Dominion Announces 2005 Earnings Forecasts 2006 Earnings of $5.05 to $5.25 Per Share Declares Common Dividend Increase

-Early return of Gulf of Mexico production boosts 2005 earnings above company guidance
-Conference call scheduled for 10 a.m. EST today

January 26, 2006

RICHMOND, Va. - Dominion (NYSE: D) announced today unaudited net income determined in accordance with Generally Accepted Accounting Principles (GAAP) for the 12 months ended Dec. 31, 2005, of $1.03 billion ($3.00 per share) compared to net income of $1.25 billion ($3.78 per share) for the same period last year.

Operating earnings for the 12 months ended Dec. 31, 2005, were $1.56 billion ($4.53 per share) compared to operating earnings of $1.52 billion ($4.61 per share) for the 12 months ended Dec. 31, 2004. Operating earnings are defined as GAAP earnings adjusted for certain items.

Operating earnings in 2005 exceeded earnings guidance provided Nov. 3 of $4.11 to $4.21 per share largely due to earlier-than-expected resumption of storm-delayed natural gas and oil production at the company's offshore facilities in the Gulf of Mexico. Also contributing favorably to operating earnings was a non-cash, mark-to-market benefit from hedges de-designated following the storms. These benefits were partially offset by lower-than-expected gas and oil price realization, primarily due to increased locational basis differentials.

Dominion uses operating earnings as the primary performance measurement of its earnings outlook and results for public communications with analysts and investors. Dominion also uses operating earnings internally for budgeting, reporting to the board of directors and for the company’s annual incentive plan. Dominion management believes operating earnings provide a more meaningful representation of the company’s fundamental earnings power.

Business segment results and detailed descriptions of items included in 2005 and 2004 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.

Tom Farrell, president and chief executive officer, said:

“Our 2005 results reflect the ingenuity and diligence of our employees, particularly our E&P team. By finding unconventional ways to deliver offshore gas and oil production to market following Hurricanes Katrina and Rita, we were able to overcome obstacles and deliver 2005 earnings above post-hurricane expectations. This also benefits Dominion’s cash flow and reduces our potential business interruption insurance claims.

“The structural factors that will drive earnings and cash flow growth in 2007, 2008 and 2009 remain in place. Because of this, our Board of Directors demonstrated its confidence in our outlook by declaring a 2-cents per share increase to our quarterly common stock dividend. This results in an annual dividend rate of $2.76 per share or a 3-percent increase over 2005.”

 
Fourth-quarter earnings

Dominion also announced today unaudited net income determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended Dec. 31, 2005, of $257 million (74 cents per share) compared to net income of $224 million (67 cents per share) for the same period last year.

Operating earnings for the three months ended Dec. 31, 2005, were $353 million ($1.02 per share) compared to operating earnings of $408 million ($1.22 per share) for the three months ended Dec. 31, 2004.

Business segment results and detailed descriptions of items included in 2005 and 2004 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.
 

Fourth-quarter 2005 operating earnings compared to guidance

Dominion’s fourth-quarter 2005 actual operating earnings of $1.02 per share compares to fourth-quarter operating earnings guidance of 60 to 70 cents per share provided on Nov. 3. The earlier-than-expected resumption of approximately 23 Bcfe of natural gas and oil production resulted in a 38-cents per share benefit in the quarter. In addition, 2005 operating earnings include a 23-cents per share non-cash mark-to-market benefit from de-designated hedges. The mark-to-market benefit is due to lower 2006 gas and oil prices as of Dec. 31 as compared to prices on Sept. 30. These positives were partially offset by 17 cents per share due to lower natural gas prices and increased locational basis differentials, net of basis hedges. Items detailed above also explain the difference between Dominion’s full-year 2005 actual operating earnings of $4.53 per share as compared to operating earnings guidance of $4.11 to $4.21 per share updated on Nov. 3.

Complete details of fourth-quarter and full-year 2005 results versus guidance can be found on Schedule 4 of this release.
 

2005 operating earnings compared to 2004

Fourth-quarter 2005 operating earnings of $1.02 per share compares to operating earnings of $1.22 per share in the fourth quarter of 2004. The decrease is primarily attributable to hurricane-related delays in gas and oil production, business interruption insurance proceeds recorded in the fourth quarter of 2004 but not in the fourth quarter of 2005, and higher Virginia fuel expenses. These negatives were partially offset by higher realized gas and oil prices and a non-cash, mark-to-market benefit from hedges de-designated following the hurricanes.

Full-year 2005 operating earnings of $4.53 per share compares to operating earnings of $4.61 per share in 2004. The decrease is primarily attributable to hurricane-related delays in gas and oil production, higher Virginia fuel expenses, and the effect of gains on oil options in 2004 that did not recur in 2005. These negatives were partially offset by higher realized gas and oil prices, higher contributions from the company’s merchant generation and producer services businesses, and gains on the sale of excess emissions allowances.

Complete details of 2005 operating earnings compared to 2004 can be found on Schedule 5 of this release.
 

2006 operating earnings guidance

Dominion expects 2006 operating earnings in the range of $5.05 to $5.25 per share. This compares to the company’s previous operating earnings guidance of $5.00 to $5.25 per share provided on May 4, 2005. An expected benefit from higher commodity prices is the primary earnings driver that compares favorably to original guidance. Drivers expected to offset the benefit of higher prices include the negative effect of increased locational basis differentials, lower gas and oil production, increased business interruption insurance policy premiums and higher pension and benefits expenses.

In providing operating earnings guidance, there could be differences between expected GAAP and operating earnings, for matters such as, but not limited to, changes in accounting principles. At this time Dominion is aware of potential differences related to the adoption of SFAS No. 123R, Share-Based Payment, but is not at this time able to provide a corresponding GAAP equivalent for 2006 earnings per share guidance.

Complete details of the company’s 2006 guidance can be found in Dominion’s 2006 Earnings Guidance Kit at www.dom.com/investors/.
 

May 22 analyst meeting

Dominion will host an analyst meeting at The Fairmont Copley Plaza in Boston on Monday, May 22, where management plans to discuss preliminary 2007 earnings guidance, supporting drivers and assumptions, as well as the company’s outlook for 2008. Specifics of the 10:00 am EDT meeting will be published as details are finalized.
 

Conference call today

Dominion will host a conference call at 10:00 a.m. EST, Jan. 26, when management will discuss details of 2005 financial results, 2006 earnings guidance and other issues of interest to the financial community.

Domestic callers should dial 866-710-0179. The passcode for the conference call is “Dominion.” International callers should dial 334-323-9871. Participants should dial in 10 to 15 minutes prior to the scheduled start time. Members of the media also are invited to listen.

A live Web cast of the conference call will be available on the company’s investor information page at www.dom.com/investors/.

A replay of the conference call will be available beginning about 1 p.m. EST Jan. 26 and lasting until 11 p.m. EST Feb. 2. Domestic callers may access the recording by dialing 877-919-4059. International callers should dial 334-323-7226. The PIN for the replay is 30116847. Additionally, a replay of the Web cast will be available on the company’s investor information page by the end of the day Jan. 26.

Dominion is one of the nation's largest producers of energy, with a portfolio of about 28,100 megawatts of generation, about 6 trillion cubic feet equivalent of proved natural gas reserves and 7,900 miles of natural gas transmission pipeline. Dominion also operates the nation's largest underground natural gas storage system with more than 965 billion cubic feet of storage capacity and serves retail energy customers in nine states. For more information about Dominion, visit the company's Web site at www.dom.com.

This release contains forward-looking statements including our expectations for 2006 financial results 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 the timing of the closing dates of acquisitions, realization of and timing of the receipt of expected business interruption insurance proceeds, estimates of future market conditions, estimates of proved and unproved reserves, the company’s ability to meet its production forecasts, the behavior of other market participants, and the effects of hurricanes on our operations, oil and gas production and commodity prices. Other factors include, but are not limited to, weather conditions, governmental regulations, economic conditions in the company's service area, fluctuations in energy-related commodity prices, including changes in the cost of fuel for our regulated electric business, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates recoverable by Dominion, the transfer of control over electric transmission facilities to a regional transmission organization, 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.

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CONTACTS:    
Media: Mark Lazenby, 804-819-2042
Hunter Applewhite, 804-819-2043
 
     
Analysts: Joseph O'Hare, 804-819-2156
T. A. Hickman, 804-819-2129
Greg Snyder, 804-819-2383