Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

Terms of One-Time Website Use

 

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

 

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

 

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S CONFIRMS FOREST OIL'S Ba2 SR. IMPLIED & B1 SR. SUB RATINGS; ASSIGNS Ba3 TO NEW SR. UNSECURED NOTES

22 Jun 2001
MOODY'S CONFIRMS FOREST OIL'S Ba2 SR. IMPLIED & B1 SR. SUB RATINGS; ASSIGNS Ba3 TO NEW SR. UNSECURED NOTES

Approximately $1.1 Billion of Debt Securities & Bank Facilities Affected.

New York, June 22, 2001 -- Moody's Investors Service assigned a Ba3 rating to Forest Oil Corporation's (FST) offering of $200 million of 8% seven year senior unsecured notes. Moody's also confirmed FST's Ba2 senior implied rating, Ba1 senior secured bank revolver rating, and B1 senior subordinated ratings on FST's $100 million of 10.5% notes due 2006 and Canadian Forest Oil's (CFOIL) $200 million of 8.75% notes due 2007. FST guarantees CFOIL debt but CFOIL does not guarantee FST debt. Note proceeds will initially repay secured bank debt, with that amount subsequently re-borrowed to fund a call of, first, the CFOIL senior subordinated notes and, second, a call of the parent's senior subordinated notes. The rating outlook is stable.

The Ba1 bank debt is one notch above the Ba2 senior implied rating due to ample coverage by 80% of FST's consolidated reserve value. The Ba3 senior unsecured note rating is one notch below the senior implied rating due to: (1) the notes' effective subordination to a large potential overhang of secured debt due to note covenants allowing secured debt the greater of $600 million or $150 million plus 25% of consolidated net tangible assets, (2) a view that the secured debt carve-out's scale is needed for front-end development costs of long-lead time projects and for acquisitions, (3) reduced junior capital under the notes after retiring subordinated debt with secured bank debt; and (4) the lack of a guarantee from increasingly important CFOIL.

FST's March 2001 rating upgrade reflected its Forcenergy acquisition and credit accretion. At a reasonable cost, Force increased FST's capacity to support the risk and large front-end capital outlays of multiple long-lead time U.S. and foreign exploration and development projects. While Force increased FST's reliance on the Gulf of Mexico (GOM), it intensified FST's GOM holdings, diversified GOM reserve replacement risk, and permitted cost synergies. The merger added the Cook Inlet Alaska holdings, with the Redoubt Shoal exploration play recently delivering a second successful exploration well. FST now operates four core regions and holds a large development, recompletion, workover, and exploration prospect inventory across the risk spectrum in a wide range of basins, geologic complexity, and basin maturity.

FST's ratings potential benefits from the active role played by the Anschutz Corporation (31% of FST common) which supports aggressive growth with sound funding. Moody's also observes a material strengthening of FST's board of directors. FST appears to be mounting a serious operational and funding effort to eventually reach investment grade. Regarding debt structure, the new notes are FST's first move to evolve the structure to senior unsecured status.

Nevertheless, at a time when FST is long on opportunity in the form of long-lead time, higher risk, cash absorbing exploration plays offshore South Africa, in Northern Canada, and in the Cook Inlet, the senior implied rating remains restrained by: the reliance of 68% of FST's cash flows and over 56% of production on very short-lived GOM reserves with associated higher reinvestment risk and high spending needs to replace GOM reserves; a high concentration of GOM cash flow in few well-bores; significant leverage on proven developed (PD) reserves and significant debt plus full development and abandonment capex on total reserves ($5/boe); and a fairly short reserve life on total PD reserves. Also, FST's reserve volumes were calculated at unusually high up-cycle natural gas and high oil prices.

Other limiting factors in the near-term include rising reserve replacement costs and a view that moderating prices and FST's spending needs may preempt further 2001debt reduction, causing debt to rise above 3/31/01 levels. Moody's expects 6/30/01 debt to be materially above 3/31/00 levels. Moody's believes EBITDA during the last nine months of the year will be in the range of $350 million to $400 million. Capex for 2001 is budgeted for $470 million ($113 million spent in 1Q01), a high 52% of capex is devoted to exploration activity that will not augment 2001 production, and 2001 interest expense may exceed $55 million.

Also, pro-forma for Forcenergy, the organic production trend has been flat-to-down, partly reflecting the impact of a fairly short reserve life and allocation of high proportions of annual capex to long lead time exploration activity.

Nevertheless, year 2000 and 2001 placed FST in its strongest position yet, and FST is far better positioned to take on the higher risks and funding needs of higher impact exploration activity. Forcenergy increased FST's scale to 230 mmboe of reserves, intensified its GOM and added Cook Inlet activity; provided generally greater volume and prospect diversification, and somewhat reduced leverage on reserves. FST displays visible 2001 reserve replacement and growth potential, a promising outlook for key exploration prospects with potential impact for the 2003 to 2010 period, and credit firming from adequately productive reinvestment of up-cycle cash flow. Forcenergy also enhanced funding flexibility due to greater scale, risk diversification, and liquidity in FST common shares.

FST's main cash flow driver is short-lived GOM production. Until FST brings a new longer-lived core area to production, Moody's believes material organic volume growth may be hard to maintain. FST's high concentration of production at any given time from a hand full of flush but short-lived GOM wellbores complicates the task of mounting organic growth while FST also allocates high proportions of capex to long-lead time exploration projects. This causes production trends to be prone to events in the GOM and elsewhere.

Thus, FST reported a 6.5% decline in 1Q01 production from pro-forma 4Q00, a 2% decline from pro-forma 1Q00, and Moody's expects a very modest 2Q01 production gain over 1Q01. Curtailed 1Q01 production due to gas gathering and processing constraints, steep natural declines on key properties, and the 2001 capex mix indicate flat-to-modest 2001 volume gains.

Near-term production gain is visible from shallower and deeper geologic horizons at GOM High Island 116, other shallow and deeper horizon completions in shallow GOM waters, initial production in 1H01 from the first six Cutpick wells in the complex Alberta Foothills play, development of the West McArthur River Field in Cook Inlet, Alaska, and the Mattson discovery in the Ft. Liard area of the Northwest Territories in Canada. The Lost Ark discovery in East Breaks 421 in deeper GOM waters (2,700 feet) is another significant recent discovery.

Medium-term, the second Redoubt Shoal well in the Alaska Cook Inlet oil prospect was successful and FST appears committed to an initial $150 million to $175 million spending program in 2001-2002 to bring Redoubt to first production later in 4Q02. Costs include continued drilling, development, and completion work, including an offshore pipeline to an Alaskan landfall and artificial lift equipment for completed wellbores. The second well drilled to a total depth of 15,325 feet and extended the proven expanse of the reservoir. On third-party engineering, FST believes it will add about 40mmboe of year-end 2001 reserves to the current 10mmboe of booked Redoubt reserves. A third exploration well will drill shortly. Elsewhere, in its growing Canadian business, FST holds 170,000 net undeveloped acres in Alberta, Canada and 345,000 net undeveloped acres in frontier areas of the Northwest Territories.

Pro-forma annualized 4Q00 production and pro-forma 2000 reserves yield a reserve life of 7.4 years on total reserves and 5.4 years on PD reserves. A high 60% of production is concentrated in GOM reserves with roughly a 3.7 year PD reserve life and even lower proven developed producing reserve life. This increases the pressure for sustained drilling success on new flush wellbores with minimum development delay. FST sustained this profile for many years, but it reduces the capacity to absorb failures, delays, shut-ins, and trough cash flow pressures without affecting production trends.

Assuming oil and gas prices do not fall materially from mid-2001 levels, Moody's expects 2001 EBITDA in the range of $540million to $590 million, prior to about $22 million of capitalized G&A. Very high 1Q01 EBITDA of $211 million before capitalized G&A benefited from peak natural gas prices that since fell sharply. After capitalized G&A, EBITDA/Interest for 2001 should be in the range of 9.4x to 10.3x and about 7.5x to 8.5x in the last nine months of 2001 if prices hold their mid-2001 levels. Interest coverage by EBITDAX minus three-year average reserve replacement capex for 2001 of almost $300 would in the range of 4x to 5.2x.

In June 2001, Moody's estimates total debt on PD reserves at a substantial $3.50/boe, and total debt, plus capex needed to bring PUD and PDNP reserves to production, plus plugging and abandonment costs to equate to about $4.95/boe of total reserves. On the other hand, 12/31/00 debt to total capital strengthened from 42% on 12/31/00 to 36% on 3/31/01 due to earnings retention and debt reduction during extraordinarily high natural gas and oil prices.

At 1Q01 full-cycle costs, FST appears to need about $19/boe in realized prices to break-even on both interest expense and its pattern of full reserve finding and development costs. Total 1Q01 full-cycle costs were $18.80/boe, including $5.49/boe of production costs and severance tax, $1.50/boe of gross cash G&A, $1.85/boe of cash interest, and about $10/boe of pro-forma three-year average all-sources reserve replacement costs.

FST's $19 of total unit operating, interest, and RRC structure is not fully compatible with the Ba2 senior implied ratings at trough conditions and mid-cycle prices. Still, though FST faces rising 2001 sector cost pressures, part of the high RRC derives from pursuing inherently high cost but high margin GOM production, part from heavy front-end exploration and development spending on strategic prospects, and part from FST and Force reserve revisions at 1998 trough prices. Moody's expects improvement in FST's high RRC's, though this will need to surmount high 2001 and probably 2002 drilling, vessel, and oilfield services costs.

Forest Oil Corporation is headquartered in Denver, Colorado.

New York
Robert N. McCreary
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

New York
Andrew Oram
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com