Forest Oil Announces Fourth Quarter and Year-End 2012 Results

  Forest Oil Announces Fourth Quarter and Year-End 2012 Results

Fourth Quarter 2012 Average Net Sales Volumes of 309 MMcfe/d; 35% Liquids
Compared to 30% Liquids in Fourth Quarter 2011

Fourth Quarter 2012 Average Oil Net Sales Volumes of 8.7 MBbls/d; 47% Increase
Compared to Fourth Quarter 2011 Pro Forma for Divestitures

Fourth Quarter 2012 Average Liquids Net Sales Volumes of 17.9 MBbls/d; 21%
Increase Compared to Fourth Quarter 2011 Pro Forma for Divestitures

2012 Average Equivalent Net Sales Volumes Increase 6% Compared to 2011 Pro
Forma for Divestitures

2012 Average Oil Net Sales Volumes Increase 67% Compared to 2011 Pro Forma for
Divestitures

2012 Estimated Proved Reserves of 1,363 Bcfe; Oil Reserves Increase 27%
Compared to 2011 Pro Forma for Divestitures

2012 Drill Bit Reserve Replacement of 194% with Finding and Development Costs
of $2.76 per Mcfe

Business Wire

DENVER -- February 20, 2013

Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced
financial and operational results for the fourth quarter and full-year 2012
and provided year-end estimated proved reserves. References to pro forma
results excludes asset sales completed during 2012 and the South Texas
divestiture that closed on February 15, 2013.

Forest noted the following results for the three months ended December 31,
2012:

  *Average net sales volumes of 309 MMcfe/d; at the mid-point of previously
    provided guidance
  *Average oil net sales volumes of 8.7 MBbls/d; pro forma increase of 47%
    from the fourth quarter of 2011
  *Average liquids net sales volumes of 17.9 MBbls/d; pro forma increase of
    21% from the fourth quarter of 2011
  *Adjusted net earnings of $17 million compared to $20 million in the
    corresponding 2011 period
  *Adjusted EBITDA of $132 million compared to $139 million in the
    corresponding 2011 period
  *Adjusted discretionary cash flow of $93 million compared to $104 million
    in the corresponding 2011 period

Due primarily to a non-cash ceiling test write-down of $279 million and debt
extinguishment costs of $36 million, Forest reported a net loss of $287
million, or $(2.48) per share, for the three months ended December 31, 2012.

Patrick R. McDonald, President and CEO, stated, “Forest has made measurable
progress in executing a strategic realignment of operational and financial
priorities. On a pro forma basis, fourth quarter oil volumes increased 47%
compared to the fourth quarter of 2011, liquids made up approximately 35% of
our equivalent volumes, and we expect continued oil and liquids growth in
2013. Our estimated oil reserves increased 27% during 2012 and comprise 15% of
estimated proved reserves at year-end 2012 as compared with 9% at year-end
2011 pro forma for divestitures.

“Our 2012 divestiture program was successful and the recently completed sale
of our South Texas properties brought total divestiture proceeds to
approximately $600 million since announcing our deleveraging plan last July.
The proceeds are being used to pay down debt, which has improved and restored
flexibility to our balance sheet.

“Our 2013 capital budget is designed to be near projected cash flow and will
allow us to maintain ample financial liquidity. Forest entered the year with
five rigs deployed on oil and liquids prospects within our core development
areas. The 2013 capital plan is anchored by investments in our Panhandle Area
and Eagle Ford Shale assets, which form the foundation of our oil portfolio.
We believe that our planned 2013 activity in these assets will provide an
expected 30% growth in our pro forma oil volumes. This is expected to result
in our second half 2013 equivalent volumes being higher than the first half of
2013. In addition, we have hedges in place for all of our 2013 natural gas
production at approximately $4.00 per MMBtu, which protects cash flows and the
capital plan.

“Our strategy for 2013 is well defined and the Company is focused on oil and
liquids projects. We will concentrate on capturing the value that is embedded
within our large asset base, while maintaining spending near projected cash
flow. While considerable progress has been made in restoring operational and
financial flexibility, our challenge will be to accelerate the development of
our asset base in 2013.”

                         FOURTH QUARTER 2012 RESULTS

For the three months ended December 31, 2012, Forest reported a net loss of
$287 million, or $(2.48) per diluted share. This compares to Forest's net
earnings of $19 million, or $0.17 per diluted share, in the corresponding 2011
period. The net loss in the fourth quarter of 2012 was affected by the
following items:

  *The effect of a ceiling test write-down of $279 million ($178 million net
    of tax)
  *An increase in the valuation allowance on deferred tax assets of $104
    million ($104 million net of tax)
  *Loss on debt extinguishment of $36 million ($23 million net of tax)
  *Unrealized gain on derivative instruments of $7 million ($5 million net of
    tax)
  *Rig stacking costs of $4 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 December 31, 2012 was
$17 million, or $0.14 per diluted share, compared to $20 million, or $0.18 per
diluted share, in the corresponding 2011 period. Forest's adjusted EBITDA for
the three months ended December 31, 2012 was $132 million compared to $139
million in the corresponding 2011 period. Forest's adjusted discretionary cash
flow for the three months ended December 31, 2012 was $93 million compared to
$104 million in the corresponding 2011 period. The decrease in each of the
above metrics was primarily due to lower natural gas sales volumes and
revenues, which was partially offset by an increase in oil sales volumes.

Average Net Sales Volumes, Average Realized Prices, and Revenues

Forest's average net sales volumes for the three months ended December 31,
2012 decreased 10% and 9% from the corresponding 2011 period and from the
third quarter of 2012, respectively. Fourth quarter 2012 net sales volumes
were lower as a result of the South Louisiana property sale that closed on
November 16, 2012, and a decline in natural gas volumes due to the Company’s
decision to defer capital investment on its natural gas properties until it
sees a more robust commodity price environment. The following table details
the components of average net sales volumes, average realized prices, and
revenues for the three months ended December 31, 2012:

                                 Three Months Ended December 31, 2012
                                  Gas       Oil        NGLs       Total
                                  (MMcf/d)   (MBbls/d)   (MBbls/d)   (MMcfe/d)
                                                                     
Average Net Sales Volumes           202         8.7         9.2        309
                                                                     
Average Realized Prices           Gas        Oil         NGLs        Total
                                  ($/Mcf)    ($/Bbl)     ($/Bbl)     ($/Mcfe)
                                                                     
Average realized prices not
including realized derivative     $ 2.93     $  91.57    $  32.40    $ 5.45
gains
Realized gains on NYMEX            0.90       4.68       1.56      0.77
derivatives
Average realized prices
including realized derivative     $ 3.83     $  96.25    $  33.96    $ 6.22
gains
                                                                     
Revenues (in thousands)           Gas        Oil         NGLs        Total
                                                                     
Revenues not including realized   $ 54,258   $  73,344   $  27,312   $ 154,914
derivative gains
Realized gains on NYMEX            16,720     3,750      1,314     21,784
derivatives
                                                                       
Revenues including realized       $ 70,978   $  77,094   $  28,626   $ 176,698
derivative gains
                                                                       

Average Net Sales Volumes Excluding Asset Sales

Forest’s 2012 average net sales volumes excluding production associated with
asset sales completed during 2012 and the recently completed sale of
properties in South Texas were 244 MMcfe/d, which is a 6% increase over 2011
pro forma average net sales volumes of 231 MMcfe/d. The following table
provides a reconciliation of the Company’s 2012 and 2011 average net sales
volumes excluding asset divestitures:

                                                      Year Ended December 31,
                                                       2012         2011
                                                       (MMcfe/d)     (MMcfe/d)
                                                                     
Reported Average Net Sales Volumes                     330           335
% liquids                                              33%           28%
                                                                     
Average Net Sales Volumes Associated with Asset        (87)          (104)
Divestitures*
% liquids                                              26%           27%
                                                                     
Pro Forma Average Net Sales Volumes                    244           231
% liquids                                              36%           28%
                                                                     
* Includes South Texas asset sale that closed on February 15, 2013


Total Cash Costs

Forest's total cash costs for the fourth quarter of 2012 decreased 6% to $84
million, compared to $89 million in the corresponding 2011 period. Total cash
costs per-unit for the fourth quarter of 2012 increased 4% to $2.95 per Mcfe,
compared to $2.83 per Mcfe in the corresponding 2011 period.

The following table details the components of total cash costs for the
comparative periods:

                  Three Months Ended December 31,
                   2012            Per Mcfe       2011            Per Mcfe
                   (In thousands, except per-unit amounts)
                                                                     
Production         $  36,640        $  1.29         $  40,475        $ 1.29
expense
General and
administrative
expense
(excluding
stock-based           11,153           0.39            11,912          0.38
compensation of
$2,888 and
$4,071,
respectively)
Interest              37,899           1.33            36,674          1.17
expense
Current income       (1,817  )       (0.06  )       (75     )      (0.00 )
tax expense
Total cash         $  83,875       $  2.95        $  88,986       $ 2.83  
costs
_________________________

Total cash costs is a non-GAAP measure that is used by management to assess
the Company’s cash operating performance. Forest defines total cash costs as
all cash operating costs, including production expense; general and
administrative expense (excluding stock-based compensation); interest expense;
and current income tax expense.


Depreciation and Depletion Expense

Forest's per-unit depreciation and depletion expense for the three months
ended December 31, 2012 increased 15% to $2.35 per Mcfe, compared to $2.05 per
Mcfe in the corresponding 2011 period. The increase was primarily the result
of higher finding and development costs associated with Forest's oil- and
liquids-focused capital expenditure program.

Ceiling Test Write-Down

Forest recorded a non-cash ceiling test write-down of $279 million in the
fourth 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 decreases in
the natural gas and natural gas liquids prices used in the ceiling test
calculation in the fourth quarter of 2012 compared to the third quarter of
2012.

Loss on Debt Extinguishment

Forest redeemed $300.0 million of the 8½% Senior Notes due 2014 at 110.24% of
par value in October 2012. This redemption resulted in a recognized loss of
$36.3 million, comprised of a $30.7 million call premium and a write-off of
$5.6 million of unamortized discount and debt issuance costs.

Total Capital Expenditures

Forest's exploration and development capital expenditures for the three months
and year ended December 31, 2012 were $103 million and $648 million,
respectively, compared to $178 million and $683 million in the corresponding
2011 periods. The decrease was primarily the result of the Company’s decision
in July of 2012 to adjust the capital spending rate to be more aligned with
projected cash flow.

Forest’s land and leasehold acquisition costs for the three months and year
ended December 31, 2012 were $3 million and $64 million, respectively,
compared to $22 million and $205 million in the corresponding 2011 periods.

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

                                            Three Months Ended  Year Ended
                                             December 31,         December 31,
                                             2012                 2012
                                                                  
Exploration and development                  $      103,116       $   647,962
Land and leasehold acquisitions - Cash              3,288             27,626
Land and leasehold acquisitions - Stock            -                36,431
                                                    106,404           712,019
                                                                  
Add:
ARO, capitalized interest, and capitalized         3,128            20,620
equity compensation
Total capital expenditures                   $      109,532       $   732,639
                                                                      

                          ESTIMATED PROVED RESERVES

Forest reported December 31, 2012 estimated proved reserves of 1,363 Bcfe,
which were 69% proved developed, compared to 1,904 Bcfe at December 31, 2011,
which were 55% proved developed. The decrease in estimated proved reserves was
a result of 604 Bcfe of revisions primarily related to significantly lower
natural gas prices and 52 Bcfe of asset divestitures offset by extensions and
discoveries of 235 Bcfe in our core areas. With continued focus on oil and
liquids-rich drilling, extensions and discoveries were comprised of 60% oil
and natural gas liquids and 40% natural gas. The amount of estimated proved
reserves comprised of oil and natural gas liquids at year-end 2012 increased
to 33% compared to 24% at year-end 2011. The pricing utilized for estimated
proved reserves at December 31, 2012 was based on a 12-month average of the
2012 first-day-of-the-month Henry Hub price for natural gas and West Texas
Intermediate price for oil of $2.76 per MMbtu and $94.79 per barrel,
respectively. This compares to the pricing utilized for estimated proved
reserves at December 31, 2011 for natural gas and oil of $4.12 per MMbtu and
$96.08 per barrel, respectively. Forest's estimated proved reserves were
audited by DeGolyer and MacNaughton (D&M), an independent third party
engineering firm. D&M's audit covered properties representing over 83% of the
value of Forest's total estimated proved reserves at year-end 2012.

The following table reflects the 2012 activity related to the estimated proved
reserves and includes calculations of reserve replacement ratio and finding
and development costs utilizing net sales volumes and capital expenditures:

                                                             Estimated Proved
                                                              Reserves (Bcfe)
                                                              
December 31, 2011                                                  1,904
                                                              
Extensions and discoveries                                        235     
Reserve additions                                                  235
                                                              
Net sales volumes                                                  (121    )
Sales of properties                                                (52     )
Price-related revisions                                            (502    )
Performance-related revisions                                      (50     )
Other revisions ^(1)                                              (52     )
Reserve subtractions                                               (776    )
                                                              
December 31, 2012                                                 1,363   
                                                              
Drill bit reserve replacement ratio excluding revisions            194     %
^(2)
                                                              
Drill bit finding and development costs excluding revisions   $    2.76
(per Mcfe) ^(3)

                                                             

  EXPLANATION OF RESERVE REPLACEMENT RATIO AND FINDING AND DEVELOPMENT COSTS

The following discussion relates to Forest's reserve replacement ratios and
finding and development costs in 2012:

       Forest reclassified its natural gas reserves in Italy from proved to
^(1)  probable following an Italian regional regulatory body’s denying
       approval of an environmental impact assessment needed in order for
       Forest to commence production.

       The drill bit reserve replacement ratio excluding revisions of 194% was
^(2)   calculated by dividing extensions and discoveries of 235 Bcfe by net
       sales volumes of 121 Bcfe.

       The drill bit finding and development costs, excluding revisions, of
       $2.76 per Mcfe was calculated by dividing the sum of exploration and
^(3)   development capital expenditures (excluding land and leasehold
       acquisitions, asset retirement obligations, capitalized interest, and
       capitalized equity compensation) of $648 million by extensions and
       discoveries of 235 Bcfe.
       

                          OPERATIONAL PROJECT UPDATE

Texas Panhandle Area

The Company is focused on drilling higher-margin oil opportunities, including
the Missourian Wash (Hogshooter), Tonkawa, Douglas, and other intervals in the
Texas Panhandle Area. In aggregate, seven zones have been identified for oil
development. Forest is currently running two rigs in the Texas Panhandle Area
and expects to maintain this level of activity during 2013.

Highlighting drilling activity since the last earnings release, the Company
participated in drilling two Missourian Wash (Hogshooter) wells that had a
30-day average gross production rate of 1,840 Boe/d (68% oil). In addition, a
third Missourian Wash (Hogshooter) well is currently in the process of being
completed.

The Company has drilled eight Missourian Wash (Hogshooter) wells since
initiating its drilling program in late-2011 that have had a 30-day average
gross production rate of 1,820 Boe/d (67% oil) and a 90-day average gross
production rate of 1,200 Boe/d (64% oil). The most productive well completed
during 2012 began producing in January and had cumulative equivalent
production of approximately 450,000 barrels of oil in its first year of sales.

Eagle Ford Shale

Drilling in the Eagle Ford continues to be focused in the central fairway of
Forest’s acreage position in Gonzales County, where the Company has
experienced the most consistent performance within the drilling program.
Forest currently plans to operate a one- to two-rig program during 2013 and
believes that it can hold a core development position of approximately 40,000
net acres over the next several years.

The Company completed two Eagle Ford wells within the central fairway since
the last earnings release that had a 30-day average gross production rate of
515 Boe/d (94% oil). In addition, Forest continues to make progress on
lowering well costs and reached a notable milestone in the development of the
Eagle Ford as one of the recent wells was drilled and completed for less than
$6 million. The Company initiated a pad drilling program during the fourth
quarter and is scheduled to complete the initial four-well pad during March of
2013.

The Company drilled fourteen wells in the central fairway of the Eagle Ford
during 2012 that had a 30-day average gross production rate of 490 Boe/d (94%
oil), and thirteen of the wells had a 90-day average gross production rate of
353 Boe/d (94% oil). The most productive well completed during 2012 began
producing in July and had cumulative production of approximately 70,000
barrels of oil in its first 180 days.

The recent wells and the 2012 well program continue to meet Forest’s type
curve. The type curve projects an estimated ultimate recovery of 300 Mboe,
with a pre-tax drilling rate of return of approximately 30% based on a $90
WTI-NYMEX oil price and a $6 million well cost.

Average net sales volumes from the Eagle Ford in the fourth quarter of 2012
increased 28% to 2,300 Boe/d as compared to third quarter 2012 volumes of
1,800 Boe/d. For 2012, net sales volumes averaged approximately 1,600 Boe/d, a
132% increase over 2011 net sales volumes.

Forest plans to continue a one- to two-rig program in the Eagle Ford and to
drill approximately 20 wells during 2013.

East Texas

The Company remains active in East Texas targeting higher-margin liquids
opportunities within the Cotton Valley and other prospective zones. Since the
last earnings release, two horizontal Cotton Valley wells (100% working
interest) were completed with a 30-day average gross production rate of 9
MMcfe/d (37% liquids).

The Company drilled eight Cotton Valley wells during 2012 that had a 30-day
average gross production rate of 7.9 MMcfe/d (38% liquids), and seven of the
wells had a 90-day average gross production rate of 6.6 MMcfe/d (39% liquids).

The Company plans to continue a one-rig program targeting the liquids-rich
Cotton Valley and other prospective zones in 2013.

                       NATURAL GAS AND OIL DERIVATIVES

As of February 20, 2013, Forest had natural gas and oil derivatives in place
for 2013 and 2014 covering the aggregate average daily volumes and weighted
average prices shown below:

                                            
                                     2013      2014
Natural gas swaps:
Contract volumes (Bbtu/d)              160.0     80.0
Weighted average price (per MMBtu)   $ 3.98    $ 4.34
                                               
Oil swaps:
Contract volumes (MBbls/d)             4.0       -
Weighted average price (per Bbl)     $ 95.53   $ -
                                               

In connection with several swaps shown in the table above, Forest granted
swaption instruments to counterparties in exchange for Forest receiving
premium hedged prices on the swaps. The table below sets forth the outstanding
swaptions as of February 20, 2013:

                                    2014      2015
Natural gas swaptions:
Contract volumes (Bbtu/d)              40.0       -
Weighted average price (per MMBtu)   $ 4.50     $ -
                                                
Oil swaptions:
Contract volumes (MBbls/d)             5.0        3.0
Weighted average price (per Bbl)     $ 101.80   $ 100.00
                                                  

                         NON-GAAP FINANCIAL MEASURES

Adjusted Net Earnings

In addition to reporting net earnings (loss) from continuing operations as
defined under generally accepted accounting principles (GAAP), Forest also
presents adjusted net earnings from continuing operations (adjusted net
earnings), which is a non-GAAP performance measure. Adjusted net earnings
consist of net earnings (loss) from continuing operations after adjustment for
those items shown in the table below. Adjusted net earnings does not
represent, and should not be considered an alternative to, GAAP measurements
such as net earnings (loss) from continuing operations (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 that the measure is useful
to investors because similar measures are frequently used by securities
analysts, investors, and other interested parties in their evaluation of
companies in the oil and gas industry. Forest's management does not view
adjusted net earnings in isolation and also uses other measurements, such as
net earnings (loss) from continuing operations and revenues to measure
operating performance. The following table provides a reconciliation of net
earnings (loss) from continuing operations, the most directly comparable GAAP
measure, to adjusted net earnings for the periods presented (in thousands):

                    Three Months Ended          Year Ended
                     December 31,                 December 31,
                     2012          2011          2012            2011
                                                                   
Net earnings
(loss) from          $ (286,533 )   $ 19,467      $ (1,288,931 )   $ 98,260
continuing
operations
                                                                   
Ceiling test
write-down of oil
and natural gas        178,032        -             634,047          -
properties, net of
tax
Change in
valuation
allowance on
deferred tax           104,442        -             575,778          -
assets and foreign
income tax rate
differential
Impairment of
properties, net of     -              -             50,811           -
tax
Stock-based
compensation
expense                -              -             -                4,228
attributable to
the spin-off, net
of tax
Severance and
stock based
compensation           -              -             3,835            -
acceleration, net
of tax
Non-deductible
stock based            -              -             1,702            -
compensation costs
Rig stacking, net      2,466          -             4,219            -
of tax
Loss on debt
extinguishment,        23,200         -             23,200           -
net of tax
Unrealized (gains)
losses on
derivative             (4,615   )     940           25,037           (24,957 )
instruments, net
of tax
Canadian dividend      -              -             -                18,460
tax, net of tax
Legal proceeding      -            -           18,688         4,149   
costs, net of tax
Adjusted net         $ 16,992      $ 20,407     $ 48,386        $ 100,140 
earnings
                                                                   
Earnings
attributable to       (406     )    (444    )    (1,138     )    (2,076  )
participating
securities
                                                                             
Adjusted net
earnings for         $ 16,586      $ 19,963     $ 47,248        $ 98,064  
diluted earnings
per share
                                                                   
Weighted average
number of diluted     115,477      112,382     114,960        112,868 
shares outstanding
                                                                   
Adjusted diluted     $ 0.14        $ 0.18       $ 0.41          $ 0.87    
earnings per share
                                                                             

Adjusted EBITDA

In addition to reporting net earnings (loss) from continuing operations as
defined under GAAP, Forest also presents adjusted net earnings before
interest, income taxes, depreciation, depletion, and amortization from
continuing operations (adjusted EBITDA), which is a non-GAAP performance
measure. Adjusted EBITDA consists of net earnings (loss) from continuing
operations 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 (loss) from continuing operations (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 the oil and gas industry. 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 (loss) from continuing operations and revenues to measure
operating performance. The following table provides a reconciliation of net
earnings (loss) from continuing operations, the most directly comparable GAAP
measure, to adjusted EBITDA for the periods presented (in thousands):

                      Three Months Ended        Year Ended
                       December 31,               December 31,
                       2012          2011        2012            2011
                                                                   
Net earnings (loss)
from continuing        $ (286,533 )   $ 19,467    $ (1,288,931 )   $ 98,260
operations
                                                                   
Income tax (benefit)     (1,832   )     12,195      173,437          89,135
expense
Interest expense         37,899         36,674      141,831          149,755
Ceiling test
write-down of oil        278,654        -           992,404          -
and natural gas
properties
Impairment of            -              -           79,529           -
properties
Depreciation,
depletion, and           66,656         64,457      280,458          219,684
amortization
Unrealized (gains)
losses on derivative     (7,246   )     1,451       39,126           (39,087 )
instruments, net
Stock-based              2,847          2,727       15,074           20,536
compensation
Accretion of asset
retirement               1,749          1,586       6,663            6,082
obligations
Legal
proceeding/severance     -              -           31,102           6,500
costs
Loss on debt             36,312         -           36,312           -
extinguishment
Rig stacking            3,860        -          6,604          -       
Adjusted EBITDA        $ 132,366     $ 138,557   $ 513,609       $ 550,865 
                                                                             

Adjusted Discretionary Cash Flow

In addition to reporting net cash provided by operating activities of
continuing operations as defined under GAAP, Forest also presents adjusted
discretionary cash flow of continuing operations (adjusted discretionary cash
flow), which is a non-GAAP liquidity measure. Adjusted discretionary cash flow
consists of net cash provided by operating activities of continuing operations
after adjustment for those items shown in the table below. This measure does
not represent, and should not be considered an alternative to, GAAP
measurements such as net cash provided by operating activities of continuing
operations (its most comparable GAAP financial measure), and Forest's
calculations thereof may not be comparable to similarly titled measures
reported by other companies. Forest's management uses adjusted discretionary
cash flow as a measure of liquidity and believes it provides useful
information to investors because it assesses cash flow from operations before
changes in operating assets and liabilities, which fluctuate due to the timing
of collections of receivables and the settlements of liabilities, and other
items. Forest's management uses adjusted discretionary cash flow to manage its
business, including in preparing its annual operating budget and financial
projections. This measure does not represent the residual cash flow available
for discretionary expenditures. Forest’s management does not view adjusted
discretionary cash flow in isolation and also uses other measurements, such as
net cash provided by operating activities of continuing operations to measure
operating performance. The following table provides a reconciliation of net
cash provided by operating activities of continuing operations, the most
directly comparable GAAP measure, to adjusted discretionary cash flow for the
periods presented (in thousands):

                        Three Months Ended         Year Ended
                         December 31,                December 31,
                         2012         2011          2012         2011
                                                                   
Net cash provided by
operating activities     $ 85,830      $ 92,683      $ 371,655     $ 398,097
of continuing
operations
                                                                   
Changes in operating
assets and
liabilities:
Accounts receivable        (2,503  )     6,450         (11,573 )     (23,236 )
Other current assets       1,796         (6,052  )     (2,630  )     (14,314 )
Accounts payable and       23,346        1,374         21,164        6,470
accrued liabilities
Accrued interest and       (15,799 )     9,543         (2,322  )     5,566
other
Canadian dividend          -             -             -             28,921
tax^(1)
Current income tax
credit/income              -             -             (33,327 )     -
tax-carryback ^(1)
Legal
proceeding/severance       -             -             31,102        6,500
costs^(1)
                                                                
Adjusted discretionary   $ 92,670     $ 103,998    $ 374,069    $ 408,004 
cash flow
                                                                             

       The Canadian dividend tax, current income tax credit/income
       tax-carryback, and legal proceeding/severance costs are non-recurring
^(1)  cash-settled items. Including the effect of these items, adjusted
       discretionary cash flow for the years ended December 31, 2012 and 2011
       would have been $376 million and $373 million, respectively.
       

Net Debt

In addition to reporting total debt as defined under GAAP, Forest also
presents net debt, which is a non-GAAP debt measure. Net debt consists of the
principal amount of debt adjusted for cash and cash equivalents at the end of
the period. Forest's management uses net debt to assess Forest's indebtedness.
The following table sets forth the components of net debt (in thousands):

                        December 31, 2012          December 31, 2011
                         Principal    Book^(1)      Principal    Book^(1)
Credit facility          $ 65,000      $ 65,000      $ 105,000     $ 105,000
7% Senior subordinated     12            12            12            12
notes due 2013
8 1/2% Senior notes        300,000       296,723       600,000       587,611
due 2014 ^(2)
7 1/4% Senior notes        1,000,000     1,000,365     1,000,000     1,000,421
due 2019
7 1/2% Senior notes       500,000      500,000      -            -
due 2020 ^(2)
Total debt                 1,865,012     1,862,100     1,705,012     1,693,044
                                                                   
Less: cash and cash       1,056        1,056        3,012        3,012
equivalents
                                                                   
Net debt                 $ 1,863,956   $ 1,861,044   $ 1,702,000   $ 1,690,032
                                                                     

       Book amounts include the principal amount of debt adjusted for
^(1)  unamortized net discounts on the issuance of certain senior notes of $3
       million and $12 million at December 31, 2012 and 2011, respectively.

       In September 2012, Forest issued $500 million in 7 1/2% Senior notes
^(2)   due September 15, 2020. A portion of the proceeds were used in October
       2012 to redeem 50% of the $600 million 8 1/2% Senior notes due February
       15, 2014.
       

                             TELECONFERENCE CALL

A conference call is scheduled for Thursday, February 21, 2013, at 9:00 AM MT
to discuss the release. You may access the call by dialing toll free
866.356.3095 (for U.S./Canada) and 617.597.5391 (for International) and
request the Forest Oil teleconference (ID # 18661304). The conference call
will also be webcast live on the Internet and can be accessed by going to the
Forest Oil website at www.forestoil.com in the “Investor Relations” section of
the website. A Q&A period will follow.

A replay of the conference call will be available through March 7, 2013. You
may access the replay by dialing toll free 888.286.8010 (for U.S./Canada) and
617.801.6888 (for International), conference ID # 57791293. An archive of the
conference call webcast will also be available at www.forestoil.com in the
“Investor Relations” section of the website.

                          FORWARD-LOOKING STATEMENTS

This news release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of historical
facts, that address activities that Forest assumes, plans, expects, believes,
projects, estimates or anticipates (and other similar expressions) will,
should or may occur in the future are forward-looking statements. The
forward-looking statements provided in this press release are based on
management's current belief, based on currently available information, as to
the outcome and timing of future events. Forest cautions that future natural
gas and liquids production, revenues, cash flows, liquidity, plans for future
operations, expenses, outlook for natural gas and liquids prices, timing of
capital expenditures, and other forward-looking statements relating to Forest
are subject to all of the risks and uncertainties normally incident to their
exploration for and development and production and sale of natural gas and
liquids.

These risks relating to Forest include, but are not limited to, natural gas
and liquids price volatility, its level of indebtedness, access to cash flows
and other sources of liquidity, its ability to replace production or to renew
or maintain leases, its ability to compete with larger producers, the
uncertainty inherent in estimating oil and gas reserves, the impact of low
natural gas and liquids prices, 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.

February 20, 2013


FOREST OIL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
                                                         
                                           December 31,
                                           2012             2011
ASSETS                                     (In thousands)
                                                            
Current assets:
Cash and cash equivalents                  $ 1,056          $ 3,012
Accounts receivable                          67,516           79,089
Derivative instruments                       40,190           89,621
Other current assets                        16,318         38,950     
Total current assets                         125,080          210,672
                                                            
Net property and equipment                   1,754,238        2,651,116
                                                            
Deferred income taxes                        14,681           231,116
Goodwill                                     239,420          239,420
Derivative instruments                       8,335            10,422
Other assets                                60,108         38,405     
                                           $ 2,201,862     $ 3,381,151  
                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                            
Current liabilities:
Accounts payable and accrued liabilities   $ 164,786        $ 247,880
Accrued interest                             23,407           23,259
Derivative instruments                       9,347            28,944
Deferred income taxes                        14,681           20,172
Current portion of long-term debt            12               -
Other current liabilities                   14,092         20,582     
Total current liabilities                    226,325          340,837
                                                            
Long-term debt                               1,862,088        1,693,044
Asset retirement obligations                 56,155           77,898
Derivative instruments                       7,204            -
Other liabilities                           92,914         76,259     
Total liabilities                            2,244,686        2,188,038
                                                            
Shareholders' equity:
Common stock                                 11,825           11,454
Capital surplus                              2,541,859        2,486,994
Accumulated deficit                          (2,575,994 )     (1,287,063 )
Accumulated other comprehensive loss        (20,514    )    (18,272    )
Total shareholders' (deficit) equity         (42,824    )     1,193,113
                                                           
                                           $ 2,201,862     $ 3,381,151  
                                                                         

FOREST OIL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
                                               
                     Three Months Ended           Year Ended
                     December 31,                 December 31,
                     2012          2011          2012            2011
                     (In thousands, except per share amounts)
                                                                   
Revenues:
Oil, gas, and NGL    $ 154,914      $ 176,616     $ 605,523        $ 703,531
sales
Interest and other    13           87          136            1,026   
Total revenues         154,927        176,703       605,659          704,557
                                                                   
Costs, expenses,
and other:
Lease operating        25,860         28,565        108,027          99,158
expenses
Production and         7,314          8,445         34,249           40,632
property taxes
Transportation and     3,466          3,465         14,633           13,728
processing costs
General and
administrative         14,041         15,983        59,262           65,105
expense
Depreciation,
depletion, and         66,656         64,457        280,458          219,684
amortization
Ceiling test
write-down of oil      278,654        -             992,404          -
and gas properties
Impairment of          -              -             79,529           -
properties
Interest expense       37,899         36,674        141,831          149,755
Realized and
unrealized gains       (31,902  )     (17,432 )     (72,646    )     (88,064 )
on derivative
instruments, net
Other, net            41,304       4,884       83,406         17,164  
Total costs,
expenses, and         443,292      145,041     1,721,153      517,162 
other
Earnings (loss)
from continuing        (288,365 )     31,662        (1,115,494 )     187,395
operations before
income taxes
Income tax            (1,832   )    12,195      173,437        89,135  
Net earnings
(loss) from            (286,533 )     19,467        (1,288,931 )     98,260
continuing
operations
Net earnings from
discontinued          -            -           -              44,569  
operations
Net earnings           (286,533 )     19,467        (1,288,931 )     142,829
(loss)
Less: net earnings
attributable to       -            -           -              4,987   
noncontrolling
interest
                                                                             
Net earnings
(loss)
attributable to      $ (286,533 )   $ 19,467     $ (1,288,931 )   $ 137,842 
Forest Oil
Corporation
                                                                   
Basic earnings
(loss) per common
share attributable
to Forest Oil
Corporation common
shareholders:
Earnings (loss)
from continuing      $ (2.48    )   $ 0.17        $ (11.21     )   $ 0.86
operations
Earnings from
discontinued          -            -           -              0.35    
operations
                                                                             
Basic earnings
(loss) per common
share attributable   $ (2.48    )   $ 0.17       $ (11.21     )   $ 1.21    
to Forest Oil
Corporation common
shareholders
                                                                   
Diluted earnings
(loss) per common
share attributable
to Forest Oil
Corporation common
shareholders:
Earnings (loss)
from continuing      $ (2.48    )   $ 0.17        $ (11.21     )   $ 0.85
operations
Earnings from
discontinued          -            -           -              0.34    
operations
                                                                             
Diluted earnings
(loss) per common
share attributable   $ (2.48    )   $ 0.17       $ (11.21     )   $ 1.19    
to Forest Oil
Corporation common
shareholders
                                                                             

FOREST OIL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
                                                              
                   Three Months Ended            Year Ended
                   December 31,                  December 31,
                   2012          2011           2012             2011
                   (In thousands)
Operating
activities:
Net earnings       $ (286,533 )   $ 19,467       $ (1,288,931 )   $ 142,829
(loss)
Less: net
earnings from       -            -            -              44,569   
discontinued
operations
Net earnings
(loss) from          (286,533 )     19,467         (1,288,931 )     98,260
continuing
operations
                                                                  
Adjustments to
reconcile net
earnings (loss)
from continuing
operations to
net cash
provided by
operating
activities of
continuing
operations:
Depreciation,
depletion, and       66,656         64,457         280,458          219,684
amortization
Deferred income
tax expense          (15      )     12,270         208,975          58,994
(benefit)
Unrealized
(gains) losses       (7,246   )     1,451          39,126           (39,087  )
on derivative
instruments, net
Ceiling test
write-down of        278,654        -              992,404          -
oil and gas
properties
Impairment of        -              -              79,529           -
properties
Stock-based          2,847          2,727          15,074           20,536
compensation
Accretion of
asset retirement     1,749          1,586          6,663            6,082
obligations
Loss on debt         36,312         -              36,312           -
extinguishment
Other, net           246            2,040          6,684            8,114
                                                                  
Changes in
operating assets
and liabilities:
Accounts             2,503          (6,450   )     11,573           23,236
receivable
Other current        (1,796   )     6,052          2,630            14,314
assets
Accounts payable
and accrued          (23,346  )     (1,374   )     (21,164    )     (6,470   )
liabilities
Accrued interest
and other           15,799       (9,543   )    2,322          (5,566   )
current
liabilities
Net cash
provided by
operating            85,830         92,683         371,655          398,097
activities of
continuing
operations
                                                                  
Investing
activities:
Capital
expenditures for
property and
equipment:
Exploration,
development,         (122,654 )     (216,983 )     (721,536   )     (873,877 )
acquisition, and
leasehold costs
Other fixed          (3,117   )     (2,598   )     (9,128     )     (6,968   )
assets
Proceeds from       253,980      159          262,882        121,115  
sales of assets
Net cash
provided (used)
by investing         128,209        (219,422 )     (467,782   )     (759,730 )
activities of
continuing
operations
                                                                  
Financing
activities:
Proceeds from        593,000        148,000        1,244,000        160,000
bank borrowings
Repayments of        (528,000 )     (43,000  )     (1,284,000 )     (55,000  )
bank borrowings
Issuance of
senior notes,        -              -              491,250          -
net of issuance
costs
Redemption of        (330,709 )     (285,000 )     (330,709   )     (285,000 )
senior notes
Change in bank       13,499         37,776         (24,217    )     17,116
overdrafts
Other, net          58           1,886        (2,153     )    (10,421  )
Net cash (used)
provided by
financing            (252,152 )     (140,338 )     94,171           (173,305 )
activities of
continuing
operations
                                                                  
Cash flows of
discontinued
operations:
Operating cash       -              -              -                101,292
flows
Investing cash       -              -              -                (255,470 )
flows
Financing cash      -            -            -              478,324  
flows
Net cash
provided by          -              -              -                324,146
discontinued
operations
Effect of
exchange rate       -            -            -              (3,476   )
changes on cash
Net decrease in
cash and cash        (38,113  )     (267,077 )     (1,956     )     (214,268 )
equivalents
Net increase in
cash and cash
equivalents of      -            -            -              (289     )
discontinued
operations
Net decrease in
cash and cash
equivalents of       (38,113  )     (267,077 )     (1,956     )     (214,557 )
continuing
operations
Cash and cash
equivalents of
continuing          39,169       270,089      3,012          217,569  
operations at
beginning of
period
Cash and cash
equivalents of
continuing         $ 1,056       $ 3,012       $ 1,056         $ 3,012    
operations at
end of period
                                                                             

Contact:

Forest Oil Corporation
Larry C. Busnardo, 303-812-1441
Director – Investor Relations
 
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