Forest Oil Corporation has entered into an agreement to sell the majority of its East Texas natural gas gathering assets to a subsidiary of Tristate Midstream II, LLC for proceeds of $34 million.
Forest can also earn up to $9 million of additional performance payments contingent on future activity. In conjunction with the sale, Forest has entered into a ten-year natural gas gathering agreement with the buyer under which Forest will commit its production from its existing and future operated wells located within five miles of the current configuration of the gathering system. The transaction is expected to close on October 31, 2012 and is subject to customary closing conditions and purchase price adjustments.
Forest intends to use the net proceeds from the sale to repay a portion of the outstanding borrowings under its bank credit facilities.