CONDENSED CONSOLIDATING FINANCIAL INFORMATION

3 Months Ended

Mar. 31, 2012

Condensed Consolidating Financial Information Disclosure [Abstract]

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company’s 8½% senior notes due 2014 and 7¼% senior notes due 2019 have been fully and unconditionally guaranteed by Forest Oil Permian Corporation (the “Guarantor Subsidiary”), a wholly-owned subsidiary of Forest. Forest’s remaining subsidiaries (the “Non-Guarantor Subsidiaries”) have not provided guarantees. Based on this distinction, the following presents condensed consolidating financial information as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011 on an issuer (parent company), guarantor subsidiary, non-guarantor subsidiaries, eliminating entries, and consolidated basis. Elimination entries presented are necessary to combine the entities.

CONDENSED CONSOLIDATING BALANCE SHEETS

(Unaudited)

(In Thousands)



	March 31, 2012												December 31, 2011
	Parent Company		Guarantor Subsidiary		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated		Parent Company		Guarantor Subsidiary		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	677	$	4	$	196		$	—		$	877	$	1,734	$	1	$	1,277		$	—		$	3,012
Accounts receivable	35,769		36,164		1,789			(988		)	72,734		43,999		34,142		2,201			(1,253		)	79,089
Other current assets	146,754		314		673			—			147,741		127,667		313		591			—			128,571
Total current assets	183,200		36,482		2,658			(988		)	221,352		173,400		34,456		4,069			(1,253		)	210,672
Property and equipment, at cost	8,259,763		1,355,430		219,213			—			9,834,406		8,000,466		1,317,917		282,719			—			9,601,102
Less accumulated depreciation, depletion, and amortization	5,830,188		1,121,007		101,000			—			7,052,195		5,782,409		1,102,339		65,238			—			6,949,986
Net property and equipment	2,429,575		234,423		118,213			—			2,782,211		2,218,057		215,578		217,481			—			2,651,116
Investment in subsidiaries	139,518		—		—			(139,518		)	—		160,591		—		—			(160,591		)	—
Goodwill	216,460		22,960		—			—			239,420		216,460		22,960		—			—			239,420
Due from subsidiaries	149,564		47,875		—			(197,439		)	—		214,394		46,944		—			(261,338		)	—
Deferred income taxes	322,042		—		26,691			(119,440		)	229,293		312,564		—		25,564			(107,012		)	231,116
Other assets	58,998		—		—			—			58,998		48,827		—		—			—			48,827
	$	3,499,357	$	341,740	$	147,562		$	(457,385	)	$	3,531,274	$	3,344,293	$	319,938	$	247,114		$	(530,194	)	$	3,381,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	216,006	$	4,039	$	5,445		$	(988	)	$	224,502	$	235,788	$	8,846	$	4,499		$	(1,253	)	$	247,880
Other current liabilities	133,409		88		6,311			—			139,808		86,618		63		6,276			—			92,957
Total current liabilities	349,415		4,127		11,756			(988		)	364,310		322,406		8,909		10,775			(1,253		)	340,837
Long-term debt	1,804,481		—		—			—			1,804,481		1,693,044		—		—			—			1,693,044
Due to parent and subsidiaries	—		—		197,439			(197,439		)	—		—		—		261,338			(261,338		)	—
Deferred income taxes	—		119,440		—			(119,440		)	—		—		107,012		—			(107,012		)	—
Other liabilities	143,057		2,745		14,277			—			160,079		135,730		2,614		15,813			—			154,157
Total liabilities	2,296,953		126,312		223,472			(317,867		)	2,328,870		2,151,180		118,535		287,926			(369,603		)	2,188,038
Shareholders’ equity	1,202,404		215,428		(75,910		)	(139,518		)	1,202,404		1,193,113		201,403		(40,812		)	(160,591		)	1,193,113
	$	3,499,357	$	341,740	$	147,562		$	(457,385	)	$	3,531,274	$	3,344,293	$	319,938	$	247,114		$	(530,194	)	$	3,381,151

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In Thousands)



	Three Months Ended March 31,
	2012															2011
	Parent Company			Guarantor Subsidiary			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent Company			Guarantor Subsidiary			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil, natural gas, and NGL sales	$	106,823		$	51,606		$	472		$	—		$	158,901		$	117,013		$	48,716		$	581		$	—		$	166,310
Interest and other	778			1,959			—			(2,705		)	32			807			1,081			—			(1,336		)	552
Equity earnings in subsidiaries	(16,794		)	—			—			16,794			—			25,992			—			—			(25,992		)	—
Total revenues	90,807			53,565			472			14,089			158,933			143,812			49,797			581			(27,328		)	166,862
Costs, expenses, and other:
Lease operating expenses	23,819			3,688			100			—			27,607			20,536			2,988			106			—			23,630
Other production expenses	13,797			1,277			51			—			15,125			12,146			3,086			25			—			15,257
General and administrative	14,364			731			289			—			15,384			14,868			609			343			—			15,820
Depreciation, depletion, and amortization	47,869			18,668			433			—			66,970			36,074			12,092			378			—			48,544
Ceiling test write-down of natural gas properties	—			—			34,817			—			34,817			—			—			—			—			—
Interest expense	33,392			1,711			994			(2,705		)	33,392			38,037			957			379			(1,336		)	38,037
Realized and unrealized (gains) losses on derivative instruments, net	(24,607		)	(4,847		)	(70		)	—			(29,524		)	35,796			405			45			—			36,246
Other, net	25,232			90			1,598			—			26,920			2,456			(41		)	1,207			—			3,622
Total costs, expenses, and other	133,866			21,318			38,212			(2,705		)	190,691			159,913			20,096			2,483			(1,336		)	181,156
Earnings (loss) from continuing operations before income taxes	(43,059		)	32,247			(37,740		)	16,794			(31,758		)	(16,101		)	29,701			(1,902		)	(25,992		)	(14,294		)
Income tax	(10,386		)	12,428			(1,127		)	—			915			(12,771		)	8,973			(575		)	—			(4,373		)
Net earnings (loss) from continuing operations	(32,673		)	19,819			(36,613		)	16,794			(32,673		)	(3,330		)	20,728			(1,327		)	(25,992		)	(9,921		)
Net earnings from discontinued operations	—			—			—			—			—			—			—			6,591			—			6,591
Net earnings (loss)	$	(32,673	)	$	19,819		$	(36,613	)	$	16,794		$	(32,673	)	$	(3,330	)	$	20,728		$	5,264		$	(25,992	)	$	(3,330	)

Comprehensive income (loss)	$	(32,486	)	$	19,819		$	(36,613	)	$	16,794		$	(32,486	)	$	4,885		$	20,728		$	5,264		$	(25,992	)	$	4,885

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)



	Three Months Ended March 31,
	2012												2011
	Parent Company			Guarantor Subsidiary			Combined Non-Guarantor Subsidiaries			Consolidated			Parent Company			Guarantor Subsidiary			Combined Non-Guarantor Subsidiaries			Consolidated
Operating activities:
Net earnings (loss)	$	(15,879	)	$	19,819		$	(36,613	)	$	(32,673	)	$	(29,322	)	$	20,728		$	5,264		$	(3,330	)
Less: net earnings from discontinued operations	—			—			—			—			—			—			6,591			6,591
Net earnings (loss) from continuing operations	(15,879		)	19,819			(36,613		)	(32,673		)	(29,322		)	20,728			(1,327		)	(9,921		)
Adjustments to reconcile net earnings (loss) from continuing operations to net cash provided (used) by operating activities of continuing operations:
Depreciation, depletion, and amortization	47,869			18,668			433			66,970			36,074			12,092			378			48,544
Deferred income tax	(10,168		)	12,428			(1,127		)	1,133			(12,372		)	8,973			(575		)	(3,974		)
Unrealized (gains) losses on derivative instruments, net	(4,171		)	(1,125		)	(16		)	(5,312		)	49,200			525			59			49,784
Ceiling test write-down of natural gas properties	—			—			34,817			34,817			—			—			—			—
Other, net	7,354			87			(470		)	6,971			8,464			78			(762		)	7,780
Changes in operating assets and liabilities:
Accounts receivable	8,230			(2,022		)	147			6,355			12,034			13,173			(4,899		)	20,308
Other current assets	(341		)	(1		)	(82		)	(424		)	2,983			(2		)	(3,147		)	(166		)
Accounts payable and accrued liabilities	(11,062		)	(1,441		)	965			(11,538		)	(8,504		)	(299		)	5,658			(3,145		)
Accrued interest and other current liabilities	25,174			2,545			(459		)	27,260			10,816			(131		)	(197		)	10,488
Net cash provided (used) by operating activities of continuing operations	47,006			48,958			(2,405		)	93,559			69,373			55,137			(4,812		)	119,698
Investing activities:
Capital expenditures for property and equipment	(143,394		)	(43,102		)	(3,138		)	(189,634		)	(128,570		)	(38,874		)	(2,597		)	(170,041		)
Proceeds from sales of assets	899			—			—			899			11,614			—			—			11,614
Net cash used by investing activities of continuing operations	(142,495		)	(43,102		)	(3,138		)	(188,735		)	(116,956		)	(38,874		)	(2,597		)	(158,427		)
Financing activities:
Proceeds from bank borrowings	202,000			—			—			202,000			—			—			—			—
Repayments of bank borrowings	(92,000		)	—			—			(92,000		)	—			—			—			—
Change in bank overdrafts	(17,510		)	(253		)	479			(17,284		)	14,932			—			1,551			16,483
Net activity in investments from subsidiaries	1,617			(5,600		)	3,983			—			(25,795		)	(16,408		)	42,203			—
Other, net	325			—			—			325			1,539			142			(1,297		)	384
Net cash provided (used) by financing activities of continuing operations	94,432			(5,853		)	4,462			93,041			(9,324		)	(16,266		)	42,457			16,867
Cash flows from discontinued operations:
Operating cash flows	—			—			—			—			—			—			26,253			26,253
Investing cash flows	—			—			—			—			—			—			(57,791		)	(57,791		)
Financing cash flows	—			—			—			—			—			—			(1,561		)	(1,561		)
Net cash used by discontinued operations	—			—			—			—			—			—			(33,099		)	(33,099		)
Effect of exchange rate changes on cash	—			—			—			—			—			—			124			124
Net (decrease) increase in cash and cash equivalents	(1,057		)	3			(1,081		)	(2,135		)	(56,907		)	(3		)	2,073			(54,837		)
Net increase in cash and cash equivalents of discontinued operations	—			—			—			—			—			—			(1,807		)	(1,807		)
Net (decrease) increase in cash and cash equivalents of continuing operations	(1,057		)	3			(1,081		)	(2,135		)	(56,907		)	(3		)	266			(56,644		)
Cash and cash equivalents of continuing operations at beginning of period	1,734			1			1,277			3,012			216,580			3			986			217,569
Cash and cash equivalents of continuing operations at end of period	$	677		$	4		$	196		$	877		$	159,673		$	—		$	1,252		$	160,925