Forest Oil will develop its Eagle Ford assets alone and forgo a potential joint venture on its acreage. The company recently moved a second rig into the area and will be able to develop more than 40,000 core acres alone (100% working interest). The company’s remaining acreage will either be sold or farmed out to other operators.
Since the last update from Forest:
Three horizontal wells have been completed in the central fairway of the Company’s Eagle Ford acreage position that had an average 24-hour maximum production rate of 787 Boe/d (96% oil). The first two wells had a 30-day average production rate of 535 Boe/d (95% oil), and the third well, which has been on production for 18 days, has averaged 616 Boe/d (94% oil).
Forest is now shifting from a acreage holding strategy to a development strategy. The company has realized the most consistent results in what the company calls the central fairway in Gonzales County. Forest will now target increased drilling efficiencies and begin pad drilling in efforts to drive well costs below $6 million.
Recent wells all meet or exceed the company’s 300,000 boe type curve. The expected type curve yields a 25% rate-of-return at $80 oil and $6 million well costs. The 40,000 acres the company is targeting has reported potential of 500 wells at 80-acre spacing. That indicates expected recoveries of 150 million boe.
Capital Budget Cut and Directed to the Eagle Ford
Forest is cutting drilling in East Texas (2 down to 1 rig) and in the Texas Panhandle (5 down to 2 rigs) in favor of Eagle Ford development. The company is slashing its overall capital budget by approximately 50% for the second half of the year. In the first half of 2012, the company spent more than $400 million on exploration & production, and leasehold acquisition. In the second half of 2012, the company plans to spend approximately $200 million.