0000038079-13-000013.txt : 20130220 0000038079-13-000013.hdr.sgml : 20130220 20130219173832 ACCESSION NUMBER: 0000038079-13-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20130215 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130220 DATE AS OF CHANGE: 20130219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST OIL CORP CENTRAL INDEX KEY: 0000038079 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 250484900 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13515 FILM NUMBER: 13624534 BUSINESS ADDRESS: STREET 1: 707 SEVENTEENTH STREET STREET 2: SUITE 3600 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3038121400 MAIL ADDRESS: STREET 1: 707 SEVENTEENTH STREET STREET 2: SUITE 3600 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: Forest Oil CORP DATE OF NAME CHANGE: 20040819 FORMER COMPANY: FORMER CONFORMED NAME: FOREST OIL CORP DATE OF NAME CHANGE: 19920703 8-K 1 item201-8xkx213.htm 8-K Item 2.01-8-K-2.13
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 15, 2013
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation)
1-13515
 
25-0484900
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
707 17th Street, Suite 3600, Denver, Colorado
 
80202
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(303) 812-1400
(Registrant’s telephone number, including area code)
 
 
 
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







 



Item 2.01.
Completion of Acquisition or Disposition of Assets.
On February 15, 2013, Forest Oil Corporation (“Forest”) together with two of its wholly-owned subsidiaries, Forest Oil Permian Corporation and Forcenergy Onshore Inc., completed the previously announced sale of oil and gas properties located in the State of Texas (the “Texas Oil and Gas Assets”) and various other related assets (together with the Texas Oil and Gas Assets, the “Texas Assets”) to Hilcorp Energy I, L.P.. The sales price of the Texas Assets was $325 million, which was subject to customary adjustments to, among other things, reflect an economic effective date of January 1, 2013. Forest received $16 million of the sales price as a deposit upon execution of the purchase and sale agreement, and received an additional $291 million at closing of the transaction, for total net proceeds of $307 million. Forest intends to use the proceeds to redeem the remaining $300 million principal amount outstanding of its 8½% Senior Notes due 2014. The net proceeds do not include approximately $14 million that may be received in the future related to Texas Assets for which third-party consents have not yet been received.
See Item 9.01(b) below for pro forma information related to the sale of the Texas Assets, as well as the sale of assets located in the State of Louisiana (the “Louisiana Assets”) which was completed on November 16, 2012 and reported on a Form 8-K on that date.
Item 9.01.    Financial Statements and Exhibits.
(b)    Pro Forma Financial Information.
The pro forma financial statements of Forest Oil Corporation and its subsidiaries reflecting the closing of the sales of the Texas Assets and Louisiana Assets are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
(d)    Exhibits.
Exhibit Number
Description
 
 
99.1
Pro Forma Financial Information


2

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
FOREST OIL CORPORATION
(Registrant)
 
 
 
February 19, 2013
By:
/s/ Victor A. Wind
 
 
Victor A. Wind
Senior Vice President, Chief Accounting Officer and Corporate Controller



3

EXHIBIT INDEX

Exhibit Number
Description
 
 
99.1
Pro Forma Financial Information



4
 EX-99.1 2 exhibit991-213.htm EXHIBIT Exhibit 99.1-2.13
Exhibit 99.1

FOREST OIL CORPORATION
INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
On January 2, 2013, Forest Oil Corporation (“Forest”) together with two of its wholly-owned subsidiaries, Forest Oil Permian Corporation and Forcenergy Onshore Inc., entered into an Agreement for Purchase and Sale of Assets with Hilcorp Energy I, L.P. (“Hilcorp”).  Pursuant to the purchase and sale agreement, Forest agreed to sell to Hilcorp oil and gas properties located in the State of Texas (the “Texas Oil and Gas Assets”) and various other related assets (together with the Texas Oil and Gas Assets, the “Texas Assets”). The transaction closed on February 15, 2013. The sales price for the Texas Assets was $325 million, which was subject to customary adjustments to reflect an economic effective date of January 1, 2013. Forest received $16 million of the sales price as a deposit upon execution of the purchase and sale agreement and the remaining $291 million at closing, for total net proceeds of $307 million. Forest intends to use the proceeds to redeem the remaining $300 million principal amount outstanding of its 8½% Senior Notes due 2014. The net proceeds do not include approximately $14 million that may be received in the future related to Texas Assets for which third-party consents have not yet been received.

On October 11, 2012, Forest entered into an Agreement for Purchase and Sale of Assets with Texas Petroleum Investment Company (“TPIC”).  Pursuant to the purchase and sale agreement, Forest agreed to sell to TPIC oil and gas properties located in the State of Louisiana (the “Louisiana Oil and Gas Assets,” and together with the Texas Oil and Gas Assets, the “Oil and Gas Assets”) and various other related assets (together with the Louisiana Oil and Gas Assets, the “Louisiana Assets,” and together with the Texas Assets, the “Assets”). The transaction closed on November 16, 2012. The sales price for the Louisiana Assets was $220 million, which was subject to customary adjustments to reflect an economic effective date of August 1, 2012. Forest received $11 million of the sales price as a deposit upon execution of the purchase and sale agreement and the remaining $197 million at closing, for total net proceeds of $208 million. Forest used the net proceeds to reduce borrowings outstanding under its credit facility. The net proceeds do not include approximately $2 million to be received in the future related to Louisiana Assets on which third parties possess preferential purchase rights that have recently been exercised.
 
The following unaudited pro forma condensed consolidated financial statements and explanatory notes present how the condensed consolidated financial statements of Forest may have appeared had the sales of the Assets occurred as of September 30, 2012 (with respect to the balance sheet information presented) or as of January 1, 2011 (with respect to the statement of operations information presented).
 
The unaudited pro forma condensed consolidated financial statements have been derived from and should be read together with the historical consolidated financial statements and the related notes of Forest included in its Annual Report on Form 10-K for the year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.
 
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to represent what the results of operations or financial position of Forest would actually have been had the transactions described above occurred on the dates noted above, or to project the results of operations or financial position of Forest for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments are directly attributable to the transactions and are expected to have a continuing impact on the results of operations of Forest. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made.




1


FOREST OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2012

 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
 (In Thousands)
ASSETS
 
 
 
 
 
Current assets:
 

 
 

 
 
Cash and cash equivalents
$
39,169

 
$
191,064

(a)
$
230,233

Accounts receivable
77,210

 
—

 
77,210

Derivative instruments
43,853

 
—

 
43,853

Other current assets
16,278

 
(500
)
(b)
15,778

Total current assets
176,510

 
190,564

 
367,074

Property and equipment:
 

 
 

 
 
Oil and natural gas properties, full cost method of accounting:
 

 
 

 
 
Proved, net of accumulated depletion
1,774,587

 
(568,028
)
(c)
1,206,559

Unproved
442,275

 
(13,851
)
(c)
428,424

Net oil and natural gas properties
2,216,862

 
(581,879
)
 
1,634,983

Other property and equipment, net of accumulated depreciation and amortization
16,327

 
(287
)
(d)
16,040

Assets held for sale
27,373

 
—

 
27,373

Net property and equipment
2,260,562

 
(582,166
)
 
1,678,396

Deferred income taxes
9,851

 
—

 
9,851

Goodwill
239,420

 
—

 
239,420

Derivative instruments
5,273

 
—

 
5,273

Other assets
90,762

 
(1,903
)
(e)
88,859

 
$
2,782,378

 
$
(393,505
)
 
$
2,388,873

LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

 
 
Current liabilities:
 

 
 

 
 
Accounts payable and accrued liabilities
$
189,753

 
$
(1,935
)
(f)
$
187,818

Current portion of long-term debt
296,002

 
—

 
296,002

Accrued interest
29,663

 
(3,117
)
(g)
26,546

Derivative instruments
7,759

 
—

 
7,759

Deferred income taxes
9,851

 
—

 
9,851

Other current liabilities
20,743

 
(6,901
)
(h)
13,842

Total current liabilities
553,771

 
(11,953
)
 
541,818

Long-term debt
1,796,369

 
(295,990
)
(i)
1,500,379

Asset retirement obligations
79,133

 
(58,337
)
(h)
20,796

Derivative instruments
16,640

 
—

 
16,640

Other liabilities
93,688

 
(101
)
(j)
93,587

Total liabilities
2,539,601

 
(366,381
)
 
2,173,220

Shareholders’ equity:
 

 
 

 
 
Preferred stock, none issued and outstanding
—

 
—

 
—

Common stock
11,823

 
—

 
11,823

Capital surplus
2,538,129

 
—

 
2,538,129

Accumulated deficit
(2,289,461
)
 
(27,124
)
(k)
(2,316,585
)
Accumulated other comprehensive loss
(17,714
)
 
—

 
(17,714
)
Total shareholders’ equity
242,777

 
(27,124
)
 
215,653

 
$
2,782,378

 
$
(393,505
)
 
$
2,388,873


See accompanying notes to unaudited pro forma condensed consolidated financial statements.


2


FOREST OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
(In Thousands, Except Per Share Amounts)
Revenues:
 

 
 

 
 
Oil, natural gas, and natural gas liquids sales
$
450,609

 
$
(138,128
)
(l)
$
312,481

Interest and other
123

 
—

 
123

Total revenues
450,732

 
(138,128
)
 
312,604

Costs, expenses, and other:
 

 
 

 
 
Lease operating expenses
82,167

 
(32,399
)
(l)
49,768

Production and property taxes
26,935

 
(13,810
)
(l)
13,125

Transportation and processing costs
11,167

 
(1,697
)
(l)
9,470

General and administrative
45,221

 
—

 
45,221

Depreciation, depletion, and amortization
213,802

 
(50,465
)
(m)
163,337

Ceiling test write-down of oil and natural gas properties
713,750

 
23,230

(n)
736,980

Impairment of properties
79,529

 
—

 
79,529

Interest expense
103,932

 
(24,425
)
(o)
79,507

Realized and unrealized gains on derivative instruments, net
(40,744
)
 
—

 
(40,744
)
Other, net
42,102

 
(3,464
)
(p)
38,638

Total costs, expenses, and other
1,277,861

 
(103,030
)
 
1,174,831

Loss before income taxes
(827,129
)
 
(35,098
)
 
(862,227
)
Income tax
175,269

 
(12,709
)
(q)
206,082

 
 
 
43,522

(r)
 
Net loss
$
(1,002,398
)
 
$
(65,911
)
 
$
(1,068,309
)
 
 
 
 
 
 
Basic loss per common share
$
(8.73
)
 
 
 
$
(9.31
)
Diluted loss per common share
(8.73
)
 
 
 
(9.31
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
114,784

 
 
 
114,784

Diluted
114,784

 
 
 
114,784


See accompanying notes to unaudited pro forma condensed consolidated financial statements.


3


FOREST OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011

 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
(In Thousands, Except Per Share Amounts)
Revenues:
 
 
 
 
 
Oil, natural gas, and natural gas liquids sales
$
703,531

 
$
(255,029
)
(l)
$
448,502

Interest and other
1,026

 
—

 
1,026

Total revenues
704,557

 
(255,029
)
 
449,528

Costs, expenses, and other:
 
 
 
 
 
Lease operating expenses
99,158

 
(43,768
)
(l)
55,390

Production and property taxes
40,632

 
(22,226
)
(l)
18,406

Transportation and processing costs
13,728

 
(2,320
)
(l)
11,408

General and administrative
65,105

 
—

 
65,105

Depreciation, depletion, and amortization
219,684

 
(67,394
)
(m)
152,290

Interest expense
149,755

 
(29,637
)
(o)
120,118

Realized and unrealized gains on derivative instruments, net
(88,064
)
 
—

 
(88,064
)
Other, net
17,164

 
(4,494
)
(p)
12,670

Total costs, expenses, and other
517,162

 
(169,839
)
 
347,323

Earnings from continuing operations before income taxes
187,395

 
(85,190
)
 
102,205

Income tax
89,135

 
(30,813
)
(q)
58,322

Net earnings from continuing operations
$
98,260

 
$
(54,377
)
 
$
43,883

 
 
 
 
 
 
Basic earnings from continuing operations per common share
$
.86

 
 
 
$
.38

Diluted earnings from continuing operations per common share
.85

 
 
 
.38

 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
111,690

 
 
 
111,690

Diluted
112,868

 
 
 
112,868

 
 
 
 
 
 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.


4


FOREST OIL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 AND DECEMBER 31, 2011
 
Note 1   Basis of Presentation
 
The accompanying unaudited pro forma condensed consolidated financial statements and explanatory notes present how the financial statements of Forest may have appeared had the sales of (i) certain oil and gas properties located in the State of Texas (the “Texas Oil and Gas Assets”) and various other related assets (together with the Texas Oil and Gas Assets, the “Texas Assets”) and (ii) certain oil and gas properties located in the State of Louisiana (the “Louisiana Oil and Gas Assets,” and together with the Texas Oil and Gas Assets, the “Oil and Gas Assets”) and various other related assets (together with the Louisiana Oil and Gas Assets, the “Louisiana Assets”, and together with the Texas Assets, the “Assets”) occurred as of September 30, 2012 (with respect to the balance sheet information presented) or as of January 1, 2011 (with respect to the statement of operations information presented). The transactions for which these pro forma financial statements are presented are explained in more detail in the introductory paragraph to the accompanying pro forma financial information.
 
Following are descriptions of certain columns included in the accompanying unaudited pro forma condensed consolidated financial statements:
 
Historical—Represents the historical condensed consolidated balance sheet of Forest as of September 30, 2012, the historical condensed consolidated statement of operations of Forest for the nine months ended September 30, 2012, and the historical condensed consolidated statement of operations related to the continuing operations of Forest for the year ended December 31, 2011.
 
Pro Forma Adjustments—Represents the adjustments to the historical condensed consolidated financial statements necessary to arrive at the pro forma financial position of Forest as of September 30, 2012, as if the sales of the Assets occurred as of September 30, 2012, the pro forma results of operations of Forest for the nine months ended September 30, 2012, as if the sales of the Assets occurred as of January 1, 2011, and the pro forma results of Forest’s continuing operations for the year ended December 31, 2011, as if the sales of the Assets occurred as of January 1, 2011.
 
Note 2    Pro Forma Adjustments for the Sales of Assets
 
Condensed Consolidated Balance Sheet
 
(a)
To record excess cash remaining after using a portion of the total net proceeds of $516 million to redeem $300 million of the 8½% Senior Notes due 2014 (“8½% Notes”). The assumed September 30, 2012 redemption of the 8½% Notes required $325 million in cash, consisting of $300 million in principal, $3 million of accrued interest, and a $21 million call premium.

(b)
To eliminate materials and supplies inventory included in the Texas Assets.

(c)
To record the sales proceeds attributable to the proved and unproved oil and gas properties in accordance with the full cost method of accounting.

(d)
To eliminate other property and equipment included in the Texas Assets.

(e)
To eliminate $2 million of unamortized debt issue costs associated with the 8½% Notes, which were redeemed using a portion of the total proceeds, and to eliminate gas balancing and pipeline imbalance receivables totaling $.2 million included in the Assets.
 
(f)
To eliminate revenues held in suspense that were transferred to TPIC and Hilcorp.
 
(g)
To eliminate the accrued interest associated with the 8½% Notes, which were redeemed using a portion of the total proceeds.

(h)
To eliminate the asset retirement obligations associated with the Oil and Gas Assets.


5


(i)
To eliminate $300 million in principal of the 8½% Notes and the related unamortized original issuance discount of $4 million.

(j)
To eliminate gas balancing payables of $.1 million included in the Assets.

(k)
To record the income tax and accumulated deficit impact of the $21 million call premium, the write-off of $4 million of unamortized original issuance discount, and the write-off of $2 million of unamortized debt issue costs, all of which would be charged against earnings in connection with the redemption of $300 million of 8½% Notes. As discussed in Forest’s Quarterly Reports on Form 10-Q for the periods ended September 30, 2012 and June 30, 2012, in the second quarter of 2012, Forest placed a full valuation allowance against its deferred tax assets. Since Forest had a full valuation allowance against its deferred tax assets at September 30, 2012, the tax impact of the aforementioned charge against earnings nets to zero, with the full amount of the charge showing in accumulated deficit.

The call premium and write-offs of the unamortized original issuance discount and debt issue costs are not included as pro forma adjustments in the condensed consolidated statements of operations since they are nonrecurring charges.

Condensed Consolidated Statements of Operations
 
(l)
To eliminate the revenues and direct operating expenses associated with the Oil and Gas Assets.
 
(m)
To adjust depletion to give effect to the reduction in the pro forma full cost pool, total estimated proved reserves, and production volumes as a result of the sale of the Oil and Gas Assets and to adjust depreciation to give effect to the reduction in other property and equipment included in the Texas Assets.
 
(n)
To adjust the ceiling test write-down of oil and natural gas properties to give effect to the reduction in the pro forma future net revenues from estimated production of proved oil and gas properties, properties not being amortized, and capitalized costs used in the ceiling test calculations as a result of the sale of the Oil and Gas Assets.
 
(o)
To adjust interest expense to give effect to the redemption of $300 million of 8½% Notes and to give effect to the application of the net cash proceeds remaining after the 8½% Notes redemption to reduce indebtedness under the credit facility. The reductions related to the 8½% Notes redemption were $22 million and $30 million for the nine months ended September 30, 2012 and the year ended December 31, 2011, respectively. These reductions include interest expense on the $300 million principal amount, amortization of the original issuance discount, and amortization of debt issue costs.

(p)
To eliminate accretion expense attributable to asset retirement obligations associated with the Oil and Gas Assets.

(q)
To adjust income tax expense for the effects of the pro forma adjustments at statutory rates.

(r)
To adjust income tax expense to give effect to the increase in the valuation allowance that would have been required associated with the pro forma decrease in income before income taxes. As discussed in Forest’s Quarterly Reports on Form 10-Q for the periods ended September 30, 2012 and June 30, 2012, in the second quarter of 2012, Forest placed a full valuation allowance against its deferred tax assets.

Note 3 Pro Forma Earnings (Loss) Per Share

The following reconciles pro forma net earnings (loss) from continuing operations as reported in the unaudited pro forma condensed consolidated statements of operations to pro forma net earnings (loss) from continuing operations used for calculating pro forma basic and diluted earnings (loss) from continuing operations per share for the periods presented.

 
Nine Months Ended
 
Year Ended
 
September 30, 2012
 
December 31, 2011
 
(In Thousands)
Pro forma net earnings (loss) from continuing operations
$
(1,068,309
)
 
$
43,883

Pro forma net earnings attributable to participating securities
—

 
(910
)
Pro forma net earnings (loss) from continuing operations for basic and diluted earnings per share
$
(1,068,309
)
 
$
42,973



6


The following reconciles basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the periods presented.
 
Nine Months Ended
 
Year Ended
 
September 30, 2012
 
December 31, 2011
 
(In Thousands)
Weighted average common shares outstanding during the period for pro forma basic earnings (loss) from continuing operations per share
114,784

 
111,690

Dilutive effects of potential common shares
—

 
1,178

Weighted average common shares outstanding during the period, including the effects of dilutive potential common shares, for pro forma diluted earnings (loss) from continuing operations per share
114,784

 
112,868



7