Dominion Power 2005 Annual Report Download - page 96

Notes to Consolidated Financial Statements, Continued
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:
2005 2004 2003
United United United
Total States Canada Total States Canada Total States Canada
(millions)
Future cash inflows(1) $63,004 $61,112 $1,892 $36,819 $35,735 $1,084 $36,486 $32,922 $3,564
Less:
Future development costs(2) 1,979 1,877 102 1,527 1,488 39 1,505 1,391 114
Future production costs 8,127 7,718 409 5,609 5,302 307 5,582 4,765 817
Future income tax expense 19,019 18,527 492 10,152 9,909 243 9,457 8,715 742
Future cash flows 33,879 32,990 889 19,531 19,036 495 19,942 18,051 1,891
Less annual discount (10% a year) 18,916 18,560 356 10,505 10,275 230 10,709 9,745 964
Standardized measure of discounted future
net cash flows $14,963 $14,430 $ 533 $ 9,026 $ 8,761 $ 265 $ 9,233 $ 8,306 $ 927
(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 $594 million, $330 million and $176 million for 2006, 2007 and 2008, 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 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 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 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:
2005 2004 2003
(millions)
Standardized measure of discounted future net cash flows at January 1 $ 9,026 $ 9,233 $ 7,805
Changes in the year resulting from:
Sales and transfers of gas and oil produced during the year, less production costs (2,502) (2,004) (1,997)
Prices and production and development costs related to future production 8,929 1,656 480
Extensions, discoveries and other additions, less production and development costs 1,396 1,118 1,920
Previously estimated development costs incurred during the year 284 172 182
Revisions of previous quantity estimates 27 (734) (918)
Accretion of discount 1,367 1,359 1,149
Income taxes (3,659) (291) (679)
Other purchases and sales of proved reserves in place 140 (878) 84
Other (principally timing of production) (45) (605) 1,207
Standardized measure of discounted future net cash flows at December 31 $14,963 $ 9,026 $ 9,233
94 Dominion 2005