While it is putting more emphasis on its utilities longer term, Rapid City, SD-based Black Hills Corp. is focused shorter term on “proving up and capturing substantial value” from its oil and natural gas properties in the Mancos Shale plays in the San Juan and Piceance basins, along with new-found interest in Powder River Basin oil, CEO Dave Emery said Tuesday during a second quarter earnings conference call.

While earnings were up sharply for both the 2Q2013 and first six months of this year compared to the same periods last year, profits from oil and gas operations were down substantially for both periods following the sale of major assets in the Williston Basin in North Dakota last year (see Shale Daily, Oct. 1, 2012).

“We’re focused on our existing oil/gas properties, primarily the Mancos Shale resources, and also some limited exploration opportunities, primarily oil plays, that will have an impact on our reserve potential,” said Emery, adding that Black Hills may drill up to three new wells in the Powder River Basin later this year.

Black Hills’ existing oil/gas leases in the Piceance and San Juan Basins have a combined net resource potential in excess of 2 Tcf of gas, Emery said. “We believe that is a fairly conservative number based on current well spacing, and we believe it could be higher as we get more information from a technical standpoint,” he said.

This estimate, however, does not include the 20,000 net acres Black Hills is in line to get from an undisclosed third party when the company completes two wells it drilled in the second quarter in the Mancos in the Piceance. When those wells are completed by the fourth quarter, Black Hills’ Mancos holdings will increase by 27%, Emery said.

While the drilling “has gone as planned,” Emery told analysts he would not say anything about potential production or other details on the two wells due to a confidentiality agreement with a third party.

In response to other questions, Emery said Black Hills now has six well drilling permits from the federal Bureau of Land Management (BLM) for exploring on federal lands in the Piceance, but only two are “ready now,” and the other four have conditions for environmental work that the company finds too onerous and is in discussions with BLM to try to get some of the conditions removed.

“We could drill those wells despite those conditions, but I think it is very much a case of overreach by the BLM, so we’re trying to be careful about how we proceed with those because we don’t think some of the conditions are necessary,” said Emery, adding that the company is seeking other permits, hoping to have about 18 in hand by next spring before beginning any drilling.

Ultimately, the productivity and reserves that will be produced will depend on the extent and configuration of the individual well drilling, Emery said. “It really comes down to lateral length and frack stages [the number of them],” he said. “We would expect to drill these next wells with longer laterals [8,000-9,000 feet] and more [hydraulic fracturing] stages [up to 40].”

For the 2Q2013, Black Hills reported net income of $18.3 million (41 cents/share) compared with $15.1 million (34 cents/share) for the same period last year.