The transaction provides the following benefits to Forest:
Forest believes it can profitably exploit and add value to the Permian Basin assets and reduce field operating costs. In addition, the acquired Canadian assets have numerous infill drilling locations for exploitation and the Wild River area contains several multi-pay exploration opportunities similar to Forest's successful Narraway field in the Alberta foothills.
Wiser's reported estimated proved reserves as of December 31, 2003 were 191 Bcfe, of which 51% were natural gas. Wiser produced approximately 64 MMcfe/d in the first quarter of 2004. At December 31, 2003 approximately 50% of Wiser's production and 30% of its reserves were located in Canada and 20% of Wiser's production and 45% of its reserves were located in the Permian Basin. Also, approximately 85% of Wiser's estimated proved reserves were classified as proved developed.
Forest has put in place hedges in anticipation of this acquisition. Forest entered into natural gas NYMEX swap arrangements for 25,000 to 30,000 MMbtus/d from July 2004 through December 31, 2005 at an average price of $6.18 per MMbtu. It also entered into oil NYMEX swap arrangements for 3,500 to 4,000 Bbls/d for July 2004 through December 31, 2005 at an average price of $35.37 per barrel.
Giving effect to this transaction, in the last year Forest has acquired approximately:
Forest's total consideration for these transactions has been approximately $720 million. The acquisitions were all made through negotiated transactions in existing core areas of the company.
"This negotiated transaction will provide additional quality assets to our Canadian, Western and Gulf Regions, all within their defined areas of operations. We are particularly pleased to obtain high quality Canadian assets at an attractive price given the intense competition for Canadian assets lately. Most of the acquired assets are in the same reservoirs, the same trends, and the same neighborhoods as our existing assets. We believe the Wiser assets will benefit from a more focused capital program and the implementation of cost reduction initiatives. The investment is consistent with our four-point strategy as we continue to invest more capital into our traditional, high rate of return areas. Nine months ago we stated our goal to acquire properties in the Gulf Coast, Canada, and the Permian Basin. We have now achieved that goal with superior economics and high quality assets," said Craig Clark, Forest's President and Chief Executive Officer.
Forest plans to finance the acquisition with a combination of equity, debt and cash on hand. Forest also announced plans to dispose of at least $100 million of non-strategic assets in the U.S. and Canada, primarily from its existing portfolio. The asset dispositions are anticipated to be completed by year-end.
Under the terms of the agreement between Wiser and Forest, a subsidiary of Forest will commence a tender offer to purchase all of the outstanding shares of Wiser at a price of $10.60 per share in cash. The boards of directors of both Forest and Wiser have unanimously approved the transaction. The Wiser board of directors is recommending shareholders of Wiser accept the offer and the holders of approximately 41 percent of the outstanding shares of Wiser have agreed to tender their shares to the offer. The offer is expected to commence within the next 7 business days, and is expected to close at the end of the second quarter or early in the third quarter of 2004. A vote of Wiser's stockholders will be required only if less than 90 percent of Wiser's shares are tendered into the Forest offer. Under certain circumstances, should Forest not be successful in acquiring the minimum number of shares required under the tender offer, and Wiser is acquired by, or in certain instances enters into an agreement to be acquired by another party, Forest will receive a cash payment of $11 million from Wiser.
Following completion of the tender offer and receipt of any necessary Wiser stockholder approval, Wiser will merge with a subsidiary of Forest and each share of Wiser common stock not tendered in the tender offer will be converted into the right to receive $10.60 in cash. Upon completion of the merger, Wiser will become a wholly-owned subsidiary of Forest.
The closing of the tender offer and merger of the Forest subsidiary and Wiser are subject to customary terms and conditions, including the tender of at least a majority of Wiser's outstanding shares of common stock on a fully diluted basis and customary regulatory approvals.
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