BKH
Black Hills Corporation
Energy, Event Driven/Special Sit
08/01/2014
Presented
| Date | 07/30/2014 |
| Price | $54.42 |
| Market Cap | $2.43B |
| Ent Value | $3.92B |
| P/E Ratio | 17.3x |
| Book Value | $30.80 |
| Div Yield | 3.3% |
| Shares O/S | 44.63M |
| Ave Daily Vol | 210,000 |
| Short Int | 4.06% |
Current
| Price | $60.91 |
| Market Cap | $4.25B |
| Black Hills Corporation, through its subsidiaries, operates as a diversified energy company in the United States. The company’s Electric Utilities segment generates, transmits, and distributes electricity to approximately 203,500 electric customers in South Dakota, Wyoming, Colorado, and Montana; and distributes natural gas to approximately 35,500 gas utility customers in Cheyenne, Wyoming. This segment owns 790 megawatts of generation capacity and 8,599 miles of electric transmission and distribution lines. Its Gas Utilities segment distributes natural gas to approximately 538,000 natural gas utility customers in Colorado, Nebraska, Iowa, and Kansas. This segment owns 604 miles of intrastate gas transmission pipelines and 19,998 miles of gas distribution mains and service lines. The company’s Power Generation segment produces electric power and sells the electric capacity and energy primarily to its utilities under long-term contracts. Its Coal Mining segment produces coal at its coal mine located near Gillette, Wyoming and sells the coal to electric generation facilities. The company’s Oil and Gas segment explores, develops, and produces crude oil and natural gas primarily in the Rocky Mountain region. This segment’s principal assets include the operating interests in the properties in the San Juan basin, the Powder River basin, and the Piceance basin; and non-operated interests in wells located in the Williston, Wind River, Bear Paw Uplift, Arkoma, Anadarko, and Sacramento basins. As of December 31, 2013, it had total reserves of approximately 87 billion cubic feet equivalent of natural gas and crude oil. Black Hills Corporation also provides appliance repair services to approximately 62,000 residential customers; and constructs gas infrastructure facilities for gas transportation customers. The company was founded in 1941 and is headquartered in Rapid City, South Dakota. |
Publicly traded companies mentioned herein: Black Hills Corporation (BKH), Encana Corporation (ECA), Williams Companies, Inc. (WMB)
Highlights
The presenter is long shares of Black Hills Corporation (BKH) because he believes there is substantial optionality on the diversified energy company’s E&P assets. The overall risk/ reward is attractive as BKH’s utility operations are “sound” and the value of its Mancos shale gas play in the San Juan Basin is underappreciated. At ~$55-56 per-share, the market cap of the company is $2.5 billion, and he sees the utility assets making up $46 of the value, and the PV10 of $5 on proved reserves suggests there is limited downside risk ($51). On the upside, BKH’s most promising shale play is surrounded by acreage owned by both Williams and Encana, and drilling results to-date have been broadly positive and suggest to the presenter that the value of the reserves could be far greater than the market anticipates.
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