EX-99.1 2002 FINANCIAL MODEL ESTIMATES
EXHIBIT 99.1
2002 Financial Model Estimates
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This document is intended to provide information and estimates to
permit preparation of models of Tom Brown, Inc. ("Tom Brown" or the "Company")
for 2002. 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, 2001, the Company's planned capital and operating budget for 2002 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 2002 estimates were prepared assuming that
demand, curtailment and general market conditions for oil and gas will be
substantially similar to those experienced during 2001. 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;
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.
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 effecting 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
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The following 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.
Tom Brown expects 2002 production to increase 4% to 6% from 2001. The
following table summarizes the mid-point values of the estimated production
levels for the first quarter and full-year 2002.
<Table>
<Caption>
FIRST QUARTER 2002 FULL YEAR 2002
-------------------------------- --------------------------------
U.S. CANADA TOTAL U.S. CANADA TOTAL
------- ------ ------- ------- ------ -------
Natural gas (Mcfpd) 170,000 17,000 187,000 171,000 17,500 188,500
Natural gas liquids (Bonglpd) 3,200 425 3,625 3,200 425 3,625
Oil (Bopd) 1,850 150 2,000 1,400 175 1,575
------- ------ ------- ------- ------ -------
Total equivalent (Mcfepd) 200,300 20,450 220,750 198,600 21,100 219,700
Total production (Mmcfe) 18,000 1,800 19,800 72,500 7,700 80,200
</Table>
Gas price hedges
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The Company currently has no commodity price hedges in place.
Depending on various circumstances, the Company may enter into
financial derivatives that would hedge expected crude oil and natural gas
production.
Marketing, trading, gathering and processing margin
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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. In addition, through a wholly-owned subsidiary the Company owns and
operates certain mid-stream gathering and processing assets. The Company expects
the marketing, gathering and processing margin to average $2.5 to $3.0 million
per quarter for 2002.
Oil and gas production costs
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The Company's consolidated lease operating expense is expected to
average $0.41-$0.43 per Mcfe for 2002. Production taxes are estimated to average
8.0-9.0 percent of wellhead oil and gas sales revenue.
Exploration costs/Impairment of leasehold cost
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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 $28-32 million for 2002. The Company is also
budgeting $1.4 million per quarter for amortization of impairment of leasehold
cost.
Depreciation, depletion and amortization
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Depreciation, depletion and amortization (DD&A) rate for the Company's
consolidated operations is expected to be $1.05-$1.07 per Mcfe for 2002.
General and administrative expense
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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
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The Company's borrowings outstanding at the end of the fourth quarter
2001 totaled approximately $121 million. Based upon current LIBOR rates the
Company is assuming effective interest cost will average between 5.5%-6.0% for
2002. Assuming borrowing levels remain consistent with the balances outstanding
at year-end 2001, interest expense is expected to average $0.08-$0.09/Mcfe in
2002.
Provision for income taxes
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Provision for income taxes of pre-tax earnings is expected to be
approximately 37%. Approximately one-quarter of the total tax provision is
projected to represent taxes currently payable.
2001 Capital Budget
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The 2002 capital expenditures are expected to be in the range of
$115-$125 million. This is a decrease of approximately 50% from the 2001 oil and
gas exploration and development spending of $242 million.
Tom Brown expects the capital expenditures will be funded out of
discretionary cash flow and sale of non-core assets based on anticipated
commodity prices and is subject to change if market conditions shift or new
opportunities are identified.