Forest Oil – Schlumberger Eagle Ford Development Agreement Inked

Less Acreage Means More Value For Forest In Deal Worth $3,300/Acre
Forest - Schlumberger Eagle Ford Acreage

Forest – Schlumberger Eagle Ford Acreage | Click to Enlarge

Forest Oil and Schlumberger have signed an Eagle Ford development agreement in Gonzales County, TX. Schlumberger will pay $90 million in the form of future drilling and completion services, as well as related development capital in order to earn a 50% interest in Forest’s Eagle Ford acreage position.

Once the $90 million has been contributed, Forest and Schlumberger will participate in future drilling on a 50/50 basis. Forest expects the drilling carry will contribute to development through 2014.

Patrick R. McDonald, Forest’s CEO, stated, “We believe that our Eagle Ford position is a valuable oil asset and being aligned and working together cooperatively with a strategic partner such as Schlumberger will greatly enhance the value of this important asset.”

Accelerating Eagle Ford Development

Forest Oil Schlumberger Eagle Ford Development Plan

Forest Oil 2013-2014 Eagle Ford Development Plan | Click to Enlarge

With the drilling carry, Forest plans to accelerate development by moving to four rigs running in the play by the end of the third quarter. Forest has kept 1-2 rigs running through the past several months. Forest estimates the increased pace of drilling will improve the company’s asset value by ~$250 million.

Forest’s share of capital expenditures are estimated at $125 million in 2013 and $220 million in 2014. Production projections are flat in 2013 at 2,800 boe/d, but increase from an estimated 3,700 boe/d to 6,500 boe/d in 2014.

Forest now estimates it will hold an aggregate of 55,000 gross (27,500 net) acres in Gonzales County. That’s a larger footprint, but a smaller net holding than the 40,000 gross (40,000 net) acres that would have been held under the company’s previous development plan.

Based on 80-acre spacing, Forest has a total of 688 gross (344 net) drilling locations identified. Consider an estimated ultimate recovery of 300,000 boe and unrisked resource potential comes in at 100 million boe net to each company.

The agreement affects all wells spud on or after November 28, 2012.

Carl Trowell, President, Schlumberger Production Management, commented, “We are pleased to be part of this exciting opportunity, in which Forest and Schlumberger are fully aligned and committed to the development of Forest’s Eagle Ford unconventional resources.”

The deal reads well for Schlumberger because the company gets to utilize its expertise, while reinvesting its margin into high quality Eagle Ford assets. The deal values Forest’s Gonzales County acreage at a little less than $3,300 per acre.

Read the full announcement at forestoil.com

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R.T. Dukes

R.T. Dukes

Managing Editor at EagleFordShale.com
R.T. is the managing editor of EagleFordShale.com. In prior roles, he advised major oil companies on strategy, the macro business environment, and opportunity screening. 2503 Robinhood, Houston, TX, 77005, U.S.A. | Telephone: 832.429.4790

Comments

  1. Becky Roberds says:

    Does anbody know what services Schlumberger is bringing to the table? Are they running their Flare system. Thanks.

    • Tim Powell says:

      They will probably bring there entire suite of drilling and completion software, tools and equipment to optimize the well planning, well placement, drilling fluids, logging, perforating, hydraulic fracturing and well completion tools….in short, they will be in charge of everything downhole except for the drilling rig contractor. Then they will feed everthing back to their technology center and re-optimize the process for the next batch of wells….true technology company at work!

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