Dominion Power 2003 Annual Report Download - page 20

Left: The average life span of
a Sonora Field well is 30–40
years.
Right: Workers apply a lubricant
to the drill pipe pin at a Sonora
Field drilling site.
18.Dominion 2003
culture that motivates people to take a lot of pride in their
jobs and log continuing savings along the way.
Our Six Sigma process improvement initiative is now
in its fourth year. We’ve found more than $200 million in
ongoing savings. More than 150 Six Sigma “black belt”
experts are enhancing our productivity. With more than
350 workplace improvement projects under way in 2004
and another 600 in the queue, we’re targeting additional
ongoing savings in 2004 of $50 million per year.
Pounding the Ground Harder,
Getting the Gas Faster
An example at our Sonora natural gas properties in west
Texas brings clear meaning to the term “process improve-
ment.” We acquired the Sonora properties in 2001 with
our purchase of Louis Dreyfus Natural Gas. Time is
money in Sonora—the faster you can get the gas out,
the quicker it goes to market, the sooner sales hit the
cash register. Our seasoned gas pros are using Six
Sigma techniques to promote faster drilling. Lately,
they’ve been racing each other to drill faster, but always
maintaining the highest standards of safety. Dominion is
a leader in industry safety and environmental awards.
At year-end, gross production at Sonora exceeded
200 million cubic feet per day. Since we acquired
Sonora, production at those properties is up more than
50 percent.
Capital Preservation: Managing Our Risks,
Minding Our Balance Sheet
Over the years, our Dominion team has earned a reputa-
tion among investors for spending capital wisely. That’s
why the write-offs at our telecommunications business
were so painful. Unfortunately, markets for Dominion
Telecom’s services did not develop as we had expected,
and I alone accept responsibility.
Our best move was to minimize the impact and try
to get it behind us. In March of this year, we signed an
agreement to sell Dominion Telecom. Although we
excluded the write-offs from our operating earnings, it
did reduce the equity on our balance sheet.
Maintaining a strong balance sheet is a critical piece
of our strategy. Three times in the last two years we’ve
issued new shares in public offerings to raise equity
instead of increasing our debt. In total, we issued more
than 49 million shares. That raised more than $2.4 bil-
lion. Spread our net income over that expanded share
base (more than 325 million shares outstanding) and the
dilution amounted to 65 cents per share by the end of
2003. In most cases, we’d rather absorb the impact of
dilution in our short-term earnings, than rob our long-term
future by neglecting our balance sheet.
Over the course of the last few years, we’re proud of
the progress we’ve made in strengthening our credit
ratios. We will continue to focus on improving these mea-
sures, such as debt to total capital and cash coverage of
interest expense. Our objective is to lower our adjusted
debt as a percentage of our total capital to the 50 per-
cent range, and to have our funds from operations cover
our interest expense by at least four times. Turn to page
24 for details on the same metrics under GAAP.