Forest Oil Corporation (NYSE:FST) – Planning Financial Flexibility through Acreage Sale


Dallas, Texas 09/12/2013 (Financialstrend) – An independent oil and gas company, Forest Oil Corporation (NYSE:FST) is primarily involved in oil, natural gas and natural gas liquids acquisition, exploration and production with key areas in the East Texas, and Texas Panhandle Area, Canada and Mexico. The company sold its properties in South Texas effective January 1, 2013. Recently the company has also announced to sell its properties in West Texas and plan to use the proceeds from this divestment to reduce outstanding borrowings under its bank credit facility and enhance financial flexibility.

Last week on Tuesday, September 3, 2013 the company announced its agreement to sell a portion of Permian Basin in West Texas. The portion has been a part of largely undeveloped acreage to be sold for $35 million to an undisclosed buyer. With due consideration to customary purchase price adjustments and closing conditions, the sale is most likely to close within a week time. Post transaction FST will have 68,250 gross acres (63,500 net) of its Permian Basin position located in Pecos and Reeves Counties, Texas after sales of 58,200 gross acres (52,350 net) in Crockett County, Texas.

FST is conscientiously focusing on divestment of its non-core properties to enhance financial flexibility and strength alongside pursuing growth opportunities in its key businesses. Given the weakness in natural gas prices, the company has already taken initiatives to improve its liquids production and has added significant acreage allowing access to potential oil resources in the Permian Basin. The production forecast, expected to be around 225 million cubic feet equivalent per day, is primarily focused on oil with liquids accounting 40% of the total production.

Along these valued decisions which could please the investors with potential upside for the stock, FST’s exposure to the volatile oil industry, portfolio of highly gas-weighted reserves, and long-term debt of over $1600 million needs due consideration before investment.