In a March 11 article about Forest Oil’s sale of its Alaska assets, Petroleum News quotes a statement from Forest’s lease broker’s Web site picked up March 5 that says, “Forest Oil Corporation has initiated a process for the sale of its entire Alaskan position, including its wholly owned subsidiary Forest Alaska Operating LLC and other assets in the Cook Inlet area.”
Sometime between then and March 10, the introductory message on the broker’s Web page was changed to say Forest Oil has “initiated a process for the sale of its Alaskan position including its wholly owned subsidiary, Forest Alaska Operating LLC. Other assets remaining in the state may be evaluated and will be considered separately.”
Scotia Waterous, the asset broker, also added more non-confidential information to the site, including a “non-binding” bid date of April 26 and confirmation that the data room opened March 12.
It also says Forest’s Alaska assets will be offered in two separate transactions, but that “Forest prefers to negotiate with a single party” for both.
First transaction: Forest Alaska OperatingThe first transaction is the sale of 100 percent of the capital stock of Forest Alaska Operating, which Scotia Waterous says is being offered for cash and contains all of Forest’s operating assets and some low-risk exploration assets.
The second transaction will involve Forest Oil’s other Alaska assets, which are also being offered for cash, and consist of about 1 million acres of exploration assets, a 40 percent interest in Cook Inlet Pipeline Co., and approximately 120 square miles proprietary 3-D seismic and 840 miles proprietary 2-D seismic.
The 1 million acres appears to encompass the rest of Forest’s exploration assets in Alaska, including Cook Inlet basin exploration acreage on and offshore (including the Corsair unit), two Susitna basin exploration licenses and ownership in a Copper River exploration license.
The Forest Alaska Operating assets in the first offering are identified by Scotia Waterous as follows:
• All Alaska production and proven reserves;
• Net production approximately 6,000 barrels per day (80 percent oil);
• Term loans of $375 million at LIBOR plus 4.5 percent (LIBOR stands for London Interbank Offered Rate. It’s the interest rate offered by a specific group of London banks for U.S. dollar deposits);
• Hedges on 3.65 million barrels of oil from January 2007 to December 2009 at $66.94 per barrel;
• 2006 EBITDA of approximately $70 million (EBITDA stands for earnings before interest, tax, depreciation and amortization);
• Mix of Forest and Chevron operated assets; and
• Low-risk exploitation opportunities quantified by DeGolyer and MacNaughton.
Proved and probable reserves of 51.3 million boeScotia Waterous says Forest’s three key producing fields are Chevron-operated McArthur River, which represents 45 percent of Forest’s Alaska production, Forest-operated Redoubt Shoal (11 percent), and Chevron-operated Trading Bay (7 percent).
In a reserves and production summary, current production is pegged at 5,900 barrels of oil equivalent per day, which is the company’s average daily production for the second half of 2006.
Proved reserves is listed at 32.5 million barrels of oil equivalent, but proved and probable reserves are 51.3 million barrels of oil equivalent. Those numbers come from a DeGolyer and MacNaughton reserves appraisal effective June 30, 2006, but Scotia Waterous says an updated D&M report effective Dec. 31 is available in the data room to qualified bidders.