Forest Oil Announces First Quarter 2014 Results

  Forest Oil Announces First Quarter 2014 Results

First Quarter 2014 Average Net Sales Volumes of 105 MMcfe/d (68% Natural Gas,
32% Liquids)

Completed Six Eagle Ford Wells with a 30-Day Average Gross Production Rate of
418 Boe/d (93% oil)

Eagle Ford Drilling and Completion Costs Averaged Approximately $4.5 Million
Per Well in the First Quarter 2014

Completed a Liquids-Rich Cotton Valley Well with a 30-Day Average Gross
Production Rate of 7 MMcfe/d; Drilled and Completed for Less Than $7 Million

Business Wire

DENVER -- May 6, 2014

Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced
financial and operational results for the first quarter of 2014.

For the three months ended March 31, 2014, Forest reported a net loss of $21
million, or $(0.18) per diluted share, compared to net earnings of $106
million, or $0.89 per share in the fourth quarter of 2013. Net loss for the
first quarter of 2014 included the following items:

  *Unrealized losses on derivative instruments of $8 million
  *Rig lease buyout/stacking costs of $5 million
  *Write-off of debt issuance costs of $3 million
  *Employee-related asset disposition costs of $1 million
  *Loss on asset disposition of $1 million

Without the effect of these items, Forest’s results for the first quarter were
as follows:

  *Adjusted net loss of $3 million, or $(0.02) per diluted share
  *Adjusted EBITDA of $35 million
  *Adjusted discretionary cash flow of $21 million

Management Comment

Patrick R. McDonald, President and CEO, stated, “We are pleased with the
operational execution and cost discipline that was exhibited by our team
during the first quarter. We made further and significant progress in lowering
drilling costs through improvements in the efficiencies of our operations and
enhancements of completion designs, which continues to translate into lower
costs in each of our operating areas.

“We are nearly complete with merging and reprocessing our 3D seismic surveys
within the small portion of the Eagle Ford field where the reprocessing was
required, and are pleased that it has progressed as anticipated. As previously
indicated, the reprocessed data will be available by the third quarter. In the
Ark-La-Tex, we increased further our level of activity from the first quarter
with the recent addition of a third drilling rig in mid-April.

“We believe that operational execution and continued financial discipline will
be instrumental in our ability to meet the strategic objectives we have
outlined and allow us to deliver on our 2014 operating plan. As we move
forward into 2014, we will continue to manage prudently our drilling program
to focus on the highest risk-adjusted rate-of-return projects. The progress
shown in the first quarter provides us with a good start to 2014.”

Average Net Sales Volumes, Average Realized Prices, and Revenues

Forest's average net sales volumes for the three months ended March 31, 2014,
were 105 MMcfe/d (68% natural gas, 32% liquids), which was within the provided
guidance range of 105 – 110 MMcfe/d. Forest began the first quarter operating
three rigs and ended the quarter operating four rigs. Beginning in mid-April,
Forest is operating five rigs, including three rigs in East Texas and two rigs
in the Eagle Ford. With the increased rig count, we expect that average net
sales volumes will be sequentially higher on a quarterly basis for the
remainder of the year, particularly in the third and fourth quarters of 2014.

The following table details the components of average net sales volumes,
average realized prices, and revenues for the three months ended March 31,
2014:

                      Three Months Ended March 31, 2014
                        Gas          Oil          NGLs        Total
                        (MMcf/d)       (MBbls/d)      (MBbls/d)     (MMcfe/d)
                                                                    
Average Net Sales         71.5           3.6             2.0          105.1
Volumes
                                                                 
Average Realized        Gas           Oil            NGLs          Total
Prices                  ($/Mcf)        ($/Bbl)        ($/Bbl)       ($/Mcfe)
                                                                    
Average realized
prices not              $ 4.38         $ 93.04        $  33.45      $ 6.81
including realized
derivative losses
Realized losses on       (0.53  )      (3.17  )       -           (0.47  )
NYMEX derivatives
Average realized
prices including        $ 3.84        $ 89.88       $  33.45      $ 6.34   
realized derivative
losses
                                                                    
Revenues (in            Gas            Oil            NGLs          Total
thousands)
                                                                    
Revenues not
including realized      $ 28,171       $ 30,332       $  5,954      $ 64,457
derivative losses
Realized losses on       (3,428 )      (1,032 )       -           (4,460 )
NYMEX derivatives
                                                                             
Revenues including
realized derivative     $ 24,743      $ 29,300      $  5,954      $ 59,997 
losses
                                                                             

Total Cash Costs

Forest's total cash costs for the first quarter of 2014, excluding stock-based
compensation and employee-related asset disposition costs, decreased 21% to
$42 million, compared to $53 million in the fourth quarter of 2013. Total cash
costs on a per-unit basis were higher compared to the fourth quarter of 2013
as a result of lower equivalent production volumes following the sale of the
Texas Panhandle assets during the fourth quarter of 2013. The Company expects
to see a reduction in per unit lease operating expense over the coming
quarters as production volumes are expected to increase for the remainder of
the year in conjunction with the increased level of drilling activity.

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

                     Three Months Ended
                       March 31,    Per Mcfe    December 31,   Per Mcfe
                       2014                         2013
                       (In thousands, except per-unit amounts)
Lease operating        $ 14,510       $ 1.53        $  17,059        $ 1.13
expenses
Production and           3,225          0.34           2,945           0.19
property taxes
Transportation and       2,515          0.27           2,727           0.18
processing costs
General and
administrative
expense (excluding
stock-based
compensation and         6,853          0.72           5,448           0.36
employee-related
asset disposition
costs of $1,387
and $6,485,
respectively)
Interest expense         16,011         1.69           24,790          1.64
Current income tax      (1,214 )      (0.13 )       (245    )      (0.02 )
benefit
Total cash costs       $ 41,900      $ 4.43       $  52,724       $ 3.48  

________________________
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 and
employee-related asset disposition costs); interest expense; and current
income tax benefit.

Total Capital Expenditures

Forest's exploration and development capital expenditures for the three months
ended March 31, 2014 and December 31, 2013, are set forth in the table below
(in thousands):

                                        Three Months Ended
                                          March 31, 2014   December 31, 2013
                                                             
Exploration and development               $    37,250        $      41,732
Non-drilling capital (capitalized              7,968                9,114
overhead, seismic, and other)
Land and leasehold acquisitions               88                  1,933
                                               45,306               52,779
                                                             
Add:
ARO, capitalized interest, and                582                 6,198
capitalized equity compensation
Total capital expenditures                $    45,888        $      58,977
                                                                    

Exploration and development capital for the three months ended March 31, 2014
was $37 million compared to Forest’s full year 2014 guidance of $260 million
to $270 million. First quarter exploration and development capital was lower
than the fourth quarter of 2013 as Forest began the first quarter operating
three rigs and ended the quarter operating four rigs. In mid-April, Forest
increased its operated rig count to five rigs, including three rigs in East
Texas and two rigs in the Eagle Ford. Accordingly, exploration and development
capital is anticipated to be higher on a quarterly basis for the remainder of
the year.

                          OPERATIONAL PROJECT UPDATE

Eagle Ford

Highlighting drilling activity since the last earnings release, six gross
(three net) wells were completed across the southern extent of the Eagle Ford
field and placed on production with an average 30-day gross production rate of
418 Boe/d (93% oil or 386 Bbls/d). The average lateral length of the wells
drilled in the first quarter was 4,099 feet as four wells required
shorter-than-average laterals due to lease configurations. When normalized to
the 2013 average lateral length of 5,166 feet, the 30-day average gross
production rate for the six wells completed in the first quarter was
approximately 525 Boe/d (93% oil or 488 Bbls/d), which compares favorably to
the 2013 average 30-day gross production rate of 408 Boe/d (95% oil).

Forest also achieved significant cost reductions for the wells drilled during
the first quarter through operational synergies and implementing a modified
completion technique that, when combined with the shorter laterals, lowered
drilling and completion costs to approximately $4.5 million per well. This
compares to a 2013 average of $6.0 million per well.

Net sales volumes from the Eagle Ford averaged approximately 3,025 Boe/d in
the first quarter, which was a 3% sequential increase over the fourth quarter
of 2013.

Ark-La-Tex

Consistent with what the Company outlined in last quarter’s operational
update, Forest increased drilling activity targeting the liquids-rich Cotton
Valley formation in East Texas during the first quarter with the addition of a
second rig in late-February. A third drilling rig was added in mid-April.

Highlighting drilling activity since the last earnings release, a Cotton
Valley well was completed in Rusk County, Texas that had a 30-day average
gross production rate of 7 MMcfe/d and a completed well cost below $7 million.
This compares to the 2013 average of $8.5 million per well. The Company is
currently operating two rigs in Rusk County and a third rig in Panola County,
Texas.

Net sales volumes for the Ark-La-Tex averaged approximately 87 MMcfe/d in the
first quarter of 2014.

                         NON-GAAP FINANCIAL MEASURES

Adjusted Net (Loss) Earnings

In addition to reporting net loss as defined under generally accepted
accounting principles (GAAP), Forest also presents adjusted net (loss)
earnings, which is a non-GAAP performance measure. Adjusted net (loss)
earnings consist of net loss after adjustment for those items shown in the
table below. Adjusted net (loss) earnings does not represent, and should not
be considered an alternative to, GAAP measurements such as net loss (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 (loss) earnings in isolation and also uses other measurements,
such as net loss and revenues, to measure operating performance. The following
table provides a reconciliation of net loss, the most directly comparable GAAP
measure, to adjusted net (loss) earnings for the periods presented (in
thousands):

                                           Three Months Ended
                                               March 31,
                                               2014 ^(1)       2013 ^(2)
                                                                   
Net loss                                       $ (21,007 )         $ (67,948 )
Change in valuation allowance on
deferred tax assets associated with              -                   24,585
net loss and adjusting items
Employee-related asset disposition               721                 4,263
costs, net of tax
Rig lease buyout/stacking costs, net             5,184               1,940
of tax
Loss on debt extinguishment, net of              -                   16,107
tax
Write-off of debt issuance costs                 3,323               -
Loss on asset disposition                        794                 -
Unrealized losses on derivative                 8,391             24,481  
instruments, net of tax
Adjusted net (loss) earnings                   $ (2,594  )         $ 3,428   
                                                                   
Earnings attributable to participating          -                 (97     )
securities
Adjusted net (loss) earnings for               $ (2,594  )         $ 3,331   
diluted (loss) earnings per share
                                                                   
Weighted average number of diluted              116,838           115,655 
shares outstanding
                                                                   
Adjusted diluted (loss) earnings per           $ (0.02   )         $ 0.03    
share

(1) The tax rate used for the three months ended March 31, 2014 was 0%
(2) The tax rate used for the three months ended March 31, 2013 was 36.12%



Adjusted EBITDA

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

                                           Three Months Ended
                                               March 31,
                                               2014            2013
                                                                   
Net loss                                       $ (21,007 )         $ (67,948 )
Income tax (benefit) expense                     (1,214  )           337
Interest expense                                 16,011              36,128
Depreciation, depletion, and                     21,415              48,543
amortization
Unrealized losses on derivative                  8,391               38,311
instruments, net
Stock-based compensation                         794                 3,647
Accretion of asset retirement                    513                 1,244
obligations
Loss on asset disposition, net                   794                 -
Write-off of debt issuance costs                 3,323               -
Employee-related asset disposition               579                 5,821
costs
Loss on debt extinguishment                      -                   25,223
Rig lease buyout/stacking costs                 5,184             3,038   
Adjusted EBITDA ^(1)                           $ 34,783           $ 94,344  

(1) The decrease in adjusted EBITDA was primarily due to oil and natural gas
property divestitures completed during 2013.

Adjusted Discretionary Cash Flow

In addition to reporting net cash provided by operating activities as defined
under GAAP, Forest also presents adjusted discretionary cash flow, which is a
non-GAAP liquidity measure. Adjusted discretionary cash flow consists of net
cash provided by operating activities 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 (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, to measure
operating performance. The following table provides a reconciliation of net
cash provided by operating activities, the most directly comparable GAAP
measure, to adjusted discretionary cash flow for the periods presented (in
thousands):

                                                Three Months Ended
                                                    March 31,
                                                    2014          2013
                                                                    
Net cash provided by operating activities           $ 8,846         $ 34,322
                                                                    
Changes in operating assets and
liabilities:
Accounts receivable                                   (135    )       (265   )
Other current assets                                  1,764           1,109
Accounts payable and accrued liabilities              11,533          14,697
Accrued interest and other                            (10,541 )       53
Employee-related asset disposition costs              579             5,821
^(1)
Rig lease buyout/stacking costs ^(1)                  8,794
                                                                   
Adjusted discretionary cash flow ^(2)               $ 20,840       $ 55,737 

      The employee-related asset disposition costs and rig lease
      buyout/stacking costs are non-recurring cash-settled items. Including
(1)  the effect of these items, adjusted discretionary cash flow would have
      been $11 million and $50 million for the three months ended March 31,
      2014 and 2013, respectively.
      
(2)   The decrease in adjusted discretionary cash flow was primarily due to
      oil and natural gas property divestitures completed during 2013.
      

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):

                         March 31, 2014            December 31, 2013
                           Principal   Book^(1)      Principal   Book^(1)
Credit facility            $ -           $ -           $ -           $ -
7 1/4% Senior notes          577,914       578,084       577,914       578,092
due 2019
7 1/2% Senior notes         222,087      222,087      222,087      222,087
due 2020
Total debt                   800,001       800,171       800,001       800,179
                                                                     
Less: cash and cash         48,328       48,328       66,192       66,192
equivalents
                                                                     
Net debt                   $ 751,673     $ 751,843     $ 733,809     $ 733,987

       Book amounts include the principal amount of debt adjusted for
^(1)  unamortized premiums on the issuance of certain senior notes of $0.2
       million at March 31, 2014 and December 31, 2013.
       

                             TELECONFERENCE CALL

Forest will not host the conference call previously scheduled for Wednesday,
May 7, 2014 at 7:00 AM MT. Forest expects to file its quarterly report Form
10-Q with the Securities and Exchange Commission on May 6, 2014.

                          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, intends, 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 oil and natural gas prices, timing of
capital expenditures, timing and terms of any divestitures, and other
forward-looking statements relating to Forest are subject to all of the risks
and uncertainties normally incident to the exploration for and development and
production and sale of liquids and natural gas.

These risks relating to Forest include, but are not limited to, oil 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, the decision to sell or offer for
sale, or to determine not to sell any portion of its assets, the ability to
enter into agreements relating to such sales on desirable terms or at all, the
timing of any such agreements, the ability to consummate any such sales, the
ability to realize the anticipated benefits of any such sales, the ability to
determine the use of proceeds from any such sales, the ability to determine
whether to reduce outstanding indebtedness and the amount and timing of any
such reductions, 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.
Forest's principal reserves and producing properties are located in the United
States in Arkansas, Louisiana, Oklahoma, and Texas. 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)
                                                           
                                             March 31,          December 31,
                                             2014               2013
ASSETS                                       (In thousands)
                                                                
Current assets:
Cash and cash equivalents                    $ 48,328           $ 66,192
Accounts receivable                            32,840             35,654
Derivative instruments                         713                5,192
Other current assets                          23,871           6,756      
Total current assets                           105,752            113,794
                                                                
Net property and equipment                     841,718            818,569
                                                                
Deferred income taxes                          1,762              2,230
Goodwill                                       134,434            134,434
Derivative instruments                         2,216              400
Other assets                                  16,305           48,525     
                                             $ 1,102,187       $ 1,117,952  
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                
Current liabilities:
Accounts payable and accrued liabilities     $ 149,525          $ 141,107
Accrued interest                               13,445             6,654
Derivative instruments                         9,598              4,542
Deferred income taxes                          1,762              2,230
Other current liabilities                     5,847            12,201     
Total current liabilities                      180,177            166,734
                                                                
Long-term debt                                 800,171            800,179
Asset retirement obligations                   24,337             22,629
Derivative instruments                         672                -
Other liabilities                             61,945           73,941     
Total liabilities                              1,067,302          1,063,483
                                                                
Shareholders' equity:
Common stock                                   11,910             11,940
Capital surplus                                2,556,277          2,554,997
Accumulated deficit                            (2,523,077 )       (2,502,070 )
Accumulated other comprehensive loss          (10,225    )      (10,398    )
Total shareholders' equity                     34,885             54,469
                                                               
                                             $ 1,102,187       $ 1,117,952  
                                                                             
                                                                             

FOREST OIL CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
                                   
                                      Three Months Ended
                                      March 31,
                                      2014                    2013
                                      (In thousands, except per share amounts)
                                                                
Revenues:
Oil, gas, and NGL sales               $   64,457                $  118,042
Interest and other                       737                    132      
Total revenues                            65,194                   118,174
                                                                
Costs, expenses, and other:
Lease operating expenses                  14,510                   21,204
Production and property taxes             3,225                    2,216
Transportation and processing             2,515                    3,280
costs
General and administrative                8,240                    20,014
expense
Depreciation, depletion, and              21,415                   48,543
amortization
Interest expense                          16,011                   36,128
Realized and unrealized losses on         12,851                   25,580
derivative instruments, net
Other, net                               8,648                  28,820   
Total costs, expenses, and other         87,415                 185,785  
Loss before income taxes                  (22,221   )              (67,611  )
Income tax (benefit) expense             (1,214    )             337      
Net loss                              $   (21,007   )           $  (67,948  )
                                                                
Basic and diluted weighted                116,838                  115,655
average shares outstanding
                                                                
Basic and diluted loss per common     $   (0.18     )           $  (0.59    )
share
                                                                            
                                                                            

FOREST OIL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
                                             
                                                  Three Months Ended
                                                  March 31,
                                                  2014          2013
                                                  (In thousands)
Operating activities:
Net loss                                          $ (21,007 )     $ (67,948  )
                                                                  
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation, depletion, and amortization           21,415          48,543
Unrealized losses on derivative                     8,391           38,311
instruments, net
Stock-based compensation                            794             3,647
Loss on debt extinguishment                         -               25,223
Other, net                                          1,874           2,140
Changes in operating assets and
liabilities:
Accounts receivable                                 135             265
Other current assets                                (1,764  )       (1,109   )
Accounts payable and accrued liabilities            (11,533 )       (14,697  )
Accrued interest and other                         10,541        (53      )
Net cash provided by operating activities           8,846           34,322
                                                                  
Investing activities:
Capital expenditures for property and
equipment:
Exploration, development, leasehold, and            (46,380 )       (101,665 )
acquisition costs
Other property and equipment                        (3,520  )       (268     )
Proceeds from sales of assets                      2,239         313,805  
Net cash (used) provided by investing               (47,661 )       211,872
activities
                                                                  
Financing activities:
Proceeds from bank borrowings                       -               202,000
Repayments of bank borrowings                       -               (127,000 )
Redemption of senior notes                          -               (321,315 )
Change in bank overdrafts                           21,664          590
Other, net                                         (713    )      (300     )
Net cash provided (used) by financing               20,951          (246,025 )
activities
                                                                  
Net (decrease) increase in cash and cash            (17,864 )       169
equivalents
Cash and cash equivalents at beginning of          66,192        1,056    
period
Cash and cash equivalents at end of               $ 48,328       $ 1,225    
period

Contact:

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