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Denver-based independent oil and gas company, Forest Oil Corporation (FST - Analyst Report) has announced the closure of its previously announced sale of its assets in the Texas Panhandle Area.

Forest has raised net cash proceeds of about $944 million, after customary adjustments, effective Oct 1, 2013. This amount excludes about $44 million that were closed into escrow. The escrow amount may be received by the company as consents-to-assign are received and after the closing title curative work is finished.

The net proceeds also do not comprise $10 million, which will remain in escrow for a year following the transaction closure. This amount will support Forest’s indemnity obligations under the purchase and sale agreement, with the balance to be distributed to Forest at the end of that period.

The proceeds from the sale will be used to finance the previously announced cash tender offer of Forest’s 7.5% Senior Notes due 2020 and its 7.25% Senior Notes due 2019. The closure of this transaction has reduced the borrowing base under Forest’s credit facilities to $400 million.

Forest intends to use the proceeds from the sale to reduce debt and enhance financial flexibility. This divestiture would enable the company to focus on its core Eagle Ford Shale assets, where oil production is projected to show significant growth going forward.

Forest Oil has a growing upstream presence in the emerging basins of Texas, Canada and Mexico. Production growth from the Eagle Ford Shale is a key component of the company’s overall annual upstream growth plans over the next few years.

The company nonetheless is intent on divesting its non-core properties to boost financial strength and flexibility. We believe this will eventually allow the company to aggressively pursue growth opportunities in its plays and provide meaningful upside potential for investors.

Forest Oil holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include SM Energy Company (SM - Analyst Report), Abraxas Petroleum Corp. (AXAS - Snapshot Report) and Western Gas Partners LP (WES - Snapshot Report). All these stocks hold a Zacks Rank #1 (Strong Buy).

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