5 May 2007 - 15:41
  • News Code: 103876

RICHMOND, Va. – Dominion Resources Inc. said Monday it plans to sell its offshore U.S. oil and natural gas business to a subsidiary of Italian energy company Eni SpA for about $4.76 billion.

The deal with Eni Petroleum Co. includes about 967 billion cubic feet equivalent of natural gas and oil reserves in the Gulf of Mexico, about 15 percent to 18 percent of Dominion"s total proved reserves. Average daily production in 2006 was about 503 million cubic feet, Dominion said.

AdvertisementThe sale is part of the Richmond energy company"s previously announced plan to refocus on its electric generation and energy distribution, transmission, storage and retail operations. Proceeds of the deal will be used to reduce debt, buy back shares and to acquire other energy assets, the company said in a statement.

“Dominion has been extremely successful in the E&P (exploration and production) operations, but that success has not been fully reflected in our share price,” chief executive Thomas F. Farrell II said in the statement announcing the deal, which is expected to be completed on July 2.


Shares of Eni rose 0.4 percent to 24.44 euros ($33.34) in Milan trading. Dominion shares fell 35 cents to close at $91.20 on the New York Stock Exchange.


Shelby G. Tucker, an analyst with Banc of America Securities, said the sale price for the Gulf of Mexico operations was well above the $3.2 billion to $3.6 billion range he had estimated. Banc of America analysts had previously said that for every $500 million difference from the estimated sale price, Dominion"s estimated stock value would change by $1 per share.


“Thus, if the sale price for the remainder of the E&P assets is in line with our estimates, this could add $2/share to Dominion"s valuation,” Tucker said Monday in a research report.


Dominion said in Monday"s statement that it is continuing efforts to sell its onshore oil and natural gas holdings in the U.S. and western Canada. It plans to keep its Appalachian basin E&P operations, which contain about 15 percent of Dominion"s proved reserves.


Dominion said last November that it planned to sell most of its energy and production assets by mid-2007 in an attempt to cut earnings volatility, reduce risk and maintain or improve the company"s credit rating. Dominion"s oil and natural gas holdings are managed by its Dominion Exploration & Production Inc. subsidiary, based in Houston. It has been the most active driller of new wells over the past four years, with just under 4,000 net wells, the company said.


After selling off most of its E&P businesses, Dominion said it expects earnings per share to grow 4 percent to 6 percent annually.


Eni"s acquisition will increase its Gulf of Mexico production to 110,000 barrels of oil equivalent a day by the second half of the year, up from 36,000 barrels, Eni said in a statement.


The deal is the latest in a series of Eni"s acquisitions this year in Congo, Angola, Russia and Alaska, and will allow the company to build on other holdings in the United States, where it has been operating since 1966, Eni said.



News Code 103876

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