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Q2 2014 EARNINGS CALL – Black Hills Corporation

Black Hills Corporation · Aug 6, 2014 · 65 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. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 1
    Second Quarter Earnings Aug. 6, 2014
  2. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 2
    Discussion Agenda Second Quarter Review David Emery Chairman, President and CEO Financial Update Tony Cleberg Executive Vice President and CFO Strategic Overview David Emery Chairman, President and CEO Q&A 2014…
  3. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 3
    Q2 Review Pueblo Airport Generating Station near Pueblo, Colo. 2014 Second Quarter Review - Aug. 6, 2014 4
  4. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 4
    Q2 2014 Highlights Business Environment Normal weather in utility service territories compared to colder weather in same period last year Utilities Black Hills Power filed for a certificate of public convenience and necessity in…
  5. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 5
    Q2 2014 Highlights Utilities continued Cheyenne Light received approval from Federal Energy Regulatory Commission to establish rates for transmission services; approval includes return on equity of 10.6% and capital structure of 54%…
  6. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 6
    Q2 2014 Highlights Power Generation Received FERC approval on July 16 for sale of 40 MW natural gas-fired combustion turbine to City of Gillette, WY, for approximately 22 million; transaction closing expected Aug. 31 Includes 20-year…
  7. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 7
    Q2 2014 Financial Highlights 7% Growth in EPS, as adjusted Earnings, as adjusted* Key Earnings Drivers (in millions) (per share) Higher Electric Utilities industrial 0.44 demand 0.41 Electric Utilities financing riders Increased…
  8. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 8
    Q2 2014 Financial Highlights Change in Net Income, as adjusted*, from Prior Year Q2 2013 18.3 0.7 Electric Utilities (1.2) Gas Utilities 1.9 Power Generation 0.0 Coal Mining 0.3 Oil & Gas (0.2) Corporate Q2 2014…
  9. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 9
    Financial Update Elmo Bailey & Ebi Kazemi prepare for pole line installation in the mountains near Victor, Colo. 2014 Second Quarter Review - Aug. 6, 2014 10
  10. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 10
    Earnings Per Share Analysis Q2-2014 Q1-2014 Q4-2013 Q3-2013 Q2-2013 Net Income (loss) (GAAP) 0.44 1.08 0.41 0.52 0.69 Loss (income) from discontinued operations (GAAP) - - 0.02 - - Income (loss) from continuing operations (GAAP)…
  11. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 11
    Q2 Revenue/Op Income Total Revenue, as adjusted* (in millions) Total Operating Income, as adjusted* (in millions) 283 280 46.6 49.0 Q2 2014 Q2 2013 Q2 2014 Q2 2013 162 30.8 Electric Util Electric Util 158 31.5 103…
  12. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 12
    Income Statement (in millions, except earnings per share) 2nd Qtr 2014 2013 Revenue 283.2 279.8 Gross margin* 181.9 180.7 Operating expense (98.6) (96.5) DD&A (36.7) (35.2) Operating Income 46.6 49.0 Interest expense (16.7)…
  13. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 13
    Q2 Utilities - Revenue/Op Income Electric Utilities (in millions) Gas Utilities (in millions) 162 158 Q2 2014 Q2 2014 Q2 2013 Q2 2013 103 106 30.8 31.5 6.6 10.7 Revenue Operating Income, as Revenue Operating Income, as…
  14. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 14
    Q2 Non-Regulated Energy - Revenue/Op Income Power Generation (in millions) Coal Mining (in millions) 23 15 14 21 Q2 2014 Q2 2014 Q2 2013 Q2 2013 9.5 8.4 2.1 2.1 Revenue* Operating Income, as Revenue Operating Income, as…
  15. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 15
    Q2 Non-Regulated Energy - Revenue/Op Income Oil & Gas (in millions) 15 Q2 2014 12 Q2 2013 (2.4) (3.4) Revenue Operating Income, as adjusted * Higher volumes sold Higher average prices for natural gas and NGLs Lower…
  16. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 16
    Capital Structure (In millions, except for ratios) June 30, March 31, Dec. 31, Sept. 30, June 30, 2014 2014 2013 2013 2013 Capitalization Short-term Debt 408 100 83 394 356 Long-term Debt 1,122 1,397 1,397 956 959 Total Debt 1,530…
  17. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 17
    Earnings Guidance The company reaffirms expected 2014 earnings per share, as adjusted, to be in the range of 2.65 to 2.85, as issued on May 1, 2014 2014 Second Quarter Review - Aug. 6, 2014 18
  18. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 18
    Operating Income and EPS, as Adjusted (in millions, except per share amounts) 350 3.00 2.75 ** 2009 2014 EPS CAGR = 14.8% 300 2.45 2.50 2.09 250 36.1 2.00 36.2 1.67 1.69 200 1.38 5.2 1.50 19.0 150 19.9 1.00 210.4 219.8…
  19. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 19
    Strategic Overview Busch Ranch Wind Farm near Pueblo, Colo. 2014 Second Quarter Review - Aug. 6, 2014 20
  20. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 20
    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…
  21. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 21
    Capital Expenditures Historical and Forecasted Capital Expenditures (in millions)* 490 441 416 369 385 205 340 127 341 199 84 134 127 133 285 285 314 217 213 251 208 2010 2011 2012 2013 2014F 2015F 2016F Regulated…
  22. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 22
    Capital Investment by Segment (in millions) 2009 2010 2011 2012 2013 2014F 2015F 2016F Generation 168 146 85 72 130 92 42 58 Transmission 21 28 20 38 32 64 38 14 Other 53 59 68 57 60 95 109 89 Subtotal Electric Utilities 242 233…
  23. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 23
    Select Major Utility Projects Forecasted Capital Expenditures * Excludes routine capital expenditures for maintenance Projected of assets In-service 2017F (in millions) Date 2013 2014F 2015F 2016F - 2018F Total** Utilities…
  24. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 24
    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 Black Hills Power being built in…
  25. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 25
    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…
  26. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 26
    Oil and Gas Strategy Complete 2014 Program Drill and complete up to six Mancos Shale wells in southern Piceance Basin Continue Mancos Shale infrastructure improvements Continue participation in non-operated Bakken drilling…
  27. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 27
    Dividend Growth Dividend Increased for 44 Consecutive Years 1.60 Dividend yield was 2.8% on July 29, 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…
  28. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 28
    Credit Rating On June 13, Fitch Ratings upgraded its corporate credit rating on Black Hills Corp. and Black Hills Power to BBB+ from BBB; they also raised Black Hills Powers senior secured ratings to A from A-; all ratings issued with…
  29. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 29
    Utilities Regulatory Update Filing Utility & Filing Description* 2013 2014 2015 Status Date CPGS - 2.8MM BHP Hearing Aug. 20, 2014 request, 53%/47%, Q1 2014 Rate case WY Approval before Q4 2014 10.25% ROE CPGS - 14.6MM Hearing…
  30. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 30
    Operating Performance Power Plant Fleet Availability by Fuel Type Natural Gas Turbine Starting Reliability 100% 100% BHC Industry BHC Industry 95% 96% 90% 85% 92% 80% 88% 75% 70% 84% 65% 60% 80% Coal Gas Diesel Wind…
  31. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 31
    Operating Performance 2012 IEEE Reliability Benchmarking Study Total Annual Outage Minutes AGA Energy Analysis 2012 Performance Benchmarks for Gas Utilities Represents average outage in minutes per customer, per year based on…
  32. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 32
    Operating Performance Recognition Safety Performance 2014 Second Quarter Review - Aug. 6, 2014 33
  33. Q2 2014 EARNINGS CALL – 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. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 34
    Questions 2014 Second Quarter Review - Aug. 6, 2014 35
  35. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 35
    Appendix Dory Batka and Jerry Likewise monitor the energy supply at our Neil Simpson Complex in Gillette, Wyo. 2014 Second Quarter Review - Aug. 6, 36 2014
  36. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 36
    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 777,000 electric…
  37. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 37
    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…
  38. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 38
    Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 89.9 Q2 2014 84.8 711 Q2 2014 78.1 Q1 2014 (Total for all gas service* areas weighted by 95.5 3,524 Q1 2014 Gas…
  39. Q2 2014 EARNINGS CALL – 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. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 40
    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…
  41. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 41
    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…
  42. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 42
    Q2 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…
  43. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 43
    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…
  44. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 44
    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…
  45. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 45
    Oil & Gas Exploration & Development Program Note: approximate areas of geologic basins does not reflect BHEP acreage 2014 Second Quarter Review - Aug. 6, 2014 46
  46. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 46
    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*…
  47. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 47
    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…
  48. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 48
    Southern Piceance Basin Western Colorado 2014 Second Quarter Review - Aug. 6, 2014 49
  49. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 49
    Southern Piceance Basin Mancos Drilling Program 2013-2015 2014 Second Quarter Review - Aug. 6, 2014 50
  50. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 50
    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…
  51. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 51
    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 2014 Second Quarter Review - Aug. 6, 2014 52
  52. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 52
    San Juan Basin Mancos Production Production Rates in Mcf/D 100,000 10,000 Gas Flow in 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…
  53. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 53
    In Millions 0 300 400 500 600 100 200 2014 2015 275MM Term Loan 2016 2017 2018 75MM 2019 2020 200MM 5.88% Note 2021 2014 Second Quarter Review - Aug. 6, 2014 CLFP IR Bond 2022 Debt Maturities 2023…
  54. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 54
    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…
  55. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 55
    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…
  56. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 56
    Use of Non-GAAP Financial Measures Revenue, as adjusted (in thousands) Utilities Non-Regulated Energy Electric Power QTD June 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Revenue 158,740…
  57. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 57
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Power QTD June 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  58. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 58
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy Electric Power YTD Dec. 31, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total…
  59. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 59
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Utilities Non-Regulated Energy YTD Dec. 31, 2011 Electric Utilities Gas Utilities Power Generation Coal Mining Oil and Gas Corporate Total…
  60. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 60
    Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Utilities Non-Regulated Energy Electric Power QTD June 30, 2014 Utilities Gas Utilities Generation Coal Mining Oil and Gas…
  61. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 61
    Use of Non-GAAP Financial Measures EBITDA For the Three Months Ended June 30, (in thousands) 2014 2013 Income from continuing operations 19,820 30,518 Depreciation, depletion and amortization 36,712 35,151 Interest expense,…
  62. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 62
    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…
  63. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 63
    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…
  64. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 64
  65. Q2 2014 EARNINGS CALL – Black Hills Corporation – slide 65
    To see more ways we are improving life with energy visit us at www.blackhillscorp.com.

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