Dominion Sells Assets to Consol for $3.4B
RICHMOND, Va. (
) --
Dominion
(D) - Get Report
is selling its natural gas and oil exploration and production business to a newly-formed subsidiary of
Consol Energy
(CNX) - Get Report
for more than $3.4 billion.
The move away from exploration and production (E&P) was made by Dominion as a way to raise capital without having to issue new shares, and to focus the company on its regulated business model.
Dominion's regulated businesses are now expected to contribute about 70% of consolidated operating earnings in 2011, up from less than 45% in 2006. "This transaction is accretive to earnings per share, reduces our commodity sensitivity by over 20%, and eliminates our need to issue new shares to fund our infrastructure growth program through 2011," said Chairman, President and CEO Thomas Farrell.
Dominion's estimated after-tax proceeds from the sale will be $2.2 billion to $2.4 billion, which the company noted should enable it to offset its equity needs for 2010 and 2011, fund the revenue credits to Dominion Virginia Power customers included in a rate case settlement agreement, and allow for the repurchase of common stock.
Dominion expects the sale to enhance the visibility of its core natural gas pipeline and storage businesses and reduce spending by approximately $200 million per year.
Consol said the deal will increase its total proved gas reserves by more than 50%, and doubles its potential resource base for gas to about 41 trillion cubic feet.
Consol plans to raise about $4 billion in equity and debt to fund the transaction, expected to close by April 30.
Shares of Dominion were up more than 2% in the pre-market. Shares of Consol were down more than 6% on the acquisition news.
Dominion reaffirmed its 2010 operating earnings guidance of $3.20 to $3.40 per share.
-- Reported by Eric Rosenbaum in New York.
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