Forest Oil (FST) -4.9% premarket after receiving two downgrades, to Sell from Neutral at Goldman Sachs and to Underweight from Equal Weight at Morgan Stanley.
Goldman sees limited upside for FST's Eagle Ford Shale position and does not see an upside catalyst at non-core Eagle Ford assets, and the recent sale of Texas panhandle assets removes an upside overhang; also, the firm views valuation as unattractive both vs. peers and on an NAV basis vs. resource life.
The sales price is greater than FST's ~$770M market cap.
FST says the sale enables it to focus development of its core Eagle Ford Shale assets; it doesn't expect to incur any income taxes on the sale and intends to use the proceeds primarily to reduce debt and bolster financial flexibility.
The properties sold have produced ~100M cf/day YTD and have estimated proved reserves of 517B cf of gas; FST had said earlier that it was seeking a buyer for the assets after receiving unsolicited offers.
Forest Oil (FST -3.4%) is downgraded to Hold from Buy at Stifel Nicolaus based on valuation.
The firm says shares have approached its $6.50 target price and believes further upside is more dependent on an above industry average sales price for the ongoing Texas Panhandle sale; the asset accounts for 48% of FST's production and the wide range of transaction multiples for previous sales in this region suggests a wide range of potential outcomes for the stock.
At current levels, Stifel thinks the stock is already reflecting proceed potential of about $60K/boe/day relative to a transaction range of $50K-$70K/boe/day.
Forest Oil (FST) says CFO Michael Kennedy is stepping down effective Aug. 23 to pursue other opportunities in the oil and gas industry and names Treasurer Victor Wind as his replacement.
Wind has served in various management positions, including director of financial reporting and controller at Evergreen Resources during 2001-04; he joined FST as controller of financial accounting in Jan. 2005.
Forest Oil (FST +3.5%) is upgraded to Equalweight from Underweight at Morgan Stanley. Analyst Drew Venker says "the unpredictable nature of the divestiture process" makes him uncomfortable taking an Overweight stance ahead of a possible Texas Panhandle asset sale (previous). Venker says $750M in proceeds from a potential sale implies "fair value based on [an] NAV analysis." Others have the deal bringing between $900M-1B.
Forest Oil (FST +10.5%) logs double-digit gains after yesterday's strong session, bringing the two-day rally to 16% as investors cheer the company's plans to divest assets in the Texas Panhandle. Simmons & Co. believes proceeds from a potential sale could come in at around $1.06B, while Baird says a deal could bring in between $900M-1B, according to TheStreet. For its part, Zeits Energy Analytics says only an offer above $1.5B would "justify FST's stock price."