Forest Oil (NYSE:FST) Spinning Off Lone Pine Resources

Forest Oil (NYSE:FST) said the spinning off of Lone Pine Resources should empower the company to increase their valuation to levels comparable to their Canadian peers.

Canaccord commented on the spinoff, saying , "Forest announced on Monday that its wholly-owned subsidiary Lone Pine Resources has filed a Form S-1 registration statement the U.S. Securities and Exchange Commission (SEC) relating to the proposed initial public offering of shares of common stock of Lone Pine. Lone Pine will be the new parent of Canadian Forest Oil, which owns all of Forest’s Canadian assets. Lone Pine plans to sell up to 19.9% of its common stock in an IPO, which it expects to complete in the first half of 2011. The IPO is estimated to be worth $375 million, putting the valuation of Canadian operations at about $1.9 billion, or about $1 billion higher than the estimate of at least one analyst. Lone Pine intends to use the net proceeds from the offering to repay intercompany debt amounts owed to Forest, and the remainder, if any, for general corporate purposes. Following the offering, Forest intends to distribute, or spin-off, its remaining ownership in Lone Pine to Forest’s shareholders. The spin-off is expected to occur approximately four months after the IPO; however, Forest will retain the right to decide whether to commence the spin-off at its discretion. Forest believes that the separation will enhance Lone Pine’s ability to achieve a valuation comparable to those of stand-alone Canadian peer companies, by allowing Lone Pine to focus its exploration and development efforts at capital levels consistent with its own business strategy. In that regard, Lone Pine intends to focus on growing its estimated proved reserves and production through its repeatable vertical and horizontal development inventory and shale positions with initial investment of capital in excess of cash flow. Lone Pine said that it intends to apply to list its shares on the NYSE under the symbol LPR (NYSE:LPR)."

Forest Oil was trading at $36.40, down $0.08, or 0.22 percent, as of 12:52 PM EST.