Seeking Alpha

Forest Oil (FST) continues to deleverage, announcing the sale of all of its South Texas...

Forest Oil (FST) continues to deleverage, announcing the sale of all of its South Texas properties - excluding those in the Eagle Ford shale - for after-tax proceeds of $325M. The money will be used to pay down debt. The properties generated about $60M of lease-level income in 2012. (PR)
Comments (1)
  • FST had previously described these Eagle Ford properties as “core.” However FST claimed IRRs of only 25% - 45% at $90 oil. The Eagle Ford accounted for 35% of FST’s 2012 capital spending. Selling them appears to be a good move.

     

    That leaves the Texas panhandle as FST’s main area of focus. FST and others have been making terrific Hogshooter wells. This is a complex area and the closest thing FST has to a Crown Jewel.

     

    FST is also active pursuing the Cotton Valley = 39% NGLs and oil and 61% natural gas. I’m not keen on this play. However, FST claims its 100,000 acres are HBP (held by production); so the wells will have to compete for capital with the Hogshooter wells (unless there is something FST isn’t telling us).

     

    FST has a market capitulation of $820,000, which seem pretty high for what they have.

     

    FST now gives us a fairly pure Hogshooter play. I don’t own any now, but I’ll be looking to jump in.
    3 Jan 2013, 08:05 AM Reply Like
DJIA (DIA) S&P 500 (SPY)