DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2011

DISCONTINUED OPERATIONS [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

In December 2010, Forest announced its intention to separate its Canadian operations through an initial public offering of up to 19.9% of the common stock of its wholly-owned subsidiary, Lone Pine, which would hold Forest’s ownership interests in its Canadian operations, followed by a distribution, or spin-off, of the remaining shares of Lone Pine held by Forest to its shareholders.  In May 2011, as part of a corporate restructuring in anticipation of Lone Pine’s initial public offering, Lone Pine Resources Canada Ltd. (“LPR Canada”), Forest’s former Canadian subsidiary, declared a stock dividend to Forest immediately before Forest’s contribution of LPR Canada to Lone Pine, with such stock dividend resulting in Forest incurring a dividend tax payable to Canadian federal tax authorities of $28.9 million, which Forest paid in June 2011. This dividend tax is classified within “Income tax” on the Condensed Consolidated Statement of Operations. On June 1, 2011, Lone Pine completed an initial public offering of 15 million shares of its common stock at a price of $13.00 per share ($12.22 per share net of underwriting discounts and commissions).  Upon completion of the offering, Forest retained controlling interest in Lone Pine, owning approximately 82% of the outstanding shares of Lone Pine’s common stock.  The net proceeds from the offering received by Lone Pine, after deducting underwriting discounts and commissions and offering expenses, were $178.2 million.  Lone Pine used the net proceeds to pay $29.2 million to Forest as partial consideration for Forest’s contribution to Lone Pine of Forest’s direct and indirect interest in its Canadian operations.  Additionally, Lone Pine used the remaining net proceeds and borrowings under Lone Pine’s credit facility to repay Lone Pine’s outstanding indebtedness owed to Forest, consisting of a note payable, intercompany advances, and accrued interest, of $400.5 million.  Forest completed the spin-off of the remaining shares of Lone Pine held by Forest on September 30, 2011, in the form of a pro rata common stock dividend to all Forest shareholders of record as of the close of business on September 16, 2011 (the “Record Date”). Forest shareholders received 0.61248511 of a share of Lone Pine common stock for every share of Forest common stock held as of the close of business on the Record Date.

The table below sets forth the effects of changes in Forest’s ownership interest in Lone Pine on Forest’s equity.

	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
	(In Thousands)
Net earnings attributable to Forest Oil Corporation	$	82,795		$	118,375
Transfers from (to) the noncontrolling interest:
Increase in Forest Oil Corporation’s capital surplus for sale of 15 million Lone Pine Resources Inc. common shares	(269		)	112,610
Decrease in Forest Oil Corporation’s capital surplus for spin-off of 70 million Lone Pine Resources Inc. common shares	(333,568		)	(333,568		)
Change from net earnings attributable to Forest Oil Corporation and transfers from (to) noncontrolling interest	$	(251,042	)	$	(102,583	)

Since Lone Pine was a component of Forest with operations and cash flows clearly distinguishable both operationally and for financial reporting purposes from those of Forest, and because Lone Pine’s operations and cash flows have been eliminated from the ongoing operations of Forest and Forest will not have any significant continuing involvement in the operations of Lone Pine, Forest has presented Lone Pine’s results of operations as discontinued operations in the Condensed Consolidated Statements of Operations for the periods presented. Additionally, Forest has separately presented Lone Pine’s assets and liabilities in the Condensed Consolidated Balance Sheet as of December 31, 2010. Lone Pine’s assets and liabilities are not presented in Forest’s Condensed Consolidated Balance Sheet as of September 30, 2011 due to the spin-off occurring on that date.

The table below presents the major classes of assets and liabilities included in the discontinued operations classifications within the Condensed Consolidated Balance Sheet as of December 31, 2010.

	December 31, 2010
	(In Thousands)
Cash	$	576
Accounts receivable	33,405
Other current assets	16,161
Current assets of discontinued operations	$	50,142
Net property and equipment	$	645,405
Goodwill	17,422
Other assets	2,222
Long-term assets of discontinued operations	$	665,049
Accounts payable and accrued liabilities	$	42,202
Other current liabilities	3,445
Current liabilities of discontinued operations	$	45,647
Deferred income taxes	$	57,560
Asset retirement obligations	13,741
Other long-term liabilities	3,172
Long-term liabilities of discontinued operations	$	74,473

The table below presents the major components of earnings from discontinued operations for the periods presented.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(In Thousands)
	(Unaudited)
Total revenues	$	50,298		$	35,193		$	137,834		$	110,864
Direct operating expenses	13,902			10,108			40,350			27,885
General and administrative	3,255			1,694			8,846			5,525
Depreciation, depletion, and amortization	20,799			15,875			60,780			45,516
Interest expense	3,000			82			3,866			274
Realized and unrealized gains on derivative instruments, net	(28,498		)	—			(33,628		)	—
Other, net	235			(9,026		)	(4,053		)	(4,561		)
Earnings from discontinued operations before tax	37,605			16,460			61,673			36,225
Income tax	9,497			3,120			17,104			8,664
Earnings from discontinued operations, net of tax	$	28,108		$	13,340		$	44,569		$	27,561