Black Hills Swings to Black

Gas output slips.
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Black Hills

(BKH) - Get Report

, a diversified energy company, said it swung to a profit in its third quarter.

The Rapid City, S.D.-based company posted a profit of $22.3 million, or 66 cents a share, in the quarter, compared with a loss of $23.9 million, or 73 cents a share, a year ago. Earnings in the most recent quarter include a positive impact to income tax expense netting to 6 cents a share, related to the resolution of federal income tax audits, and a 6 cents a share after-tax benefit from insurance proceeds received related to the outages and repairs of the Las Vegas II power plant earlier this year. Analysts polled by Thomson First Call were expecting earnings of 57 cents a share.

Third-quarter revenue rose 5.8% to $157.6 million as against analysts' expectation of $168.3 million.

The company expects earnings from continuing operations to be in the lower end of the range $2.10 a share to $2.25 a share due to decrease in prices for natural gas. For 2007, the company expects earnings from continuing operations to be in the range of $2.10 a share to $2.30 a share. Analysts are expecting earnings of $2.09 a share in 2006 and $2.37 a share in 2007.

For 2006, the company expects strong reserve growth driven by its Piceance Basin acquisitions and estimates annual production at about 14.2 billion cubic feet equivalent, compared to 13.7 billion cubic feet equivalent for 2005.

Revenue from retail services group rose 7.1% to $76.9 million and sales from wholesale energy segment increased 4.6% to $80.7 million.

"In the third quarter of 2006, our oil and gas operations experienced a decrease in natural gas prices," the company said. "Gas production was slightly less than third quarter 2005 due to an unexpected loss of production from our best well in the Denver-Julesburg Basin and delays in first gas sales from new wells in the San Juan Basin. Oil production was up 7 percent in the third quarter of 2006. While the loss of gas production in the DJ Basin was unexpected, recent well completions are testing at or above expectations and we expect to demonstrate year over year gas production growth in the fourth quarter."

Black Hills said construction of Wygen II, its latest 90 megawatt, coal-fired, mine-mouth power plant is ahead of schedule and the company is anticipating to have it in service by the end of 2007.

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