South Dakota

(State or other jurisdiction of incorporation)

001-31303

46-0458824

(Commission File Number)

(IRS Employer Identification No.)

625 Ninth Street, PO Box 1400

Rapid City, South Dakota

(Address of principal executive offices)

57709-1400

(Zip Code)

605.721.1700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)



Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02

Results of Operations and Financial Condition.

Item 9.01  

Financial Statements and Exhibits

(c)

Exhibits

99

Press Release dated May 4, 2006.

BLACK HILLS CORPORATION

By:  /s/ Mark T. Thies             

Mark T. Thies

Executive Vice President

and Chief Financial Officer

Date:  May 4, 2006

•     a $4.9 million, or $0.15 per share, increase in energy marketing earnings;

•     a $1.5 million, or $0.04 per share, increase in retail services earnings;

•     a $1.8 million, or $0.05 per share, decrease in power generation earnings; and

•     a $1.6 million, or $0.05 per share, increase in corporate loss.

BLACK HILLS CORPORATION
(In thousands, except per share amounts)

Three months ended March 31,

2006

2005

Revenues:

Retail Services (a)

$ 87,503

$ 70,124

Wholesale Energy (a)

84,371

72,031

Corporate

16

265

$ 171,890

$ 142,420

Net income (loss) available
for common stock:
Continuing operations –

Retail Services

$ 6,296

$ 4,834

Wholesale Energy

15,215

11,762

Corporate

(2,950)

(1,342)

Income from
continuing operations

18,561

15,254

Discontinued operations (b)

7,590

486

Net income

26,151

15,740

Less: preferred stock dividends

-

(79)

$ 26,151

$ 15,661

Weighted average common shares
outstanding:

Basic –

33,120

32,444

Diluted –

33,460

33,009

Earnings per share:

Basic –

Continuing operations

$ 0.56

$ 0.46

Discontinued operations

0.23

0.02

Total

$ 0.79

$ 0.48

Diluted –

Continuing operations

$ 0.55

$ 0.46

Discontinued operations

0.23

0.02

Total

$ 0.78

$ 0.48

(a) Presentation of our 2005 revenues has changed to reflect the reclassification of the Company’s oil marketing and transportation business and Communications segment financial results to discontinued operations.

(b) 2006 discontinued operations reflect the after-tax results of operations at the Company’s oil marketing and transportation business. 2005 discontinued operations reflect the after-tax results of operations of the crude oil marketing and transportation business, the communications segment, and the Pepperell power plant.

•     Net income from the Electric utility business segment for the three months ended March 31, 2006 was $4.9 million, compared to $4.3 million in 2005. The increase was primarily due to increased revenues, lower depreciation expense and legal costs, offset in part by increased fuel cost and general and administrative costs.

•     Net income from the Electric and gas utility segment for the three months ended March 31, 2006 was $1.4 million, compared to $0.5 million for the period from January 21 through March 31, 2005. The increase is primarily due to an increase in base rates, effective January 1, 2006 offset in part by increased operating expenses and general and administrative costs.

The following tables provide certain Retail Services operating statistics:

Electric Utility (Black Hills Power)

Three months ended

March 31,

2006

2005

Retail sales–MWh

410,473

400,325

Contracted wholesale sales–MWh

162,251

160,838

Off-system sales–MWh

180,163

188,114

752,887

749,277

Electric and Gas Utility
(Cheyenne Light, Fuel & Power)

Three months ended
March 31, 2006

Jan. 21, 2005 to
March 31, 2005

Electric sales – MWh

232,827

177,100

Gas sales – Dekatherm (Dth)

1,870,454

1,412,101

•     Energy marketing income from continuing operations quadrupled to $6.3 million, compared to income of $1.4 million in 2005. Increased earnings were primarily the result of higher gross margins offset in part by a 6 percent decrease in natural gas volumes marketed. The higher margins resulted from opportunities to deliver natural gas through transportation and storage strategies during a period of market volatility. The unrealized mark-to-market gain component of natural gas marketing margins was $2.7 million higher after tax than in the same period in 2005.
In March 2006, we completed the sale of the operating assets of our oil marketing and transportation business, which resulted in an after-tax gain on sale of approximately $8.8 million, which is reported within “discontinued operations.” In April, we began crude oil marketing at our Colorado-based energy marketing operations.

•     Oil and gas income from continuing operations was $5.4 million in 2006 and $5.0 million in 2005. Revenues increased 32 percent primarily due to average prices received (net of hedges) that were 30 percent higher for natural gas and 38 percent higher for oil. Overall production increased 1 percent on an equivalent basis, as gas production increased 2 percent and oil production decreased 6 percent. Total operating expenses increased 39 percent primarily due to industry-wide higher field service costs, increased depletion expense, an increase in revenue-based taxes, and an increased number of producing wells. On a per Mcfe basis, lease operating expense (LOE) increased

•     49 percent to $1.19 per Mcfe. The increase in LOE is due primarily to more work done in certain fields in the first quarter due to milder weather as compared to the previous year. Depletion costs per Mcfe increased 64 percent to $1.62, due to higher capitalized costs, higher estimated future development costs, and the addition of higher average-cost reserves from recent acquisitions. Results were also impacted by increased interest expense due to higher borrowings to fund acquisition and development costs. In the first quarter of 2006, we completed the acquisition of certain assets of Koch Exploration, Inc. in the Piceance Basin of Colorado. The purchase price for the 18,000 net acre leasehold with approximately 63 wells and 40 billion cubic feet equivalent proven developed and undeveloped reserves was $51.4 million.

•     Power generation income from continuing operations was $2.1 million, compared to income of $3.9 million in 2005. The 46 percent decline in earnings was primarily the result of a 12 percent decrease in revenues due to outages at our Las Vegas power plants and a planned one-week outage at our Wygen I plant. Partially offsetting these factors was an increase in revenues from our Harbor power plant. In addition, operating expense decreased

•     9 percent, due to lower variable operating costs related to the Las Vegas outages, offset in part by an increase in repair and maintenance costs. Plant availability of our contracted fleet was affected by the planned maintenance at Las Vegas I and unplanned outages at Las Vegas II. Excluding Las Vegas, the availability of the remainder of our gas-fired fleet was approximately 99 percent. Availability of our Wygen I coal-fired plant was approximately

•     92 percent. The Las Vegas I power plant resumed operations in late April 2006, and the Las Vegas II plant is expected to be fully operational in May 2006. The total negative financial impact of this unplanned outage is expected to be in the range of $0.05 to $0.08 per share.

•     Coal mining income from continuing operations was $1.4 million in 2006 compared to $1.5 million in 2005. Results were affected by a 23 percent increase in mining expense from higher taxes and royalties and higher transportation and overburden removal costs, offset partially by increased revenues due to higher average prices received and a 6 percent increase in production during the quarter.