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Current FST Stock Info

This morning, Forest Oil Corp. (ticker: FST) announced the divestiture of 272 Bcfe of proved reserves for $325MM (after tax) to Hilcorp (private).

The transaction metrics were $1.19/Mcfe or approximately $4,924 per flowing Mcfe.  At the close of business on December 28, 2012, FST’s Enterprise Value per Reserves was $1.47/Mcfe and its EV to Trailing 12-Month production valuation was $8,298 Mcfe/d.  Forest Oil has generated a little more than $600MM from asset sales for roughly 88 MMcfe/d of production, or $6,818 per flowing Mcfe/d.

For the trailing twelve months ended September 30, 2012, Forest Oil production was 338 MMcfe/d, a decrease of 17% year-over-year.  Long-term debt at September 30, 2012, was $2.092 million, or 15% higher from the corresponding period in 2011.  The sold assets represent about 19% of the company’s Q3’12 production.

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The company has an undrawn line of credit of $1.5 billion.  However, unless there is a bolt-on acquisition that does not require the issuance of stock to close the deal, it would be a tough sell to the market to add further financial encumbrances as FST works to de-lever the balance sheet as management said in its Q3’12 conference call.

On December 28, 2012, FST was trading at an estimated 2013 P/CFPS ratio of 2.1 times.  Using our proprietary valuation methodology, when comparing to a 25-company small cap group (companies with market capitalizations that range between $1.0 billion and $500MM), the predicted 2013 P/CFPS ratio for FST is 1.9 times.  Were Forest to reduce its debt/market capitalization ratio from 277% to the small-cap median of 65%, the forward 2013 P/CFPS ratio would jump to 3.3 times.  Our analysis delivers an R-squared ratio of 68% and a 93% confidence interval.  See slide attached.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable.  This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note.  This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary.  Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results.  EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services.  In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies.  As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note.  The company or companies covered in this note did not review the note prior to publication.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.