Denver-based independent oil and gas company,
Forest Oil Corporation
) has entered into a definitive agreement with Templar Energy LLC
to sell its oil and gas assets located in the Texas Panhandle
Area. The transaction - valued at for $1.0 billion - is expected
to close on or before Nov 25, 2013, with an effective date of Oct
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 notable growth over the
next several years.
We like the initiatives undertaken by Forest Oil to increase
its liquids production. The company's focus on cost control and
the upside from Granite Wash and the Missourian Wash interval
position it well to weather the volatility in natural gas prices.
In its attempt to expand liquids production, Forest Oil has
already added considerable acreage in the Permian Basin, gaining
access to potential oil resources in several oil-bearing pay
zones, including the Wolfbone and Wolfcamp Shale plays.
Production for the year is expected to average 220-230 million
cubic feet equivalent per day (MMcfe/d). The forecast is mainly
centered on oil, which should be favorable in light of weak gas
prices with liquids comprising 40% of the total production.
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 #2 (Buy). However, there are
other stocks in the oil and gas sector such as
Matador Resources Company
Pioneer Energy Services Corp.
TransGlobe Energy Corp.
) which hold a Zacks Rank #1 (Strong Buy) and are expected to
FOREST OIL CORP (FST): Free Stock Analysis
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