Forest Oil Expands Permian Holdings By More Than 65,000 Acres

Acquired 68,500 gross acres targeting Wolfbone formation in Pecos and Reeves cos., TX.

Forest Oil Corp., Denver, (NYSE: FST) has acquired acreage prospective for the Wolfbone oil play in Texas from an undisclosed seller for approximately $104.9 million in cash and stock.

Forest Oil will pay $66 million in cash and issue 2.7 million shares to the seller. The shares were trading at $14.40 at press time.

The assets include 68,500 gross acres (63,000 net) in Pecos and Reeves counties. The Wolfbone acreage increases Forest’s total Permian Basin acreage position, inclusive of Forest’s Wolfcamp shale acreage position in Crockett County, Texas, of 57,500 gross acres (51,500 net), to 126,000 gross acres (114,500 net), providing a concentrated geographic footprint in the Delaware and Midland basins.

The accumulation of 68,500 gross acres ranks Forest as the one of the largest acreage holders in the Wolfbone play in Pecos and Reeves counties, according to the company. The Wolfbone acreage position contains primary lease terms of three to five years. Forest initially intends to develop its Wolfbone acreage position through vertical delineation drilling and commingling a number of the stacked pay zones present in the basin. Once the properties are delineated, Forest may transition to horizontal completions to optimize development of the play.

Forest intends to initiate a one-rig drilling program to test the Wolfbone formation at the end of the first quarter in 2012.

Forest Oil president and chief executive H. Craig Clark says, “The addition of the Wolfbone acreage brings our total Permian Basin position to over 100,000 net acres and achieves our goal of developing an acreage base with significant size and scale that provides exposure to numerous oil objectives, with both vertical and horizontal drilling opportunities. The acreage is concentrated in large, contiguous positions in both the Delaware and Midland Basins.”