EX-99.1 3 a2062739zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 FOREST OIL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 2001 2000 -------------- ------------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 4,500 14,003 Accounts receivable....................................... 169,221 203,245 Derivative instruments.................................... 34,237 -- Other current assets...................................... 34,523 21,580 ---------- --------- Total current assets.................................... 242,481 238,828 Net property and equipment, at cost......................... 1,572,249 1,359,756 Deferred income taxes....................................... 46,922 119,300 Goodwill and other intangible assets, net................... 17,089 19,412 Other assets................................................ 20,408 15,082 ---------- --------- $1,899,149 1,752,378 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 203,066 192,200 Accrued interest.......................................... 6,842 11,436 Current portion of deferred tax liability................. 10,534 -- Other current liabilities................................. 20,003 36,301 ---------- --------- Total current liabilities............................... 240,445 239,937 Long-term debt.............................................. 655,748 622,234 Other liabilities........................................... 15,528 16,376 Deferred income taxes....................................... 18,106 14,865 Shareholders' equity: Common stock.............................................. 4,882 4,840 Capital surplus........................................... 1,152,982 1,139,136 Accumulated deficit....................................... (136,153) (269,567) Accumulated other comprehensive gain (loss)............... 3,779 (12,177) Treasury stock, at cost................................... (56,168) (3,266) ---------- --------- Total shareholders' equity.............................. 969,322 858,966 ---------- --------- $1,899,149 1,752,378 ========== =========
See accompanying notes to condensed consolidated financial statements. 1 FOREST OIL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF PRODUCTION AND OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- ----------------------------- 2001 2000 2001 2000 ------------- ------------- ------------- ------------- (IN THOUSANDS EXCEPT PRODUCTION AND PER SHARE AMOUNTS) PRODUCTION Natural gas (mmcf)....................................... 26,811 28,884 83,311 84,053 ======== ======= ======= ======= Oil, condensate and natural gas liquids (thousands of barrels)............................................... 2,724 2,873 7,785 8,612 ======== ======= ======= ======= STATEMENTS OF CONSOLIDATED OPERATIONS Revenue: Marketing and processing............................... $ 55,371 67,546 253,941 170,691 Oil and gas sales: Gas.................................................. 82,167 91,869 397,775 242,744 Oil, condensate and natural gas liquids.............. 63,575 71,070 192,944 191,342 -------- ------- ------- ------- Total oil and gas sales............................ 145,742 162,939 590,719 434,086 -------- ------- ------- ------- Total revenue.................................... 201,113 230,485 844,660 604,777 Operating expenses: Marketing and processing............................... 54,494 67,162 251,441 168,282 Oil and gas production................................. 52,434 35,317 136,605 101,067 General and administrative............................. 7,750 7,652 21,032 25,717 Merger and seismic licensing expense................... 3,763 -- 8,261 -- Depreciation and depletion............................. 60,381 53,029 174,321 153,738 -------- ------- ------- ------- Total operating expenses......................... 178,822 163,160 591,660 448,804 -------- ------- ------- ------- Earnings from operations................................... 22,291 67,325 253,000 155,973 Other income and expense: Other (income) expense, net............................ 685 46 1,868 (2,000) Interest expense....................................... 12,270 14,411 37,763 42,659 Translation loss on subordinated debt.................. 5,465 2,824 7,766 7,638 Realized gain on derivative instruments, net........... (11,826) -- (11,826) -- Unrealized (gain) loss on derivative instruments, net.................................................. 8,881 -- (4,705) -- -------- ------- ------- ------- Total other income and expense................... 15,475 17,281 30,866 48,297 -------- ------- ------- ------- Earnings before income taxes and extraordinary item........ 6,816 50,044 222,134 107,676 Income tax expense: Current.................................................. 485 325 2,721 631 Deferred................................................. 3,964 15,925 83,582 31,977 -------- ------- ------- ------- 4,449 16,250 86,303 32,608 -------- ------- ------- ------- Net earnings before extraordinary item..................... 2,367 33,794 135,831 75,068 Extraordinary loss on extinguishment of debt............... (827) -- (2,417) -- -------- ------- ------- ------- Net earnings............................................... $ 1,540 33,794 133,414 75,068 ======== ======= ======= ======= Earnings attributable to common stock...................... $ 1,540 32,334 133,414 72,037 ======== ======= ======= ======= Weighted average number of common shares outstanding: Basic.................................................... 47,182 46,136 47,989 46,150 ======== ======= ======= ======= Diluted.................................................. 48,476 48,008 49,722 47,335 ======== ======= ======= ======= Basic earnings per common share: Earnings attributable to common stock before extraordinary item..................................... $ .05 .70 2.83 1.56 Extraordinary loss on extinguishment of debt............. (.02) -- (.05) -- -------- ------- ------- ------- Earnings attributable to common stock.................... $ .03 .70 2.78 1.56 ======== ======= ======= ======= Diluted earnings per common share: Earnings attributable to common stock before extraordinary item..................................... $ 05 .67 2.73 1.52 Extraordinary loss on extinguishment of debt............. (.02) -- (.05) -- -------- ------- ------- ------- Earnings attributable to common stock.................... $ .03 .67 2.68 1.52 ======== ======= ======= =======
See accompanying notes to condensed consolidated financial statements. 2 FOREST OIL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 2001 2000 --------- -------- (IN THOUSANDS) Cash flows from operating activities: Net earnings before extraordinary item.................... $ 135,831 75,068 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and depletion.............................. 174,321 153,738 Amortization of deferred debt costs..................... 1,309 1,114 Translation loss on subordinated debt................... 7,766 7,638 Unrealized gain on derivative instruments, net.......... (4,705) -- Deferred income tax expense............................. 83,582 31,977 Stock and stock option compensation..................... -- 2,570 Other, net.............................................. (54) (992) Decrease (increase) in accounts receivable.............. 31,876 (30,351) Increase in other current assets........................ (11,102) (30,764) Increase (decrease) in accounts payable................. 46,080 (10,826) Decrease in accrued interest and other current liabilities........................................... (55,617) (16,076) --------- -------- Net cash provided by operating activities before reorganization item................................. 409,287 183,096 Decrease in accrued reorganization costs................ -- (11,199) --------- -------- Net cash provided by operating activities after reorganization item................................. 409,287 171,897 Cash flows from investing activities: Capital expenditures for property and equipment........... (431,392) (277,695) Proceeds from sales of assets............................. 31,846 8,577 Increase in other assets, net............................. (2,497) (3,514) --------- -------- Net cash used by investing activities................. (402,043) (272,632) Cash flows from financing activities: Proceeds from bank borrowings............................. 687,986 246,907 Repayments of bank borrowings............................. (788,238) (272,283) Issuance of 8% senior notes, net of issuance costs........ 199,500 -- Proceeds from issuance of preferred stock................. -- 38,800 Redemption of 8 3/4% senior subordinated notes............ (67,003) (4,630) Proceeds from the exercise of options and warrants........ 8,261 6,291 Purchase of treasury stock................................ (55,720) (2,818) Decrease in other liabilities, net........................ (1,202) (2,153) --------- -------- Net cash provided (used) by financing activities...... (16,416) 10,114 Effect of exchange rate changes on cash..................... (331) 24 --------- -------- Net decrease in cash and cash equivalents................... (9,503) (90,597) Cash and cash equivalents at beginning of period............ 14,003 99,661 --------- -------- Cash and cash equivalents at end of period.................. $ 4,500 9,064 ========= ======== Cash paid (refunded) during the period for: Interest.................................................. $ 35,398 72,139 Income taxes.............................................. $ 4,512 (3,404)
See accompanying notes to condensed consolidated financial statements. 3 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (1) BASIS OF PRESENTATION The condensed consolidated financial statements included herein are unaudited. The consolidated financial statements include the accounts of Forest Oil Corporation and its consolidated subsidiaries (collectively, Forest). In the opinion of management, all adjustments, consisting of normal recurring accruals, have been made which are necessary for a fair presentation of the financial position of Forest at September 30, 2001 and the results of operations for the three and nine months ended September 30, 2001 and 2000. Quarterly results are not necessarily indicative of expected annual results because of the impact of fluctuations in prices received for liquids (oil, condensate and natural gas liquids) and natural gas and other factors. For a more complete understanding of Forest's operations and financial position, reference is made to the consolidated financial statements of Forest, and related notes thereto, filed with Forest's annual report on Form 10-K for the year ended December 31, 2000, previously filed with the Securities and Exchange Commission. On December 7, 2000, Forest completed its merger with Forcenergy Inc (Forcenergy). The merger was accounted for as a pooling of interests for accounting and financial reporting purposes. Under this method of accounting, the recorded assets and liabilities of Forest and Forcenergy were carried forward to the combined company at their recorded amounts, and income of the combined company includes income of Forest and Forcenergy for all periods presented. The components of total comprehensive income for the periods consist of net earnings, foreign currency translation, changes in the unfunded pension liability, gains (losses) on derivative instruments and unrealized gains (losses) on securities available for sale and are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- (IN THOUSANDS) Net earnings.............................. $ 1,540 33,794 133,414 75,068 Other comprehensive income................ 14,394 256 15,956 1,018 ------- ------ ------- ------ Total comprehensive income................ $15,934 34,050 149,370 76,086 ======= ====== ======= ======
(2) NET PROPERTY AND EQUIPMENT Components of net property and equipment are as follows:
SEPTEMBER 30, DECEMBER 31, 2001 2000 -------------- ------------- (IN THOUSANDS) Oil and gas properties.............................. $ 3,399,757 3,020,778 Buildings, transportation and other equipment....... 21,697 21,399 ----------- ---------- 3,421,454 3,042,177 Less accumulated depreciation, depletion and valuation allowance............................... (1,849,205) (1,682,421) ----------- ---------- $ 1,572,249 1,359,756 =========== ==========
4 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (2) NET PROPERTY AND EQUIPMENT (CONTINUED) The Company uses the full cost method of accounting to report oil and gas operations. Accordingly, the cost to acquire, explore for and develop oil and gas properties is capitalized. Under full cost accounting rules, the net capitalized costs of oil and gas properties may not exceed a "ceiling limit" which is based upon the present value of estimated future net cash flows from proved reserves, discounted at 10%, plus the lower of cost or fair market value of unproved properties. If net capitalized costs of oil and gas properties exceed the ceiling limit, the amount of the excess must be charged to earnings. This is called a "ceiling limitation writedown." This charge does not impact cash flow from operating activities, but does reduce shareholders' equity. The risk that Forest will be required to write down the carrying value of its oil and gas properties increases when oil and gas prices are low or volatile. In addition, writedowns may occur if Forest experiences substantial downward adjustments to estimated proved reserves. Based on oil and gas prices in effect on September 30, 2001 ($1.83 per MMBTU for gas and $23.43 per barrel for oil in the United States and $1.97 (CDN) per MMBTU for gas and $31.75 (CDN) per barrel for oil in Canada), the net capitalized costs of the Company's oil and gas properties in both the United States and Canada exceeded the cost center ceiling from its proved oil and gas reserves. However, the Company was not required to record a writedown of oil and gas properties because oil and gas prices increased sufficiently after September 30, 2001 such that the net capitalized costs did not exceed the cost center ceiling. Because of the volatility of oil and gas prices and, in particular, the recent relatively low prices for oil and gas, the Company cannot assure you that it will not experience ceiling limitation writedowns in the future. If, for purposes of determining the present value of estimated future net cash flows from proved reserves in the United States at September 30, 2001, the Company had used prices of $1.83 per MMBTU for gas and $23.43 per barrel for oil, there would have been a ceiling limitation writedown of approximately $172,000,000 ($278,000,000, pre-tax) in the United States in the third quarter of 2001. As recently as October 30, 2001, relevant benchmark prices in the United States were $3.10 per MMBTU for gas (Henry Hub Midpoint) and $21.88 per barrel for oil (West Texas Intermediate Cushing). If, for purposes of determining the present value of estimated future net cash flows from proved reserves in Canada at September 30, 2001, the Company had used prices of $1.97 (CDN) per MMBTU for gas and $31.75 (CDN) per barrel for oil, there would have been a ceiling limitation writedown of approximately $29,000,000 CDN ($49,000,000 CDN, pre-tax) in Canada in the third quarter of 2001. As recently as October 30, 2001, relevant benchmark prices in Canada were $3.94 (CDN) per MMBTU for gas (Alberta N.I.T. gas) and $34.13 (CDN) per barrel for oil (Edmonton Par Oil). 5 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (3) GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets recorded in the acquisition of Producers Marketing Ltd. (ProMark), the Company's Canadian gas marketing subsidiary, consist of the following:
SEPTEMBER 30, DECEMBER 31, 2001 2000 ------------- ------------ (IN THOUSANDS) Goodwill............................................ $ 14,518 15,295 Gas marketing contracts............................. 12,666 13,344 -------- ------ 27,184 28,639 Less accumulated amortization....................... (10,095) (9,227) -------- ------ $ 17,089 19,412 ======== ======
Goodwill is being amortized on a straight line basis over 20 years. The amount attributed to the value of gas marketing contracts acquired is being amortized on a straight line basis over the average life of such contracts of 12 years. (4) LONG-TERM DEBT Components of long-term debt are as follows:
SEPTEMBER 30, DECEMBER 31, 2001 2000 -------------- ------------- (IN THOUSANDS) U.S. Credit Facility................................ $226,000 305,000 Canadan Credit Facility............................. 6,333 28,690 8% Senior Notes..................................... 200,000 -- 8 3/4% Senior Subordinated Notes.................... 127,129 192,382 10 1/2% Senior Subordinated Notes................... 96,286 96,162 -------- ------- $655,748 622,234 ======== =======
In June 2001, the Company issued $200,000,000 of 8% Senior Notes due 2008. The net proceeds were used to repay a portion of the Company's U.S. credit facility. In October 2001, Forest issued an additional $65,000,000 principal amount of 8% Senior Notes at 99% of par. The net proceeds were initially used to repay a portion of the Company's U.S. credit facility. Subsequently, borrowings were made under this facility to repurchase approximately $58 million of 8 3/4% Senior Subordinated Notes. The 8 3/4% Senior Subordinated Notes (the 8 3/4% Notes) were issued by Forest's wholly owned subsidiary, Canadian Forest Oil Ltd. (Canadian Forest), and are guaranteed on a senior subordinated basis by Forest. Forest is required to recognize foreign currency translation gains or losses related to the 8 3/4% Notes because the debt is denominated in U.S. dollars and the functional currency of Canadian Forest is the Canadian dollar. As a result of the change in the value of the Canadian dollar relative to the U.S. dollar during the third quarter and first nine months of 2001, Forest reported 6 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (4) LONG-TERM DEBT (CONTINUED) noncash translation losses of approximately $5,465,000 and $7,766,000, respectively, compared to noncash translation losses of $2,824,000 and $7,638,000 in the third quarter and first nine months of 2000. (5) EARNINGS PER SHARE Basic earnings per share is computed by dividing net earnings attributable to common stock by the weighted average number of common shares outstanding during each period, excluding treasury shares. Net earnings attributable to common stock represents net earnings less preferred stock dividends of $1,460,000 and $3,031,000 in the third quarter and first nine months of 2000, respectively. Diluted earnings per share is computed by adjusting the average number of common shares outstanding for the dilutive effect, if any, of convertible preferred stock, stock options and warrants. The effect of potentially dilutive securities is based on earnings before extraordinary items. The following sets forth the calculation of basic and diluted earnings per share:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2001(1) 2000(2) 2001(3) 2000(4) -------- -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Earnings before extraordinary loss........................ $ 2,367 33,794 135,831 75,068 Less: preferred stock dividends........................... -- (1,460) -- (3,031) ------- ------ ------- ------ Earnings before extraordinary loss available to common stockholders............................................ $ 2,367 32,334 135,831 72,037 ======= ====== ======= ====== Weighted average common shares outstanding during the period.................................................. 47,182 46,136 47,989 46,150 Add dilutive effects of employee stock options.......... 513 1,006 803 675 Add dilutive effects of warrants........................ 781 866 931 510 ------- ------ ------- ------ Weighted average common shares outstanding including the effects of dilutive securities.......................... 48,476 48,008 49,722 47,335 ======= ====== ======= ====== Basic earnings per share before extraordinary item........ $ .05 .70 2.83 1.56 ======= ====== ======= ====== Diluted earnings per share before extraordinary item...... $ .05 .67 2.73 1.52 ======= ====== ======= ======
------------------------ (1) At September 30, 2001, options to purchase 2,009,820 shares of common stock at prices ranging from $27.02 to $50.00 per share were outstanding, but were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the common stock during the period. These options expire at various dates from 2002 through 2011. (2) At September 30, 2000, options to purchase 282,000 shares of common stock at prices ranging from $29.50 to $50.00 per share were outstanding, but were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the 7 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (5) EARNINGS PER SHARE (CONTINUED) average market price of the common stock during the period. These options expire at various dates from 2002 through 2010. (3) At September 30, 2001, options to purchase 345,250 shares of common stock at prices ranging from $30.75 to $50.00 were outstanding, but were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the common stock during the period. These options expire at various dates from 2003 to 2011. (4) At September 30, 2000, options to purchase 604,850 shares of common stock at prices ranging from $25.25 to $50.00 were outstanding, but were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the common stock during the period. These options expire at various dates from 2002 to 2010. (6) FINANCIAL INSTRUMENTS Forest periodically hedges a portion of its oil and gas production through swap and collar agreements. The purpose of the hedges is to provide a measure of stability in the volatile environment of oil and gas prices and to manage the exposure to commodity price risk. Through December 31, 2000, gains and losses from these financial instruments have been recognized in revenues in the periods to which the derivative financial instruments relate. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. It requires the recognition of all derivative instruments as assets or liabilities in the balance sheet and measurement of those instruments at fair value. The accounting treatment of the changes in fair value is dependent upon whether or not a derivative instrument is designated as a hedge and if so, the type of hedge. For derivatives designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Adoption of SFAS No. 133 at January 1, 2001 resulted in the recognition of a liability of approximately $52,700,000 (of which $10,900,000 was classified as current) and a deferred tax asset of approximately $20,000,000 (of which $4,200,000 was classified as current) and a corresponding reduction in other comprehensive income of approximately $32,700,000. The cumulative effect of the accounting change did not have any effect on the Company's net earnings or earnings per share. Amounts were determined as of January 1, 2001 based on estimated market values, the Company's portfolio of derivative instruments, and the Company's measurement of hedge effectiveness. In a typical swap agreement, Forest receives the difference between a fixed price per unit of production and a price based on an agreed upon third-party index if the index price is lower. If the index price is higher, Forest pays the difference. By entering into swap agreements the Company 8 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (6) FINANCIAL INSTRUMENTS (CONTINUED) effectively fixes the price that it will receive in the future for the hedged production. Forest's current swaps are settled in cash on a monthly basis. Forest enters into swap agreements when prices are less volatile or when collar arrangements are not attractively priced. As of September 30, 2001, Forest had the following swaps in place:
NATURAL GAS OIL ----------------------- ----------------------- AVERAGE AVERAGE BBTU'S HEDGED PRICE BARRELS HEDGED PRICE PER DAY PER MMBTU PER DAY PER BARREL -------- ------------ -------- ------------ 2001................................ 38.1 $3.17 2,000 $26.71 2002................................ 57.8 $3.46 3,996 $24.85
Forest also enters into collar agreements with third parties. A collar agreement is similar to a swap agreement, except that the Company receives the difference between the floor price and the index price only if the index price is below the floor price, and the Company pays the difference only if the index price is above the ceiling price. Collars are settled in cash, either on a monthly basis or at the end of their terms. By entering into collars the Company effectively provides a floor for the price that it will receive for the related production; however, the collar also establishes a maximum price that the Company will receive for the related production if prices increase above the ceiling price. The Company enters into collars during periods of volatile commodity prices in order to protect against a significant decline in prices in exchange for forgoing the benefit of price increases in excess of the ceiling price on the hedged production. As of September 30, 2001, the Company had the following collars in place:
NATURAL GAS ---------------------------------------------- AVERAGE FLOOR AVERAGE CEILING PRICE PRICE BBTU'S PER PER MMBTU PER MMBTU DAY ------------- --------------- ------------ 2001................................ $4.36 $6.45 73.6 2002................................ $4.00 $8.05 2.5
OIL ------------------------------------------------- AVERAGE FLOOR AVERAGE CEILING PRICE PRICE PER BBL PER BBL BARRELS PER DAY ------------- --------------- --------------- 2001................................. $25.56 $29.91 10,500
The Company also uses basis swaps in connection with natural gas swaps to fix the differential price between the NYMEX price and the index price at which the hedged gas is sold. At September 30, 2001 there were basis swaps in place with weighted average volumes of 125.1 BBTU's per day in 2001. The Company periodically assesses the estimated portion of its anticipated production that is subject to hedging arrangements, and adjusts this percentage based on assessment of market conditions and the availability of hedging arrangements that meet the Company's criteria. Hedging arrangements 9 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (6) FINANCIAL INSTRUMENTS (CONTINUED) covered 49% and 48% of Forest's consolidated production, on an equivalent basis, during the third quarter and nine months ended September 30, 2001, respectively. As discussed above, on January 1, 2001, the Company began accounting for the energy swaps and collars, in accordance with SFAS No. 133. All of Forest's energy swap and collar agreements and a portion of Forest's basis swaps in place at January 1, 2001 have been designated as cash flow hedges. As a result, changes in the fair value of the cash flow hedges are recognized in other comprehensive income until the hedged item is recognized in earnings, and any change in fair value resulting from ineffectiveness is recognized immediately in earnings. Changes in the fair value of basis swaps not designated as cash flow hedges are recognized in other income. The increase in fair value of derivative financial instruments included in other comprehensive income during the third quarter and nine months ended September 30, 2001 was $14,308,000 and $30,774,000, respectively. The change in the time value of options and the ineffective portion of derivative financial instruments qualifying as cash flow hedges totaling $(75,000) and $2,407,000 were included in other income (expense) during the third quarter and nine months ended September 30, 2001, respectively. Also included in other income during the third quarter and nine months ended September 30, 2001 are net gains (losses) of $(8,806,000) and $2,298,000, respectively, on basis swaps and other instruments not designated as cash flow hedges. The Company expects to transfer approximately $30,774,000 ($19,080,000, net of tax) of the balance in accumulated other comprehensive income to earnings when the forecasted transactions actually occur. All forecasted transactions currently being hedged are expected to occur by December 2002. In connection with the issuance of $200,000,000 8% Senior Notes due 2008, the Company entered into an interest rate swap under which it will pay a variable rate based on six month LIBOR plus 195 basis points in exchange for a fixed rate of 8% on $100,000,000 over the term of the senior note issue. 10 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (7) BUSINESS AND GEOGRAPHICAL SEGMENTS Segment information has been prepared in accordance with Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information (Statement No. 131). Forest has six reportable segments: oil and gas operations in the Gulf Coast Offshore Region, Gulf Coast Onshore Region, Western Region, Alaska and Canada, and marketing and processing operations in Canada. The segments were determined based upon the type of operations in each segment and the geographical location of each segment. The segment data presented below was prepared on the same basis as Forest's consolidated financial statements. THREE MONTHS ENDED SEPTEMBER 30, 2001
MARKETING GULF COAST REGION AND ------------------- WESTERN TOTAL PROCESSING TOTAL OFFSHORE ONSHORE REGION ALASKA U.S. CANADA TOTAL CANADA COMPANY -------- -------- -------- -------- --------- -------- --------- ---------- --------- (IN THOUSANDS) Revenue................... $83,782 12,769 15,178 23,098 134,827 11,304 146,131 54,982 201,113 Marketing and processing expense................. -- 333 -- -- 333 -- 333 54,161 54,494 Oil and gas production expense................. 22,804 4,938 6,888 13,019 47,649 4,785 52,434 -- 52,434 General and administrative expense................. 3,570 744 948 1,281 6,543 892 7,435 315 7,750 Depreciation and depletion expense................. 42,081 3,530 3,345 5,580 54,536 4,036 58,572 463 59,035 -------- ------- ------- ------- --------- ------- --------- ------ --------- Earnings from operations.............. $15,327 3,224 3,997 3,218 25,766 1,591 27,357 43 27,400 ======== ======= ======= ======= ========= ======= ========= ====== ========= Capital expenditures...... $102,157 15,603 19,193 21,824 158,777 15,246 174,023 -- 174,023 ======== ======= ======= ======= ========= ======= ========= ====== ========= Property and equipment, net..................... $626,195 271,109 201,108 176,056 1,274,468 223,828 1,498,296 -- 1,498,296 ======== ======= ======= ======= ========= ======= ========= ====== =========
Information for Forest's reportable segments relates to the Company's September 30, 2001 consolidated totals as follows:
(IN THOUSANDS) -------------- EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM: Earnings from operations for reportable segments............ $ 27,400 Administrative asset depreciation........................... (1,346) Other expense, net.......................................... (685) Merger and seismic licensing expense........................ (3,763) Interest expense............................................ (12,270) Translation loss on subordinated debt....................... (5,465) Realized gain on derivative instruments, net................ 11,826 Unrealized loss on derivative instruments, net.............. (8,881) ---------- Earnings before income taxes and extraordinary item......... $ 6,816 ========== CAPITAL EXPENDITURES: Reportable segments......................................... $ 174,023 International interests..................................... 3,431 Administrative assets and other............................. 623 ---------- Total capital expenditures.................................. $ 178,077 ========== PROPERTY AND EQUIPMENT, NET: Reportable segments......................................... $1,498,296 International interests..................................... 68,694 Administrative assets, net and other........................ 5,259 ---------- Total property and equipment, net........................... $1,572,249 ==========
11 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (7) BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED) THREE MONTHS ENDED SEPTEMBER 30, 2000
MARKETING GULF COAST REGION AND ------------------- WESTERN TOTAL PROCESSING TOTAL OFFSHORE ONSHORE REGION ALASKA U.S. CANADA TOTAL CANADA COMPANY -------- -------- -------- -------- --------- -------- --------- ---------- --------- (IN THOUSANDS) Revenue................... $92,274 12,630 24,848 17,649 147,401 15,460 162,861 67,624 230,485 Marketing and processing expense................. -- 237 -- -- 237 -- 237 66,925 67,162 Oil and gas production expense................. 17,540 2,343 5,279 6,615 31,777 3,540 35,317 -- 35,317 General and administrative expense................. 3,267 1,024 1,400 567 6,258 1,090 7,348 304 7,652 Depreciation and depletion expense................. 30,386 5,100 7,433 4,644 47,563 4,574 52,137 815 52,952 -------- ------- ------- ------- --------- ------- --------- ------ --------- Earnings (loss) from operations.............. $41,081 3,926 10,736 5,823 61,566 6,256 67,822 (420) 67,402 ======== ======= ======= ======= ========= ======= ========= ====== ========= Capital expenditures...... $68,463 264 7,248 20,581 96,556 12,165 108,721 -- 108,721 ======== ======= ======= ======= ========= ======= ========= ====== ========= Property and equipment, net..................... $496,545 261,180 204,542 124,254 1,086,251 192,848 1,279,369 -- 1,279,369 ======== ======= ======= ======= ========= ======= ========= ====== =========
Information for Forest's reportable segments relates to the Company's September 30, 2000 consolidated totals as follows:
(IN THOUSANDS) -------------- EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM: Earnings from operations for reportable segments............ $ 67,402 Administrative asset depreciation........................... (77) Other expense, net.......................................... (46) Interest expense............................................ (14,411) Translation loss on subordinated debt....................... (2,824) ---------- Earnings before income taxes and extraordinary item......... $ 50,044 ========== CAPITAL EXPENDITURES: Reportable segments......................................... $ 108,721 International interests..................................... 5,926 Administrative assets and other............................. 515 ---------- Total capital expenditures.................................. $ 115,162 ========== PROPERTY AND EQUIPMENT, NET: Reportable segments......................................... $1,279,369 International interests..................................... 32,656 Administrative assets, net and other........................ 7,638 ---------- Total property and equipment, net........................... $1,319,663 ==========
12 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (7) BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED) NINE MONTHS ENDED SEPTEMBER 30, 2001
MARKETING GULF COAST REGION AND ------------------- WESTERN TOTAL PROCESSING TOTAL OFFSHORE ONSHORE REGION ALASKA U.S. CANADA TOTAL CANADA COMPANY -------- -------- -------- -------- --------- -------- --------- ---------- --------- (IN THOUSANDS) Revenue................... $366,995 53,440 66,660 57,335 544,430 47,074 591,504 253,156 844,660 Marketing and processing expense................. -- 1,070 -- -- 1,070 -- 1,070 250,371 251,441 Oil and gas production expense................. 64,580 13,949 18,553 26,937 124,019 12,586 136,605 -- 136,605 General and administrative expense................. 9,116 2,082 2,797 3,299 17,294 2,705 19,999 1,033 21,032 Depreciation and depletion expense................. 120,219 11,232 12,310 12,885 156,646 13,098 169,744 1,405 171,149 -------- ------- ------- ------- --------- ------- --------- ------- --------- Earnings from operations.............. $173,080 25,107 33,000 14,214 245,401 18,685 264,086 347 264,433 ======== ======= ======= ======= ========= ======= ========= ======= ========= Capital expenditures...... $237,010 28,243 29,861 56,420 351,534 46,468 398,002 -- 398,002 ======== ======= ======= ======= ========= ======= ========= ======= ========= Property and equipment, net..................... $626,195 271,109 201,108 176,056 1,274,468 223,828 1,498,296 -- 1,498,296 ======== ======= ======= ======= ========= ======= ========= ======= =========
Information for Forest's reportable segments relates to the Company's September 30, 2001 consolidated totals as follows:
(IN THOUSANDS) -------------- EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM: Earnings from operations for reportable segments............ $ 264,433 Administrative asset depreciation........................... (3,172) Other expense, net.......................................... (1,868) Merger and seismic licensing expense........................ (8,261) Interest expense............................................ (37,763) Translation loss on subordinated debt....................... (7,766) Realized gain on derivative instruments, net................ 11,826 Unrealized gain on derivative instruments, net.............. 4,705 ---------- Earnings before income taxes and extraordinary item......... $ 222,134 ========== CAPITAL EXPENDITURES: Reportable segments......................................... $ 398,002 International interests..................................... 30,332 Administrative assets and other............................. 3,058 ---------- Total capital expenditures.................................. $ 431,392 ========== PROPERTY AND EQUIPMENT, NET: Reportable segments......................................... $1,498,296 International interests..................................... 68,694 Administrative assets, net and other........................ 5,259 ---------- Total property and equipment, net........................... $1,572,249 ==========
13 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (7) BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED) NINE MONTHS ENDED SEPTEMBER 30, 2000
MARKETING GULF COAST REGION AND ------------------- WESTERN TOTAL PROCESSING TOTAL OFFSHORE ONSHORE REGION ALASKA U.S. CANADA TOTAL CANADA COMPANY -------- -------- -------- -------- --------- -------- --------- ---------- --------- (IN THOUSANDS) Revenue................... $240,762 36,797 67,559 47,463 392,581 42,347 434,928 169,849 604,777 Marketing and processing expense................. -- 664 -- -- 664 -- 664 167,618 168,282 Oil and gas production expense................. 47,615 8,891 19,304 16,184 91,994 9,073 101,067 -- 101,067 General and administrative expense................. 11,689 3,085 4,289 2,507 21,570 3,074 24,644 1,073 25,717 Depreciation and depletion expense................. 86,967 15,904 20,282 14,594 137,747 13,387 151,134 1,801 152,935 -------- ------- ------- ------- --------- ------- --------- ------- --------- Earnings (loss) from operations.............. $94,491 8,253 23,684 14,178 140,606 16,813 157,419 (643) 156,776 ======== ======= ======= ======= ========= ======= ========= ======= ========= Capital expenditures...... $164,353 5,450 17,432 41,948 229,183 36,622 265,805 -- 265,805 ======== ======= ======= ======= ========= ======= ========= ======= ========= Property and equipment, net..................... $496,545 261,180 204,542 124,254 1,086,521 192,848 1,279,369 -- 1,279,369 ======== ======= ======= ======= ========= ======= ========= ======= =========
Information for Forest's reportable segments relates to the Company's September 30, 2000 consolidated totals as follows:
(IN THOUSANDS) -------------- EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM: Earnings from operations for reportable segments............ $ 156,776 Administrative asset depreciation........................... (803) Other income, net........................................... 2,000 Interest expense............................................ (42,659) Translation loss on subordinated debt....................... (7,638) ---------- Earnings before income taxes and extraordinary item......... $ 107,676 ========== CAPITAL EXPENDITURES: Reportable segments......................................... $ 265,805 International interests..................................... 10,657 Administrative assets and other............................. 1,233 ---------- Total capital expenditures.................................. $ 277,695 ========== PROPERTY AND EQUIPMENT, NET: Reportable segments......................................... $1,279,369 International interests..................................... 32,656 Administrative assets, net and other........................ 7,638 ---------- Total property and equipment, net........................... $1,319,663 ==========
14 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION Canadian Forest is the issuer of the 8 3/4% Notes (see Note 4). The 8 3/4% Notes are unconditionally guaranteed on a senior subordinated basis by Forest. The indenture executed in connection with the 8 3/4% Notes does not place significant restrictions on a subsidiary's ability to make distributions to the parent. The Company has not presented separate financial statements and other disclosures concerning Canadian Forest or ProMark because management has determined that such information is not material to holders of the 8 3/4% Notes; however, the following condensed consolidating financial information is being provided as of September 30, 2001 and December 31, 2000 and for the three and nine months ended September 30, 2001 and 2000. Investments in subsidiaries are accounted for on the cost basis. Earnings or losses of subsidiaries are therefore not reflected in the related investment accounts. The principal eliminating entries eliminate investments in subsidiaries and intercompany balances. 15 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2001
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING ELIMINATING FOREST OIL CORPORATION LTD. LTD. ENTRIES CORPORATION ----------- ---------- --------- ----------- ------------ (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents............ $ 4,500 70 (70) -- 4,500 Accounts receivable.................. 139,396 9,444 20,381 -- 169,221 Derivative instruments............... 34,237 -- -- -- 34,237 Other current assets................. 33,751 772 -- 34,523 ---------- ------- ------ -------- --------- Total current assets............... 211,884 10,286 20,311 -- 242,481 Net property and equipment, at cost, full cost method..................... 1,353,063 219,164 22 -- 1,572,249 Deferred income taxes.................. 46,922 -- -- -- 46,922 Goodwill and other intangible assets, net.................................. -- -- 17,089 -- 17,089 Intercompany investments............... 148,046 25,713 -- (173,759) -- Other assets........................... 18,649 1,759 -- -- 20,408 ---------- ------- ------ -------- --------- $1,778,564 256,922 37,422 (173,759) 1,899,149 ========== ======= ====== ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable..................... $ 168,391 18,573 16,102 -- 203,066 Accrued interest..................... 6,350 492 -- -- 6,842 Current portion of deferred tax liability.......................... 10,534 -- -- -- 10,534 Other current liabilities............ 19,014 962 27 -- 20,003 ---------- ------- ------ -------- --------- Total current liabilities.......... 204,289 20,027 16,129 -- 240,445 Long-term debt......................... 522,286 133,462 -- -- 655,748 Other liabilities...................... 15,646 (118) -- -- 15,528 Deferred income taxes.................. -- 28,023 (9,917) -- 18,106 Shareholders' equity: Common stock......................... 4,882 148,046 25,265 (173,311) 4,882 Capital surplus...................... 1,152,982 -- -- -- 1,152,982 Accumulated deficit.................. (77,155) (69,249) 10,251 -- (136,153) Accumulated other comprehensive loss............................... 11,354 (3,269) (4,306) -- 3,779 Treasury stock, at cost.............. (55,720) -- -- (448) (56,168) ---------- ------- ------ -------- --------- Total shareholders' equity......... 1,036,343 75,528 31,210 (173,759) 969,322 ---------- ------- ------ -------- --------- $1,778,564 256,922 37,422 (173,759) 1,899,149 ========== ======= ====== ======== =========
16 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2001
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING FOREST OIL CORPORATION LTD. LTD. CORPORATION ----------- ---------- --------- ------------ (IN THOUSANDS) Revenue: Marketing and processing........................ $ 389 -- 54,982 55,371 Oil and gas sales: Gas........................................... 77,916 4,251 -- 82,167 Oil, condensate and natural gas liquids....... 56,688 6,887 -- 63,575 -------- ------ ------ ------- Total oil and gas sales......................... 134,604 11,138 -- 145,742 -------- ------ ------ ------- Total revenue............................... 134,993 11,138 54,982 201,113 Expenses: Marketing and processing........................ 333 -- 54,161 54,494 Oil and gas production.......................... 47,649 4,785 -- 52,434 General and administrative...................... 6,543 867 340 7,750 Merger and seismic licensing expense............ 3,763 -- -- 3,763 Depreciation and depletion...................... 55,337 4,581 463 60,381 -------- ------ ------ ------- Total operating expenses.................... 113,625 10,233 54,964 178,822 -------- ------ ------ ------- Earnings from operations.......................... 21,368 905 18 22,291 Other income and expense: Other (income) expense, net..................... 683 17 (15) 685 Interest expense................................ 9,012 3,258 -- 12,270 Translation gain on subordinated debt........... -- 5,465 -- 5,465 Realized gain on derivative instruments, net.... (11,826) -- -- (11,826) Unrealized loss on derivative instruments, net........................................... 8,881 -- -- 8,881 -------- ------ ------ ------- Total other income and expense.............. 6,750 8,740 (15) 15,475 -------- ------ ------ ------- Earnings (loss) before income taxes and extraordinary item.............................. 14,618 (7,835) 33 6,816 Income tax expense: Current......................................... 369 103 13 485 Deferred........................................ 3,602 86 276 3,964 -------- ------ ------ ------- 3,971 189 289 4,449 -------- ------ ------ ------- Earnings (loss) before extraordinary item......... 10,647 (8,024) (256) 2,367 Extraordinary loss on extinguishment of debt...... -- (827) -- (827) -------- ------ ------ ------- Net earnings (loss)............................... $ 10,647 (8,851) (256) 1,540 ======== ====== ====== =======
17 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2001
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING FOREST OIL CORPORATION LTD. LTD. CORPORATION ----------- ---------- --------- ------------ (IN THOUSANDS) Revenue: Marketing and processing........................ $ 785 -- 253,156 253,941 Oil and gas sales: Gas........................................... 374,689 23,086 -- 397,775 Oil, condensate and natural gas liquids....... 169,107 23,837 -- 192,944 -------- ------ ------- ------- Total oil and gas sales........................... 543,796 46,923 -- 590,719 -------- ------ ------- ------- Total revenue............................... 544,581 46,923 253,156 844,660 Expenses: Marketing and processing........................ 1,070 -- 250,371 251,441 Oil and gas production.......................... 124,019 12,586 -- 136,605 General and administrative...................... 17,294 2,680 1,058 21,032 Merger and seismic licensing expense............ 8,261 -- -- 8,261 Depreciation and depletion...................... 158,187 14,729 1,405 174,321 -------- ------ ------- ------- Total operating expenses.................... 308,831 29,995 252,834 591,660 -------- ------ ------- ------- Earnings from operations.......................... 235,750 16,928 322 253,000 Other income and expense: Other (income) expense, net..................... 1,700 241 (73) 1,868 Interest expense................................ 25,239 12,524 -- 37,763 Translation loss on subordinated debt........... -- 7,766 -- 7,766 Realized gain on derivative instruments, net.... (11,826) -- -- (11,826) Unrealized gain on derivative instruments, net........................................... (4,705) -- -- (4,705) -------- ------ ------- ------- Total other income and expense.............. 10,408 20,531 (73) 30,866 -------- ------ ------- ------- Earnings (loss) before income taxes and extraordinary item.............................. 225,342 (3,603) 395 222,134 Income tax expense: Current......................................... 2,462 225 34 2,721 Deferred........................................ 79,387 3,238 957 83,582 -------- ------ ------- ------- 81,849 3,463 991 86,303 -------- ------ ------- ------- Earnings (loss) before extraordinary item......... 143,493 (7,066) (596) 135,831 Extraordinary loss on extinguishment of debt...... -- (2,417) -- (2,417) -------- ------ ------- ------- Net earnings (loss)............................... $143,493 (9,483) (596) 133,414 ======== ====== ======= =======
18 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2001
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING FOREST OIL CORPORATION LTD. LTD. CORPORATION ----------- ---------- --------- ------------ (IN THOUSANDS) Cash flow from operating activities: Net earnings (loss) before extraordinary item........... $ 143,493 (7,066) (596) 135,831 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and depletion............................ 158,187 14,729 1,405 174,321 Amortization of deferred debt costs................... 991 318 -- 1,309 Translation loss on subordinated notes................ -- 7,766 -- 7,766 Unrealized gain on derivative instruments, net........ (4,705) -- -- (4,705) Deferred income tax expense........................... 79,387 3,238 957 83,582 Other, net............................................ (53) (5) 4 (54) Decrease (increase) in accounts receivable............ 2,509 (2,322) 31,689 31,876 Decrease (increase) in other current assets........... (11,367) (135) 400 (11,102) Increase (decrease) in accounts payable............... 44,787 35,125 (33,832) 46,080 Increase (decrease) in accrued interest and other current liabilities................................. (19,684) (35,954) 21 (55,617) --------- ------- ------- -------- Net cash provided by operating activities........... 393,545 15,694 48 409,287 Cash flows from investing activities: Capital expenditures for property and equipment....... (384,662) (46,730) -- (431,392) Proceeds from sale of assets.......................... 31,681 165 -- 31,846 Increase in other assets, net......................... (2,497) -- -- (2,497) --------- ------- ------- -------- Net cash used by investing activities............... (355,478) (46,565) -- (402,043) Cash flows from financing activities: Proceeds from bank borrowings......................... 675,000 12,986 -- 687,986 Repayments of bank borrowings......................... (754,000) (34,238) -- (788,238) Issuance of 8% senior notes, net of issuance costs.... 199,500 -- -- 199,500 Redemption of 8 3/4% senior subordinated notes........ -- (67,003) -- (67,003) Proceeds from the exercise of options and warrants.... 8,261 -- -- 8,261 Purchase of treasury stock............................ (55,720) -- -- (55,720) Decrease in other liabilities, net.................... (1,160) (42) -- (1,202) --------- ------- ------- -------- Net cash provided (used) by financing activities.... 71,881 (88,297) -- (16,416) Intercompany advances, net.............................. (120,209) 120,209 -- -- Effect of exchange rate changes on cash................. (17) (312) (2) (331) --------- ------- ------- -------- Net increase (decrease) in cash and cash equivalents.... (10,278) 729 46 (9,503) Cash and cash equivalents at beginning of year.......... 14,778 (659) (116) 14,003 --------- ------- ------- -------- Cash and cash equivalents at end of year................ $ 4,500 70 (70) 4,500 ========= ======= ======= ========
19 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2000
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING ELIMINATING FOREST OIL CORPORATION LTD. LTD. ENTRIES CORPORATION ----------- ---------- --------- ----------- ------------ (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents............ $ 14,778 (659) (116) -- 14,003 Accounts receivable.................. 141,932 7,349 53,964 -- 203,245 Other current assets................. 20,039 1,106 435 -- 21,580 ---------- ------- ------- ------- --------- Total current assets............... 176,749 7,796 54,283 -- 238,828 Net property and equipment, at cost, full cost method..................... 1,161,420 198,276 60 -- 1,359,756 Deferred income taxes.................. 119,300 -- -- -- 119,300 Goodwill and other intangible assets, net.................................. -- -- 19,412 -- 19,412 Intercompany investments............... 27,840 25,713 -- (53,553) -- Other assets........................... 12,096 2,986 -- -- 15,082 ---------- ------- ------- ------- --------- $1,497,405 234,771 73,755 (53,553) 1,752,378 ========== ======= ======= ======= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable..................... $ 123,944 16,569 51,687 -- 192,200 Accrued interest..................... 6,393 5,043 -- -- 11,436 Other current liabilities............ 35,443 852 6 -- 36,301 ---------- ------- ------- ------- --------- Total current liabilities.......... 165,780 22,464 51,693 -- 239,937 Long-term debt......................... 401,162 221,072 -- -- 622,234 Other liabilities...................... 16,458 (82) -- -- 16,376 Deferred income taxes.................. -- 26,300 (11,435) -- 14,865 Shareholders' equity Common stock......................... 4,840 27,840 25,265 (53,105) 4,840 Capital surplus...................... 1,139,136 -- -- -- 1,139,136 Accumulated deficit.................. (220,648) (59,766) 10,847 -- (269,567) Accumulated other comprehensive loss............................... (6,505) (3,057) (2,615) -- (12,177) Treasury stock, at cost.............. (2,818) -- -- (448) (3,266) ---------- ------- ------- ------- --------- Total shareholders' equity......... 914,005 (34,983) 33,497 (53,553) 858,966 ---------- ------- ------- ------- --------- $1,497,405 234,771 73,755 (53,553) 1,752,378 ========== ======= ======= ======= =========
20 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING ELIMINATING FOREST OIL CORPORATION LTD. LTD. ENTRIES CORPORATION ----------- ---------- --------- ----------- ------------ (IN THOUSANDS) Revenue: Marketing and processing.................... $ (78) -- 67,624 -- 67,546 Oil and gas sales: Gas....................................... 83,883 8,506 (520) -- 91,869 Oil, condensate and natural gas liquids... 60,066 10,484 520 -- 71,070 -------- ------ ------ --- ------- Total oil and gas sales..................... 143,949 18,990 -- -- 162,939 -------- ------ ------ --- ------- Total revenue........................... 143,871 18,990 67,624 -- 230,485 Expenses: Marketing and processing.................... 237 -- 66,925 -- 67,162 Oil and gas production...................... 31,777 3,540 -- -- 35,317 General and administrative.................. 6,258 1,090 304 -- 7,652 Depreciation and depletion.................. 47,892 4,650 487 -- 53,029 -------- ------ ------ --- ------- Total operating expenses................ 86,164 9,280 67,716 -- 163,160 -------- ------ ------ --- ------- Earnings (loss) from operations............... 57,707 9,710 (92) -- 67,325 Other income and expense: Other expense (income), net................. (230) 317 (50) 9 46 Interest expense............................ 9,362 5,049 9 (9) 14,411 Translation loss on subordinated debt....... -- 2,824 -- -- 2,824 -------- ------ ------ --- ------- Total other income and expense.......... 9,132 8,190 (41) -- 17,281 -------- ------ ------ --- ------- Earnings (loss) before income taxes........... 48,575 1,520 (51) -- 50,044 Income tax expense (benefit): Current..................................... 143 149 33 -- 325 Deferred.................................... 13,583 2,382 (40) -- 15,925 -------- ------ ------ --- ------- 13,726 2,531 (7) -- 16,250 -------- ------ ------ --- ------- Net earnings (loss)........................... $ 34,849 (1,011) (44) -- 33,794 ======== ====== ====== === ======= Earnings (loss) attributable to common stock....................................... $ 33,389 (1,011) (44) -- 32,334 ======== ====== ====== === =======
21 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2000
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING ELIMINATING FOREST OIL CORPORATION LTD. LTD. ENTRIES CORPORATION ----------- ---------- --------- ----------- ------------ (IN THOUSANDS) Revenue: Marketing and processing.............. $ 842 -- 169,849 -- 170,691 Oil and gas sales: Gas................................. 221,523 20,747 474 -- 242,744 Oil, condensate and natural gas liquids........................... 163,046 27,776 520 -- 191,342 -------- ------- ------- ---- ------- Total oil and gas sales............... 384,569 48,523 994 -- 434,086 -------- ------- ------- ---- ------- Total revenue..................... 385,411 48,523 170,843 -- 604,777 Expenses: Marketing and processing.............. 664 -- 167,618 -- 168,282 Oil and gas production................ 91,994 8,997 76 -- 101,067 General and administrative............ 21,570 3,074 1,073 -- 25,717 Depreciation and depletion............ 138,675 13,262 1,801 -- 153,738 -------- ------- ------- ---- ------- Total operating expenses.......... 252,903 25,333 170,568 -- 448,804 -------- ------- ------- ---- ------- Earnings from operations................ 132,508 23,190 275 -- 155,973 Other income and expense: Other (income) expense, net........... (2,022) (5,530) 5,179 373 (2,000) Interest expense...................... 27,364 15,295 373 (373) 42,659 Translation loss on subordinated debt................................ -- 7,638 -- -- 7,638 -------- ------- ------- ---- ------- Total other income and expense.... 25,342 17,403 5,552 -- 48,297 -------- ------- ------- ---- ------- Earnings (loss) before income taxes..... 107,166 5,787 (5,277) -- 107,676 Income tax expense (benefit): Current............................... 143 387 101 -- 631 Deferred.............................. 28,221 23,139 (19,383) -- 31,977 -------- ------- ------- ---- ------- 28,364 23,526 (19,282) -- 32,608 -------- ------- ------- ---- ------- Net earnings (loss)..................... $ 78,802 (17,739) 14,005 -- 75,068 ======== ======= ======= ==== ======= Earnings (loss) attributable to common stock................................. $ 75,771 (17,739) 14,005 -- 72,037 ======== ======= ======= ==== =======
22 FOREST OIL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED) (8) SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2000
CANADIAN PRODUCERS CONSOLIDATED FOREST OIL FOREST OIL MARKETING FOREST OIL CORPORATION LTD. LTD. CORPORATION ----------- ---------- --------- ------------ (IN THOUSANDS) Cash flow from operating activities: Net earnings (loss)..................................... $ 78,802 (17,739) 14,005 75,068 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and depletion............................ 138,675 13,262 1,801 153,738 Amortization of deferred debt costs................... 817 297 -- 1,114 Translation loss on subordinated notes................ -- 7,638 -- 7,638 Deferred income tax expense (benefit)................. 28,221 23,139 (19,383) 31,977 Stock and stock option compensation................... 2,570 -- -- 2,570 Other, net............................................ (701) (293) 2 (992) Increase in accounts receivable....................... (15,582) (6,918) (7,851) (30,351) Decrease (increase) in other current assets........... (34,368) 1,275 2,329 (30,764) Increase (decrease) in accounts payable............... (13,691) (9,566) 12,431 (10,826) Increase (decrease) in accrued interest and other current liabilities................................. (20,555) 4,474 5 (16,076) --------- ------- ------- -------- Net cash provided by operating activities before reorganization item............................... 164,188 15,569 3,339 183,096 Decrease in accrued reorganization costs.............. (11,199) -- -- (11,199) --------- ------- ------- -------- Net cash provided by operating activities after reorganization item................................. 152,989 15,569 3,339 171,897 Cash flows from investing activities: Capital expenditures for property and equipment....... (240,932) (36,763) -- (277,695) Proceeds from sale of assets.......................... 6,862 1,715 -- 8,577 Increase in other assets, net......................... (3,514)) -- -- (3,514) --------- ------- ------- -------- Net cash used by investing activities............... (237,584) (35,048) -- (272,632) Cash flows from financing activities: Proceeds from bank borrowings......................... 234,657 12,250 -- 246,907 Repayments of bank borrowings......................... (263,530) (8,753) -- (272,283) Proceeds from issuance of preferred stock............. 38,800 -- -- 38,800 Redemption of 8 3/4% Senior Secured Notes............. -- (4,630) -- (4,630) Proceeds from exercise of options..................... 6,291 -- -- 6,291 Purchase of treasury stock............................ (2,818) -- -- (2,818) Decrease in other liabilities, net.................... (1,789) (364) -- (2,153) --------- ------- ------- -------- Net cash provided (used) by financing activities.... 11,611 (1,497) -- 10,114 Intercompany advances, net.............................. (20,429) 21,054 (625) -- Effect of exchange rate changes on cash................. 28 23 (27) 24 --------- ------- ------- -------- Net increase (decrease) in cash and cash equivalents.... (93,385) 101 2,687 (90,597) Cash and cash equivalents at beginning of year.......... 100,136 (343) (132) 99,661 --------- ------- ------- -------- Cash and cash equivalents at end of year................ $ 6,751 (242) 2,555 9,064 ========= ======= ======= ========
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