Operating earnings for the 12 months ended Dec. 31, 2006 amounted to $1.81 billion ($5.16 per share) compared to operating earnings of $1.57 billion ($4.56 per share) for the twelve months ended Dec. 31, 2005. Operating earnings are defined as GAAP earnings adjusted for certain items.
Dominion uses operating earnings as the primary performance measurement of its earnings outlook and results for public communications with analysts and investors. Dominion also uses operating earnings internally for budgeting, reporting to the board of directors and for the company's annual incentive plan. Dominion management believes operating earnings provide a more meaningful representation of the company's fundamental earnings power.
Thomas F. Farrell II, president and chief executive officer, said:
"Dominion's full year 2006 operating earnings reflect the hard work and dedication of our more than 17,000 employees. Despite the poor utility weather throughout the year and its resulting impact on our revenues, we achieved solid earnings in-line with our financial objectives.
"In November we announced the results of our strategic review, which led to our decision to pursue the divestiture of the majority of our E&P business and to focus on our traditional utility-oriented business lines. The performance of the business units that would remain a part of Dominion following our proposed E&P divestiture strengthens our belief in this strategic decision.
"The board of directors has recently expressed its continued confidence through a 2-cents per share increase to our quarterly common stock dividend at the January board meeting. This will result in an annual dividend rate of $2.84 per share, or a 3 percent increase over 2006."
Dominion also announced today unaudited net income determined in accordance with GAAP for the three months ended Dec. 31, 2006, of $31 million (9 cents per share) compared to net income of $257 million (74 cents per share) for the same period last year.
Operating earnings for the three months ended Dec. 31, 2006, were $275 million (78 cents per share) compared to operating earnings of $357 million ($1.02 per share) for the three months ended Dec. 31, 2005.
2006 operating earnings compared to 2005
Fourth-quarter 2006 operating earnings of 78 cents per share compare to operating earnings of $1.02 per share in the fourth quarter of 2005. The decrease is primarily attributable to milder-than-normal weather in the electric and gas utility service areas, lower average realized prices for natural gas and oil sales and the absence of a mark-to-market benefit from hedges de-designated following Hurricanes Katrina and Rita. These negatives were partially offset by increased natural gas and oil production, lower unrecovered Virginia fuel expenses and higher contributions from the company's merchant generation and nonregulated retail energy marketing businesses.
Full-year 2006 operating earnings of $5.16 per share compare to 2005 operating earnings of $4.56 per share. The increase is primarily attributable to higher natural gas and oil production, higher business interruption insurance proceeds, mark-to-market benefits including the gain from natural- gas hedges de-designated following Hurricanes Katrina and Rita, lower unrecovered Virginia fuel expenses, and higher contributions from the company's merchant generation, nonregulated retail energy marketing, gas transmission and producer services businesses. These positives were partially offset by milder-than-normal weather in the electric and gas utility service areas, lower sales of emissions allowances and lower average realized prices and higher production costs in the company's E&P business.
Dominion is one of the nation's largest producers of energy, with a portfolio of about 28,000 megawatts of generation, about 6.5 trillion cubic feet equivalent of proved natural gas reserves and 7,800 miles of natural gas transmission pipeline. Dominion also operates the nation's largest underground natural gas storage system with about 960 billion cubic feet of storage capacity and serves retail energy customers in eleven states.
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