EnCana to buy Tom Brown in $2.7 billion deal

April 15, 2004
EnCana Corp., Calgary, agreed to buy Tom Brown Inc., Denver, for $2.7 billion, which includes a tender offer of $48 per share and the assumption of debt.

By OGJ editors
HOUSTON, Apr. 15 -- EnCana Corp., Calgary, agreed to buy Tom Brown Inc., Denver, for $2.7 billion, which includes a tender offer of $48 per share and the assumption of debt.

The transaction is expected to close before June 1, and upon completion, Tom Brown will become a wholly owned EnCana subsidiary.

"Tom Brown's assets are a hand-in-glove fit with our US Rockies asset base. These are high-working interest, low-decline, early-life operated properties where we believe we can apply our proven resource play management system to grow production, reserves, and financial returns," said Randy Eresman, EnCana's chief operating officer.

EnCana's acquisition of Tom Brown is expected to add 325 MMcfed of gas production, 1.2 tcf of proved gas reserves, and 2 million net undeveloped acres. Tom Brown has identified an estimated 3,200 drilling locations on these properties.

Of the $2.7 billion acquisition total, $358 million is related to the purchase of undeveloped exploration land, certain midstream assets, and Tom Brown's Sauer Drilling Co., EnCana said.

The cost per unit of proved reserves is estimated at $1.95/Mcf. Full-cycle finding and development costs, including the acquisition cost and all future development costs, to exploit the reserves are estimated at $1.50/Mcf, EnCana said.

Both companies' boards unanimously approved the transaction. Tom Brown directors and senior executives said they plan to tender their shares. Tom Brown's shareholders will be required to vote only if fewer than 90% of the company's shares are tendered.