Forest Oil selling noncore South Texas gas assets

Forest Oil Corp., Denver, agreed to sell its South Texas properties, excluding its Eagle Ford shale oil properties, for aftertax cash proceeds of $325 million.

The buyer is a privately owned exploration and production company, Forest said.

Subject to customary closing conditions, the transaction is expected to close by Feb. 15 with an effective date of Jan. 1.

The properties, which produced 66 MMcfed (86% natural gas) during third-quarter 2012, had estimated proved reserves of 272 bcfe (85% natural gas) as of Dec. 31, 2011.

Forest intends to use the proceeds from this divestiture to pay down debt and retains all of its natural gas hedges.

Patrick R. McDonald, president and chief executive officer, said the company is allocating its capital and resources towards core oil and liquids assets in the Texas Panhandle and Eagle Ford.

After the South Texas divestiture closes, liquids will account for 40% of the Forest Oil production. McDonald expects the liquids share of the production mix will increase.

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