Unocal Corp. agreed over the weekend to sell Forest Oil Corp. 70 of its offshore Gulf of Mexico (GOM) and onshore Louisiana properties for $295 million. As of July 1, the 273,000 net acres held approximately 34 MMboe in reserves, with net production of 18,000 boe/d.

The sales agreement is Forest’s fourth acquisition since May 2003, and comes less than two months after former COO Craig Clark took over as chief executive and Forrest Hoglund was named chairman of the board (see Daily GPI, Aug. 1). Clark had been in charge of Apache Corp.’s U.S. operations when he was recruited to join Forest three years ago; Hoglund, a long-time oil and gas executive, is a presiding director.

Unocal had put the properties up for sale early this year as part of its continuing efforts to pare down debt and increase funding on its sizable inventory of development projects and discoveries in the Lower 48. About 20 properties remain for sale and are expected to be sold in the fourth quarter.

After the sales are completed, Unocal’s Gulf Region business unit portfolio will include roughly 25 fields with production of approximately 67,000 boe/d, along with an option to initiate deep exploration on many of the fields being sold to Forest. Unocal, whose GOM investment is about $6.2 billion, also will continue its deep shelf exploration program, which currently is in the process of drilling five deep shelf tests.

Third quarter 2003 special items related to the Lower 48 asset sales include a $30 million pretax charge related to the sale to Forest, a $18 million pretax charge related to the expected fourth quarter asset sales, and a $45 million pretax gain from the sale of Tom Brown Inc. shares earlier this month. Unocal also will record a special item charge for employee reductions related to the asset sales, with the amount depending on the number hired by Forest in the transition.

Standard & Poor’s (S&P) analyst Paul B. Harvey said the sale proceeds would be applied to debt reduction and to fund investments in projects that “likely will yield improved returns over the long term.”

Harvey said the third quarter charges of $30 million, along with expected fourth quarter asset sales of $18 million”will be largely offset by the recent $45 million gain recognized on the sale of shares of Tom Brown Inc.” Unocal, said Harvey, is shifting its portfolio to longer-lived properties” in an attempt to “fortify its financial profile in anticipation of funding several large, long lead-time, capital-intensive projects.?

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