10-QPeriod: Q2 FY2008

DOMINION ENERGY, INC Quarterly Report for Q2 Ended Jun 30, 2008

Filed July 31, 2008For Securities:D

Summary

Dominion Energy, Inc. (D) reported a significant turnaround in its financial performance for the six months ended June 30, 2008, compared to the same period in 2007. The company posted a net income of $978 million, a substantial improvement from a net loss of $77 million in the prior year. This rebound was driven by the absence of significant charges experienced in 2007, including those related to asset sales and an extraordinary charge associated with regulatory accounting changes. Favorable factors also included higher contributions from merchant generation operations and the reversal of deferred tax liabilities. Operationally, revenue saw a decrease due to the prior year's sale of substantial Exploration & Production (E&P) assets. However, electric utility operations and producer services showed revenue increases. The company is also actively managing its asset portfolio, with plans to sell its regulated gas distribution subsidiaries, Peoples and Hope, for approximately $910 million, and a recent agreement to assign natural gas drilling rights in the Marcellus Shale formation for approximately $552 million. These strategic moves highlight Dominion's focus on optimizing its business mix and financial structure.

Financial Highlights

21 data points
Beta

Revenue

$3.40B

Net Income

$298.00M

8.8% Net Margin

EPS (Diluted)

$0.51

Free Cash Flow

-$973.00M

Financial Statements
Beta
Revenue$3.40B
Operating Expenses$2.69B
Operating Income$711.00M
Net Income$298.00M
EPS (Basic)$0.52
EPS (Diluted)$0.51

Key Highlights

  • 1Net income surged to $978 million for the first six months of 2008, a significant recovery from a net loss of $77 million in the same period of 2007.
  • 2Diluted Earnings Per Share (EPS) improved dramatically to $1.69 from a loss of $0.11 in the prior year, aided by share repurchases and the absence of 2007 charges.
  • 3The company announced an agreement to sell its regulated gas distribution subsidiaries, Peoples and Hope, for approximately $910 million, a move expected to close in 2009.
  • 4Dominion generated $528 million in net cash from operating activities for the first six months of 2008, a decrease from $1,973 million in 2007, largely due to asset dispositions and higher collateral requirements.
  • 5Significant debt financing activities occurred, including issuing $1.83 billion in long-term debt and repaying $853 million during the first six months of 2008.
  • 6The company is actively managing its E&P assets, agreeing to assign Marcellus Shale drilling rights for approximately $552 million, while retaining a royalty interest.
  • 7Dominion Generation reported a substantial increase in net income contribution due to favorable market prices and the absence of prior year extraordinary charges.

Frequently Asked Questions

The primary reason for the substantial improvement in net income from a net loss in 2007 to a significant profit in 2008 is the absence of large, one-time charges incurred in the prior year. These included charges related to the sale of E&P operations, an impairment charge for Dresden, and an extraordinary charge for regulatory accounting adjustments. The company also benefited from improved performance in its merchant generation segment and the reversal of deferred tax liabilities.

Dominion Energy is actively managing its asset portfolio to optimize its business mix and financial structure. The planned sale of Peoples and Hope for approximately $910 million aims to divest regulated gas distribution operations. Concurrently, the agreement to assign Marcellus Shale drilling rights for $552 million, while retaining a royalty interest, reflects a strategic shift to monetize E&P assets while retaining upside potential in a promising resource play.

Cash flow from operating activities decreased significantly to $528 million for the first six months of 2008, down from $1,973 million in the same period of 2007. This reduction is primarily attributed to the prior year's disposition of the majority of its E&P operations, which generated substantial cash. Additionally, higher commodity prices led to increased collateral requirements for its commodity hedging transactions, and higher income tax payments also impacted operating cash flow.

Dominion Energy has been active in its financing activities. For the first six months of 2008, the company issued $1.83 billion in long-term debt and repaid $853 million of long-term debt. It also managed its short-term debt, with net issuances of $721 million. These activities reflect ongoing capital management and funding needs.