Denver-based independent oil and gas company, Forest Oil Corporation (FST) announced that the lenders under its revolving credit facility have completed their regularly scheduled semi-annual redetermination of the borrowing base.
As part of the redetermination process, Forest and the lenders agreed to amend the facility and increased the permitted maximum total debt to EBITDA ratio (leverage ratio) for the 2014–15 calendar quarters. In conjunction with the amended leverage ratio, Forest's borrowing base under the credit facility was reduced to $300 million. There are currently no outstanding borrowings under the credit facility.
Denver-based independent oil and gas company, Forest Oil’s efforts to expand liquid production to maximize margin is gaining traction.
The company’s focus on cost control along with the upside from the Granite Wash and Missourian Wash interval positions it well to weather the weakness in natural gas prices. Forest Oil has a growing upstream presence in the emerging basins of Texas, Canada and Mexico.
Moreover, the company has already added considerable acreage in the Permian Basin, enabling it to access potential oil resources in several oil-bearing pay zones, including the Wolfbone and Wolfcamp Shale plays.
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 for the next few years.
On the flip side, the company has a highly gas-weighted reserves/production profile and exposure to the inherently cyclical and volatile exploration and production sector. This does not get any help from its highly levered balance sheet.
The company nonetheless is intent on divesting its non-core properties to boost financial strength and flexibility. We believe that this will eventually allow Forest Oil to aggressively pursue growth opportunities in its plays and provide a meaningful upside potential for investors.
Forest Oil currently retains a Zacks Rank #4 (Sell), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked players in the energy sector like Valero Energy Corp. (VLO), Range Resources Corp. (RRC) and Helmerich & Payne, Inc. (HP). All the stocks sport a Zacks Rank #1 (Strong Buy).