Forest Oil (FST) shares dropped 5.5% in early morning trading Friday, after the producer of oil and natural gas announced a deal to sell its Texas Panhandle assets for $1 billion.
The Denver-based company is selling the assets to privately held Templar Energy. The deal, which tops Forest Oil’s market value on Thursday of roughly $760 million, is expected to close by Nov. 25.
Forest Oil said it doesn’t expect to incur any income taxes from the deal. It will use the proceeds to continue reducing its debt.
Like other energy companies that primarily focus on natural gas production, Forest Oil has struggled to combat low gas prices. The company has turned to asset sales and production of natural gas liquids, which is more lucrative.
Chief Executive Patrick McDonald said the deal sharpens Forest Oil’s focus and allows the company to continue development efforts at the Eagle Ford Shale in Texas. He noted that Eagle Ford is “projected to show notable growth over the next several years.”
The divested assets accounted for earnings before interest, taxes, depreciation and amortization of about $180 million for the most recent 12-month period.
Shares were recently trading 35 cents lower at $6.00. As of Thursday’s close, the stock was already down about 5% since the start of the year.