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Analyst Blog

Denver-based Forest Oil Corporation’s second-quarter 2014 loss of 6 cents per share (excluding non-recurring items) lagged the Zacks Consensus Estimate of a loss of 2 cents per share. Moreover, the quarterly figure decreased 200% from the year-ago earnings of 6 cents.


The lackluster performance was mainly due to a fall in net sales volume and oil sales volume. Lower oil prices also contributed to the decline.

Total revenue in the reported quarter decreased 48.3% to $60.4 million from the year-ago level of $116.8 million and missed the Zacks Consensus Estimate of $68.0 million.

Production

Net sales volume shrunk nearly 53% year over year to 99.6 million cubic feet equivalent per day (MMcfe/d). It comprised 31% liquids compared with 41% in the prior-year quarter.

The company’s net oil sales volume in the second quarter decreased nearly 52% from the year-ago period to 3.2 thousand barrels per day (MBbls/d). On the bright side, natural gas sales volume in the quarter was 68.3 million cubic feet per day (MMcf/d) and accounted for 68.6% of the total quarterly volume.

Realized Prices

The average equivalent price per million cubic feet (Mcf), including the effect of hedging, was $6.16, up 2.2% from the year-ago realization of $6.03. Natural gas was sold at $3.97 per Mcf, up 14.4% from the comparable prior-year quarter. However, natural gas liquids (NGLs) were sold at $29.97 per barrel, up nearly 8% from the year-ago quarter and average realized oil price was $87.92 per barrel, down nearly 7% from the year-ago quarter.

Expenses

During the second quarter, lease operating expenses of $1.58 per Mcfe increased 11.3% year over year. Unit general and administrative expenses rose 37.3% to 70 cents per Mcfe from the year-ago level of 51 cents per Mcfe. Interest expense per unit increased nearly 14% to $1.74 per Mcfe from $1.53 per Mcfe in the second quarter of 2013.

Financials

At quarter-end, Forest Oil had $14.6 million of cash and cash equivalents with $800.2 million of long-term debt (including current portion), representing a debt-to-capitalization ratio of 106% (up from 95.8% at the end of first-quarter 2014).

Zacks Rank

At present, Forest Oil has a Zacks Rank #3 (Hold). However, other stocks in the oil and gas sector like Weatherford International plc (WFT - Analyst Report), CNOOC Ltd (CEO - Analyst Report) and Kosmos Energy Ltd. (KOS - Snapshot Report), sporting a Zacks Rank #1 (Strong Buy), are expected to perform better.
 

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