Forest Oil to buy Texas properties for $892 million

NEW YORK (Reuters) - Oil and natural gas company Forest Oil Corp (FST.N) said on Monday that it would buy about 118,000 gross acres of producing assets in two of its core regions in Texas for $892 million in cash and stock.

The company is buying the properties, located in the Greater Buffalo Wallow and East Texas regions, from Cordillera Texas for about $708 million in cash plus 3.5 million shares of common stock.

The new assets produced about 34 million cubic feet of natural gas equivalent per day in the first half and have estimated proved reserves of 350 billion cubic feet equivalent.

Denver-based Forest said the East Texas acreage is focused in the Cotton Valley and Travis Peak intervals and also has rights in the hot Haynesville shale area.

The company expects more than 30 percent production increase in the assets in 2009 as it ramps up its drilling rig count by 20 percent.

Ultimately, Forest plans to pay for the deal by selling noncore, nonstrategic assets and has identified $500 million to $600 million of them to divest. Those sales would be in addition to the $300 million to $500 million in assets it is already trying to sell, the company said.

Forest shares fell 53 cents, or 1 percent, to $52.30 on the New York Stock Exchange on Monday morning.

(Reporting by Michael Erman; Editing by Lisa Von Ahn, Dave Zimmerman)