Denver-based independent oil and gas company,
Forest Oil Corporation
) has announced the closure of its previously announced sale of
its assets in the Texas Panhandle Area.
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Forest has raised net cash proceeds of about $944 million, after
customary adjustments, effective Oct 1, 2013. This amount
excludes about $44 million that were closed into escrow. The
escrow amount may be received by the company as
consents-to-assign are received and after the closing title
curative work is finished.
The net proceeds also do not comprise $10 million, which will
remain in escrow for a year following the transaction closure.
This amount will support Forest's indemnity obligations under the
purchase and sale agreement, with the balance to be distributed
to Forest at the end of that period.
The proceeds from the sale will be used to finance the previously
announced cash tender offer of Forest's 7.5% Senior Notes due
2020 and its 7.25% Senior Notes due 2019. The closure of this
transaction has reduced the borrowing base under Forest's credit
facilities to $400 million.
Forest intends to use the proceeds from the sale to reduce debt
and enhance financial flexibility. This divestiture would enable
the company to focus on its core Eagle Ford Shale assets, where
oil production is projected to show significant growth going
Forest Oil has a growing upstream presence in the emerging basins
of Texas, Canada and Mexico. Production growth from the Eagle
Ford Shale is a key component of the company's overall annual
upstream growth plans over the next few years.
The company nonetheless is intent on divesting its non-core
properties to boost financial strength and flexibility. We
believe this will eventually allow the company to aggressively
pursue growth opportunities in its plays and provide meaningful
upside potential for investors.
Forest Oil holds a Zacks Rank #3 (Hold). Some better-ranked
stocks in the same sector include
SM Energy Company
Abraxas Petroleum Corp.
Western Gas Partners LP
). All these stocks hold a Zacks Rank #1 (Strong Buy).