Dominion Power 2006 Annual Report Download - page 105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Standardized Measure of Discounted Future NetCash Flows and Changes Therein
The following tabulation has been prepared in accordance with the FASB’s rulesfor disclosure of astandardized measure of discounted
future netcash flows relating to proved gasand oil reserve quantities that we own:
2006 2005 2004
Total
United
States Canada Total
United
States Canada Total
United
States Canada
(millions)
Future cash inflows(1) $38,326 $36,604 $1,722 $63,004 $61,112 $1,892 $36,819 $35,735 $1,084
Less:
Future development costs(2) 3,226 3,052 174 1,979 1,877 102 1,5271,488 39
Future production costs 7,421 6,936 485 8,127 7,718 409 5,609 5,302 307
Future income tax expense 9,112 8,782 330 19,019 18,527 492 10,152 9,909 243
Future cash flows 18,567 17,834 733 33,879 32,990 889 19,531 19,036 495
Less annual discount (10% ayear) 10,458 10,143 315 18,916 18,56035610,505 10,275 230
Standardized measure of discounted future netcash
flows $8,109 $7,691 $418 $14,963 $14,430$533 $9,026 $ 8,761 $ 265
(1) Amounts exclude the effect of derivative instruments designated as hedges of future salesof production at year-end.
(2) Estimated future development costs, excluding abandonment, for proved undeveloped reserves are estimatedtobe $704 million, $468 million and$340 million for
2007, 2008 and 2009, respectively.
In the foregoing determination of future cash inflows, sales
prices forgas and oil were based on contractual arrangements or
market pricesat year-end. Future costs of developing and produc-
ing the proved gasand oil reservesreported at the end of each
year shown were based on costs determined at each such year end,
assumingthe continuation of existing economic conditions.
Future income taxes were computed by applying the appropriate
year-end or future statutory taxrate to future pretax net cash
flows, less the tax basis of the properties involved, and giving
effect totaxdeductions, permanent differences and taxcredits.
It is not intended that the FASB’s standardized measure of
discounted future netcash flows represent the fair market value of
our proved reserves. We caution that the disclosuresshown are
based on estimates of proved reserve quantities and future pro-
ductionschedules which are inherently imprecise and subject to
revision, and the 10% discountrateis arbitrary. In addition, costs
and prices as of the measurement dateareused in the determi-
nations, and no value maybeassigned to probableorpossible
reserves.
The following tabulation is asummary of changes between the total standardized measure of discounted future netcash flows at the
beginning and end of each year:
2006 2005 2004
(millions)
Standardized measure of discounted future netcash flows at January 1 $14,963 $9,026 $ 9,233
Changes in the year resulting from:
Sales and transfers of gas andoil produced during the year, less production costs (2,791) (2,502) (2,004)
Prices and production anddevelopment costsrelated to future production (11,788) 8,929 1,656
Extensions, discoveries andotheradditions, less production anddevelopment costs 758 1,396 1,118
Previously estimated development costsincurred during the year 302 284 172
Revisions of previous quantity estimates 409 27 (734)
Accretion of discount 2,327 1,367 1,359
Income taxes 4,352 (3,659) (291)
Other purchases andsales of proved reserves in place (346) 140 (878)
Other (principally timing of production) (77) (45) (605)
Standardized measure of discounted future netcash flows at December 31 $8,109 $14,963 $ 9,026
104 DOMINION2006 Annual Report