OGJ Senior Staff Writer
HOUSTON, Dec. 14 -- Forest Oil Corp. plans to sell 19.9% of its subsidiary, Lone Pine Resources Inc., in an initial public offering to be followed by a spinoff of Forest’s remaining shares in Lone Pine to Forest’s shareholders. The IPO is estimated at $375 million.
A Denver company, Forest Oil said Lone Pine filed a registration statement with the US Securities and Exchange Commission regarding the proposed IPO. Along with the IPO, Forest Oil intends to contribute its ownership of Canadian Forest Ltd. to Lone Pine.
Forest Oil believes separation of the Canadian assets from the rest of its assets will enhance Lone Pine’s valuation. Forest Oil also expects that its own overall valuation will improve as a result.
The IPO is expected to be completed by July 2011. Forest Oil plans a spinoff of its remaining ownership in Lone Pine about 4 months after the IPO, although Forest Oil retains the right to decide the timing.
Forest Oil said it intends to focus on growth through horizontal drilling on its remaining liquids-rich development inventory. Lone Pine intends to use net proceeds from the offering to repay debt it owes Forest Oil, and Lone Pine will use any remaining funds for general corporate purposes.
“Lone Pine intends to focus on growing its estimated proved reserves and production,” Forest Oil said, adding the IPO is intended to be done in a manner to preserve Forest Oil's ability to complete a tax-free spin off of its remaining stake in Lone Pine.
Forest Oil’s principal reserves and producing properties are in Arkansas, Louisiana, Oklahoma, Texas, Utah, Wyoming, and Canada.
Canadian Forest Oil, the current owner of Forest Oil’s Canadian assets, has estimated proved reserves of 322 bcf of gas equivalent through holdings in Alberta, British Columbia, Quebec, and the Northwest Territories.
UBS analyst David Deckelbaum issued a research note suggesting Forest will use the transaction to finance “greater activity in Forest’s core 103,000 net acres in the Granite Wash," a liquids play primarily in Texas.
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Forest Oil plans Canadian subsidiary spinoff