Forest Oil Corporation (NYSE:FST) to raise $1 billion from sale of its assets


Dallas, Texas 10/07/2013 (Financialstrend) – Forest Oil Corporation (NYSE:FST) stock shed close to 9.61% in one single trading session on October 4. At close of business the share price had settled at $5.74 per share with close to 18 million shares of the stock changing hands through the day. This was 6 times the average trading volume of the stock. The sell off was on the back of news that the oil major had managed to sell its Texas property for close to $1 billion proceeds.

On October 3 Forest Oil Corporation, through a its subsidiary Forest Oil Permian Corporation, entered into a sale agreement with Templar Energy LLC. The deal will hand over control of all the oil and gas properties of Forest Corp, located in the Texas panhandle area to Templar Energy. The agreement was backdates to October with both companies targeting November 25 for a final closure of the deal.

The deal has been valued at $1 billion which will be paid out in cash. As part of the sale agreement, Templar has set aside $ 30 million in an escrow account as earnest money for the transaction. The deal also envisions $10 million to be set aside in a separate escrow account by Forest Oil. This will act as Forest Oil’s indemnity for any future obligations. The extended cut off for this sale is December 31.

The stock plummeted by close to 10% due to above announcement. Forest Oil has a market cap of $666 million with accumulated loss of $779 million over the previous 12 months trading period. Its sales have dipped by close to 13% on a quarter on quarter basis with 116 million shares outstanding.

The oil firm had managed to sell $546 million  with a gross margin of 76%. After the steep fall in the previous trading session, the stock is trading  37% below its 52 week high valuation.