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Vol. 12, No. 35 Week of September 02, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Pacific Energy closes on Forest Alaska assets

Alan Bailey

Petroleum News

Pacific Energy Resources closed Aug. 27 on its purchase of Forest Oil Corp.’s Alaska assets. The two companies announced the acquisition at the end of May and since then have been negotiating the details of the agreement.

Pacific Energy Chief Financial Officer Jerett Creed told Petroleum News Aug. 30 that his company plans to move ahead with exploration of the Cook Inlet acreage it acquired from Forest.

“We’ve been working on that and we do have plans to pursue the prospects. …We are very optimistic,” Creed said.

Looking for a jackup

Creed said the company wants to use a jackup rig to explore its Cook Inlet offshore prospects. Those prospects include Corsair, which is on the same geologic trend as the North Cook Inlet, Kenai and Cannery Loop gas fields. Pacific Energy has been engaged in discussions with other companies interested in bringing a jackup to the Inlet, and with drilling companies, Creed said.

But Pacific Energy has yet to announce who will lead its Alaska operations and how those operations will be organized. Company management will be in Alaska shortly to meet with the staff that it has inherited from Forest, Creed said.

$400 million plus

Under the final agreement Pacific Energy has acquired a 100 percent interest in Forest Alaska Operating LLC, the Forest subsidiary that owned most of Forest’s Alaska properties. Pacific Energy has also acquired other Forest assets that were not owned by Forest Alaska Operating. The purchase price was $400 million, plus the issuance of 10 million shares of Pacific Energy common stock and a seller note to Forest with a net present value of approximately $30 million, Pacific Energy said.

The assets that Pacific Energy has acquired include interests in nine producing fields in the Cook Inlet area; nearly 1 million net acres in oil and gas leases; and a 50 percent equity interest in the Cook Inlet pipeline that carries oil down the west side of Cook Inlet to the Drift River terminal, Pacific Energy said.

Appeal of undeveloped acreage

“We are extremely pleased to have successfully completed this acquisition; it represents a tremendous opportunity for the corporation and its shareholders,” said Darren Katic, president of Pacific Energy. “This package of assets is a direct extension of our business strategy; the established production, with long life reserves, generates strong predictable cash flow. The multiple infill drilling opportunities provide a low risk means to grow the corporation’s production through redevelopment. Significant undeveloped acreage with multiple high-quality exploration targets provides large exploration upside.”

“The close of this transaction marks a key strategic event for Forest,” said Craig Clark, president and CEO of Forest Oil. “The producing assets of the company are now entirely onshore North America and focused primarily on repeatable plays in tight-gas sands and long-lived oil. Additionally, with the sale of these assets, Forest has reduced the leverage on its balance sheet.”



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