April 29, 2002; Forest Oil’s Alaskan Discovery May Be Worth A Billion Dollars

Forest Oil stock is currently valued at the median enterprise value of about $1.30 per mcf ($7.80 per barrel) for small cap producers.  The denominator of the ratio includes about 50 million barrels for the company’s oil discovery in the Cook Inlet of Alaska.  Estimates of reserves commonly increase with additional information about a new discovery.  The full limits of oil accumulation at Redoubt Shoal have not yet been determined and a new natural gas zone has been discovered above the oil zone.  The ultimate size of the field may be 150 million barrels net to Forest.  The increment would be worth more than $10 a share even before full development.   

The company’s new chief operating officer, recently arrived from Apache Corporation, makes a strong impression as an energetic, profit oriented, technically capable manager.  In addition to Alaska, Craig Clark highlights Forest’s exposure in the Fort Liard area of Canada where two separate exploratory wells are planned soon.  Mr. Clark is eager for Forest to bid on new lands in the Northwest Territories as soon as the indigenous peoples are ready to deal.