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Forest acquires East Texas gas prospect
Petroleum News
Forest Oil said Feb. 13 that it has acquired some 26,000 net acres primarily in the Cotton Valley play in East Texas from six private entities. Forest said the assets have estimated proved reserves of 110 billion cubic feet of gas equivalent and produced an average of some 13 million cubic feet of gas equivalent a day in January. The company will pay approximately $255 million in cash for the assets and intends to fund the acquisition using its credit facility and cash on hand.
Forest said the purchase adds “another low-risk repeatable onshore development play with a growing production portfolio” to its properties. It plans a four-rig drilling program for 2007 and said there are 300 identified drilling locations on the acreage.
Of the 110 bcfe, Forest said 43 percent is proved developed and 90 percent is natural gas. Additions to the company’s production will be an estimated 4 bcfe in 2006 and 8 bcfe in 2007, “based on current drilling assumptions.” The company said its expected drilling activity will increase by 20 wells in 2006 and by 50 wells in 2007. Tight gas basin “Most of this area of the Cotton Valley play has been approved for 40 acre down-spacing with locations yet to be drilled,” Craig Clark, Forest’s president and chief executive officer, said in a statement. “It is another tight gas basin acquisition with a good acreage position that has similar completion techniques to Buffalo Wallow and Wild River.”
He said the acreage would give the company “another significant multi-year, multi-rig development drilling program,” with production from the assets expected to double by the end of 2007.
Forest said current well economics in the acquisition area indicate an investment of $1.6 million to $2 million to drill and complete a well with an average estimated ultimate recovery of 1.2 bcfe to 1.3 bcfe; acquired assets have estimated production expenses of less than $1 per thousand cubic feet equivalent.
The acquisition is scheduled to close March 31.
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