Seeking Alpha
Editor's notes: FST's asset sale has left the cupboard looking bare. With high leverage and a multiple that doesn't match its asset quality, the company could see shares drop 25-45% more.

Thursday after the close, Forest Oil Corporation (FST) announced a definitive agreement to sell its Texas Panhandle assets to First Reserve-backed Templar Energy LLC for $1.0 billion in cash. The divested properties have produced approximately 100 MMcfe/d during 2013, generated EBITDA of approximately $180 million for the most recent twelve month period (including an allocation of Forests G&A expense), and had estimated proved reserves of 517 Bcfe as of December 31, 2012.

Leverage Will Remain A Major Handicap

While the sale price falls within the valuation range based on previous comparable transactions (albeit at the low end of the range), the outcome of the divestiture process is a disappointment. The transaction leaves Forest without its highest quality...

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