Forest Oil Reports Loss as Expected in Q1 - Analyst Blog

Denver-based Forest Oil Corporation's FST first-quarter 2014 loss of 2 cents per share (excluding non-recurring items) came in line with the Zacks Consensus Estimate. Moreover, the quarterly figure decreased approximately 167% from the year-earlier earnings of 3 cents.

The lackluster performance was mainly due to a fall in net sales volume and oil sales volume. Lower oil prices also contributed to the decline.

Total revenue in the reported quarter decreased 44.8% to $65.2 million from the year-ago level of $118.2 million and missed the Zacks Consensus Estimate of $67.0 million.

Production

Net sales volume shrunk nearly 57% year over year to 105.1 million cubic feet equivalent per day (MMcfe/d) in the reported quarter. It comprised 32% liquids compared to 34% in the prior-year quarter.

The company's oil net sales volume in the first quarter decreased nearly 42% from the year-ago period to 3.6 thousand barrels per day (MBbls/d). On the bright side, natural gas sales volume in the quarter was 71.5 MMcf/d and accounted for 68% of the total quarterly volume.

Realized Prices

The average equivalent price per Mcf (including the effect of hedging) was $6.34, up 8.6% from the year-ago realization of $5.84. Natural gas was sold at $3.84 per Mcf, up 6.1% from the comparable prior-year quarter. However, natural gas liquids (NGLs) were sold at $33.45 per barrel, up nearly 9% from the year-ago quarter and average realized oil price was $89.88 per barrel, down 7.6% from the year-ago quarter.

Expenses

The first-quarter lease operating expenses of $1.53 per Mcfe increased 35% year over year. Unit general and administrative expenses rose 100% to 72 cents per Mcfe from the year-ago level of 36 cents per Mcfe. Transportation and processing costs per unit increased nearly 50% to $0.27 per Mcfe from $0.18 per Mcfe in the first quarter of 2013.

Financials

At the quarter-end, Forest Oil had $48.3 million of cash and cash equivalents with $800.2 million of long-term debt (including current portion), representing a debt-to-capitalization ratio of 95.8% (up from 46.4% at the end of fourth-quarter 2013).

Zacks Rank

At present, Forest Oil has a Zacks Rank #3 (Hold). However, other stocks in the oil and gas sector like Unit Corp UNT, Targa Resources Partners LP NGLS and Boardwalk Pipeline Partners LP BWP, sporting a Zacks Rank #1 (Strong Buy) are expected to perform better.