Inability to find a buyer for its “high-quality” Gulf of Mexicoproperties pushed Miami-based Forcenergy over the edge into Chapter11 bankruptcy last week, Chairman Stig Wennerstrom said in aconference call. At least one other debt-laden producing companycould follow in its footsteps.

“We had a lot of interest in [the properties] but no success ingetting to closing. It’s a soft market. It’s a buyers’ market outthere, and, by the way, these properties are not for sale anymore.”

Forcenergy, which has current production of about 200 MMcf/d ofgas and 22,000 barrels/d of oil and condensate, is laden with debt.The company owes $315 million from a $320 million credit facilityas well as $50 to $60 million of payables to vendors, some of whichare overdue. On a net basis, the company has about $40 million ofnegative working capital.

“We also attempted to raise capital basically for the last 12months in a market with downward spiraling product prices, both inoil and gas. We didn’t succeed in raising capital to the terms wewere looking for,” Wennerstrom said. “Lately, what made us act overthe weekend is that we heard rumors that trade vendors tried toorganize and were talking about pushing us into involuntarybankruptcy. We said that is not in the best interest of all thestakeholders in the company.”

Not all company stakeholders took that news to heart. In fact,on the Yahoo! Internet message board where investors post thoughtson the company, nearly all that could be found among recent postswas grousing and gloating. The New York Stock Exchange last Tuesdaysuspended trading of Forcenergy shares and moved to delist thecompany from the exchange, prompting one investor to writeWednesday, “How can we liquidate our stock? What are our options?Please someone let me know.” Another wrote, “I only have a fewthousand lost in the FEN scam, but I would be interested in filinga class action suit.” But yet another post called the stock agamble from the start. “You guys make me puke. Anyone with half abrain could see that this (Chapter 11) was a possibility.”

The filing came as a surprise to at least one analyst, however,Jeffrey Robertson of Salomon Smith Barney said he did not expectit. “I knew they didn’t have a lot of liquidity under their banklines, but I didn’t realize they had this much trade payables out($50 to $60 million). I’m not sure how long it will take them toemerge from bankruptcy, maybe up to a year plus or minus.

“There are other companies that don’t have a lot of liquidity,but I don’t know that anybody is going to have to take the stepsthat Force has taken.”

One name that has come up is that of Dallas-based independentCoho Energy. On March 8, Coho said it had been notified by lendersthat it is in default under its existing credit agreement. Thedefault stems from non-payment of the first of five installmentsdue March 2 on the difference between the company’s total loan of$239.6 million and the borrowing base of $150 million. In Februarylenders had cut Coho’s borrowing base. Jefferies &amp Co.downgraded the company from “buy” to “hold” Feb 22. Coho’s lasttrade was March 5 when it closed at 5/8.

Petrie Parkman analyst Paul Leibman said, “If in fact the[Forcenergy] trade creditors were getting ready to do something,obviously they wanted to preempt the process and have a choice ofwhat venue they file in. I don’t know any inside skinny here thatwould suggest some sleight of hand being played.”

The last trade in Forcenergy shares was March 19. The stockclosed at 2 1/8. The stock’s 12-month high was 27 _ and low was _.

Independent Forcenergy for the nine months ended Sept. 30 hadtotal revenues of $210.6 million and a net loss of $19.8 million,versus net income of $18.9 million for the period one year prior.Activities are in the Gulf of Mexico, Alaska, Australia andoffshore Gabon. Forcenergy began life as a Swedish company whichthen created an American subsidiary based in Miami. Forcenergy Inc.and subsidiary Forcenergy Resources are the two entities filing forbankruptcy protection. Most of the company’s assets are held byForcenergy Inc.

Wennerstrom touted the company’s asset base, saying it has muchupside potential. “And we had a positive discretionary cash flow,even in months like January. It is clearly on the positive side.The immediate plan for the near future is to contact ourbondholders to discuss conversion of debt to equity.

“We will complete our debt financing, which is well underway. Weare looking at a pretty sizeable debt financing to provide us withample capital through the bankruptcy process. We also will beworking to secure new capital to strengthen the company andincrease its ability when we emerge from bankruptcy to act onopportunities in the marketplace.”

One analyst listening to the company’s conference callquestioned how Forcenergy could have positive discretionary cashflow in January or more recently when the company owes vendors $50to $60 million, at least some of it overdue.

Joe Fisher, Houston

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