Forest Oil to Acquire Permian Basin Assets

Forest Oil has entered into an agreement to purchase oil and gas assets located primarily in the Permian Basin and five fields in South Texas.

The acquisition is in the form of a stock purchase of a private company (the Seller). The assets to be acquired include 102 Bcfe of estimated proved oil and gas reserves (70% oil and 85% proved developed) which presently produce approximately 25 MMcfe/d. Forest intends to utilize its credit facility to fund the transaction. The transaction is expected to close on December 31, 2003.

The stock purchase will include working capital, certain other financial assets and liabilities of the Seller. The amount of cash consideration for the oil and gas assets of the Seller (including all land, pipelines, facilities and offices) is estimated to be $102 million at closing.

Craig Clark, Forest's President and Chief Executive Officer, stated "This acquisition is consistent with the strategy announced in September to acquire properties in this region. There are exploitation opportunities through secondary recovery, recompletions, shallow-drilling and cost reductions. We are pleased with the swift progress our acquisition team has made on yet another negotiated transaction as well as the balance that the acquisition program has provided us to date."

Forest's 2003 acquisition program, including the transaction described above, has added significant assets in the Gulf of Mexico, Gulf Coast, and the Permian Basin. The program, which has been in place since May of this year, has yielded the following estimated statistics:

  • Consideration paid for oil and gas assets ($MM) 370

  • Proved oil and gas reserves (Bcfe) 310

  • Proved developed reserves 80%

  • Onshore proved reserves 67%

  • Production at closing (MMcfe/d) 110

  • Natural gas production 60%

  • Undeveloped land (acres) 154,000

  • The 2003 acquisition program has resulted in consideration paid for oil and gas assets based on estimated proved reserves only (with no allocation to land, seismic, plants, pipelines and non-proved reserves) of $1.19 per Mcfe and $3,363 per MMcfe/d of production with an estimated reserve life of approximately eight years.