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Forest Oil Announces Second Quarter 2012 Results

These risks relating to Forest include, but are not limited to, liquids and natural gas price volatility, its level of indebtedness, its ability to replace production, its ability to compete with larger producers, environmental risks, drilling and other operating risks, regulatory changes, credit risk of financial counterparties, risks of using third-party transportation and processing facilities and other risks as described in reports that Forest files with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Any of these factors could cause Forest's actual results and plans to differ materially from those in the forward-looking statements.

Forest Oil Corporation is engaged in the acquisition, exploration, development, and production of natural gas and liquids in the United States and selected international locations. Forest's estimated proved reserves and producing properties are located in the United States in Arkansas, Louisiana, Oklahoma, Texas, Utah, and Wyoming. Forest's common stock trades on the New York Stock Exchange under the symbol FST. For more information about Forest, please visit its website at www.forestoil.com.

FOREST OIL CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

           
June 30, December 31,
2012 2011
ASSETS (In thousands)
 
Current assets:
Cash and cash equivalents $ 680 $ 3,012
Accounts receivable 60,012 79,089
Derivative instruments 85,545 89,621
Deferred income taxes 69,220 -
Other current assets   33,617     38,950  
Total current assets 249,074 210,672
 
Net property and equipment 2,578,329 2,651,116
 
Deferred income taxes - 231,116
Goodwill 239,420 239,420
Derivative instruments 15,392 10,422
Other assets   35,115     38,405  
$ 3,117,330   $ 3,381,151  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable and accrued liabilities $ 212,284 $ 247,880
Accrued interest 23,469 23,259
Derivative instruments 16,670 28,944
Deferred income taxes 28,130 20,172
Current portion of long-term debt 12 -
Other current liabilities   41,518     20,582  
Total current liabilities 322,083 340,837
 
Long-term debt 1,938,906 1,693,044
Asset retirement obligations 77,993 77,898
Derivative instruments 7,745 -
Other liabilities   74,478     76,259  
Total liabilities 2,421,205 2,188,038
 
Shareholders' equity:
Common stock 11,824 11,454
Capital surplus 2,533,109 2,486,994
Accumulated deficit (1,830,909 ) (1,287,063 )
Accumulated other comprehensive loss   (17,899 )   (18,272 )

Total shareholders' equity

696,125 1,193,113
   
$ 3,117,330   $ 3,381,151  
 

FOREST OIL CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

       
Three Months Ended
June 30,
2012       2011

(In thousands, except per shareamounts)

 
Revenues:
Oil, gas, and NGL sales $ 135,694 $ 186,593
Interest and other   37     278  

Total revenues

135,731 186,871
 
Costs, expenses, and other:
Lease operating expenses 27,134 23,483
Production and property taxes 6,940 12,655
Transportation and processing costs 3,615 3,415
General and administrative expense 16,421 13,360
Depreciation, depletion, and amortization 72,987 52,360
Ceiling test write-down of oil and natural gas properties 348,976 -
Interest expense 34,317 37,819
Realized and unrealized gains on derivative instruments, net (34,015 ) (40,917 )
Other, net   3,455     8,835  
Total costs, expenses, and other   479,830     111,010  
Earnings (loss) from continuing operations before income taxes (344,099 ) 75,861
Income tax   167,074     46,757  
Net earnings (loss) from continuing operations (511,173 ) 29,104
Net earnings from discontinued operations   -     9,870  
Net earnings (loss) (511,173 ) 38,974
Less: net earnings attributable to noncontrolling interest   -     64  
Net earnings (loss) attributable to Forest Oil Corporation $ (511,173 ) $ 38,910  
 
Weighted average number of common shares outstanding:
Basic 115,107 111,636
Diluted 115,107 112,176
 
Basic and diluted earnings (loss) per common share:
Earnings (loss) from continuing operations $ (4.44 ) $ 0.26
Earnings from discontinued operations   -     0.08  

Basic and diluted earnings (loss) per common share

$ (4.44 ) $ 0.34  
 

FOREST OIL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

             
Three Months Ended
June 30,
2012 2011
(In thousands)
Operating activities:
Net earnings (loss) $ (511,173 ) $ 38,974
Less: net earnings from discontinued operations   -     9,870  
Net earnings (loss) from continuing operations (511,173 ) 29,104
 

Adjustments to reconcile net earnings (loss) from continuing operations tonet cash provided by operating activities of continuing operations:

Depreciation, depletion, and amortization 72,987 52,360
Deferred income tax 166,747 17,314
Unrealized gains on derivative instruments, net (111 ) (35,774 )
Ceiling test wite-down of oil and natural gas properties 348,976 -
Stock-based compensation 6,240 3,604
Accretion of asset retirement obligations 1,597 1,508
Other, net 2,282 2,201
Changes in operating assets and liabilities:
Accounts receivable 12,722 12,633
Other current assets 2,729 10,607
Accounts payable and accrued liabilities (9,063 ) (5,478 )
Accrued interest and other current liabilities   (11,068 )   (14,128 )

Net cash provided by operating activities of continuingoperations

82,865 73,951
 
Investing activities:
Capital expenditures for property and equipment:
Exploration, development, acquisition, and leasehold costs (208,659 ) (206,472 )
Other fixed assets (2,398 ) (1,684 )
Proceeds from sales of assets   203     109,020  

Net cash used by investing activities of continuing operations

(210,854 ) (99,136 )
 
Financing activities:
Proceeds from bank borrowings 241,000 12,000
Repayments of bank borrowings (108,000 ) (12,000 )
Change in bank overdrafts (3,382 ) (2,130 )
Other, net   (1,826 )   (12,796 )

Net cash provided (used) by financing activities of continuingoperations

127,792 (14,926 )
 
Cash flows of discontinued operations:
Operating cash flows - 30,981
Investing cash flows - (147,483 )
Financing cash flows   -     475,928  
Net cash provided by discontinued operations - 359,426
Effect of exchange rate changes on cash   -     (3,474 )
Net (decrease) increase in cash and cash equivalents (197 ) 315,841
 
Net increase in cash and cash equivalents of discontinued operations   -     (2,627 )

Net (decrease) increase in cash and cash equivalents of continuingoperations

(197 ) 313,214
 
Cash and cash equivalents of continuing operations at beginning of period   877     160,925  
Cash and cash equivalents of continuing operations at end of period $ 680   $ 474,139  




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