Back to top

Analyst Blog

Denver-based Forest Oil Corporation (FST - Analyst Report) plans to offload its assets in Texas for an after-tax sum of $325 million, which it intends to utilize for paying down debt. However, the name of the buyer was not disclosed by the company.

The South Texas properties under consideration, barring its Eagle Ford Shale oil properties, produced 66 million cubic feet equivalent per day in the third quarter of 2012 and had 272 billion cubic feet equivalent of proved reserves as of December 31, 2011. The natural gas accounts for 86% of the third quarter production and 85% of proved reserves.

The properties also generated $60 million in income during 2012 and Forest Oil expects the transaction to close on February 15, 2013, upon fulfillment of customary closing conditions and purchase price adjustments. The funds raised from this sale are likely to be used to pay off a portion of the company's outstanding borrowings.

Forest Oil Corporation is an independent oil and gas company engaged in the acquisition, exploration, production and development of oil and gas properties in North America. The company operates five distinct geographic business units − Canada, Eastern, Southern, Western and International.

The company plans to focus on the divestiture of its non-core properties to boost its financial strength and flexibility. We believe Forest Oil's financial leverage remains comparatively higher than peer averages due to the company's recent acquisition activity. We also assert that returning to the growth mode will require external capital, asset sales or a recovery in commodity prices.

We like Forest Oil’s initiatives to increase liquids production, like its peer Chesapeake Energy Corporation (CHK - Analyst Report). The company has entered the fourth quarter with five drilling rigs, which are all operating in liquids-rich prospects in its three core development areas that include Panhandle and Eagle Ford.

However, we remain skeptical about its natural gas weighted production level. As natural gas accounted for 66% of the company’s total production in the third quarter of 2012, Forest Oil is exposed to the cautious outlook of the North American natural gas market.

Forest Oil holds a Zacks #3 Rank, equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%