Dominion Resources Inc.’s (D) first quarter 2010 EPS was 96 cents, within the guidance range of 90 cents to $1.00 issued by it and above the Zacks Consensus Estimate of 94 cents. However, the quarterly EPS declined slightly from last year’s 98 cents.
The earnings drag during the quarter is attributed to 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.
Segment wise, operating earnings in the first quarter at Dominion Virginia Power, Dominion Energy and Dominion Generation declined 1%, 2% and 44%, respectively, compared to the corresponding period last year.
Net operating revenues for the quarter decreased 9.1% to $4.2 billion.
During the quarter, two significant events occurred that will allow Dominion to continue moving toward its goal of becoming a more regulated company and one less sensitive to commodity prices.
First, the Virginia State Corporation Commission has approved the comprehensive settlement agreement for the 2009 Virginia Jurisdictional Base Rate case that was agreed to by all parties. Second, the company reached an agreement to sell the remainder of its natural gas and oil exploration and production business to a subsidiary of CONSOL Energy.
Dominion continues to focus on its regulated infrastructure growth plan for new generation and electric transmission to meet the expected customer demand for electricity over the next decade. Dominion service territory’s peak demand is expected to grow an additional 5,600 megawatts over the next 10 years.
Dominion is also progressing on its electric infrastructure expansion plans with nearly 1,200 megawatts of generation under construction through its Virginia City Hybrid Energy Center and Bear Garden projects, plus two significant 500 kV electric transmission lines.
Given the earnings outperformance and limited sensitivity to commodity price changes, Dominion has reaffirmed its 2010 EPS guidance in the range of $3.20 to $3.40. Dominion expects second quarter 2010 operating earnings in the range of 55 cents per share to 65 cents per share, compared to second quarter 2009 operating earnings of 68 cents per share.
Furthermore, it plans to present more details on its 2010 operating earnings guidance as well as other long-term growth drivers at the Investor and Analyst Meeting to be held on May 7, 2010.
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