Rapid City, SD-based Black Hills Corp., as it has been of late, remains focused on its substantial oil and natural gas holdings in the Mancos Shale within the San Juan and Piceance basins, CEO David Emery said Tuesday during a conference call to discuss third quarter performance (see Shale Daily,Oct. 7).

Production should to begin flowing before the end of the year from two exploratory wells nearing completion in the Piceance Mancos section, said Emery.

The two exploratory wells now being completed are each estimated to produce 6-8 Bcf of gas at an estimated well cost of $1.22-1.50/Mcf, Emery said. Overall in the San Juan and Piceance, Black Hills has 74,000 net acres, 55,000 of which are in the Piceance.

Emery sees growth accelerating for the company led by the Mancos.

“A large portion of the growth in production from this year to next is going to be coming from the Mancos wells,” he said. “They are all big-volume wells so it doesn’t take many of them to produce a couple of Bcf easily. The lion’s share of our growth in production is going to be coming from our Mancos activity.”

There is a lot of value upside in the company’s oil and gas assets, but for now there is going to limited exploration activity on natural gas, with the biggest focus on oil, said the CEO. Longer term for the Mancos, the upside may be up to 2 Tcf in gas reserves, he said.

Black Hills reported earnings of $21.1 million (47 cents/share) in 3Q2013, compared with $18.7 million (42 cents) in the year-ago period. Compared with 3Q2012, operating income declined by $2.5 million in 3Q2013.

CFO Tony Cleberg said the increase in profits was driven two two things: a cutback in natural gas drilling and the sale of most of Black Hills’ oil producing assets in the Williston Basin (see Shale Daily,Aug. 27, 2012). As a result, gas production declined 23% year/year, while oil production dropped more than 50%.