Dominion Announces Volumetric Production Payment Transaction with UBS Investment Bank
Houston – Dominion (NYSE: D), one of the nation’s
largest energy producers, announced today an agreement for a volumetric production
payment (VPP) with UBS Investment Bank.
Under the terms of the agreement, Dominion will receive $424.4
million in cash for a fixed-term overriding royalty interest in more than 2,900
producing natural gas wells located in Utah, New Mexico, Alabama, West Virginia
and Michigan. Dominion will retain control of the properties and rights to future
development drilling, as well as production above the VPP volumes.
This VPP transaction will allow UBS to receive 76.4 billion
cubic feet (Bcf) of natural gas over the next four years. UBS’s natural
gas production will be delivered to multiple pooling points in various states
at an initial rate in excess of 67 million cubic feet (MMcf) per day, declining
to approximately 43 MMcf per day at the end of the four-year term. Total 2005
volume will be 19.8 Bcf. This is Dominion’s third VPP transaction since
2003.
"This VPP transaction allows us to monetize a portion
of our reserves while retaining control of the underlying assets,” said
Duane Radtke, president and chief executive officer of Dominion Exploration
& Production. “It also provides a stable and predictable supply of
natural gas to UBS from our long-lived gas production."
The VPP transaction will reduce Dominion’s natural gas
reserves by 76.4 Bcf. Dominion will recognize revenue from the transaction as
natural gas is produced and delivered at approximately $5.50 per thousand cubic
feet. Dominion will continue to incur the operating costs. The transaction has
no effect on Dominion’s 2005 operating earnings per share guidance.
Dominion is one of the nation's largest producers of energy,
with an energy 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 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 successful completion of pending acquisitions, estimates of future
market conditions, estimates of proved and unproved reserves 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 related to operating
businesses in regulated industries that are becoming deregulated, 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.
