Dominion agreed to sell its offshore natural gas and oil exploration
and production operations to Eni Petroleum Co. Inc.
, a subsidiary of Italian energy company Eni, for approximately $4.76 billion.
These operations include approximately 967 billion cubic feet equivalent of proved natural gas and oil reserves
in the Gulf of Mexico shelf
and deep water as of Dec. 31, 2006, with 2006 average daily production of approximately 503 million cubic feet equivalent.
"Today’s announcement is a significant step in Dominion’s previously announced strategic plan to refocus on the power generation and energy distribution
, transmission, storage and retail businesses
," said Chairman, President and CEO Thomas F. Farrell II
. "Dominion has been extremely successful in the E&P business, but that success has not been fully reflected in our share price. Our plan is designed to realize the value of these assets for our shareholders."
The company continues to pursue the disposition of its U.S. onshore E&P operations, except those in the Appalachian Basin, as well as its E&P operations in western Canada
. It expects to make further announcements in the near future.
The sale of the offshore E&P assets to Eni is expected to close by early July 2007, subject to customary closing conditions and adjustments.
Dominion announced last November that it would pursue the sale of most of its E&P assets as part of a strategic refocusing. The move is designed to enhance the long-term value of the company by realigning Dominion’s operations and risk profile more closely with the company’s peer investment group of utilities.
Dominion plans to retain its low-risk E&P operations in the Appalachian Basin because of their value to the company’s natural gas pipeline, storage and gathering businesses. The Appalachian properties account for approximately 15 percent of proved reserves and 8 percent of Dominion average daily production as of Dec. 31, 2006.
Production from these reserves is expected to contribute less than 5 percent of Dominion’s future consolidated operating earnings.
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.