Summary
Dominion Resources, Inc. (now Dominion Energy) filed an 8-K on August 1, 2007, to report the completion of significant divestitures of its non-Appalachian natural gas and oil exploration and production (E&P) operations. These transactions, effective July 31, 2007, involved the sale of assets to HighMount Exploration & Production LLC (a Loews Corporation subsidiary) for approximately $4.0 billion and to XTO Energy Inc. for approximately $2.5 billion. The company also reported the completion of sales for its Canadian E&P operations to Paramount Energy Trust and Baytex Energy Trust for approximately $624 million (June 26, 2007), and its offshore E&P operations to Eni Petroleum Co. Inc. for approximately $4.73 billion (July 2, 2007). The strategic rationale behind these sales is to exit non-Appalachian E&P operations, retaining only Appalachian assets which constituted about 15% of total reserves at the end of 2006. Dominion plans to utilize the proceeds from these dispositions, totaling over $11 billion across the completed and pending sales, primarily for debt reduction ($3.2-$3.5 billion) and the repurchase of its common stock. Pro forma financial statements indicate a significant reduction in assets and debt, along with a corresponding impact on revenues and expenses, reflecting the company's strategic shift.
Key Highlights
- 1Dominion completed the sale of non-Appalachian oil and gas E&P operations to HighMount Exploration & Production LLC for $4.0 billion and to XTO Energy Inc. for $2.5 billion on July 31, 2007.
- 2Prior completed sales include Canadian E&P operations for $624 million and offshore E&P operations for $4.73 billion.
- 3A pending sale of Mid-Continent basin E&P operations to Linn Energy, LLC for approximately $2.05 billion is expected to close by the end of Q3 2007.
- 4The company plans to use the proceeds to reduce outstanding debt by $3.2 billion to $3.5 billion and for share repurchases.
- 5Pro forma financial statements reflect the impact of these dispositions, showing reduced assets, debt, revenue, and expenses.
- 6A pre-tax charge of approximately $580 million is expected in Q2 2007 related to the discontinuance of hedge accounting for certain cash flow hedges.
- 7Dominion expects an overall pre-tax gain of $4.0 billion to $4.5 billion from the disposition of its non-Appalachian E&P operations.