Forest Oil Announces Second Quarter 2012 Results

Ceiling Test Write-Down and Deferred Tax Asset Valuation Allowance

Forest recorded a non-cash ceiling test write-down of $349 million in the second quarter of 2012 pursuant to the ceiling test limitation prescribed by the Securities and Exchange Commission for companies using the full cost method of accounting. The write-down was primarily a result of a significant decline in natural gas prices used in the ceiling test calculation to $3.15 per Mcf in the second quarter of 2012 from $3.73 per Mcf in the first quarter of 2012. Based on current commodity prices, Forest expects further decreases in the natural gas and NGL prices used in the ceiling test calculation which will likely result in a ceiling test write-down in the third quarter of 2012. As a result of this quarter’s ceiling test write-down and the anticipated ceiling test write-down next quarter, Forest recorded a valuation allowance of $290 million against its deferred tax assets.

Total Capital Expenditures

Forest's exploration and development capital expenditures for the three months ended June 30, 2012 were $198 million compared to $193 million in the corresponding 2011 period.

Forest’s land and leasehold acquisition costs for the three months ended June 30, 2012 were $9 million compared to $52 million in the corresponding 2011 period. The land and leasehold acquisitions in 2012 and 2011 were a result of Forest's decision to expand exposure to prospective oil and liquids-rich areas.

The following table summarizes total capital expenditures for the comparative periods (in thousands):

					Three Months Ended June 30,
					2012					2011
Exploration and development					$	197,574				$	192,525
Land and leasehold acquisitions						8,937					51,801
						206,511					244,326
Add:
ARO, capitalized interest, and capitalized equitycompensation						4,863					5,378
Total capital expenditures					$	211,374				$	249,704

OPERATIONAL PROJECT UPDATE

Panhandle Area

Forest holds approximately 179,000 gross acres (109,000 net) in the Panhandle Area.

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