How is Dominion using the proceeds from its E&P asset sales?

Dominion intends to use the after-tax proceeds from the divestiture of its non-Appalachian E&P operations primarily to reduce its outstanding debt by an estimated $3.2 billion to $3.5 billion and use the remaining net proceeds for repurchasing shares of its common stock.

What is the significance of the reapplication of SFAS No. 71?

Dominion reapplied Statement of Financial Accounting Standards (SFAS) No. 71 to the Virginia jurisdiction of its utility generation operations following new legislation. This reapplication resulted in a $158 million after-tax extraordinary charge and impacted how certain decommissioning trust funds and pension/postretirement benefit costs are accounted for, establishing new regulatory assets and liabilities.

How did the company's operating revenue change, and what segments contributed most to the increase?

Operating revenue increased by 7% to $3.7 billion in the second quarter of 2007 compared to the same period in 2006. The primary contributors to this increase were merchant generation operations (driven by higher realized prices and new capacity markets) and electric utility operations (influenced by customer growth and weather patterns).

D 10-Q Quarterly Report Q2 FY2007 — Revenue, Net Income, EPS

Q: What was the primary driver of Dominion's net loss in the second quarter of 2007?

The primary driver of Dominion's net loss of $530 million in the second quarter of 2007 was significant charges related to the ongoing divestiture of its non-Appalachian oil and gas exploration and production (E&P) assets, an impairment charge for the Dresden generation facility, and an extraordinary charge associated with the reapplication of SFAS No. 71.

Summary

Dominion Resources, Inc. (D) reported a net loss of $530 million for the three months ended June 30, 2007, a significant shift from a net income of $161 million in the same period of 2006. This loss was largely driven by substantial charges related to the announced sale of non-Appalachian oil and gas exploration and production (E&P) assets, an impairment charge for the Dresden generation facility, and an extraordinary charge from the reapplication of SFAS No. 71. Despite these headwinds, the company saw increased operating revenue driven by its merchant generation and electric utility segments, partly due to higher realized prices and increased customer activity. The company is actively divesting its E&P business, intending to use the proceeds to reduce debt and repurchase shares. For the six months ended June 30, 2007, Dominion Resources also reported a net loss of $77 million, compared to a net income of $695 million in the prior year. Similar to the quarterly results, significant charges impacted profitability. The company's strategic shift away from non-Appalachian E&P assets is a major theme, with substantial progress made in sales agreements. Investors should monitor the execution of these divestitures, the deployment of proceeds, and the impact of ongoing strategic adjustments on future profitability and financial health.

Key Highlights

1Reported a net loss of $530 million for Q2 2007, compared to a net income of $161 million in Q2 2006, impacted by significant charges related to asset dispositions and impairments.
2Year-to-date net loss of $77 million for the first six months of 2007, a decrease from a net income of $695 million in the same period of 2006.
3Operating revenue increased by 7% to $3.7 billion in Q2 2007 compared to Q2 2006, driven by merchant generation and electric utility operations.
4Completed or entered into agreements to sell substantially all non-Appalachian natural gas and oil E&P operations, with expected after-tax proceeds used for debt reduction and share repurchases.
5Recorded a $387 million impairment charge for the partially completed Dresden generation facility, now under agreement to be sold.
6Reapplied SFAS No. 71 to Virginia jurisdiction utility generation operations, resulting in a $158 million after-tax extraordinary charge.
7Continued to manage credit risk effectively, with 83% of gross credit exposure at June 30, 2007, from investment-grade counterparties.

DOMINION ENERGY, INC Quarterly Report for Q2 Ended Jun 30, 2007

Summary

Key Highlights

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