Pacific Energy Resources Ltd. agreed Tuesday to buy Forest Oil Corp.'s Alaskan subsidiary for an estimated $448 million and 5.5 million Pacific Energy shares.
Forest in January said it would sell its Alaska business unit, which is one of its five core operating businesses, to help pay for its $1.6 billion purchase of The Houston Exploration Co. (see Daily GPI, Jan. 9).
At year-end 2006, Forest Alaska Operating LLC's estimated proved reserves totaled 181 Bcfe, with production of 38 MMcfe/d. In addition to the subsidiary, Pacific Energy will gain about one million acres net of undeveloped acreage in Alaska along with Forest's interest in the Cook Inlet Pipe Line Co.
"This represents a tremendous opportunity to build a new position that fits well within our business strategy and expertise," said Pacific Energy President Darren Katic. "These large legacy assets have exactly the kind of characteristics we look for when pursuing acquisition opportunities."
The purchase price includes $380 million in cash, which will be used to repay loans, $68 million in cash to Forest and 5.5 million shares worth about $16 million before Tuesday's trading. The transaction is expected to close by the end of June; it carries an effective date of Jan. 1.
"We are pleased to announce this agreement to sell our Alaskan assets right on the schedule we stated earlier this year," said Forest CEO H. Craig Clark. "Our equity ownership in Pacific indicates our confidence in their plan for further developing these assets based on their work in similar fields in the U.S."
Pacific Energy, headquartered in Long Beach, CA, currently operates onshore assets that consist of seven oil and natural gas fields in the Los Angeles and San Joaquin basins. The properties have about 170 operating wells averaging 850 boe/d. Pacific Energy also has a participation agreement with Shell Oil Co. and Wolverine to explore and develop a 99,000-acre area in the Green River Basin of Wyoming.
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