Forest Oil Acquires East Texas Cotton Valley Assets

Cotton Valley Trend - E. Texas
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Forest Oil has agreed with six private entities to acquire producing assets including approximately 26,000 net acres primarily in the Cotton Valley play in East Texas. Forest attributes estimated proved reserves of 110 Bcfe to the assets which produced an average of approximately 13 MMcfe/d in January of 2006. Forest will pay approximately $255 million cash for the assets, and intends to fund the acquisition using its credit facility and cash on hand. The expected impact to Forest is as follows:

  • Adds another low risk repeatable onshore development play with a growing production profile to the Company's portfolio; a four rig program to be instituted in 2007
  • Adds estimated proved reserves of 110 Bcfe (43% proved developed, 90% natural gas)
  • Adds estimated production of 4 Bcfe in 2006 and 8 Bcfe in 2007, based on current drilling assumptions
  • Adds approximately 26,000 net acres with 300 identified drilling locations
  • Increases Forest's expected drilling activity in 2006 and 2007 by 20 and 50 wells, respectively

H. Craig Clark, Forest's President and Chief Executive Officer stated, "We are excited about this opportunity to enter the Cotton Valley play in East Texas and expand our successful acquire and exploit program. Most of this area of the Cotton Valley play has been approved for 40 acre down-spacing with the locations yet to be drilled. It is another tight gas basin acquisition with a good acreage position that has similar completion techniques to Buffalo Wallow and Wild River. This asset base will give us another significant multi-year, multi-rig development drilling program and will increase both the size and quality of our onshore North American asset base and provides an additional core growth area to our Southern Business Unit following the offshore spin-off. Our plan is to continue a two rig program in this area during 2006 and increase the work level to a four rig program in 2007. We expect the production from these assets to double by the end of 2007."

Forest has identified 300 drilling locations. Current well economics in this area indicate an investment of approximately $1.6 to $2.0 million to drill and complete a well with an average estimated ultimate recovery of 1.2 to 1.3 Bcfe. The acquired assets have estimated production expenses below $1.00 per Mcfe.

The acquisition is scheduled to close on March 31, 2006 and is subject to customary closing conditions and adjustments.


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