Natural Gas and Oil Production

• Development and acquisition strategy focuses on long-lived gas reserves.
• 2005 production -- 13.7 Bcfe -- was the eighth consecutive annual record and a 9% increase over the previous year.
• Record earnings of $17.9 million in 2005 -- 47% higher than 2004 results.
• 169 Bcfe reserves at year-end 2005, with natural gas comprising 76% of the total.
• Acquired 13,000 net acre leasehold located in the Piceance Basin in western Colorado in late 2005.
• In March 2006, acquired 40 Bcfe and 18,000 net acres in the Piceance, further complementing operations in that region.
• Production is concentrated in New Mexico, Colorado and Wyoming, with additional production in several Plains states and California.

Coal Mining

• Our Powder River Basin coal mine near Gillette, Wyoming, supports low-cost mine-mouth power generation.
• 2005 production: 4.7 million tons, including 1.1 million tons of train load-out sales.
• 290 million tons of coal reserves at year-end 2005 -- a 50-plus year supply at current production rates.

Oil and gas production expands

Late in 2005, we acquired another 13,000 net-acre leasehold in the Piceance Basin in western Colorado. We are confident in the long-term production potential of this acquisition. We are already active in this region, and have implemented a methodical rework and recompletion program on shun-in wells as we ramp up a more aggressive drilling and development program for this acreage. In March 2006, we acquired an additional 18,000 net acres in the same region and will incorporate this leasehold into our overall drilling and development program.

Coal mining progress

Our coal resource exemplifies the underlying value of our energy assets. We mined and sold 4.7 million tons of our Powder River coal profitably in 2005. We sell and deliver coal to our mine-mouth customers, including Black Hills Energy (independent power), Black Hills Power, and PacifiCorp, at a very competitive cost of less than $1 per MMBtu. Compare that to the wholesale market price of natural gas, which ranged from about $4 to $15 per MMBtu during 2005. Our coal provides a powerful competitive advantage for us, and we intent to use it to our benefit -- as well as our customers' -- for many years to come. We have approximately 290 million tons of coal reserves, which is a 50-plus year supply at current production rates.