Forest Oil Corporation (FST) is a North American oil and natural gas exploration and production company with properties in the Southern and Western United States and in Canada.

Since I last reviewed Forest Oil in July 2008, crude and natural gas prices have plunged. The stock is now a Zacks #2 Rank (buy) stock instead of a Zacks #1 Rank (strong buy). After a rough couple of quarters, estimates are once again on the rise as crude prices rebound.

On May 19, the company announced it was offering 12.5 million shares of common stock with the intent to use the proceeds to pay off debt under its current bank credit facilities.

On May 19, Forest Oil reported first quarter results that surprised on estimates by 70.59%. Adjusted earnings per share were $27.9 million, or 29 cents. Analysts’ expected 12 cents. However, this was well under the year ago period, which was $1.06 per share.

Due to the drop in crude price, the company has been cutting production. Rig count fell to 8 from 15 at the start of 2009. Despite this drop, volume was flat from the fourth quarter of 2008.

Covering analysts have turned bullish. Consensus estimates for the second quarter and 2009 have been rising in the last month. Second-quarter estimates jumped 8 cents to 42 cents per share.

2009 consensus estimates are up 15.5% to $1.71 from $1.48 in the last 30 days.

Value Fundamentals Still Hold

Forest Oil is still attractively valued. It is trading at 8.9x forward earnings. Its price to book ratio is 3.03. The company has a solid 1-year return on equity (ROE) of 16.08%.

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