Forest Oil Announces 2014 Capital Budget and Guidance Drilling and Completion Budget of $260 Million to $270 Million; Total Capital Budget of $290 Million to $310 Million Average Equivalent Net Sales Volumes Guidance of 120 MMcfe/d to 130 MMcfe/d (42% Liquids); Represents 11% Growth Pro Forma for Divestitures Oil Volumes Expected to Grow 90% - 100% Pro Forma for Divestitures Eagle Ford Net Sales Volumes Projected to More than Double to 6,250 Boe/d Business Wire DENVER -- December 2, 2013 Forest Oil Corporation (NYSE:FST) (Forest or the Company) announced today that its Board of Directors has approved a 2014 capital budget and that it is providing 2014 average net sales volumes and cost guidance. Patrick R. McDonald, President and CEO, commented, “Following the completion of the Texas Panhandle asset sale, we are focused on the development and expansion of our Eagle Ford operations along with attention to our asset positions in Ark-La-Tex and the Permian Basin. Our 2014 capital plan is designed to deliver growth in oil volumes and accompanying growth in EBITDA as we initiate development drilling activities in the central area of our Eagle Ford position, with emphasis on pad drilling and increasing economies of scale and capital efficiency. Based on our planned activity, 2014 production is expected to increase by 11% with oil production volumes expected to increase by nearly 100%. Since the acceleration of the Eagle Ford drilling program in the second quarter of 2013, we have secured approximately 70% of the overall position of 55,000 gross acres, the balance of which we expect to hold by the second quarter of 2014. Our 2013 results have been instrumental in providing important data to prepare for the development phase of the program and, specifically, to design a development plan to maximize the recovery of the oil in place. We believe that our 2014 investment plan will position Forest to achieve continued growth in oil production volumes and will create a strong foundation for an increase in shareholder value over the next several years.” 2014 GUIDANCE The following guidance is subject to all the cautionary statements and limitations described immediately below and under the caption “Forward-Looking Statements.” Estimates for Forest’s future sales volumes are based on assumptions of capital expenditure levels and the assumption that market demand, prices for liquids and gas, and the cost of required services and materials will continue at levels that allow for economic production of these products. The production, transportation, and marketing of liquids and gas are complex processes that are subject to disruption due to transportation and processing availability, mechanical failure, human error, and meteorological events (including, but not limited to severe weather, hurricanes, and earthquakes). Further, actual capital expenditures are subject to a number of factors, including economic conditions, well performance, and commodity prices, and Forest has the flexibility to reduce or increase the budget as appropriate. Therefore, Forest can give no assurance that its future results will be as estimated. The comparative production and average net sales volume information contained throughout this press release relates only to Forest on a pro forma basis, exclusive of 2013 asset divestitures. Forest’s 2014 guidance is detailed in the table below: Budget Low Budget High Drilling and Completion Capital Budget ($ $ 260 $ 270 million) Non-Drilling Capital Budget: Leasehold, Seismic, and Other ($ 10 15 million) Capitalized Overhead ($ million) 20 25 Total Capital Budget ($ million) $ 290 $ 310 Average Net Sales Volumes (MMcfe/d) 120 130 % Natural Gas 58.0% 58.0% % Oil 32.0% 32.0% % Natural Gas Liquids 10.0% 10.0% Production Expense ($ per Mcfe) $ 1.85 $ 1.95 Depreciation, Depletion and Amortization ($ per $ 2.50 $ 2.70 Mcfe) General and Administrative Expense ($ million) $ 28 $ 30 Stock-Based Compensation ($ million) $ 9 $ 11 Income Tax Rate (%) 0% 0% Forest’s Board has approved a drilling and completion budget for 2014 in the range of $260 million to $270 million (excluding capitalized interest, capitalized stock-based compensation, and asset retirement obligations incurred). The budget targets oil and other liquids-rich drilling opportunities and will be allocated approximately 77% to the Eagle Ford and 23% to the Ark-La-Tex. Current plans entail operating three drilling rigs in the Eagle Ford to drill 80 gross (40 net) wells as the program transitions to full-scale development drilling. Forest plans to operate one drilling rig in the Ark-La-Tex and will participate in 10 gross (7 net) liquids-rich Cotton Valley wells. Increased drilling efficiencies and other operational synergies in the Eagle Ford have resulted in a significant savings in the cost to drill and complete wells. Specifically, drilling and completion costs for the wells drilled during the third quarter averaged approximately $5.75 million, or a 10% improvement over the wells drilled during the second quarter. Forest expects to see continued improvement in well costs due the use of existing pad locations as development drilling commences, centralized production facilities are implemented, and continued optimization of completion techniques are achieved. Mr. McDonald further stated, “Our 2014 plan will allow us to expand further the contribution from our Eagle Ford assets as we transition to development drilling early in the year. We expect to have the remainder of our acreage held by the second quarter, and will continue to refine the ongoing modeling and testing of the optimal drilling density and well spacing for each area of the field. We are presently seeking opportunities to add acreage to increase the scale of our Eagle Ford resource development opportunity.” Net sales volumes are forecasted to average 120 MMcfe/d to 130 MMcfe/d for 2014, which represents an increase of approximately 11% (at the mid-point of guidance) compared to forecasted 2013 production volumes of approximately 113 MMcfe/d. The production growth is expected to be driven by a 90% to 100% increase in oil volumes to approximately 6,800 barrels per day in 2014, which is expected to be offset by a 9% decrease in natural gas production in the Ark-La-Tex. The liquids component of our equivalent production is expected to increase to approximately 42% of average equivalent net sales volumes compared to pro forma liquids production of approximately 30% in 2013. Mr. McDonald added, “Our 2014 Eagle Ford oil production volumes are projected to increase by over 100% from 2013 levels, providing a production profile which is increasingly weighted toward crude oil and which will create corresponding growth in EBITDA. The growth in overall volumes will be offset by normal declines in natural gas volumes.” The following table below provides a summary of 2013 and 2014 average net sales volumes by area: Average Net Sales Volumes (MMcfe/d) 2014 Area 1Q13A 2Q13A 3Q13A 4Q13E 2013E Guidance ^(1) Ark-La-Tex 103 95 96 91 - 96 - 85 - 90 95 98 Eagle Ford 11 14 18 19 - 15 - 35 - 40 20 16 Total 114 109 114 110 - 111 - 120 - 130 115 114 2014 Production 11% Growth ^(2) 2014 Oil Volume 90% - Growth 100% ^(1) Assumes that the Eagle Ford midstream gathering system becomes fully operational by July 2014 ^(2) Assumes the mid-point of guidance Forest expects to show a significant reduction in cash costs post the Texas Panhandle asset sale. General and administrative (G&A) expense is expected to total $28 million to $32 million, not including stock-based compensation expense, due to a more streamlined corporate structure. This results in an approximate 30% reduction in G&A expense when compared to 2013, using the mid-point of guidance. Interest expense is also expected to be significantly lower as the majority of the net proceeds received from the Texas Panhandle sale were used to reduce outstanding debt. Based on 2014 estimates, we expect that interest expense will be approximately 50% lower than 2013. Our effective income tax rate in 2014 is expected to be 0% due to the valuation allowance placed against our net deferred tax assets. Similarly, no cash income taxes are expected to be owed. Upcoming Investor Conferences Forest also today announced management’s participation in the upcoming investor conferences: Conference City Date Presentation Time BAML Leveraged Boca Raton, December 4, 3:30 PM ET Finance Conference FL 2013 Wells Fargo Energy New York, NY December 11, 1:40 PM ET Symposium 2013 Capital One New Orleans, December, 12, Southcoast Energy LA 2013 12:00 PM ET Conference Goldman Sachs Energy Miami, FL January 9, TBD Conference 2014 FORWARD-LOOKING STATEMENTS This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, that address activities that Forest assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements provided in this press release are based on management's current belief, based on currently available information, as to the outcome and timing of future events. Forest cautions that future natural gas and liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing of capital expenditures, and other forward-looking statements relating to Forest are subject to all of the risks and uncertainties normally incident to their exploration for and development and production and sale of liquids and natural gas. These risks relating to Forest include, but are not limited to, oil and natural gas price volatility, its level of indebtedness, its ability to replace production, its ability to compete with larger producers, environmental risks, drilling and other operating risks, regulatory changes, credit risk of financial counterparties, risks of using third-party transportation and processing facilities and other risks as described in reports that Forest files with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Any of these factors could cause Forest's actual results and plans to differ materially from those in the forward-looking statements. ***** Forest Oil Corporation is engaged in the acquisition, exploration, development, and production of natural gas and liquids in the United States and selected international locations. Forest's estimated proved reserves and producing properties are located in the United States primarily in Arkansas, Louisiana, Oklahoma and Texas. Forest's common stock trades on the New York Stock Exchange under the symbol FST. For more information about Forest, please visit its website at www.forestoil.com. Contact: Forest Oil Corporation Larry C. Busnardo, 303-812-1441 VP - Investor Relations
Forest Oil Announces 2014 Capital Budget and Guidance
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