Forest Oil and Unocal Team Up in the Gulf of Mexico

Forest Oil Corporation and Unocal Corporation have signed a memorandum of understanding to jointly explore and exploit certain properties in the central Gulf of Mexico, primarily in the South Marsh Island and Vermilion areas of the shelf.

Under the proposed transaction, Unocal would acquire a portion of Forest's proved reserves, estimated at about 4 percent of Forest's proved reserve base and 5 percent of Forest's current production. Unocal would acquire 50 percent of Forest's interest in South Marsh Island and a portion of the Vermilion areas offshore central Louisiana for $120 million in cash. Unocal would operate the jointly owned properties, working with Forest to fully exploit and explore these properties and other leases in the Gulf of Mexico.

The companies are currently negotiating the details of the transaction, including commitments that Unocal would make related to additional drilling and seismic analysis on certain leases held by Forest.

Detailed terms were not disclosed, pending completion of negotiations and definitive agreements. The parties expect to conclude negotiations, execute binding and definitive agreements, and close the transaction by December 1.