Forest oil net declines

Allen Baker

Earnings at Forest Oil Corp. dropped in the third quarter as lower prices combined with increased investment in Alaska infrastructure to deal with new production. The company earned $1.5 million in the quarter, down from $33.8 million in the same quarter a year earlier. That’s a drop of 96 percent, though special items had some impact.

Besides the $4 million spent to upgrade pipelines to take increased flow from a big new strike in the McArthur River field, Forest booked several big “unusual items” in the quarter, notably $11 million in foreign currency translation losses and losses from derivatives, along with $2.3 million in merger expenses from the acquisition of the former Forecenergy.

Still, volumes were down. Natural gas production was 291.4 million cubic feet daily, a 7 percent reduction from the 314 million a year earlier.

Liquids production slipped 5 percent from 31,200 barrels a day to 29,600 barrels. Prices for those products dropped as well, as they did for all the oil companies.

Denver-based Forest said the decrease in volumes reflects the effects of property sales, a reduction in drilling activity, and a shifting of investment dollars to Alaska, where Forest’s Osprey platform is showing a lot of promise that won’t be turned into a flow of oil and dollars until the end of next year. Forest is predicting production will continue to decline in the fourth quarter of this year.

Revenues for the third quarter were $201.1 million, down 13 percent from $230.5 million for the year-ago period.