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 UPGRADES FOREST OIL'S SR. SUBORDINATED NOTES TO B1 AND SR. SECURED BANK FACILITY TO Ba1

02 Mar 2001
MOODY'S UPGRADES FOREST OIL'S SR. SUBORDINATED NOTES TO B1 AND SR. SECURED BANK FACILITY TO Ba1

About $900 Million of Debt Securities and Bank Facilities Affected.

New York, March 02, 2001 -- Moody's Investors Service upgraded to B1 from B2 senior subordinated ratings on Forest Oil's (FST) $100 million of 10.5% notes due 2006 and subsidiary Canadian Forest Oil's (CFOIL) $200 million of 8.75% notes due 2007. FST guarantees CFOIL debt; CFOIL does not guarantee FST debt. Moody's upgraded FST's $600 million senior secured bank revolver maturing 2005 to Ba1 from Ba2, senior implied rating to Ba2 from Ba3, and senior unsecured issuer rating to Ba3 from B1. The bank borrowing base is $500 million; borrowings currently are below the $334 million drawn at year-end. The upgrade triggers removal of bank borrowing base control. The banks remain secured by 80% of reserve values; coupled with the subordinated debt cushion, this warrants notching the revolver above the senior implied rating. Outlook: stable.

The upgrades reflect FST's increased scale to 230 mmboe of reserves, production and prospect diversification, and somewhat reduced leverage on reserves after the Forcenergy (Force) acquisition; reasonably visible 2001 reserve replacement; promising outlook for key exploration prospects with potentially important impact in the late 2002 to 2008 period; and credit accretion from sufficiently productive reinvestment of flush up-cycle 2000 and 2001 cash flow. The merger enhanced funding efficiency due to greater scale and risk diversification and liquidity in FST common shares. Force declared bankruptcy in March 1999, emerging in February 2000 after converting $390 million of $700 million in debt to equity. FST continues to report an intention to further reduce debt levels in 2001.

After a series of acquisitions, FST expanded its developed reserve base across four core regions and inventory of development, recompletion, workover, and low and high risk exploration prospects across a wide range of basins, geologic complexity, and basin maturity. If successful, one lower risk and two higher risk long lead-time exploration plays could materially add to the productive base. So far, the ratings also benefit from the active business development and strategy roles played by Anschutz Corporation (32.8% of FST common shares). Mr. Anschutz supports aggressive growth backed by sound funding. FST also displays an attractive crude oil and natural gas weighting.

Still, the upgrades are prospective to further performance improvement, including: generating convincing internal production momentum; stronger cash-on-cash returns over the price cycle, in particular by reducing unit reserve replacement costs (RRC); reducing exposure to short-lived concentrations as new areas grow in relation to total production; and continuing to reduce debt leverage on proven developed (PD) reserves. "Old" FST's production stabilized at 3.3mmboe to 3.4mmboe in 4Q99 through 3Q00, after falling from a peak 4.15/mmboe in 4Q1998. Force boosted production by 75%, but pro-forma production was flat in 3Q00 and 4Q00 and 1Q01 may again be flat. Curtailed production due to natural gas gathering and processing constraints, steep production declines on key property concentrations, and the 2001 capex mix indicate flat-to-modest production growth for 2001.

With 60% of FST's production coming from very short-lived reserves, Moody's recognizes the credit implications of: a fairly aggressive business plan overall; front-end funding needs and long lead times to first production for FST's Redoubt Shoal, South African, and Canadian Northwest Territories prospects should they be declared commercial, plus other frontier activity in seven other countries. Also, FST's reserve volumes were calculated at extraordinarily high sector natural gas and high oil prices. Added to rising drilling and services costs, it is highly likely 2001 reserves will be calculated at materially lower prices and pressure 2001 RRC's.

FST's challenge in mounting sustained internal production growth partly reflects the relative scarcity of longer-lived high impact prospects in North America and underscores the reinvestment risk faced by exploration and production firms focused on the continent's heavily drilled basins. FST seeks to eventually mitigate this exposure with its international and Canadian frontier exploration efforts.

Though FST faces reasonable odds that at least one of its major exploration plays will be successful, and the property portfolio contains considerable promise, the asset mix remains a restraining factor for the new ratings. This reflects (1) the modest scale and short reserve life of the PD reserve foundation, (2) high RRC's, and (3) the resulting high cash consumption pace and drilling, development, and inherent delay risk inherent to replacing core production decline and funding near-term production growth while simultaneously funding strategic but high risk long-term projects. Near-term, if full Redoubt Shoal development proceeds during 2001 and 2001, development capex needs would rise materially above announced levels. FST is amply exposed to the spending, drillbit, and delay risks of multiple long-lead time projects.

Force significantly increased FST's reliance on short-lived Gulf of Mexico (GOM) production but, within the GOM, Force diversified "old" FST's high concentration of GOM production in a handful of short-lived properties and intensified the GOM position overall. FST has a valuable portfolio of GOM leases, production platforms and gathering/processing infrastructure and 40 years of geologic and operating experience in the offshore and onshore GOM. "New FST" has a larger prospect inventory across its GOM, Gulf Coast, Rocky Mountain, Alaskan, Canadian, and South African properties. FST's GOM holdings expose it to sustained reserve replacement potential across shallow and deep horizons from existing infrastructure. In its growing Canadian business, FST holds 170,000 net undeveloped acres in Alberta, Canada and 345,000 net undeveloped acres in the Northwest Territories.

Across the low-to-high-risk spectrum, FST's prospect inventory is broadly diversified. Near-term production is visible from its GOM High Island 116 Number 4 well that commenced production in January, several other shallow GOM completions, initial production in 1H01 from its first six Cutpick wells in the complex Alberta Foothills play, development of the West McArthur River Field in Cook Inlet, Alaska, and its Fort Liard area properties in the southern Northwest Territories in Canada. The Fort Liard deep gas prospect, if declared commercial, is a candidate for first production in late 2001 or early 2002. The Lost Ark discovery in deeper GOM waters was a promising discovery this year. Medium-term, the first Redoubt Shoal well in the Alaska Cook Inlet oil prospect was deemed successful, but full commerciality and development depends on results from three remaining exploration wells. If successful, FST believes first Redoubt oil could flow by late 2002.

Longer term, if commercial development proceeds, FST hopes offshore South Africa is a candidate for 2004 or 2005 production. FST also believes its large acreage position in Canada's highly prospective Mackenzie River Delta area position it well for exploration and development if Arctic gas commerciality is justified and take-away pipeline capacity is built. FST was also successful in three exploration wells indicating large recoverable natural gas reserves in the Ibhubezi Field offshore South Africa. Commerciality will depend on continued successful delineation drilling and, importantly, development of an onshore natural gas market sizable enough to justify large outlays for offshore production and processing infrastructure and transmission pipeline to the coastline.

Pro-forma annualized 4Q00 production and pro-forma 2000 reserves yield a reserve life of 7.6 years on total reserves and 5.5 years on PD reserves. A high 60% of production is concentrated in GOM reserves having roughly a 3.7 year PD reserve life and lower PDP life and an even higher proportion of cash flow is generated by GOM reserves. 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.

Pro-forma EBITDA, after deducting $21.8 million of 2000 capitalized G&A, was about $427 million and about $136 million after about $5.5 million capitalized G&A in 4Q00. Results benefit from peak prices. After capitalized G&A, pro-forma EBITDA/Interest was 6.8x for 2000 and about 7.5x for 4Q00, each benefiting from the price up-cycle. But, in spite of peak prices, EBITDAX minus average reserve replacement capex covered interest just under 2x for 2000 and just over 3x in 4Q00. At 4Q00 full-cycle costs, FST appears to need somewhat over $19/boe in realized prices to cover interest and its pattern of reserve maintenance capex. Total capex for 2001 is currently budgeted for $400 million, of which about 52% is devoted to exploration activity, and interest expense may be in the range of $50 million.

Total 12/31/00 debt on PD reserves is a substantial $3.71/boe and on total reserves is $2.71/boe. Moody's estimates that total debt plus plugging and abandonment costs plus capex needed to bring PUD and PDNP reserves to production is in the range of $4.50/boe of total reserves. On the other hand, 12/31/00 debt to total capital is a stronger 42%.

Total pro-forma 4Q00 full-cycle costs exceed $19/boe, including $5.33/boe of production costs and severance taxes, $1.97/boe of gross cash G&A costs, $2.35/boe of cash interest expense, and $9/boe of pro-forma three-year average all-sources RRC's. The three-year average RRC is over $10/boe blending FST's and Force's separate results together. In spite of peak annualized 4Q00 oil and gas prices, annualized 4Q00 unit cash flow after interest covered three-year average unit reserve replacement costs only 147%. In keeping with the high margin nature of GOM production, GOM RRC's in the range of $8/boe could be supportive of the rating. RRC's in other basins inherently need to be substantially lower.

FST's current $19+ total unit operating, interest, and RRC structure is not fully compatible with the Ba2 senior implied ratings at trough conditions and is marginal at mid-cycle prices. Still, though FST's RRC's face added 2001 sector cost pressures, much 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. Force carried front-end costs for the valuable Redoubt Shoal drilling and production platform and Redoubt shows promise of contributing booked reserves by year-end 2001. The new ratings temporarily accommodate the high RRC's as long as funding from cash flow and/or an equity offering is sufficient to fund resulting higher reserve replacement and growth capex in order to avoid rising leverage.

The $600 million revolver consists of a US$500 million facility for the parent and a US$100 million-equivalent facility for Canadian Forest Oil (CFOIL). Borrowings are capped by the revolver amount and will no longer be capped by a borrowing base. CFOIL bank debt is secured by CFOIL reserves and parent bank debt is secured by parent reserves. CFOIL and parent reserves cross-collateralize each facility and the parent provides a senior guarantee on CFOIL bank debt and senior subordinated guarantee of the notes. The FST notes are structurally subordinated to debt on CFOIL assets.

Forest Oil is headquartered in Denver, Colorado.

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

New York
Andrew Oram
V.P. - Senior Credit Officer
Corporate Finance
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