Saba Capital Doubles Stake in Forest Oil Corporation (FST)


Led by Boaz Weinstein, Saba Capital considerably increased its stake Forest Oil Corporation (NYSE:FST). A recent 13G filing with the SEC shows that the updated position now amounts to 12.75 million shares with a current market value of around $29.75 million – 10.71% of the company’s total market cap.


Forest Oil Corporation (NYSE:FST) is an independent oil and gas company that engages in the acquisition, exploration, development, and production of natural gas and liquids in North America and other international locations. On May 6, 2014, the company announced the signing of a definitive merger agreement under which Sabine Oil & Gas LLC and Forest Oil will combine their businesses in an all-stock transaction to form Sabine Oil & Gas Corporation, which is expected to list on the New York Stock Exchange under the ticker “SABO.” The same press release states that the combined company will have estimated proved reserves of 1.50 trillion cubic feet and estimated daily production of 345.00 million cubic feet for 2014, giving the new company a leading position among its industry peers in production and cash flow growth.

Delivering Return on Assets of 8.10, versus 2.45 the Oil & Gas industry average, Forest Oil Corporation (NYSE:FST) generated net profits of $0.62 per share last year, compared to net losses of $11.21 in 2012. The company is also considerably more levered than most of its peers, operating under a Debt to Equity ratio of approximately 23.00, compared to 0.5 for the industry. Its shares priced at $2.33 apiece, Forest Oil trades at a trailing Price to Earnings ratio of around 3.80, a number significantly lower than that for the industry (more than 17.00). Analysts downgraded Forest’s rating from “Underweight” to “Hold” in the past month, expecting the company’s share price to drop to $2.18 apiece and estimating it to produce earnings of $0.05 per share for 2014.

One of the company’s largest shareholders, Don Morgan’s Brigade Capital owns around 7.35 million shares of Forest Oil Corporation (NYSE:FST).

Credit-centric hedge fund Saba Capital owns an equity portfolio worth more than $1.66 billion. More than half of that value is invested in Financial stocks. At the beginning of 2014, the fund disclosed an increased stake in Managed High Yield Plus Fund Inc. (NYSE:HYF), a closed-end diversified management investment company.

Disclosure: none