Wachovia Believes Forest Oil's (FST) Haynesville Play Presents $33/share Potential Upside

July 1, 2008 9:32 AM EDT

Wachovia believes that Forest Oil's (NYSE: FST) Haynesville Shale play presents a $33/share potential upside for the company. The firm maintains their Outperform rating and $72-$76 valuation range.

Wachovia highlighted that FST has 143,000 gross / 113,000 net acres in East Texas / North Louisiana, of which an estimated 90,000 net acres is prospective for the Haynesville Shale. The firm also highlighted that FST has a experienced management team that knows East Texas. The company’s existing gathering system also provides an edge against its competitors.

The firm said, "We have calculated the value of the Haynesville for FST using a detailed per well project NPV analysis In this methodology we incorporate a number of assumption regarding D&C costs, EUR’s, IP’s, LOE, taxes, spacing etc., which we detail in the attached chart. We then run an assumed drilling program using our own estimates of the level of activity we expect from the company over the next few years. All in, assuming only 30% of FST’s acreage is commercial, we estimate FST’s Haynesville projects in total could be worth $2.8 Billion or $33/share."

Forest Oil Corporation, an oil and gas company, engages in the acquisition, exploration, development, and production of natural gas and liquids primarily in North America.

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• Wachovia
• Haynesville Shale

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