"We believe Forest Oil is well-positioned to generate accelerated reserve and production growth through its exploration activities in the highly prospective Northwest Territories and the Canadian Foothills," says Robert S. Morris, director and E&P analyst for Salomon Smith Barney in New York. "In addition, the company's growing international exploratory endeavors could provide further significant [reserve and production] upside. We are initiating coverage of FST with an Outperform rating." Headquartered in Denver, Forest Oil is engaged in the acquisition, exploration, development, production and marketing of natural gas and liquids throughout North America-including the onshore and offshore Gulf of Mexico, the western U.S. and Canada. Internationally, it has 17 concessions covering about 21.7 million acres in eight countries: Albania, Germany, Italy, Romania, South Africa, Switzerland, Thailand and Tunisia. At year-end 1999, the company's estimated proved reserves were 718 billion cu. ft. of gas equivalent, 73% natural gas. Meanwhile, total production in 1999 averaged about 241 million cu. ft. equivalent per day. "Forest owns one of the largest acreage positions in the Northwest Territories in Canada, including roughly 120,000 net acres in the Fort Liard region-an area where four recent industry discoveries have found an estimated 1 trillion cu. ft. (Tcf) of natural gas," says Morris. This includes Forest's P-66 discovery well, which was recently brought on line and now accounts for 7% of the company's total production. "FST has identified 11 additional exploration prospects on its Fort Liard acreage that it plans to drill in the next three to five years." The company has established a large acreage position in the Canadian Foothills-one of the hottest exploration plays in onshore North America-where it has made initial discoveries at its Cutpick and Narrway prospects. As a consequence, Forest's natural gas production in Canada could increase by more than 50% year-over-year in the fourth quarter of 2000, Morris says. "Canada, which represents more than 25% of Forest's total current proven reserves and production, should garner nearly 35% of the company's total $140-million capital budget in 2000, as it continues to tap the significant upside from its acreage positions." The company's growing international exploratory prospects, which provide significant additional long-term reserve and production upside, should also see the drill bit in 2000. "Forest's most intriguing current international activities are in South Africa, where preliminary evaluation indicates that its offshore AK-1 discovery well could hold roughly 200 billion cu. ft. of natural gas-with up to 2.5 Tcf associated reserve potential in the AK Field," says Morris. FST estimates it could bring the field on line as early as 2004, with gross production reaching 750 million cu. ft. per day by 2008. In Switzerland, Forest owns an interest in 1.8 million acres with greater than 2 Tcf potential gas accumulation in shallow tight sands. It plans to spud a well there this summer. Later in October, the company plans to spud a 200-million-barrel oil prospect in Albania. "Forest's U.S. properties, which account for nearly 75% of the company's total proven reserves and production, generate significant excess cash flow," says Morris. "FST is using that cash flow to help fund its higher-potential Canadian and international endeavors." Note: Analysis took place 6-2-00 when FST closed at $15.19 and was reaffirmed 6-30 when $15.94. Currently, some 53.5 million shares are outstanding. The recent 52-week price range was $18.13-$7.19.