Rapid City, SD-based Black Hills Corp. has decided to sell what remains of its oil/natural gas business by the end of next year, CEO David Emery reported during a 3Q2017 earnings conference call on Friday. Included are San Juan Basin and Powder River Basin assets.
With its decision earlier this year to abandon plans to establish a natural gas reserve program among its utilities spread around eight states, the Black Hills board approved selling off the remaining oil/gas assets in New Mexico and Wyoming. The company recently agreed to sell the operated New Mexico assets and a portion of the Powder River assets in Wyoming in separate deals totaling $28 million. Both sales are expected to close by the end of this year.
Sale of the San Juan Basin properties is subject to approvals by the U.S. Bureau of Indian Affairs and the U.S. Bureau of Land Management.
Emery said that Black Hills has retained advisors to support sales efforts that include plans to divest all remaining oil/gas properties by the end of next year. With those plans in place, Black Hills will report its oil/gas business as discontinued operations beginning in 4Q2017, he said.
Two years ago, Black Hills began divesting noncore oil/gas assets. It has sold nearly half of its operating wells as it shifts to a total utility focus and strategy. There are 534 wells left to be sold, Emery said.
CFO Richard Kinzley said the oil/gas segment produced a $7.5 million operating loss in 3Q2017.
"We're not going to sell the whole [exploration/production] company in a single transaction, so there isn't going to be a huge transaction that would attract a lot of large buyers," Emery said. "We think that is the optimum way, given the properties we have left, to divest those assets.
"We have almost no proved undeveloped reserves on our books. It would qualify most of our Piceance Basin assets as probable or possible, and at current price levels a lot of them would not be categorized that way either because to be reserves by definition they must be economically recoverable at current prices. We would categorize a lot of the properties as resources rather than anything else."
In recent years, as Black Hills was pursuing its cost-of-service utility gas reserves program, Emery consistently cited the company's Mancos Shale assets as potentially part of that program.
For 3Q2017, Black Hills reported net income of $27.7 million (50 cents/share), compared to $14.1 million (26 cents) for the same period in 2016.