Dominion Exploration & Production, Inc. has agreed to sell about 82.7 Bcf of gas production over the next four years under a fixed-term royalty interest sale to an affiliate of The Goldman Sachs Group for $413 million in cash.

Under the terms of the agreement, Dominion will deliver to multiple pooling points in various states Goldman’s share of production from 1,600 producing natural gas wells located in Pennsylvania, West Virginia, Texas, Oklahoma and offshore Louisiana. Dominion will retain control of the properties and rights to future development drilling, as well as production above the volumetric production payment (VPP) volumes, for the remaining life of the properties.

This transaction will allow Goldman to receive an initial rate in excess of 100 MMcf/d, declining to 37 MMcf/d at the end of the four-year period.

“This VPP transaction allows us to monetize a portion of our reserves while retaining our control and our rights to operate the properties and manage future development drilling,” said Dominion E&P President Duane Radtke. “It also provides a stable and predictable supply of natural gas to Goldman from our long-lived gas production.”

The VPP transaction will reduce Dominion’s natural gas reserves by 82.7 Bcf. Dominion will recognize revenue from the transaction as natural gas is produced and delivered at $5/Mcf. Dominion will continue to incur the operating costs on the properties related to the VPP.

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