Forest Oil Announces Second Quarter 2014 Results

  Forest Oil Announces Second Quarter 2014 Results

Business Wire

DENVER -- August 11, 2014

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

For the three months ended June 30, 2014, Forest reported a net loss of $83
million, or $(0.71) per diluted share, compared to a net loss of $21 million,
or $(0.18) per share in the first quarter of 2014. Net loss for the second
quarter of 2014 included the following items:

  *Ceiling test write-down of oil and gas properties of $77 million
  *Gain on asset dispositions of $22 million
  *Merger-related costs of $10 million
  *Unrealized losses on derivative instruments of $7 million
  *Rig lease buyout/stacking costs of $3 million

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

  *Adjusted net loss of $7 million, or $(0.06) per diluted share
  *Adjusted EBITDA of $31 million
  *Adjusted discretionary cash flow of $16 million

See “Non-GAAP Financial Measures” below for a discussion of each of these
measures and a reconciliation of each to the most comparable GAAP measure.

Management Comment

Patrick R. McDonald, President and CEO, commented, “We accomplished several
objectives during the second quarter as we announced a proposed merger with
Sabine Oil & Gas that will create one of the industry’s largest East Texas
players and received final disbursement of escrowed funds from our $1 billion
Texas Panhandle divestiture. Our proposed merger with Sabine continues to
progress in a timely manner and we are working diligently to complete this
transaction during the fourth quarter. Our priority for the remainder of the
year will be to direct capital to our highest rate-of-return projects to
generate increased capital efficiency within our drilling program as we work
to optimize capital spending ahead of the merger closing. This will result in
a reduction in capital expenditures and a corresponding reduction in the
number of wells to be completed during the second half of the year as compared
to our earlier guidance.”

Average Net Sales Volumes, Average Realized Prices, and Revenues

Forest's average net sales volumes for the three months ended June 30, 2014,
were 100 MMcfe/d (69% natural gas, 31% liquids). This compares to average net
sales volumes of 105 MMcfe/d (68% natural gas, 32% liquids) for the three
months ended March 31, 2014. The decline in average net sales volumes from the
first quarter was primarily the result of delays in well completions and from
the lower-than-expected production rate from an East Texas well, where a
mechanical issue resulted in an approximate 20% effective completed lateral
length of 1,000 feet.

The following table details the components of average net sales volumes,
average realized prices, and revenues for the three months ended June 30,
2014:

                     Three Months Ended June 30, 2014
                        Gas          Oil          NGLs        Total
                        (MMcf/d)       (MBbls/d)      (MBbls/d)     (MMcfe/d)
                                                                    
Average Net Sales         68.3           3.2             2.0          99.6
Volumes
                                                                    
Average Realized        Gas            Oil            NGLs          Total
Prices                                                              ($/Mcfe)
                        ($/Mcf)        ($/Bbl)        ($/Bbl)
                                                                    
Average realized
prices not              $ 4.27         $ 96.26        $  29.97      $ 6.63
including realized
derivative losses
Realized losses on       (0.30  )      (8.33  )       -           (0.47  )
NYMEX derivatives
Average realized
prices including        $ 3.97        $ 87.92       $  29.97      $ 6.16   
realized derivative
losses
                                                                    
Revenues (in            Gas            Oil            NGLs          Total
thousands)
                                                                    
Revenues not
including realized      $ 26,545       $ 28,107       $  5,454      $ 60,106
derivative losses
Realized losses on       (1,863 )      (2,433 )       -           (4,296 )
NYMEX derivatives
Revenues including
realized derivative     $ 24,682      $ 25,674      $  5,454      $ 55,810 
losses
                                                                             

Total Cash Costs

Forest's total cash costs for the second quarter of 2014, excluding
stock-based compensation and employee-related asset disposition costs,
remained essentially unchanged from the first quarter of 2014 at $41 million.
Total cash costs on a per-unit basis were slightly higher compared to the
first quarter of 2014 as a result of lower equivalent production volumes.

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

                     Three Months Ended
                         June 30,     Per Mcfe    March 31,    Per Mcfe
                         2014                         2014
                         (In thousands, except per-unit amounts)
Lease operating          $ 14,295      $ 1.58        $ 14,510      $ 1.53
expenses
Production and             2,740          0.30          3,225          0.34
property taxes
Transportation and         2,379          0.26          2,515          0.27
processing costs
General and
administrative
expense (excluding
  stock-based
  compensation and
  employee-related
  asset                    6,351          0.70          6,853          0.72
  disposition costs
  of $1,909 and
  $1,387,
  respectively)
Interest expense           15,738         1.74          16,011         1.69
Current income tax        (78    )      (0.01 )      (1,214 )      (0.13 )
benefit
       Total cash        $ 41,425      $ 4.57       $ 41,900      $ 4.43  
       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 and
employee-related asset disposition costs); interest expense; and current
income tax benefit.

Capital Expenditures

Forest's exploration and development capital expenditures for the three months
ended June 30, 2014 and March 31, 2014, are set forth in the table below (in
thousands):

                                             Three Months Ended
                                                June 30,       March 31,
                                                2014             2014
                                                                 
Exploration and development                     $ 45,023         $ 37,250
Non-drilling capital (capitalized overhead,     6,677            7,968
seismic, and other)
Land and leasehold acquisitions                 302              88
                                                52,002           45,306
                                                                 
Add:
ARO, capitalized interest, and capitalized
equity
            compensation                        462              582
Total capital expenditures                      $ 52,464         $ 45,888
                                                                 

Exploration and development capital for the six months ended June 30, 2014
totaled $82 million compared to budgeted exploration and development capital
of $109 million for the first half of 2014. The lower-than-budgeted capital
spending is primarily attributable to drilling and completion delays within
the Ark-La-Tex and Eagle Ford areas.

Ceiling Test Write-Down

Forest recorded a non-cash ceiling test write-down of $77 million in the
second quarter of 2014 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 the result of a downward
revision of previous reserve estimates in the Eagle Ford due to well
performance that resulted in a 13% decrease to the Company’s type-curve and a
reduction in the number of proved undeveloped locations in the Eagle Ford
pursuant to the SEC five-year rule due to a slower pace of planned future
development.

                          OPERATIONAL PROJECT UPDATE

Consistent with the drilling program the Company has outlined in previous
updates, Forest increased drilling activity targeting the liquids-rich Cotton
Valley formation in East Texas with the addition of a third drilling rig
during the second quarter.

Since the Company’s last earnings release, two Cotton Valley wells were
completed in Rusk County that had a 30-day average gross production rate of 11
MMcfe/d (40% liquids). The production rate for these new wells is performing
above the type-curve. In addition, the completion of a well that was expected
to begin producing in April was deferred until mid-July due to a mechanical
issue that resulted in the completion of only 1,000 feet of the well’s
lateral. Since being placed online, the well has averaged approximately 2
MMcfe/d (52% liquids) during its initial 20 days of production from the short
lateral. However, when normalized for the type-curve lateral length of
approximately 4,400 feet, the production rate is calculated to be
approximately 10 MMcfe/d. Two additional wells are currently in varying stages
of completion operations and do not have sufficient production history to
report at this time.

Forest also drilled a well during the second quarter within its light sweet
crude oil play located in Cherokee County, Texas. The Company has recently
initiated completion operations on the well.

Net sales volumes for the Ark-La-Tex averaged approximately 85 MMcfe/d in the
second quarter of 2014. Forest plans to operate three drilling rigs in the
Ark-La-Tex for the second half of 2014.

In the Eagle Ford, Forest has essentially completed the acreage holding phase
of its drilling program and is presently focused on development drilling. The
Company has completed the reprocessing of its 3D seismic surveys and is
utilizing the data to select drilling locations for the second half of 2014
drilling program. Net sales volumes from the Eagle Ford averaged approximately
2,500 Boe/d during the second quarter. Gross drilling and completion costs for
the wells drilled during 2014 have averaged approximately $4.5 million per
well. Plans for the second half of 2014 entail operating one drilling rig in
the Eagle Ford.

2014 Guidance

Incorporating the operational results for the first half of 2014 and
maintaining a disciplined capital program ahead of the proposed merger with
Sabine Oil & Gas will result in spending less capital and in a corresponding
reduction in the number of wells drilled during the second half of 2014.
Accordingly, Forest is adjusting its 2014 full-year guidance as follows:

  *Drilling and completion capital is expected to be in a range of $220
    million to $230 million (excluding capitalized interest, capitalized
    stock-based compensation, and asset retirement obligations incurred) for
    2014 as compared to a previous range of $260 million to $270 million. This
    will fund a three rig program in the Ark-La-Tex and a one rig program in
    the Eagle Ford. The total capital budget is expected to be in a range of
    $240 million to $250 million compared to a previous range of $290 million
    to $310 million.
  *Average net sales volumes are expected to be in a range of 105 – 110
    MMcfe/d for 2014. The liquids component of our equivalent production is
    expected to average approximately 33% of the average net sales volumes.
  *Production expense, which includes lease operating expense, ad valorem
    taxes, production taxes, and product processing, gathering and
    transportation, is expected to average $1.95 to $2.05 per Mcfe compared to
    a previous range of $1.55 to $1.65 per Mcfe.
  *Depreciation, depletion and amortization expense is expected to be $2.30
    to $2.40 per Mcfe compared to a previous range of $2.45 to $2.65 per Mcfe.

Forest’s guidance for 2014 remains subject to the cautionary statements and
limitations contained in the Company’s December 2, 2013 and February 25, 2014
press releases under the caption “2014 Guidance” as well as those stated below
under the caption “Forward-Looking Statements.”

Sabine Oil & Gas Merger Update

Forest is party to an agreement and plan of merger with Sabine Oil & Gas.
Completion of the proposed merger transaction is conditioned upon, among other
things, Forest shareholder approval at a special meeting of Forest
shareholders. In connection with the special meeting, Forest filed a
preliminary proxy statement with the Securities and Exchange Commission on
August 7, 2014. The transaction is expected to be completed in the fourth
quarter of 2014. Please refer to (a) Forest’s Current Reports on Form 8-K
filed on May 6, 2014, July 10, 2014, July 11, 2014 and July 15, 2014, (b)
Forest’s press releases dated May 6, 2014 and July 10, 2014 and (c) Forest’s
preliminary proxy statement for more information.

Teleconference Call

Forest will not host a conference call this quarter.

Internal Control Review and Second Quarter Form 10-Q

As disclosed in Item 8.01 of Forest’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on August 11, 2014, the Public Company
Accounting Oversight Board conducted an inspection of Ernst & Young LLP’s
(“EY”) audits of the financial statements included in, and internal control
over financial reporting with respect to, Forest’s Annual Report on Form 10-K
for the year ended December 31, 2013 (the “Form 10-K”). Following this
inspection, EY requested a reevaluation of certain previously-identified
deficiencies in Forest’s Information Technology General Controls (“ITGCs”)
around the financial accounting system and the adequacy of the related
compensating review controls, as well as the precision and specificity to
which these review controls were executed and documented. Specifically, EY
questioned the compensating controls’ reliance on the financial accounting
system where the identified ITGC deficiencies originated. Following extensive
consultation with EY and other outside advisers, Forest’s management has now
concluded that its compensating review controls were not adequate and that the
ITGC and review control deficiencies each represent a “material weakness” in
internal control over financial reporting. As of the date of this release, to
the knowledge of Forest’s Chief Executive Officer and Chief Financial Officer,
these internal control material weaknesses did not result in a material
misstatement of Forest’s financial statements included in the Form 10-K.
Furthermore, EY has not withdrawn its audit report on the financial statements
included in the Form 10-K. However, EY must conduct additional audit
procedures to be sure a misstatement did not occur. This additional testing
has prevented EY from conducting a timely review of Forest’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2014, and until such review is
completed, any such Form 10-Q filed with the Securities and Exchange
Commission would be incomplete and not fully compliant with applicable rules.

Please see Forest’s Current Report on Form 8-K, filed with the Securities and
Exchange Commission on August 11, 2014, for more detail.

READERS ARE CAUTIONED THAT THE ADDITIONAL AUDIT PROCEDURES BEING CONDUCTED ON
FOREST’S FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-K MAY RESULT IN CHANGES
TO THE RESULTS INCLUDED IN THIS EARNINGS RELEASE.

                         NON-GAAP FINANCIAL MEASURES

Adjusted Net (Loss) Earnings

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

                                                Three Months Ended
                                                   June 30,
                                                   2014^(1)      2013^(2)
                                                                   
Net earnings (loss)                                $ (82,717 )     $ 33,439
Change in valuation allowance on deferred tax
assets, net of non-deductible
         stock-based compensation costs              -               (12,330 )
Ceiling test write-down of oil and gas               77,176          -
properties
Merger-related costs, net of tax                     10,202          -
Rig stacking/lease termination costs, net of         3,075           803
tax
Gain on asset dispositions, net of tax               (22,185 )       -
Employee-related asset disposition costs, net        238             -
of tax
Unrealized losses (gains) on derivative             7,345         (14,584 )
instruments, net of tax
Adjusted net earnings (loss)                       $ (6,866  )     $ 7,328   
                                                                   
Earnings attributable to participating              -             (222    )
securities
Adjusted net earnings (loss) for diluted           $ (6,866  )     $ 7,106   
earnings (loss) per share
                                                                   
Weighted average number of diluted shares           117,117       116,033 
outstanding
                                                                   
Adjusted diluted earnings (loss) per share         $ (0.06   )     $ 0.06    

(1)  The tax rate used for the three months ended June 30, 2014 was 0%
(2)   The tax rate used for the three months ended June 30, 2013 was 36.14%
      

Adjusted EBITDA

In addition to reporting net earnings (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 earnings (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 earnings (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 earnings (loss) and revenues, to measure operating performance.
The following table provides a reconciliation of net earnings (loss), the most
directly comparable GAAP measure, to adjusted EBITDA for the periods presented
(in thousands):

                                                Three Months Ended June 30,
                                                   2014          2013
                                                                   
Net earnings (loss)                                $ (82,717 )     $ 33,439
Income tax benefit                                   (78     )       (212    )
Interest expense                                     15,738          29,392
Depreciation, depletion, and amortization            20,303          43,804
Ceiling test write-down of oil and gas               77,176          -
properties
Unrealized losses (gains) on derivative              7,345           (22,913 )
instruments, net
Stock-based compensation                             1,500           2,832
Accretion of asset retirement obligations            381             549
Employee-related asset disposition costs             156             -
Gain on asset dispositions, net                      (22,185 )       -
Merger-related expenses                              10,202          -
Rig stacking/lease termination costs                3,075         1,258   
            Adjusted EBITDA ^ (1)                  $ 30,896       $ 88,149  

(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 June 30,
                                                  2014          2013
                                                                  
Net cash provided by operating activities         $  4,887        $ 76,090
                                                                  
Changes in operating assets and liabilities:
Accounts receivable                                  (8,907 )       4,433
Other current assets                                 401            (840    )
Accounts payable and accrued liabilities             16,424         (32,653 )
Accrued interest and other                           (9,429 )       10,895
Employee-related asset disposition costs ^(1)        156            -
Merger-related costs ^(1)                            10,202         -
Rig stacking costs ^(1)                              2,025          -
                                                                 
      Adjusted discretionary cash flow ^(2)       $  15,759      $ 57,925  

     
       The employee-related asset disposition costs, merger-related costs, and
^(1)   rig stacking costs are non-recurring cash-settled items. Including the
       effect of these items, adjusted discretionary cash flow would have been
       $3 million for the three months ended June 30, 2014.
       
^(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):

                        June 30, 2014             December 31, 2013
                           Principal   Book^(1)      Principal   Book^(1)
Credit facility            $ -           $ -           $ -           $ -
7 1/4% Senior notes          577,914       578,076       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       800,163       800,001       800,179
                                                                     
Less: cash and cash         14,582       14,582       66,192       66,192
equivalents
                                                                     
      Net debt             $ 785,419     $ 785,581     $ 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 June 30, 2014 and December 31, 2013.
       

                                    *****

Forest Oil Corporation is engaged in the acquisition, production, exploration,
and development of natural gas and liquids in the United States. Forest’s
principal reserves and producing properties are located in East Texas, the
Eagle Ford in South Texas, Arkansas, and Louisiana. Forest’s common stock
trades on the New York Stock Exchange under the symbol FST. For more
information about Forest Oil, please visit its website at
http://www.forestoil.com.

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

In connection with the proposed transaction, Forest Oil Corporation filed a
preliminary proxy statement  with the Securities and Exchange Commission
(“SEC”) on August 7, 2014, and each of Sabine Oil & Gas LLC and Forest Oil
Corporation also plan to file other relevant documents with the SEC regarding
the proposed transaction.The preliminary proxy statement has not yet become a
definitive proxy statement. This press release shall not constitute an offer
to sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. INVESTORS ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS TO THOSE DOCUMENTS, IF AND WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of
the preliminary proxy statement and the definitive proxy statement (if and
when it becomes available) and other relevant documents filed by Sabine Oil &
Gas LLC and Forest Oil Corporation with the SEC at the SEC’s website at
www.sec.gov. You may also obtain Forest’s documents by contacting Forest Oil
Corporation’s Investor Relations department atwww.forestoil.comor by email
atIR@forestoil.com.

PARTICIPANTS IN THE SOLICITATION

Forest Oil Corporation, Sabine Oil & Gas LLC and their respective directors
and executive officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect of the
proposed transaction.Information about Forest Oil Corporation’s directors is
available in Forest Oil Corporation’s proxy statement filed with the SEC on
March 26, 2014, for its 2014 annual meeting of shareholders, and information
about Forest Oil Corporation’s executive officers is available in Forest Oil
Corporation’s Annual Report on Form 10-K for 2013 filed with the SEC on
February 26, 2014.Information about Sabine Oil & Gas LLC’s directors and
executive officers is available in the registration statement on Form S-4
filed by New Forest Oil Inc. on May 29, 2014. Other information regarding the
participants in the proxy solicitations and a description of their direct and
indirect interests, by security holdings or otherwise, will be contained in
the definitive proxy statement and other relevant materials to be filed with
the SEC regarding the proposed transactions when they become available.
Investors should read the definitive proxy statement carefully when it becomes
available before making any voting or investment decisions.You may obtain
free copies of these documents from Forest Oil Corporation using the sources
indicated above.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements concerning the proposed
transactions, its financial and business impact, management’s beliefs and
objectives with respect thereto, and management’s current expectations for
future operating and financial performance, based on assumptions currently
believed to be valid.Forward-looking statements are all statements other than
statements of historical facts.The words “anticipates,” “may,” “can,”
“plans,” “believes,” “estimates,” “expects,” “projects,” “intends,” “likely,”
“will,” “should,” “to be,” and any similar expressions or other words of
similar meaning are intended to identify those assertions as forward-looking
statements.It is uncertain whether the events anticipated will transpire, or
if they do occur what impact they will have on the results of operations and
financial condition of Forest Oil Corporation or Sabine Oil & Gas LLC.These
forward-looking statements involve significant risks and uncertainties that
could cause actual results to differ materially from those anticipated,
including but not limited to the ability of the parties to satisfy the
conditions precedent and consummate the proposed transactions, the timing of
consummation of the proposed transactions, the ability of the parties to
secure regulatory approvals in a timely manner or on the terms desired or
anticipated, the ability of Forest Oil Corporation to integrate the acquired
operations, the ability to implement the anticipated business plans following
closing and achieve anticipated benefits and savings, and the ability to
realize opportunities for growth.Other important economic, political,
regulatory, legal, technological, competitive and other uncertainties are
identified in the documents filed with the SEC by Forest Oil Corporation from
time to time, including Forest Oil Corporation’s Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.For
additional information on the risks and uncertainties that could impact Sabine
Oil & Gas LLC’s business and operations, as well as risks related to the
transactions, please see the registration statement on Form S-4 filed by New
Forest Oil, Inc. on May 29, 2014. The forward-looking statements included in
this document are made only as of the date hereof.Neither Forest Oil
Corporation nor Sabine Oil & Gas LLC undertakes any obligation to update the
forward-looking statements included in this document to reflect subsequent
events or circumstances.

                                                         
FOREST OIL CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)
                                                                
                                             June 30,           December 31,
                                             2014               2013
         ASSETS                              (In thousands)
                                                                
Current assets:
    Cash and cash equivalents                $ 14,582           $ 66,192
    Accounts receivable                        25,981             35,654
    Derivative instruments                     395                5,192
    Other current assets                      8,894            6,756      
         Total current assets                  49,852             113,794
                                                                
Net property and equipment                     795,782            818,569
                                                                
Deferred income taxes                          444                2,230
Goodwill                                       134,434            134,434
Derivative instruments                         363                400
Other assets                                  15,950           48,525     
                                             $ 996,825         $ 1,117,952  
                                                                
         LIABILITIES AND SHAREHOLDERS'
         EQUITY
                                                                
Current liabilities:
    Accounts payable and accrued             $ 129,744          $ 141,107
    liabilities
    Accrued interest                           6,653              6,654
    Derivative instruments                     13,503             4,542
    Deferred income taxes                      444                2,230
    Other current liabilities                 4,864            12,201     
         Total current liabilities             155,208            166,734
                                                                
Long-term debt                                 800,163            800,179
Asset retirement obligations                   21,821             22,629
Derivative instruments                         1,940              -
Other liabilities                             63,332           73,941     
         Total liabilities                     1,042,464          1,063,483
                                                                
Shareholders' equity:
    Common stock                               11,935             11,940
    Capital surplus                            2,558,271          2,554,997
    Accumulated deficit                        (2,605,794 )       (2,502,070 )
    Accumulated other comprehensive loss      (10,051    )      (10,398    )
         Total shareholders' equity            (45,639    )       54,469
                                                               
                                             $ 996,825         $ 1,117,952  
                                                                             

                                
FOREST OIL CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)
                                      
                                      Three Months Ended
                                      June 30,
                                      2014                    2013
                                      (In thousands, except per share amounts)
                                                                
Revenues:
   Oil, gas, and NGL sales            $   60,106                $  116,786
   Interest and other                    329                    28       
        Total revenues                    60,435                   116,814
                                                                
Costs, expenses, and other:
   Lease operating expenses               14,295                   19,167
   Production and property taxes          2,740                    5,029
   Transportation and processing          2,379                    3,098
   costs
   General and administrative             8,260                    13,114
   expense
   Depreciation, depletion, and           20,303                   43,804
   amortization
   Ceiling test write-down of oil         77,176                   -
   and gas properties
   Interest expense                       15,738                   29,392
   Realized and unrealized losses
   (gains) on derivative                  11,641                   (31,610  )
   instruments, net
   Other, net                            (9,302    )             1,593    
        Total costs, expenses,           143,230                83,587   
        and other
   Earnings (loss) before income          (82,795   )              33,227
   taxes
   Income tax benefit                    (78       )             (212     )
   Net earnings (loss)                $   (82,717   )           $  33,439   
                                                                
Basic and diluted weighted                117,117                  116,033
average shares outstanding
                                                                
Basic and diluted earnings (loss)     $   (0.71     )           $  0.28     
per common share
                                                                            

                                            
FOREST OIL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)
                                                  
                                                  Three Months Ended
                                                  June 30,
                                                  2014          2013
                                                  (In thousands)
Operating activities:
Net earnings (loss)                               $ (82,717 )     $ 33,439
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
     Depreciation, depletion, and                   20,303          43,804
     amortization
     Unrealized losses on derivative                7,345           (22,913  )
     instruments, net
     Stock-based compensation                       1,500           2,832
     Ceiling test write-down of oil and gas         77,176          -
     properties
     Gain on asset dispositions, net                (22,185 )       -
     Other, net                                     1,954           763
     Changes in operating assets and
     liabilities:
            Accounts receivable                     8,907           (4,433   )
            Other current assets                    (401    )       840
            Accounts payable and accrued            (16,424 )       32,653
            liabilities
            Accrued interest and other             9,429         (10,895  )
                    Net cash provided by            4,887           76,090
                    operating activities
                                                                  
Investing activities:
Capital expenditures for property and
equipment:
     Exploration, development, leasehold, and       (48,406 )       (103,434 )
     acquisition costs
     Other property and equipment                   (1,274  )       (847     )
Proceeds from sales of assets                      21,906        25,172   
                    Net cash used by                (27,774 )       (79,109  )
                    investing activities
                                                                  
Financing activities:
Proceeds from bank borrowings                       -               118,000
Repayments of bank borrowings                       -               (128,000 )
Change in bank overdrafts                           (10,553 )       12,933
Other, net                                         (306    )      (718     )
                    Net cash (used) provided        (10,859 )       2,215
                    by financing activities
                                                                  
Net decrease in cash and cash equivalents           (33,746 )       (804     )
Cash and cash equivalents at beginning of          48,328        1,225    
period
Cash and cash equivalents at end of period        $ 14,582       $ 421      
                                                                             

Contact:

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