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Tom Brown looking to unload drilling company
Ray Tyson Petroleum News Houston Correspondent
Denver-based independent Tom Brown, which saw its 2003 fourth-quarter profit jump nearly 250 percent versus the same period a year earlier, said it wants to get out of the drilling business and focus entirely on exploration and production.
Tom Brown said Feb. 19 that it has retained investment bank Petrie Parkman to advise the company on the sale of its wholly owned subsidiary Sauer Drilling, which Tom Brown bought in 1998 to maintain a drilling program on the Wind River Indian Reservation in Wyoming.
“The business has been performing very well,” said Jim Lightner, Tom Brown’s chief executive officer. “However, owning drilling rigs is not the core business of Tom Brown.”
Based in Casper, Wyo., Sauer operates nine drilling rigs with average depth ratings of 5,000 to 16,000 feet and drawworks ratings from 500 to 1,500 horsepower. Sauer had five rigs when Tom Brown bought the company.
Today, only two of the 20 Tom Brown-operated rigs are company owned.
“Our manpower and capital resources are better focused on growing our reserves and production than on running a drilling company,” Lightner said, adding that Tom Brown is confident it would be able to contract with Sauer or other contractors to meet its drilling needs. Fourth-quarter profits soar On the strength of increased production and strong commodity prices, Tom Brown’s 2003 fourth-quarter profit soared to $25.5 million or 54 cents per share, compared to $7.4 million or 18 cents per share in the year-ago period.
The company attributed the earnings surge specifically to acquisitions, development drilling and exploration. “This resulted in record production, earnings, discretionary cash flow and reserve additions,” Lightner said.
Helping the company’s cause in the 2003 fourth quarter was last June’s acquisition of independent Matador Petroleum, which boosted Tom Brown’s reserves and production. Compared to the 2002 fourth quarter, Tom Brown posted a 37 percent increase in average daily production to 309.2 million cubic feet of gas equivalent.
Separately, Tom Brown reported year-end 2003 proved reserves of 1.137 trillion cubic feet of gas equivalent, a 52 percent increase over year-end 2002 reserves of 750 billion cubic feet of equivalent. The company said it replaced 521 percent of its production last year.
The company’s discretionary cash flow in the final quarter of 2003 was $82.1 million, an increase of 90 percent from the $43.1 million in the corresponding period of 2002. Tom Brown’s results for the recent quarter did include a pre-tax $7.8 million charge for the impairment of value on oil and gas properties at the company’s James Lime play in East Texas.
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