May 5, 2015 36
  36. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 36
    Black Hills Corporation Overview A growth-oriented, vertically-integrated energy company with a tradition of improving life with energy and a vision to be the energy partner of choice. Based in Rapid City, South Dakota, the company serves…
  37. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 37
    Guidance Assumptions Issued on Feb 2, 2015 Black Hills reaffirms its 2015 earnings guidance, as adjusted, to be in the range of 2.80 to 3.00 per share. The guidance range is based upon the following key assumptions: Capital spending of…
  38. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 38
    Capital Expenditures Historical and Forecasted Capital Expenditures (in millions)* 495 455 416 369 382 386 340 182 130 199 84 118 129 127 285 313 325 264 257 217 213 2011 2012 2013 2014 2015F 2016F 2017F Regulated…
  39. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 39
    Select Major Utility Projects Forecasted Capital Expenditures * Projected Excludes routine capital for maintenance of assets In-service 2015F 2016 - 2019F Total ** Date (in millions) Utilities Cheyenne Light - Energy West…
  40. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 40
    Electric and Gas Utilities Black Hills Nebraska Iowa Power Gas Gas Colorado Cheyenne Gas Light Kansas Gas Colorado Electric Electric Utilities* Natural Gas Utilities* Generates, transmits and distributes electricity to…
  41. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 41
    Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 95.7 Q1 2015 91.3 3,222 Q1 2015 93.0 Q4 2014 (Total for all gas service* areas weighted by 98.1 2,416 Q4 2014 Gas…
  42. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 42
    Estimated Utility Rate Base Estimated Rate Base* 2010 2011 2012 2013 2014 by Utility Segment (in millions) Electric Utilities 901 1,007 1,272 1,248 1,487 Gas Utilities 425 443 450 454 489 Total 1,326 1,450 1,722 1,702 1,976…
  43. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 43
    Utility Regulatory Results Authorized Electric Effective Return on Rate Base Jurisdiction Or Gas Date Equity Capital Structure (in millions) BHP-SD Electric 10/01/2014 Global Settlement Global Settlement 543.9 BHP-WY Electric…
  44. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 44
    Mitigating Regulatory Recovery Risk Mechanisms reduce regulatory lag and the risk of non-recovery Cost Recovery Mechanisms Electric Utility Environmental DSM/ Trans- Fuel Cost Trans- Purchased Fixed Cost Financing Jurisdiction Cost…
  45. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 45
    Non-Regulated Energy Power Generation* Owns interests in two power generation facilities totaling 269 MW Wygen I - 69 MW of a 90 MW coal-fired facility in Gillette, WY Pueblo Airport - 200 MW natural gas-fired facility in Pueblo, CO…
  46. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 46
    Q1 2015 Non-Regulated Update IPP Generation Contract Availability (%) Coal Production Revenue and Expense per Ton Sold (Coal in millions of tons and overburden in millions (Units = tons sold plus cubic yards of overburden Coal-fired…
  47. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 47
    Gillette Energy Complex Value proposition through integrated approach Coal production, generation, transmission utility and non-regulated assets Shared staff, facilities, land and infrastructure Wyodak Mine Interstate 90…
  48. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 48
    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…
  49. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 49
    Oil & Gas Exploration & Development Program Note: approximate areas of geologic basins does not reflect BHEP acreage 2015 First Quarter Review - May 5, 2015 50
  50. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 50
    Oil and Gas Mancos Shale Strategy Three successful test wells drilled in 2011 (4,000 5,000 foot horizontal laterals) affirmed potential in San Juan and southern Piceance Basins Two successful wells drilled in southern Piceance Basin…
  51. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 51
    Southern Piceance - Mancos Shale Horizontal Well Pad Spacing 1 mile Mancos Formation 660 feet 1,320 feet Schematic Not to scale 2015 First Quarter Review - May 5, 2015 52
  52. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 52
    Current Mancos Well Plan 10-3/4 Surface Casing set 1,000' Measured Depth 7-5/8 Intermediate Casing set 5,800'-6,500' Measured Depth 4-1/2 Production Casing set 17,000-18,000' Total Measured Depth Total of 40-50 Frac Stages;…
  53. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 53
    Southern Piceance Basin Western Colorado 2015 First Quarter Review - May 5, 2015 54
  54. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 54
    Southern Piceance Basin Mancos Production Piceance Basin Type Curve 10,000 WHF 208,712' (BHEP) 10,000' Lateral Type Curve 9.5 Bcf Gas Rate, MCFD WHF 198,115' (BHEP) 1,000 5,000' Lateral Type Curve 5.4 Bcf 100…
  55. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 55
    San Juan Basin Mancos Shale WPX Rosa Unit Wells Rosa 634B (upper target) Rosa 634A (lower target) 16 miles BHGR Jicarilla Horizontal Well Jicarilla 434-30 724 (lower target) 45 miles Southern Mancos (Gallup) Oil…
  56. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 56
    San Juan Basin Mancos Production 10,000 EUR 6.5 BCFE Gross Gas MCFD 1,000 100 1 11 21 31 41 51 Months On Production WPX - ROSA UNIT 634A WPX - ROSA UNIT 634B BHEP - JIC 464-30 724 2015 First Quarter Review - May…
  57. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 57
    Reserve Data and Net Present Value Reserve calculation at Dec. 31, 2014 Net Average Average Net Oil Equiv Price Oil Price Nat Average (MMBO) Net Gas Net NGL (BCFE)* PV10 Per BBL Gas Price NGL ** (BCF)** (MMB) * (MM) per MCF Per BBL…
  58. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 58
    In Millions 0 100 200 300 400 500 600 2015 2016 2017 Term Loan 2018 2019 75MM 2020 BHC 5.88% Note 2015 First Quarter Review - May 5, 2015 2021 CLFP IR Bond 2022 Debt Maturities 2023 BHC 4.25% Note 2024…
  59. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 59
    Use of Non-GAAP Financial Measures 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 GAAP to…
  60. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 60
    Use of Non-GAAP Financial Measures Revenue / Gross Margin, as adjusted (in thousands) Utilities Non-Regulated Energy Electric Power Corporate - QTD Mar 31, 2015 Utilities Gas Utilities Generation Coal Mining Oil and Gas I/C Elim…
  61. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 61
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Power QTD Mar 31, 2015 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  62. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 62
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Power YTD Dec. 31, 2014 Electric Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  63. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 63
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Power YTD Dec. 31, 2011 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  64. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 64
    Use of Non-GAAP Financial Measures Net Income, as adjusted (in thousands, after-tax) Utilities Non-Regulated Energy Electric Power QTD Mar 31, 2015 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Net Income…
  65. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 65
    Use of Non-GAAP Financial Measures Depreciation, Depletion & Amortization, adjusted for Intercompany Capital Lease* (in thousands, pre-tax) Electric Gas Total Power Total Non- YTD Dec. 31, 2014 Utilities Utilities Utilities Generation…
  66. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 66
    Use of Non-GAAP Financial Measures EBITDA For the Three Months Ended Mar 31, (in thousands) 2015 2014 Net Income 47,894 48,118 Depreciation, depletion and amortization 39,586 36,083 Interest expense, net 19,029 16,943 Income…
  67. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 67
    Use of Non-GAAP Financial Measures EPS, as adjusted Earnings Per Share, as adjusted 2009 2010 2011 2012 2013 2014 Net income (GAAP) 2.11 1.76 1.24 1.85 2.59 2.89 Discontinued Operations (0.11) (0.14) (0.23) 0.16 0.02 - Income (loss) from…
  68. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 68
  69. Q1 2015 EARNINGS CALL – Black Hills Corporation – slide 69
    To see more ways we are improving life with energy visit us at www.blackhillscorp.com.

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