Forest Oil to Sell South Texas Assets Excluding Eagle Ford
Forest Oil Corp. has announced it will sell its South Texas assets, excluding the Eagle Ford shale, for $325 million as it seeks to raise cash and bring its balance sheet in line and focus efforts on its profitable oil-producing properties.
As natural gas prices have tumbled, Forest and other companies that focus on natural-gas production have seen revenues decline. The company has taken on debt as it has tried to navigate the shift toward more profitable, but more expensive, oil production, and shareholders have demanded in recent months that the company take more aggressive steps to get its fiscal house in order.
Last year the company announced $277 million in asset sales, including the sale for $220 million of all its properties in south Louisiana.
Forest Chief Executive Patrick McDonald said the company has made "significant progress" toward improving its balance sheet and will have more freedom to allocate capital toward its oil assets in the Texas Panhandle and the Eagle Ford formation.
Analysts said Thursday's announcement was good news for Forest, allowing it to rid itself of natural gas-heavy assets and pay down debt.
Wells Fargo analysts wrote in a note Thursday that the sale was a "positive surprise."
"South Texas, which is mainly dry gas, was a declining natural gas asset and only receiving minimal maintenance capex--pulling the trigger on a sale makes sense to us," the analysts wrote.
Investors agreed. Shares of Forest skyrocketed Thursday, up 6.5% at $7.36 in recent trading.
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