A 30% decline in quarterly profits was within Dominion’s expectations and growth opportunities are within sight, according to the Richmond, VA-based company, which affirmed its 2010 operating earnings guidance range of $3.20-3.40/share.

The company expects to continue to advance its goal of becoming a more regulated company — and one less sensitive to commodity prices, CEO Thomas F. Farrell II said during a conference call with analysts Thursday.

“As we move forward, we continue to see strong growth opportunities,” Farrell said. “Specifically, the Dominion service territory peak demand will grow an additional 5,600 MW over the next 10 years as forecasted by PJM. We continue to focus on our regulated infrastructure growth plan for new generation and electric transmission to meet the expected customer demand for electricity over the next decade. In addition, we are focused on building the necessary pipelines, gathering and products extraction infrastructure required to meet the needs of the emerging Marcellus [Shale gas] supply.”

Reaching an agreement to sell its natural gas and oil exploration and production business to a subsidiary of Consol Energy for $3.475 billion in cash (see Daily GPI, March 16) will help move Dominion toward its goal, Farrell said. The deal is expected to cut Dominion’s commodity price sensitivity by more than 20%. Farrell said late last year the company planned to sell its Marcellus assets (see Daily GPI, Nov. 2, 2009). Dominion sold most of its E&P assets in several transactions in 2007, but it kept its leasehold in the Appalachian Basin (see Daily GPI, Aug. 14, 2007).

Earlier this year Dominion said it was moving forward with the sale of its Pittsburgh-based Dominion Peoples to Peoples Hope Gas Co. LLC (PH Gas), a company that was created by a San Francisco-based infrastructure investment firm to carry out the deal (see Daily GPI, Jan. 5).

Dominion saw its earnings slip in 1Q2010, posting unaudited earnings of $174 million (29 cents/share) a 30% decline compared with $248 million (42 cents) for the same period in 2009. Operating earnings, which Dominion uses as its primary performance measurement, amounted to $576 million (96 cents/share) compared with operating earnings of $574 million (98 cents) for the same period in 2009.

Lower merchant generation margins, lower gas and oil production as a result of the expiration of overriding royalty interests associated with former volumetric production payment agreements, and lower contributions from producer services all contributed to the lower earnings numbers. Higher contributions from the regulated electric utility and gas transmission businesses, including favorable weather in Dominion’s regulated electric service territory, partially offset those negatives, the company said.

In the last quarter of 2009 Dominion reported unaudited earnings of $165 million (28 cents/share), a 53% decline compared with $348 million (60 cents) for the same period in 2008.

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