Forest Oil Corp. said it will pay about $255 million for producing assets, including about 26,000 acres, mainly in the Cotton Valley play of East Texas. The 110 Bcfe of estimated proved reserves (43% proved developed, 90% natural gas) produced about 13 MMcfe/d in January, and the Denver-based company said it expects to double production by the end of 2007.

“Most of this area of the Cotton Valley play has been approved for 40 acre down-spacing with the locations yet to be drilled,” said Forest CEO H. Craig Clark. “It is another tight gas basin acquisition with a good acreage position that has similar completion techniques to Buffalo Wallow and Wild River. This asset base will give us another significant multi-year, multi-rig development drilling program and will increase both the size and quality of our onshore North American asset base and provide an additional core growth area to our Southern Business Unit following the offshore spinoff.”

Forest said it will continue a two-rig program in the area during 2006, increasing to a four-rig program in 2007. The company has identified 300 drilling locations, requiring an estimated $1.6-2 million to drill and complete each well. Estimated recovery is 1.2 to 1.3 Bcfe per well with production expenses of less than $1.00 per Mcfe.

Forest is acquiring the assets from six private entities; the transaction is scheduled to close March 31. Almost a year ago Forest announced the acquisition of its interest in the Buffalo Wallow field through the $200 million cash (plus $30 million debt) purchase of a private company with an 83% average working interest in the Texas field (see Daily GPI, March 1, 2005).

Last week the company’s board declared a special dividend in connection with the spinoff of its Gulf of Mexico operations (see Daily GPI, Sept. 13, 2005).

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