Unocal's Spirit Energy 76 negotiates equity trade with Tom Brown, Inc., for Rocky Mountain assets
Sugar Land, Texas, March 10, 1998 -- Spirit Energy 76, Unocal Corporation's U.S. Lower 48 exploration and production unit, today said that it has signed a letter of intent to trade most of its Rocky Mountain oil and gas assets for 5.8 million shares of Tom Brown, Inc., and $5 million in cash.
Based on yesterday's closing price of $12.3125 per share of Tom Brown, Inc., the total value of the transaction would be $76 million. Unocal will hold 16.52 percent of the outstanding common stock of Tom Brown, Inc. based on the number of shares to be issued. The agreement also gives Unocal a seat on Tom Brown, Inc.'s board of directors and the option to increase its ownership up to 19.50 percent through open market purchases. The stock holding in Tom Brown is subject to certain restrictions, including a 24-month lock-up period.
"Tom Brown is a focused Rocky Mountain player whose substantial exploratory position combines well with Unocal's assets in the region. The trade will give both companies greater participation in the North American natural gas value chain," said John T. Donohue, president of Spirit Energy 76.
"This transaction provides the opportunity to realize good value for these assets for Unocal stockholders and participate in the growth potential of Tom Brown, Inc. At the same time, a spin-off of the Rocky Mountain properties will allow our management team to focus on core growth opportunities in the Gulf of Mexico, Gulf Coast and Permian Basin," Donohue said.
The transaction involves approximately 35 net wells that had 1998 net sales of 18 million cubic feet of natural gas per day, 290 barrels of oil per day and 92,000 gallons of gas plant liquids per day. In addition, the transaction includes proved reserves of approximately 89 billion cubic feet equivalent of natural gas and about 65,000 undeveloped acres located in Colorado, Utah, Wyoming and North Dakota.
Also included in the deal is the Lisbon Cryogenic Processing Plant located near Moab, Utah, that removes hydrogen sulfide, carbon dioxide and nitrogen from the natural gas produced in southeastern Utah. The plant markets residue gas, natural gas liquids and molten sulfur and is one of only seven plants in the United States that produces liquid helium. It is contemplated that all of Spirit Energy's local work force, totaling about 50 employees, will be retained by Tom Brown, Inc.
The company said the deal is expected to be slightly dilutive to Unocal's reserves and production in the short term but is expected to be accretive as Tom Brown Inc. applies its aggressive exploration and development activities to the Unocal assets.
The transaction is expected to close in the second quarter, with an effective date of January 1, 1999.
Tom Brown is engaged in the exploration for, and the acquisition, development, production and sale of, natural gas and crude oil in the U.S. The company reported 1998 net production of 115 million cubic feet equivalent per day of natural gas and net reserves totaling more than 406 billion cubic feet equivalent.
Spirit Energy 76, Unocal Corporation's U.S. Lower 48 exploration and production unit, has major operations onshore in Texas and Louisiana and on the Gulf of Mexico shelf, in addition to a significant presence in the Gulf of Mexico deepwater.
Unocal is one of the world's largest independent oil and gas exploration and production companies, with resource development, power plant and pipeline projects in Asia, the U.S. Gulf of Mexico region and Latin America.
Forward-looking statements regarding exploration activities, future production, drilling success and capital spending in this news release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially.
Updated: March 1999