Craig Clark, President and CEO, stated: "We are excited to be able to purchase this quality Granite Wash asset base and add another legacy asset to our portfolio. The Buffalo Wallow Field has been under development on 40 acre spacing for the last several years and has just recently received approval for 20 acre spacing. It is a high-quality field which gives us a significant multi-year, multi-rig development drilling program. Without allocating any of the purchase price to land or other categories of reserves, Forest's acquisition cost per proved Mcfe is about $1.92 and cost per daily unit of production is $9,000 per Mcfe per day which is very attractive for this type of resource play. Our anticipated 2005 free cash flow will be used to acquire and exploit this new asset. This is another step to increase the relative size and quality of our onshore North American asset base. It also represents another accretive acquisition at reasonable economics. With this acquisition, Forest has now spent over $1 billion in acquisitions since the introduction of the Four-Point Game Plan."
In the Buffalo Wallow Field, Forest has identified 40 proved undeveloped and 330 probable and possible locations. Current well economics in the Buffalo Wallow Field indicate an investment of approximately $1.4 to $1.9 million to drill and complete a well with an estimated ultimate recovery of 1.4 to 1.8 Bcfe. The field presently has estimated lease operating expenses of $.63 per Mcfe.
In connection with the transaction, Forest has executed natural gas hedges for 20,000 MMbtu/d with price protection averaging $6.70 per MMbtu through 2006. The price protection level is above the gas prices used to evaluate the property. Forest expects the transaction to be accretive to cash flow in 2005 and beyond. In addition, Forest has announced plans to dispose of approximately $50 million in non-core assets during 2005.
The acquisition is scheduled to close on March 31, 2005, and is subject to customary closing conditions. Assuming a timely closing, the acquisition should add production of 7-8 Bcfe in 2005 and 15-16 Bcfe in 2006. Forest will announce further updated guidance following the closing of the transaction.
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