Dominion Power 2001 Annual Report Download - page 86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
84
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 pro-
ducing 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 properties involved, and giving
effect to tax deductions, or 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 Dominion’s proved reserves. Dominion cautions that the dis-
closures shown are based on estimates of proved reserve quanti-
ties and future production schedules which are inherently
imprecise and subject to revision, and the 10% discount rate is
arbitrary. In addition, present costs and prices 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.
(millions) Year Ended December 31, 2001 2000 1999
Standardized measure of discounted future
net cash flows at January 1 $8,176 $ 549 $ 382
Changes in the year resulting from:
Sales and transfers of gas and oil produced
during the year, less production costs (1,038) (796) (152)
Prices and production and development
costs related to future production (9,793) 9,544 (110)
Extensions, discoveries and other additions,
less production and development costs 767 1,602 103
Previously estimated development costs
incurred during the year 134 82 57
Revisions of previous quantity estimates 62 (778) 34
Accretion of discount 1,117 259 44
Income taxes 2,949 (3,309) (44)
Acquisition of Louis Dreyfus and CNG 1,347 1,322 —
Other purchases and sales of proved
reserves in place 102 994 245
Other (principally timing of production) (610) (1,293) (10)
Standardized measure of discounted future
net cash flows at December 31 $3,213 $ 8,176 $ 549
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 owned by Dominion.
(millions) Year Ended December 31, 2001 2000 1999
United United United
Total States Canada Total States Canada Total States Canada
Future cash inflows $12,350 $11,161 $1,189 $23,602 $19,117 $4,485 $2,401 $1,282 $1,119
Less:
Future development cost(1) 845 770 75 503 405 98 110 — 110
Future production cost 3,571 3,091 480 2,055 1,540 515 987 497 490
Future income tax expense 1,917 2,026 (109) 7,145 5,591 1,554 209 125 84
Future cash flows 6,017 5,274 743 13,899 11,581 2,318 1,095 660 435
Less annual discount (10% a year) 2,804 2,513 291 5,723 4,622 1,101 546 310 236
Standardized measure of discounted
future net cash flows(2) $ 3,213 $ 2,761 $ 452 $ 8,176 $ 6,959 $1,217 $ 549 $ 350 $ 199
(1) Estimated future development costs, excluding abandonment, for proven undeveloped reserves are estimated to be $241 million, $272 million and $85 million for 2002, 2003, and 2004,
respectively.
(2) Amounts exclude the effect of contracts designated as hedges of future sales of production at year end.