<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 2, 1999
TOM BROWN, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
-----------------------------
(State or other
jurisdiction of incorporation)
0-3880 95-1949781
---------------------- ----------------------------------
(Commission file number) (IRS employer identification number)
508 W. Wall, Suite 500, Midland, Texas 79702
-------------------------------------------------
(Address of principal executive offices) (Zip code)
(915) 682-9715
-------------------------------------------------
(Registrant's telephone number including area code)
<PAGE> 2
The undersigned registrant, Tom Brown, Inc. (the Company), hereby
amends Item 7. "Financial Statements, Pro Forma Financial Information and
Exhibits" of its Current Report on Form 8-K, dated July 2, 1999.
The following contains certain "forward-looking statements" as defined
by the Private Securities Litigation Reform Act of 1995 including, without
limitation, estimates and expectations of the properties' production, reserves,
future development costs, operating costs, and general and administrative costs,
and energy prices and future tax rates, deductions and credits. Such
forward-looking statements involve estimates, assumptions and uncertainties. No
assurance can be given that the Company's expectations will be realized, and
actual results may differ materially from those expressed in the forward-looking
statements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
Attached hereto as Schedule A is the audited Statement of Revenues
and Direct Operating Expenses of the Gas and Oil Properties Acquired from Union
Oil Company of California (Unocal) by Tom Brown, Inc., for the year ended
December 31, 1998, and the related notes thereto, together with the Report of
Independent Public Accountants.
(b) Pro Forma Financial Information.
Attached hereto as Schedule B, for Tom Brown, Inc. and
Subsidiaries, are the Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1998 and for the six months ended
June 30, 1999, the Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of June 30, 1999, and the related notes thereto, adjusted to show the pro forma
effects of the Company's acquisition of certain gas and oil properties (the
Unocal Properties) from Unocal. The financial statements contained in Schedule B
incorporate the financial statements of the Company contained in its Annual
Report on Form 10-K for the year ended December 31, 1998 and in its Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Purchase and Sale Agreement, dated June 8, 1999,
between Union Oil Company of California and Tom
Brown, Inc. (previously filed with 8-K dated July
2, 1999).
10.2 Stock Ownership and Registration Rights Agreement,
dated as of June 29, 1999, between Union Oil
Company of California and Tom Brown, Inc.
(previously filed with 8-K dated July 2, 1999).
*23.1 Consent of Arthur Andersen LLP
</TABLE>
---------------
* Filed herewith.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: September 15, 1999
TOM BROWN, INC.
By: /s/ R. Kim Harris
---------------------------------------
R. Kim Harris, Controller
3
<PAGE> 4
Schedule A
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Tom Brown, Inc.
We have audited the accompanying Statement of Revenues and Direct
Operating Expenses for the Gas and Oil Properties Acquired from Union Oil
Company of California by Tom Brown, Inc. for the year ended December 31, 1998.
This Statement is the responsibility of the management of Tom Brown, Inc. Our
responsibility is to express an opinion on this Statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall Statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K/A of Tom Brown, Inc. and is not intended to be a complete
financial presentation of the properties described above.
In our opinion, the Statement referred to above presents fairly, in all
material respects, the Revenues and Direct Operating Expenses for the Gas and
Oil Properties Acquired from Union Oil Company of California by Tom Brown, Inc.
for the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
August 26, 1999
<PAGE> 5
A-1
Statement of Revenues and Direct Operating Expenses for the Gas and Oil
Properties Acquired from Union Oil Company of California by Tom Brown, Inc.
(in thousands)
<TABLE>
<CAPTION>
For the Six Months Ended For the Year Ended
June 30, December 31,
------------------------ ------------------
1999 1998 1998
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Revenues:
Gas and oil revenues $ 9,484 $ 9,088 $18,612
Marketing, gathering and
processing revenues 1,807 1,825 3,890
------- ------- -------
Total Revenues 11,291 10,913 22,502
Direct operating expenses 3,447 3,680 8,655
------- ------- -------
Revenues in excess of direct
operating expenses $ 7,844 $ 7,233 $13,847
======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 6
A-2
Notes to Statement of Revenues and Direct Operating Expenses for the Gas and Oil
Properties Acquired from Union Oil Company of California by Tom Brown, Inc.
(1) The Properties
On July 2, 1999, Tom Brown, Inc. (the Company) acquired most of the
Rocky Mountain gas and oil assets (the Acquired Properties) of Union
Oil Company of California (Unocal) for a purchase price of
approximately $63 million comprised of $5 million in cash and 5.8
million shares of the Company's common stock. The effective date of the
transaction was January 1, 1999. The Acquired Properties consist of
approximately 35 net wells, approximately 65,000 net undeveloped acres
and a natural gas processing plant located in the Rocky Mountains.
(2) Basis of Presentation
During the period presented, the Acquired Properties were not accounted
for or operated as a separate division by Unocal. Certain costs, such
as depreciation, depletion and amortization, general and administrative
expenses, and corporate income taxes were not allocated to individual
properties. Accordingly, full separate financial statements prepared in
accordance with generally accepted accounting principles do not exist
and are not practicable to obtain in these circumstances.
Revenues and direct operating expenses included in the accompanying
statement represent Unocal's net working interest in the Acquired
Properties and are presented on the accrual basis of accounting.
Natural gas revenues were recognized as Unocal's entitlement share of
natural gas that was produced based on Unocal's net working interests
in the Acquired Properties. Depreciation, depletion and amortization,
allocated general and administrative expenses and corporate income
taxes have been excluded.
The statement presented is not indicative of the future financial
condition or future results of operations of the Acquired Properties
due to changes in and the omission of various operating expenses.
(3) Commitments and Contingencies
Pursuant to the terms of the Purchase and Sale Agreement dated June 8,
1999 (the Agreement), any claims, litigation or disputes pending as of
the effective date (January 1, 1999) or any matters arising in
connection with ownership of the Acquired Properties prior to the
effective date are retained by Unocal. Notwithstanding this
indemnification, neither the Company nor Unocal are aware of any legal,
environmental or other commitments or contingencies that would be
materially important in relation to the revenues and direct operating
expenses of the Acquired Properties.
(4) Related Party Transactions
Affiliates of Unocal acquired substantially all of the natural gas
production from the Acquired Properties during the period from July
1998 through December 1998. Such sales, attributable to the net revenue
interest of the Acquired Properties, amounted to approximately $5.9
million.
(5) Capital Expenditures (unaudited)
Direct operating expenses do not include exploration and development
expenditures related to the Acquired Properties which amount to
approximately $6.4 million for the year ended December 31, 1998.
<PAGE> 7
A-3
SUPPLEMENTAL GAS AND OIL INFORMATION
(Unaudited)
GAS AND OIL RESERVE INFORMATION
Proved gas and oil reserve quantities for the Acquired Properties are
based on estimates prepared by the Company's engineers, and from information
provided by Unocal, in accordance with guidelines established by the Securities
and Exchange Commission (SEC).
There are numerous uncertainties inherent in estimating quantities of
proved reserves and projecting future rates of production and timing of
development expenditures. The following reserve data represents estimates only
and should not be construed as being exact.
Reserve Information
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
------------------------------------
Crude Oil,
Condensate and
Gas Natural Gas Liquids
Mmcf Mbbl
------------ ---------------------
<S> <C> <C>
Proved developed and undeveloped reserves
Balance, beginning of year 58,290 7,825
Revisions of previous estimates (364) 130
Purchase of minerals in place 4,963 21
Extensions, discoveries, and improved recovery 1,346 14
Production (9,776) (863)
------ -----
Balance, end of year 54,459 7,127
====== =====
Proved developed reserves
Balance, beginning of year 50,936 7,622
====== =====
Balance, end of year 47,589 6,942
====== =====
</TABLE>
<PAGE> 8
A-4
SUPPLEMENTAL GAS AND OIL INFORMATION
(Unaudited)
FUTURE NET CASH FLOWS
Future cash inflows for the Acquired Properties are based on year end
gas and oil prices except in those instances where future natural gas or oil
sales are covered by physical or derivative contract terms providing for higher
or lower amounts. Operating costs, production and ad valorem taxes and future
development costs are based on current costs with no escalation.
The following table sets forth unaudited information concerning future
net cash flows for gas and oil reserves, net of income tax expense. Income tax
expense has been computed using expected future tax rates and giving effect to
tax deductions and credits available, under current laws, and which relate to
gas and oil producing activities. This information does not purport to present
the fair market value of the Acquired Properties' gas and oil assets, but does
present a standardized disclosure concerning possible future net cash flows that
would result under the assumptions used.
Standardized Measure of Discounted Future Net Cash Flows
<TABLE>
<CAPTION>
As of
December 31, 1998
-----------------
(in thousands)
<S> <C>
Future:
Cash inflows $168,308
Production costs (92,953)
Development costs (10,898)
Income tax expense (10,387)
--------
Net cash flows 54,070
Discount for estimated timing of future cash flows (15,643)
--------
Total $ 38,427
========
</TABLE>
Changes in the Standardized Measure of Discounted Future Net Cash Flows
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1998
------------------
(in thousands)
<S> <C>
Beginning of year $ 59,096
Gas and oil sales, net of production costs (13,738)
Net change in anticipated prices and production costs (28,116)
Extensions, discoveries and improved recovery, less related costs 568
Changes in future development costs (1,715)
Previously estimated development costs incurred 1,387
Net change in income taxes 14,980
Purchase of minerals in place 2,021
Accretion of discount 8,187
Revision of quantity estimates 235
Changes in production rates and other (4,478)
--------
End of year $ 38,427
========
</TABLE>
<PAGE> 9
Schedule B
TOM BROWN, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated
Financial Statements
The following unaudited pro forma condensed consolidated financial
statements and related notes are presented to show the pro forma effects of the
acquisition of gas and oil properties (the Acquired Properties) from Union Oil
Company of California (Unocal). The Unocal transaction will be reported using
the purchase method of accounting.
The pro forma condensed consolidated statements of operations are
presented to show income from continuing operations as if the Unocal transaction
occurred effective January 1, 1998. The pro forma condensed consolidated balance
sheet is based on the assumption that the Unocal transaction occurred effective
June 30, 1999.
Pro forma data are based on assumptions and include adjustments as
explained in the notes to the unaudited pro forma condensed consolidated
financial statements. The pro forma data are not necessarily indicative of the
financial results that would have been attained had the Unocal transaction
occurred on the dates referenced above, and should not be viewed as indicative
of operations in future periods. The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the notes thereto, Tom
Brown, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998
and its Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and
the Statement of Revenues and Direct Operating Expenses for the Gas and Oil
Properties Acquired From Union Oil Company of California by Tom Brown, Inc.
included herein as Schedule A.
<PAGE> 10
B-1
TOM BROWN, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Unocal
Tom Brown, Inc. Properties Adjustments
Historical Historical Pro Forma Pro Forma
--------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Gas and oil sales $ 78,072 $ 18,612 $ 96,684
Marketing, gathering and processing 47,981 3,890 51,871
Drilling 4,561 4,561
Interest income and other 716 716
-------- -------- --------- --------
Total revenues 131,330 22,502 0 153,832
-------- -------- --------- --------
Costs and expenses:
Gas and oil production 14,522 8,655 23,177
Taxes on gas and oil production 7,512 7,512
Cost of gas sold 48,442 48,442
Drilling operations 4,367 4,367
Exploration costs 17,274 17,274
Impairments of leasehold costs 3,215 3,215
General and administrative 7,139 200 (a) 7,339
Depreciation, depletion, and amortization 44,575 8,662 (b) 53,237
Impairment of gas and oil properties 51,344 51,344
Interest expense and other 4,301 4,301
-------- -------- --------- --------
Total costs and expenses 202,691 8,655 8,862 220,208
-------- -------- --------- --------
Income (loss) before income taxes (71,361) 13,847 (8,862) (66,376)
Income tax benefit (provision) 27,878 (1,745)(c) 26,133
-------- -------- --------- --------
Net income (loss) (43,483) 13,847 (10,607) (40,243)
Preferred stock dividend (1,750) (1,750)
-------- -------- --------- --------
Net income (loss) attributable to common stock $(45,233) $ 13,847 $ (10,607) $(41,993)
======== ======== ========= ========
Weighted average number of common Shares outstanding:
Basic 29,251 5,800 (d) 35,051
======== ========= ========
Diluted 29,251 5,800 (d) 35,051
======== ========= ========
Net income (loss) per common share:
Basic $ (1.55) $ (1.20)
======== ========
Diluted $ (1.55) $ (1.20)
======== ========
</TABLE>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
<PAGE> 11
B-2
TOM BROWN, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Six Months Ended June 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Unocal
Tom Brown, Inc. Properties Pro Forma
Historical Historical Adjustments Pro Forma
--------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Gas and oil sales $ 38,417 $ 9,484 $ $ 47,901
Marketing, gathering and processing 26,178 1,807 27,985
Drilling 2,152 2,152
Interest income and other 1,164 1,164
-------- ------- -------- --------
Total revenues 67,911 11,291 0 79,202
-------- ------- -------- --------
Costs and expenses:
Gas and oil production 7,423 3,447 10,870
Taxes on gas and oil production 3,989 3,989
Cost of gas sold 25,767 25,767
Drilling operations 1,900 1,900
Exploration costs 3,246 3,246
Impairments of leasehold costs 1,800 1,800
General and administrative 3,908 100 (a) 4,008
Depreciation, depletion, and amortization 21,018 3,768 (b) 24,786
Interest expense and other 2,855 2,855
-------- ------- -------- --------
Total costs and expenses 71,906 3,447 3,868 79,221
-------- ------- -------- --------
Income (loss) before income taxes (3,995) 7,844 (3,868) (19)
Income tax benefit (provision) 903 (1,392)(c) (489)
-------- ------- -------- --------
Net income (loss) (3,092) 7,844 (5,260) (508)
Preferred stock dividend (875) (875)
-------- ------- -------- --------
Net income (loss) attributable to common stock $ (3,967) $ 7,844 $ (5,260) $ (1,383)
======== ======= ======== ========
Weighted average number of common shares outstanding:
Basic 29,267 5,800 (d) 35,067
======== ======== ========
Diluted 29,267 5,800 (d) 35,067
======== ======== ========
Net income (loss) per common share:
Basic $ (0.14) $ (0.04)
======== ========
Diluted $ (0.14) $ (0.04)
======== ========
</TABLE>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
<PAGE> 12
B-3
TOM BROWN, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Tom Brown, Inc. Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ----------
<S> <C> <C> <C>
ASSETS
Current assets 41,492 2,657(1) 44,149
Net property and equipment 363,938 60,857(1) 427,270
2,475(2)
Other assets 36,206 (2,420)(2) 33,786
------------ ------------ ----------
441,636 63,569 505,205
============ ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 36,221 55(2) 36,276
Bank debt 74,000 74,000
Other noncurrent liabilities 2,670 2,670
------------ ------------ ----------
Total liabilities 112,891 55 112,946
Stockholders' equity 328,745 63,514(1) 392,259
------------ ------------ ----------
441,636 63,569 505,205
============ ============ ==========
</TABLE>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of these statements.
<PAGE> 13
B-4
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
BASIS OF PRESENTATION
The unaudited pro forma statement of operations for the year ended
December 31, 1998, is based on the audited financial statements of the Company
for the year ended December 31, 1998, the audited statement of revenues and
direct operating expenses for the Unocal Properties for the year ended December
31, 1998, and the adjustments and assumptions described below.
The unaudited pro forma statement of operations for the six months
ended June 30, 1999, and the unaudited pro forma balance sheet as of June 30,
1999, are based on the unaudited financial statements of the Company as of and
for the six months ended June 30, 1999, the unaudited statement of revenues and
direct operating expenses for the Unocal properties for the six months ended
June 30, 1999, and the adjustments and assumptions described below.
PRO FORMA ADJUSTMENTS
THE UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS REFLECT THE FOLLOWING
ADJUSTMENTS:
a. Record estimated increase is general and administrative
expense as a result of the purchase of the Unocal Properties.
b. Record incremental depreciation, depletion and amortization
expense using the units-of-production method for gas and oil
properties and the straight-line method for the gas
processing plant.
c. Record a pro forma income tax provision, assuming a 35 percent
rate, based on the pro forma change in pre-tax income.
d. Record the issuance of 5,800,000 shares of the Company's
common stock to Unocal.
THE UNAUDITED PRO FORMA BALANCE SHEET REFLECTS THE FOLLOWING
ADJUSTMENTS:
1. The issuance of 5,800,000 shares of the Company's common stock
to Unocal valued at $10.95 per share plus $5,000,000. This
cash payment was more than offset by the approximate
$7,657,000 that the Company received from Unocal for six
months of operating cash flow as the transaction was effective
as of January 1, 1999. The preliminary allocation of the net
purchase price reflects an allocation of $2.9 million to
unproved gas and oil properties, $38.9 million to proved gas
and oil properties, $20.7 million to a natural gas processing
plant and $.8 million to a pipeline. These purchase price
allocations are subject to further review and audit.
2. Record transaction costs, primarily investment banking fees
relating to the Unocal transaction.
<PAGE> 14
B-5
TOM BROWN, INC. AND SUBSIDIARIES
Pro Forma Supplemental Gas and Oil Disclosure
(Unaudited)
The following table sets forth certain unaudited pro forma information
concerning the Company's proved gas and oil reserves at December 31, 1998,
giving effect to the Unocal transaction as if it had occurred on January 1,
1998. There are numerous uncertainties inherent in estimating the quantities of
proved reserves and projecting future rates of production and timing of
development expenditures. The following reserve data represents estimates only
and should not be construed as being exact.
PROVED OIL AND NATURAL GAS RESERVES
<TABLE>
<CAPTION>
NATURAL GAS
-------------------------------------------------
UNOCAL
TOM BROWN, INC. PROPERTIES PRO FORMA
--------------- ------------ ------------
(Mmcf)
<S> <C> <C> <C>
Estimated reserves at December 31, 1997 347,104 58,290 405,394
Revisions of previous estimates (7,021) (364) (7,385)
Purchase of minerals in place -- 4,963 4,963
Extension, discoveries and improved recovery 67,921 1,346 69,267
Sales of minerals in place (95) -- (95)
Production (35,887) (9,776) (45,663)
------------ ------------ ------------
Estimated reserves at December 31, 1998 372,022 54,459 426,481
============ ============ ============
Proved developed reserves:
December 31, 1997 258,756 50,936 309,692
December 31, 1998 263,747 47,589 311,336
</TABLE>
<TABLE>
<CAPTION>
OIL, CONDENSATE AND NATURAL GAS LIQUIDS
-------------------------------------------------
UNOCAL
TOM BROWN, INC. PROPERTIES PRO FORMA
--------------- ------------ ------------
(Mbls)
<S> <C> <C> <C>
Estimated reserves at December 31, 1997 7,227 7,825 15,052
Revisions of previous estimates (1,211) 130 (1,081)
Purchase of minerals in place -- 21 21
Extension, discoveries and improved recovery 711 14 725
Sales of minerals in place (18) -- (18)
Production (1,027) (863) (1,890)
------------ ------------ ------------
Estimated reserves at December 31, 1998 5,682 7,127 12,809
============ ============ ============
Proved developed reserves:
December 31, 1997 5,749 7,622 13,371
December 31, 1998 4,029 6,942 10,971
</TABLE>
<PAGE> 15
B-6
TOM BROWN, INC. AND SUBSIDIARIES
Pro Forma Supplemental Gas and Oil Disclosures - (continued)
(Unaudited)
FUTURE NET CASH FLOWS
The following table sets forth unaudited pro forma information
concerning the discounted future net cash flows from proved gas and oil reserves
of the Company as of December 31, 1998, net of income tax expense, and giving
effect to the Unocal acquisition as if it had occurred on January 1, 1998.
Income tax expense has been computed using assumptions relating to the future
tax rates and the permanent differences and credits under the tax laws relating
to gas and oil activities at December 31, 1998. Cash flows relating to the
Unocal Properties are based on the Company's evaluation of reserves and on
information provided by Unocal. Future income tax expense on the Unocal
Properties is based on the Company's estimated purchase price allocation. The
information should be viewed only as a form of standardized disclosure
concerning possible future cash flows that would result under the assumptions
used, but should not be viewed as indicative of fair market value. Reference is
made to the Company's financial statements for the fiscal year ended December
31, 1998, and the Statement of Revenues and Direct Operating Expenses for the
Gas and Oil Properties Acquired from Union Oil Company of California by Tom
Brown, Inc. included herein for a discussion of the assumptions used in
preparing the information presented.
Standardized Measure of Discounted Future Net Cash Flows
<TABLE>
<CAPTION>
UNOCAL
TOM BROWN, INC. PROPERTIES PRO FORMA
--------------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
Cash inflows $ 764,974 $ 168,308 $ 933,282
Production and development costs (292,003) (103,851) (395,854)
Income tax expense (71,960) (10,387) (82,347)
------------ ------------ ------------
Net cash flows 401,011 54,070 455,081
Annual discount at 10% (179,294) (15,643) (194,937)
------------ ------------ ------------
Standardized measure of discounted
future cash flows (1) $ 221,717 $ 38,427 $ 260,144
============ ============ ============
</TABLE>
(1) Pro forma future net cash flows before income tax expense, discounted
at 10% per annum, totaled approximately $300.2 million.
<PAGE> 16
B-7
TOM BROWN, INC. AND SUBSIDIARIES
Pro Forma Supplemental Gas and Oil Disclosures - (continued)
(Unaudited)
Changes in the standardized measure of discounted future net cash flows:
<TABLE>
<CAPTION>
UNOCAL
TOM BROWN, INC. PROPERTIES PRO FORMA
--------------- ------------ ------------
(in thousands)
<S> <C> <C> <C>
Beginning of year $ 265,174 $ 59,096 $ 324,270
Gas and oil sales, net of production costs (56,032) (13,738) (69,770)
Net change in anticipated prices and
production costs (36,581) (28,116) (64,697)
Extension, discoveries and improved
recovery, net of related costs 33,651 568 34,219
Change in future development costs (2,652) (1,715) (4,367)
Previously estimated development costs
incurred 8,690 1,387 10,077
Net change in income taxes 3,336 14,980 18,316
Purchases of minerals in place -- 2,021 2,021
Sales of minerals in place (151) -- (151)
Accretion of discount 30,081 8,187 38,268
Revisions of quantity estimates (10,716) 235 (10,481)
Change in production rates and other (13,083) (4,478) (17,561)
------------ ------------ ------------
End of year $ 221,717 $ 38,427 $ 260,144
============ ============ ============
</TABLE>
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Purchase and Sale Agreement, dated June 8, 1999,
between Union Oil Company of California and Tom
Brown, Inc. (previously filed with 8-K dated July
2, 1999).
10.2 Stock Ownership and Registration Rights Agreement,
dated as of June 29, 1999, between Union Oil
Company of California and Tom Brown, Inc.
(previously filed with 8-K dated July 2, 1999).
*23.1 Consent of Arthur Andersen LLP
</TABLE>
---------------
* Filed herewith
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated August 26, 1999, on the Statement of Revenues and
Direct Operating Expenses for the Gas and Oil Properties Acquired from Union Oil
Company of California by Tom Brown, Inc., included in this Form 8-K/A, into Tom
Brown, Inc.'s previously filed Registration Statements on Form S-8 Nos.
33-42991, 33-44225, 33-60191, 33-60842, 33-13157, 33-30069, 33-42011, 333-56577
and 333-69353.
ARTHUR ANDERSEN LLP
Houston, Texas
September 13, 1999
