Dominion Agrees To Sell Canadian E&P Operations For U.S. $583 Million
Transaction continues previously announced strategic repositioning
Proceeds to be used for debt reduction, share buyback and business growth
Process ongoing to sell remaining E&P operations except Appalachian Basin
RICHMOND, Va. – Dominion (NYSE: D) today announced
that it has agreed to sell its Canadian natural gas and oil exploration and
production operations to Paramount Energy Trust and Baytex Energy Trust,
both of Calgary, Canada, for approximately U.S. $583 million based on currency
exchange rates at close of business on May 25, 2007.
These operations include approximately 267 billion
cubic feet equivalent (Bcfe) of proved natural gas and oil reserves in western
Canada as of Dec. 31, 2006, with 2006 average daily production of approximately
60 million cubic feet equivalent (MMcfe).
"This announcement represents
another step toward achieving our goal of refocusing Dominion on the power
generation and energy distribution, transmission, storage and retail businesses," said
Chairman, President and CEO Thomas F. Farrell II. "When the transition
is completed, the company’s
risk profile will be substantially reduced, earnings growth should be less
volatile and our capital structure will be even stronger."
Dominion said
previously it would pursue the disposition of all of its E&P
operations except those in the Appalachian Basin. The company announced on
April 30, 2007, that it had agreed to sell virtually all of its offshore E&P
operations in the Gulf of Mexico for approximately $4.76 billion to Eni Petroleum
Co. Inc., a subsidiary of Italian energy company Eni. It continues to pursue
the disposition of its U.S. onshore E&P operations except those in the
Appalachian Basin.
Closing of the sale of the Canadian operations is expected
to occur by the end of June 2007, subject to customary closing conditions and
adjustments.
Proceeds from the disposition of E&P assets as well as the
planned sale of the company’s Dominion Peoples and Dominion Hope natural
gas distribution businesses would position the company to reduce debt — including
debt at its CNG subsidiary — repurchase common shares and grow other
Dominion businesses.
With all of the restructuring transactions not yet announced,
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 our anticipated lower risk profile and, ultimately, the amount of
proceeds that will be available to repurchase shares of common stock.
"We
continue to 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.
Scotia Waterous and Juniper Advisory
LP are Dominion’s financial advisers
in the sale. Stikeman Elliott LLP is the company’s legal adviser
for the sale.
Dominion is one of the nation's largest producers of energy,
with a portfolio of more than 26,500 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 volatility, 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.
