Dominion Agrees To Sell Canadian E&P Operations For U.S. $583 Million

- Transaction continues previously announced strategic repositioning
- Proceeds to be used for debt reduction, share buyback and business growth
- Process ongoing to sell remaining E&P operations except Appalachian Basin

RICHMOND, Va. – Dominion (NYSE: D) today announced that it has agreed to sell its Canadian natural gas and oil exploration and production operations to Paramount Energy Trust and Baytex Energy Trust, both of Calgary, Canada, for approximately U.S. $583 million based on currency exchange rates at close of business on May 25, 2007.

These operations include approximately 267 billion cubic feet equivalent (Bcfe) of proved natural gas and oil reserves in western Canada as of Dec. 31, 2006, with 2006 average daily production of approximately 60 million cubic feet equivalent (MMcfe).

"This announcement represents another step toward achieving our goal of refocusing Dominion on the power generation and energy distribution, transmission, storage and retail businesses," said Chairman, President and CEO Thomas F. Farrell II. "When the transition is completed, the company’s risk profile will be substantially reduced, earnings growth should be less volatile and our capital structure will be even stronger."

Dominion said previously it would pursue the disposition of all of its E&P operations except those in the Appalachian Basin. The company announced on April 30, 2007, that it had agreed to sell virtually all of its offshore E&P operations in the Gulf of Mexico for approximately $4.76 billion to Eni Petroleum Co. Inc., a subsidiary of Italian energy company Eni. It continues to pursue the disposition of its U.S. onshore E&P operations except those in the Appalachian Basin.

Closing of the sale of the Canadian operations is expected to occur by the end of June 2007, subject to customary closing conditions and adjustments.

Proceeds from the disposition of E&P assets as well as the planned sale of the company’s Dominion Peoples and Dominion Hope natural gas distribution businesses would position the company to reduce debt — including debt at its CNG subsidiary — repurchase common shares and grow other Dominion businesses.

With all of the restructuring transactions not yet announced, several important pieces of financial information are not yet ready for disclosure. That includes total proceeds, applicable tax rate, targeted credit metrics in view of our anticipated lower risk profile and, ultimately, the amount of proceeds that will be available to repurchase shares of common stock.

"We continue to suggest that investors wait for all of these announcements before drawing any firm conclusions on how these transactions will affect Dominion’s ongoing earnings power," Farrell said.

Scotia Waterous and Juniper Advisory LP are Dominion’s financial advisers in the sale.  Stikeman Elliott LLP is the company’s legal adviser for the sale.

Dominion is one of the nation's largest producers of energy, with a portfolio of more than 26,500 megawatts of generation, about 6.5 trillion cubic feet equivalent of proved natural gas reserves and 7,800 miles of natural gas transmission pipeline. Dominion also owns and operates the nation's largest underground natural gas storage system with about 960 billion cubic feet of storage capacity and serves retail energy customers in 11 states. For more information about Dominion, visit the company's Web site at http://www.dom.com.

This news release contains certain forward-looking statements including our projected future long-term operating earnings growth rates, components of our projected future earnings volatility, and projected use of proceeds that are subject to various risks and uncertainties.  Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energy-related commodity prices, including changes in the cost of fuel for our regulated electric business, the timing of the closing dates of acquisitions or divestitures (including our divestiture of The Peoples Natural Gas Company and Hope Gas, Inc. and any divestiture of our natural gas and oil assets), the amount of net proceeds received from any divestitures, additional risk exposure associated with the termination of business interruption and offshore property damage related to our exploration and production operations and our inability to replace such insurance on commercially reasonable terms, estimates of future market conditions, estimates of proved and unproved reserves, the company’s ability to meet its natural gas and oil production forecasts, the behavior of other market participants, and the effects of hurricanes on our operations, gas and oil production and realized prices. Other factors include, but are not limited to, weather conditions, governmental regulations, economic conditions in the company's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, risks associated with the realignment of our operating assets (including the potential dilutive effect on earnings in the near term, costs associated with any disposition of our exploration and production business and the redeployment of proceeds from any dispositions), changes to rating agency requirements and ratings, changing financial accounting standards, trading counter-party credit risks, risks related to energy trading and marketing, and other uncertainties. Other risk factors are detailed from time to time in Dominion’s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with the Securities & Exchange Commission.

This news release is not an offer to sell securities and we are not soliciting any offers to buy securities.

###


CONTACTS:    
Media: Dan Donovan, (412) 690-1370
Chet Wade, (804) 775-5697
 
     
Analysts:

Joe O’Hare, (804) 819-2156
Fiona McCarthy, (804) 819-2447