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Forest Oil Corporation Valuation Report, July 2010 - Strategic and Operational Analysis
GlobalData, July 2010, Pages: 132
Forest Oil Corporation Valuation Report, July 2010 - Strategic and Operational Analysis
Summary
Forest Oil is an independent oil & gas company primarily dealing with exploration and production activities of natural gas, crude oil and NGLs in the US and Canada. The company has taken the strategic step of transforming itself from an offshore Gulf of Mexico operator to an onshore North America focused player. It has been pursuing acquisitions and divestitures actively since 2003-2004 and supplemented them with a strong display of drillbit reserve addition as part of this strategy. It invests in oil and gas assets with high growth opportunities and maintains financial flexibility aiming capital discipline and cost control. The company’s core operations are located in Buffalo Wallow, east Texas/ north Louisiana and Canadian Deep Basin. Apart from these, it has interests in upcoming resource plays such as Utica Shale in Canada and Eagle Ford Shale in south Texas. The company had estimated proved reserves of approximately 354 million of barrels of oil equivalent (MMboe) by the end of 2009 of which 83% were in the US, 15% in Canada and the rest in Italy. It also holds certain undeveloped acreage in South Africa. The company reported total oil & gas production of around 30.5 MMboe in 2009, an approximate 3.6% decline over the previous year volumes.
Scope
- Investment Thesis: This section highlights the companies new ventures, liquidity issues, assets analysis, hedging, new projects details, capex funding, geographical results of oil and gas operations, and other related analysis.
- Goals and Strategies: Provide highlights on their existing and upcoming challenges with the possible strategies.
- SWOT: This section highlights the companies internal strength, weakness, opportunities and threats to better understand their position in the market
- Production and Development profile: This section highlights the companies’ forecasted crude oil and natural gas production from their existing and upcoming assets. It also covers the detailed information and analysis on the producing and development assets.
- Exploration and M&A trends: This section includes exploration assets information resulted due to new discoveries, new drilling and other activities. Additionally, M&A section highlights the companies’ recent assets transactions, joint ventures, acquisition, and divestment activities during the specified period.
- Financial Forecast and Valuation: This section highlights the detailed financial forecast of the companies for coming five years. This section also provides intrinsic value of the companies’ by using different valuation techniques.
- Peer Group: This section compares peer group performance with the main companies on the basis of share prices, financial ratios, operational and financial parameters and other related activities.
Reasons to buy
- The report will enhance the decision-making capability in a more rapid and time sensitive manner. It will allow you to:
- Provide detailed analysis to those who are interested in knowing the companies’ existing and future business strategies.
- Provide in-depth analysis on the companies E&P profiles along with the exploration and M&A updates.
- Provide valuable insights to those who are tracking oil and gas markets and wants to know the intrinsic value of the companies.
- Use the analysis for strategy and planning, M&A identifications, and competitor analysis.
1 Table of contents
1.1 List of Tables
1.2 List of Figures
2 Forest Oil Corporation, Company Overview
3 Forest Oil Corporation, Watchlist for 2010
4 Forest Oil Corporation, Investment Summary
4.1 Forest Oil’s Texas Panhandle Will Emerge as The Largest Contributor to The Production; Granite Wash Development Holds The Key
4.2 Cotton Valley/ Haynesville Formations, Switch To Horizontal Drilling To Increase Operational Efficiency
4.3 Canadian Deep Basin Area - Multiple Formations For Potential Drilling; Dependent On Evi Light Oil To Add Liquids
4.4 Forest Oil’s Capital Expenditure Mainly Depends On Internally Generated Cash Flow; Asset Sales Set To Improve Debt To Equity Level
5 Forest Oil Corporation, SWOT Analysis
5.1 Strengths
5.1.1 Low Cost Operator; Stand-out Among Its Peers
5.1.2 Core Assets Concentrated in The US And Canada Offering Repeatable Plays
5.2 Weakness
5.2.1 Declining Profitability
5.3 Opportunities
5.3.1 Substantial Potential In Texas Panhandle, Canadian Deep Basin Along With Shale Plays; Focus Shifted To Horizontal Drilling To Increase Recovery Potential
5.3.2 Divestitures Of Non-Operated Interests To Create More Concentrated Portfolio
5.4 Threat
5.4.1 Low Liquids Content In Production Might Dent Forest Oil’s Revenues in The Near Future
6 Forest Oil Corporation, Goals and Strategies
6.1 Maintain The Asset Portfolio Focusing On Repeatable Resource Plays
6.2 Control Operating Costs To Achieve Operational Efficiency
6.3 Maintain Financial Flexibility To Make Viable Capex Decisions
7 Forest Oil Corporation, Production Overview
7.1 Production Profile
7.2 Texas Panhandle Area To Emerge as The Major Production Growth Area for Forest Oil
7.3 Forest Oil’s East Texas/ North Louisiana Region is Expected to Witness Reduced Activity Due To Weak Gas Prices
7.4 Nikanassin Development is Likely to Increase the Company’s Canadian Production
7.5 South Texas And Others
8 Forest Oil Corporation, Development Overview
8.1 Development Profile
8.2 Granite Wash And Morrow Development Form Major Activity In Texas Panhandle
8.3 Shale Development To Benefit Forest Oil In The Long Term; Extensive Additions Of Acreage Continues
8.4 Deep Basin Development A Low Risk Event; Nikanassin Could Become New Growth Driver In The Region
9 Forest Oil Corporation, Exploration and M&A Highlights
9.1 Utica Shale Has Significant Potential As Per Industry Estimates; Forest Oil Looking For More Data
9.2 Uptrend In Organic Reserve Additions
9.3 M&A Activity
10 Forest Oil Corporation, Outlook
11 Forest Oil Corporation, Forecast Production & Financial Statements
11.1 Income Statement (2007-2014E)
11.2 Balance Sheet (2007-2014E)
11.3 Cash Flow Statement (2007-2014E)
11.4 Financial Ratios (2007-2014E)
12 Forest Oil Corporation, Valuation
12.1 Net Asset Value
13 Forest Oil Corporation, Peer Comparision
13.1 Share Price Performance
13.2 Operational And Financial Performance
14 Forest Oil Corporation, Key Risks
14.1 Volatile Commodity Price
14.2 Reserve Replacement
14.3 Competition with peers
15 Forest Oil Corporation, Detailed Operational & Financial Analysis
15.1 Forest Oil Corporation, Quarterly Results of Oil & Gas Operations Per boe Produced
15.1.1 Results of Oil & Gas Operations Per boe Produced
15.1.2 Results of Oil & Gas Operations Per boe Growth Rates
15.2 Forest Oil Corporation, Quarterly E&P Costs Trends
15.2.1 Upstream Capital Expenditure
15.3 Forest Oil Corporation, Quarterly Production Trends
15.3.1 Total Crude Oil and Natural Gas Production Trend
15.3.2 Total Crude Oil & Natural Gas Production, By Country/Region, Q1, 2009-Q1, 2010
15.4 Forest Oil Corporation, Crude Oil Production
15.4.1 Total Crude Oil Production Trend, Q1, 2009-Q1, 2010
15.4.2 Crude Oil Production, By Country/Region, Q1, 2009-Q1, 2010
15.5 Forest Oil Corporation, Natural Gas Production
15.5.1 Total Natural Gas Production Trend, Q1, 2009-Q1, 2010
15.5.2 Natural Gas Production, By Country/Region, Q1, 2009-Q1, 2010
15.6 Forest Oil Corporation, Valuation and Financial Data
15.6.1 Share Price Performance, 2004-2009
15.6.2 Key Valuation Metrics, 2004-2009
15.7 Forest Oil Corporation, Production and Reserves Trends
15.7.1 Total Crude Oil and Natural Gas Production and Reserves Trend, 2004-2009
15.7.2 Total Crude Oil & Natural Gas Production and Reserves By Country/Region, 2004-2009
15.7.3 Total Crude Oil and Natural Gas Reserve Changes, 2004-2009
15.8 Crude Oil/Liquids Production and Reserve
15.8.1 Crude Oil/Liquids Production and Reserve Trend, 2004-2009
15.8.2 Crude Oil Production and Reserves By Country/Region, 2004-2009
15.8.3 Crude Oil/Liquids Reserve Changes, 2004-2009
15.9 Natural Gas Production and Reserve
15.9.1 Natural Gas Production and Reserve Trend, 2004-2009
15.9.2 Natural Gas Production and Reserves, By Country/Region, 2004-2009
15.9.3 Natural Gas Reserve Changes, 2004-2009
15.10 Total Crude Oil and Natural Gas Reserves Life Index
15.10.1 Total Crude Oil and Natural Gas Reserves Life Index, 2004-2009
15.10.2 Total Crude Oil and Natural Gas Reserves Life Index, By Country/Region, 2004-2009
15.11 Forest Oil Corporation, E&P Costs Trends
15.11.1 Upstream Capital Expenditure, 2004-2009
15.11.2 Acquisition Costs By Country/Region, 2004-2009
15.11.3 Exploration and Development Costs, By Country/Region, 2004-2009
15.12 Oil and Gas Cost Per boe, $/boe
15.12.1 Oil and Gas Cost Per boe, $/boe, 2004-2009
15.12.2 Oil and Gas Cost Per boe, $/boe, By Country/Region, 2004-2009
15.13 Forest Oil Corporation, Reserve Replacement Ratio
15.13.1 Oil and Gas Production Replacement Ratio, 2004-2009
15.13.2 Oil and Gas Production Replacement Ratio, By Country/Region, 2004-2009
15.14 Forest Oil Corporation, Results of Oil & Gas Operations Trend
15.14.1 Oil and Gas Revenue and Expenses, 2004-2009
15.14.2 Oil and Gas Revenue and Expenses, By Country/Region, 2004-2009
15.15 Oil and Gas Revenue and Expenses, Per boe
15.15.1 Oil and Gas Revenue and Expenses, By boe, 2004-2009
15.15.2 Oil and Gas Revenue and Expenses Per boe, By Country/Region, 2004-2009
15.16 Oil and Gas Performance Metrics
15.17 Forest Oil Corporation, Land Holdings and Well Data
15.17.1 Gross and Net Developed and Undeveloped Acreage, 2004-2009
15.17.2 Gross and Net Developed and Undeveloped Acreage, By Country/Region, 2004-2009
15.18 Well Statistics
15.18.1 Producible Oil and Gas Well, 2004-2009
15.18.2 Producible Oil and Gas Well, By Country/Region, 2004-2009
15.18.3 Exploration and Development Wells Drilled, 2004-2009
15.18.4 Exploration and Development Wells Drilled, By Country/Region, 2004-2009
15.18.5 Developed Reserves per Well, Oil (Mbbls per Well), Gas (MMcf per Well), Oil & Gas (Mboe per Well), 2004-2009
15.18.6 Developed Reserves per Well, By Country/Region, 2004-2009
16 Appendix
16.1 Methodology
16.1.1 Coverage
16.1.2 Secondary Research
16.1.3 Primary Research
16.1.4 Forecasts
16.2 Key Economic Assumptions
16.3 Data Sources
16.3.1 Company Source
16.3.2 SEC/Other Regulatory Filings
16.3.3 Agency Reports
16.3.4 Other Sources
16.4 Expert Panel Validation
16.5 Definitions
16.6 Unit Of Measure
16.7 About Us
16.8 Disclosure
16.9 Disclaimer
Forest Oil’s Texas Panhandle Will Emerge as The Largest Contributor to The Production; Granite Wash Development Holds The Key
Forest Oil owns approximately 94,000 net acres in Texas Panhandle area with a net unrisked potential of around 1,892 Bcfe. The company has been exploring unconventional liquids-rich Granite Wash play opportunities spanning across Hemphill, Lipscomb, Roberts and Wheeler Counties in this area. Apart from the Granite Wash play, this area has multiple drilling opportunities mainly targeting Des Moines, Atoka and Morrow intervals. The company proposed a capital spending of $152m in this area in 2010. The company is currently focusing on Granite Wash play in Central and South Fairways of Texas Panhandle. It is targeting the Morrow interval in the North Fairway.
The Central Fairway is located in the Hemphill County with major areas in focus being Buffalo Wallow and Canadian SE. It holds around 33,600 net acres in this fairway with a net unrisked potential of approximately 799 Bcfe. The company intends to target the best available Granite Wash zones for horizontal drilling. As part of the 2010 drilling program, it plans to drill six wells with an intention to establish operational efficiencies in drilling techniques in par with that of the industry. It plans to spend an estimated $27m capital in 2010 with an emphasis on cost control in the development process.
The South Fairway comprises Camp South and Frye Ranch areas in the Wheeler County. The company holds around 23,800 net acres with a net unrisked potential of approximately 751 billion cubic feet of gas equivalent (Bcfe) in South Fairway. It intends to introduce optimized development plans with the use of advanced technology targeting longer laterals and advanced hydraulic fracture design providing significant upside in its production. The company expects this implementation of advanced technology to improve its production rate and estimated ultimate recovery (EUR) of drilled well and simultaneously control the costs . The company plans to drill 12 wells in 2010 with an estimated net capital of $66m.
Forest Oil targets Morrow play in the North Fairway of Texas Panhandle. The Morrow interval is located at much deeper depths compared to Granite Wash and Atoka. The company holds around 36,600 net acres in this fairway with an estimated net unrisked potential of 342 Bcfe. The acreage is spread in Kelln and Mendota Ranch areas across Hemphill and Roberts Counties. The company plans to drill seven wells with an estimated net capital of $29m in 2010.
The authors expect the company to be well positioned in Texas Panhandle as an operator with the largest holding in the industry. The authors estimate the net production from this region in 2010 to be around 95.2 MMcfepd with major contribution from the South Fairway at approximately 66.5 MMcfepd in the same year.
Forest Oil Corporation
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