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Unocal Swaps Rockies Assets For Tom Brown Shares

Unocal Swaps Rockies Assets For Tom Brown Shares

Spirit Energy 76, Unocal Corp.'s U.S. Lower 48 exploration and production unit, signed a letter of intent to trade most of its Rocky Mountain oil and gas assets for 5.8 million shares of Tom Brown Inc. and $5 million in cash. The total value of the deal was about $76 million. Unocal will hold 16.52% of the outstanding common stock of Tom Brown based on the number of shares to be issued. The agreement also gives Unocal a seat on Tom Brown's board and the option to increase its ownership up to 19.5% through open market purchases.

"Tom Brown is a focused Rocky Mountain player whose substantial exploratory position combines well with Unocal's assets in the region. The trade will give both companies greater participation in the North American natural gas value chain," said John T. Donohue, president of Spirit Energy 76. "This transaction provides the opportunity to realize good value for these assets for Unocal stockholders and participate in the growth potential of Tom Brown Inc. At the same time, a spin-off of the Rocky Mountain properties will allow our management team to focus on core growth opportunities in the Gulf of Mexico, Gulf Coast and Permian Basin."

The transaction involves about 35 net wells with 1998 net sales of 18 MMcf/d, 290 barrels of oil/d, and 92,000 gallons of gas plant liquids/d. In addition, the transaction includes proved reserves of about 89 Bcfe of gas and about 65,000 undeveloped acres in Colorado, Utah, Wyoming and North Dakota. Also included in the deal is the Lisbon Cryogenic Processing Plant located near Moab, UT. It is expected all of Spirit Energy's local work force of about 50 employees will be retained by Tom Brown. The deal will be slightly dilutive to Unocal reserves and production in the short term but is expected to be accretive as Tom Brown applies aggressive exploration and development activities to the Unocal assets.

Joe Fisher, Houston

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