"With today's announced divestitures, sales proceeds for more than 85 percent of reserves to be sold are known. We now have sufficient information to accurately model the new company on a post-divestiture basis," said Chairman, President and CEO Thomas F. Farrell II.
"We expect the New Dominion to produce 2008 operating earnings of $6.00 or more per share, and we are confident that we can achieve long-term average annual earnings per share growth of at least 4 percent to 6 percent thereafter. We will provide detailed 2008 operating earnings guidance in January," Farrell said.
Farrell added, "Given the above average growth rate in our Virginia service territory, the incentives provided by the new hybrid regulatory model, the superior growth opportunities in our pipeline and storage business, and improving conditions in markets served by our merchant power fleet, the New Dominion should deliver long-term earnings per share and dividend growth above the average of our industry peers."
In providing its operating earnings outlook, the company notes that there could be differences between expected 2008 GAAP and operating earnings for matters such as, but not limited to, changes in accounting principles. At this time Dominion management is not able to estimate the impact, if any, of these items on GAAP. Accordingly, Dominion is not able to provide a corresponding GAAP equivalent for its operating earnings outlook.
In order to assist financial analysts, Dominion today posted to its Web site an update to its indicative model of 2008 operating earnings. The indicative model can be found at www.dom.com/investors/ir.jsp.
"Our adjusted credit metric targets now reflect a reduced risk profile as a result of our E&P asset dispositions and recent legislative changes to re- regulate electric markets in Virginia. We have revised our near-term targets for FFO to Debt to approximately 18 percent, FFO to Interest to greater than 4 times coverage, and Debt to Total Capital to be in the mid-50 percent range. Our $3.2 billion to $3.5 billion range of estimated debt reduction lays the groundwork for us to achieve/maintain a high triple-B credit rating over the next few years. Every dollar not used for debt retirement can be committed to the repurchase of common stock", Farrell said.
In providing its credit metric targets, the company notes that there could be differences between GAAP-based credit measures and adjusted targets for items such as, but not limited to, differences in the manner in which certain terms are defined and adjustments are made by credit ratings agencies to calculate these metrics. At this time Dominion management is not able to provide a corresponding GAAP-based equivalent for its adjusted credit metric targets.
In the transactions announced Monday:
Closing on both sales is expected to occur in August, subject to customary closing conditions and adjustments.
A process to sell operations in the Mid-Continent Basin is scheduled to begin in July and to be completed by the end of 2007. As of Dec. 31, 2006, these operations, located primarily in Oklahoma, had proved, probable and possible reserves of 780 Bcfe, 435 Bcfe and 966 Bcfe respectively, with average daily production of 120 MMcfe in 2006.
As previously announced, Dominion will retain its Appalachian operations including approximately 1 Tcfe of proved reserves as of Dec. 31, 2006. Those operations are lower risk and fit well strategically with Dominion's natural gas gathering, pipeline and storage system.
Dominion is being advised in the sale by the investment banking firms of JPMorgan, Lehman Brothers and Juniper Advisory LP. BakerBotts LLP and McGuireWoods LLP are the company's legal advisers for the sale.
Dominion is one of the nation's largest producers of energy, with a portfolio of more than 26,500 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 owns and 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 11 states.
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