RAPID CITY, S.D., March 9 /PRNewswire-FirstCall/ -- Black Hills Corporation today announced the signing of a definitive agreement to acquire certain oil and gas assets of Koch Exploration Company, LLC, in the Piceance Basin in western Colorado. The transaction, for which the purchase price was not disclosed, is contingent on the completion of remaining due diligence and is expected to be completed in the first quarter of 2006.
The Koch Exploration assets include approximately 40 billion cubic feet of proven gas reserves. The associated acreage position is comprised of leases covering more than 31,000 gross and 18,000 net acres, of which more than 48 percent of the lands are presently undeveloped. The acquisition includes 63 producing wells, of which 58 are operated by Koch Exploration, and majority interests in midstream and gathering assets, including a compressor and treatment facility currently awaiting final regulatory approvals for expansion through the addition of an amine processing plant. In 2005, production from Koch Exploration's interests was approximately 0.7 billion cubic feet equivalent. The acquisition, when completed, would increase the Company's natural gas and oil proven reserve position by approximately 24 percent and increase the Company's average daily production by approximately 5 percent.
David R. Emery, Chairman, President and CEO of Black Hills Corporation, said, "This acquisition is well-suited for our exploration and production operations, both strategically and geographically. The addition of Koch Exploration's Piceance Basin properties, adjacent to existing Black Hills operated properties, nearly doubles our acreage position in the basin to about 60,000 gross and 36,000 net acres. About 40,000 gross and 26,000 net acres require delineation and further development. We expect to increase production and reserves by commencing a multi-year recompletion and drilling program later this year. The program represents a low-risk gas play targeting shallow, long-lived wells with multiple producing zones in a region where we've experienced success for several years."
Emery continued, "We intend to improve operational efficiency by integrating our Colorado-based corporate and field staff resources. In addition, we expect to benefit from the marketing and gathering/processing expertise of Enserco Energy, our energy marketing arm located in Golden, Colorado."
ABOUT BLACK HILLS CORPORATION
Black Hills Corporation is a diversified energy company. Black Hills Energy, the wholesale energy business unit, generates electricity, produces natural gas, oil and coal, and markets energy. Our retail businesses are Black Hills Power, an electric utility serving western South Dakota, northeastern Wyoming and southeastern Montana; and Cheyenne Light, Fuel & Power, an electric and gas distribution utility serving the Cheyenne, Wyoming vicinity. More information is available at our Internet web site: http://www.blackhillscorp.com/ .
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release includes "forward-looking statements" as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward- looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward- looking statements, including the risk factors described in Items 1 and 2 of our 2004 Annual Report on Form 10-K and in Item 2 of Part I of our quarterly reports on Form 10-Q filed with the SEC, and the following:
-- The amount and timing of capital deployment in new investment
opportunities;
-- The volumes of our production from oil and gas development properties,
which may be dependent upon issuance by federal, state, and tribal
governments, or agencies thereof, of drilling, environmental and other
permits, and the availability of specialized contractors, work force,
and equipment;
-- Numerous uncertainties inherent in estimating quantities of proved oil
and gas reserves and actual future production rates and associated
costs;
-- The extent of our success in connecting natural gas supplies to
gathering, processing and pipeline systems;
-- The possibility that we may be required to take impairment charges to
reduce the carrying value of some of our long-lived assets when
indicators of impairment emerge;
-- Our ability to successfully integrate new acquisitions into our
operations;
-- Our ability to remedy any deficiencies that may be identified in the
periodic review of our internal controls;
-- The timing and extent of changes in energy-related and commodity
prices, interest rates, energy and commodity supply or volume, the cost
of transportation of commodities, and demand for our services, all of
which can affect our earnings, liquidity position and the underlying
value of our assets;
-- General economic and political conditions, including tax rates or
policies and inflation rates;
-- The creditworthiness of counterparties to trading and other
transactions, and defaults on amounts due from counterparties;
-- The amount of collateral required to be posted from time to time in our
transactions;
-- Changes in or compliance with laws and regulations, particularly those
relating to taxation, safety and protection of the environment;
-- Weather and other natural phenomena;
-- Industry and market changes, including the impact of consolidations and
changes in competition;
-- The effect of accounting policies issued periodically by accounting
standard-setting bodies;
-- The cost and effects on our business, including insurance, resulting
from terrorist actions and natural disasters or responses to such
actions and events;
-- Capital market conditions, which may affect our ability to raise
capital on favorable terms;
-- Other factors discussed from time to time in our other filings with the
SEC.
New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.
