UPDATE: Gabelli & Company Upgrades Black Hills to Buy

In a report published Friday, Gabelli & Company upgraded its rating on Black Hills Corp. (NYSE: BKH) from Hold to Buy.

Gabelli noted, “On August 23, BKH announced an agreement to sell its 85% interest in its Bakken and Three Forks shale assets (73 wells and 28,000 net lease acres) in the Williston Basin for $243 million to QEP Resources. The sale is expected to close on September 30, 2012 and net cash proceeds of $230-240 million with a considerable taxable gain offset by NOL's. We consider the agreement to be a significant positive given expected $0.10-0.15 per share earnings accretion, improved balance sheet, reduced equity needs and the realization of significant unrecognized value. We had previously valued BKH's 133 Bcfe of proved reserves at $260-270 million (at $2.00 Mcf), which compares to the $243 million for 13% of proved reserves to be realized in this agreement. The sale is consistent with BKH's more recent portfolio management approach to its businesses, i.e. the early 2012 sale of its energy marketing business for $166 million. We expect BKH to continue to prove out its 74,000 acres in the San Juan and Piceance Basin of the Mancos Shale and evaluate ongoing asset sales and purchases.”

Black Hills Corp. closed on Thursday at $31.01.