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Saturday, November 26, 2022

The Inside Scoop on Forest Oil Corporation (OTCMKTS:FSTO)

Forest Oil Corporation (OTCMKTS:FSTO) hit the bb’s last week at $0.41 a share and has been dropping significantly since on massive volume. FSTO was delisted from the NYSE on December 16 and the ticker symbol changed from FST to FSTO. The stock has been in decline for a long time since trading over $25 a share back in 2011.

ex big board stocks with massive liquidity and investor awareness already built into them such as FSTO have a history of making big moves once on the bb’s. For this very reason FSTO is at the top of many speculators watch lists as it leads the entire exchange in trades; once FSTO finds a bottom, stabilizes and reverses the situation will be explosive.

Forest Oil Corporation (OTCMKTS:FSTO) is an energy company focused on the acquisition, production, exploration, and development of natural gas and liquids in the US. The Company’s principal reserves and producing properties are located in East Texas, the Eagle Ford in South Texas, Arkansas, and Louisiana. Forest was incorporated in New York in 1924, as the successor to a company formed in 1916, and has been a publicly held company since 1969.

The Company has been in steep decline as oil prices have collapsed from well over $100 a barral to recent $57.13. The situation only deteriorated when FSTO had to sell its Arkoma Basin natural gas properties for $185 million and was subsequently delisted to the bb’s for failing to meet the $1 minimum bid requirement.

Back in November Forest Oil said that its shareholders have approved, by majority vote of the outstanding shares of Forest, all of the proposals that were presented with respect to the previously announced business combination transaction with Sabine Oil & Gas LLC at the Company’s special meeting of shareholders held today. Forest will file the voting results for each of the proposals with the SEC within four business days.

According to an article published in Bloomberg last week ”Forest Oil Corp.’s bondholders are being punished by a rarely used loophole that’s allowing the oil and gas producer to bypass repaying the debt above face value when a merger occurs, according to debt researcher Covenant Review.

Forest Oil’s bonds lost nearly half their value after the company revised its merger agreement with Sabine Oil & Gas LLC to eliminate an offer to redeem the debt at 101 cents on the dollar. The method used to get around the so-called change-of-control provision isn’t common in mergers and has been used just once during the last seven years, according to Adam Cohen, founder of Covenant Review. ”

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and according to Covenant Review ”While Sabine will own a majority of the combined companies, the revised deal terms limit its “ultimate” voting power to 49.9 percent, just short of triggering the change-of-control provision for Denver-based Forest Oil’s $800 million of bonds.”

The rapid collapse in the price of oil is the catalyst that drove FSTO to where it trades today; to regain profitability oil prices would have to rebound to the $85 – $90 level which seems very likely as the current negative outlook on oil is entirely contrived.

Currently trading at a $20 million market valuation FSTO is the top traded stock on the entire exchange. Since hitting the bb’s FSTO has been in steep decline losing well over half its value in 2 trading days.

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Smart speculators are all over FTSO and watching closely here; as I said ex big board stocks with massive liquidity and investor awareness already built into them such as FSTO have a history of making big moves once on the bb’s. FSTO in particular has seen a straight line drop from $25 a share; the reversal could be significant.

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Disclosure: we hold no position in FSTO either long or short and we have not been compensated for this article.

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