Dominion Power 2007 Annual Report Download - page 113

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
The following tabulation has been prepared in accordance with the FASB’s rules for disclosure of a standardized measure of discounted
future net cash flows relating to proved gas and oil reserve quantities that we own:
2007 2006 2005
Total U.S. Canada Total U.S. Canada Total U.S. Canada
(millions)
Future cash inflows(1) $8,128 $8,128 $— $38,326 $36,604 $1,722 $63,004 $61,112 $1,892
Less:
Future development costs(2) 671 671 — 3,226 3,052 174 1,979 1,877 102
Future production costs 1,235 1,235 — 7,421 6,936 485 8,127 7,718 409
Future income tax expense 2,432 2,432 — 9,112 8,782 330 19,019 18,527 492
Future cash flows 3,790 3,790 — 18,567 17,834 733 33,879 32,990 889
Less annual discount (10% a year) 2,346 2,346 — 10,458 10,143 315 18,916 18,560 356
Standardized measure of discounted future net
cash flows $1,444 $1,444 $— $ 8,109 $ 7,691 $ 418 $14,963 $14,430 $ 533
(1) Amounts exclude the effect of derivative instruments designated as hedges of future sales of production at year-end.
(2) Estimated future development costs, excluding abandonment, for proved undeveloped reserves are estimated to be $80 million, $79 million and $87 million
for 2008, 2009 and 2010, respectively.
In the foregoing determination of future cash inflows, sales prices for gas and oil were based on contractual arrangements or market
prices at year-end. Future costs of developing and producing the proved gas and oil reserves reported at the end of each year shown were
based on costs determined at each such year end, assuming the continuation of existing economic conditions. Future income taxes were
computed by applying the appropriate year-end or future statutory tax rate to future pretax net cash flows, less the tax basis of the proper-
ties involved, and giving effect to tax deductions, permanent differences and tax credits.
It is not intended that the FASB’s standardized measure of discounted future net cash flows represent the fair market value of our
proved reserves. We caution that the disclosures shown are based on estimates of proved reserve quantities and future production schedules
which are inherently imprecise and subject to revision, and the 10% discount rate is arbitrary. In addition, costs and prices as of the meas-
urement date are used in the determinations, and no value may be assigned to probable or possible reserves.
The following tabulation is a summary of changes between the total standardized measure of discounted future net cash flows at the
beginning and end of each year:
2007 2006 2005
(millions)
Standardized measure of discounted future net cash flows at January 1 $ 8,109 $ 14,963 $ 9,026
Changes in the year resulting from:
Sales and transfers of gas and oil produced during the year, less production costs (1,270) (2,791) (2,502)
Prices and production and development costs related to future production 289 (11,788) 8,929
Extensions, discoveries and other additions, less production and development costs 419 758 1,396
Previously estimated development costs incurred during the year 467 302 284
Revisions of previous quantity estimates 286 409 27
Accretion of discount 181 2,327 1,367
Income taxes 3,173 4,352 (3,659)
Other purchases and sales of proved reserves in place (10,197) (346) 140
Other (principally timing of production) (13) (77) (45)
Standardized measure of discounted future net cash flows at December 31 $ 1,444 $ 8,109 $14,963
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