2Q07 Earnings Release Kit August 1, 2007

Transcription

1 2Q07 Earnings Release Kit Dominion Resources, Inc.

2 Table of Contents IMPORTANT NOTES TO INVESTORS... 3 EARNINGS RELEASE AND ACCOMPANYING SCHEDULES... 4 EARNINGS RELEASE... 4 SCHEDULE 1 - SEGMENT OPERATING EARNINGS... 8 SCHEDULE 2 - RECONCILIATION OF 2007 OPERATING EARNINGS TO GAAP... 9 SCHEDULE 3 - RECONCILIATION OF 2006 OPERATING EARNINGS TO GAAP SCHEDULE 4 - COMPARISON OF SELECTED 2Q07 EARNINGS DRIVERS TO 2Q SCHEDULE 5 - RECONCILIATION OF 2007 EARNINGS TO FINANCIALS * CONSOLIDATED FINANCIAL STATEMENTS (GAAP) SEGMENT OPERATING RESULTS AND STATISTICS SCHEDULE OF LONG-TERM DEBT SCHEDULE OF DEBT MATURITY SCHEDULE OF CHANGE IN CAPITALIZATION HEDGING NATURAL GAS AND OIL HEDGE POSITION ELECTRIC GENERATION AND COAL HEDGE POSITION REGIONAL CAPACITY HEDGE POSITION * The notes contained in the most recent Forms 10-Q and 10-K are an integral part of the Consolidated Financial Statements. Reconciliation of Operating Earnings to GAAP can be found in Schedules 2 & 3 of this Earnings Kit. 2

3 Important Notes to Investors This kit contains certain forward-looking statements including our forecasted 2008 operating earnings and projected future long-term operating earnings growth rates that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energyrelated commodity prices, the timing of the closing dates of acquisitions or divestitures (including our divestiture of The Peoples Natural Gas Company and Hope Gas, Inc. and the remaining divestiture of our Mid-Continent natural gas and oil assets), the amount of net proceeds received from the divestitures, estimates of future market conditions, estimates of proved and unproved reserves, the company s ability to meet its natural gas and oil production forecasts, the behavior of other market participants, and the effects of hurricanes on our operations and realized prices. Other factors include, but are not limited to, weather conditions, governmental regulations, economic conditions in the company's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, risks associated with the realignment of our operating assets (including the potential dilutive effect on earnings in the near term and costs associated with the sale of most of our exploration and production business), changes to rating agency requirements and ratings, changing financial accounting standards, trading counter-party credit risks, risks related to energy trading and marketing, and other uncertainties. Other risk factors are detailed from time to time in Dominion s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with the Securities & Exchange Commission. The consolidated financial data and statistics in this 2Q07 Earnings Release Kit and its individual components reflect the financial position and operating results of Dominion and its primary operating segments through Independent auditors have not audited all of the financial and operating statements. Projections or forecasts shown in this document are based on the assumptions listed in this document and are subject to change at any time. Dominion undertakes no obligation to update any forward-looking information statement to reflect developments after the statement is made. This 2Q07 Earnings Release Kit has been prepared primarily for security analysts and investors in the hope that it will serve as a convenient and useful reference document. The format of this release kit may change in the future as we continue to try to meet the needs of security analysts and investors. This release kit is not intended for use in connection with any sale, offer to sell, or solicitation of any offer to buy securities. 3

4 Earnings Release and Accompanying Schedules Earnings Release FOR IMMEDIATE RELEASE Company: Dominion Contacts: Media: Mark Lazenby (804) , Chet Wade (804) , Analysts: Greg Snyder (804) , Fiona McCarthy (804) , DOMINION ANNOUNCES SECOND QUARTER 2007 EARNINGS Conference call scheduled for 10 a.m. EDT today RICHMOND, Va. Dominion (NYSE: D) announced today a net loss determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended 2007, of $530 million ($1.52 per share) compared with net income of $161 million (46 cents per share) for the same period last year. Operating earnings for the three months ended 2007, were $310 million (89 cents per share) compared with operating earnings of $279 million (80 cents per share) for the three months ended 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, for 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. In addition to differences between GAAP and operating earnings recorded through the second-quarter 2007, the company notes that there could be differences between remaining 2007 GAAP and operating earnings for matters such as, but not limited to, items related to our strategic repositioning including, gains on sale of our non- Appalachian E&P operations and changes in accounting principles. While Dominion management is currently not able to estimate precisely the impact, if any, of these items on GAAP earnings, it does expect GAAP earnings to exceed operating earnings for the year. 4

5 Business segment results and detailed descriptions of items included in 2007 and 2006 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release. Thomas F. Farrell II, chairman, president and chief executive officer, said: Our energy infrastructure businesses had an exceptional second quarter. Total operating earnings per share from our delivery, energy and generation businesses grew nearly 10 percent compared with the second quarter of Adjusting each period for the effects of weather and Virginia fuel expenses, operating earnings per share grew nearly 14 percent at those businesses. But the bigger story this quarter is our progress in repositioning the company for the future. Since our last earnings release, we completed the sale of our offshore E&P operations and announced transactions to sell all of our onshore E&P operations except those in the Appalachian Basin. We closed all of the onshore sales except the Mid- Continent transaction. We launched and completed a tender offer for $2.5 billion of debt, repaid another $700 million in debt and we commenced a tender offer to repurchase a significant number of common shares. Other corporate highlights: The Virginia General Assembly s passage in April of electric re-regulation legislation and fuel factor amendments; The request by Dominion for Virginia State Corporation Commission (SCC) approval to construct the Virginia City Hybrid Energy Center in Southwest Virginia, with an enhanced return on common equity; and The approval by the SCC of our Virginia fuel factor adjustment. Farrell added: With the strength of our continuing operations, and the imminent completion of our corporate repositioning, I remain confident in our 2008 operating earnings forecast of $6.00 or more per share, and long-term average annual operating earnings per share growth outlook of at least 4 percent to 6 percent thereafter. 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 earnings. Accordingly, Dominion is not able to provide a corresponding GAAP equivalent for its operating earnings outlook. Second-quarter 2007 operating earnings compared with 2006 Second-quarter 2007 operating earnings of 89 cents per share compares with operating earnings of 80 cents per share in the second quarter of The increase is primarily 5

6 attributable to an increase in electric and natural gas utility sales resulting from weather compared with the second quarter of 2006, higher contributions from the company s merchant generation and producer services businesses, and higher average realized prices for the company s natural gas and oil production. These positives were partially offset by higher unrecovered Virginia fuel expenses, lower contributions from the company s gas transmission business, lower natural gas and oil production and higher DD&A expenses at the company s E&P business, and higher interest expense. Complete details of second-quarter 2007 operating earnings compared with secondquarter 2006 can be found on Schedules 4 and 5 of this release. Conference call today Dominion will host its second-quarter earnings conference call at 10 a.m. EDT on Wednesday, Aug. 1. Dominion management will discuss 2007 financial results and provide an update on the company s strategic initiatives as well as other matters of interest to the financial community. Domestic callers should dial (866) The passcode for the conference call is Dominion. International callers should dial (334) Participants should dial in 10 to 15 minutes prior to the scheduled start time. Members of the media also are invited to listen. A live webcast of the conference call will be available on the company s investor information page at A replay of the conference call will be available beginning about 1 p.m. EDT Aug. 1 and lasting until 11 p.m. EDT Aug. 8. Domestic callers may access the recording by dialing (877) International callers should dial (334) The PIN for the replay is Additionally, a replay of the webcast will be available on the company s investor information page by the end of the day Aug. 1. Dominion is one of the nation's largest producers of energy, with a portfolio of more than 26,500 megawatts of generation 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. For more information about Dominion, visit the company's Web site at This news release contains certain forward-looking statements including our forecasted 2008 operating earnings and projected future long-term operating earnings growth rates that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energy-related commodity prices, the timing 6

7 of the closing dates of acquisitions or divestitures (including our divestiture of The Peoples Natural Gas Company and Hope Gas, Inc. and the remaining divestiture of our Mid-Continent natural gas and oil assets), the amount of net proceeds received from the divestitures, estimates of future market conditions, estimates of proved and unproved reserves, the company s ability to meet its natural gas and oil production forecasts, the behavior of other market participants, and the effects of hurricanes on our operations and realized prices. Other factors include, but are not limited to, weather conditions, governmental regulations, economic conditions in the company's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, risks associated with the realignment of our operating assets (including the potential dilutive effect on earnings in the near term and costs associated with the sale of most of our exploration and production business), changes to rating agency requirements and ratings, changing financial accounting standards, trading counter-party credit risks, risks related to energy trading and marketing, and other uncertainties. Other risk factors are detailed from time to time in Dominion s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with the Securities & Exchange Commission. ### 7

8 Schedule 1 - Segment Operating Earnings Unaudited (millions, except earnings per share) Three months ended Change Operating Revenue (GAAP Based) $ 3,730 $ 3,496 $ 234 Earnings: Dominion Delivery $ 83 $ 80 $ 3 Dominion Energy Dominion Generation (1) Dominion Exploration & Production (1) Corporate (1) (68) (27) (41) OPERATING EARNINGS $ 310 $ 279 $ 31 Items excluded from operating earnings (2) (840) (118) (722) GAAP EARNINGS $ (530) $ 161 $ (691) Common Shares Outstanding (average, diluted) (3) Earnings Per Share (EPS): Dominion Delivery $ 0.24 $ 0.23 $ 0.01 Dominion Energy Dominion Generation (1) Dominion Exploration & Production (1) Corporate (1) (0.20) (0.08) (0.12) OPERATING EARNINGS $ 0.89 $ 0.80 $ 0.09 Items excluded from operating earnings (2) (2.41) (0.34) (2.07) GAAP EARNINGS $ (1.52) $ 0.46 $ (1.98) Six months ended Change Operating Revenue (GAAP Based) $ 8,391 $ 8,402 $ (11) Earnings: Dominion Delivery $ 282 $ 236 $ 46 Dominion Energy (4) Dominion Generation (1) Dominion Exploration & Production (1) (42) Corporate (1) (121) (86) (35) OPERATING EARNINGS $ 828 $ 846 $ (18) Items excluded from operating earnings (2) (905) (151) (754) GAAP EARNINGS $ (77) $ 695 $ (772) Common Shares Outstanding (average, diluted) Earnings Per Share (EPS): Dominion Delivery $ 0.80 $ 0.68 $ 0.12 Dominion Energy (0.01) Dominion Generation (1) Dominion Exploration & Production (1) (0.12) Corporate (1) (0.35) (0.25) (0.10) OPERATING EARNINGS $ 2.36 $ 2.42 $ (0.06) Items excluded from operating earnings (2) (2.58) (0.43) (2.15) GAAP EARNINGS $ (0.22) $ 1.99 $ (2.21) (1) Earnings have been recast to exclude income and losses from discontinued operations. (2) Refer to schedules 2 and 3 for details related to items excluded from operating earnings, or find "GAAP Reconciliation" on Dominion's Web site at (3) As a result of the net loss from continuing operations for the three months ended 2007, the issuance of common stock under potentially-dilutive securities was considered antidilutive and therefore not included in the calculation of the diluted loss per share for that period. 8

9 Schedule 2 - Reconciliation of 2007 Operating Earnings to GAAP 2007 Earnings (Six months ended 2007) The net effects of the following items, all shown on an after-tax basis, are included in 2007 reported earnings, but are excluded from operating earnings: $546 million in net charges related to E&P divestitures including the effect of discontinuing hedge accounting from hedges on production originating from reserves sold or to be sold ($341 million); settlement of volumetric production payment (VPP) agreements ($108 million); and other charges including legal costs, employee-related expenses, and deferred tax adjustments ($97 million). The impact of discontinued operations of our Canadian E&P business is not included in these E&P divestiture-related charges, but is reflected below with other discontinued operations; $252 million impairment charge related to the potential sale of a partially completed merchant generation facility (Dresden); $158 million extraordinary item related to the re-application of SFAS No. 71, Accounting for the Effects of Certain Types of Regulation, to the Virginia jurisdiction of our electric utility generation operations, in order to establish a regulatory liability for amounts collected from Virginia customers and placed in external trusts (and earnings thereon) for the future decommissioning of our nuclear generation stations, in excess of amounts recorded pursuant to SFAS No. 143, Accounting for Asset Retirement Obligations; $16 million in charges related to litigation reserves; $2 million net loss from the discontinued operations of three merchant generation facilities (Troy, Pleasants, Armstrong), a Dominion Capital subsidiary, and the Canadian E&P operations; $1 million net benefit related to the pending sale of Dominion Peoples and Dominion Hope natural gas local distribution companies; $15 million net mark-to-market gain on derivatives related to debt tender offer; $64 million net benefit related to the release of tax valuation allowances; and $11 million in other charges. (millions, except per share amounts) 1Q07 2Q07 3Q07 4Q07 YTD 2007* Operating earnings $518 $310 $828 Items excluded from operating earnings (after-tax): Charges related to E&P divestitures (8) (538) (546) Merchant generation asset impairment (252) (252) Extraordinary item related to the re-application of SFAS No. 71 (158) (158) Litigation reserves (16) (16) Net loss from discontinued operations (22) 20 (2) Net charges (credits) related to the pending sale of Dominion Peoples and Dominion Hope natural gas distribution companies (5) 6 1 Net mark-to-market gain on derivatives related to debt tender offer Release of tax valuation allowances, net (6) Other charges (8) (3) (11) Total items excluded from operating earnings (65) (840) (905) Reported net income $453 ($530) ($77) Common shares outstanding (average, diluted) ** Operating earnings per share $1.48 $0.89 $2.36 Items excluded from operating earnings (after-tax) (0.19) (2.41) (2.58) Reported earnings per share $1.29 ($1.52) ($0.22) * YTD 2007 EPS may not equal sum of quarters due to share count differences. ** As a result of the net loss from continuing operations for the three months ended 2007, the issuance of common stock under potentially-dilutive securities was considered antidilutive and therefore not included in the calculation of the diluted loss per share for that period. 9

10 Schedule 3 - Reconciliation of 2006 Operating Earnings to GAAP 2006 Earnings (Twelve months ended December 31, 2006) The net effects of the following items, all shown on an after-tax basis, are included in 2006 reported earnings, but are excluded from operating earnings: $183 million in losses from discontinued operations of three merchant generation facilities (Troy, Pleasants, Armstrong) for which an agreement to sell was executed in December 2006 reflecting the impairment of assets ($164 million) and loss from normal operations ($19 million); $33 million in income from the discontinued operations of our Canadian E&P business sold in June 2007; $91 million in charges related to the impairment of certain Dominion Capital investments; $73 million in net charges related to the pending sale of Dominion Peoples and Dominion Hope natural gas local distribution companies; $37 million in charges due to the mark-to-market impact on certain interest rate swaps; $34 million of impairment charges, including the cancellation of a pipeline project ($17 million) and from a change in method of assessing other-than-temporary declines in the fair value of securities held in nuclear decommissioning trust funds ($15 million); $11 million of incremental charges related to Hurricanes Katrina and Rita; $6 million in charges related to the write-off of a deferred merchant generation gas transportation contract; $6 million gain on the sale of an investment in a natural gas storage development project; and $5 million in other charges including charges related to the divesture of oil and gas properties. (millions, except per share amounts) 1Q06 2Q06 3Q06 4Q06 YTD 2006 Operating earnings $567 $279 $664 $271 $1,781 Items excluded from operating earnings (after-tax): Discontinued operations - merchant generation facilities (5) (6) (4) (168) (183) Discontinued operations - Canadian E&P operations Discontinued operations - Dominion Capital subsidiary (1) 33 0 Dominion Capital related charges (85) (6) (91) Net charges related to the pending sale of Dominion Peoples and Dominion Hope natural gas distribution companies (21) (7) (7) (38) (73) Mark-to market impact related to certain interest rate swaps (37) (37) Impairment of assets (6) (28) (34) Hurricanes Katrina and Rita (7) (3) (1) (11) Merchant generation contract write-off (6) (6) Gain on sale of natural gas storage development project Other 1 (1) 0 (5) (5) Total items excluded from operating earnings (33) (118) (10) (240) (401) Reported net income $534 $161 $654 $31 $1,380 Common shares outstanding (average, diluted) Operating earnings per share $1.63 $0.80 $1.88 $0.77 $5.07 Items excluded from operating earnings (after-tax) (0.10) (0.34) (0.03) (0.68) (1.14) Reported earnings per share $1.53 $0.46 $1.85 $0.09 $3.93 * YTD 2006 EPS may not equal sum of quarters due to share count differences. 10

11 Schedule 4 - Comparison of Selected 2Q07 Earnings Drivers to 2Q06 2Q07 2Q06 Description Actual Actual GAAP earnings (mm) 1 ($530) $161 Operating earnings (mm) 1 $310 $279 Average common shares outstanding, diluted (mm) GAAP earnings per share 1 ($1.52) $0.46 Operating earnings per share 1 $0.89 $0.80 Certain Items That Impacted Operating Earnings During Period: Weather compared to normal - After-tax (mm) 3 $6 ($15) SFAS (Hedge Ineffectiveness/Other) - After-tax (mm) $21 ($2) SFAS (Katrina/Rita Dedesignated Hedges) - After-tax (mm) --- $13 Virginia Fuel Underrecovery - After-tax (mm) ($118) ($77) Natural Gas Production (Bcf) Liquids Production (mmbbls) Equivalent Natural Gas Production (Bcfe) Avg. NYMEX Spot Price - Nat Gas ($/mmbtu) $7.66 $6.79 Avg. NYMEX Spot Price - Oil ($/bbl) $65.02 $67.25 Average Realized Price without Hedging Results - Natural Gas ($/mcf) 5 $6.93 $6.36 Average Realized Price without Hedging Results - Liquids ($/bbl) 5 $54.96 $59.20 Average Realized Price without Hedging Results - Gas Equivalent ($/mcfe) 5 $7.59 $7.55 Average Realized Price with Hedging Results - Natural Gas ($/mcf) 5 $5.81 $4.00 Average Realized Price with Hedging Results - Liquids ($/bbl) 5 $38.91 $34.69 Average Realized Price with Hedging Results - Gas Equivalent ($/mcfe) 5 $6.01 $4.60 E&P Lifting Costs ($/mcfe) 5, 6, 7 $1.31 $1.22 E&P DD&A Rate ($/mcfe) 5, 6 $1.90 $1.64 VPP Volumes Delivered (Bcf) VPP Net Revenue - Pre-tax ($mm) 8 $24 $63 VPP Net Revenue - After-tax ($mm) 8 $15 $40 Average PJM West Price (7x24) ($/MWh) $55.46 $47.61 Average Mass Hub/New Eng. Price (7x24) ($/MWh) $67.18 $58.52 Quarterly Common Dividend Rate ($/share) $0.71 $0.69 1) Earnings have been recast to exclude income and losses from discontinued operations. 2) As a result of the net loss from continuing operations for the three months ended 2007, the issuance of common stock under potentially-dilutive securities was considered antidilutive and therefore not included in the calculation of the diluted loss per share for that period. 3) After-tax impact on utility base revenue. 4) Includes Dominion Transmission, excludes VPPs. 5) Dominion E&P Only. 6) E&P Lifting Cost and DD&A unit rates have been recast to exclude Canadian operations. 7) Includes transportation expense and BI insurance policy costs, net of VPP exchange and PHA fees received. 8) 2Q07 actual VPP volumes and revenues reflect the discontinuation of the original VPP agreements on May 31,

12 Schedule 5 - Reconciliation of 2007 Earnings to 2006 Preliminary, unaudited (millions, except EPS) Three Months Ended 2007 vs Increase / (Decrease) Reconciling Items Amount EPS Dominion Delivery Regulated electric sales: Weather $6 $0.02 Customer growth Regulated gas sales - weather Interest expense (3) (0.01) Retail energy marketing operations (1) 0.00 Other (3) (0.01) Change in contribution to operating earnings $3 $0.01 Dominion Energy Producer services $9 $0.02 Gas Transmission operations (12) (0.03) Electric Transmission operations Other Change in contribution to operating earnings $1 $0.00 Dominion Generation Regulated electric sales: Weather $12 $0.03 Customer growth Other Unrecovered Virginia fuel expenses (41) (0.11) Merchant generation margin Sales of emissions allowances (7) (0.02) Ancillary service revenue Interest expense (13) (0.04) Outage costs (11) (0.03) Other Change in contribution to operating earnings $16 $0.04 Dominion E&P Gas and Oil - production ($45) ($0.13) Gas and Oil - prices Operations and maintenance: SFAS133 - M2M/Hedge Ineffectiveness Other O&M (2) 0.00 DD&A (14) (0.04) Interest Expense (9) (0.02) Other Change in contribution to operating earnings $52 $0.16 Corporate Change in contribution to operating earnings ($41) ($0.12) Change in consolidated operating earnings $31 $0.09 Change in items excluded from operating earnings (1) ($722) ($2.07) Change in net income (GAAP earnings) ($691) ($1.98) (1) Refer to schedules 2 and 3 for details of items excluded from operating earnings, or find "GAAP Reconciliation" on Dominion's Web site at 12

13 Financials * Consolidated Financial Statements (GAAP) DOMINION RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME (Preliminary and Unaudited) Three Months Ended Six Months Ended (millions, except per share amounts) Operating Revenue $3,730 $3,496 $8,391 $8,402 Operating Expenses Electric fuel and energy purchases ,828 1,523 Purchased electric capacity Purchased gas ,678 1,810 Other energy-related commodity purchases Other operations and maintenance 1, ,762 1,621 Depreciation, depletion and amortization Other taxes Total operating expenses 4,110 3,022 7,771 6,976 Income (loss) from operations (380) ,426 Other income Interest and related charges: Interest expense Interest expense junior subordinated notes payable (1) Subsidiary preferred dividends Total interest and related charges Income (loss) before income taxes, minority interest and (615) ,009 extraordinary item Income tax expense (benefit) (232) Minority interest Income (loss) from continuing operations before extraordinary (392) Item Extraordinary item (2) (158) (158) Income (loss) from discontinued operations (3) (2) 15 Net Income (Loss) $ (530) $ 161 $ (77) $ 695 Earnings Per Common Share Basic Income (loss) from continuing operations before extraordinary $(1.13) $0.42 $0.23 $1.96 Item Extraordinary item (0.45) -- (0.45) -- Income from discontinued operations Net income (loss) $(1.52) $0.46 ($0.22) $2.00 Earnings Per Common Share - Diluted Income (loss) from continuing operations before extraordinary $(1.13) $0.42 $0.23 $1.95 Item Extraordinary item (0.45) -- (0.45) -- Income from discontinued operations Net income (loss) $(1.52) $0.46 ($0.22) $1.99 Dividends paid per common share $0.71 $0.69 $1.42 $1.38 (1) Includes affiliated interest expense of $22 million and $29 million for the three months ended 2007 and 2006, respectively and $44 million and $57 million for the six months ended 2007 and 2006, respectively. (2) Net of income tax benefit of $101 million for the three and six months ended (3) Net of income tax expense of $114 million and $113 million for the three and six months ended 2007, respectively. Includes income tax benefit of $16 million for the three and six months ended * The notes contained in the most recent Forms 10-Q and 10-K are an integral part of the Consolidated Financial Statements. 13

14 DOMINION RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (Preliminary and Unaudited) 2007 December 31, 2006 (1) (millions) ASSETS Current Assets Cash and cash equivalents $ 40 $ 138 Customer receivables (less allowance for doubtful accounts of $29 and $26) 2,308 2,395 Other receivables (less allowance for doubtful accounts of $11 and $13) Inventories 926 1,101 Derivative assets 1,123 1,593 Assets held for sale 1,093 1,391 Other 1,458 1,122 Total current assets 7,232 8,098 Investments Nuclear decommissioning trust funds 2,912 2,791 Other 1,097 1,034 Total investments 4,009 3,825 Property, Plant and Equipment Property, plant and equipment 44,069 43,575 Accumulated depreciation, depletion and amortization (14,565) (14,193) Total property, plant and equipment, net 29,504 29,382 Deferred Charges and Other Assets Goodwill 4,234 4,298 Pension and other postretirement benefit assets 1,282 1,246 Other 2,118 2,420 Total deferred charges and other assets 7,634 7,964 Total assets $48,379 $49,269 (1) The Consolidated Balance Sheet at December 31, 2006 has been derived from the audited Consolidated Financial Statements at that date. 14

15 DOMINION RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (Preliminary and Unaudited) 2007 December 31, 2006 (1) (millions) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Securities due within one year: Junior subordinated notes payable to affiliates $ 206 $ -- Other 2,386 2,478 Short-term debt 2,745 2,332 Accounts payable 1,986 2,142 Derivative liabilities 1,739 2,276 Liabilities held for sale Other 1,196 1,504 Total current liabilities 10,671 11,229 Long-Term Debt Long-term debt 12,609 12,842 Junior subordinated notes payable: Affiliates 929 1,151 Other Total long-term debt 14,336 14,791 Deferred Credits and Other Liabilities Deferred income taxes and investment tax credits 5,901 5,858 Asset retirement obligations 1,924 1,930 Regulatory liability 1, Other 1,517 1,654 Total deferred credits and other liabilities 10,501 10,056 Total liabilities 35,508 36,076 Commitments and Contingencies Minority Interest Subsidiary Preferred Stock Not Subject to Mandatory Redemption Common Shareholders' Equity Common stock no par (2) 11,268 11,250 Other paid-in capital Retained earnings 1,329 1,960 Accumulated other comprehensive loss (171) (425) Total common shareholders equity 12,577 12,913 Total liabilities and shareholders equity $48,379 $49,269 (1) The Consolidated Balance Sheet at December 31, 2006 has been derived from the audited Consolidated Financial Statements at that date. (2) 500 million shares authorized; 349 million shares outstanding at 2007 and December 31,

16 DOMINION RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended (millions) Operating Activities Net income (loss) $(77) $ 695 Adjustments to reconcile net income to net cash provided by operating activities: Dresden generation facility impairment loss Gain on sale of Canadian E&P operations (194) -- Extraordinary item, net of income taxes Charges related to termination of volumetric production payment agreements Dominion Capital, Inc. impairment losses 8 89 Charges related to pending sale of gas distribution subsidiaries Net realized and unrealized derivative (gains) losses 517 (234) Depreciation, depletion and amortization Deferred income taxes and investment tax credits, net (108) 242 Other adjustments to income, net 7 (29) Changes in: Accounts receivable Inventories Deferred fuel and purchased gas costs, net Accounts payable (116) (884) Accrued interest, payroll and taxes (27) 33 Deferred revenues (71) (143) Margin deposit assets and liabilities (46) (142) Other operating assets and liabilities Net cash provided by operating activities 1,973 1,989 Investing Activities Plant construction and other property additions (947) (913) Additions to gas and oil properties, including acquisitions (1,409) (1,018) Proceeds from sale of gas and oil properties Net proceeds from sale of merchant generation peaking facilities Net proceeds from sale of Canadian E&P operations Acquisition of businesses -- (91) Proceeds from sale of securities and loan receivable collections and payoffs Purchases of securities and loan receivable originations (657) (530) Other Net cash used in investing activities (1,674) (1,952) Financing Activities Issuance (repayment) of short-term debt, net 413 (553) Issuance of long-term debt 600 1,300 Repayment of long-term debt (935) (723) Net proceeds from issuance of common stock Repurchase of common stock (117) -- Common dividend payments (497) (483) Other 22 (13) Net cash used in financing activities (398) (100) Decrease in cash and cash equivalents (99) (63) Cash and cash equivalents at beginning of period (1) Cash and cash equivalents at end of period (2) $ 43 $83 Noncash Investing and Financing Activities: Accrued capital expenditures $165 $166 Proceeds held in escrow from sale of Canadian E&P operations Issuance of long-term debt and establishment of trust (1) 2007 amount includes $4 million of cash classified as held for sale on the Consolidated Balance Sheet. (2) 2007 and 2006 amounts include $3 million and $2 million, respectively, of cash classified as held for sale on the Consolidated Balance Sheets. 16

17 Segment Operating Results and Statistics Dominion Consolidated Unaudited Summary of Operating Results Three Months Ended Six Months Ended (millions, except per share amounts) (millions, except per share amounts) Operating Revenue $ 3,730 $ 3,496 $ 8,391 $ 8,402 Operating Expenses Electric fuel and energy purchases ,828 1,523 Purchased electric capacity Purchased gas ,678 1,810 Other energy-related commodity purchases Other operations and maintenance ,584 1,271 Depreciation, depletion and amortization Other taxes Total Operating Expenses 2,977 2,868 6,593 6,626 Operating Income ,798 1,776 Other income Interest and related charges Income before income taxes and minority interest ,365 1,361 Income taxes Minority interest Operating earnings (1) $ 310 $ 279 $ 828 $ 846 Operating earnings per share $ 0.89 $ 0.80 $ 2.36 $ 2.42 Items excluded from operating earnings (net of taxes) (1) (840) (118) (905) (151) Reported net income $ (530) $ 161 $ (77) $ 695 Reported net income per common share - Diluted $ (1.52) $ 0.46 $ (0.22) $ 1.99 Average shares outstanding, diluted (2) (1) 2007 and 2006 amounts have been recast to exclude from operating earnings the gains and losses from discontinued operations of three merchant generation facilities, a DCI subsidiary, and the Canadian E&P operations. (2) As result of the net loss from continuing operations for the three months ended 2007, the issuance of common stock under potentially-dilutive securities was considered antidilutive and therefore not included in the calculation of the diluted loss per share for that period. Notes: Figures may not add due to rounding For additional detail on items excluded from operating earnings, visit Dominion's Investor Relations Web site at under "GAAP Reconciliation" 17

18 Dominion Delivery Unaudited Summary of Operating Results Three Months Ended Six Months Ended (millions, except per share amounts) (millions, except per share amounts) Operating Revenue $ 817 $ 740 $ 2,444 $ 2,415 Operating Expenses Electric fuel and energy purchases Purchased electric capacity Purchased gas ,116 1,197 Other energy-related commodity purchases Other operations and maintenance Depreciation, depletion and amortization Other taxes Total Operating Expenses ,910 1,958 Operating Income Other income Interest and related charges Income before income taxes and minority interest Income taxes Minority interest Operating earnings $ 83 $ 80 $ 282 $ 236 Operating earnings per share contribution $ 0.24 $ 0.23 $ 0.80 $ 0.68 Average shares outstanding, diluted Note: Figures may not add due to rounding 18

19 Dominion Energy Unaudited Summary of Operating Results Three Months Ended Six Months Ended (millions, except per share amounts) (millions, except per share amounts) Operating Revenue $ 626 $ 534 $ 1,307 $ 1,408 Operating Expenses Electric fuel and energy purchases (2) - (2) - Purchased electric capacity Purchased gas Other energy-related commodity purchases Other operations and maintenance Depreciation, depletion and amortization Other taxes Total Operating Expenses ,020 1,097 Operating Income Other income Interest and related charges Income before income taxes and minority interest Income taxes Minority interest Operating earnings $ 69 $ 68 $ 171 $ 175 Operating earnings per share contribution $ 0.20 $ 0.20 $ 0.49 $ 0.50 Average shares outstanding, diluted Note: Figures may not add due to rounding 19

20 Dominion Generation Unaudited Summary of Operating Results Three Months Ended Six Months Ended (millions, except per share amounts) (millions, except per share amounts) Operating Revenue $ 1,776 $ 1,607 $ 3,583 $ 3,303 Operating Expenses Electric fuel and energy purchases ,740 1,470 Purchased electric capacity Purchased gas Other energy-related commodity purchases Other operations and maintenance Depreciation, depletion and amortization Other taxes Total Operating Expenses 1,596 1,461 3,150 2,870 Operating Income Other income Interest and related charges Income before income taxes and minority interest Income taxes Minority interest Operating earnings (1) $ 81 $ 65 $ 220 $ 203 Operating earnings per share contribution $ 0.23 $ 0.19 $ 0.63 $ 0.58 Average shares outstanding, diluted (1) 2006 Amounts have been recast to exclude from operating earnings the loss from discontinued operations of three merchant generation facilities that were sold in March 2007 Note: Figures may not add due to rounding 20

21 Dominion Exploration & Production Unaudited Summary of Operating Results Three Months Ended Six Months Ended (millions, except per share amounts) (millions, except per share amounts) Operating Revenue $ 678 $ 790 $ 1,346 $ 1,695 Operating Expenses Electric fuel and energy purchases Purchased electric capacity Purchased gas Other energy-related commodity purchases Other operations and maintenance Depreciation, depletion and amortization Other taxes Total Operating Expenses ,085 Operating Income Other income Interest and related charges Income before income taxes and minority interest Income taxes Minority interest Operating earnings (1) $ 145 $ 93 $ 276 $ 318 Operating earnings per share contribution $ 0.42 $ 0.26 $ 0.79 $ 0.91 Average shares outstanding, diluted (1) 2007 and 2006 amounts have been recast to exclude from operating earnings the gain from discontinued operations of the Canadian operations that were sold in June 2007 Note: Figures may not add due to rounding 21

22 Dominion Unaudited Operating Revenue Detail (GAAP Based) Three Months Ended Six Months Ended (millions, except per share amounts) (millions, except per share amounts) Dominion Consolidated Operating Revenue Electric Regulated $ 1,386 $ 1,283 $ 2,797 $ 2,582 Non-regulated ,460 1,137 Gas Regulated Non-regulated ,343 1,256 Other energy-related commodities Gas transportation and storage Gas and oil production , Other revenue Total operating revenue $ 3,730 $ 3,496 $ 8,391 $ 8,402 Dominion Delivery Operating Revenue Electric Regulated $ 287 $ 270 $ 585 $ 546 Non-regulated Gas Regulated Non-regulated Other energy-related commodities Gas transportation and storage Gas and oil production Other revenue Total operating revenue $ 817 $ 740 $ 2,444 $ 2,415 Dominion Energy Operating Revenue Electric Regulated $ 58 $ 50 $ 113 $ 101 Non-regulated Gas Regulated Non-regulated Other energy-related commodities Gas transportation and storage Gas and oil production (1) 1-1 Other revenue Total operating revenue $ 626 $ 534 $ 1,307 $ 1,408 Dominion Generation Operating Revenue Electric Regulated $ 1,041 $ 963 $ 2,099 $ 1,934 Non-regulated ,360 1,044 Gas Regulated Non-regulated (6) 1 (3) 2 Other energy-related commodities Gas transportation and storage Gas and oil production Other revenue Total operating revenue $ 1,776 $ 1,607 $ 3,583 $ 3,303 Dominion Exploration & Production Operating Revenue Electric Regulated $ - $ - $ - $ - Non-regulated Gas Regulated Non-regulated Other energy-related commodities Gas transportation and storage Gas and oil production ,154 1,066 Other revenue Total operating revenue $ 678 $ 790 $ 1,346 $ 1,695 Note: Figures may not add due to rounding 22

23 Dominion Operating Statistics Three Months Ended Six Months Ended Dominion Consolidated Regulated Electric Sales Revenue ($ millions) Residential $579 $537 $1,240 $1,138 Commercial Industrial Governmental Regulated retail revenue 1,296 1,218 2,612 2,445 Wholesale - sales for resale Other revenue Total $1,386 $1,284 $2,797 $2,581 Degree Days (Electric service area) Cooling Actual Normal Heating Actual ,360 2,041 Normal ,335 2,331 Dominion Delivery Electric Delivery Customers (at period end) Residential 2,099,770 2,069,957 2,099,770 2,069,957 Commercial 227, , , ,751 Industrial Governmental 30,994 30,804 30,994 30,804 Total Retail 2,359,082 2,325,146 2,359,082 2,325,146 Wholesale - sales for resale Total 2,359,088 2,325,152 2,359,088 2,325,152 Electricity Delivered (Gwhr) Residential 6,499 6,005 14,807 13,548 Commercial 7,033 6,675 13,642 12,930 Industrial 2,591 2,563 5,014 4,925 Governmental 2,724 2,565 5,281 4,953 Total Retail 18,847 17,808 38,744 36,356 Wholesale - sales for resale 1, ,252 1,815 Total 19,989 18,688 40,996 38,171 Dominion Generation Electricity Sold (Gwhr) to VP/NCP customers Residential 6,496 6,002 14,800 13,540 Commercial 7,033 6,675 13,642 12,930 Industrial 2,591 2,563 5,014 4,925 Governmental 2,724 2,565 5,281 4,953 Total Retail 18,844 17,805 38,737 36,348 Wholesale - sales for resale 1, ,252 1,815 Total 19,986 18,685 40,989 38,163 Note: Figures may not add due to rounding. 23

24 Dominion Operating Statistics Dominion Delivery Three Months Ended Six Months Ended Regulated Gas Revenue ($mm) Gas sales revenue Residential Commercial Industrial Other Total $ 184 $176 $ Regulated Gas Transportation & Storage Revenue ($mm) Gas transportation revenue Residential Commercial Industrial Other Total transportation revenue Storage revenue Total $ 83 $67 $ Degree Days (LDC service areas) Heating Actual ,761 3,236 Normal ,670 3,678 LDC Natural Gas Customers (at period end) Gas sales customers Residential 735, , , ,154 Commercial 56,298 57,222 56,298 57,222 Industrial Other Total 791, , , ,832 Gas transportation customers Residential 818, , , ,285 Commercial 62,775 61,859 62,775 61,859 Industrial 1,430 1,437 1,430 1,437 Total 882, , , ,581 Total LDC natural gas customers Residential 1,553,701 1,559,439 1,553,701 1,559,439 Commercial 119, , , ,081 Industrial 1,842 1,857 1,842 1,857 Other Total 1,674,652 1,680,413 1,674,652 1,680,413 LDC Natural Gas Delivery (mmcf) Gas sales volume Residential 10,095 8,657 44,373 47,073 Commercial 3,025 2,794 14,054 13,563 Industrial Other Total 13,418 11,681 59,664 61,959 Gas transportation volume 0 Residential 12,270 9,394 57,154 38,875 Commercial 8,054 6,637 31,916 26,619 Industrial 24,613 26,463 56,749 59,666 Other ,169 5,076 Total 45,625 43, , ,236 Total LDC natural gas throughput Residential 22,365 18, ,527 85,948 Commercial 11,079 9,431 45,970 40,182 Industrial 24,851 26,670 57,669 60,633 Other ,486 5,432 Total 59,043 54, , ,195 Note: Figures may not add due to rounding. 24

25 Dominion Operating Statistics Dominion Delivery (Dominion Retail) Three Months Ended Six Months Ended Unregulated Energy Customer Accounts Natural Gas 645, , , ,122 Electric 262, , , ,659 Products and Services 653, , , ,377 Total 1,561,301 1,392,158 1,561,301 1,392,158 Volumes Sold Natural Gas (Mcf) 16,677 13,236 66,347 43,226 Electricity (Mwhr) 856, ,726 1,642,932 1,945,516 Dominion Energy Gas Transmission Throughput (Bcf) * * Includes Cove Point NATURAL GAS AND OIL PRODUCTION (NGLs reported with liquids) Dominion Energy (Dominion Transmission) Volumes Produced Natural Gas (Bcf) Liquids (MBbls) Total equivalent (Bcfe) Average Realized Prices Natural Gas (per Mcf) $9.04 $9.17 $9.25 $8.92 Liquids (per Bbl) $40.77 $37.73 $36.75 $39.71 Dominion Exploration and Production Volumes Produced (1) Natural Gas US (Bcf) Liquids US (MBbls) 5, , , ,860.8 Total equivalent (Bcfe) Average Realized Prices Without Hedging Results Natural Gas (per Mcf) $6.93 $6.36 $6.75 $7.14 Liquids (per Bbl) $54.96 $59.20 $50.81 $56.59 Equivalent (per Mcfe) $7.59 $7.55 $7.28 $7.93 Average Realized Prices With Hedging Results Natural Gas (per Mcf) $5.81 $4.00 $5.78 $4.45 Liquids (per Bbl) $38.91 $34.69 $36.90 $36.59 Equivalent (per Mcfe) $6.01 $4.60 $5.89 $5.02 DOMINION CONSOLIDATED Volumes Produced (1) Natural Gas US (Bcf) Liquids US (MBbls) 5, , , ,984.4 Total equivalent (Bcfe) Average Realized Prices Without Hedging Results Natural Gas (per Mcf) $6.96 $6.40 $6.78 $7.20 Liquids (per Bbl) $54.81 $58.99 $50.66 $56.42 Equivalent (per Mcfe) $7.60 $7.55 $7.29 $7.95 Average Realized Prices With Hedging Results Natural Gas (per Mcf) $5.89 $4.14 $5.87 $4.58 Liquids (per Bbl) $38.93 $34.72 $36.90 $36.63 Equivalent (per Mcfe) $6.07 $4.69 $5.95 $5.10 Volumetric Production Agreements (Excluded from Reported Production and Average Realized Prices) Volumes Delivered (Bcf) (2) VPP1 - Texas Muncipal Gas Corp VPP2 - Goldman Sachs VPP3 - UBS Total Average Revenue Recognized ($/Mcf) (3) VPP1 - Texas Muncipal Gas Corp $3.27 $3.45 $3.42 $3.61 VPP2 - Goldman Sachs $3.77 $4.23 $4.11 $4.63 VPP3 - UBS $4.94 $5.53 $5.63 $6.25 Average $4.35 $4.52 $4.89 $4.98 Due to the classification of Canadian E&P operations as discontinued, the following historical Canadian equivalent natural gas production (1) volumes are excluded from Dominion's equity production reported above: 1Q07; 5.7 Bcfe. (2) VPP volumes delivered are not included in production volumes reported above (3) VPP revenue is not included in average realized prices reported above, but is recognized in Gas and Oil Production in Dominion E&P Note: Figures may not add due to rounding. 25

26 Schedule of Long-term Debt TENDER At 6/30 At 9/30 At 12/31 At 3/31 At 6/30 At 6/ Dominion Resources, Inc. Unsecured Senior & Medium-Term Notes: 3.66% to 8.125%, due 2006 to 2010 (1) $ 2,442 $ 2,442 $ 2,030 $ 2,030 $ 2,030 $ 1,408 5% to 7.195%, due 2012 to 2035 (1) $ 3,880 $ 3,880 $ 4,130 $ 4,130 $ 4,130 $ 3,551 Variable rates, due 2006 to 2008 $ 1,000 $ 1,000 $ 1,400 $ 1,400 $ 1,400 $ 1,400 Unsecured Convertible Senior Notes, 2.125%, due 2023 $ 220 $ 220 $ 220 $ 220 $ 220 $ 220 Unsecured Junior Subordinated Notes Payable to Affiliated Trusts, 7.83% to 8.4%, due 2027 to 2041 (1)(2) $ 825 $ 825 $ 516 $ 516 $ 516 $ 279 Enhanced Junior Subordinated Notes, 6.3% to 7.5%, due 2066 $ 300 $ 800 $ 800 $ 800 $ 800 $ 800 Dominion Resources, Inc. (from CNG merger) (5) Secured Bank Debt, Variable Rate, due 2006 $ 234 $ 234 $ - $ - $ - $ - Unsecured Debentures & Senior Notes: 5.375% to 6.875%, due 2006 to 2011 (1) $ 2,000 $ 2,000 $ 1,500 $ 1,500 $ 1,300 $ % to 6.875%, due 2013 to 2027 (1) $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 711 Unsecured Junior Subordinated Notes Payable to Affiliated Trust, 7.8%, due 2041 (3) $ 206 $ 206 $ 206 $ 206 $ 206 $ 206 Virginia Electric and Power Company Secured First and Refunding Mortgage Bonds: 7.625% due 2007 $ 215 $ 215 $ 215 $ 215 $ 215 $ 215 Secured Bank Debt, Variable Rate, due 2007 $ 370 $ 370 $ 370 $ 370 $ 370 $ 370 Unsecured Senior and Medium-Term Notes: 4.5% to 5.75%, due 2006 to 2010 $ 1,000 $ 1,000 $ 1,000 $ 350 $ 350 $ % to 8.625%, due 2013 to 2037 $ 1,755 $ 1,754 $ 1,748 $ 1,747 $ 2,342 $ 2,342 Unsecured Callable and Puttable Enhanced Securities SM, 4.10%, due 2038 $ 225 $ 225 $ 225 $ 225 $ 225 $ 225 Tax-Exempt Financings: Dominion Resources, Inc. Schedule of Long-Term Debt - Preliminary & Unaudited ($ in Millions) Variable Rate, due 2008 $ 60 $ 60 $ 60 $ 60 $ 60 $ 60 Variable Rates, due 2015 to 2027 $ 137 $ 137 $ 137 $ 137 $ 137 $ % to 7.65%, due 2007 to 2010 (4) $ 232 $ 232 $ 232 $ 220 $ 220 $ % to 7.55%, due 2014 to 2031 (4) $ 263 $ 263 $ 263 $ 209 $ 209 $ 209 Unsecured Junior Subordinated Notes Payable to Affiliated Trust, 7.375%, due 2042 $ 412 $ 412 $ 412 $ 412 $ 412 $ 412 Dominion Energy, Inc. Secured Senior Note, 7.33%, due 2020 $ 218 $ 218 $ 213 $ 213 $ 208 $ 208 Secured Bank Debt, Variable Rates, due 2006 $ 347 $ 347 $ - $ - $ - $ - Tax-Exempt Financing, 5%, due 2036 $ 47 $ 47 $ 47 $ 47 $ 47 $ 47 Dominion Capital, Inc. Notes, 12.5%, due 2006 to 2007 $ 4 $ 4 $ 4 $ 4 $ 2 $ 2 Senior Note, Variable Rate, due 2017 $ 385 $ 385 $ 385 $ 385 $ 385 $ 385 Dominion Resources Services, Inc. Secured Bank Debt, Variable Rate, due 2006 $ 107 $ - $ - $ - $ - $ - AFTER DEBT $ 18,083 $ 18,475 $ 17,313 $ 16,596 $ 16,984 $ 14,477 Fair Value Hedge Valuation (65) 3 (6) 17 (19) Amounts Due Within One Year (2,279) (4,070) (2,478) (2,254) (2,592) Unamortized Discount & Premium, net (36) (36) (38) (38) (37) Total Long-Term Debt $ 15,703 $ 14,372 $ 14,791 $ 14,321 $ 14,336 (1) Includes one or more securities that were part of the Company's tender offer to purchase up to $2.5B of debt securities. The results of this offer were not effective until July 12, (2) The 8.4% Junior Subordinated Notes due in 2041 were redeemed early on October 17, (3) The 7.8% Junior Subordinated Notes due in 2041 were redeemed early on July 17, (4) The Pittsylvania 1994-A Series tax exempt bonds were redeemed early on February 23, (5) Consolidated Natural Gas (CNG) was merged into Dominion Resources, Inc. (DRI) on 2007 at which time CNG ceased to exist and all outstanding obligations of CNG became direct obligations of DRI. 26