BUSINESSWEEK ONLINE : JULY 10, 2000 ISSUE
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET

The Rich Reserves of Forest Oil


Investors looking for oil gushers may want to heed the advice of some oil-savvy pros who focus on undervalued energy plays. Among veteran oil watchers is David Snow, an analyst at Energy Equities. One of his top picks is Big Board-listed Forest Oil (FST), whose principal reserves and producing properties are in the Gulf of Mexico, Louisiana, Wyoming, Texas, and Western Canada. ''Forest Oil is a must-own stock in a must-own group,'' says Snow. What intrigues Snow with Forest Oil are its gas reserves in South Africa, which he figures are more than four times as large as Triton Energy's huge reserves in Thailand. The African reserves are ''by far, the most significant,'' he says. Preliminary estimates put them at a possible 17.5 trillion cubic feet. Snow concedes that some risks surround the field's development.

Based just on existing properties, he figures Forest Oil will post cash flow of $3.35 a share this year and $5.30 next. He sees earnings of $1.60 a share in 2000 and $3 in 2001. Snow thinks the stock is worth 45 to 60.

Another analyst, Lewis Ropp of Frost Securities, says Forest Oil may be one of the few independent oil companies worth buying as a long-term growth stock. The company, he says, has an astute partner in Anschutz, an investor group, which has acquired a 37% stake in Forest Oil. It has been credited with aiding Forest Oil's turnaround since 1995, when it helped install new management. Some Street pros are betting Anschutz may ultimately opt to buy all of Forest Oil.

By GENE G. MARCIAL

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