By OGJ editors
HOUSTON, Jan. 8 -- Forest Oil Corp. plans to acquire Houston Exploration Co. in a stock and cash transaction totaling $1.5 billion, plus the assumption of net debt estimated at $100 million as of Dec. 31, 2006.
Forest of Denver expects to create a new business unit in Houston. In addition, Forest announced plans to sell its Alaska division to reduce debt and narrow its geographic focus.
The acquisition will add more than 3,200 drill sites to Forest's existing inventory, said H. Craig Clark, president and chief executive officer. Assets include tight gas sand basins with which Forest has experience using horizontal drilling and fracture stimulation.
On a pro forma basis using yearend 2005 statistics, the Forest-Houston Exploration combination would have proved reserves of 2 tcf of gas equivalent, of which 69% would be proved developed. About 70% of the proved reserves would be gas. Forest is adding 655 bcf of proved gas reserves and production of about 205 MMcfd of gas.
Deal terms
The agreement calls for Houston Exploration shareholders to receive 0.84 a share of Forest stock and $26.25 in cash for each Houston Exploration share outstanding. The boards of Forest and Houston Exploration unanimously approved the transaction, which remains subject to regulatory approvals and other customary conditions.
The acquisition will create a concentrated, complementary set of oil and gas assets across Texas, Forest said. The acquisition also provides a strong production base in the Arkoma basin near the emerging Fayetteville shale play.
In addition, Forest is increasing its exposure to the Rocky Mountains with 1,900 identified drilling locations in the Cretaceous Niobrara in the Denver-Julesburg basin.
