Despite spilling more red ink last year in its exploration and production (E&P) business, Rapid City, SD-based Black Hills Corp. expects growth in that part of its business, which now places more emphasis on the regulated utility sector in several states, according to CEO David Emery.

Profits for 4Q2011 were $26.5 million (62 cents/share), compared to $16.3 million (41 cents) in 4Q2010, Black Hills reported during a conference call with analysts Friday. The quarterly increase of 13% was largely due to growth in Black Hills’ natural gas and electric utilities, said Emery. Net income for the full year 2011 was $77.1 million ($1.92), compared with $70.3 million ($1.81) with that increase, which was also carried by the utilities, partially offset by poor performance by the energy marketing unit, which was put up for sale last month (see Daily GPI, Jan. 20).

Acknowledging that E&P had a “troubled year” in 2011, Emery nevertheless talked about new leadership in that unit, very good prospects from test drilling in the Mancos Shale play in southeast Colorado and parts of New Mexico, and a 20% jump in crude oil production, mostly due to its Bakken holdings.

In addition to its fuel production business in the E&P and coal mining areas, two new gas-fired power plants in Colorado will be principal drivers’ of the company’s growth in the future, Emery said. Both of the projects had very tight construction schedules, came in under-budget and ahead of schedule and began operations Jan. 1, he said.

As it retires some of its coal-fired generation plants, Black Hills expects to “significantly” increase its profits under new coal supply contracts from its mining operations, according to CFO Tony Cleberg.

A trio of test wells in the Piceance and San Juan basins have “more than met our initial expectations,” Emery said.

“We expect to book additional reserves associated with the third well later this year,” he said. “Our 74,000 net acres of oil and gas leases in the Piceance and San Juan basins include nearly 460 drill sites, based on 160-acre spacing-per-well.” Initial drilling costs in the Mancos were in the $1.30-1.40/Mcf equivalent basis, Emery said.

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.