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Black Hills Closes Book on E&P, to Concentrate on Utilities

As of the end of January, Rapid City, SD-based Black Hills Corp. had sold 90% of its exploration and production (E&P) assets for $75 million, which is now a discontinued business for the company that two years ago shifted its full strategy to the utility segment.

CEO David Emery said during a 4Q2016 conference all Friday the company has "made excellent progress in winding down this business.”

Black Hills decided last year to pull out of E&P and sell the unit by the end of this year. Emery said asset sales "have been closed or contracts have been signed to divest all of our operated properties," with the remaining nonoperated assets set for sale by mid-year, “earlier than originally anticipated."

Going forward, Black Hills plans to focus on its natural gas and electric utilities in eight states, supported by assets from power generation and mining segments, Emery said.

In the upcoming reporting periods, he said there will be slower earnings growth as the company transitions from "a period of acquisition/integration earnings growth drivers back to a more traditional utility earnings growth strategy."

Longer term, growth is expected to pick up from utility rate-based investments, particularly on the natural gas side since completing its purchase three years ago of Arkansas-based Source Gas. The company has a $1.3 billion capital expenditure plan for the next three years among its various utilities, Emery said.

"The utility acquisitions have created much larger transmission and distribution systems, and with that increase in size comes increased opportunity for investment to serve a much larger customer base,” he said. The customer base now exceeds 1.2 million. "Our long-term capital expenditure investment to serve our customers is even greater than what we estimated when we purchased and integrated Source Gas."

For 4Q2017 income from continuing operations was $71 million  ($1.30/share) versus 4Q2016 profits of $52 million (96 cents). For the full year, Black Hills earned $201 million ($3.65/share), versus 2016 earnings of $137 million ($2.57).

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