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Forest Oil sets aside $182M for Granite Wash in 2010

While focusing on its unconventional assets, Forest Oil Corp. (NYSE: FST) has been particularly impressed with its Granite Wash program. And for good reason. 

As exploration and production companies continue a push toward oil and liquids development and away from natural gas, Forest Oil has found a cozy spot in one of the most focused-on plays of 2010.

From April 2009 to April 2010, the Denver-based company's Texas Panhandle horizontal drilling program increased net production by 70 MMcfe/d.

This year, the company set aside $182 million of its 2010 capital expenditure budget, the highest percentage in any of its core areas, for the Texas Panhandle Granite Wash area.

Currently, the company holds 135,000 gross (97,000 net) acres in the area, with total 2009 proved reserves of 481 bcfe. This year, the company is operating 4 rigs in the area.

When it reported first quarter earnings for 2010, wells #8 and #9 had 24-hour production rates of 45 and 24 million cubic feet equivalent per day, respectively. Forest Oil said that 60% of the equivalent rate of its wells completed in the Granite Wash to date was from liquids.

The two most recent wells drilled in Wheeler County had an average IP rate of 34 MMcfe/d, while the most recent well drilled in Lipscomb County had an IP rate of 20 MMcfe/d.

The company plans to continue to focus on the liquids-rich zones in 2010 as they provide the highest rate of return. The company plans to drill 25 – 30 wells in the Granite Wash in 2010, with plans to expand drilling to Hemphill County. 

Forest Oil Corp. is engaged in the acquisition, exploration, development, and production of natural gas and liquids in North America and selected international locations. Forest's principal reserves and producing properties are located in the US in Arkansas, Louisiana, Oklahoma, Texas, Utah, and Wyoming, and in Canada.

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