“Net sale proceeds, expected in the range of $230 million to $240 million, will be used for debt reduction and general corporate purposes,” Emery said. “This sale will strengthen our balance sheet and enhance our ability to self-fund planned growth projects, such as the $237 million Cheyenne Prairie Generating Station, without issuing equity.
“This sale demonstrates the substantial value of our oil and gas business, and the ability of our oil and gas team to identify and develop quality assets. The $243 million sales price for only 13 percent of our proved reserves exceeds the value currently assigned to our entire oil and gas business by the street. We remain focused on realizing the significant upside opportunity of our remaining oil and gas assets, including the Mancos shale gas potential in the San Juan and Piceance basins.” Emery concluded.
Under the full cost accounting method, Black Hills anticipates booking a one-time, pre-tax gain of approximately $20 million to $40 million and will apply the remainder of the sales price as a reduction to its oil and gas full cost pool. The reduction to the cost pool will result in an expected depletion rate for the remainder of 2012 in the range of $1.30 to $1.45 per Mcfe. The assets sold will be reflected in the company’s financial and operational results through the transaction close date. Although the transaction will result in a substantial tax gain, the company has sufficient net operating loss carry-forwards that will enable the deferral of income tax payments.
Black Hills reaffirms its 2012 earnings guidance, previously issued on May 3, 2012. Earnings per share from continuing operations, as adjusted, are expected to be $1.90 to $2.10 per share. Although the sale of the Helis-operated assets will result in some special accounting items, the company expects earnings, as adjusted, to remain within the guidance range.