Forest Oil Corporation today announced that Lone Pine Resources Inc. (Lone Pine), a wholly-owned subsidiary of Forest, has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (the SEC) related to the proposed initial public offering (the IPO) of shares of common stock of Lone Pine. Lone Pine will be the new parent of Canadian Forest Oil Ltd. (Canadian Forest), which owns all of Forest’s Canadian assets.
In connection with the IPO, Forest intends to contribute its ownership of Canadian Forest to Lone Pine. Lone Pine plans to sell up to 19.9% of its common stock in the IPO, which it expects to complete in the first half of 2011. The offering is intended to be done in a manner to preserve Forest’s ability to complete a tax-free spin-off of its remaining ownership in Lone Pine. Lone Pine intends to use the net proceeds from the offering to repay intercompany debt amounts owed to Forest, and the remainder, if any, for general corporate purposes. Following the offering, Forest intends to distribute, or spin-off, its remaining ownership in Lone Pine to Forest’s shareholders. The spin-off is expected to occur approximately four months after the IPO; however, Forest will retain the right to decide whether to commence the spin-off at its discretion.
The purpose of the offering and spin-off is to separate Forest’s assets in Canada from the remainder of its operations. Forest believes that the separation will enhance Lone Pine’s ability to achieve a valuation comparable to those of stand-alone Canadian peer companies, by allowing Lone Pine to focus its exploration and development efforts at capital levels consistent with its own business strategy. In that regard, Lone Pine intends to focus on growing its estimated proved reserves and production through its repeatable vertical and horizontal development inventory and shale positions with initial investment of capital in excess of cash flow.
Forest believes that this transaction will improve the overall valuation of Forest’s assets in the United States and Canada. Forest intends to focus on growth through the continued application of horizontal drilling on its remaining liquids-rich development inventory, while maintaining capital levels consistent with expected cash flow.
J.P. Morgan will act as a lead book-running manager for the proposed offering. A written prospectus meeting the requirements of Section 10 of the Securities Act of 1933, when available, may be obtained from J.P. Morgan Securities LLC via Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, or by calling (866) 803-9204.
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