Forest Oil to Sell All South Louisiana Assets for $220 Million
Forest Oil Corp. (FST) said it agreed to sell all its properties in south Louisiana for about $220 million, as the energy producer looks to continue selling assets to help repay its debt.
The company initiated a deleveraging plan in early July and said it completed, or has under contract, a total of $277 million in transactions as part of this effort. It previously disclosed the sale of East Texas natural-gas gathering assets for $34 million, acreage in the Eagle Ford Shale for $15 million, and other additional property sales for $8 million.
"Our team has made meaningful strides in improving the company's financial position, and we will continue to focus on other non-core divestitures to improve our balance sheet and increase our financial flexibility as we maintain focus on the development of our core oil properties," Chief Executive Patrick R. McDonald said.
After completing the Louisiana deal, expected to close Nov. 16, Forest said it plans to update its 2012 guidance.
Simmons analyst Bill Herbert said the sale was a "positive near-term announcement," as the proceeds will be used to pay down some of the debt that has weighed the company down.
But, Mr. Herbert noted that the sale would likely reduce cash flow and earnings next year.
Tudor Pickering Holt analysts wrote in a note Friday that they expect to see more asset sales soon, including in the Permian Basin and areas of the Eagle Ford shale in Texas.
Forest Oil's revenue has declined in recent periods as natural-gas prices have languished amid a boom in production. As with many other energy companies, Forest has been focusing most of its drilling program on more-profitable liquid fossil fuels.
In July, the company reported it swung to an unexpected loss in the second quarter amid a ceiling test write-down related to low natural-gas prices; the exploration-and-production company was also hurt by lower revenue.
Shares were up 0.9% to $8.91 in recent trading. The stock is down 34% so far this year.
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