Dominion Power 2004 Annual Report Download - page 98

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Notes to Consolidated Financial Statements, Continued
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 properties 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 Dominion’s proved
reserves. Dominion cautions that the disclosures shown are based on esti-
mates 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 measurement 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:
2004 2003 2002
(millions)
Standardized measure of discounted future net
cash flows at January 1 $ 9,233 $ 7,805 $ 3,213
Changes in the year resulting from:
Sales and transfers of gas and oil produced
during the year, less production costs (2,004) (1,997) (1,086)
Prices and production and development costs
related to future production 1,656 480 3,975
Extensions, discoveries and other additions,
less production and development costs 1,118 1,920 2,039
Previously estimated development costs incurred
during the year 172 182 223
Revisions of previous quantity estimates (734) (918) (152)
Accretion of discount 1,359 1,149 426
Income taxes (291) (679) (2,639)
Other purchases and sales of proved reserves
in place (878) 84 799
Other (principally timing of production) (605) 1,207 1,007
Standardized measure of discounted future net
cash flows at December 31 $ 9,026 $ 9,233 $ 7,805
D 2004/Page 96