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2013 Fourth Quarter and Full Year Review – Black Hills Corporation

Black Hills Corporation · Feb 7, 2014 · 74 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. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 1
    Nathan Woods, Black Hills Power 2013 Fourth Quarter and Full Year Review February 7, 2014
  2. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 2
    Discussion Agenda 2013 Fourth Quarter and David Emery Full Year Review Chairman, President and CEO Financial Update Tony Cleberg Executive Vice President and CFO Strategic Overview David Emery Chairman, President and…
  3. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 3
    Q4 and 2013 Review Pueblo Airport Generating Station near Pueblo, Colo. 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 4
  4. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 4
    Q4 2013 Highlights Business Environment Colder weather in utility service territories compared to same period last year and compared to normal Utilities Black Hills Power filed request on Jan. 17, 2014, with Wyoming Public Service…
  5. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 5
    Q4 2013 Highlights Utilities continued Announced in Jan. 2014 the acquisition of a small natural gas distribution system adding 400 customers in northeastern Wyoming; approval required by Wyoming Public Service Commission with closing…
  6. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 6
    Q4 2013 Financial Highlights 3% Growth in EPS, as adjusted Income from Continuing Operations, as adjusted* Key Earnings Drivers (in millions) (per share) 31 Favorable weather for Gas Utilities 30 0.70 0.68 Financing riders for…
  7. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 7
    2013 Financial Highlights 17% Growth in EPS, as adjusted Income from Continuing Operations, as adjusted* (per share) Key Earnings Drivers (in millions) 109 Favorable weather for Gas Utilities 2.45 New electric and gas rates 92…
  8. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 8
    Q4 2013 Financial Highlights Change in Income from Continuing Operations, as adjusted*, from Prior Year Q4 2012 30.1 (1.2) Electric Utilities 0.1 Gas Utilities (0.1) Power Generation (0.7) Coal Mining 0.1 Oil & Gas 2.7…
  9. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 9
    2013 Financial Highlights Change in Income from Continuing Operations, as adjusted*, from Prior Year 2012 92.2 (0.9) Electric Utilities 3.4 Gas Utilities 1.1 Power Generation 0.5 Coal Mining (1.1) Oil & Gas 13.5 Corporate…
  10. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 10
    Financial Update Stan Lindholm of Exploration & Production 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 11
  11. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 11
    Earnings Per Share Analysis Q4-2013 Q3-2013 Q2-2013 Q1-2013 Q4-2012 2013 2012 Net Income (loss) (GAAP) 0.41 0.52 0.69 0.97 0.70 2.59 1.85 Loss (income) from discontinued operations (GAAP) 0.02 - - - - 0.02 0.16 Income (loss) from…
  12. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 12
    Q4 Revenue/Op Income Total Revenue, as adjusted* Electric Util 173 163 (in millions) 355 166 Gas Util 319 140 21 Power Gen 21 Q4 2013 13 Q4 2012 Coal Mining 15 13 Oil & Gas 12 (32) Corporate, including I/C Eliminations…
  13. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 13
    2013 Revenue/Op Income 665 Total Revenue, as adjusted* Electric Util 627 (in millions) 540 1,276 Gas Util 1,174 454 85 Power Gen 81 2013 57 2012 Coal Mining 58 55 Oil & Gas 79 (126) Corporate, including I/C Eliminations…
  14. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 14
    Income Statement (in millions, except earnings per share) 4th Qtr Full Year 2013 2012 2013 2012 Revenue 355.4 318.9 1,275.9 1,173.9 Gross margin 202.2 195.0 783.7 766.8 Operating expense (96.0) (87.7) (386.9) (366.7) DD&A (35.1)…
  15. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 15
    Electric Utilities - Revenue/Op Income Q4 (in millions) Change Q4 Key Performance Drivers New rates 173 Financing riders at CLFP and BHP for 163 Q4 2013 Cheyenne Prairie Generating Station Q4 2012 Transmission rider Higher O&M…
  16. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 16
    Gas Utilities - Revenue/Op Income Q4 (in millions) Change Q4 Key Performance Drivers Favorable weather - HDD up 15% 166 Higher sales and transport volumes 140 Q4 2013 Q4 2012 Capital rider Higher O&M property taxes and employee…
  17. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 17
    Power Generation - Revenue/Op Income Q4 (in millions) Change Q4 Key Performance Drivers Higher fired-hours from Pueblo Airport 21 21 Q4 2013 plant and annual price adjustment Q4 2012 Off-system pricing from Wygen I Wygen I planned…
  18. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 18
    Coal Mining - Revenue/Op Income Q4 (in millions) Change Q4 Key Performance Drivers 15 Lower O&M lower overburden and 13 Q4 2013 decreased fuel costs Q4 2012 Lower depreciation expense Wyodak unplanned outage Wygen I planned…
  19. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 19
    Oil & Gas - Revenue/Op Income Q4 (in millions) Change Q4 Key Performance Drivers 13 Higher volumes sold from additional 12 wells Q4 2013 Lower O&M costs Q4 2012 Lower average hedged price received for crude oil (basis…
  20. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 20
    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…
  21. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 21
    Capital Structure (In millions, except for ratios) Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2013 2013 2013 2013 2012 Capitalization Short-term Debt 82.5 394.0 355.5 349.6 381.0 Long-term Debt 1,396.9 956.0 958.6 936.5 938.9…
  22. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 22
    Earnings Guidance Black Hills Corp. reaffirms its guidance for 2014 earnings from continuing operations, as adjusted, to be in the range of 2.50 to 2.70 per share as previously issued on Dec. 2, 2013, based on the assumptions listed in…
  23. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 23
    Growth Operating Income and EPS, as Adjusted (in millions, except per share amount) 350 2.80 2.60 ** 2009 2014 EPS CAGR = 13.5% 2.45 300 2.40 2.09 250 2.00 36.1 1.67 1.69 36.2 200 5.2 1.60 1.38 19.0 150 1.20 19.9 210.4…
  24. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 24
    Strategic Overview Busch Ranch Wind Farm near Pueblo, Colo. 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 25
  25. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 25
    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…
  26. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 26
    Strategic Objective Operating Performance 2012 IEEE Reliability Benchmarking Study Safety Performance Total Annual Outage Minutes BHC TCIR is defined as the average number of work-related injuries incurred by 100 workers…
  27. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 27
    Strategic Objective 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% 75% 88% 70% 84% 65% 60% 80%…
  28. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 28
    Strategic Objectives Operating Performance Generation Mix by Fuel Type Generation Mix by Fuel Type 1,200 80% % of Generation by Fuel type Megawatts of Generation 1,000 70% 60% 800 50% 600 40% 400 30% 20% 200 10% 0…
  29. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 29
    Strategic Objective Earnings Growth 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…
  30. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 30
    Strategic Objective Earnings Growth 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…
  31. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 31
    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 2013 2014F 2015F - 2018F…
  32. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 32
    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…
  33. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 33
    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 increase in annual electric revenue…
  34. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 34
    Strategic Objective Earnings Growth Utilities Regulatory Updates continued Cheyenne Light Evaluatingtiming for Cheyenne Light to exercise its option to acquire the Wygen I coal- fired power plant Option to purchase Black Hills…
  35. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 35
    Strategic Objective Earnings Growth Utilities Regulatory Updates continued Filing Date 2013 2014 Progress Dates UTILITY AND FILING BHP - construction financing rider filing Dec. 2012 Approved Sept. 18 BHP - general rate case…
  36. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 36
    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 Pursue disciplined oil…
  37. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 37
    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…
  38. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 38
    Strategic Objective Credit Rating Moodys Investors Service on Jan. 30, 2014, raised its corporate credit rating on Black Hills Corp. to Baa1 from Baa2 and Black Hills Powers corporate credit rating and senior secured debt rating to A3…
  39. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 39
    Strategic Objective Dividend Growth Dividend Increased for 44 Consecutive Years 1.60 Dividend yield was 2.9% on Jan 30, 2014* 1.56 1.55 1.52 1.50 1.48 1.46 Annual Dividend 1.44 1.45 1.42 Per Share 1.40 1.35 1.30…
  40. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 40
    2013 Scorecard Strategy 2013 Progress and Future Initiatives UTILITIES + Construct additional cost effective rate-base generation and R Commence construction on Cheyenne Prairie Generating Station (CPGS) (Q2) associated transmission to…
  41. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 41
    2014 Scorecard Strategy 2014 Progress and Future Initiatives UTILITIES + Construct additional cost effective rate-base generation and Complete 222 million Cheyenne Prairie Generating Station prior to Oct. 1, 2014 associated transmission…
  42. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 42
    Questions Harney Peak , Black Hills, SD 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 43
  43. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 43
    Appendix Natural gas line installation near White Creek, Neb. 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 44
  44. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 44
    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…
  45. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 45
    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…
  46. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 46
    Use of Non-GAAP Financial Measures Revenue, as adjusted (in thousands) Electric Power Coal Oil and QTD Dec. 31, 2013 Utilities Gas Utilities Generation Mining Gas Corporate Total Revenue (GAAP) 169,223 166,249 1,020 5,656 13,300…
  47. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 47
    Use of Non-GAAP Financial Measures Revenue, as adjusted (in thousands) Electric Power Coal Oil and QTD Dec. 31, 2012 Utilities Gas Utilities Generation Mining Gas Corporate Total Revenue (GAAP) 158,759 139,738 994 7,294 12,078…
  48. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 48
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power QTD Dec. 31, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Operating income (loss) (GAAP)…
  49. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 49
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power YTD Dec. 31, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Operating income (loss) (GAAP)…
  50. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 50
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power YTD Dec. 31, 2011 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Operating income (loss) (GAAP)…
  51. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 51
    Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Electric Gas Power QTD Dec. 31, 2013 Utilities Utilities Generation Coal Mining Oil and Gas Corporate Total Income (Loss) from…
  52. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 52
    Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Electric Gas Power YTD Dec. 31, 2013 Utilities Utilities Generation Coal Mining Oil and Gas Corporate Total Income (Loss) from…
  53. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 53
    Use of Non-GAAP Financial Measures EBITDA For the Three Months Ended Dec. 31, (in thousands) 2013 2012 Income from continuing operations 19,007 30,934 Depreciation, depletion and amortization 35,149 33,234 Interest expense, net…
  54. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 54
    Use of Non-GAAP Financial Measures EBITDA For the Twelve Months Ended Dec. 31, (in thousands) 2013 2012 Income from continuing operations 115,846 88,505 Depreciation, depletion and amortization 141,217 154,632 Impairment of Oil…
  55. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 55
    Use of Non-GAAP Financial Measures Depreciation, Depletion & Amortization, adjusted for Intercompany Capital Lease* (in thousands, pre-tax) Regulated Non-Regulated Corporate Electric Gas Total Power Coal Oil and Total Non- YTD Dec. 31,…
  56. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 56
    Use of Non-GAAP Financial Measures Depreciation, Depletion & Amortization, adjusted for Intercompany Capital Lease* (in thousands, pre-tax) Regulated Non-Regulated Corporate Electric Gas Total Power Coal Oil and Total Non- YTD Dec. 31,…
  57. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 57
    Use of Non-GAAP Financial Measures EPS, as adjusted Earnings Per Share, as adjusted 2009 2010 2011 Net income (GAAP) 2.11 1.76 1.24 Discontinued Operations (0.11) (0.14) (0.23) Income from Continuing Operations., (GAAP) 2.00 1.62…
  58. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 58
    2014 Guidance Assumptions Guidance assumptions for 2014 as most recently presented on Nov. 5, 2013. Capital spending of 447 million, including oil and gas capital expenditures of 118 million; Normal operations and weather conditions…
  59. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 59
    In Millions 0 100 200 300 400 500 600 2014 2015 275MM Term Loan 2016 2017 75MM 2018 2019 2020 200MM 5.88% Note Debt Maturities 2021 CLFP Industrial Revenue Bond 2013 Fourth Quarter and Full Year Review -…
  60. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 60
    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…
  61. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 61
    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…
  62. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 62
    Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 96.1 Q4 2013 96.4 2,695 Q4 2013 95.8 Q3 2013 Q3 2013 (Total for all gas service* areas weighted by 97.6 79 Gas…
  63. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 63
    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…
  64. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 64
    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, Wyo. CT II - 40 MW combustion turbine in Gillette, WY (will be sold…
  65. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 65
    Q4 2013 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…
  66. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 66
    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…
  67. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 67
    Oil & Gas Exploration & Development Program Note: approximate areas of geologic basins does not reflect BHEP acreage 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 68
  68. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 68
    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…
  69. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 69
    Southern Piceance Basin Western Colorado 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 70
  70. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 70
    Southern Piceance Basin Mancos Drilling Program 2013-2015 2013 Fourth Quarter and Full Year Review - Feb. 7, 2014 71
  71. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 71
    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…
  72. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 72
    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 2013 Fourth Quarter and Full Year Review - Feb. 7,…
  73. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 73
    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 634A…
  74. 2013 Fourth Quarter and Full Year Review – Black Hills Corporation – slide 74

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