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Forest Oil (FST)
Q3 2013 Earnings Call
November 05, 2013 9:00 am ET
Larry C. Busnardo - Director of Investor Relations
Patrick R. McDonald - Chief Executive Officer, President, Director and Member of Executive Committee
Victor A. Wind - Chief Financial Officer, Executive Vice President, and Treasurer
Pearce W. Hammond - Simmons & Company International, Research Division
Amir Arif - Stifel, Nicolaus & Co., Inc., Research Division
Biju Z. Perincheril - Jefferies LLC, Research Division
Patrick Lee - Wells Fargo Securities, LLC, Research Division
Previous Statements by FST
» Forest Oil Management Discusses Q2 2013 Results - Earnings Call Transcript
» Forest Oil Corp. Management Discusses Q2 2013 Results (Webcast)
» Forest Oil Management Discusses Q1 2013 Results - Earnings Call Transcript
Larry C. Busnardo
Thank you, Sue, and good morning, everyone. Thank you for joining us for the Forest Oil Third Quarter 2013 Earnings Conference Call. Joining me on the call today is Patrick McDonald, Forest's President and Chief Executive Officer; and Victor Wind, our Chief Financial Officer. If you have not already done so, please go to our website at forestoil.com to obtain a copy of our earnings release. A replay of this call will be available through November 11, as described in our press release issued yesterday afternoon.
Before we begin, some of the presenters today will reference certain non-GAAP financial measures regularly used by Forest in measuring its financial performance. Reconciliations of such non-GAAP financial measures with the most comparable financial measure calculated in accordance with GAAP will be available on our website and can be viewed by clicking on the Investor Relations tab, then Non-GAAP at forestoil.com.
Forest's comments today will include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to a number of risks and uncertainties that may cause the actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties are described in Forest's earnings release and in Forest's public filings made with the Securities and Exchange Commission.
With that, I will turn the call over to Pat McDonald.
Patrick R. McDonald
Thank you, Larry. Good morning, and thank you for joining us today. I'll start with a review of the third quarter and then touch on operational highlights, after which, I will turn the call over to Victor Wind for a summary of the financial highlights for the quarter.
During the third quarter, we made good progress in the development of our Eagle Ford asset. This led to a significant jump in our Eagle Ford production volumes during the quarter. Importantly, we remain on track to meet our goal of averaging 2,800 barrels a day equivalent from the Eagle Ford in 2013, and we believe our Eagle Ford volumes will more than double in 2014 to over 6,000 BOE per day, based on an 80-gross well, 40-net well development plan, which we communicated earlier this year when we announced our joint venture in the Eagle Ford.
We made further progress in lowering our Eagle Ford drilling costs as we begin to capitalize on the synergies associated with pad drilling and more efficient and effective completions and drilling well construction. We see the potential for additional improvement in this area during 2014.
We recently announced the sale of our Texas Panhandle assets in early October for $1 billion. This will be a tax-free event for Forest. We believe the transaction remains on track to close later this month. The Texas Panhandle sale is a transformational event for the company, which positions Forest with a sharpened operational focus heading into 2014 and a strong platform for oil growth, underpinned by our Eagle Ford asset.
Consistent with what we have communicated in the past, we will use the net sale proceeds to reduce our outstanding debt.
I would like to thank all of the Forest employees who contributed to the success of this divestiture, and we look forward to closing that transaction later this month.
In terms of third quarter operational activity, we continue moving toward the completion of the acreage holding phase of the Eagle Ford development program. The focus of our drilling, to date, has been to delineate the field, hold the acreage position, and we are beginning to prepare for the transition to full-scale development drilling, and we'll concentrate on the most productive areas of the field during 2014. In this regard, we have made considerable progress toward the goal of holding an aggregate of 55,000 gross acres and 27,500 net acres. We currently have approximately 70% of the target acreage held through our drilling efforts, and we expect the remainder to be held by mid-2014.
We are currently carrying an inventory of 688 gross, 344 net locations based on an 80-acre spacing development program. This inventory of drilling provides a current pace of drilling of 7-year drilling inventory. Once the acreage holding phase is complete in mid-2014, we will begin development drilling. We are in the process of evaluating and determining the optimal drilling density and well spacing for each of the areas of the field. We believe that some offset operators have successfully tested downspacing to 40- to 60-acre spacing. And obviously, if we are successful with that level of spacing, it would increase our drilling inventory.