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Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced financial results for the second quarter of 2011. The financial results include the operations of Forest’s Canadian subsidiary, Lone Pine Resources Inc. (Lone Pine) (NYSE: LPR) (TSX: LPR). Pro forma results for the three months ended June 30, 2011 and 2010, excluding the operations of Lone Pine, are also provided to facilitate comparison of Forest’s ongoing operations giving effect to the anticipated spin-off of Forest’s ownership in Lone Pine.
On June 1, 2011, Lone Pine completed the initial public offering of 15 million shares of its common stock. As a result of this offering, Forest owns 82% of the outstanding shares of Lone Pine’s common stock. The common stock is traded on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “LPR”. Forest intends to distribute, or spin-off, to Forest’s shareholders its remaining ownership in Lone Pine on or about September 30, 2011, but retains the right to decide whether to consummate the spin-off at its discretion. The spin-off is expected to be non-taxable to Forest’s shareholders.
Forest previously announced its second quarter of 2011 operations activity in its press release dated July 6, 2011.
Forest, including the consolidated operations of Lone Pine, reported the following highlights for the three months ended June 30, 2011:
Equivalent net sales volumes of 429 MMcfe/d, including liquids net sales volumes of 18,600 Bbls/d
Adjusted net earnings of $41 million, or $0.36 per diluted share
Adjusted EBITDA and discretionary cash flow of $176 million and $140 million, respectively
For the three months ended June 30, 2011, Forest reported net earnings (net of $64,000 attributable to Lone Pine’s 18% outside ownership) of $39 million, or $0.34 per diluted share. This compares to Forest’s net earnings of $33 million, or $0.29 per diluted share, in the corresponding 2010 period. Net earnings for the three months ended June 30, 2011, were affected by the following items:
The non-cash effect of net unrealized gains on derivative instruments totaling $41 million ($27 million net of tax)
The non-cash effect of unrealized foreign currency exchange losses totaling $36 million ($31 million net of tax)
Realized foreign currency exchange gains incurred on the repayment of Lone Pine’s indebtedness to Forest totaling $34 million ($29 million net of tax)
A legal proceeding settlement of $7 million ($4 million net of tax)
The Canadian dividend tax totaling $29 million ($18 million net of tax) associated with the restructuring of Forest’s Canadian business immediately prior to the initial public offering of Lone Pine
The non-cash loss on the change in valuation allowance for deferred tax assets associated with Lone Pine totaling $4 million ($4 million net of tax)
Without the effects of these items, Forest’s adjusted net earnings for the three months ended June 30, 2011, were $41 million, or $0.36 per diluted share, which represents a decrease of 15% and 14%, respectively, compared to Forest’s adjusted net earnings of $48 million, or $0.42 per diluted share, in the corresponding 2010 period. Forest’s adjusted EBITDA for the three months ended June 30, 2011, decreased 3% to $176 million, compared to $181 million in the corresponding 2010 period. Forest’s adjusted discretionary cash flow for the three months ended June 30, 2011, decreased 2% to $140 million, compared to $143 million in the corresponding 2010 period.