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Black Hills Corp. (BKH) today announced that its oil and gas
subsidiary, Black Hills Exploration & Production, Inc., signed a
definitive agreement to sell approximately 85 percent of its Bakken and
Three Forks shale assets in the Williston Basin for approximately $243
million, subject to customary pre-closing and post-closing adjustments.
The sale has an effective date of July 1, 2012, with an estimated
closing date on or before Sept. 30, 2012.
The sale includes all of Black Hills’ interests in the Williston Basin
assets owned jointly with Helis Oil & Gas and others, including
approximately 73 gross wells and 28,000 net lease acres. As of the end
of the second quarter, net year-to-date production from these properties
totaled approximately 149 thousand barrels of oil and 171 thousand Mcf
of natural gas. Total proved reserves for these properties, as of Dec.
31, 2011, were 2.2 million barrels of oil and 3.4 BCF of natural gas.
The properties represent approximately 15 percent of Black Hills’ oil
and gas production for the first six months of 2012 and 13 percent of
year-end 2011 proved reserves.
"Upon the conclusion of our oil and gas strategic review in late 2011,
we announced our intent to optimize the substantial upside value of our
existing oil and gas properties, primarily by proving up the probable
and possible reserve potential," said David R. Emery, chairman,
president and chief executive officer of Black Hills. "The divestiture
of these assets has effectively and immediately captured the future
potential value that we projected for this portion of our oil and gas
portfolio."
Helis, as operator of the properties, engaged Tudor, Pickering, Holt &
Co. to market its interests in the properties. It offered the
non-operated working interest owners in those properties the opportunity
to market their interests in conjunction with Helis. Helis, and its
working interest co-owners, including Black Hills, accepted the offer of
QEP Resources, Inc.’s wholly-owned subsidiary, QEP Energy Company.
"Net sale proceeds, expected in the range of $230 million to $240
million, will be used for debt reduction and general corporate
purposes," Emery said. "This sale will strengthen our balance sheet and
enhance our ability to self-fund planned growth projects, such as the
$237 million Cheyenne Prairie Generating Station, without issuing equity.
"This sale demonstrates the substantial value of our oil and gas
business, and the ability of our oil and gas team to identify and
develop quality assets. The $243 million sales price for only 13 percent
of our proved reserves exceeds the value currently assigned to our
entire oil and gas business by the street. We remain focused on
realizing the significant upside opportunity of our remaining oil and
gas assets, including the Mancos shale gas potential in the San Juan and
Piceance basins." Emery concluded.
Under the full cost accounting method, Black Hills anticipates booking a
one-time, pre-tax gain of approximately $20 million to $40 million and
will apply the remainder of the sales price as a reduction to its oil
and gas full cost pool. The reduction to the cost pool will result in an
expected depletion rate for the remainder of 2012 in the range of $1.30
to $1.45 per Mcfe. The assets sold will be reflected in the company’s
financial and operational results through the transaction close date.
Although the transaction will result in a substantial tax gain, the
company has sufficient net operating loss carry-forwards that will
enable the deferral of income tax payments.
Black Hills reaffirms its 2012 earnings guidance, previously issued on
May 3, 2012. Earnings per share from continuing operations, as adjusted,
are expected to be $1.90 to $2.10 per share. Although the sale of the
Helis-operated assets will result in some special accounting items, the
company expects earnings, as adjusted, to remain within the guidance
range.
ABOUT BLACK HILLS EXPLORATION AND PRODUCTION, INC. Black
Hills Exploration and Production, Inc., a subsidiary of Black Hills
Corp., operates oil and natural gas producing properties in Colorado,
New Mexico and Wyoming, and has non-operated interests in properties
producing in California, Montana, North Dakota, Oklahoma, Texas and
Wyoming.
ABOUT BLACK HILLS CORP. Black Hills Corp. (BKH), a
diversified energy company with a tradition of exemplary service and a
vision to be the energy partner of choice, is based in Rapid City, S.D.,
and has corporate offices in Denver and Papillion, Neb. The company
serves 765,000 natural gas and electric utility customers in Colorado,
Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. The company’s
non-regulated businesses generate wholesale electricity and produce
natural gas, oil and coal. Black Hills’ 2,000 employees partner to
produce results that are improving life with energy. More information is
available at www.blackhillscorp.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS This news
release includes "forward-looking statements" as defined by the
Securities and Exchange Commission, or SEC. We make these
forward-looking statements in reliance on the safe harbor protections
provided under the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, included in this
news release that address activities, events or developments that we
project, expect, believe or anticipate will or may occur in the future
are forward-looking statements. These include, without limitation, our
2012 earnings guidance. These forward-looking statements are based on
assumptions which we believe are reasonable based on current
expectations and projections about future events and industry conditions
and trends affecting our business. However, whether actual results and
developments will conform to our expectations and projections is subject
to a number of risks and uncertainties that, among other things, could
cause actual results to differ materially from those contained in the
forward-looking statements, the risk factors described in Item 1A of
Part I of our 2011 Annual Report on Form 10-K filed with the SEC, other
reports that we file with the SEC from time to time, and the following:
--
Our ability to close the transaction to sell our interests in the
assets owned jointly with Helis for net cash proceeds of approximately
$230 to $240 million, subject to pre-closing and post-closing purchase
price adjustments. These adjustments will include operating income and
capital spending associated with the divested assets between the
effective date and closing;
--
Completion of the sale of Helis’s interest in the properties to QEP, a
condition to close the transaction for the sale of our interests in
the assets to QEP;
--
The tax and accounting treatment for the transaction including the
amount of gain on sale related to the transaction and future depletion
rates;
--
Our ability to use the cash proceeds to reduce debt and internally
fund growth projects, and delay any new equity financing for several
years;
--
The value of our remaining oil and gas assets;
--
Our ability to identify and develop quality oil and gas assets and
prove up the value of the Mancos shale gas potential;
--
The accuracy of our assumptions on which our earnings guidance is
based; and
--
Other factors discussed from time to time in our filings with the SEC.
New factors that could cause actual results to differ materially from
those described in forward-looking statements emerge from time-to-time,
and it is not possible for us to predict all such factors, or the extent
to which any such factor or combination of factors may cause actual
results to differ from those contained in any forward-looking statement.
We assume no obligation to update publicly any such forward-looking
statements, whether as a result of new information, future events or
otherwise.
SOURCE: Black Hills Corp.
Black Hills Corp.
Investor Relations:
Jerome E. Nichols, 605-721-1171
or
Media Contact:
Amy Estes, 303-566-3377
or
Media Relations Line, 866-243-9002
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