Rapid City, SD-based Black Hills Corp. is staying "very focused" on its oil/natural gas assets, despite reporting more red ink in that sector.
"We plan to prove up and capture the substantial value of our existing oil/gas properties, and also continue to pursue disciplined oil exploration projects, primarily in plays with impactful reserve potential," said CEO David Emery.
The company reported 4Q2013 adjusted income from continuing operations of $31 million (70 cents/share) compared to $30 million (68 cents/share) for the last quarter of 2012. For all of last year, profits from continuing operations were $109 million ($2.45/share) compared to $92 million ($2.09/share) in 2012.
The oil/gas segment showed losses for both 4Q2013 and the full year ($500,000 and $4.2 million, respectively).
Two horizontal wells were completed in the Mancos Shale formation in the southern Piceance Basin in Colorado in late December and January, respectively, Emery said. This year, Black Hills Exploration and Production (E&P) plans to drill six more horizontal wells in the Piceance's Mancos play with longer laterals, along with continuing a selected oil E&P program, he said.
He reiterated that the combined E&P gas holdings in the San Juan and Piceance Basins are in excess of 2 Tcf. And due to an ongoing confidentiality agreement, Black Hills has not included the wells drilled last year in reserve estimates or the additional 20,000 net acres of Mancos that it is in line to acquire as part of the confidential agreement inked last year (see Shale Daily, May 14, 2013).
Delays in the completion of gathering and processing infrastructure that was scheduled to be operational by the end of last year are restricting the initial output on the two wells recently completed in the Piceance, Emery said in response to an analyst's question. He said those facilities are expected to be online well before the additional six wells are drilled this spring and summer.
In response to another question, Emery said the company is still expecting output in the range of 6-8 Bcf of natural gas from each of the new wells in the Piceance. "With longer laterals [beyond 4,000-5,000 feet], you would expect higher reserve levels, but we cannot disclose those numbers until after the confidentiality agreement is lifted," Emery said.
It won't be until mid-year at the earliest before those restrictions are lifted, he said.