Continuing to execute its plan of expanding onshore exploration and production plays, Denver, CO-based Forest Oil Corp. announced two transactions last week that will comprise additional building blocks of the company’s 2007 capital program beyond the “Big Three” primary growth areas (Buffalo Wallow, Wild River and Cotton Valley).

Forest assumed operatorship on Tuesday of the Katy Field, located in Waller, Fort Bend and Harris Counties, TX from Exxon Mobil and, separately, executed an exploration joint venture agreement with a third party increasing Forest’s current gross acreage to 20,000 in the prolific Barnett Shale primarily in Hill and Erath Counties, TX.

The Katy Field contains 131 existing wellbores, 56 of which are producing. Forest had previously been a nonoperator of the field for 14 years with a 52% working interest. Forest operated a 3-D seismic survey in 2003, which targeted deeper objectives. The Katy Field encompasses approximately 33,000 gross acres and has produced over 10 Tcf of natural gas to date, primarily from the Yegua formation, and had gross production of 13 MMcfe/d during the first quarter of 2006.

Forest also said it has recently increased its gross acreage position to approximately 20,000 acres in the Barnett Shale play in North Texas through the execution of an exploration joint venture agreement with a third party for its acreage in Hill County, which covers approximately 14,000 acres as well as ongoing leasing activity. The acreage is located primarily in Hill and Erath Counties with 3-D seismic over a portion of the acreage. The first horizontal well in Hill County was spudded in July 2006. After this initial well and further evaluation of the acreage, Forest said it anticipates developing an active drilling program in this area in 2007.

The transactions are inline with the company’s plans to focus on onshore exploration. Last year, Forest Oil said it was spinning off its extensive offshore Gulf of Mexico operations and merging the spin-off with a subsidiary of Mariner Energy Inc. in a stock-for-stock transaction (see NGI, Sept. 19, 2005). In March 2006, the companies jointly announced the completion of the spin-off of Forest’s subsidiary, Forest Energy Resources Inc. (FERI), which owns Forest’s Gulf of Mexico operations, and the completion of a subsequent merger of FERI with a subsidiary of Mariner, making Mariner a Gulf of Mexico focused independent exploration, development and production company.

The company announced last year that its capital budget for 2006 is $425 million to $475 million, not including capital expenditures planned in the Cotton Valley area of East Texas. Of this total, Forest said approximately 40% of the budget was expected to be directed to the company’s large drilling programs in Buffalo Wallow, Wild River, and the Greater Haley area. Forest’s principal reserves and producing properties are located in Alaska, Louisiana, New Mexico, Oklahoma, Texas, Utah, Wyoming, and in Canada.

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