ValueX Vail 2014 – Forest Oil Corporation (FST)

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ValueX Vail 2014 – Forest Oil Corporation (FST)

Aquitania Capital Management, LLC’s Christopher Karlin presentation on Forest Oil Corporation (NYSE:FST) at ValueX Vail.

Who We Are?

  • Aquitania Capital Management is an opportunistic value investor with an event focus
  • Seeking dislocations where ourcounterparties are making uneconomic decisions
    • Asymmetric reward-to-risk situations with high conviction in a variant thesis
    • Securities that are either being accidentally overlooked or actively avoided by most investors

ValueX Vail: Opportunity in Forest Oil

  • Forest Oil Corporation (NYSE:FST) and Sabine Oil & Gas agreed to merge on 5/6/14
  • Merger creates value for both parties
  • Market fails to recognize value for identifiable structural reasons
  • FST trades at a substantial discount to intrinsic value
  • Margin of safety highlights gap between perceived risk and probable risk
  • Several near-term catalysts to close valuation gap with peers
  • Long-term catalysts could result in substantial growth
  • Primary risks are deal closure and energy pricing –primarily

ValueX Vail: Merger Rationale

Sabine:

  • Public listing –liquidity and capital access
  • Additional scale –reserves & production
  • Acquires reserves at a discount
  • Sabine management remains in place

Forest:

  • Improves balance sheet
  • Participates in upside

2015 synergies:

  • Eliminate 2/3 of Forest SG&A
  • Apply Sabine’s D&C talent and Forest’s cost control to improve returns on Forest reserves.

ValueX Vail: Forest Oil outlook

Forest Oil Corporation (NYSE:FST) is an asset-rich domestic E&P company with a weak balance sheet

  • Stock has significantly underperformed:
    • 2011: -50%
    • 2012: -53%
    • 2013: -46%
    • 2014 YTD (pre-merger announcement): -50%
    • 2014 YTD (6/17/14): -36%
  • Assets: Ark-La-Tex (gas), Eagle Ford (oil) & Permian (oil)
  • High indebtedness, large drilling program and weak drilling results pushed it to seek a partner

Full Presentation: 232173046-Forest-Oil-FST-ValueX-Vail-2014

Forest Oil FST ValueX Vail 2014

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