Forest To Sell Texas Panhandle Assets
Plans to sell its Panhandle assets to an unsolicited bid.
Forest Oil Corp. (NYSE: FST) plans to sell oil and gas assets in the Texas Panhandle after it received an unsolicited bid from an unidentified company to buy them.
Forest has retained J.P. Morgan Securities LLC to assist in the marketing efforts and intends to use proceeds from a potential sale to reduce debt and enhance financial flexibility.
Patrick R. McDonald, president and chief executive said, “Over the last several years, drilling and completion efforts by Forest and other companies have delineated substantial oil, natural gas and natural gas liquids resources in the Texas Panhandle. Our significant acreage position, which is largely operated by Forest and held by production, presents a large-scale, low-risk development opportunity.”
“If completed, the sale of the Texas Panhandle assets should allow us to reduce meaningfully our indebtedness and enhance our financial flexibility and ability to accelerate development of our assets. Upon successful completion of a transaction, Forest’s remaining asset portfolio will be anchored by its ongoing oil development opportunity in the Eagle Ford Shale, where oil production is projected to more than double during 2014,” he said.
In addition, Forest holds 111,000 net acres in East Texas which is largely held by production. It plans to continue the development of its oil and natural gas liquids properties and to maintain its exposure to potential natural gas development through its low-decline natural gas properties in the Ark-La-Tex region.
Wells Fargo Securities said the sale of the Texas Panhandle assets will go a long way to reduce the company's debt and enhance its liquidity, something Wall Street has been concerned about. Assuming the transaction closes in 2013, Wells Fargo said the transaction will significantly reduce the company's debt ratios.
Forest holds assets in Lispcomb, Roberts, Hemphill and Wheeler counties, targeting the Granite Wash, Cleveland Tonkawa and Missourian Wash. Forest operates two rigs in the region and believes the acreage is delineated. At the end of the first quarter, production form the region was about 100 million cubic feet equivalent (MMcfe), 50% of which were liquids. Reserves are estimated around 520 Bcfe.
Based on comparable liquids-rich transactions between Cordillera and Apache and between Noble and Unit, Wells Fargo could expect to receive in excess of $1 billion. "We estimate a value between $900 million and $1.2 billion," Wells Fargo reported.