Dominion Agrees To Sell Offshore E&P Operations
To Eni For Approximately $4.76 Billion
Transaction part of previously announced strategic
repositioning
Process continues on pursuit of disposition of
other E&P
operations except Appalachian Basin
Proceeds to be used for debt reduction,
share buyback and business growth
RICHMOND, Va. – Dominion (NYSE: D) today announced
that it has agreed to sell its offshore natural gas and oil exploration and
production operations to Eni Petroleum Co. Inc., a subsidiary of Italian
energy company Eni, for approximately $4.76 billion.
These operations include approximately 967 billion
cubic feet equivalent of proved natural gas and oil reserves in the Gulf of
Mexico shelf and deep water as of Dec. 31, 2006, with 2006 average daily production
of approximately 503 million cubic feet equivalent.
"Today’s announcement
is a significant step in Dominion’s
previously announced strategic plan to refocus on the power generation and
energy distribution, transmission, storage and retail businesses," said
Chairman, President and CEO Thomas F. Farrell II. "Dominion has been
extremely successful in the E&P business, but that success has not been
fully reflected in our share price. Our plan is designed to realize the value
of these assets for our shareholders."
The company continues to pursue
the disposition of its U.S. onshore E&P
operations, except those in the Appalachian Basin, as well as its E&P operations
in western Canada. It expects to make further announcements in the near future.
With
additional announcements yet to come, several important pieces of financial
information are not yet ready for disclosure. That includes total proceeds,
applicable tax rate, targeted credit metrics in view of recent legislative
changes in Virginia and, ultimately, the amount of proceeds that will be available
to repurchase shares of common stock.
"We suggest that investors wait
for all of these announcements before drawing any firm conclusions on how these
transactions will affect Dominion’s
ongoing earnings power," Farrell said.
The sale of the offshore E&P
assets to Eni is expected to close by early July 2007, subject to customary
closing conditions and adjustments.
The company in March completed the sale
of three natural gas-fired generating facilities. It also is in the process
of selling its Dominion Peoples and Dominion Hope natural gas distribution
companies, with closing targeted for the end of the second quarter, subject
to the receipt of regulatory approvals.
Proceeds of the asset dispositions would
position the company to reduce debt — including
debt at its CNG subsidiary — repurchase common shares and grow other
Dominion businesses.
Dominion announced last November that it would pursue
the sale of most of its E&P assets as part of a strategic refocusing. The move
is designed to enhance the long-term value of the company by realigning Dominion’s
operations and risk profile more closely with the company’s peer investment
group of utilities.
Dominion plans to retain its low-risk E&P operations
in the Appalachian Basin because of their value to the company’s natural
gas pipeline, storage and gathering businesses. The Appalachian properties
account for approximately 15 percent of proved reserves and 8 percent of Dominion
average daily production as of Dec. 31, 2006. Production from these reserves
is expected to contribute less than 5 percent of Dominion’s future consolidated
operating earnings.
Including the Appalachian Basin E&P assets, Dominion
expects its remaining businesses to grow consolidated operating earnings per
share at an average annual rate of 4 percent to 6 percent. The company anticipates
that the E&P
disposition also will reduce the volatility of earnings.
Dominion is being advised
in the sale by the investment banking firms of JPMorgan, Lehman Brothers and
Juniper Advisory LP. BakerBotts LLP and McGuireWoods
LLP are the company’s legal advisers for the sale.
Dominion is one of
the nation's largest producers of energy, with a portfolio of more than 26,300
megawatts of generation, about 6.5 trillion cubic feet equivalent of proved
natural gas reserves and 7,800 miles of natural gas transmission pipeline.
Dominion also owns and operates the nation's largest underground natural gas
storage system with about 960 billion cubic feet of storage capacity and serves
retail energy customers in 11 states. For more information about Dominion,
visit the company's Web site at http://www.dom.com/.
This news release contains
certain forward-looking statements including our projected future long-term
operating earnings growth rates, components of our projected future earnings
mix,and projected use of proceeds
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 fluctuations
in energy-related commodity prices, including changes in the cost of fuel
for our regulated electric business, the timing of the closing dates of acquisitions
or divestitures (including our divestiture of The Peoples Natural Gas Company
and Hope Gas, Inc. and any divestiture of our natural gas and oil assets),
the amount of net proceeds received from any divestitures, additional risk
exposure associated with the termination of business interruption and offshore
property damage related to our exploration and production operations and
our inability to replace such insurance on commercially reasonable terms,
estimates of future market conditions, estimates of proved and unproved reserves,
the company’s ability to meet its natural gas and oil production forecasts,
the behavior of other market participants, and the effects of hurricanes
on our operations, gas and oil production and realized prices. Other factors
include, but are not limited to, weather conditions, governmental regulations,
economic conditions in the company's service area, risks of operating businesses
in regulated industries that are subject to changing regulatory structures,
changes to regulated gas and electric rates collected by Dominion, risks
associated with the realignment of our operating assets (including the potential
dilutive effect on earnings in the near term, costs associated with any disposition
of our exploration and production business and the redeployment of proceeds
from any dispositions), 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.
This news release is not an offer to sell securities and we are not soliciting
any offers to buy securities.
