Richmond, VA-based Dominion announced strong third quarter earnings bolstered by higher returns in its pipeline and E&P units, and saying it was on track to continue the trend into the fourth quarter and come close to its stated earnings guidance of $4.90 to $4.95.

Because of an anticipated dilution from a stock offering, however, the company said it expects year-end earnings to come in between $4.80 and $4.90 with a $2.58 per share dividend. Next year is not expected to quite reach those heights with 2003 guidance currently put between $4.60 and $4.80 per share.

The company, which had indicated previously a stock offering was in the works, announced Monday it would offer 26.5 million shares of its common stock which, at Monday’s closing price of $39.35 on the New York Stock Exchange, would amount to approximately $1 billion in gross proceeds to Dominion. Proceeds from the offering will be used for general corporate purposes, principally repayment of debt. The joint book-running managers for the offering are Merrill Lynch & Co. and Morgan Stanley.

Dominion reported unaudited consolidated operating earnings for the third quarter of $430 million ($1.54 per share), compared with operating earnings of $344 million ($1.37 per share) for the same period in 2001. Third quarter 2002 and 2001 reported earnings were the same as operating earnings.

“Our third-quarter results were very strong, especially under these very difficult market conditions. If not for the anticipated dilution from the stock offering, we would be in solid position to meet our previously stated earnings guidance of $4.90 to $4.95 per share for the full year,” said Dominion Chairman Thos. E. Capps.

The company has hedged about 90% of 2002 oil and gas production, 75% of 2003 production, and 50% of 2004 production. The company has hedged about 90% of its power generation portfolio for 2002 and 2003 and about 85% for 2004.

Capps said: “With our earnings largely derived from tariff-based or hedged revenue sources, our earnings and cash flow are very stable. Accordingly, we are once again reaffirming our $2.58 per share dividend. We expect to earn $4.80 to $4.90 per share this year and $4.60 to $4.80 per share in 2003. After 2003, we expect 5 to 7% average annual earnings growth.”

Dominion Energy contributed $273 million (98 cents per share) to third-quarter 2002 earnings compared to $288 million ($1.15 per share) in the third quarter of 2001. The decrease resulted from a lower contribution from Dominion Energy Clearinghouse, additional nuclear outage costs and share dilution, which were partially offset by customer growth, warmer weather in the electric franchise area and the recognition of a state tax benefit.

Dominion Delivery earned $111 million (40 cents per share) in its third quarter compared to $68 million (27 cents per share) for the same period in 2001. The increase in Dominion Delivery’s third-quarter earnings is primarily attributable to higher than normal temperatures, customer growth, reduced expenses and the recognition of a state tax benefit partially offset by share dilution and other factors.

Dominion Exploration & Production (E&P) contributed $90 million (32 cents per share) to third-quarter 2002 earnings, up from $78 million (31 cents per share) in the third quarter of 2001. The change in Dominion E&P’s third-quarter earnings is primarily attributable to higher production, which was offset by lower average realized prices, share dilution and other factors.

The corporate segment, including Dominion Capital, posted net expenses of $44 million (16 cents per share) for the quarter, compared to net expenses of $90 million (36 cents per share) in the third quarter of 2001. The decrease in the corporate segment’s net expenses is attributable to the elimination of goodwill amortization, the recognition of a state tax benefit and improved earnings of Dominion Capital.

Dominion will host a conference call for investors Tuesday at 8 a.m. ET. Those who wish to participate in the conference call should dial 877-241-5946. International investors should call 706-643-0540. Participants should dial in 5 to 10 minutes prior to the scheduled start time.

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