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INVESTOR MEETINGS – Black Hills Corporation

Black Hills Corporation · Nov 11, 2014 · 66 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. INVESTOR MEETINGS – Black Hills Corporation – slide 1
    Investor Meetings November / December 2014
  2. INVESTOR MEETINGS – Black Hills Corporation – slide 2
    Investment Highlights Utility-centered energy company with robust capital investment opportunities creating strong earnings growth Ongoing operational excellence initiatives improve earnings Upside growth and value creation…
  3. INVESTOR MEETINGS – Black Hills Corporation – slide 3
    Black Hills Corporation Today Started serving electric customers in Deadwood, SD in 1883 Incorporated Black Hills Power in 1941 Listed on NYSE in 1980 under BKH Market capitalization of approximately 2.4 billion Annual Period…
  4. INVESTOR MEETINGS – Black Hills Corporation – slide 4
    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…
  5. INVESTOR MEETINGS – Black Hills Corporation – slide 5
    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…
  6. INVESTOR MEETINGS – Black Hills Corporation – slide 6
    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…
  7. INVESTOR MEETINGS – Black Hills Corporation – slide 7
    Q3 2014 Highlights Business Environment Cooler weather in utility service territories compared to same period last year benefited natural gas utilities but tempered results at electric utilities Utilities Announced agreement to…
  8. INVESTOR MEETINGS – Black Hills Corporation – slide 8
    Q3 2014 Highlights Utilities continued Cheyenne Light recorded new all-time peak load of 198 MW on July 21 Colorado Electric issued request on May 5 for approximately 42 MW of seasonal firm summer capacity for 2017, 2018 and 2019, and…
  9. INVESTOR MEETINGS – Black Hills Corporation – slide 9
    Q3 2014 Highlights Utilities continued On Oct. 24, Kansas Gas reached settlement agreement that increases base rates by 5.2 million; hearing scheduled for Nov. 12 with Kansas Corporation Commission and order expected by Jan. 6, 2015,…
  10. INVESTOR MEETINGS – Black Hills Corporation – slide 10
    Q3 2014 Highlights Corporate Activities Declared quarterly dividend of 0.39 per share, equivalent to an annual dividend rate of 1.56 per share Quarter included approximately 1.3 million income tax benefit Announced executive…
  11. INVESTOR MEETINGS – Black Hills Corporation – slide 11
    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…
  12. INVESTOR MEETINGS – Black Hills Corporation – slide 12
    Capital Expenditures Historical and Forecasted Capital Expenditures (in millions)* 490 416 410 423 401 369 205 340 127 138 130 199 84 127 285 285 283 285 271 217 213 2010 2011 2012 2013 2014F 2015F 2016F * Excludes…
  13. INVESTOR MEETINGS – Black Hills Corporation – slide 13
    Capital Investment by Segment (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 Other 53 59 68 57 60 96 85 102 Subtotal Electric Utilities 242 233…
  14. INVESTOR MEETINGS – Black Hills Corporation – slide 14
    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…
  15. INVESTOR MEETINGS – Black Hills Corporation – slide 15
    Cheyenne Prairie Generating Station New Generation Helps Meet Growing Demand and New Environmental Regulations Overview: Construction completed on time and on budget for new 222 million, 132 MW generating plant in Cheyenne, WY; plant…
  16. INVESTOR MEETINGS – Black Hills Corporation – slide 16
    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 Establishing…
  17. INVESTOR MEETINGS – Black Hills Corporation – slide 17
    Oil and Gas Strategy Prove up and capture value of existing oil and gas properties Prove up probable and possible reserves Capture value through optionality Pursue disciplined oil exploration, appraisal and development program…
  18. INVESTOR MEETINGS – Black Hills Corporation – slide 18
    Oil and Gas Strategy Complete 2014 Program Drill and complete up to six Mancos Shale wells in southern Piceance Basin Drilled, cased, cemented two wells and third well being drilled After third well cased and cemented, moving…
  19. INVESTOR MEETINGS – Black Hills Corporation – slide 19
    Dividend Growth Dividend Increased for 44 Consecutive Years 1.60 Dividend yield 2.9% on Oct. 31, 2014 1.56 1.55 1.52 1.50 1.48 1.46 Annual Dividend 1.45 1.44 Per Share 1.42 1.40 1.35 1.30 1.25 1.20 2009 2010…
  20. INVESTOR MEETINGS – Black Hills Corporation – slide 20
    Credit Rating Moodys Investors Service on Oct. 1 affirmed its corporate credit ratings of Black Hills Corp. at Baa1 with a stable outlook and Black Hills Power at A3 with a stable outlook Standard & Poors on July 31 affirmed its…
  21. INVESTOR MEETINGS – Black Hills Corporation – slide 21
    Utilities 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…
  22. INVESTOR MEETINGS – Black Hills Corporation – slide 22
    Operating Performance Power Plant Fleet Availability Natural Gas Turbine Starting Reliability by Fuel Type 100% 100% BHC Industry BHC Industry 96% 96% 92% 92% 88% 88% 84% 84% 80% 80% Coal Gas Diesel Wind Starting…
  23. INVESTOR MEETINGS – Black Hills Corporation – slide 23
    Operating Performance Current as of Sept. 30, 2014 Investor Meetings November / December 2014 26
  24. INVESTOR MEETINGS – Black Hills Corporation – slide 24
    Operating Performance 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…
  25. INVESTOR MEETINGS – Black Hills Corporation – slide 25
    Operating Performance Recognition Safety Performance Black Hills Energy named most trusted Midwest natural gas company by Market Strategies International. June 26, 2014 - Wyoming Gov. Matt Mead honored Black Hills Corp.s Wyodak…
  26. INVESTOR MEETINGS – Black Hills Corporation – slide 26
    Earnings Per Share Analysis YTD YTD Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Sep 2014 Sep 2013 Net Income (loss) 0.60 0.44 1.08 0.41 0.52 2.13 2.18 Loss (gain) from discontinued operations - 0.02 Income (loss) from continuing ops 0.60…
  27. INVESTOR MEETINGS – Black Hills Corporation – slide 27
    Income Statement (in millions, except earnings per share) 3rd Qtr Sep YTD 2014 2013 2014 2013 Revenue 272.1 259.9 1,015.5 920.4 Gross Margin 187.4 188.4 599.0 581.5 Operating Expenses (95.5) (96.7) (298.1) (291.0) DD&A (37.5)…
  28. INVESTOR MEETINGS – Black Hills Corporation – slide 28
    Q3 Revenue/Op Income Total Revenue, as adjusted* (in millions) Total Operating Income, as adjusted* (in millions) 272 260 54.4 55.6 Q3 2014 Q3 2013 Q3 2014 Q3 2013 175 40.9 Electric Util Electric Util 171 40.8 79 3.9…
  29. INVESTOR MEETINGS – Black Hills Corporation – slide 29
    Operating Income and EPS, as Adjusted 400 3.20 3.00*** 2.88** 350 2.80 2009 2015 EPS CAGR = 13.8% 2.45 300 2.40 2.09 250 2.00 (in millions) 36.1 (per share) 1.67 1.69 36.2 200 1.60 1.38 5.2 19.0 150 1.20 19.9…
  30. INVESTOR MEETINGS – Black Hills Corporation – slide 30
    Capital Structure (In millions, except for ratios) Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2014 2014 2014 2013 2013 Capitalization Short-term Debt 459 408 100 83 394 Long-term Debt 1,108 1,122 1,397 1,397 956 Total Debt…
  31. INVESTOR MEETINGS – Black Hills Corporation – slide 31
    Earnings Guidance 2014 2015 Black Hills raised its guidance for 2014 Black Hills initiated guidance for 2015 earnings, as adjusted, to 2.80 to 2.95 earnings, as adjusted, of 2.90 to 3.10 per share from 2.65 to 2.85 per share per…
  32. INVESTOR MEETINGS – Black Hills Corporation – slide 32
    2015 Earnings Guidance Assumptions Capital spending of 432 million, including oil and gas capital expenditures of 123 million; Normal operations and weather conditions within our utility service territories that impact customer usage,…
  33. INVESTOR MEETINGS – Black Hills Corporation – slide 33
    2014 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…
  34. INVESTOR MEETINGS – Black Hills Corporation – slide 34
    Black Hills Corporation History Originating company started in Deadwood in 1883 (131 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…
  35. INVESTOR MEETINGS – Black Hills Corporation – slide 35
    Black Hills Organizational Structure Investor Meetings November / December 2014 41
  36. INVESTOR MEETINGS – Black Hills Corporation – slide 36
    Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 95.6 Q3 2014 97.0 137 Q3 2014 89.9 Q2 2014 (Total for all gas service* areas weighted by 84.8 711 Q2 2014 Gas…
  37. INVESTOR MEETINGS – Black Hills Corporation – slide 37
    Siting Synergies Multiple generation sites with expansion potential along the Front Range Increased efficiencies through shared staff, facilities, land and infrastructure Advantageous fuel supply logistics and/or wind potential at each…
  38. INVESTOR MEETINGS – Black Hills Corporation – slide 38
    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 I-90 Wyodak…
  39. INVESTOR MEETINGS – Black Hills Corporation – slide 39
    Estimated Utility Rate Base Estimated Rate Base* by Utility Segment 2010 2011 2012 2013 (in millions) Electric Utilities 901 1,007 1,272 1,248 Gas Utilities 425 443 450 454 Total 1,326 1,450 1,722 1,702 * Estimated rate base…
  40. INVESTOR MEETINGS – Black Hills Corporation – slide 40
    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…
  41. INVESTOR MEETINGS – Black Hills Corporation – slide 41
    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…
  42. INVESTOR MEETINGS – Black Hills Corporation – slide 42
    Cost of Service Gas Program 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…
  43. INVESTOR MEETINGS – Black Hills Corporation – slide 43
    Cost of Service Gas Program 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…
  44. INVESTOR MEETINGS – Black Hills Corporation – slide 44
    Cost of Service Gas Program 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…
  45. INVESTOR MEETINGS – Black Hills Corporation – slide 45
    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…
  46. INVESTOR MEETINGS – Black Hills Corporation – slide 46
    Mining 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…
  47. INVESTOR MEETINGS – Black Hills Corporation – slide 47
    Q3 2014 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…
  48. INVESTOR MEETINGS – Black Hills Corporation – slide 48
    Oil & Gas Exploration & Development Program Note: approximate areas of geologic basins does not reflect BHEP acreage Investor Meetings November / December 2014 54
  49. INVESTOR MEETINGS – Black Hills Corporation – slide 49
    Reserve Data and Net Present Value Reserve calculation at Dec. 31, 2013 Average Average Net Oil Net Gas Net Equiv PV10 Price Oil Price Nat Gas (MMBO)** (BCF)** (BCFE)** (MM) Per BBL per MCF PDP* 3.7 55.1 77.1 163.5 89.88 3.26 PNP*…
  50. INVESTOR MEETINGS – 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. INVESTOR MEETINGS – Black Hills Corporation – slide 51
    Southern Piceance Basin Western Colorado Investor Meetings November / December 2014 57
  52. INVESTOR MEETINGS – Black Hills Corporation – slide 52
    Southern Piceance Basin 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…
  53. INVESTOR MEETINGS – Black Hills Corporation – slide 53
    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'…
  54. INVESTOR MEETINGS – Black Hills Corporation – slide 54
    San Juan Basin Mancos Shale WPX Rosa Unit Wells Rosa 634B (upper target) Produced 2.36 BCF Rosa 634A (lower target) Produced 2.07 BCF 16 miles BHGR Jicarilla Horizontal Well Jicarilla 434-30 724 (lower target) Produced 2.28…
  55. INVESTOR MEETINGS – Black Hills Corporation – slide 55
    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…
  56. INVESTOR MEETINGS – Black Hills Corporation – slide 56
    In Millions 0 100 200 600 300 400 500 2014 2015 275MM Term Loan 2016 2017 2018 75MM 2019 2020 200MM 5.88% Note Investor Meetings November / December 2014 2021 CLFP IR Bond 2022 Debt Maturities 2023 525MM…
  57. INVESTOR MEETINGS – Black Hills Corporation – slide 57
    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…
  58. INVESTOR MEETINGS – Black Hills Corporation – slide 58
    Use of Non-GAAP Financial Measures Revenue, as adjusted (in thousands) Utilities Non-Regulated Energy Electric Power QTD Sept 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Revenue 171,395 78,735…
  59. INVESTOR MEETINGS – Black Hills Corporation – slide 59
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Power QTD Sept 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  60. INVESTOR MEETINGS – Black Hills Corporation – slide 60
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Gas Power YTD Dec. 31, 2013 Utilities Utilities Generation Coal Mining Oil and Gas Corporate Total…
  61. INVESTOR MEETINGS – 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 YTD Dec. 31, 2011 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  62. INVESTOR MEETINGS – Black Hills Corporation – slide 62
    Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Utilities Non-Regulated Energy Electric Power QTD Sept 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas…
  63. INVESTOR MEETINGS – Black Hills Corporation – slide 63
    Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Utilities Non-Regulated Energy Electric Power YTD Sept 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas…
  64. INVESTOR MEETINGS – Black Hills Corporation – slide 64
    Use of Non-GAAP Financial Measures EBITDA For the Three Months For the Nine Months Ended Sept. 30, Ended Sept. 30, (in thousands) 2014 2013 2014 2013 Income from continuing operations 26,836 23,124 94,774 96,839 Depreciation,…
  65. INVESTOR MEETINGS – Black Hills Corporation – slide 65
    Use of Non-GAAP Financial Measures Depreciation, Depletion & Amortization, adjusted for Intercompany Capital Lease* (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Power Total Non- YTD Dec. 31, 2013 Utilities Gas…
  66. INVESTOR MEETINGS – Black Hills Corporation – slide 66
    Use of Non-GAAP Financial Measures EPS, as adjusted 2009 2010 2011 2012 2013 Net income (GAAP) 2.11 1.76 1.24 1.85 2.59 Discontinued Operations (0.11) (0.14) (0.23) 0.16 0.02 Income from continuing operations (GAAP) 2.00 1.62 1.01…

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