Forest Oil (NYSE:FST) is the latest energy company to break itself apart as this exploration and production company plans an initial public offering and spinoff of its Canadian oil and gas assets during 2011.
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The new company will be known as Lone Pine Resources and 19.9% of the company will be offered in an initial public offering in early 2011. Forest Oil plans a spinoff of the balance of the company approximately four months later.
This was the second spinoff for Forest Oil. In 2005, the company spun off its Gulf of Mexico assets to its shareholders and then merged the new company with Mariner Energy. Mariner Energy was purchased by Apache Corporation (NYSE:APA) in 2010.
Lone Pine Resources
Lone Pine Resources has developed and undeveloped properties in various areas in Canada. The company reported 322 BCFE of proved reserves at the end of 2009, and is primarily a natural gas company with 69% of its reserves consisting of this commodity. Net production in the third quarter of 2010 was 76 million cubic feet equivalent per day, and the company also has additional production shut in and waiting on infrastructure.
Lone Pine Resources has a large amount of acreage and reported 1.1 million acres of land under lease. The company plans to drill 58 net wells in 2011.
More than half of the company's proved reserves, and 68% of its production comes from the Deep basin area in Western Canada. This is a tight gas play that produces from many different intervals. One formation that Lone Pine Resources is working on here is the Nikanassin play, where the company has brought 15 wells on line to date and spud its first horizontal well in the fourth quarter of 2010.
Evi Light Oil Play
On the oil side, Lone Pine Resources is working at the Evi field, which is located in the Peace River Arch area in Western Canada. The company has a horizontal drilling program underway here and drilled 14 wells here in 2010. Lone Pine Resources is increasing its exposure to this play and is continuing to add acreage.
Lone Pine Resources also has two prospective areas in Canada that are undeveloped and being explored by the company. The company has 274,000 net acres that are prospective for the Utica Shale in Quebec, where it has conducted seismic surveys and drilled several exploration wells. Talisman Energy (NYSE:TLM) also has acreage prospective for the Utica Shale.
In the Liard Basin, Lone Pine Resources has 61,000 net acres and is working on developing the Muskwa Shale. Another company that is developing the Muskwa Shale is Quicksilver Resources (NYSE:KWK). The company has acreage in British Columbia, just to the south of Lone Pine Resources. Lone Pine Resources has no reserves or production from these two plays so far and will continue to evaluate them in 2011.
The Bottom Line
Forest Oil will give birth to Lone Pine Resources in 2011, as the company looks to shed its Canadian oil and gas properties and focus solely on the onshore United States. (To learn more, see our Oil & Gas Industry Primer.)
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