(By Balachander) Forest Oil Corp. (NYSE: FST) said it has agreed to sell its non-core South Texas natural gas properties for after-tax cash proceeds of $325 million.
Forest plans to use the proceeds from the sale to pay down debt and retains all of its natural gas hedges.
According to Forest Oil, the properties produced 66 MMcfe/d (86 percent natural gas) during the third quarter of 2012, had estimated proved reserves of 272 Bcfe (85 percent natural gas) as of December 31, 2011, and generated roughly $60 million of lease-level income during 2012.
"The allocation of capital and resources towards our core oil and liquids assets in the Texas Panhandle and Eagle Ford, alongside the evident improvement in our financial position, is a material positive for us," commented CEO Patrick McDonald.
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The company said it will divest all of its properties located in South Texas, excluding its Eagle Ford Shale oil properties.
On a pro forma basis, the company said the liquids contribution of its production mix is roughly 40 percent and will continue to increase due to its oil-focused drilling program.
Forest said it continues to maintain its strategic natural gas optionality within our significant East Texas / North Louisiana acreage position.
The deal is expected to be completed on or before February 15, 2013, with an effective date of January 1, 2013.
FST shares closed Wednesday's regular trading at $6.91.