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EX-99.1 2001 FINANCIAL MODEL ESTIMATES
EXHIBIT 99.1
2001 Financial Model Estimates
This document is intended to provide information and estimates to
permit preparation of models of Tom Brown, Inc. ("Tom Brown" or the "Company")
for 2001. This information constitutes the Company's current estimates based on
a number of assumptions. The estimates are based on the Company's historical
operating performance and trends, estimates of oil and gas reserves at December
31, 2000, the Company's planned capital and operating budget for 2001 and
current expectations for oil and gas production, gas trading activities, hedged
positions, tax rates and expenses. The following estimates reflect our view of
continuing operations only. The 2001 estimates were prepared assuming that
demand, curtailment and general market conditions for oil and gas will be
substantially similar to those experienced during 2000. We do not account for
the potential impact of acquisitions or divestitures except to the extent the
transactions are complete or near enough completion that it is more likely than
not to be completed. We caution you that the estimates set forth below are given
as of the date hereof only and are based on currently available information. We
are not assuming any obligation to update any information contained herein.
All of the estimates and assumptions included in this document are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. We believe that the forward-looking statements are based
on reasonable assumptions but no assurances can be given that our expectations
will be met. Actual results may differ materially due to a number of risks and
uncertainties, including but not limited to:
o COMMODITY PRICE CHANGES, INCLUDING LOCAL AND REGIONAL
VARIATIONS;
o RISKS AND PROBLEMS INCIDENT TO THE DRILLING AND OPERATION OF
OIL AND GAS WELLS, SUCH AS DRILLING DIFFICULTIES OR DELAYS,
WELL EXPLOSIONS OR OTHER DISASTERS, ENVIRONMENTAL RISKS, AND
LACK OF CONTROL OVER TIMING OF EXPENDITURES ON THIRD-PARTY
OPERATED PROPERTIES;
o CHANGES IN PRODUCTION AND DEVELOPMENT COSTS;
o CHANGES IN DRILLING SUCCESS RATES;
o CHANGES IN LAWS AND OTHER REGULATORY ACTIONS;
o CHANGES IN EXCHANGE RATES;
o RISKS INCIDENT TO HEDGING ACTIVITIES;
o CHANGES IN INTEREST RATES AND CAPITAL MARKET CONDITIONS;
o CHANGES IN GENERAL ECONOMIC CONDITIONS;
o COMPETITION FROM OTHERS IN THE ENERGY INDUSTRY;
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o THE UNCERTAINTY INHERENT IN ESTIMATES OF OIL AND GAS RESERVES
AND PRODUCTION RATES;
o UNUSUAL OR INFREQUENT ITEMS THAT ARE NOT SUSCEPTIBLE TO
ESTIMATES;
For additional information concerning important factors that may cause
actual results to differ materially from those estimated, see the Company's Form
10-K for the year ended December 31, 2000. Unless otherwise noted, all of the
following dollar amounts are expressed in U.S. dollars.
While oil and gas prices have been at or near multi-year highs in 2000
and 2001, there can be no assurance that current price levels will continue. Oil
and gas prices have fluctuated significantly in recent years in response to
numerous economic, political and environmental factors and we expect that
commodity prices will continue to fluctuate significantly in the future. Changes
in commodity prices could significantly affect our expected operating results.
In addition to directly affecting revenues, price changes can affect expected
production because production estimates necessarily assume that oil and gas can
profitably be produced at the assumed pricing levels.
Production estimates
Second Quarter 2001 Annual 2001
------------------------------- -------------------------------
U.S. Canada Total U.S. Canada Total
------- ------ ------- ------- ------ -------
Natural gas (Mcfpd) 144,000 21,000 165,000 150,300 22,200 172,500
Natural gas liquids (Bonglpd) 2,960 440 3,400 2,800 450 3,250
Oil (Bopd) 1,950 450 2,400 2,050 420 2,470
------- ------ ------- ------- ------ -------
Total equivalent (Mcfepd) 173,460 26,300 199,760 179,400 27,420 206,820
Total production (Mmcfe) 15,800 2,400 18,200 65,500 10,000 75,500
The above production estimates, for the periods indicated, reflect the
Company's current projections related to timing of online dates for new wells
from development drilling, in-service dates for new gathering and processing
facilities and incorporates the sale of non-core oil and gas properties which
have been completed or are near completion. The estimate of 150,300 Mcfpd for
total 2001 U.S. gas production has been updated, since our last guidance issued
in January 2001, to reflect the impact of 3.6 Mcfgpd for sales of non-core
properties. Pro forma for property sales the 2001 U.S. natural gas production
estimates are approximately ten percent higher than 2000. On an equivalent basis
the above guidance of 75.5 Bcfe is unchanged from our previous guidance of 77.1
Bcfe, provided in January 2001, after taking into effect the sale of non-core
properties, which reduced production by 1.6 Bcfe for the remainder of 2001. The
estimated production from Canada is primarily from the Stellarton Energy
acquisition closed in mid-January 2001. The Company's combined total oil and gas
production of 75.5 Bcfe is approximately 21% higher than 2000.
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Gas price hedges
The Company has not entered into any additional commodity price hedges
since our previous guidance filed in Form 8-K on January 9, 2001 or again
disclosed in our most recent Annual Report on Form 10-K, filed March 13, 2001.
Depending on various circumstances, the Company may periodically enter
into additional financial derivatives that would hedge expected crude oil and
natural gas production.
Marketing, gathering, processing margin
The Company's marketing group earns a margin from the sale of Tom
Brown's working interest gas production and the purchase and resale of third
party gas. The Company is currently in the process of selling certain
non-strategic gathering and processing assets. Including the effect of the
gathering and processing property asset sales the Company expects the marketing,
gathering and processing margin to average $2.0 to $2.5 million per quarter for
the remainder of 2001.
Oil and gas production costs
The Company's consolidated lease operating expense is expected to
average $0.43-$0.45 per Mcfe for the remainder of 2001. Production taxes are
estimated to average 9.0-10.0 percent of wellhead oil and gas sales revenue.
Exploration costs/Impairment of leasehold cost
Exploration expense can fluctuate significantly quarter to quarter,
depending on the timing of exploratory expenditures and the recognition of wells
as either productive or dry holes. The forecasting of these expenditures are
inherently inaccurate. Based upon planned activity levels we estimate
exploration cost in the range of $35-40 million for the remaining three quarters
of 2001. The Company is also budgeting $1.2 million per quarter for amortization
of impairment of leasehold cost.
Depreciation, depletion and amortization
Depreciation, depletion and amortization (DD&A) rate for the Company's
consolidated operations is expected to be $0.90-$0.95 per Mcfe for the remainder
of 2001.
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General and administrative expense
The Company expects its consolidated general and administrative (G&A)
expense per Mcfe to be in the range of $0.22-$0.24.
Interest expense
The Company's borrowings outstanding at the end of the first quarter
2001 totaled approximately $113 million. Based upon current LIBOR rates the
Company is assuming effective interest cost will average between 7.0%-8.0% for
the remainder of 2001.
Provision for income taxes
Provision for income taxes of pre-tax earnings is expected to be
approximately 38%. Approximately one-third of the total tax provision is
projected to represent taxes currently payable.
2001 Capital Budget
The 2001 capital expenditure is expected to be in the range of
$185-$205 million for exploration and development spending. The expected 2001
capital budget represents a 65-85% increase over 2000 (for the period excluding
acquisitions).
The spending will be funded out of the Company's discretionary cash
flow based on anticipated commodity prices and is subject to change if market
conditions shift or new opportunities are identified.