FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

Schedule of assets and liabilities measured at fair value on a recurring basis

Forest’s assets and liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012 are set forth in the table below.



	September 30, 2013		December 31, 2012
	Using Significant Other Observable Inputs (Level 2)⁽¹⁾
	(In Thousands)
Assets:
Derivative instruments⁽²⁾:
Commodity	$	19,500	$	35,465
Interest rate	—		13,060
Total assets	$	19,500	$	48,525
Liabilities:
Derivative instruments⁽²⁾:
Commodity	$	9,601	$	16,551
Total liabilities	$	9,601	$	16,551

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(1)

The authoritative accounting guidance regarding fair value measurements for assets and liabilities measured at fair value establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value. These tiers consist of: Level 1, defined as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when relevant observable inputs are not available. There were no transfers between levels of the fair value hierarchy during the three and nine months ended September 30, 2013. Forest’s policy is to recognize transfers between levels of the fair value hierarchy as of the beginning of the reporting period in which the event or change in circumstances caused the transfer.

(2)

Forest’s currently outstanding derivative assets and liabilities include commodity derivatives (see Note 8 for more information on these instruments). Forest utilizes present value techniques and option-pricing models for valuing its derivatives. Inputs to these valuation techniques include published forward prices, volatilities, and credit risk considerations, including the incorporation of published interest rates and credit spreads. All of the significant inputs are observable, either directly or indirectly; therefore, Forest’s derivative instruments are included within the Level 2 fair value hierarchy.

Schedule of fair values and carrying amounts of financial instruments

The fair values and carrying amounts of Forest’s financial instruments are summarized below as of the dates indicated.



	September 30, 2013
					Fair Value Measurements
	Carrying Amount		Total Fair Value⁽¹⁾		Using Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Using Significant Other Observable Inputs (Level 2)
	(In Thousands)
Assets:
Derivative instruments	$	19,500	$	19,500	$	—	$	19,500
Liabilities:
Derivative instruments	9,601		9,601		—		9,601
Credit facility	115,000		115,000		—		115,000
7¼% senior notes due 2019	1,000,322		1,017,000		1,017,000		—
7½% senior notes due 2020	500,000		498,125		498,125		—

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(1)

Forest used various assumptions and methods in estimating the fair values of its financial instruments. The fair values of the senior notes were estimated based on quoted market prices. The carrying amount of the Credit Facility approximated fair value due to the short original maturities of the borrowings and because the borrowings bear interest at variable market rates. The methods used to determine the fair values of the derivative instruments are discussed above. See also Note 8 for more information on the derivative instruments.



	December 31, 2012
					Fair Value Measurements
	Carrying Amount		Total Fair Value⁽¹⁾		Using Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Using Significant Other Observable Inputs (Level 2)
	(In Thousands)
Assets:
Derivative instruments	$	48,525	$	48,525	$	—	$	48,525
Liabilities:
Derivative instruments	16,551		16,551		—		16,551
Credit facility	65,000		65,000		—		65,000
8½% senior notes due 2014	296,723		321,000		321,000		—
7¼% senior notes due 2019	1,000,365		1,006,850		1,006,850		—
7½% senior notes due 2020	500,000		526,250		526,250		—

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(1)

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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