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November 2, 2005
Dominion Announces Third-Quarter 2005 Earnings
- Reports GAAP earnings of 4-cents and operating earnings of $1.08 per share
- Supplemental disclosure available on Dominion's Web site
- Conference call scheduled for 10 a.m. EST tomorrow
RICHMOND, Va. - Dominion (NYSE: D) announced today unaudited
net income determined in accordance with Generally Accepted Accounting Principles
(GAAP) for the three months ended Sept. 30, 2005, of $15 million (4 cents per
share) compared to net income of $337 million ($1.02 per share) for the same
period last year.
Operating earnings, which are defined as GAAP earnings adjusted
for certain items, amounted to $373 million ($1.08 per share) for the three
months ended Sept. 30, 2005. This compares to the company’s operating
earnings guidance of $1.20 to $1.25 per share, originally provided on August
3. Approximately 14 billion cubic feet equivalent of expected natural gas and
oil production was delayed in the quarter due to Hurricanes Katrina and Rita,
resulting in a 20-cents per share shortfall compared to guidance. Were it not
for the hurricanes, Dominion would have exceeded the upper end of its operating
earnings guidance range by 3-cents per share. Operating earnings in the third
quarter of 2004 were $400 million ($1.21 per share).
Included in third quarter 2005 GAAP earnings but excluded
from operating earnings are $358 million in net after-tax charges primarily
related to certain impacts of Hurricanes Katrina and Rita, largely reflecting
a non-cash charge due to the discontinuation of hedge accounting for certain
cash flow hedges related to forecasted production.
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 faced incredible challenges in the third quarter.
Hurricanes Katrina and Rita, both Category 5 storms while in the Gulf of Mexico,
and Categories 4 and 3 respectively when they made landfall, occurred just as
we were nearly finished recovering from Hurricane Ivan. These events not only
disrupted the natural gas and oil business industry-wide, they had a profound
effect on our workforce. Immediately following Katrina we went to work finding
and safely relocating our employees and their families to Houston.
“Fortunately, the impact of the hurricanes on our earnings
is only timing in nature. While the non-cash charge from de-designating hedges
on delayed production had a big impact on our third-quarter GAAP earnings, the
effect is temporary since we will record future net income when those volumes
are produced. Additionally, we expect to recover proceeds for delayed production
through our business interruption insurance, subject to policy deductibles.”
Dominion’s business interruption insurance covers delays
caused both by damage to its own production facilities and by damage to third-party
facilities downstream. Dominion’s policy coverage for Hurricane Katrina
has a 30-day deductible period, while its policy covering Hurricane Rita has
a 45-day deductible period.
Third-quarter 2005 operating earnings compared to guidance
Dominion’s third-quarter 2005 operating earnings of
$1.08 per share compares to the company’s third-quarter operating earnings
guidance of $1.20 to $1.25 per share. Approximately 14 billion cubic feet equivalent
of expected natural gas and oil production was delayed in the quarter due to
the hurricanes resulting in a 20-cent-per-share shortfall compared to guidance.
Also, Virginia fuel expenses were higher than expected. Commodity price escalation,
in part driven by the hurricanes, and a warmer-than-normal summer were the principal
causes for the fuel-expense variance. These negatives were partially offset
by the benefits of warmer-than-normal weather in the company’s electric
utility service area; the sale of excess emissions allowances, and higher contributions
from the company’s merchant generation business.
Complete details of third-quarter 2005 results compared to
company guidance can be found on Schedule 4 of this release.
Third-quarter 2005 operating earnings compared to 2004
Third-quarter 2005 operating earnings of $1.08 per share compares
to operating earnings of $1.21 per share in the third quarter of 2004. The decrease
is primarily attributable to higher Virginia fuel expenses and the effects of
Hurricanes Katrina and Rita. These negatives were partially offset by the benefit
of warmer-than-normal weather in the company’s electric utility service
area; an increase in the sale of emissions allowances, and higher contributions
from the company’s merchant generation and producer services businesses.
Complete details of third-quarter 2005 operating earnings
compared to 2004 can be found on Schedule 5 of this release.
Fourth-quarter 2005 operating earnings guidance
Dominion expects fourth-quarter 2005 operating earnings in
the range of 60 cents to 70 cents per share resulting in full-year operating
earnings of approximately $4.11 to $4.21 per share. This compares to operating
earnings of $1.22 in the fourth quarter 2004. Drivers that compare unfavorably
to 2004 include an increase in Virginia fuel expenses, and the continued effect
of delayed production due to the hurricanes. Expected offsets include customer
growth; a return to normal weather in the gas and electric service areas, and
contributions from the company’s merchant generation assets. For guidance
purposes, no revenue recovery through the business interruption insurance claim
process has been assumed for the fourth quarter.
In providing operating earnings guidance, there could be differences
between expected GAAP and operating earnings, beyond those differences recorded
through the third quarter, for matters such as, but not limited to, changes
in accounting principles. At this time Dominion is not able to provide a corresponding
GAAP equivalent for fourth-quarter or full-year 2005 earnings per share guidance.
GAAP earnings in 2004 amounted to 67 cents per share in the fourth quarter and
$4.61 per share for the full-year.
Complete details of Dominion’s fourth-quarter 2005 guidance
can be found on the company’s Web site at www.dom.com/investors/.
Supplemental disclosure available on Dominion's Web site
Concurrent with this earnings release, Dominion has published
on its Web site answers to commonly asked questions regarding actual and expected
future effects of Hurricanes Katrina and Rita on company operations and financial
results. The supplemental question and answer document is an appendix to Dominion’s
Third Quarter Earnings Release Kit and can be found at www.dom.com/investors/.
November 3 earnings conference call
Dominion will host a conference call at 10:00 a.m. EST, Nov.
3, when management will discuss details of third-quarter 2005 earnings and other
issues of interest to the financial community. Members of the media also are
invited to listen.
Domestic callers should dial 866-710-0179. The passcode for
the conference call is “Dominion.” International callers should
dial 334-323-9856. 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 investor information page at www.dom.com/investors/.
A replay of the conference call will be available beginning
about 1 p.m. EST Nov. 3 and lasting until 11 p.m. EST Nov. 10. Domestic callers
may access the recording by dialing 877-919-4059. International
callers should dial 334-323-7226. The PIN
for the replay is 78631397. Additionally, a replay of the Web
cast will be available on the company’s investor information page by the
end of the day Nov. 3.
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
our expectations for 2005 financial results that are subject to various risks
and uncertainties. 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 timing of the closing dates of acquisitions, realization of and
timing of the receipt 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, the behavior of
other market participants, and the effects of hurricanes on our operations,
oil and gas production and commodity prices. 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, the transfer of control over electric transmission facilities to
a regional transmission organization, changes to rating agency requirements
and 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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