Good day, ladies and gentlemen, and welcome to the Black Hills Corporation Second Quarter 2015 Earning Conference Call. My name is Matt, and I’ll be your coordinator today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Jerome Nichols, Director of Investor Relations of Black Hills Corporation. Please proceed sir.

Thank you, Matt. Good morning, everyone. Welcome to Black Hills Corporation's second quarter 2015 earnings conference call. Leading our quarterly earnings discussion today are David Emery, Chairman, President and Chief Executive Officer; and Rich Kinzley, Senior Vice President and Chief Financial Officer. During our earnings discussion today, some of the comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission and there are a number of uncertainties inherent in such comments. Although we believe that our expectations and beliefs are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, slide 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations. I will now turn the call over to David Emery.

Thank you, Jerome, and good morning everyone. I will be starting on Slide 3 of the webcast deck for those of you who are following along. This quarter we’ll follow a similar format to previous quarters. I'll give a quick update on the quarter, Rich Kinzley, our CFO will provide the financial update for the quarter, and then I’ll speak to strategy going forward followed finally by a question-and-answer session. If you would turn to slide 5 second quarter highlights we had an exciting quarter. In the second quarter we posted strong earnings growth, and EPS as adjusted compared to last year, almost a 22% improvement. We announced the signing of an agreement subsequent to the end of the quarter to acquire SourceGas and that will be the largest transaction in the company’s history. We also closed on the $17 million purchase of a natural gas utility in Northwest Wyoming and I think notably related to that acquisition, that utility was fully integrated into all of our systems on day one following the closing of the transaction. On the business environment side from a weather perspective we have moderate weather in our utilities service territories this year compared to colder than normal weather in the same period last year and that tempered the results slightly from both our electric and gas utilities. Highlight from our utilities, The Black Hills Power received approval from the Wyoming Public service commission for a CPC and to construct a new 144 mile, $54 million electric transmission line from Northeast Wyoming to Rapid City, South Dakota. If you recall last year the South Dakota PUC also approved the same line and we expect construction to commence in the fourth quarter of this year. Cheyenne Light, Fuel & Power recorded a new all-time peak electric load…

All right, thanks Dave, and good morning. As Dave mentioned our core utility and utility like businesses continue to demonstrate strong performance. In the second quarter as you saw on slide 9 each of the businesses improved financial performance compared to the second quarter of 2014. In particular electric utilities posted strong operating results and low commodity prices continue to impact oil and gas business, but despite that challenge we posted a great quarter. On Slide 11 we reconciled GAAP earnings to earning as adjusted, a non-GAAP measure. We do this to isolate special items and communicate earnings to better indicate our ongoing performance. In the first two quarters of 2015 we reported non-cash ceiling test impairment at our oil and gas business and in the second quarter of 2015 we had an impairment of an equity investment at our oil and gas business. These impairments were due to continued low natural gas and crude oil prices and were non-cash charges that are not reflective of our on-going operational performance. We also incurred acquisition cost in the second quarter of 2015 related to the SourceGas acquisitions which were non-recurring in nature. Our second quarter EPS as adjusted reflective of ongoing operations was $0.56 per share compared to $0.46 per share in the second quarter last year. Our trailing 12-months EPS as adjusted was $3.02, a 10% increase over $2.74 reported for the 12-months ended June 30, 2014. Moving to slide 12, we incurred $66 million in after-tax noncash impairment charges related to our oil and gas holdings in the second quarter. While performing our ceiling test calculation for our oil and gas reserves at the end of the second quarter we determined calculations of this test in prior periods were an error. The error related to evaluated, evaluating and correctly…

All right thank you Rich. Moving on to strategy, on slide 22, you’ve seen this before. We group our strategic goals into four major categories with the overall objective of being an industry leader in everything we do. Those four major goals for us include profitable growth, valued service, better every day and great work place. On slide 23, subsequent to the quarter end we announced our agreement to acquire SourceGas Holdings LLC for a total consideration of $1.89 billion, that is and will be the largest transaction in our company’s history. We’re excited about that opportunity. It provides a lot of benefits to us, customers and shareholders. It expands our utility presence in Colorado, Nebraska and Wyoming. Also adds the new state for us, the Arkansas which has a fast growth service territory. We’re excited about entering a new state in Arkansas. It increases our customer base by 55% and most importantly it enhances the future growth potential of our utility, and it will be meaningfully accretive to EPS in the first calendar following closing. We expect to file for all necessary approvals next week and anticipate closing in the first half of 2016. Slide 24 provides an illustration of the combined company footprint. Following closing we serve a total $1.2 million electric and natural gas utility customers and 790 communities and eight states. Moving on to slide 25, strong capital spending drives our earnings growth. We forecast the total of $1.2 billion of investment from 2015 to 2017 with nearly $493 million for 2015. Our projected capital spending far exceeds depreciation driving our earnings growth. It’s important to note on this table that it does not include any capital related to the SourceGas properties. Once we close the acquisition we’ll add those into the schedule. Also since last…

Thank you, sir. Ladies and gentlemen, we are ready to open the line for your questions. [Operator Instructions] Our first question comes from Matt Tucker of KeyBanc Capital Markets. Your question please.

Good morning. Congrats on a nice quarter.

Hey, good morning, Matt.

First, I wanted to ask about the cost of service gas program, I mean should we look at increase in the CapEx there as a sign that you’re increasingly confident in getting approval and including your Mancos Shale assets?

We haven’t made a final decision to include the Mancos, but that’s certainly the goal we’re working towards. I think as we continue to complete wells this fall we’re getting increasingly confident in the quality of the play. So I view that as a real positive sign for us. And we really like the program. We’ve had a lot of decisions in all the states and definitely plan to get filed this fall.

Got it. And just to clarify, if you don’t include the Mancos assets in the program, would some of the CapEx shift back to the non-regulated side or do you plan to in the current commodity environment, stick with the numbers that you have laid out today?

Realistically, we wouldn’t shift that capital back to normal E&P programs, Matt. At current price levels they just don’t support the rates of return necessary for simple payouts on drilling wells in most of our plays. When you look at the long term cost of service gas program, you’re looking to beat a little different number rather than the spot price of natural gas. So it’s viable there. If we don’t include the Mancos which we certainly hope to include the Mancos, we’re still looking to acquire some producing properties, gas properties that will be relatively small, but we would include those in the cost of service gas program instead. So the CapEx forecast we have in there is really for the Mancos and/or acquisition of some small producing properties, all of which would be included in a cost of service gas if things work out as expected here.

Okay. Thanks. So I think I understand - you think the regulators would take a longer-term view, so while it may not make sense to invest over the next couple of years in the non-regulated side, they would look at it differently?

Yes. We feel pretty strongly that the best time to implement a cost of service gas program is when gas prices are low. Drilling cost are little lower, obviously not low enough to just drill for rate of return, but when you look at long term life of property hedge on gas prices which essentially cost of service gas program provides, it’s a great time to get a program in place. It gives you a relatively low number on a per Mcfe base, that will be around for years to come. And then you’ve got the program in place when the gas prices do rebound and customers can reap the entire benefit. Makes a lot more sense to implement when prices are low than after prices have already started to rise.

That’s very helpful. Thanks. And then I just shifting gears, wanted to ask about the wind farm application and I guess just give us a sense what’s changed versus in the bid versus the last time. Is it just lower now or what gives you optimism that it will get improved this time? And then as a follow-up to that, if the cost to construct end up coming in above what you’re assuming or the developer is assuming, is the developer on the hook for those costs?

The last part of your question is yes. The first part is really what changes, there are several things, but when we went into the commission last year one of the concerns they expressed with the projects we proposed was that we had evaluated those against the higher forecast for natural gas prices. And so one of the primary suggestions they made really was to go back to the suppliers, see if you can get better bids, but then obviously evaluate those against the more current natural gas price forecast which we have done. We still believe that this project is in the best long term interest of our customers at Colorado Electric and so we’ve re-proposed that. Hopefully the commission will agree with this.

Great. Thanks, Dave. I will jump back in the queue.

Thanks, Matt.

[Operator Instructions] We have a follow-up from Matt Tucker. Your line is open.

Okay, great. I noticed the costs for a couple of the Whittaker flats wells completed earlier this year had gone up little bit relative to the first quarter slides. Could you just comment on what was going on there?

I don’t have that slide sitting in front of me, Matt, but I think the Whittaker flats numbers actually look pretty good. We had a couple wells on Homer Deep 9-11 pad that were just a little bit higher, those wells are deeper for one thing by almost a couple of thousand feet and total measured depth; Whittaker Flats more in the 16,000 range or little more and there some of the Homer Deep wells are 18,000 feet measured in depths so there is a difference in cost related to that. On the 9-11 pad we did have a few drilling problems and you can see that on a graphs basically where we stay at the same place for quite a while don’t make much progress. But overall I think we are very happy with the way the drilling is gone and interestingly the 9-11 pad was the least modern of the three rigs that we were running in the play. And so, what we’ve seen in the Whittaker Flats and on the Homer Deep 7-23 pad is really good drilling efficiencies in cost that you will see that as we move forward into the following quarters and give you a full detailed cost information on those wells, but those are two really purpose built rigs that are designed to drill these deeper horizontal wells efficiently and safely and they did a bang up job for us. So, I think as we get some more numbers out there you will be pleased with what you see. That combined with the fact that just service cost have come down overall anyway due to the downturn in the industry.

Thanks, and I actually misspoke. I meant to refer to the Homer Deep wells, but that commentary was helpful. And the follow-up to that the 7-23 wells that you're not expecting to produce now until late 2016, early 2017, can you test those wells earlier or do you just not complete them until the later date?

No because you need to do the full frac job to do an adequate test and the fracs on those four wells we’re predicting are going to cost around $30 million. And again if we just test them and shut them in, it doesn’t make a whole lot of sense. We don’t need the production out of the plant for at least another full year because of the plant capacity issue. If we were concerned that we really needed those well test results, we would probably be planning on completing them still even though we can’t produce them just to get the well test results, to increase our confidence and the predictability of the program. What we’ve seen so far we’re pretty pleased with the predictability of the program and don’t really anticipate needing the results of those four wells to be fairly confident and the ongoing viability of the drilling program there.

Makes sense, thanks. And then just on the SourceGas acquisition, your equity currency has lost a little value since you announced the deal. Does that impact your accretion expectations or are there other levers you can pull or adjustments you can make to the financing plan to offset that?

Sure, Matt this is Rich. I mean there is a lot of things we are looking at there that the reduced CapEx at E&P in 2016 and 2017 certainly helped in terms of post acquisition how quickly we will delever. So our attempt is going to be to finance this as aggressively as we can in terms of least amount of equity while maintaining our strong investment grade ratings, so we’re looking at all those things we should generate good cash flow in the second half of the year. My hope is that we’re not going to have to issue as much equity is what you see in the deck, but we’ll be looking at all that as we move forward.

Okay, that's all I had. Congrats again on a nice quarter.

All right. Thank you, Matt.

[Operator Instructions] At this time I am showing no further questions. I would like to turn it back to David Emery for closing remarks.

Very well thanks for joining us this morning everyone. We appreciate your time and attention and obviously we appreciate your continued interest in Black Hills. As I said at the beginning of the call we’re really excited. We had a great quarter, the announcement of SourceGas obviously is a huge, another large transformational acquisition for us and we are excited about getting that deal closed in the next year or less hopefully and getting it integrated into our existing utilities. So I look forward to next quarter. Talk to you then, thank you.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.