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BKH ANALYST DAY – Black Hills Corporation

Black Hills Corporation · Oct 6, 2014 · 137 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. BKH ANALYST DAY – Black Hills Corporation – slide 1
    BKH Analyst Day Oct. 6, 2014
  2. BKH ANALYST DAY – Black Hills Corporation – slide 2
    Agenda Welcome Jerome Nichols Director of Investor Relations Introduction David Emery and Strategic Chairman, President & CEO Overview Linn Evans President & COO Utilities Segment Stuart Wevik VP Utility Operations…
  3. BKH ANALYST DAY – Black Hills Corporation – slide 3
    Introduction Cheyenne Prairie Generating Station Cheyenne, Wyoming BKH Analyst Day - Oct. 6, 2014 4
  4. BKH ANALYST DAY – Black Hills Corporation – slide 4
    Todays Objectives Engage with our leadership team Review our value proposition and track record Provide insight into our segment growth strategies, objectives and operations Black Hills Corporation is a utility-centered…
  5. BKH ANALYST DAY – Black Hills Corporation – slide 5
    Todays Presenters Sr. Management Linn Evans Tony Cleberg David Emery President and EVP and Chief Chairman, President and CEO COO Utilities Financial Officer Segment Vice Presidents Utility Vice President Stuart Wevik…
  6. BKH ANALYST DAY – Black Hills Corporation – slide 6
    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, South Dakota, the company serves 777,000…
  7. BKH ANALYST DAY – Black Hills Corporation – slide 7
    Investment Highlights Utility-centered energy company with robust capital investment opportunities creating strong earnings growth Upside growth and value creation provided by Oil and Gas (potential funding source for growth…
  8. BKH ANALYST DAY – Black Hills Corporation – slide 8
    Focusing on Growth Capital deployment opportunities drive organic growth Three-year plan period forecasts 1.3 billion in capital investments, with approximately 68% targeted toward utilities Cheyenne Prairie Generating Station in…
  9. BKH ANALYST DAY – Black Hills Corporation – slide 9
    Business Environment Changing energy environment offers opportunities and challenges Macro Economic New Regulations and Technological and Market Trends Public Policy Advances Sluggish economic Greenhouse Gas/CO2 Distributed…
  10. BKH ANALYST DAY – Black Hills Corporation – slide 10
    Delivering for Shareholders BKH Closing Stock Price * Total Shareholder Return % ** 60 200 50 160 40 120 30 80 20 40 10 0 0 -40 BKH BKH Peers 2014 S&P Utilities S&P 500 Annualized Total Shareholder Return 30%…
  11. BKH ANALYST DAY – Black Hills Corporation – slide 11
    Delivering for Shareholders Total Shareholder Return Annual Dividend EPS, as adjusted * 2009 - 9/19/14 1.38 1.67 1.69 2.09 2.45 1.42 1.44 1.46 1.48 1.52 1.56 143% 131% 152% 85% 2009 2010…
  12. BKH ANALYST DAY – Black Hills Corporation – slide 12
    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…
  13. BKH ANALYST DAY – Black Hills Corporation – slide 13
    Utilities Linn Evans President & COO Utilities Stuart Wevik VP Utility Operations Ivan Vancas VP Operations Services Mark Stege VP Operations CLFP
  14. BKH ANALYST DAY – Black Hills Corporation – slide 14
    Utilities Leadership Team Linn Evans President and COO Utilities Stuart Wevik Ivan Vancas Mark Lux Steve Pella VP Utility VP Operations VP & GM VP Corporate Operations Services Power Delivery Affairs BKH Analyst Day -…
  15. BKH ANALYST DAY – Black Hills Corporation – slide 15
    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…
  16. BKH ANALYST DAY – Black Hills Corporation – slide 16
    Regional Unemployment August 2014 Unemployment Rates by State (U.S. Bureau of Labor Statistics ) 2014 2013 Rank State Rate Rate 2 South Dakota 3.6 3.8 Unemployment Rate August 2014 3 Nebraska 3.6 4.2 9 Iowa 4.5 4.9 <…
  17. BKH ANALYST DAY – Black Hills Corporation – slide 17
    Overview Utility Customers and Usage Electric Utilities* Natural Gas Utilities* Volumes Including Transport in millions of Dths 205 5,000 570 140 No. Retail Customers in 000s No. Retail Customers in 000s 130 Total…
  18. BKH ANALYST DAY – Black Hills Corporation – slide 18
    Gas Utilities Distribution Volumes by Customer Type Industrial 8% Cheyenne Nebraska Light Gas Iowa Commercial Gas 27% Colorado Gas Residential 65% Kansas Gas Volumes with Number of Miles of Miles of Transport…
  19. BKH ANALYST DAY – Black Hills Corporation – slide 19
    Electric Utilities Usage in MWh by Customer Type Off-System 23% Residential Black Hills 22% Black Hills Power Power Wholesale 6% Cheyenne Light Municipal Commercial 2% Industrial 31% 16% Colorado Electric Number…
  20. BKH ANALYST DAY – Black Hills Corporation – slide 20
    Electric Transmission System Rapid City DC TIE (Tie to Eastern Interconnect) WYODAK Black Hills Power Common Use Transmission System Cheyenne Light WAPA Fuel & Power Transmission Map Legend Transmission symbols PSCO…
  21. BKH ANALYST DAY – Black Hills Corporation – slide 21
    Recent Accomplishments Cheyenne Prairie Generating Station placed into commercial operation Oct. 1 Rate case settlements approved for Black Hills Power (WY) and Cheyenne Light (both gas and electric) - effective Oct. 1 285MM of…
  22. BKH ANALYST DAY – Black Hills Corporation – slide 22
    Cheyenne Prairie Generating Station New 222 million, 132 MW generating plant jointly owned by Cheyenne Light and Black Hills Power placed in service Oct. 1 in Cheyenne, Wyoming BKH Analyst Day - Oct. 6, 2014 23
  23. BKH ANALYST DAY – Black Hills Corporation – slide 23
    Electric Reliability 2013 IEEE Reliability Benchmarking Study* 1st Quartile < 93 minutes Total Annual Outage in Minutes BHC 2013 SAIDI = 63 minutes BHC Utility * Represents average outage in minutes per…
  24. BKH ANALYST DAY – Black Hills Corporation – slide 24
    Rising to the Challenge Winter Storm Atlas (Oct. 3, 2013) 50% of customers without power 95% of customers had power back within six days Overall customer response was very positive during and following the storm Black Hills Power…
  25. BKH ANALYST DAY – Black Hills Corporation – slide 25
    Technology Integration Progress as of June 30, 2014 BKH Analyst Day - Oct. 6, 2014 26
  26. BKH ANALYST DAY – Black Hills Corporation – slide 26
    Safety Statistics 5.0 4.5 Rolling Twelve Month Incident Rates 4.0 3.5 3.0 U.S. Utility Industry Average : 2.8 Incident Rate 2.5 TCIR 2.0 1.8 1.5 DART 2014 TCIR Target : 1.3 1.0 1.0 0.5 0.0 TCIR - the…
  27. BKH ANALYST DAY – Black Hills Corporation – slide 27
    Company Employee Engagement 2014 BHC Speak Up survey results Strong response rate - 84% of all Black Hills employees participated Overall survey results continue to trend upward Out of 40 items with prior survey results, gains were…
  28. BKH ANALYST DAY – Black Hills Corporation – slide 28
    Resource Planning Update Colorado Electric Electric Resource Plan settlement approved Jan. 2014 Approved construction of 40 MW natural gas-fired combustion turbine in 2016 as replacement for W.N. Clark retirement Approved an All…
  29. BKH ANALYST DAY – Black Hills Corporation – slide 29
    Resource Planning Update Black Hills' Electric Utilities Loads and Resources 1400 1200 1000 800 600 MW 400 200 0 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F Base Load (Coal and Renewables)…
  30. BKH ANALYST DAY – Black Hills Corporation – slide 30
    Regional Comparison Average Fleet Age Versus Customer Rates 39 34 33 31 31 28 17 16.0 13.6 13.1 12.0 11.3 11.0 10.3 10.1 10.0 7 3 PacifiCorp CLFP CLFP Xcel COE COE Xcel NWE OTTR MDU…
  31. BKH ANALYST DAY – Black Hills Corporation – slide 31
    Regulatory Update Filing Utility & Filing Description* 2013 2014 2015 Status Date CPGS - 2.8MM Approved 8-20-14; 2.2MM, BHP request, 53%/47%, Q1 2014 53.32%/46.68%, 9.9% ROE Rate case WY 10.25% ROE Effective 10-1-14 Hearing Jan.…
  32. BKH ANALYST DAY – Black Hills Corporation – slide 32
    Optimizing Regulatory Recovery Cost Recovery Mechanisms Electric Utility Environmental DSM/ Trans- Fuel Cost Trans- Purchased Fixed Cost Financing Jurisdiction Cost Energy mission mission Power Recovery* Cost Rider Efficiency Cap-Ex…
  33. BKH ANALYST DAY – Black Hills Corporation – slide 33
    Utility Strategy Leverage vertically integrated generation assets Invest in transmission and distribution growth and integrity projects Deploy capital to reduce pass-through and O&M expenses to benefit both customers and…
  34. BKH ANALYST DAY – Black Hills Corporation – slide 34
    Capital Investment Utilities (in millions) 2009 2010 2011 2012 2013 2014F 2015F 2016F Generation 168 146 85 72 130 76 62 72 Transmission 21 28 20 38 32 48 68 41 Distribution and Other 53 59 68 57 60 96 85 102 Subtotal Electric…
  35. BKH ANALYST DAY – Black Hills Corporation – slide 35
    Select Major Utility Projects Estimated Capital Expenditures * Projected Excludes routine capital expenditures for maintenance of assets In-service 2016E (in millions) Date 2014E 2015E - 2019E Total ** Utilities Cheyenne Light one…
  36. BKH ANALYST DAY – Black Hills Corporation – slide 36
    Organic Growth in Natural Gas Utilities Leverage our entrepreneurial culture through targeted additions of natural gas utility customers and load within or near existing service territories Municipal and LDC acquisitions Fuel…
  37. BKH ANALYST DAY – Black Hills Corporation – slide 37
    Technology Integration Finished In progress Not started New bill New mobile Social eBill format friendly websitea media PowerOn NextGen QR Energy use code dashboard Customere Customer Interactive profil self voice responce…
  38. BKH ANALYST DAY – Black Hills Corporation – slide 38
    Utility Growth Opportunities Replace Grow Replace Invest for pass-through customers O&M with reliability and costs with and Demand capital capacity capital Cost of Service Gas Direct investment in gas reserves provides…
  39. BKH ANALYST DAY – Black Hills Corporation – slide 39
    Enhanced Price Stability Ownership of physical natural gas supplies provides greater long- term price stability for customers 160 140 Average Residential Monthly Gas Bill 120 100 80 60 Commodity Cost Commodity Cost…
  40. BKH ANALYST DAY – Black Hills Corporation – slide 40
    Utility Gas Supply Portfolio Index Purchases Purchases at market prices (NYMEX) Physical purchases - seasonal term Fixed Price Contracts and Storage Addition of Purchases at a specific price and term Physical purchases seasonal…
  41. BKH ANALYST DAY – Black Hills Corporation – slide 41
    Cost of Service Gas Program Non-utility subsidiary drills and/or acquires reserves Produces natural gas and sells at market price Credits proceeds from market gas sales to utility Bills utilities using a cost-based formula…
  42. BKH ANALYST DAY – Black Hills Corporation – slide 42
    Natural Gas Demand by State Cost of Service Gas Annual Demand* 50% Target Entity or State (Bcf) (Bcf) Gas Utilities Iowa 20.4 10.2 Nebraska 18.0 9.0 Kansas 13.9 6.9 Wyoming 4.9 2.5 Colorado 8.8 4.4 Power Generation Wyoming…
  43. BKH ANALYST DAY – Black Hills Corporation – slide 43
    Proposed Business Model How it Works Cost of Service Gas Price = (Revenue from Market Sales) - (Expenses + (Investment x ROI)) Customer Savings: Difference between market .50* price and Cost of Service Gas price credited to…
  44. BKH ANALYST DAY – Black Hills Corporation – slide 44
    Proposed Business Model BHC Newly created non-regulated subsidiary (similar to Wyodak coal mine) expected to be best BH Non-Reg CLFP/BHP BHU Holdings Holding choice to own and operate the natural gas properties New C.O.S. Gas…
  45. BKH ANALYST DAY – Black Hills Corporation – slide 45
    Reasons for Cost of Service Gas Program Opportunity to stabilize customer bills and reduce their long-term gas costs by enhancing current utility gas supply portfolio approach using enterprise oil and gas expertise Portfolio…
  46. BKH ANALYST DAY – Black Hills Corporation – slide 46
    Regulation and Policy Precedence Other utility customers have benefited from long-term price stability Implemented solution Evaluating opportunity to implement solution North- for 82,000 customers in Western Black Hills for 765,000…
  47. BKH ANALYST DAY – Black Hills Corporation – slide 47
    Next steps/status update Regulatory Initial Regulator and Consumer Advocate meetings held spring 2014 Technical workshops Iowa on Sept. 23 Other states pending in fourth quarter Evaluating properties for inclusion in Cost of…
  48. BKH ANALYST DAY – Black Hills Corporation – slide 48
    Cheyenne Light, Fuel and Power Mark Stege VP Operations
  49. BKH ANALYST DAY – Black Hills Corporation – slide 49
    Growth in Cheyenne Strong Customer and Load Growth Beginning in Early 1990s Economic Development LEADS (Cheyenne-Laramie County Corporation for Economic Development) Utility Infrastructure Cheyenne Light, Fuel and Power Location,…
  50. BKH ANALYST DAY – Black Hills Corporation – slide 50
    Cheyenne - Strong Economic Growth EchoStar Data NCAR Microsoft Green House Data Green House Phase 2 New business locations 2006-2010 2011-2012 2013-2015 Data Center Cheyenne Business Park North Range Business…
  51. BKH ANALYST DAY – Black Hills Corporation – slide 51
    Economic Development in Southeast WY Cheyenne LEADS Facilitates development Long-standing Cheyenne Light involvement Creation of 4,100 new jobs (approximately 44,400 total jobs in Cheyenne) Business friendly state Cheyenne Light…
  52. BKH ANALYST DAY – Black Hills Corporation – slide 52
    Cheyenne Lights Investment in Infrastructure Cheyenne Prairie Generating Station Microsoft Gas Power Plant CLFP 115kV Border Station WAPA 230 kV Substation WAPA 115 kV Gas Pipeline CLFP Dist. WAPA Cheyenne Business…
  53. BKH ANALYST DAY – Black Hills Corporation – slide 53
    Cheyenne Logistics Attributes Union Pacific BNSF I-25 I-80 Railroad Interstate Hwy Multiple Tier 3 Fiber Providers Fiber Optic Cheyenne Business Park North Range Business Park BKH Analyst Day - Oct. 6, 2014 Swan…
  54. BKH ANALYST DAY – Black Hills Corporation – slide 54
    Results - Strong Reliability Exceptional electrical transmission system reliability - three year average transmission reliability of 99.999% Three year average (2011-2013) distribution reliability SAIDI = 27 minutes Southeast Wyoming…
  55. BKH ANALYST DAY – Black Hills Corporation – slide 55
    Cheyenne Lights Load Growth 5-Year Percent Increase in Total Energy Sales 24% Change in Electric Sales (MWh) 19% 14% 9% 4% -1% 2000 2005 2010 2015* CLFP % Increase USA % Increase * Forecasted Value BKH…
  56. BKH ANALYST DAY – Black Hills Corporation – slide 56
    Preparing for the Future LEADS strong driver of growth in Cheyenne Cheyenne Light system investments facilitate future economic growth Cheyenne Prairie Generating Station Increased reliability, security and adaptability Low…
  57. BKH ANALYST DAY – Black Hills Corporation – slide 57
    Power Generation and Coal Mining Mark Lux VP & GM Power Delivery
  58. BKH ANALYST DAY – Black Hills Corporation – slide 58
    Power Generation Ownership in two power generation facilities Duplicating smaller plant approach facilitates totaling 269 MW latest technology Wygen I - 69 MW of a 90 MW coal-fired Operate generation assets with same core…
  59. BKH ANALYST DAY – Black Hills Corporation – slide 59
    Generation Expertise Construct power plants safely, on-schedule and on-budget Operating 1,166 MW of generation 712 MW Gas 385 MW Coal 40 MW Diesel 29 MW Wind 40 MW of third party generation Providing energy management…
  60. BKH ANALYST DAY – Black Hills Corporation – slide 60
    Plant Construction Expertise Black Hills Electric Generation Projects Managed Power Plant Name Fuel Size Project Cost Utility or IPP In-Service Date Neil Simpson II (WY) Coal 90 MW 119 million Utility 9/1995 Neil Simpson CT (WY) Gas…
  61. BKH ANALYST DAY – Black Hills Corporation – slide 61
    Cheyenne Prairie Generating Station New Generation Helps Meet Growing Demand and New Environmental Regulations Overview: Construction completed for new 222 million, 132 MW generating plant in Cheyenne, WY; plant jointly owned by…
  62. BKH ANALYST DAY – Black Hills Corporation – slide 62
    Operations Excellence Power Plant Fleet Availability by Fuel Type Natural Gas Turbine Starting Reliability 104% 100% BHC 3 Industry BHC 3 Industry 100% 96% 96% 92% 92% 88% 88% 84% 84% 80% 80% Coal Gas Diesel Wind…
  63. BKH ANALYST DAY – Black Hills Corporation – slide 63
    Industry Leading Safety Performance Black Hills Major Construction Projects Project Man Hours OSHA Total Case Incident Rate (TCIR) Wygen III 900,000 man hours 6 Pueblo Airport 1.2 million man hours BHC Industry 5 Busch Ranch…
  64. BKH ANALYST DAY – Black Hills Corporation – slide 64
    Generation Locations and Activity Gillette Energy Complex City of Gillette CLFP Lange Substation Rapid City Cheyenne Prairie Generating Station BHE - COE Pueblo Airport Generating Station Busch Ranch Wind Farm…
  65. BKH ANALYST DAY – Black Hills Corporation – slide 65
    Infrastructure Efficiencies Develop multiple generation sites with expansion potential Co-locate facilities owned by multiple parties to increase efficiencies and reduce costs Shared staff, facilities, land and infrastructure Each…
  66. BKH ANALYST DAY – Black Hills Corporation – slide 66
    Power Generation Strategy Sell power plant capacity under long-term tolling arrangements to affiliates, municipalities and other load serving electric utilities Sell economy energy purchase power agreements to other utilities…
  67. BKH ANALYST DAY – Black Hills Corporation – slide 67
    Competitive Advantage CONSTRUCT Site selection Engineering Permitting Construction Procurement Project management OPERATIONS Coal ENERGY MANAGEMENT Gas Generation dispatch Wind Power marketing services NERC compliance…
  68. BKH ANALYST DAY – Black Hills Corporation – slide 68
    Business Model Distributed Traditional Energy Resources PPA Power Generation Business Model Opportunities Economy Energy PPA BKH Analyst Day - Oct. 6, 2014 69
  69. BKH ANALYST DAY – Black Hills Corporation – slide 69
    Economy Energy PPA Power Economy Energy Power Energy Generation Purchase Agreement (EEPPA) Partner Access to Markets Sharing in the arbitrage between Access to Generation Capacity purchasing versus generating Energy Cost…
  70. BKH ANALYST DAY – Black Hills Corporation – slide 70
    Distributed Energy Resources (DER) DER = Opportunity for Growth DER Services to commercial and Parity of industrial on-site customers: Black Hills generation to be the costs to Generation energy indicative Construction solution…
  71. BKH ANALYST DAY – Black Hills Corporation – slide 71
    Coal Mining Serve as fuel supply to adjacent mine mouth Current mine plan sequence will reduce electric power generation customers reclamation liability and optimize strip-ratio Approximately 46-year supply of low-sulfur Powder…
  72. BKH ANALYST DAY – Black Hills Corporation – slide 72
    Actual and Forecasted Tons Sold 5,000,000 4,000,000 Tons of Coal Sold 3,000,000 Neil Simpson I Retired (3/2014) 2,000,000 1,000,000 Potential Wygen Potential I Wygen I Transfer Transfer to to CLFP CLFP…
  73. BKH ANALYST DAY – Black Hills Corporation – slide 73
    Industry Leading Safety Performance Completed five years without a lost time accident Completed two and a half years without an MSHA reportable incident Completed four years with lower quartile MSHA citations compared to other…
  74. BKH ANALYST DAY – Black Hills Corporation – slide 74
    Coal Mining Strategy Provide low-cost fuel supply to adjacent mine-mouth electric power plant customers while maintaining sufficient coal reserves to meet life-of-plant needs Maximize sale margins from existing contracts Provide…
  75. BKH ANALYST DAY – Black Hills Corporation – slide 75
    Limited Growth Opportunities PacifiCorp coal sale agreement coal price reopener will adjust in third quarter 2014 1.6 to 1.8 million tons estimated annual coal sales Long-term contract price opener in 2014 allows us to retain full…
  76. BKH ANALYST DAY – Black Hills Corporation – slide 76
    Focus on Low Costs and Efficiencies Current mine plan yields lower stripping ratios; key driver in reducing mining costs; plan better aligns stripping ratios with coal contract margins Productivity Enhancements and Benefits Fewer…
  77. BKH ANALYST DAY – Black Hills Corporation – slide 77
    Operating Metrics Revenue and Expense per Ton Sold (Units in millions*) (/ton) 25 15 20 12 15 9 10 6 5 3 0 0 2011 2012 2013 2014 (6 months) Coal Tons OB Yards Rev/Ton Exp/Ton * Units = tons sold plus cubic…
  78. BKH ANALYST DAY – Black Hills Corporation – slide 78
    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…
  79. BKH ANALYST DAY – Black Hills Corporation – slide 79
    Competitive Delivered Fuel Cost 2013 Delivered Coal Cost vs. Natural Gas Wyodak Mine Affiliate Pricing versus Regional Power Plants 4.00 3.50 3.00 2.50 MMBtu 2.00 1.50 1.00 0.50 - BHC Affiliate Dave…
  80. BKH ANALYST DAY – Black Hills Corporation – slide 80
    Oil and Gas John Benton VP & GM Oil & Gas
  81. BKH ANALYST DAY – Black Hills Corporation – slide 81
    Oil and Gas Properties Operated wells in San Juan, Piceance and Powder River Basins Non-operated wells in North Dakota and Montana (Bakken Shale), California, Oklahoma, Texas and Wyoming 87 Bcfe of reserves at year-end 2013;…
  82. BKH ANALYST DAY – Black Hills Corporation – slide 82
    Oil and Gas Properties Note: approximate areas of geologic basins does not reflect BHEP acreage Dec 2013 Average Production June 2014 Average Production Daily Net Daily Net Daily Net Daily Net Daily Net Daily Net Gas NGL Oil…
  83. BKH ANALYST DAY – Black Hills Corporation – slide 83
    Oil and Gas Strategy Prove up the potential upside value of existing oil and gas properties Pursue a disciplined oil exploration, appraisal and development program Capture value of oil and gas assets through optionality Provide…
  84. BKH ANALYST DAY – Black Hills Corporation – slide 84
    Drilling Program 2013 Program Drilled and completed two Mancos appraisal wells in southern Piceance Participated in select oil exploration prospects Continued to identify and acquire acreage with oil resource potential 2014 Program…
  85. BKH ANALYST DAY – Black Hills Corporation – slide 85
    Mancos Shale Cretaceous Age sediment averaging 1,400 feet of gas-saturated rock Legacy assets - 90% of leases held by units or held by production Southern Piceance Basin - control oil and gas leases covering 73,000 net acres San…
  86. BKH ANALYST DAY – Black Hills Corporation – slide 86
    Mancos Shale Drill 12 additional appraisal wells during 2014 - 2015 Drilled 5 wells in 2011 - 2013 Objectives for appraisal drilling program: Prove up majority of lease positions Optimize well design lateral lengths, frac…
  87. BKH ANALYST DAY – Black Hills Corporation – slide 87
    Mancos Shale Opportunity Existing Spacing Increased Density Spacing Estimated Resource Potential Estimated Resource Potential (1,320 Feet Between Horizontal Wellbores) (660 Feet Between Horizontal Wellbores) Gross Net Gross Net…
  88. BKH ANALYST DAY – Black Hills Corporation – slide 88
    Mancos Horizontal Prospect Hypothetical 8 Wells per Spacing unit 1 mile Mancos Formation 660 feet 1,320 feet Schematic Not to scale BKH Analyst Day - Oct. 6, 2014 89
  89. BKH ANALYST DAY – Black Hills Corporation – slide 89
    Southern Piceance Mancos Drilling Program 2013-2015 Questar White River Hub 1800 MMCF/day capacity 51 miles to the north 9-11 9-41 Questar White River Hub 21-41H 10-31-99 D-17 WT 12-16 19D 20D 4-28…
  90. BKH ANALYST DAY – Black Hills Corporation – slide 90
    Southern Piceance Basin Liquids Potential BKH Analyst Day - Oct. 6, 2014 91
  91. BKH ANALYST DAY – Black Hills Corporation – slide 91
    Southern Piceance 2014 Mancos Wells Well AH TD Aug 13 Well BH TD Sept 09 Well CH Skid rig/spud - Sept 21 (BH) 10000 Drilled, 9820 Cased Lateral 7430 TVD (BH) 7529 TVD (BH) 7354 TVD (AH) 7480 TVD (AH) (AH)10000 Drilled,…
  92. BKH ANALYST DAY – Black Hills Corporation – slide 92
    Mancos Well Optimization Measured Depth versus Capital Cost Before Completion 0 2,000 4,000 6,000 2011 8,000 Depth (MD) 10,000 5.64 MM 6.78 MM 12,000 14,000 6.60 MM 16,000 3.54 MM 2013/2014 3.39 MM 5.81…
  93. BKH ANALYST DAY – Black Hills Corporation – slide 93
    Mancos Well Optimization Capital Cost per Cased Lateral Foot 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 /ft Cased Costs /ft Drilled and Completed JIC 464-30 724 (2011) HSC 4-28 (2011) HDU…
  94. BKH ANALYST DAY – Black Hills Corporation – slide 94
    Mancos Well Optimization Total Drilling and Completion Cost 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 464-30 724 (2011) HSC 4-28 (2011) HDU 21-41(2011) WhF…
  95. BKH ANALYST DAY – Black Hills Corporation – slide 95
    Southern Piceance Basin Mancos Production Lateral Lengths 7000' Daily Niobrara / Mancos Production 5,000 Gross Gas, Mcf/D Federal 36-1H7,884 (ECA) KM DH5A-32 9,787 (ECA) WHF 208,712 (BHEP) WHF 198,115 (BHEP) KM…
  96. BKH ANALYST DAY – Black Hills Corporation – slide 96
    Southern Piceance Basin Mancos Production Piceance Basin Type Curve 10,000 10,000' Lateral Type Curve 9.5 BCFE Gross Gas, Mcf/D 5,000' Lateral Type Curve 5.4 BCFE 1,000 100 1 11 21 31 MONTHS 41 51 61 Type 10,000'…
  97. BKH ANALYST DAY – Black Hills Corporation – slide 97
    Effective Wellhead Gas Prices Whittaker Flats* Homer Deep** Description (Estimated) (Estimated) Henry Hub 4.00 4.00 San Juan Basin Basis -0.14 -0.14 Gathering, Transportation, Processing -1.18 -1.18 BTU Upgrade 0.33 0.33…
  98. BKH ANALYST DAY – Black Hills Corporation – slide 98
    Well Economics - Whittaker Flats Capital Investment versus Before Tax IRR 25 Gross F&D costs 2.33/mcfe 20 Well Capital Costs MM 2.10/mcfe Forecast economic results from 2 Whittaker Flats wells drilled in 1.86/mcfe late…
  99. BKH ANALYST DAY – Black Hills Corporation – slide 99
    San Juan Basin - Mancos Production Production Rates in Mcf/D 100,000 10,000 Gross Gas, Mcf/D EUR 6.9 BCFE 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 32 33 34 35 36 37…
  100. BKH ANALYST DAY – Black Hills Corporation – slide 100
    Disciplined Oil Exploration Strategy Oil Exploration Target Criteria Known oil producing basin Multiple-zone production potential Thermally mature Normal to over pressured system Resource plays Growth potential Identify play…

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