Forest Oil Corp. Earnings: From the Black to the Red

Forest Oil Corporation (NYSE:FST) reported its results for the third quarter. Forest Oil is an independent oil and gas company engaged in the acquisition, exploration, development, and production of natural gas and liquids mainly North America.

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Forest Oil Corporation Earnings Cheat Sheet

Results: Reported a loss of $458.6 million ($3.97 per diluted share) in the quarter. Forest Oil Corporation had a net income of $82.8 million or 72 cents per share in the year-earlier quarter.

Revenue: Fell 10.3% to $156 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Forest Oil Corporation reported adjusted net income of 10 cents per share. By that measure, the company beat the mean estimate of 9 cents per share. It fell short of the average revenue estimate of $187.7 million.

Quoting Management: Patrick R. McDonald, President and CEO, stated, “During the third quarter Forest made significant progress towards achieving the strategic objectives that we have communicated to our shareholders. Our divestiture program is off to a good start, with approximately $277 million in sales closed or pending. We will continue to focus on other non-core divestitures to improve our financial position and flexibility. We opportunistically took advantage of favorable high-yield market conditions to complete a $500 million Senior Notes offering, with proceeds used to redeem 50% of our outstanding Senior Notes due 2014. Importantly, our capital program is now closely aligned with our expected cash flow. Forest entered the fourth quarter operating five drilling rigs, all targeting oil or liquids-rich opportunities in our three core development areas. These actions have resulted in measurable achievements designed to better position Forest for the long-term. Operationally, we continue to execute on our development program by targeting higher-margin oil opportunities within our core Panhandle and Eagle Ford areas. During the third quarter, we opened up a new area of the Hogshooter play with a successful completion in the Camp South Area and we completed our first well targeting the Douglas oil horizon. These results continue to demonstrate the resource potential that exists within the oil zones of the Panhandle. In the Eagle Ford, we have introduced a drilling rig equipped with a “rig-walking” system that will allow for multi-well pad drilling in the central fairway. This should result in more efficient operations, while driving well costs lower and increasing our overall returns. Our focus on oil projects continues to generate positive results, as third quarter oil volumes increased 7% sequentially and 29% as compared to the third quarter of 2011. Forest made significant strides on all fronts during the most recent quarter; continued execution is critical in bringing forward the value of our assets. Everyone at Forest is focused on building upon the operational and financial momentum gained during the third quarter for the remainder of 2012 and into 2013.”

Key Stats:

Revenue has dropped for four quarters in a row. Revenue declined 42.9% to $135.7 million in the second quarter. The figure fell 21.6% in the first quarter from the year earlier and dropped 17.4% in the fourth quarter of the last fiscal year from the year-ago quarter.

After two quarters of falling short, the company beat estimates last quarter. In the second quarter, it missed the mark by 3 cents, and in the first quarter, it came in under estimates by 9 cents.

Looking Forward: Analysts are pessimistic about the company’s results for the next quarter. The average estimate has fallen for the fourth quarter to 11 cents per share, down from 12 cents seven days ago. The average estimate for the fiscal year has seen a bump from 36 cents per share sixty days ago to 39 cents.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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