Forest Oil Corp. plans to sell $100-150 million of midstream assets in East Texas and noncore Canadian properties this year and will use the proceeds to increase flexibility and reduce debt, CEO Craig Clark said during a conference call with financial analysts Thursday.
The Texas assets had throughput of 80 MMcf/d in 2009 with more than 200 miles of pipelines and 350 MMcf/d of capacity, Clark said. Divesting the Canadian properties — noncore properties with 15-20 MMcfe/d of production and 60-70 Bcfe of estimated proved reserves — would complete a plan first announced last year. Craig said the main components of the Denver-based producer’s capital spending and organic growth will be the Texas Panhandle, the Haynesville/Bossier Shale and the Deep Basin Nikanassin Play.
The company has sold $1.1 billion of assets since announcing a divestiture plan almost two years ago, Craig said.
Last year Forest reduced its drilling investments and decided to concentrate its efforts in the Granite Wash play of West Texas and the Haynesville Shale (see Daily GPI, Aug. 6, 2009). Forest has reduced its gross well count from 9,583 to 5,037, but it was able to report earnings before interest, taxes, depreciation and amortization of $209 million in 4Q2009, an increase of 18% compared with 4Q2008.
“We’ve become increasingly efficient as we’ve become increasingly focused,” Craig said.
Forest said it has drilled and completed 10 wells in its Canadian Deep Basin Nikanassin play with average 24-hour initial test rates of 14 MMcfe/d per well and has added 43,000 gross and net acres for a total of 105,000 gross (64,000 net) acres in the play. Forest is currently running three rigs in the Nikanassin and estimates that it has 20-25 MMcfe/d of net production that is shut in while awaiting infrastructure scheduled to be completed in the fourth quarter.
Forest said the first four wells of its Texas Panhandle Granite Wash program have performed in excess of the company’s pre-drill decline curve and have resulted in “significant production and revenue realizations.” In January Forest said its third operated horizontal well in the play produced at a 24-hour production rate of 15.1 MMcf/d, and the fourth well produced at an initial rate of 16 MMcf/d (see Daily GPI, Jan. 15).
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