Forest Oil Paying $225M for E. Texas Acres

Forest Oil Corp. said Monday it was paying $225 million for East Texas oil and natural gas properites.

The all-cash deal, which is funded by cash on hand, gets Forest about 26,000 net acres in the Cotton Valley and proved reserves of 110 billion cubic feet of natural gas and oil.

The properties have a current daily production of about 13 million cubic feet equivalent, Forest said.

Most of this area of the Cotton Valley play has been approved for 40 acre down-spacing with the locations yet to be drilled, said Forest chief executive H. Craig Clark.

It is another tight gas basin acquisition with a good acreage position that has similar completion techniques to Buffalo Wallow and Wild River. This asset base will give us another significant multi-year, multi-rig development drilling program and will increase both the size and quality of our onshore North American asset base and provides an additional core growth area to our Southern Business Unit following the offshore spin-off. Our plan is to continue a two-rig program in this area during 2006 and increase the work level to a four rig program in 2007. We expect the production from these assets to double by the end of 2007.

Forest has identified 300 drilling locations, he said.