Filed by Sabine Oil & Gas LLC
Pursuant to Rule 425 of the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Forest Oil Corporation
Commission File No.: 001-13515
Sabine Oil & Gas LLC posted the following investor presentation to its website on June 24, 2014:
 Global Hunter
Securities 100 Energy Conference
June 24, 2014 |
 Forward Looking
Statements 1
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC In connection with the
proposed transactions, on May 29, 2014, New Forest Oil Inc. (which will be renamed Sabine Oil & Gas Corporation as of the closing of the proposed
transaction) (“Holdco”) filed with the SEC a registration statement on Form S-4 that
includes a preliminary proxy statement of Forest Oil Corporation that also constitutes a
preliminary prospectus of Holdco. Each of Holdco and Forest Oil Corporation also plan to file
other relevant documents with the SEC regarding the proposed transactions. INVESTORS ARE
URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the
definitive joint proxy statement/prospectus (if and when it becomes available) and other relevant
documents filed by Holdco and Forest Oil Corporation with the SEC at the SEC’s website at www.sec.gov. You may also
obtain these documents by contacting Holdco or Forest Oil Corporation at Forest Oil Corporation’s
Investor Relations department at www.forestoil.com or by email at
IR@forestoil.com.
PARTICIPANTS IN THE
SOLICITATION
Holdco, Forest Oil Corporation, Sabine Oil & Gas LLC and their respective directors and executive
officers and other members of management and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transactions. Information about Forest Oil Corporation’s directors is available in Forest
Oil Corporation’s proxy statement filed with the SEC on March 26, 2014, for its 2014 annual meeting
of shareholders, and information about Forest Oil Corporation’s executive officers is
available in Forest Oil Corporation’s Annual Report to shareholders filed with the SEC on February 26, 2014. Information about Sabine Oil & Gas LLC’s
directors and executive officers is available in the registration statement on Form S-4 filed by New
Forest Oil Inc. on May 29, 2014. Other information regarding the participants in the proxy
solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the definitive proxy
statement/prospectus and other relevant materials to be filed with the SEC regarding the proposed
transactions when they become available. Investors should read the definitive proxy
statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these
documents from Holdco or Forest Oil Corporation using the sources indicated above.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be
made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act
of 1933, as amended. CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements concerning the proposed transactions, its
financial and business impact, management’s beliefs and objectives with respect thereto, and
management’s current expectations for future operating and financial performance, based on assumptions currently believed to be valid. Forward-
looking statements are all statements other than statements of historical facts. The words
“anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,”
“projects,” “intends,” “likely,” “will,” “should,”
“to be,” and any similar expressions or other words of similar meaning are intended to identify those assertions as forward-
looking statements. It is uncertain whether the events anticipated will transpire, or if they do
occur what impact they will have on the results of operations and financial condition of Holdco,
Forest Oil Corporation or Sabine Oil & Gas LLC. These forward-looking statements involve significant risks and uncertainties that could cause actual
results to differ materially from those anticipated, including but not limited to the ability of the
parties to satisfy the conditions precedent and consummate the proposed transactions, the timing
of consummation of the proposed transactions, the ability of the parties to secure regulatory approvals in a timely manner or on the terms desired
or anticipated, the ability of Holdco to integrate the acquired operations, the ability to implement the
anticipated business plans following closing and achieve anticipated benefits and savings, and
the ability to realize opportunities for growth. Other important economic, political, regulatory, legal, technological, competitive and other
uncertainties are identified in the documents filed with the SEC by Holdco or Forest Oil Corporation
from time to time, including Forest Oil Corporation’s Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. For additional information on the risks and uncertainties that could impact Sabine Oil & Gas
LLC’s business and operations, as well as risks related to the transactions, please see the
registration statement on Form S-4 filed by New Forest Oil, Inc. on May 29, 2014. The
forward-looking statements included in this document are made only as of the date hereof. None of Holdco, Forest Oil Corporation nor Sabine Oil & Gas LLC
undertakes any obligation to update the forward-looking statements included in this document to
reflect subsequent events or circumstances. |
 2
Overview of Sabine Oil & Gas LLC
•
1Q14 Production ~ 31 MBOED (33% liquids)
•
1Q14 Adjusted EBITDA ~ $78 MM
•
YE13 Proved reserves of 839 Bcfe (56% PD; 70% gas)
•
$1.35B PV10 on SEC
pricing
($96.78 Oil /$3.67 gas /$41.23 NGL)
•
Ryder Scott prepared reserve report
Company Overview
1.
Acreage count and production rates are as of March 31, 2014
2.
East Texas acreage does not include 71,000 net acres in DK prospect
North Texas
(1)
•
2.5 MBOE/D (71% liquids)
•
~36,200 net acres
•
Primary Target: Granite Wash
East Texas
(1)(2)
•
18.7 MBOE/D (15% liquids)
•
~104,000 net acres
•
Primary Targets: Cotton Valley
Sand, Haynesville Shale
South Texas
(1)
•
9.5
MBOE/D
(60%
liquids)
•
~40,400
net
acres
•
Primary
Target:
Eagle
Ford
Shale
»
Formed in 2007, privately-held natural gas and oil company
owned by First Reserve and Management
»
Core areas are East Texas (Cotton Valley Sand &
Haynesville Shale), South Texas (Eagle Ford Shale) and
North Texas (Granite Wash)
»
Extensive inventory of low-risk drilling locations with
strong economics
»
High degree of operational control provides optionality to
direct capital
»
Top-tier operational capabilities |
 3
Sabine Historical Growth
Production (MMCFE/D)
34% of Production from Liquids
50% of Revenue from Liquids
1Q14 Revenue Mix
(1)
(1)
2013 Production pro forma for the Cleveland Sand divesture
(2)
Represents 2014 Mid point production guidance
1Q14 Production Mix
2013 Proved Reserves (BCFE)
56% Proved Developed & 70% Gas
(2)
Total 839 BCFE
1Q14 Rev $112 MM
1Q14 Prod 16.6 BCFE
32
59
77
121
133
155
220
0
50
100
150
200
250
2008
2009
2010
2011
2012
2013
2014E
447
19
373
PDP
PDNP
PUD
66%
Gas
Oil
NGL
50%
35%
15%
Gas
Oil
NGL |
 4
2013 Results
•
Evolving completion techniques and
improving gas price leading to better
economics
•
5 wells completed in 2013 had an average
IP30 of 10.1 MMCFE
2014 Plan
•
Run
(1)
Rig
with
plan
to
add
2
rig
in
Q3
•
Attractive breakeven cost (10% IRR)
–
$1.88/MCF at $85 flat oil
–
$1.74/MCF at Strip oil (6/2/14)
East Texas: Cotton Valley
nd |
 5
East Texas: Haynesville Shale
»
2013 Results
•
Industry
leader
in
East
TX
–
completion
design evolution leading to results
improving over time
•
7 wells completed in 2013 had an average
IP30 of 9.7 MMCFE
»
2014 Plan
•
Completing (8) JV wells in the 1H14
•
Plan to add a rig in Q3 to drill two well pads
and test casing design change with $500K
expected savings
•
Breakeven cost of $4.04/MCF with the new
well design |
 6
East Texas Acreage
CVS Acreage by County
95% Developed
5% Undeveloped
HYV Acreage by County
95% Developed
5% Undeveloped
Note: A significant portion of the Company’s Haynesville Shale
and Cotton Valley Sand acreage overlaps geographically, so such acreage is only counted once in East
Texas’s acreage despite representing two distinct targets and development
opportunities County
Developed
Net Acres
Undeveloped
Net Acres
Total
Harrison
43,374
2,283
45,657
Rusk
34,632
1,823
36,455
Panola
6,053
318
6,371
Total Cotton Valley
84,059
4,424
88,483
County
Developed
Net Acres
Undeveloped
Net Acres
Total
Harrison
46,784
2,462
49,246
Panola
13,501
711
14,212
Rusk
3,159
166
3,325
Total Haynesville
63,444
3,339
66,783
Cotton Valley
Haynesville |
 7
Eagle Ford Shale: Shiner area
»
Upper Eagle Ford landing validated and has excellent productivity in
northern DeWitt and Lavaca counties
»
Sabine Haynesville completion design being implemented:
•
Tighter perf cluster, frac stage spacing
•
Hybrid fluid design with emphasis on high volumes of slick water
•
Lower strength proppant to reduce cost
•
Less expensive proppant and reduced chemicals helps offset cost
of additional stimulation volumes
»
Optimal landing point coupled with significant stimulated rock
volume translates into shallower production declines
•
Operators in Lower Eagle Ford tout higher 24-hour IP’s, but first
year production for Sabine wells is comparable
»
Operated results to date
•
Acreage well delineated, now in development phase
–
31 wells drilled to date and 6 wells currently drilling
–
9 -12 additional wells expected to be spud by end of 2014
–
30% of acreage is HBP
•
Industry leading results
–
Avg IP24 of 1,590 BOE/D & Avg IP30 of 1,230 BOE/D
•
Attractive breakeven cost:$51/BBL at Strip gas (6/2/14) |
 8
Eagle Ford Shale: Sugarkane
KARNES
DE WITT
2013 SABO Wells
2014 SABO Wells
IP30 (BOE/D)
T-Bird 2H
2,192 BOE/D
Offsets within 12 x 3 mi polygon around SABO production
T-Bird 3H
2,257 BOE/D
T-Bird 4H
2,238 BOE/D
T-Bird 5H
2,261 BOE/D
Kozielski 1H
2,340 BOE/D
Kozielski 2H
3,026 BOE/D
Kozielski 3H
2,376 BOE/D
Kozielski 4H
2,535 BOE/D
McClanahan 1H
1,694 BOE/D
McClanahan 2H
2,045 BOE/D
McClanahan 3H
1,707 BOE/D
McClanahan 4H
1,742 BOE/D
McClanahan 5H
1,615 BOE/D
»
Acquired acreage in December 2012
»
“Core of the core”
Eagle Ford reservoir
»
Acreage in full development phase
•
13 wells drilled to date plus 1 acquired well
•
25 additional wells planned
•
All acreage is HBP
»
Well results on par with majority of leading offset
operators
•
Avg IP24 of 2,567 BOE/D & Avg IP30 of 2,156
BOE/D
»
Breakeven cost: $80/BBL at Strip gas (6/2/14) |
 9
North Texas: Granite Wash –
Roberts County
Well A
895 BOE/D
2013 SABO Wells
2014 SABO Wells
IP30 (BOE/D)
»
Operated ~ 33,500 net acres in oil window of play,
shallowest part of Granite Wash trend
»
Outstanding productivity in trend:
•
8 operated wells drilled and completed since
mid 2013
•
19 additional wells expected to be spud by
end of 2014
•
Majority of acreage HBP or held by continuous
development
•
Strong economics, often < 1yr. payout
»
Currently testing the western extent of the
Granite Wash, which could represent material
upside to the inventory count
»
Industry leading results in immediate area
•
Avg IP24 of 1,439 BOE/D & Avg IP30 of 1,136
BOE/D
•
100% IRR’s
»
Attractive breakeven cost: $35/bbl at Strip gas as
of 6/2/14
Well D
1,232 BOE/D
Well B
1,882 BOE/D
Well E
1,420 BOE/D
Well H
190 BOE/D
Well F
1,641 BOE/D
Well C
1,373 BOE/D
Well G
460 BOE/D |
 Combination
of
Sabine
Oil
&
Gas
LLC
and
Forest Oil Corporation
10 |
 »
Company
headquarters
–
Houston,
Texas
»
Each Forest share to be exchanged for 0.1 shares of SABO
•
Designed to replicate a 10 for 1 reverse stock split
»
Former Sabine unitholders to own 73.5% of pro forma shares
»
Former Forest shareholders to own 26.5% of pro forma shares
»
Board representation proportional to ownership interest
•
6 current Sabine directors, 2 current Forest directors
•
C-Suite Team from Sabine
•
David
Sambrooks
–
Chairman
and
Chief
Executive
Officer
•
Shane
Bayless
–
Chief
Financial
Officer
•
Todd
Levesque
–
Chief
Operating
Officer
»
Approval by Forest shareholders
»
Customary regulatory approvals
»
Closing expected in late Q3 / early Q4
Transaction Summary
11
Transaction
Overview
Consideration
Board /
Management
Key Conditions /
Timing
»
All-stock strategic combination between Sabine Oil & Gas LLC (“Sabine”) and
Forest Oil Corporation (“Forest”
or “FST”) under a newly incorporated public holding
company, Sabine Oil & Gas Corporation (“SABO”), expected to be listed on the
NYSE |
 »
Extensive overlap in top two asset areas: East Texas and Eagle Ford
»
Creates a leading East Texas position of ~207,000 net acres
•
Compelling inventory of high return, liquids-rich Cotton Valley Sand opportunities
•
Significant
inventory
of
Haynesville
drilling
opportunities
with
compelling
current
economics
and significant upside value
»
Complementary positions in the Eagle Ford, creating significant scale of ~65,000 net
acres •
Sabine’s Eagle Ford results top 10% in the industry in 2013
»
Combined
12/31/13
proved
reserves
of
1.5
Tcfe
(71%
gas)
and
2014E
production
of
~345
Mmcfed (65% gas) based on respective company guidance
»
Substantial production and cash flow growth
•
Over 20% pro forma 2014E production growth
»
Cost savings from reduced overhead and streamlined operations
»
Ability
to
optimize
capital
allocation
on
$800
-
$825
million
capital
program
»
Will apply top tier operational results across portfolio
»
Liquidity to fund drilling program through 2015 without accessing capital markets
»
Clear path to improving balance sheet through property divestments and optimized capital
allocation
-
to
be
implemented
as
a
top
priority
»
First Reserve, an energy-focused private equity firm, remains a controlling
shareholder Strategic Rationale
12
Complementary
Asset Positions
Scale and
Growth
Operating
Synergies
Capitalization |
 Leadership
13
David Sambrooks
Chief Executive Officer
•
Former Vice President and General Manager of Devon Energy Corporation's Southern Division and
prior to that,
their International Division
•
Over his thirty-four years of experience, held various executive, business development
and engineering positions with Sun Oil Company / Oryx Energy and Santa Fe Energy
Resources / Santa Fe Snyder Corporation
•
Bachelor of Science degree in Mechanical Engineering from the University of Texas at Austin
and a Master of Business Administration from the Executive Program at the University
of Houston Shane Bayless
Executive Vice President and
Chief Financial Officer
•
Former
Executive
Vice
President
-
Chief
Financial
Officer
and
Treasurer
with
Petrohawk
Energy
•
Over his twenty-four years of experience, held various executive and senior positions
with 3TEC Energy, Encore Acquisition Company, Hugoton Energy and Ernst &
Young •
Bachelor of Science in Accounting from Wichita State University and a Certified Public
Accountant Todd Levesque
Executive Vice President and
Chief Operating Officer
•
Previously served as Senior Vice President of Engineering and Development of Sabine
•
Over
his
twenty-two
years
of
experience,
held
various
engineering
and
management
positions
with Devon/Ocean Energy, Burlington Resources and Amerada Hess
•
Bachelor of Science degree in Petroleum Engineering from Texas A&M University
»
The
combined
company’s
management
team
has
been
together
since
Sabine’s
formation
in
2007,
delivering
top-tier well results and production/cash flow/asset growth |
 Complementary
Asset Footprints 14
1
Daily production representative of 1Q 2014 production
2
Does not include additional acreage in North Louisiana or ~71,000 DK exploratory net acres in
East Texas Map of Acreage Position
(1)
Combined Total
»
~424,000 net acres
»
~290 Mmcfe/d current
production (67% gas)
»
1,464 Bcfe proved
reserves (61% PD; 71%
gas)
»
Creates one of the
largest East Texas
positions with
concentrated and
contiguous acreage
T E X A S
O K L A H O M A
L O U I S I A N A
M I S S I S S I P P I
A R K A N S A S
Arkoma
Mississippi
Granite Wash
•
~33,500 net acres
•
15 Mmcfe/d (29% gas)
Permian Basin
•
~60,250 net acres
•
No material production
•
~35,000 net acres
•
22 Mmcfe/d (100% gas)
•
~14,600 net acres
•
No current production
•
~207,000 net acres
(2)
•
178 Mmcfe/d (81% gas)
Sabine Acreage
Forest Acreage
•
~64,500 net acres
•
74 Mmcfe/d (31% gas)
Panola
De Soto
Caddo
Gregg
Smith
Cherokee
Upshur
Gonzales
DeWitt
Lavaca
Karnes
Wilson
Eagle Ford
East Texas
Rusk |
 Pro Forma Asset
Profile 15
1
As of 12/31/13
2
Per current guidance
3
Represents combination of current standalone guidance from Forest and Sabine management
4
Does not include additional ~71,000 DK net acres in East Texas
5
Excludes East Texas acreage
Proved Reserves
(1)
FY2014E Production Guidance
Acreage (in thousands) |
 Pro Forma Asset
Profile Versus Comps 16
2014E Production
(2)
Proved Reserves
(1)
Bcfe
MMcfe/d
»
Combined company gains significant scale; aligns with gas-weighted peers with focus on
East Texas 134% proved
reserve increase
to Forest
176% 2014E
production increase
to Forest
% Gas
75%
61%
94%
40%
71%
90%
70%
39%
73%
31%
77%
44%
11%
1
Per company press releases and SEC filings. Reserves data includes most recent information
released by listed companies 2
Peers 2014E production per FactSet estimates. Sabine and Forest 2014E production per Sabine and
Forest guidance 3
Percent gas per latest daily production from company press releases and SEC filings
(3)
% Gas
79%
63%
93%
89%
37%
67%
67%
74%
42%
32%
48%
13%
68%
1,247
806
677
387
380
345
220
187
175
152
134
133
125
0
200
400
600
800
1,000
1,200
1,400
WPX
QEP
UPL
XCO
ROSE
SABO
PF
Sabine
CRK
CRZO
PVA
JONE
SN
FST
4,966
4,344
3,614
1,671
1,464
1,124
839
818
625
609
585
534
352
0
1,000
2,000
3,000
4,000
5,000
WPX
QEP
UPL
ROSE
SABO
PF
XCO
Sabine
PVA
FST
CRZO
CRK
JONE
SN |
 Industry Leading
East Texas Position 17
Acreage Location
Asset Overview
»
Combination creates large, contiguos acreage position providing critical mass in
region
»
Evolving completion techniques, lower costs and improving gas prices leading to
better economics and increased activity
»
Multi-play basin with opportunities in the Cotton Valley (multiple benches),
Haynesville, Bossier, Pettet and Travis Peak
»
2013
Combined
Cotton
Valley
Sand
Program
–
11
wells
»
2013
Sabine
Haynesville
Program
–
7
wells
»
2014 Plans
•
Currently running four rigs in liquids-rich Cotton Valley play
•
Test new Haynesville well design, $500k potential capital savings
•
Evaluating drilling program for combined company, potential for increased
activity
East Texas has been a core asset for Sabine and
Forest. With current gas prices and increased activity,
this area will provide significant production and
reserve growth.
Sabine Acreage
Forest Acreage (1)
1
Strip pricing as of 4/29/14
(1)
24-hr IP (Mmcfe/d)
10.4
30-day IP (Mmcfe/d)
9.7
% Liquids
7%
EUR (Bcfe)
8.0
Well Cost ($ millions)
$9.3
24-hr IP (Mmcfe/d)
11.0
30-day IP (Mmcfe/d)
9.5
% Liquids
34%
EUR (Bcfe)
9.2
Well Cost ($ millions)
$8.8
Program Economics
$4/$90
Strip
Rate of Return
27%
36%
PV10 per well ($ millions)
$4.3
$5.6
F&D ($/mcfe)
$1.23
Commodity Pricing
Program Economics
$4/$90
Strip
Rate of Return
17%
26%
PV10 per well ($ millions)
$1.7
$3.4
F&D ($/mcfe)
Commodity Pricing
$1.54 |
 Industry Leading
Performance 18
Cotton Valley
•
Incorporated Haynesville designs into CV
completion
•
Higher perf cluster density
•
Tighter frac stage spacing
•
Higher fluid and proppant volumes
Haynesville
•
More economical proppant, reduced
chemical usage has offset cost impact of
larger stimulations
Note: Industry results represent entire Cotton Valley and Haynesville plays,
respectively. 5
23
9
13
5
6
22
37
24
10
32
18
51
6
21
47
31
74
6
11
10
9
10
10
8
5
8
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
(# of wells)
Sabine
Total
Program
FST
Total
Program
Sabine
2013
FST
2013
302
11
148
269
193
106
23
7
17
105
577
77
20
49
24
20
45
103
8
4
5
85
11
39
4
14
A
B
C
D
E
F
G
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
500
1,000
1,500
2,000
2,500
Sabine
Total
Program
Sabine
2013
FST
Total
Program
Top
Industry
Operators
–
Cotton
Valley
Top 25 Operators -
Haynesville
-
-
Source: HPDI Data for industry wells. Internal production estimates for Forest and Sabine
»
Advanced completion design relative to most
in industry, improving well performance
»
Plan to apply Sabine’s completion design across
combined company
»
Experience: With almost 70 CV completions
combined, knowledge to high-grade acreage
»
Latest Sabine performance on-par with NLA
Haynesville “core”
–
with lower cost structure
»
Tighter perf clusters, frac stages, utilizing
“zipper”
fracs
»
Higher stimulation volumes
»
Deeper landing point in reservoir, contacts
more rock |
 Significant Eagle
Ford Position 19
Acreage Overview
Asset Overview
»
Sabine’s results have extended the best part of the Eagle Ford
trend further northeast, with results comparable to core players
»
Sabine acreage is generally in the gas-condensate window
•
Higher pressures and gas reservoirs improve recoveries
•
Best wells are in this part of the hydrocarbon envelope
»
Forest acreage subject to Schlumberger agreement whereby
Schlumberger receives a 50% working interest in Forest’s Eagle
Ford assets in exchange for a $90 million drilling carry
•
$29 million of carry remaining as of 12/31/13
»
Leveraging experience from Haynesville resource development
and targeting of Upper Eagle Ford to generate superior results
»
2013
Sabine
Shiner
Area
Eagle
Ford
Program
–
10
wells
»
2014 Plans
•
Currently operating four rigs in DeWitt/Lavaca and two rigs in
Gonzales
•
Greater scale allows for combined company to evaluate
opportunity to shift more capital to East Texas
Devon (former
GeoSouthern)
Penn Virginia
Sabine acreage borders Devon and Penn Virginia, with
comparable results. Devon/GeoSouthern sale and recent
PVA stock rally are additional positive indications of
industry/market view of this part of Eagle Ford play.
Sabine Shiner
Area
Sabine
Sugarkane Area
Sabine Acreage
Forest Acreage 1
Strip pricing as of 4/29/14
(1)
24-hr IP (Boe/d)
1,772
30-day IP (Boe/d)
1,331
% Liquids
78%
EUR (Mboe)
723
Well Cost ($ millions)
$10.6
Texas
Program Economics
$4/$90
Strip
Rate of Return
27%
34%
PV10 per well ($ millions)
$2.4
$2.8
F&D ($/boe)
Commodity Pricing
$19.29 |
 Eagle Ford
Performance 20
»
In northern DeWitt and Lavaca counties, Sabine has
validated that the upper Eagle Ford has excellent
productivity
»
Also unique to industry, Sabine brought its Haynesville
completion experience to the Eagle Ford
•
Tighter perf cluster, frac stage spacing
•
Hybrid fluid design with emphasis on high volumes of
slick water
•
Lower strength proppant to reduce cost
•
Less expensive proppant and reduced chemicals helps
offset cost of additional stimulation volumes
»
Optimal landing point coupled with significant stimulated
rock volume translates into shallower production declines
•
Operators in Lower Eagle Ford tout higher 24-hour IP’s,
but first year production for Sabine wells is
comparable
Note: Industry results represent entire Eagle Ford Play
Source: HPDI Data for industry wells. Internal production estimates for Sabine
Top 25 Operators
Top 25 Operators |
 High Return
Granite Wash Position 21
Acreage Overview
Asset Overview
»
Sabine operates ~ 33,500 net acres in oil window of play, shallowest
part of Granite Wash trend
•
Outstanding productivity, with 8 of 17 horizontals producing (or
projected to produce) in excess of 200 Mboe in first year
•
Two recent wells projected at 300-350 Mboe in first year
(~ 60% oil)
•
Two years of identified drilling locations, with potential for up to
200 locations depending on western delineation results
•
Wells to date have exhibited extremely strong economics, often
paying out in under a year
»
Sabine
2013
Program
Results
–
5
wells
»
2014 Plans
•
2014 development plan: Running 2 rigs, balance of low-risk
development locations with measured step-out tests to the west
Mesa Vista and Lard Ranch have been extensions on-trend with
several large Granite Wash developments. With the shallower
depth, Mesa Vista also has a higher oil content.
1
Strip pricing as of 4/29/14
(1)
Program Economics
$4/$90
Strip
Rate of Return
>100%
>100%
PV10 per well ($ millions)
$5.3
$5.7
F&D ($/boe)
Commodity Pricing
$15.20
24-hr IP (Boe/d)
1,561
30-day IP (Boe/d)
1,142
% Liquids
76%
EUR (Mboe)
674
Well Cost ($ millions)
$8.1
»
Sabine is currently testing the western extent of the Granite Wash,
which could represent material upside to the inventory count on this
position
Mesa Vista (2011)
Cum: 2 MMBOE (49% Oil)
Lard Ranch Field (2005)
Cum: 13.9 MMBOE (21% Oil)
Hemphill Field (1963)
Cum: 169.5 MMBOE (8% Oil)
Mendota Field (1964)
Cum: 130.1 MMBOE (13% Oil)
Buffalo Wallow Field (1969)
Cum: 286.1 MMBOE (4% Oil)
Stiles Ranch Field (1979)
Cum: 170.2 MMBOE (11% Oil) |
 1Q14
Activity 22
»
Combined
company
production
for
Q1
was
approximately
290
MMCFE/D
(33%
liquids)
•
Combined Adjusted EBITDA was $113MM, operating cash flow was $134MM
»
Twelve rigs running for the combined company during the quarter
•
Six rigs running in the Eagle Ford: Four on Sabine, two on Forest
•
Four rigs running in the Cotton Valley: Three on Forest, one on Sabine
•
Two rigs running on Sabine's Granite Wash asset in North Texas
»
Renewed focus on East Texas Cotton Valley
•
Strong economics, Rusk County proving to be best in play
•
Forest shifting capital from Eagle Ford
•
Sabine maintaining pace, likely to increase in second half of year
»
Eagle Ford moving into development phase
•
Delineation and lease-saving activity on Forest acreage is near completion
–
Forest testing alternative targets and well designs to reduce capital and improve
economics •
Sabine is methodically testing South Shiner term acreage acquired in 2013
–
Majority of current drilling focused on low-risk and proven updip South Shiner units
»
Continued success in Granite Wash, progressing development to the west
|
 ($ in millions)
Status Quo
Status Quo
Sabine
Forest
Pro Forma
Cash
$1
$48
$49
Revolving Credit Facility
$355
-
$376
2nd Lien Term Loan due 2018
650
-
650
Senior Unsecured Notes due 2017
350
-
350
Senior Unsecured Notes due 2019
$578
-
Senior Unsecured Notes due 2020
-
222
-
New Senior Notes (to extent put)
-
-
850
Total Debt
$1,355
$800
$2,226
Book Equity
199
35
415
Total Book Capitalization
$1,554
$835
$2,642
LTM 3/31/14 EBITDA
$315
$169
$484
Proved Reserves (Bcfe)
839
625
1,464
Proved Developed Reserves (Bcfe)
466
414
881
% Developed
56%
66%
61%
% Liquids
30%
27%
29%
Latest Daily Production (Mmcfe/d)
185
105
290
1P PV-10 (After-tax)
(4)
$1,351
$735
$2,059
Credit Statistics
Net Debt / LTM EBITDA
4.3x
4.4x
4.5x
Net Debt / Proved Reserves ($/mcfe)
$1.61
$1.20
$1.49
Net Debt / PD Reserves ($/mcfe)
$2.90
$1.81
$2.47
Net Debt / Latest Daily Prod. ($/mcfe/d)
$7,334
$7,150
$7,514
Net Debt / PV-10 (After-tax)
1.0x
1.0x
1.1x
Liquidity
Cash
$1
$48
$49
Revolver Borrowing Base
$700
$300
$1,000
Amount Drawn
(355)
-
(376)
Total Liquidity
$346
$348
$673
Financing Highlights and Pro Forma Capitalization
23
Capitalization Table
Financing Highlights
(2)
(3)
1
Forest pro forma for 2013 divestitures
2
Reserves as of 12/31/13
3
Average 1Q 2014 production
4
Sabine price deck of $96.78 / $3.67. Forest price deck of $97.33 / $3.67
(2)
(1)
»
Forest 2019 and 2020 bonds subject to change of control
put at 101 (triggered at time of close)
•
Expect to run liability management process
•
Committed financing in place should bondholders
exercise the 101 put
»
Will monitor the credit markets with a view to
opportunistically refinance all or a portion of the
existing Sabine 2 lien and 2017 bonds
»
Sabine corporate ratings have been put on Review for
Upgrade by Moody's; current ratings are B3 / B
»
Credit accretive on a PF basis versus as standalone
companies
»
The combined company will pursue portfolio
rationalization and debt reduction over the next twelve
months
•
Will aggressively but prudently evaluate accretive
divestment opportunities
nd
To allow optimization of capital allocation
To increase liquidity and de-lever balance sheet
»
New $1 billion RBL facility (already committed)
•
May also seek to opportunistically term out RCF
drawings |
 2014 Financial
Guidance 24
Pro Forma Combined 2014E Guidance
1
Production taxes assume price deck of $3.50/Mcf gas and $85/Bbl oil.
Low
-
High
Midpoint
Production:
Natural Gas (Mmcf/d)
212
-
234
223
Oil (Bbl/d)
10,731
-
11,860
11,296
Natural Gas Liquids (Bbl/d)
8,552
-
9,452
9,002
Total Production (Mmcfe/d)
328
-
362
345
Total Production (Mboe/d)
55
-
60
58
Operating Expenses:
Lease Operating / Workover Expense
$0.75
-
$0.85
$0.80
Marketing, Transportation, Processing
$0.25
-
$0.35
$0.30
Production
&
Ad
Valorem
Taxes
(1)
$0.35
-
$0.40
$0.38
General & Administrative Expense
$0.39
-
$0.44
$0.42
Total Operating Expense ($ / Mcfe)
$1.74
-
$2.04
$1.89
Capex:
Total Capex ($ millions)
$800
-
$825 |
 Conclusions
25
»
Extensive overlap in top two asset areas: East Texas and Eagle Ford
»
Creates a leading East Texas position of ~207,000 net acres
•
Compelling inventory of high return, liquids-rich Cotton Valley Sand opportunities
•
Significant
inventory
of
Haynesville
drilling
opportunities
with
compelling
current
economics
and significant upside value
»
Complementary positions in the Eagle Ford, creating significant scale of ~65,000 net
acres •
Sabine’s Eagle Ford results top 10% in the industry in 2013
»
Combined
12/31/13
proved
reserves
of
1.5
Tcfe
(71%
gas)
and
2014E
production
of
~345
Mmcfed (65% gas) based on respective company guidance
»
Substantial production and cash flow growth
•
Over 20% pro forma 2014E production growth
»
Cost savings from reduced overhead and streamlined operations
»
Ability
to
optimize
capital
allocation
on
$800
-
$825
million
capital
program
»
Will apply top tier operational results across portfolio
»
Liquidity to fund drilling program through 2015 without accessing capital markets
»
Clear path to improving balance sheet through property divestments and optimized capital
allocation
-
to
be
implemented
as
a
top
priority
»
First Reserve, an energy-focused private equity firm, remains a controlling
shareholder Complementary
Asset Positions
Scale and
Growth
Operating
Synergies
Capitalization |
 Appendix
26 |
 Sabine
Oil & Gas Holdings
II LLC
Sabine Oil &
Gas LLC
(1)
Forest’s existing 7.25% Senior Notes due 2019
(the “Forest 2019 Notes”).
Forest’s existing 7.5% Senior Notes due 2020
(the “Forest 2020 Notes”).
Sabine’s existing Second Lien Term
Loan Due 2018 (the “Sabine Second
Lien Term Loan”).
Sabine’s existing 9.75% Senior
Notes due 2017 (the “Sabine 2017
Notes”).
Sabine Oil & Gas
Corporation
(“SABO”) (formerly
New Forest Oil Inc.)
Forest Oil
Corporation
Shareholders
Sabine Oil & Gas
Holdings LLC
Last Closing Date Transaction Step
27
(1) SOGH II and Sabine O&G will
be merged with and into Forest
Oil Corporation, with Forest Oil
Corporation surviving. |
 Resulting Debt
Structure After Closing Date Transactions Forest and Sabine
Subsidiaries
(3)
/Assets
New
$1,000 MM Borrowing Base Revolving Credit Facility
Existing
$578 MM Forest 2019 Notes
(2)
$222 MM Forest 2020 Notes
(2)
$650 MM Sabine Second Lien Term Loan
$350 MM Sabine 2017 Notes
Forest Oil
Corporation
(1)
(1)
Assumes only existing revolvers are replaced on closing date.
(2)
Change of Control tripped; put right exists; backstop financing commitments are in
place for put.
(3)
Guarantors of Forest Oil Corporation debt, subject to certain exceptions.
Shareholders
Sabine Oil & Gas
Corporation
(“SABO”) (formerly
New Forest Oil
Inc.)
Sabine Oil & Gas
Holdings LLC
(former holdco of
Sabine Oil & Gas
LLC)
28 |
 29 |