Dallas, Texas 10/15/2013 (Financialstrend) – Forest Oil Corporation (NYSE:FST) investors would be a confused lot over the past couple of weeks. This is because analysts have been panning the $628 million market caped oil production company’s decision to sell off its much touted Texas pan handle assets. On the other hand the Oil and gas company’s board of directors are telling their share holders that the $1 billion in net proceeds from the sale offers a good valuation for the assets being sold.
Post the decision being made public on October 3, Forest Oil shares dipped in valuation over two days of trading. It ended last week trading posting a 2.4% increase in value while it has shed close to 12.7% in the past 30 days.
In a mandatory SEC filing the Forest Oil disclosed that its 100% fully owned subsidiary Forest Oil Premian Corporation had entered into a sale agreement with Templar energy. The property covered under this agreement is the entire stock, assets and lease hold interests related to Forest Oil “Texas panhandle area”. In return the buyer is shelling out $1 billion in cash and hopes to complete the transaction by November 25. The effective date of transfer of rights would be October 1. On signing off on the deal Templar has transferred $30 million as deposit into a escrow account. A $10 million corpus will be retained in this escrow for a period of 1 year towards facing any situations which would require sellers indemnity. As per the agreement, both the seller and the buyer retain the right to terminate the deal under specific clauses already listed out in the agreement. A $125 million bail out fee will be forfeited for terminating the agreement. As of close of business on October 14, the shares of FST were trading at $5.42 per share.