Forest Oil Corporation
) first-quarter 2013 earnings of 3 cents per share (excluding
non-recurring items) beat the Zacks Consensus Estimate by a
penny. However, the quarterly figure decreased approximately 73%
from the year-earlier earnings of 11 cents.
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The lackluster performance was mainly due to lower net sales
volume due to the divestiture of the Louisiana property and lower
natural gas sales volumes as the company has postponed capital
investment on its natural gas properties to concentrate on
higher-margin oil prospects. Lower natural gas liquids (NGLs) and
oil prices also contributed to the decline.
Total revenue in the reported quarter decreased 25.6% from the
year-ago level of $159.0 million to $118.2 million and missed the
Zacks Consensus Estimate of $144.0 million.
Net sales volume shrunk nearly 28% year over year to 243 million
cubic feet equivalent per day (MMcfe/d) in the reported quarter.
It comprised 34% liquids compared to 32% in the year-ago quarter.
Notably, the company has been able to raise its oil net sales
volume in the first quarter, which organically increased 9% from
the year-ago period to 5.8 thousand barrels per day (MBbls/d).
However, natural gas sales volume in the quarter was 159.2
MMcf/d, and comprised 65.5% of the total quarterly volume.
The average equivalent price per Mcf (including the effect of
hedging) was $5.84, marginally down 0.5% from the year-ago
realization of $5.87. Natural gas was sold at $3.62 per Mcf, up
4.3% from the comparable prior-year quarter. However, NGLs were
sold at $30.69 per barrel, down nearly 13% from the year-ago
quarter and average realized oil price was $97.30 per barrel,
down 3.5% from the year-ago quarter.
The first-quarter production expenses of $1.22 per Mcfe decreased
12% year over year. Unit general and administrative expenses
increased 84.6% year over year to 72 cents per Mcfe from the
year-ago level of 39 cents per Mcfe. Importantly, depreciation
and depletion expenses per unit increased nearly 2% to $2.22 per
Mcfe from $2.18 per Mcfe in the first quarter of 2012.
At quarter end, Forest had $1.2 million of cash and cash
equivalents with $1,640.4 million of long-term debt (including
current portion), representing a debt-to-capitalization ratio of
46.4% (up from 45.8% at the end of fourth-quarter 2012).
Forest expects the net sales volumes in the second quarter of
2013 to be at about the same level as the first quarter of 2013,
including the projected impact of the recently announced Eagle
Ford shale development agreement. Further, Forest's drilling
activity is expected to receive a boost during 2013 with the
expansion of the Eagle Ford development plan.
However, the company's capital expenses are anticipated to be
lower than the first quarter as the benefit of the drilling carry
related with the Eagle Ford Shale development agreement is likely
to be recognized in 2014. Therefore, net capital expenditure in
the second quarter is forecasted to be $70 million - $80 million.
The spending per quarter for the later half of 2013 is estimated
to be maintained at this level.
Forest Oil holds a Zacks Rank #3 (Hold). However, there are other
stocks in the oil and gas sector -
EPL Oil & Gas, Inc.
) - which hold a Zacks Rank #1 (Strong Buy) and are expected to