Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced updated second half 2012 net sales volumes and capital expenditures guidance and provided its current hedge position.
Updated Second Half 2012 Guidance
For the second half of 2012, Forest expects net sales volumes to average approximately 330 – 340 MMcfe/d (66% natural gas and 34% oil and natural gas liquids). This represents an increase of 3% compared to the previous guidance of 320 – 330 MMcfe/d (67% natural gas and 33% oil and natural gas liquids) provided on July 9, 2012.
For the second half of 2012, Forest intends to invest between $240 million and $260 million for capital expenditures (excluding capitalized interest, capitalized stock-based compensation, and asset retirement obligations incurred). This represents an increase of $50 million from previous guidance and is primarily related to increased drilling efficiencies and a higher level of non-operated drilling activity than previously expected. Forest entered the third quarter of 2012 operating nine drilling rigs and is currently operating five rigs within its core Texas Panhandle, Eagle Ford and East Texas programs.Forest’s updated guidance for net sales volumes and capital expenditures for the second half of 2012 remains subject to the cautionary statements and limitations contained in Forest’s December 12, 2011 press release under the caption “2012 Guidance” as well as those stated below under the caption “Forward-Looking Statements.” Except as indicated above, guidance detailed in Forest’s press releases dated December 12, 2011, April 30, 2012, and July 9, 2012 remains unchanged. Hedge Position Forest has added 4 MBbls/d of Calendar 2013 oil swaps at $95.53 per barrel since July 30, 2012, the date of its last earnings release. As of September 12, 2012, the Company had natural gas, natural gas liquids, and oil derivatives in place for 2012 and 2013 covering the aggregate average daily volumes and weighted average prices as follows:
|Jul - Dec|
|Natural gas swaps:|
|Contract volumes (Bbtu/d)||155.0||(1)||160.0|
|Weighted average price (per MMBtu)||$||4.63||$||3.98|
|Natural gas liquids swaps:|
|Contract volumes (MBbls/d)||2.0||-|
|Weighted average price (per Bbl)||$||45.22||$||-|
|Contract volumes (MBbls/d)||4.5||4.0|
|Weighted average price (per Bbl)||$||97.26||$||95.53|
|(1)||50 Bbtu/d of 2012 gas swaps (with a weighted average hedged price per MMBtu of $5.30) are layered with a written put of $3.53 and a call spread of $4.00-to-$4.50. Together with the put and call spread, Forest will receive the swap price of $5.30 on the 50 Bbtu/d except as follows: Forest will receive (i) NYMEX Henry Hub (HH) plus $1.77 when NYMEX HH is below $3.53; (ii) $5.30 plus the value of the call spread when NYMEX HH is between $4.00 and $4.50; and (iii) $5.80 when NYMEX HH is $4.50 or above.|
|In connection with entering into certain 2012 gas swaps with premium hedged prices, Forest granted oil puts to the counterparties, giving the counterparties the option to put 5 MBbls/d to Forest at $75.00 per Bbl on a monthly basis during the period July 2012 through December 2012.|
|Natural gas swaptions:|
|Contract volumes (Bbtu/d)||40.0||-||-|
|Weighted average price (per MMBtu)||$||4.02||$||-||$||-|
|Contract volumes (MBbls/d)||2.0||5.0||3.0|
|Weighted average price (per Bbl)||$||95.00||$||105.80||$||100.00|
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