Sabine Oil & Gas Merger with Forest Oil Corporation

Forest Oil Eagle Ford Acreage Map Year-end 2013
Forest Oil Eagle Ford Acreage Map Year-end 2013

Houston-based Sabine Oil and Gas and Denver-based Forest Oil Corp will merge in an all-stock transaction.

At closing, which is expected some time during the fourth quarter, Sabine investors will hold 73.5% of the combined company's stock. The announcement of the merger was revealed by both companies in early May of 2014.

Forest’s asset portfolio is an excellent complement with Sabine’s asset portfolio and we have confidence that Sabine’s management team is equipped to deliver exceptional shareholder value through the enhanced opportunities that are embedded in Forest’s assets.
— Forest CEO, Patrick McDonald

The combined company, which is expected to be listed on the NYSE as "SABO", will hold a 207,000 net acreage position in East Texas, and a 65,000 net acreage position in the Eagle Ford. Estimated proved reserves from the combined company's assets are 1.5 trillion cubic feet equivalent (71% gas) (as of December 31, 2013), and estimated daily production of 345 million cubic feet equivalent (65% gas) for 2014.

Forest Oil Was in Trouble

The merger comes on the heels of multiple asset divestitures by Forest over the past several years. In early January of 2013, the company sold some of its South Texas assets to pay down debt.

Read more: Forest Oil Sells South Texas Assets

Recently, Forest Oil hit a snag in the Eagle Ford during the fourth quarter of 2013, after three gross (1.5 net) wells hit a fault line in the company’s southern acreage. 77% of the company’s $290-310 million capital budget was slated for the Eagle Ford in 2014, but new estimates were set at 36% after problems arose.

Read more: Forest Oil Eagle Ford Drilling Shifting Gears in 2014 Due to Faulting

The new company's headquarters will be based in Houston, TX, and led by Sabine's current executive management. Prior to the merger, Sabine Oil and Gas was a privately held company.