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Forest Oil Announces Second Quarter 2011 Results

Adjusted EBITDA

In addition to reporting net earnings as defined under GAAP, Forest also presents net earnings before interest, income taxes, depreciation, depletion, and amortization (adjusted EBITDA), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings after adjustment for those items shown in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to, GAAP measurements such as net earnings (its most comparable GAAP financial measure), and Forest’s calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items shown below, Forest believes the measure is useful in evaluating its fundamental core operating performance. Forest also believes that adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Forest’s management uses adjusted EBITDA to manage its business, including in preparing its annual operating budget and financial projections. Forest’s management does not view adjusted EBITDA in isolation and also uses other measurements, such as net earnings and revenues to measure operating performance. The following table provides a reconciliation of net earnings, the most directly comparable GAAP measure, to adjusted EBITDA for the periods presented (in thousands):

      Forest Remainco               Total Company
Three Months Ended June 30, 2011
  2011                   2010   2011                   2010
 
Net earnings attributable to Forest Oil Corporation $ 33,385 $ 36,131 $ 38,910 $ 33,254
Interest expense 36,516 35,332 38,842 37,109
Income tax expense 43,986 20,684 51,708 21,058
Depreciation, depletion, and amortization 52,360 46,072 73,322 62,446
Accretion of asset retirement obligations 1,508 1,651 1,787 1,909
Unrealized (gains) losses on derivative instruments, net (35,774 ) 9,494 (40,904 ) 9,494
Unrealized foreign currency exchange gains, net - - 36,360 10,604
Realized foreign currency exchange gains incurred on the repayment of intercompany indebtedness - - (33,892 ) -
Stock-based compensation 3,604 4,721 3,642 5,077
Legal proceeding settlement   6,500     -   6,500     -
 
Adjusted EBITDA $ 142,085   $ 154,085 $ 176,275   $ 180,951




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