Troubled Denver-based Forest Oil Corp., which has been selling assets to reduce debt for more than a year, will merge with privately-held Sabine Oil & Gas LLC,the companies announced Tuesday.
The all-stock transaction, expected to close no later than the fourth quarter of 2014, will leave Sabine shareholders with 73.5 percent of the new company, Sabine Oil & Gas Corp., which will be headquartered in Houston. The new company expects to be traded on the New York Stock Exchange under the symbol SABO.
The new company will be led by Sabine’s existing executive team, with president and CEO David Sambrooks adding chairman of the board to his duties. Two Forest Oil board members will be named to the new company’s board.
Forest Oil workers — about 363 remained company wide at the end of December, according to Bloomberg data, down from 605 the year before — were told at an employee meeting Tuesday in Denver that Sabine and Forest managers are developing a new organizational structure.
“We will aim to ensure that all Forest employees are considered for opportunities in the new organization and that they are provided formal notice of their employment status once final decisions are made,” Forest CEO Patrick R. McDonald wrote in an interoffice memo.
In a conference call earlier Tuesday, McDonald said the transaction gives Forest shareholders “a great opportunity” to make financial gains with a larger, better-capitalized company that has a broader portfolio.
Sabine’s team, he said, is
“equipped to deliver exceptional shareholder value through the enhanced opportunities that are embedded in Forest’s assets.”
Forest Oil was incorporated in New York in 1924 and has been a publicly traded since 1969.
The two companies have been in discussions for a couple of months.
Combining, they said, will give the new company a powerful position in East Texas, and strengthen Sabine’s position in the Granite Wash, Permian and Arkoma basins of Texas and Oklahoma.
The new company will have access to 207,000 acres in East Texas, and 65,000 acres in the Eagle Ford shale formation in South Texas. The combined acreage contains an estimated proven reserve equal to 1.5 trillion cubic feet of natural gas.
“With this combination, we have created a leading industry position in this highly economic, multi-play basin,” Sambrooks said.
For more than a year, Forest Oil has been selling assets to lower its debt. In October 2012, it sold its oil and natural gas holdings in south Louisiana for $220 million in cash. Four months later, it shed south Texas properties, including some in the Eagle Ford, for $325 million in cash.
In August, Forest sold undeveloped land in the West Texas Permian Basin for $35 million in cash and in October, Templar Energy paid $1 billion for Forest’s Texas Panhandle assets.
For the nine months ended Sept. 30, Forest logged a net loss of $32 million, down from a $1 billion net loss for the nine-months ended Sept. 30, 2012, according to Securities and Exchange Commission filings.
Howard Pankratz: 303-954-1939, hpankratz@denverpost.com or twitter.com/howardpankratz
