Some of the presenters today will reference certain non-GAAP financial measures regularly used by Forest in measuring its financial performance. Reconciliations of such non-GAAP financial measures with the most comparable financial measure calculated in accordance with GAAP will be available on our website and viewed by clicking on the Investor Relations tab, then non-GAAP at forestoil.com. In addition, I'd like to caution you about our forward-looking statements. All statements other than statements of historical facts that address activities and outcomes that Forest expects, assumes, plans, believes, budgets, forecasts, projects, estimates, anticipates, et cetera, about, what will, should or may occur in the future are forward-looking statements. Please carefully review our cautionary language regarding forward-looking statements as its contained at the end of our press release.And with that, I'll turn the call over to Michael Kennedy. Michael N. Kennedy Thanks, Larry, and thanks to everyone joining us today. I'll keep my comments relatively brief and touch on a couple of the highlights for the quarter, as the press release issued yesterday afternoon covers the quarter in detail. Second quarter 2012 equivalent production came in at 335 million per day. This is unchanged on a year-over-year basis. Our focus on oil projects continues to pay dividends, as second quarter oil volumes increased 27% over the same period last year. This effort trend will continue as Forest Oil 4 of our 5 rigs targeting oil projects by the fourth quarter. Third-party infrastructure issues in the Panhandle persisted in the second quarter, which negatively impacted production by approximately 8 million per day due to downtime associated with the third-party NGL facility. The plant was return to operations on July 3. Unplanned downtime is frustrating and we continue to incorporate additional gas gatherers for our Panhandle production. This will provide us with flexibility and optionality, and should help to minimize these unplanned curtailments going forward. We should begin to see these benefits beginning later this year.
We, along with the industry, continues to feel the effects of lower natural gas prices this year. Due to this, Forest recorded a ceiling test write-down of $345 million in the second quarter. The write-down was primarily a result of the significant decline in the 12 months trailing natural gas price used in the ceiling test calculation from $3.73 per Mcfe last quarter to $3.15 per Mcfe this quarter. Given the current pricing environment, we expect the ceiling test write-down in the third quarter as well. We also recorded a deferred tax asset valuation allowance of $290 million due primarily to the ceiling test write-down.As the natural gas environment has remained depressed, our hedge position continues to work in our favor, as we realized a 73% uplift to our unhedged realized price. This translated into $28 million realized gain on our second quarter gas hedges. We have selectively added to our natural gas hedge position for 2013 by adding 26 million per day of swaps of $3.78. We now have 155 million per day of swaps for the second half of 2012 period at $4.63 and 160 million per day for 2013 at $3.98. A full summary of our hedge position can be found on Page 6 of the press release or in the 10-Q to be filed later. We have taken the initial steps in improving the company's financial strength and flexibility. The first step was reducing second half capital expenditures to a range of $190 million to $210 million, or about cash flow. This leaves down significantly from the first half front rate and will allow us to align spending more closely with expected cash flow levels by the start of the fourth quarter. Secondly, we will first look to monetize non-reserve-based and noncore assets. These are primarily assets outside our core Panhandle, Eagle Ford and East Texas areas. We hope to have a couple hundred million of asset sales over the next several quarters completed and we'll continue the effort throughout 2013. The process is underway and we will update you once we have something to report. Read the rest of this transcript for free on seekingalpha.com