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 rates Forest Oil's $250 million senior notes B1; positive outlook

19 May 2008
Moody's rates Forest Oil's $250 million senior notes B1; positive outlook

Approximately $1.7 billion of notes affected

New York, May 19, 2008 -- Moody's Investors Service assigned a B1 (LGD 5; 72%) rating to Forest Oil's (FST) pending $250 million 11-year senior unsecured notes and affirmed its existing Ba3 corporate family, Ba3 probability of default rating, existing B1 (LGD 5; 72%) senior unsecured note, and SGL-2 speculative grade liquidity ratings. The note ratings are assigned under Moody's Loss Given Default notching methodology. The rating outlook is moved up from stable to positive. The outlook assumes that FST will not conduct leveraging acquisitions.

Note proceeds along with working capital will repay at maturity FST's $265 million of 8% Senior Notes due June 15, 2008. Liquidity is good, with well over $1 billion in undrawn revolver availability expected throughout the year and very strong bank covenant coverage.

Moody's changed the rating outlook from stable to positive, reflecting a more bondholder friendly profile, favorable pro-forma production trends, strong organic reserve replacement volumes and drillbit finding and development costs for the current ratings, a currently acceptable leverage range for the ratings after digesting the Houston Exploration acquisition, and a potential pause before additional leveraging acquisitions. The positive outlook also reflects FST's relatively competitive 2007 year reserve replacement cost trends, greater production and prospect portfolio risk diversification, and the further high grading of the reserve base and debt reduction with divestitures.

The ratings are restrained by increased leverage due to FST's heavy capital spending plan and debt funded closing this quarter of its $281 million acquisition of 47,000 acres of lease rights in FST's Ark-La-Tex operating region; FST's medium reserve and production scale for the ratings; its Ba range metrics for unit full-cycle costs, reserve replacement costs, and unit cash margin coverage of reserve replacement costs (leveraged full-cycle ratio); a need to see competitive drillbit reserve replacement costs with the stepped up rate of capital spending, and inherent event risk.

Over the last several years, FST has been shifting its strategy away from material acquisitions towards a focus on heavy organic spending to accelerate development and production of its existing unconventional tight gas and conventional natural gas plays. This follows a period of major portfolio transformations that involved proportionately major acquisitions and divestitures as the firm moved away from its historic roots in short-lived reserves in the Gulf of Mexico and towards longer-lived onshore properties. Aside from the leverage incurred while mounting that transition, the asset base is now more bondholder friendly.

Forest recently completed the previously announced $281 million acquisition of approximately 69,000 gross acres (47,000 net acres) of producing assets located primarily in its Ark-La-Tex core areas, with hoped for Haynesville Shale potential. The acquisition adds an additional 500 identified drilling locations in East Texas and North Louisiana to the company's drilling inventory in the Ark-La-Tex area. The assets produced approximately 13 MMcfe/d in 2007 and contained an estimated 110 Bcfe of estimated proved reserves.

Forest has now reestablished itself primarily as an exploitation company and the acquisition concurs with the long established Forest strategy of acquiring low risk producing assets and creating value by improving operational efficiency drawing upon FST's technical expertise in core producing areas. The Ark-La-Tex acquisition primarily consists of the three main fields of Jewett/McBee area, Woodardville field and Overton field. The main geological formation target is the Cotton Valley tight sandstone where FST has had long time exposure in neighboring areas. FST is planning to expand its horizontal drilling and exploitation expertise in Cotton Valley to the Travis Peak zones in the area. The area also provides exposure to the Haynesville shale resource play.

Forest is beginning to develop greater expertise in the resource plays particularly with the recent success in the Utica Shale find in the St. Lawrence Lowlands in Quebec. However, the move by FST into the capital extensive resource plays where economical success or failure can take years to materialize could still result in substantial leverage increase impairing FST's short term financial performance.

FST has announced a 26% increase in capital expenditure spending for 2008 compared to previous guidance and, depending on ultimately realized 2008 prices, may outspend cash flow modestly. Forest continues to be acquisitive and recently increased its revolver borrowing commitments from $1 billion to $1.8 billion. Moody's anticipates that the revolver may be reduced to as low as $1.4 billion after the note offering and subsequent asset sales. The company has indicated it intends to fund the capital expenditure deficit with future asset divestitures.

To be upgraded, FST will need to sustain favorable sequential quarter production trends (pro-forma for any debt reducing divestitures); modestly reduce leverage on proven developed (PD) reserves, on total reserves, and on production; commit to support further significant acquisitions with suitable equity funding; and continue to demonstrate successful organic reserve replacement trends at competitive costs.

Per Moody's Exploration and Production methodology, FST maps to a Ba3 rating category. This reflects the firm's Ba reserve and production scale and diversification, a Ba range leveraged full-cycle ratio (cash-on-cash returns), a Ba range cash flow coverage of debt after deducting sustaining capex from cash flow, and competitive reserve replacement cost trends. The Ba metrics are currently offset in the model by Caa rating range leverage on PD and total reserves, total full-cycle costs, and reserve replacement costs (though improving).

Forest has 3-year all sources cost of approximately $16.58/boe and a 3-year drillbit cost of approximately $13.33/boe. While historically high, we note that FST's 2007 reserve replacement costs were stronger than previous years, and competitive with sector 2007 costs. Total full-cycle costs are estimated to be in the low-mid $30/boe range. Forest has a production cost of approximately $8.39/boe (pro-forma for the Ark-La-Tex Acquisition). G&A/boe, including significant capitalized G&A expense, is estimated to be approximately $4.21/boe and interest expense/boe to be approximately $4.54/boe.

Adjusted pro-forma leverage of approximately $8.35/boe of PD reserves and $9.40/boe of total proven reserves (adding SFAS 69 future development costs to debt) remains high and maps to the Caa and B range respectively. Though leverage may come down with further divestitures, we believe it will remain elevated relative to the current ratings. FST currently has approximately $608 million of secured debt under its upsized $1.8 billion revolver and approximately $1.4 billion of senior unsecured notes (pro-forma for new note offering). Future development costs are expected to be approximately $1.3 billion prior to further assets divestitures.

Forest Oil is an independent oil and gas exploration and production company headquartered in Denver, Colorado.

New York
Steven Wood
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