Stifel Nicolaus Initiates Buy on Forest Oil

NEW YORK (TheStreet) -- While most of the energy sector was rising higher in the afternoon, one of the biggest upward moves came from Denver-based Forest Oil(FST Quote).

Earlier in the day, Stifel Nicolaus analysts initiated coverage on the natural gas and crude oil explorer, giving the independent a buy rating and a $30 price target.

Near the closing bell on Monday, Forest Oil shares were rising $1.21, or 5.8%, to $21.92.

Though analysts noted that the company in 2009 focused chiefly on reducing debt by generating free cash flow, they also said "once the balance sheet concerns have subsided, investors will start to appreciate the quality asset base, in our view." The analysts also anticipate that Forest Oil's core focus in 2010 and after will be on heightened drilling activities at its Greater Buffalo and Haynesville shale positions.

"Both plays provide some of the best economics out of U.S. gas plays and, in both plays, we believe that the market is underestimating FST's potential value with only $6/share being reflected and the plays being worth $15-$25/share, in our view," the report said. "As drilling and production history increases, the market will become more comfortable with the potential value of this play."

Around the energy sector, shares of Anadarko Petroleum(APC Quote), Exxon Mobil(XOM Quote) and Chesapeake Energy(CHK Quote) were moving higher, adding 0.7%, 1.2% and 1%, respectively, near the end of the regular trading session.

-- Written by Sung Moss in New York

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