Forest Oil to divest Alaska-based assets

Posted: Wednesday, January 10, 2007

The Osprey oil platform off Nikiski is among Alaska assets being spun off by Forest Oil Corp. as it attempts to reduce its debt following its takeover of Houston Exploration Co.

Forest, which transferred the majority of its Cook Inlet assets to a newly formed subsidiary — Forest Alaska Operating LLC — in November, announced Monday it will divest its Alaska business to reduce debt and narrow its geographic focus.

One of North America’s largest independent exploration and production companies, Forest agreed to acquire 100 percent of outstanding stock in Houston Exploration, in a stock and cash transaction totaling approximately $1.5 billion. Analysts described the takeover as friendly.

In addition to the Osprey platform, Forest has interests in the Cosmopolitan prospect operated by ConocoPhillips north of Anchor Point.

Kenai Peninsula Borough oil, gas and mining liaison Bill Popp said Forest also has onshore acreage in Susitna and West Forelands and has interest in the Corsair prospect south of the Tyonek platform in upper Cook Inlet.

“This is not unexpected,” said Popp. “This has not been one of their leading assets for some time.”

Popp said the spin-off should be viewed as an opportunity in that the new buyer of Forest Oil’s Alaska assets would likely come in with money “to develop the assets and make it work.”

“We’re sorry to see Forest go. They have made a tremendous investment in Cook Inlet,” Popp said Tuesday.

Forest Oil representatives did not return phone calls seeking their comment on the divestiture.

The combined Forest Oil-Houston Exploration Company will have estimated proved reserves of 2 trillion cubic feet of natural gas equivalent in the Rocky Mountains, Texas, Arkansas and Oklahoma.

The deal consists of 23.6 million shares and $740 million in cash.

Houston Exploration shareholders will receive 0.84 of a share of Forest Oil and $26.25 in cash for each share of Houston Exploration.

Forest Oil will also assume about $100 million in Houston Exploration debt.

The transaction is pending the approval of shareholders of both companies and regulators. The boards of directors of both companies approved the deal.

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