“Strategically we are committed and have taken the first step to improve our financial strength by adjusting our second half capital program to be near projected cash flow. With our remaining 2012 capital budget mainly targeting higher-margin oil opportunities, we expect to deliver second half oil volume growth that is 10-15% higher than the first half of the year. We have reduced spending in, and will have lower production from, lower-return liquids and natural gas projects.

“Operational execution is critical in bringing forward the value of our assets as their quality has not been adequately reflected in our recent results. The entire Forest team is focused on and committed to delivering this value to our shareholders.”

SECOND QUARTER 2012 RESULTS

For the three months ended June 30, 2012, Forest reported a net loss of $511 million, or $(4.44) per diluted share. This compares to Forest's net earnings from continuing operations of $29 million, or $0.26 per diluted share, in the corresponding 2011 period. The net loss for the three months ended June 30, 2012 was affected by the following items:
  • The effect of a ceiling test write-down of $349 million ($223 million net of tax)
  • An increase in the valuation allowance on deferred tax assets (primarily driven by the ceiling test write-down) of $290 million ($290 million net of tax)
  • The effect of potential contractual severance costs and accelerated stock-based compensation costs (based on grant-date valuations) associated with the termination of Forest’s prior Chief Executive Officer of $6 million ($4 million net of tax)
  • The income tax effect of non-deductible stock-based compensation of $2 million ($2 million net of tax)

Without the effect of these items, Forest's adjusted net earnings and earnings per share on a diluted basis for the three months ended June 30, 2012 decreased 76% to $7 million, or $0.06 per diluted share, compared to $29 million, or $0.25 per diluted share, in the corresponding 2011 period. Forest's adjusted EBITDA for the three months ended June 30, 2012 decreased 14% to $122 million compared to $142 million in the corresponding 2011 period. Forest's adjusted discretionary cash flow for the three months ended June 30, 2012 decreased 15% to $89 million compared to $106 million in the corresponding 2011 period. The decrease in each of these three items was primarily attributable to a significant decrease in natural gas prices over the reported periods.

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