Forest Oil Corporation
) recently announced its plans to divest all of its South Louisiana
assets for $220 million. The name of the buyer, however, was not
disclosed by the company.
The properties under consideration produced 20 million cubic feet
equivalent per day in the third quarter of 2012 and had 45 billion
cubic feet equivalent per day of proved reserves as of December 31,
Forest Oil expects the transaction to close on November 16, 2012,
upon fulfillment of customary closing conditions and purchase price
adjustments. The funds raised from this sale are likely to be used
to pay off a portion of the company's outstanding borrowings under
its bank credit facilities.
The company plans to focus on divestiture of its non-core
properties to boost its financial strength and flexibility. Also,
it intends to update the guidance for fiscal 2012 after the closure
of this transaction.
The company commenced a deleveraging plan in early July comprising
transactions worth $277 million. It includes an agreement announced
by the company in August with a subsidiary of Tristate Midstream
II, LLC to divest a lion's share of its East Texas natural gas
gathering assets. The deal is likely to fetch the company around
Forest Oil Corporation is an independent oil and gas company
engaged in the acquisition, exploration, production and development
of oil and gas properties in North America. The company operates
five distinct geographic business units − Canada, Eastern,
Southern, Western and International.
We believe Forest Oil's financial leverage remains comparatively
higher than peer averages due to the company's recent acquisition
activity. We also assert that returning to the growth mode will
require external capital, asset sales or a recovery in commodity
Forest Oil - which completed the spin-off of
Lone Pine Resources Inc.
) in 2011 - holds a Zacks #3 Rank, equivalent to a Hold rating for
a period of one to three months. Longer term, we maintain our
Neutral recommendation on the stock.
FOREST OIL CORP (FST): Free Stock Analysis
LONE PINE RSRCS (LPR): Free Stock Analysis
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