Forest Oil Corp. continued its quest for onshore natural-gas assets by agreeing Monday to purchase natural-gas properties in east Texas for $255 million.
Denver-based Forest said it has identified about 300 drilling locations in the purchased properties and plans to spend up to $2 million per well for drilling.
The purchase signals Forest’s ongoing intent to acquire onshore energy holdings in the United States – a movement prompted by the company’s decision last year to spin off its offshore Gulf of Mexico oil and gas operation to shareholders and then sell the newly formed company to Mariner Energy Inc.
“It’s been a transition for Forest,” said Denver-based energy analyst David Tameron of Jefferies & Co. “They’ve gone from a company with lots of exploration to more of an acquire-and-exploit type of company.”
The 26,000-acre Cotton Valley gas properties in Texas will add 10 percent to Forest’s proven reserves. The acreage produces about 13 million cubic feet of natural gas a day – equivalent to 2 percent of the natural gas consumed in Colorado on an average day.
Forest chief executive Craig Clark said he anticipates that the firm’s aggressive drilling program will result in doubled production from Cotton Valley by the end of 2007.
Shares of Forest fell 81 cents Monday, or 1.7 percent, to $47.29 on the New York Stock Exchange.
Tameron described the Texas purchase as “a pretty good acquisition for them – not huge, but it gives them more assets and production.”
“The knock on Forest always had been that they couldn’t show double-digit production growth,” he said. “Now they’re in a position to grow production at a double-digit-plus rate over the next couple of years.”
Staff writer Steve Raabe can be reached at 303-820-1948 or sraabe@denverpost.com.
