Forest Oil Corporation
) fourth-quarter 2012 earnings of 14 cents per share (excluding
non-recurring items) beat the Zacks Consensus Estimate of 11
cents. However, the quarterly figure decreased approximately 22%
from the year-earlier earnings of 18 cents. The lackluster
performance was mainly due to lower natural gas sales volumes and
revenues, which was partly offset by an increase in oil sales
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Full year 2012 earnings of 41 cents per share decreased
significantly (by almost 53%) from the year-earlier earnings of
Total revenue in the reported quarter decreased 12.3% from the
year-ago level of $176.7 million to $154.9 million, and failed to
meet the Zacks Consensus Estimate of $171.0 million. Full year
2012 revenue was $605.7 million, down 14% year over year.
For full year 2012, Forest reported average net sales volumes 330
million cubic feet equivalent per day (MMcfe/d), down 1.5% from
335 MMcfe/d in the prior year.
Net sales volume shrunk 9.5% year over year to 309 MMcfe/d in the
reported quarter. It comprised 35% liquids compared to 30% in the
Notably, the company has been able to raise its oil net sales
volume in the fourth quarter, which organically increased 47%
from the year-ago period to 8.7 thousand barrels per day
(MBbls/d). However, natural gas sales volume in the quarter was
202.0 MMcf/d, and comprised 65% of the total quarterly volume.
At the end of 2012, oil and gas proved reserves were 1,363
billion cubic feet equivalent (Bcfe) compared with 1,904 Bcfe at
the end of 2011. Drill bit reserve replacement ratio excluding
revisions was 194%. During 2012, the Corporation added 235 Bcfe
to proved reserves.
The average equivalent price per Mcf (including the effect of
hedging) was $6.22, down 1.5% from the year-ago realization of
$6.13. Natural gas was sold at $3.83 per Mcf, down 13.2% from the
comparable prior-year quarter. However, natural gas liquids
(NGLs) were sold at $33.96 per barrel, up nearly 9% from the
year-ago quarter and average realized oil price was $96.25 per
barrel, up 2.5% from the year-ago quarter.
The fourth quarter production expenses of $1.29 per Mcfe remained
the same year over year. Unit general and administrative expenses
increased 2.6% year over year to 39 cents per Mcfe from the
year-ago level of 38 cents per Mcfe. Importantly, depreciation
and depletion expenses per unit increased nearly 15% to $2.35 per
Mcfe from $2.05 per Mcfe in the fourth quarter of 2011.
At quarter end, Forest had $1.1 million of cash and cash
equivalents with $1,862.1 million of long-term debt (including
current portion), representing a debt-to-capitalization ratio of
45.8% (up from 42.9% at the end of third quarter 2012).
Forest's 2013 capital budget is expected to be close to the
estimated cash flow and provide sufficient financial liquidity.
The company had 5 rigs deployed on oil and liquids prospects
within their core development areas at the beginning of the year.
The 2013 capital plan is secured by investments in their
Panhandle Area and Eagle Ford Shale assets that form the
foundation of Forest's oil portfolio. The planned 2013 activity
in these assets is likely to deliver 30% growth in the oil
volumes. This is expected to result in higher equivalent volumes
in the second half of 2013 than in the first half. The company
has also put in place proper hedging to protect cash flows and
the capital plan.
Forest Oil holds a Zacks Rank #3. However, there are other stocks
in the oil and gas sector -
NGL Energy Partners LP
Calumet Specialty Products Partners LP
Lehigh Gas Partners LP
) - which hold a Zacks Rank #1 (Strong Buy) and are expected to