DEBT

The components of debt are as follows:



	September 30, 2012									December 31, 2011
	Principal			Unamortized Premium (Discount)			Total			Principal		Unamortized Premium (Discount)			Total
	(In Thousands)
Credit Facility	$	—		$	—		$	—		$	105,000	$	—		$	105,000
7% Senior Subordinated Notes due 2013	12			—			12			12		—			12
8½% Senior Notes due 2014⁽¹⁾	600,000			(8,020		)	591,980			600,000		(12,389		)	587,611
7¼% Senior Notes due 2019	1,000,000			379			1,000,379			1,000,000		421			1,000,421
7½% Senior Notes due 2020	500,000			—			500,000			—		—			—
Total debt	$	2,100,012		$	(7,641	)	$	2,092,371		$	1,705,012	$	(11,968	)	$	1,693,044
Less: current portion of long-term debt⁽¹⁾	(300,012		)	4,010			(296,002		)	—		—			—
Long-term debt	$	1,800,000		$	(3,631	)	$	1,796,369		$	1,705,012	$	(11,968	)	$	1,693,044

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(1)	In September 2012, the Company irrevocably called $300.0 million (50% of the aggregate principal amount) of the 8½% senior notes due 2014 and redeemed those called notes in October 2012 at 110.24% of par, recognizing a loss of $36.3 million upon redemption.

Bank Credit Facility

As of September 30, 2012, the Company had a $1.5 billion credit facility (the “Credit Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the “Administrative Agent”), which matures in June 2016. The size of the Credit Facility may be increased by $300.0 million, to a total of $1.8 billion, upon agreement between the applicable lenders and Forest.

Forest’s availability under the Credit Facility is governed by a borrowing base. As of September 30, 2012, the borrowing base under the Credit Facility was $1.20 billion. The determination of the borrowing base is made by the lenders in their sole discretion, on a semi-annual basis, taking into consideration the estimated value of Forest’s oil and gas properties based on pricing models determined by the lenders at such time, in accordance with the lenders’ customary practices for oil and gas loans. The available borrowing amount under the Credit Facility could increase or decrease based on such redetermination. In addition to the scheduled semi-annual redeterminations, Forest and the lenders each have discretion at any time, but not more often than once during a calendar year, to have the borrowing base redetermined. The borrowing base is also subject to automatic adjustments if certain events occur, such as if Forest or any of its Restricted Subsidiaries (as defined in the Credit Facility) issue senior unsecured notes, in which case the borrowing base will immediately be reduced by an amount equal to 25% of the stated principal amount of such issued senior notes, excluding any senior unsecured notes that Forest or any of its Restricted Subsidiaries may issue to refinance then-existing senior notes. This was the case in September 2012, when the borrowing base was reduced by $50.0 million from $1.25 billion to $1.20 billion. The borrowing base is also subject to automatic adjustment if Forest or any of its Restricted Subsidiaries sell oil and natural gas properties included in the borrowing base, as applicable, having a fair market value in excess of 10% of the borrowing base then in effect. In this case, the borrowing base would be reduced by an amount either (i) equal to the percentage of the borrowing base attributable to the sold properties, as determined by the Administrative Agent, or (ii) if none of the borrowing base is attributable to the sold properties, a value agreed upon by Forest and the required lenders. Forest expects the sale of its south Louisiana properties for $220.0 million, discussed in Note 5 below, will result in an approximate $80.0 million reduction to its borrowing base when the transaction closes.

Effective October 5, 2012, the lenders completed the most recent scheduled semi-annual redetermination of the borrowing base, reducing the borrowing base to $1.15 billion. The next scheduled semi-annual redetermination of the borrowing base will occur on or about May 1, 2013. A lowering of the borrowing base could require Forest to repay indebtedness in excess of the borrowing base in order to cover the deficiency. The Credit Facility is collateralized by Forest’s assets, and Forest is required to mortgage and grant a security interest in 75% of the present value of the estimated proved oil and gas properties and related assets of Forest and its U.S. subsidiaries.

The Credit Facility includes terms and covenants that place limitations on certain types of activities, including restrictions or requirements with respect to additional debt, liens, asset sales, hedging activities, investments, dividends, mergers, and acquisitions, and also includes a financial covenant. The Credit Facility provides that Forest will not permit its ratio of total debt outstanding to EBITDA (as adjusted for non-cash charges) for a trailing twelve-month period to be greater than 4.5 to 1.0 at any time.

At September 30, 2012, there were no outstanding borrowings under the Credit Facility.

7½% Senior Notes Due 2020

On September 17, 2012, Forest issued $500.0 million in principal amount of 7½% senior notes due 2020 (the “7½% Notes”) at par for net proceeds of $491.3 million, after deducting initial purchaser discounts. Net proceeds from the 7½% Notes were used to redeem $300.0 million in principal amount of the 8½% senior notes due 2014 at 110.24% of par in October 2012 (after the required notice of redemption period elapsed), with the balance of the net proceeds used to reduce outstanding borrowings under the Credit Facility. Prior to redeeming a portion of the 8½% senior notes due 2014, the net proceeds were used to temporarily reduce outstanding borrowings under the Credit Facility. Interest on the 7½% Notes is payable semiannually on March 15 and September 15.

The 7½% Notes are redeemable, at Forest’s option, at the prices set forth below, expressed as percentages of the principal amount redeemed, plus accrued but unpaid interest, if redeemed during the 12-month period beginning on or after September 15 of the years indicated below:



2016	103.75	%
2017	101.88	%
2018 and thereafter	100.00	%

Forest may also redeem the 7½% Notes, in whole or in part, at any time prior to September 15, 2016, at a price equal to the principal amount plus a make-whole premium, calculated using the applicable Treasury yield plus 0.5%, plus accrued but unpaid interest. In addition, prior to September 15, 2015, Forest may, at any time or from time to time, redeem up to 35% of the aggregate principal amount of the 7½% Notes with the net proceeds of certain equity offerings at 107.5% of the principal amount of the 7½% Notes, plus any accrued but unpaid interest, if at least 65% of the aggregate principal amount of the 7½% Notes remains outstanding after such redemption and the redemption occurs within 120 days of the date of the closing of such equity offering.