Forest Oil Shares Rise on Analyst Notes
Wednesday August 8, 2:39 pm ET
Forest Oil Shares Rise 7.7 Percent on Positive Analyst Reports
DENVER (AP) -- Shares of Forest Oil Corp. rose 7.7 percent Wednesday afternoon, after positive analyst reports that followed the company's second-quarter earnings release the day before. In afternoon trading, Forest Oil shares rose $2.42, or 6.1 percent, to $42.18.
The company's profit was generally in line with expectations, but analysts were more focused on its acquisition of Houston Exploration Co. and the sale of its Alaska assets as part of an encouraging strategy for long-term growth. "We believe shares are positioned to outperform over the next few quarters, and FST remains a top pick in our universe," wrote Wachovia Securities analyst David Tameron. He expects Forest to deliver "solid production growth" once the two deals are finalized.
Tameron anticipates the sale of another $100 million to $200 million worth of Forest properties, whose proceeds may be used to pay down debt or fund other acquisitions.
While another acquisition the size of the $1.5 billion Houston Exploration deal is unlikely, according to Tameron, another $100 million to $400 million in transactions are expected. He mentioned South Texas properties El Paso Corp. as possible acquisitions.
"The successful transformation of FST continues," wrote Morgan Stanley analyst Lloyd Byrne, who rates Forest shares as "Equal-Weight." Byrne expects Forest to provide long-term guidance, with a focus on 2008 production and cash flow, after closing the Alaska deal on Aug. 24.
Forest said Tuesday its second-quarter earnings rose 35 percent to $76.8 million, or $1.08 per share, versus $57 million, or 90 cents per share, a year earlier. Revenue rose 49 percent to $140.8 million from $94.8 million.
Tameron and Byrne said those figures and Forest's guidance on production and expenses for the second half of 2007 were generally in line with expectations.
