Following the abrupt departure of Forest Oil Corp. (FST) CEO H. Craig Clark, one analyst that follows the company suggested that his quick exit was related to the company’s failure to strike a joint venture (JV) in the Eagle Ford Shale of South Texas.

“There had been a lot of Street speculation that the board would make this move if FST was unable to execute on an Eagle Ford JV,” wrote Wells Fargo Securities analyst David Tameron in a note Friday. It’s “hard to know at this point if this move is an indication of that failure, but that may be the read-through for the Street.”

The Forest board appointed board member Patrick R. McDonald to serve as interim CEO. McDonald has been a Forest director since 2004 and has served as CEO, president and director of Carbon Natural Gas Co., an oil and gas exploration company, since April 2003 and will continue to serve in those capacities.

“Among Pat’s first priorities will be to personally involve himself in Forest’s Eagle Ford Shale process and in concluding other transactions in progress to reduce debt,” said Forest Chairman James D. Lightner. The board initiated a search process for a permanent CEO and has retained recruiting firm Spencer Stuart. McDonald has asked not to be considered for a permanent role as CEO.

“Forest has valuable assets, hard-working and talented employees and tremendous potential, and the board is confident that the company can significantly increase shareholder value,” Lightner said. “We will remain focused on executing our strategic plan: driving strong cash flow generation by growing Forest’s oil and liquids production, while maintaining our prudent approach to portfolio management and controlling the bottom line.”

Friday morning Forest shares were trading around $6.43 after slipping slightly from Thursday’s close. The stock’s 52-week high is $28.22.

Tameron wrote that although the Wells Fargo team has “been a big supporter [of Clark] over the years, we think it is time for Forest to seek a new strategic direction, and [Friday’s] announcement is likely the first major step in that process.”

The analyst said likely in order next are appointment of a new management team along with a restructuring; “putting the entire company up for sale,” also is possible.

“On the restructuring front, the Eagle Ford still represents [the] biggest variable,” Tameron wrote. “If the company is able to secure a JV partner, this would ease the urgency to raise cash through asset sales. If there is no EF [Eagle Ford] JV, [the] company could sell existing Permian acreage or noncore EF acreage, or raise cash through some sale combination of Uinta acreage, midstream assets, or other transactions such as a trust. With FST shares trading close to proved value, we think this could be a turning point for FST as new management looks to de-lever and refocus operations.”

Back in January following an Eagle Ford pairing of Japan’s Marubeni Corp. and Hunt Oil Co., Tameron wrote that the deal was a positive for Forest “who has acreage in the same vicinity and is currently trying to get a joint venture done” (see Shale Daily, Jan. 9).

Forest holds about 112,000 gross acres (103,000 net) and is running one rig in the oil-bearing section of the Eagle Ford, according to information on the company’s website dated April 30.

“…[T]he company completed three horizontal wells (100% working interest) targeting the upper-most member of the Eagle Ford Shale interval,” it said. “The first well reached a 24-hour maximum production rate of 605 boe/d (96% oil). This well, which utilized a new stimulation design, had a 30-day average production rate of greater than 500 boe/d and, in less than 60 days, had cumulative production of approximately 25,000 bbl of oil.

“Forest completed its second and third wells in April and they are currently testing at 24-hour rates of 449 boe/d (92% oil) and 116 boe/d (97% oil).”