Forest Oil Divests Arkoma Basin Natural Gas Assets for $185M - Analyst Blog
Denver-based independent oil and gas company, Forest Oil Corporation (FST) divested natural gas properties located in the Arkoma Basin to Camterra Resources Partners Ltd. The sales price of the Arkoma assets was approximately $185 million.
The divested properties produced natural gas of approximately 22 million cubic feet equivalent per day (MMcfe/d) during the third quarter of 2014. The properties had an estimated natural gas proved reserves of 159 Bcfe as of Dec 31, 2013, and generated approximately $23 million of lease-level income during the 12 months ended Sep 30.
With this divestment, Forest Oil’s efforts to focus more on liquid production are 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 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 leveraged 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 for investors.
At present, Forest Oil carries a Zacks Rank #3 (Hold). Better-ranked players in the energy sector include SandRidge Mississippian Trust I (SDT), Sandridge Mississippian Trust II (SDR) and Seadrill Partners LLC (SDLP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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