8-KMaterial AgreementsFinancial EventsExhibits & Filings

DOMINION ENERGY, INC 8-K Report, Material Agreement (Jun 7, 2007)

Filed June 7, 2007For Securities:D

Summary

Dominion Energy, Inc. (D) announced significant strategic divestitures of its exploration and production (E&P) assets on June 1, 2007. The company is selling its E&P operations in the Alabama, Michigan, and Permian basins to L O & G Acquisition Corp., a subsidiary of Loews Corporation, for approximately $4.025 billion. Concurrently, Dominion is selling its E&P operations in the Gulf Coast, Rockies, South Louisiana, and San Juan basin to XTO Energy Inc. for approximately $2.5 billion. These divestitures are part of a broader plan to exit substantially all of its offshore and Canadian E&P operations, with prior announcements of sales to Eni Petroleum Co. Inc. and Paramount Energy Trust/Baytex Energy Trust. The net proceeds from these sales are earmarked for debt reduction, including at its Consolidated Natural Gas Company subsidiary, and for share repurchases. The transactions are expected to close in August 2007.

Key Highlights

  • 1Divestiture of E&P assets in Alabama, Michigan, and Permian basins for approximately $4.025 billion to L O & G Acquisition Corp.
  • 2Divestiture of E&P assets in Gulf Coast, Rockies, South Louisiana, and San Juan basins for approximately $2.5 billion to XTO Energy Inc.
  • 3Transactions are part of a larger strategy to exit substantially all offshore and Canadian E&P operations.
  • 4Total announced sale proceeds (including previous deals) approach $7.8 billion ($4.025B + $2.5B + $4.76B + $0.583B minus overlaps or pending confirmation).
  • 5Net proceeds will be used to reduce debt and repurchase common stock.
  • 6The June 1 dispositions are expected to result in initial pre-tax charges of approximately $311 million in Q2 2007, largely due to hedge accounting adjustments and termination of volumetric production payment agreements.
  • 7The transactions are subject to customary closing conditions and are expected to close in August 2007.

Frequently Asked Questions

Dominion Energy is selling its exploration and production (E&P) operations in specific U.S. basins. This includes assets in the Alabama, Michigan, and Permian basins (sold to L O & G Acquisition Corp. for ~$4.025 billion) and assets in the Gulf Coast, Rockies, South Louisiana, and San Juan basin (sold to XTO Energy Inc. for ~$2.5 billion). These are part of a larger divestiture strategy.

The two announced transactions on June 1, 2007, total approximately $6.525 billion ($4.025 billion + $2.5 billion). When combined with previously announced sales of offshore and Canadian E&P operations, the total value of announced divestitures is substantial, approaching $7.8 billion before any potential adjustments or further sales.

The net cash proceeds generated from this disposition and any future dispositions are primarily intended to reduce the company's outstanding debt, including debt at its Consolidated Natural Gas Company subsidiary. Additionally, a portion of the proceeds will be used to repurchase shares of Dominion Energy's common stock.

Dominion Energy anticipates initial pre-tax charges of approximately $311 million for the June 1 dispositions, which will be recorded in the second quarter of 2007. These charges are primarily related to discontinuing hedge accounting for certain derivatives and the termination of volumetric production payment agreements. While these charges will impact Q2 earnings, the company expects them to be more than offset by the gains from the asset sales themselves.