Dominion Power 2004 Annual Report Download - page 14

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Frontier
Emerging Plays
Established Plays
Aging Plays
High
Low
High
Low 2004 CAPEX $1.3 Billion
Extension Drilling
Development
Drilling
Program
Drilling
Exploration10%
Exploitation50%
Gas Factories40%
Unrisked Return
Risk
Development
Exploration
Dominion's Exploration & Production Portfolio Model
D 2004/Page 12
100 miles southeast of New Orleans. By
the end of the fourth quarter of 2005, we
are expecting eight wells to be up and
running. We hold firm capacity rights in
the spar of about 300 million cubic feet
equivalent (Mmcfe) of natural gas per
day. Meanwhile, the first of eight wells
at the Front Runner facility began produc-
ing in 2004. Our ownership share of
the Front Runner spar’s capacity is about
140 Mmcfe of natural gas per day.
Why Natural Gas and Oil
Exploration and Production?
Investors often ask me why Dominion, a
gas and electric generation, transmis-
sion, distribution and pipeline company,
should invest money in natural gas and
oil exploration and production. Regulated
and non-regulated energy businesses
appear very different. One attracts
investors who want to minimize risk
and gain reliable, steadily growing earn-
ings. The other beckons to investors with
an appetite for risk and roller-coaster
earnings.
My answer is simple: focus on finding
low-risk proved and probable reserves
that will contribute to a steady, growing
earnings stream. We emphasize produc-
tion over exploration.
Predictability in Natural Gas and
Oil Exploration and Production
Dominion’s E&P business is dominated by
production from low-risk onshore fields.
They account for about three-fourths
of our gas and oil production and about
80 percent of our proved reserves. The
balance lies in our offshore operations
in the Gulf of Mexico.
The heart of our onshore business
encompasses “gas factories” which span
seven major basins in the U.S. and
western Canada. We call them factories
Investors often ask
me why Dominion, a
gas and electric
generation, trans-
mission, distribution
and pipeline
company, should
invest money in
natural gas and oil
exploration and
production.
Dominion’s
E&P business is
dominated by
production from
low-risk onshore
fields.