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August 3, 2005
Dominion Announces Second-Quarter 2005 Earnings
- Company reaffirms 2005 earnings guidance
- Conference call scheduled for 10 a.m. EDT today
RICHMOND, Va. - Dominion (NYSE: D) announced today unaudited
net income determined in accordance with Generally Accepted Accounting Principles
(GAAP) for the three months ended June 30, 2005, of $332 million (97 cents per
share) compared to net income of $251 million (76 cents per share) for the same
period last year.
Operating earnings, which are defined as GAAP earnings adjusted
for certain items, were $340 million (99 cents per share) for the three months
ended June 30, 2005. This compares to operating earnings guidance of 73 cents
to 85 cents per share and operating earnings of $267 million (81 cents per share)
for the same period in 2004.
Dominion uses operating earnings as the primary performance
measurement of its earnings outlook and results for public communications with
analysts and investors. Dominion also uses operating earnings internally for
budgeting, reporting to the board of directors and for the company’s annual
incentive plan. Dominion management believes operating earnings provide a more
meaningful representation of the company’s fundamental earnings power.
Business segment results and detailed descriptions of items
included in 2005 and 2004 GAAP earnings but excluded from operating earnings
can be found on Schedules 1, 2 and 3 of this release.
Thos. E. Capps, chairman and chief executive officer, said:
“We are pleased with both the performance of our operating
units and the successful settlement of our business interruption claim related
to Hurricane Ivan during the second quarter.
“The net impact of Dominion’s entry into PJM has
so far been quite positive. Access to more generation has increased our flexibility
in meeting our load obligations and has helped offset rising fuel expenses.
Dominion Delivery produced improved reliability performance and experienced
healthy customer growth in regulated operations. And growth in Producer Services
margins and elimination of proprietary trading helped to increase Dominion Energy’s
contribution to earnings.
“A major accomplishment in the second quarter was the
successful settlement with our insurance carriers. This eliminated the uncertainty
normally associated with such claims, allowed earnings and cash flow predictability,
and provided us the flexibility to manage our offshore drilling program without
fear of impacting our claim.
“Now that we have successfully completed the first six
months of 2005, we are reaffirming our full-year operating earnings guidance
of $5.00 to $5.10 per share.”
In providing operating earnings guidance, Dominion management
is not aware of differences between expected 2005 operating earnings and GAAP
earnings beyond those recorded through the second quarter. The corresponding
GAAP equivalent for 2005 earnings per share guidance is $4.79 to $4.89 per share.
Second-quarter 2005 operating earnings compared to guidance
Dominion’s operating earnings of 99 cents per share
exceeded the upper end of the company’s operating earnings guidance range
of 73 cents to 85 cents by 14 cents per share. This variance can be attributed
to the settlement of Dominion’s insurance claim related to Hurricane Ivan.
While there were other factors that resulted in variances to specific guidance
line items, they were generally offsetting in nature. Results below the company’s
forecast were driven by milder-than-normal weather in the company’s electric
service area; lower-than-projected production and price benefits at E&P;
the impact of hedge ineffectiveness due to an increase in gas and oil basis
differentials; and the effect of an unplanned merchant generation outage. Offsetting
these negative factors was the sale of excess emissions allowances. Two other
related variances to guidance were also essentially offsetting. Virginia fuel
expense was above forecast, but was offset by benefits related to financial
transmission rights granted to offset congestion costs associated with participation
in PJM.
Complete details of second-quarter 2005 results compared to
company guidance can be found on Schedule 4 of this release.
Second-quarter 2005 operating earnings compared to 2004
Second-quarter 2005 operating earnings of 99 cents per share
compares to 81 cents per share in the second quarter of 2004. The increase is
primarily attributable to the settlement of insurance claims related to Hurricane
Ivan; the sale of excess emissions allowances; higher natural gas and oil prices
at E&P; improved results from the company’s Producer Services business;
contributions from the Dominion New England assets acquired in January 2005;
and lower purchased-power capacity expenses.
These positives were partially offset by milder-than-normal
weather in the company’s gas and electric service areas; higher expenses
at E&P, including an increase in hedge ineffectiveness due to an increase
in gas and oil basis differentials; and favorable second-quarter 2004 items
at E&P that did not recur in the second quarter of 2005, such as gains on
oil options and a positive tax adjustment.
Complete details of second-quarter 2005 operating earnings
compared to 2004 can be found on Schedule 5 of this release.
Third-quarter 2005 operating earnings guidance
Dominion expects third-quarter 2005 operating earnings in
the range of $1.20 to $1.25 per share. This compares to $1.21 per share in the
third quarter of 2004. Drivers that compare favorably to 2004 include customer
growth; a return to normal weather in the gas and electric service areas; contributions
from the company’s unregulated generation assets; commodity prices at
E&P; and results from the company’s Producer Services business. Expected
offsets include higher Virginia fuel expenses in excess of rate recovery and
higher E&P expenses including the effect of gains on oil options recorded
in the third quarter 2004 not expected to recur in the third quarter of 2005.
In providing third-quarter 2005 operating earnings guidance,
Dominion management is not aware of differences between operating earnings and
GAAP earnings. Therefore the corresponding GAAP equivalent for third-quarter
2005 earnings per share guidance also is $1.20 to $1.25 per share. GAAP earnings
in the third quarter 2004 were $1.02 per share.
Complete details of Dominion’s third-quarter 2005 guidance
can be found on the company’s Web site at www.dom.com/investors/.
August 3 earnings conference call
Dominion will host a conference call at 10:00 a.m. EDT today,
when management will discuss details of second-quarter 2005 earnings and other
issues of interest to the financial community. Members of the media also are
invited to listen.
Domestic callers who wish to participate in the conference
call should dial 888-243-3836. International callers should
dial 973-935-2096. Participants should dial in 10 to 15 minutes
prior to the scheduled start time.
A live Web cast of the conference call will be available on
the company’s Web site at www.dom.com/investors/.
A replay of the conference call will be available from approximately
1 p.m. EDT, Aug. 3, until 11 p.m. EDT, Aug. 10. Domestic investors may access
the recording by dialing 877-519-4471. International callers
should dial 973-341-3080 to access the recording. The PIN
for the conference call replay is 6166595. Additionally, a
replay of the Web cast will be available on the company’s investor information
page by the end of the day Aug. 10.
Dominion is one of the nation's largest producers of energy,
with a portfolio of about 28,100 megawatts of generation, about 6 trillion cubic
feet equivalent of proved natural gas reserves and 7,900 miles of natural gas
transmission pipeline. Dominion also operates the nation's largest underground
natural gas storage system with more than 965 billion cubic feet of storage
capacity and serves retail energy customers in nine states. For more information
about Dominion, visit the company's Web site at www.dom.com.
This release contains forward-looking statements including
the company’s expectations for 2005 earnings that are subject to various
risks and uncertainties. Discussion of factors that could cause actual results
to differ materially from management's projections, forecasts, estimates and
expectations may include factors that are beyond the company's ability to control
or estimate precisely, such as the receipt of approvals for and timing of the
closing dates of acquisitions, realization of expected business interruption
insurance proceeds, estimates of future market conditions, estimates of proved
and unproved reserves, the company’s ability to meet its production forecasts
and the behavior of other market participants. Other factors include, but are
not limited to, weather conditions, governmental regulations, economic conditions
in the company's service area, fluctuations in energy-related commodity prices,
including changes in the cost of fuel for our regulated electric business, risks
of operating businesses in regulated industries that are subject to changing
regulatory structures, changes to regulated gas and electric rates recoverable
by Dominion, transitional issues related to the transfer of control over electric
transmission facilities to a regional transmission organization, changes to
rating agency requirements or ratings, changing financial accounting standards,
trading counter-party credit risks, risks related to energy trading and marketing,
and other uncertainties. Other risk factors are detailed from time to time in
Dominion’s most recent quarterly report on Form 10-Q or annual report
on Form 10-K filed with the Securities & Exchange Commission.
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