21:05 | 01.11.2010
Forest Oil Announces Third Quarter 2010 Results; Sequential Organic Net Sales Volumes Growth; Increases 2010 Net Sales Volumes Guidance; Expansion of Texas Panhandle Program
Forest Oil Corporation (NYSE:FST) (Forest or the Company) today
announced financial and operational results for the third quarter of
2010.
The Company reported the following highlights:
Net sales volumes of 457 MMcfe/d organically increased 16% from the
corresponding 2009 period, pro forma for asset divestitures
Net sales volumes guidance range increased to 470 – 480 MMcfe/d and
450 – 455 MMcfe/d for the fourth quarter 2010 and full year 2010,
respectively
Net sales volumes attributable to liquids increased from 22% in first
quarter 2010 to 26% in third quarter 2010 and is expected to increase
to approximately 28% in fourth quarter 2010
Net debt decreased 3% sequentially to $1.6 billion at September 30,
2010
H. Craig Clark, President and CEO, stated, “The Texas Panhandle
continues to outperform our expectations. Our extensive wellbore
database has provided information that enables us to expand the play
both geographically and throughout multiple zones. During the quarter,
our first operated well in the Canadian Southeast field was completed at
an average 24-hour initial production rate of 16 MMcfe/d with a 40%
liquids cut. This well, and six others which were drilled in multiple
zones during the quarter, expanded our successful results achieved in
the play, yielding an average 24-hour initial production rate of 27
MMcfe/d. As a direct result, Forest’s updated net sales volumes guidance
for the fourth quarter of 2010 represents organic growth of 20% from the
fourth quarter of 2009. Our forecasted liquids production in the fourth
quarter of 2010 has also increased to 28% of total production from 22%
in the first quarter of 2010. The ability to grow organically at double
digit rates, driven by liquids production, while keeping net debt flat,
demonstrates the quality of our asset base and the capital efficiency of
our drilling program.”
THIRD QUARTER 2010 RESULTS
For the three months ended September 30, 2010, Forest reported net
earnings of $68.9 million or $0.60 per diluted share. This compares to
Forest’s net earnings of $172.3 million or $1.53 per diluted share in
the corresponding 2009 period. Net earnings for the three months ended
September 30, 2010, were affected by the following items:
The non-cash effect of net unrealized gains on derivative instruments
totaling $29.1 million ($18.6 million net of tax)
The non-cash effect of unrealized foreign currency exchange gains
totaling $9.2 million ($7.8 million net of tax)
Without the effects of these items, Forest’s adjusted net earnings for
the three months ended September 30, 2010, were $42.5 million or $0.37
per diluted share. This is a decrease of 21% and 23%, respectively,
compared to Forest’s adjusted net earnings of $53.5 million and $0.48
per diluted share in the corresponding 2009 period. Forest’s adjusted
EBITDA decreased 9% for the three months ended September 30, 2010, to
$176.2 million, compared to $192.7 million in the corresponding 2009
period. Forest’s adjusted discretionary cash flow decreased 7% for the
three months ended September 30, 2010, to $140.8 million, compared to
$151.5 million in the corresponding 2009 period.
The decrease in net earnings, EBITDA, and discretionary cash flow, each
as adjusted, was primarily due to lower net realized commodity prices
(including net realized derivative gains) for the three months ended
September 30, 2010, compared to the corresponding 2009 period.
Net Sales Volumes, Average Realized Prices, and
Revenues
Forest’s average net sales volumes increased organically 16% for the
three months ended September 30, 2010, to 457 MMcfe/d, compared to 396
MMcfe/d in the corresponding 2009 period, pro forma for asset
divestitures.
Forest’s average oil and natural gas liquids (NGLs) sales volumes
increased 18% for the three months ended September 30, 2010, to 26%
(19.7 MBbls/d) of total equivalent net sales volumes, compared to 22%
(15.6 MBbls/d) for the three months ended March 31, 2010.
Three Months Ended September 30, 2010
Gas
Oil
NGLs
Total
Net sales volumes
(MMcf/d)
(MBbls/d)
(MBbls/d)
(MMcfe/d)
United States
279.2
6.5
10.6
381.5
Canada
59.7
2.4
0.3
75.8
Totals
338.9
8.8
10.9
457.2
Average realized prices
Gas
($/Mcf)
Oil
($/Bbl)
NGLs
($/Bbl)
Total($/Mcfe)
United States
$ 3.94
73.82
30.54
4.99
Canada
3.53
65.24
56.48
5.05
Average realized prices not including realized derivative
gains and losses
3.87
71.53
31.29
5.00
Realized gains (losses) on NYMEX derivatives
1.12
(0.05
)
-
0.83
Realized losses on basis derivatives
(0.25
)
-
-
(0.18
)
Average realized prices including realized derivative gains and
losses
$ 4.74
71.48
31.29
5.64
Revenues (in thousands)
Gas
Oil
NGLs
Total
United States
$ 101,268
44,071
29,652
174,991
Canada
19,396
14,156
1,638
35,190
Revenues not including realized derivative gains and losses
120,664
58,227
31,290
210,181
Realized gains (losses) on NYMEX derivatives
34,941
(41
)
-
34,900
Realized losses on basis derivatives
(7,747
)
-
-
(7,747
)
Revenues including realized derivative gains and losses
$ 147,858
58,186
31,290
237,334
Total Cash Costs
Forest’s total cash costs decreased 22% for the three months ended
September 30, 2010, to $82.9 million, compared to $106.1 million in the
corresponding 2009 period. Total cash costs per-unit decreased 19% for
the three months ended September 30, 2010, to $1.97 per Mcfe, compared
to $2.42 per Mcfe in the corresponding 2009 period. Excluding the effect
of a current income tax credit of $17.0 million due to a reduction in
our 2009 federal income tax liability recorded in the third quarter of
2010, cash costs decreased 6% for the three months ended September 30,
2010, to $99.9 million, compared to $106.1 million in the corresponding
2009 period.
The following table details the components of total cash costs for the
three months ended September 30, 2010, and 2009:
Three Months Ended September 30,
2010
Per Mcfe
2009
Per Mcfe
(In thousands, except per-unit amounts)
Production expense
$ 49,763
1.18
51,163
1.17
General and administrative expense (excludingstock-based
compensation of $5,105 and $5,037, respectively)
12,902
0.31
12,279
0.28
Interest expense
37,088
0.88
42,653
0.97
Current income tax expense
(16,814
)
(0.40
)
-
-
Total cash costs
$ 82,939
1.97
106,095
2.42
_________________________
Total cash costs is a non-GAAP measure calculated in accordance with
oil and gas industry standards that is used by management to assess the
Company’s cash operating performance.Total cash costs is defined
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 depreciation and depletion expense per-unit increased 3% for
the three months ended September 30, 2010, to $1.54 per Mcfe, compared
to $1.49 per Mcfe in the corresponding 2009 period.
Exploration and Development Capital Expenditures
Forest invested $149.0 million in exploration and development activities
(excluding capitalized interest, capitalized stock-based compensation,
asset retirement obligations incurred, and leasehold acquisitions) for
the three months ended September 30, 2010, compared to $72.2 million in
the corresponding 2009 period. The increase in exploration and
development capital expenditures for the three months ended September
30, 2010, was a result of an increased rig count compared to the
corresponding 2009 period.
OPERATIONAL PROJECT UPDATE
Forest expects to run six to eight rigs for the remainder of 2010.
Texas Panhandle – Granite Wash
Forest drilled and completed seven Granite Wash wells in the third
quarter of 2010 that had an average 24-hour initial production rate of
27 MMcfe/d.
Operated Wells
WorkingInterest (%)
Gross NaturalGas (MMcf/d)
Gross Oil &Condensate(Bbls/d)
Gross NaturalGas Liquids(Bbls/d)
GrossEquivalent(MMcfe/d)
Prior Average (13 Wells)
77.6
12.1
954
1,791
29
New 3rd Quarter (7 Wells)
89.5
10.4
1,221
1,558
27
Program Average
81.8
11.5
1,047
1,709
28
The results from the seven wells in the third quarter bring Forest’s
average 24-hour initial production rate from its horizontal Granite Wash
program to 28 MMcfe/d. The program continues to expand the play both
geographically, further north into Hemphill County, Texas, and
geologically, with completions in two Granite Wash zones and one Atoka
zone during the quarter.
Forest successfully tested an operated well with a 24-hour initial
production rate of 16 MMcfe/d in its Canadian Southeast acreage in
Hemphill County. Over 1,000 Bbls/d of this equivalent rate was
attributable to condensate and NGLs. In addition, Forest participated
with a non-operated working interest in a well in Canadian Southeast
that had a 24-hour initial production rate of 15 MMcfe/d, including a
sizable liquids component. Each of these wells confirmed the existence
of highly productive, liquids-rich pay intervals in Forest’s Canadian
Southeast acreage. Drilling and completion costs associated with wells
in this acreage position are expected to be less than wells in Wheeler
County due to shallower depths. These wells are expected to open
Forest’s Canadian Southeast acreage to expanded exploitation efforts
using horizontal drilling.
Forest plans to operate five rigs in the play for the remainder of the
year.
Canadian Deep Basin – Nikanassin Resource Play
Forest continued its delineation efforts in the third quarter of 2010
and drilled and completed three wells that had an average 24-hour
initial production rate of 9 MMcfe/d. In total, Forest has drilled and
completed 15 wells in the play, with an average 24-hour initial
production rate of 13 MMcfe/d.
After delineating the Nikanassin Resource Play with vertical wells, the
Company expects to spud its first horizontal well in the area in the
fourth quarter of 2010. This well is expected to be completed in the
first quarter of 2011.
Forest has approximately 25 to 30 MMcfe/d of net production shut-in
awaiting completion of infrastructure projects. These projects are
expected to be completed and production turned to sales in late November
of 2010.
Forest plans to operate two rigs in the play for the remainder of the
year.
East Texas, North Louisiana – Haynesville /
Bossier Shale
Forest drilled and completed three wells in the third quarter of 2010.
In order to optimize recovery from Haynesville / Bossier Shale wells,
Forest has adopted a restricted flow rate production program. With this
operating strategy, initial production rates from the last three wells
were curtailed at 11 to 13 MMcfe/d. Results have shown that cumulative
production from the restricted-rate wells has exceeded the cumulative
production from comparable unrestricted wells after approximately 90
days. Further, early indications support expectations that estimated
ultimate recoveries for restricted-rate wells should exceed recoveries
for less restricted wells.
The Company does not plan to operate any rigs in the play for the
remainder of the year. All of Forest’s leasehold in Red River Parish,
Louisiana was converted to held by production status in the third
quarter of 2010.
Gonzales, Lee, Wilson, Atascosa, and DeWitt
Counties, Texas – Eagle Ford Shale
Forest is currently shooting seismic in Wilson and Gonzales Counties,
Texas, and expects to commence drilling with a one rig program in the
fourth quarter of 2010 after the results from the seismic shoot are
assessed. Additional rigs are expected to be added to the play in 2011.
NATURAL GAS, NATURAL GAS LIQUIDS, AND OIL DERIVATIVES
As of November 1, 2010, Forest had natural gas, natural gas liquids, and
oil derivatives in place for the remainder of 2010 and 2011 covering the
aggregate average daily volumes and weighted average prices shown below.
Since August of 2010, Forest added to its 2011 natural gas hedge program
with the addition of 25 Bbtu/d of swaps at an average price of $5.03 per
MMbtu. In addition, Forest hedged 3,000 Bbls/d of natural gas liquids at
an average price of $36.75 per Bbl for 2011. This fixed price was
calculated based on an average natural gas liquids barrel within
Forest’s portfolio.
None of these derivatives contain knock-out provisions that would cause
a derivative to cease to exist at prices below an established threshold.
The derivative counterparties consist primarily of commercial banks that
are lenders under Forest’s credit facilities, or affiliates of such
banks.
Oct – Dec2010
2011
Natural gas swaps:
Contract volumes (Bbtu/d)
210.0
115.0
Weighted average price (per MMBtu)
$
6.20
5.68
Natural gas liquids swaps:
Contract volumes (MBbls/d)
-
3.0
Weighted average price (per Bbl)
$
-
$
36.75
Oil swaps:
Contract volumes (MBbls/d)
3.0
-
Weighted average price (per Bbl)
$
76.06
-
Oil collars:
Contract volumes (MBbls/d)
2.0
3.0
Weighted average ceiling price (per Bbl)
$
98.50
90.20
Weighted average floor price (per Bbl)
$
60.00
75.00
Summary weighted average oil derivatives:
Contract volumes (MBbls/d)
5.0
3.0
Weighted average ceiling price (per Bbl)
$85.04
$90.20
Weighted average floor price (per Bbl)
$69.64
$75.00
In connection with several natural gas derivatives discussed above,
Forest granted option instruments (several commodity swaptions and one
call option) to counterparties in exchange for Forest receiving premium
hedged prices on natural gas swaps. As of November 1, 2010, none of the
options have been exercised by the counterparties. The table below sets
forth the outstanding options as of November 1, 2010:
2011
2012
Natural gas swaptions:
Contract volumes (Bbtu/d)
50.0
-
Weighted average price (per MMBtu)
$
5.80
-
Oil swaptions:
Contract volumes (MBbls/d)
1.0
2.0
Weighted average price (per Bbl)
$
85.00
$
90.00
Oil call options:
Contract volumes (MBbls/d)
1.0
-
Weighted average price (per Bbl)
$
90.00
$
-
UPDATED 2010 GUIDANCE
The detail below represents Forest’s updated guidance for oil and gas
net sales volumes and depreciation, depletion, and amortization (DD&A)
expense for the full year 2010. The updated guidance remains subject to
the cautionary statements and limitations contained in our January 7,
2010, press release under the caption “Guidance,” as well as those
stated below under the caption “Forward-Looking Statements.” Except as
indicated below, all other guidance detailed in Forest’s press releases
dated January 7, 2010, May 3, 2010, and August 2, 2010, has not changed.
Oil and Gas Net Sales Volumes: As a result of the strong
performance from Forest’s drilling program, Forest increased guidance
for average net sales volumes to a range of 470 to 480 MMcfe/d for the
fourth quarter of 2010 from its previously guided range of 465 to 475
MMcfe/d and to a range of 450 to 455 MMcfe/d for the full year 2010 from
its previously guided range of 443 to 453 MMcfe/d. The increase includes
the negative effect of net sales volumes associated with divestitures of
16 MMcfe/d in 2010. Organic net sales volumes growth for the fourth
quarter of 2010 and for the full year 2010 compared to the corresponding
2009 periods, pro forma for asset divestitures, is expected to be
approximately 20% and 5%, respectively. Net sales volumes are expected
to be comprised of approximately 27% to 29% liquids (13% crude and
condensate and 15% natural gas liquids) in the fourth quarter of 2010,
an increase from 22% in the first quarter of 2010. The following is a
detail of the anticipated organic growth from 2009 to 2010, excluding
net sales volumes attributable to properties divested during 2010:
(MMcfe/d)
Fourth QuarterLow
Fourth QuarterHigh
Annual Low
Annual High
2009 net sales volumes
459
459
501
501
Effect of 2009 divestiture activity
(47
)
(47
)
(61
)
(61
)
Pro forma 2009 net sales volumes
412
412
440
440
2010 original guided net sales volumes
452
462
439
449
Effect of 2010 divestiture activity
(16
)
(16
)
(9
)
(9
)
Increased guided net sales volumes
34
34
20
15
Revised 2010 guided net sales volumes
470
480
450
455
Pro forma organic growth
18
%
21
%
4
%
6
%
Depreciation, Depletion, and Amortization (DD&A) Expense: As
a result of higher future development costs, finding and development
costs in excess of current DD&A rates, and the foreign currency
translation effects from the appreciation of the Canadian dollar, Forest
has increased the guided range for the full year 2010 to $1.48 to $1.53
per Mcfe from its previously guided range of $1.40 to $1.50 per Mcfe.
NON-GAAP FINANCIAL MEASURESAdjusted Net Earnings
In addition to reporting net earnings as defined under generally
accepted accounting principles (GAAP), Forest also presents adjusted net
earnings, which is a non-GAAP performance measure. Adjusted net earnings
consists of net earnings after adjustment for those items described in
the table below. Adjusted net earnings does not represent and should not
be considered an alternative to GAAP measurements, such as net earnings
(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 described 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 similar
industries. Forest’s management does not view adjusted net earnings in
isolation and also uses other measurements, such as net earnings and
revenues to measure operating performance. The following table provides
a reconciliation of net earnings, the most directly comparable GAAP
measure, to adjusted net earnings for the periods presented (in
thousands):
Three Months Ended
September 30,
2010
2009
Net earnings
$ 68,911
172,311
Unrealized (gains) losses on derivative instruments, net of
tax
(18,624
)
50,550
Unrealized foreign currency exchange gains, net of tax
(7,784
)
(8,103
)
Rig stacking, net of tax
-
2,571
Change in valuation allowance for deferred tax assets
-
(163,858
)
Adjusted net earnings
42,503
53,471
Earnings attributable to participating securities and other
adjustments
(806
)
(1,071
)
Adjusted net earnings for diluted earnings per share
$ 41,697
52,400
Weighted average number of diluted shares outstanding
111,778
110,222
Adjusted diluted earnings per common share
$ 0.37
0.48
Adjusted EBITDA
In addition to reporting net earnings as defined under GAAP, Forest also
presents net earnings before interest, income taxes, depreciation,
depletion, and amortization (adjusted EBITDA), which is a non-GAAP
performance measure. Adjusted EBITDA consists of net earnings after
adjustment for those items described in the table below. Adjusted EBITDA
does not represent and should not be considered an alternative to GAAP
measurements, such as net earnings (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 described 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 similar
industries. 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 and
revenues to measure operating performance. The following table provides
a reconciliation of net earnings, the most directly comparable GAAP
measure, to adjusted EBITDA for the periods presented (in thousands):
Three Months Ended
September 30,
2010
2009
Net earnings
$
68,911
172,311
Income tax expense (benefit)
37,433
(163,851
)
Unrealized (gains) losses on derivative instruments, net
(29,091
)
79,238
Unrealized foreign currency exchange gains
(9,244
)
(9,723
)
Interest expense
37,088
42,653
Accretion of asset retirement obligations
1,693
2,014
Depreciation, depletion, and amortization
64,737
65,275
Stock-based compensation
4,658
4,764
Adjusted EBITDA
$
176,185
192,681
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 described in the table below. Adjusted
discretionary cash flow 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 working capital, which fluctuates due
to the timing of collections of receivables and the settlements of
liabilities. 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. 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
September 30,
2010
2009
Net cash provided by operating activities
$ 152,348
185,651
Changes in working capital:
Accounts receivable
(18,445
)
(4,982
)
Other current assets
12,818
(5,147
)
Accounts payable and accrued liabilities
19,546
(7,909
)
Accrued interest and other current liabilities
(8,486
)
(16,091
)
Current income tax credit
(16,984
)
-
Adjusted discretionary cash flow
$ 140,797
151,522
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 for the periods presented (in thousands):
September 30, 2010
June 30, 2010
Principal
Book*
Principal
Book*
8% Senior notes due 2011
$ 285,000
287,626
$ 285,000
288,160
7% Senior subordinated notes due 2013
12
12
12
12
8 1/2% Senior notes due 2014
600,000
580,323
600,000
578,856
7 1/4% Senior notes due 2019
1,000,000
1,000,492
1,000,000
1,000,506
Total debt
1,885,012
1,868,453
1,885,012
1,867,534
Less: cash and cash equivalents
251,599
251,599
200,786
200,786
Net debt
$ 1,633,413
1,616,854
$ 1,684,226
1,666,748
_________________________
*Book amounts include the principal amount of debt adjusted
for unamortized gains on interest rate swap terminations of $1.0 million
and $1.2 million at September 30, 2010, and June 30, 2010, respectively,
and unamortized net discounts on the issuance of certain senior notes of
$(17.6) million and $(18.7) million at September 30, 2010, and June 30,
2010, respectively.TELECONFERENCE CALL
A conference call is scheduled for Tuesday, November 2, 2010, at 12:00
PM MT to discuss the release. You may access the call by dialing toll
free 800.399.6298 (for U.S./Canada) and 706.634.0924 (for International)
and request the Forest Oil teleconference (ID # 17678604). A Q&A period
will follow.
A replay will be available from Tuesday, November 2, through November
16, 2010. You may access the replay by dialing toll free 800.642.1687
(for U.S./Canada) and 706.645.9291 (for International), conference ID #
17678604.
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 its 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,
and other forward-looking statements are subject to all of the risks and
uncertainties normally incident to Forest’s exploration for and
development and production and sale of oil and gas.
These risks include, but are not limited to, oil and natural gas price
volatility, Forest’s access to cash flows and other sources of liquidity
to fund its capital expenditures, its level of indebtedness, its ability
to replace production, the impact of the current financial and economic
environment on Forest’s business and financial condition, a lack of
availability of goods and services, environmental risks, drilling and
other operating risks, regulatory changes, the uncertainty inherent in
estimating future oil and gas production or reserves, and other risks as
described in reports that Forest files with the Securities and Exchange
Commission (SEC), including its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K. Also, the
financial results of Forest’s foreign operations are subject to currency
exchange rate risks. 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 North America
and selected international locations. Forest’s principal reserves and
producing properties are located in the United States in Arkansas,
Louisiana, Oklahoma, Texas, Utah, and Wyoming, and in Canada. 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
November 1, 2010
FOREST OIL CORPORATIONCondensed Consolidated Balance Sheets(Unaudited)
September 30,
December 31,
2010
2009
ASSETS
(In thousands)
Current assets:
Cash and cash equivalents
$ 251,599
467,221
Accounts receivable
102,709
126,354
Derivative instruments
91,784
35,643
Deferred income taxes
-
7,108
Inventory
40,445
52,211
Other current assets
50,858
41,455
Total current assets
537,395
729,992
Net property and equipment
2,615,295
2,259,207
Deferred income taxes
301,940
393,061
Goodwill
256,259
255,908
Derivative instruments
24,251
556
Other assets
40,290
45,966
$ 3,775,430
3,684,690
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$ 271,644
284,302
Accrued interest
34,705
25,755
Derivative instruments
14,071
41,358
Current portion of long-term debt
-
156,678
Asset retirement obligations
1,690
4,853
Deferred income taxes
25,840
-
Other current liabilities
21,498
22,074
Total current liabilities
369,448
535,020
Long-term debt
1,868,453
1,865,836
Asset retirement obligations
85,871
88,450
Derivative instruments
5,034
826
Deferred income taxes
54,329
46,884
Other liabilities
73,166
68,520
Total liabilities
2,456,301
2,605,536
Shareholders’ equity:
Common stock
11,336
11,234
Capital surplus
2,675,128
2,652,689
Accumulated deficit
(1,441,099
)
(1,652,426
)
Accumulated other comprehensive income
73,764
67,657
Total shareholders’ equity
1,319,129
1,079,154
$ 3,775,430
3,684,690
FOREST OIL CORPORATIONCondensed Consolidated Statements of Operations(Unaudited)
Three Months Ended
September 30,
2010
2009
(In thousands, except per share amounts)
Revenues:
Oil and gas sales
$ 210,181
177,184
Interest and other
206
(42
)
Total revenues
210,387
177,142
Costs, expenses, and other:
Lease operating expenses
30,177
34,938
Production and property taxes
13,376
10,873
Transportation and processing costs
6,210
5,352
General and administrative (including stock-based compensation of
$5,105 and $5,037, respectively)
18,007
17,316
Depreciation, depletion, and amortization
64,737
65,275
Interest expense
37,088
42,653
Realized and unrealized gains on derivative instruments, net
(59,156
)
(5,665
)
Other, net
(6,396
)
(2,060
)
Total costs, expenses, and other
104,043
168,682
Earnings before income taxes
106,344
8,460
Income tax expense (benefit):
Current
(16,814
)
-
Deferred
54,247
(163,851
)
Total income tax expense (benefit)
37,433
(163,851
)
Net earnings
$ 68,911
172,311
Weighted average number of common shares outstanding:
Basic
110,992
110,054
Diluted
111,778
110,222
Basic earnings per common share
$ 0.61
1.53
Diluted earnings per common share
$ 0.60
1.53
FOREST OIL CORPORATIONCondensed Consolidated Statements of Cash Flows(Unaudited)
Three Months Ended
September 30,
2010
2009
(In thousands)
Cash flows from operating activities:
Net earnings
$ 68,911
172,311
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation, depletion, and amortization
64,737
65,275
Accretion of asset retirement obligations
1,693
2,014
Unrealized (gains) losses on derivative instruments, net
(29,091
)
79,238
Unrealized foreign currency exchange gains
(9,244
)
(9,723
)
Deferred income tax
54,247
(163,851
)
Stock-based compensation
4,658
4,764
Other, net
1,870
1,494
Changes in operating assets and liabilities:
Accounts receivable
18,445
4,982
Other current assets
(12,818
)
5,147
Accounts payable and accrued liabilities
(19,546
)
7,909
Accrued interest and other current liabilities
8,486
16,091
Net cash provided by operating activities
152,348
185,651
Cash flows from investing activities:
Capital expenditures
(168,186
)
(71,160
)
Proceeds from sales of assets
48,979
115,988
Other, net
1,189
-
Net cash (used) provided by investing activities
(118,018
)
44,828
Cash flows from financing activities:
Bank repayments and borrowings, net
-
(243,179
)
Change in bank overdrafts
16,239
12,683
Proceeds from the exercise of options and from employee stock purchase
plan
466
404
Other, net
(496
)
(273
)
Net cash provided (used) by financing activities
16,209
(230,365
)
Effect of exchange rate changes on cash
274
(457
)
Net increase (decrease) in cash and cash equivalents
50,813
(343
)
Cash and cash equivalents at beginning of period
200,786
5,496
Cash and cash equivalents at end of period
$ 251,599
5,153
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