-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bDgHuscPpBRYxp8SrgqG45tM010T6iTVH80Xfd92nE8tqEn5MAbebSzkmQ9bOt0t JO3IqwXPn1YTavC2RU+aJQ== 0000912057-94-003860.txt : 19941116 0000912057-94-003860.hdr.sgml : 19941116 ACCESSION NUMBER: 0000912057-94-003860 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST OIL CORP CENTRAL INDEX KEY: 0000038079 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 250484900 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04597 FILM NUMBER: 94559481 BUSINESS ADDRESS: STREET 1: 1500 COLORADO NATIONAL BLDG STREET 2: 950 17TH ST CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 8143687171 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A Commission File Number 0-4597 FOREST OIL CORPORATION (Exact name of registrant as specified in its charter) New York 25-0484900 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1500 Colorado National Building 950 - 17th Street Denver, Colorado 80202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 592-2400 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ NUMBER OF SHARES OUTSTANDING TITLE OF CLASS OF COMMON STOCK OCTOBER 31, 1994 - ------------------------------ ---------------- Common Stock, Par Value $.10 Per Share 28,157,088 - ------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION FOREST OIL CORPORATION Condensed Consolidated Balance Sheets (Unaudited)
September 30, December 31, 1994 1993 ----------- ---------- (In Thousands) ASSETS Current assets: Cash and cash equivalents $ 2,027 6,949 Accounts receivable 22,918 25,257 Other current assets 2,656 3,309 ---------- ---------- Total current assets 27,601 35,515 Property and equipment, at cost: Oil and gas properties - full cost accounting method 1,159,862 1,140,656 Buildings, transportation and other equipment 12,569 12,420 ---------- ---------- 1,172,431 1,153,076 Less accumulated depreciation, depletion and valuation allowance 870,100 787,380 ---------- ---------- Net property and equipment 302,331 365,696 Investment in and advances to affiliate 11,731 16,451 Other assets 10,911 9,093 ---------- ---------- $ 352,574 426,755 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdraft $ 3,464 3,894 Current portion of nonrecourse secured loan and production payment obligation 686 4,371 Current portion of subordinated debentures -- 7,171 Accounts payable 21,503 28,348 Retirement benefits payable to executives and directors 610 553 Accrued expenses and other liabilities: Interest 1,616 3,817 Other 4,483 1,857 ---------- ---------- Total current liabilities 32,362 50,011 Long-term bank debt 27,000 25,000 Nonrecourse secured loan and production payment obligation 74,606 70,035 Subordinated debentures 99,305 99,272 Retirement benefits payable to executives and directors 3,623 4,135 Other liabilities 20,657 22,918 Deferred revenue 43,791 67,228 Shareholders' equity: Convertible preferred stock 15,845 15,845 Capital stock 2,829 2,825 Capital surplus 189,594 193,717 Accumulated deficit (153,548) (117,656) Foreign currency translation (914) (785) Treasury stock (2,576) (5,790) ---------- ---------- Total shareholders' equity 51,230 88,156 ---------- ---------- $ 352,574 426,755 ---------- ---------- ---------- ----------
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, September 30, September 30, 1994 1993 1994 1993 ------------- ------------- ------------- ------------- (In Thousands Except Production and Per Share Amounts) PRODUCTION Gas (MMCF) 11,371 10,719 36,628 30,416 --------- --------- --------- --------- --------- --------- --------- --------- Oil and condensate (thousand barrels) 365 369 1,152 1,146 --------- --------- --------- --------- --------- --------- --------- --------- STATEMENTS OF CONSOLIDATED OPERATIONS: Revenue: Oil and gas sales: Gas $ 20,727 19,943 70,483 57,933 Oil and condensate 5,830 5,811 16,825 19,665 Products and other 66 -- 280 -- --------- --------- --------- --------- 26,623 25,754 87,588 77,598 Miscellaneous, net 437 460 2,299 1,717 --------- --------- --------- --------- Total revenue 27,060 26,214 89,887 79,315 Expenses: Oil and gas production 5,419 4,897 16,647 13,789 General and administrative 2,964 2,582 7,553 7,556 Interest 6,602 5,753 20,077 19,068 Depreciation and depletion 15,869 15,734 51,473 44,730 Provision for impairment of oil and gas properties 30,000 -- 30,000 -- --------- --------- --------- --------- Total expenses 60,854 28,966 125,750 85,143 --------- --------- --------- --------- Loss before income taxes, cumulative effects of changes in accounting principles and extraordinary loss on extinguishment of debt (33,794) (2,752) (35,863) (5,828) Income tax expense (benefit): Current (55) (172) 29 254 Deferred -- (227) -- (1,525) --------- --------- --------- --------- (55) (399) 29 (1,271) --------- --------- --------- --------- Loss before cumulative effects of changes in accounting principles and extraordinary loss on extinguishment of debt (33,739) (2,353) (35,892) (4,557) Cumulative effects of changes in accounting principles: Postretirement benefits, net of income tax benefit of $1,639,000 -- -- -- (3,183) Income taxes -- -- -- 2,060 --------- --------- --------- --------- -- -- -- (1,123) --------- --------- --------- --------- Loss before extraordinary loss on extinguishment of debt (33,739) (2,353) (35,892) (5,680) Extraordinary loss on extinguishment of debt, net of tax benefit of $4,652,000 -- (10,749) -- (10,749) --------- --------- --------- --------- Net loss $ (33,739) (13,102) (35,892) (16,429) --------- --------- --------- --------- --------- --------- --------- ---------
(continued on next page) -2- FOREST OIL CORPORATION Condensed Consolidated Statements of Production and Operations, continued (Unaudited)
Three Months Ended Nine Months Ended ---------------------------- ------------------------------ September 30, September 30, September 30, September 30, 1994 1993 1994 1993 ------------- ------------ ------------- ------------- (In Thousands Except Production and Per Share Amounts) Weighted average number of common shares outstanding 28,135 27,525 28,072 20,032 --------- --------- --------- --------- --------- --------- --------- --------- Net loss attributable to common stock $ (34,280) (13,653) (37,513) (18,137) --------- --------- --------- --------- --------- --------- --------- --------- Primary and fully diluted loss per share: Loss before cumulative effects of changes in accounting principles and extraordinary loss on extinguishment of debt $ (1.20) (.09) (1.28) (.23) Cumulative effects of changes in accounting principles -- -- -- (.06) --------- --------- --------- --------- Loss before extraordinary loss on extinguishment of debt (1.20) (.09) (1.28) (.29) --------- --------- --------- --------- Extraordinary loss on extinguishment of debt -- (.39) -- (.53) --------- --------- --------- --------- Net loss $ (1.20) (.48) (1.28) (.82) --------- --------- --------- --------- --------- --------- --------- --------- Net loss attributable to common stock $ (1.22) (.50) (1.34) (.91) --------- --------- --------- --------- --------- --------- --------- ---------
See accompanying notes to condensed consolidated financial statements. -3- FOREST OIL CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended ----------------------------- September 30, September 30, 1994 1993 -------------- ------------- (In Thousands) Cash flows from operating activities: Loss before cumulative effects of changes in accounting principles and extraordinary loss on extinguishment of debt $ (35,892) (4,557) Adjustments to reconcile loss to net cash provided by operating activities: Depreciation and depletion 51,473 44,730 Provision for impairment of oil and gas properties 30,000 -- Deferred Federal income tax benefit -- (1,525) Other, net 3,230 2,526 ---------- ---------- 48,811 41,174 Net changes in current assets and liabilities: Decrease in accounts receivable 2,339 3,913 (Increase) decrease in other current assets 653 (844) Decrease in accounts payable (6,788) (16,890) Increase (decrease) in accrued expenses and other liabilities 425 (1,856) ---------- ---------- Net cash provided by operating activities 45,440 25,497 Cash flows from investing activities: Capital expenditures for property and equipment (26,706) (45,960) Proceeds from sales of property and equipment 13,203 2,726 Increase in other assets, net (1,895) (1,914) ---------- ---------- Net cash used by investing activities (15,398) (45,148) Cash flows from financing activities: Proceeds of long-term bank debt 12,500 -- Repayments of long-term bank debt (10,500) -- Proceeds of nonrecourse secured loan 1,400 -- Repayments of production payment (2,394) (4,930) Redemptions and purchases of subordinated debentures (7,171) (33,094) Proceeds of volumetric production payments 4,353 27,261 Amortization of deferred revenue (27,790) (29,436) Proceeds of common stock offering, net of offering costs -- 51,506 Issuance of senior subordinated notes, net of offering costs -- 96,259 Preferred stock dividends (1,621) -- Deferred debt costs (702) (113) Decrease in cash overdraft (430) (2,575) Decrease in other liabilities, net (2,773) (687) ---------- ---------- Net cash provided (used) by financing activities (35,128) 104,191 Effect of exchange rate changes on cash 164 -- ---------- ---------- Net increase (decrease) in cash and cash equivalents (4,922) 84,540 Cash and cash equivalents at beginning of period 6,949 63,487 ---------- ---------- Cash and cash equivalents at end of period $ 2,027 148,027 ---------- ---------- ---------- ---------- Cash paid during the period for: Interest $ 20,543 19,330 ---------- ---------- ---------- ---------- Income taxes $ 6 453 ---------- ---------- ---------- ----------
See accompanying notes to condensed consolidated financial statements. -4- FOREST OIL CORPORATION Notes to Condensed Consolidated Financial Statements Nine Months Ended September 30, 1994 and 1993 (Unaudited) (1) Basis of Presentation The consolidated financial statements included herein are unaudited. 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 the Company at September 30, 1994 and the results of operations for the nine month periods ended September 30, 1994 and 1993. Quarterly results are not necessarily indicative of expected annual results because of the impact of fluctuations in prices received for oil and natural gas and other factors. For a more complete understanding of the Company's operations and financial position, reference is made to the consolidated financial statements of the Company, and related notes thereto, filed with the Company's annual report on Form 10-K for the year ended December 31, 1993, previously filed with the Securities and Exchange Commission. (2) Earnings (Loss) Per Share Primary earnings (loss) per share is computed by dividing net earnings (loss) attributable to common stock by the weighted average number of common shares and common share equivalents outstanding during each period, excluding treasury shares. Net earnings (loss) attributable to common stock represents net earnings (loss) less preferred stock dividend requirements. Common share equivalents include, when applicable, dilutive stock options using the treasury stock method and warrants using the if converted method. Fully diluted earnings (loss) per share is computed assuming, in addition to the above, (i) that convertible debentures were converted at the beginning of each period or date of issuance, if later, with earnings being increased for interest expense, net of taxes, that would not have been incurred had conversion taken place, (ii) that convertible preferred stock was converted at the beginning of each period or date of issuance, if later, and (iii) any additional dilutive effect of stock options and warrants. The assumed exercises and conversions were antidilutive for the nine months ended September 30, 1994 and 1993. (3) Acquisitions The Company completed three significant property acquisitions in the fourth quarter of 1993. The results of operations of the Company for the 1994 periods presented herein include the effects of those acquisitions. (4) Investment in and Advances to Affiliate On June 24, 1994 the Company's affiliate, CanEagle Resources Corporation (CanEagle), sold a significant portion of its oil and gas properties in Canada to a third party. In conjunction with this transaction, the Company received payment of approximately $4,400,000 ($6,124,000 CDN) representing principal and unpaid interest on the CanEagle subordinated debenture held by the Company. In addition, the Company exchanged its remaining investment in CanEagle for preferred shares of a newly formed entity, Archean Energy, Ltd. The Company recognized no gain or loss as a result of this transaction. -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto. RESULTS OF OPERATIONS FOR THE THIRD QUARTER OF 1994 NET LOSS The net loss for the third quarter of 1994 was $33,739,000 or $1.22 per common share compared to a net loss of $13,102,000 or $.50 per common share in the third quarter of 1993. The 1994 loss included a $30,000,000 writedown of the book value of the Company's oil and gas properties due to a ceiling test limitation and the 1993 loss included an extraordinary loss on extinguishment of debt of $10,749,000. REVENUE The Company's oil and gas sales revenue increased by 3% to $26,623,000 in the third quarter of 1994 from $25,754,000 in the third quarter of 1993. As a result of property acquisitions, discoveries and extensions, natural gas production levels for the 1994 period increased over the 1993 period, but these increases were partially offset by the effects of property sales and normal production declines. Oil production levels remained approximately the same in the third quarter of 1994 as in the third quarter of 1993. The average sales price for natural gas in the third quarter of 1994 was $1.82 per thousand cubic feet of natural gas (MCF), a decrease of $.04 per MCF or 2% compared to the average sales price of $1.86 per MCF in the third quarter of the prior year. The average sales price for oil in the third quarter of 1994 of $15.97 per barrel represented an increase of $.22 per barrel or 1% compared to the average sales price of $15.75 per barrel in the same period of the prior year. EXPENSES Oil and gas production expense increased 11% to $5,419,000 in the third quarter of 1994 from $4,897,000 in the comparable period of 1993. The increase was due primarily to increased natural gas production. On an MCFE basis (MCFE means thousands of cubic feet of natural gas equivalents, using a conversion ratio of one barrel of oil to six MCF of natural gas), production expense increased 5% in the third quarter of 1994 to $.40 per MCFE from $.38 per MCFE in the third quarter of 1993. General and administrative expense was $2,964,000 in the third quarter of 1994, an increase of 15% from $2,582,000 in the third quarter of 1993. Total overhead costs (capitalized and expensed general and administrative costs) of $4,911,000 in the third quarter of 1994 increased 13% from $4,332,000 in the comparable period in 1993. Both increases are due primarily to employee relocation expenses and increased insurance expense attributable to a larger asset base. Interest expense of $6,602,000 in the third quarter of 1994 increased 15% from $5,753,000 in the comparable period in 1993 due to higher loan balances as a result of recent capital spending. Depreciation and depletion expense increased slightly to $15,869,000 in the third quarter of 1994 from $15,734,000 in the third quarter of 1993 due to increased production in the 1994 period. The depletion rate per unit of production in the 1994 period was $1.16 per MCFE, compared to $1.20 per MCFE in the prior year period. Forest Oil and other companies utilizing full cost accounting are required to perform quarterly ceiling tests and to write down capitalized exploration and development costs to the extent such costs exceed the estimated value of oil and gas reserves calculated in the manner prescribed by the rules of the Securities and Exchange Commission (SEC). The SEC rules require the use of unescalated current contract prices or spot prices for volumes not under contract in the valuation of reserves. The Company's SEC PV10 reserve value (estimated future net revenues discounted at 10%) was severely impacted in the third quarter because its reserves are primarily natural gas which has experienced -6- periods of price volatility since being deregulated, including a sharp decline in the third quarter of 1994. The writedown results entirely from low natural gas prices and is not the result of a decrease in the quantity of the Company's oil and gas reserves. The writedown of the carrying value of oil and gas properties will have no effect upon the Company's cash flow, liquidity or debt covenants. Presented below is a schedule of Changes in the Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves from December 31, 1993 to September 30, 1994, prepared in accordance with Statement of Financial Accounting Standards No. 69. Changes in the demand for oil and natural gas, inflation and other factors make estimates inherently imprecise and subject to substantial revision. This table should not be construed to be an estimate of the current market value of the Company's proved reserves. The information presented demonstrates that the writedown is entirely attributable to a decrease in spot market prices for natural gas. Even though reserves have been added through purchases, extensions, discoveries and revisions, the increased value attributed to such reserves was more than offset by the impact of decreasing prices.
Nine Months Ended September 30, 1994 ------------------- (In Thousands) December 31, 1993 $ 299,053 Changes resulting from: Sales of oil and gas, net of production costs (51,039) Net changes in prices and future production costs (82,301) Net changes in future development costs 5,360 Extensions, discoveries and improved recovery 9,209 Previously estimated development costs incurred during the period 5,593 Revisions of previous quantity estimates 8,957 Sales of reserves in place (7,972) Purchases of reserves in place 8,325 Accretion of discount on reserves at beginning of year before income taxes 24,251 Net change in income taxes 23,156 --------- September 30, 1994 $ 242,592 --------- ---------
The Company could have chosen to lessen or completely eliminate the need for a writedown by entering into financial derivatives (swaps) and locking in future natural gas prices. The Company would have had to contract approximately one-third of its natural gas reserve base to avoid the entire writedown. Company management decided not to enter into such contracts because it believes the natural gas market is now at a cyclical low, and such arrangements would ultimately be detrimental to the Company's shareholders. In addition, the Company considered but chose not to adopt successful efforts accounting. It is management's belief that full cost accounting remains the most appropriate method of accounting for the Company's current mix of operations, despite the quarterly ceiling test requirement. Additional writedowns of the full cost pool may be required if prices decrease, undeveloped property values decrease, estimated proved reserve volumes are revised downward or costs incurred in exploration, development, or acquisition activities exceed the discounted future net cash flows from the additional reserves, if any. -7- RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 NET LOSS The net loss for the first nine months of 1994 was $35,892,000 or $1.34 per common share compared to a net loss of $16,429,000 or $.91 per common share for the comparable period in 1993. The 1994 net loss included a $30,000,000 writedown of the book value of the Company's oil and gas properties as described above. The 1993 net loss included cumulative effects of changes in accounting principles of $1,123,000 and an extraordinary loss on extinguishment of debt of $10,749,000. The increase in operating revenues in the first nine months of 1994 from the properties acquired at the end of 1993 was more than offset by an increase in production and depletion expense in the 1994 period. The weighted average number of common shares outstanding during the nine months ended September 30, 1994 was approximately 28,072,000 compared to approximately 20,032,000 in the corresponding period of the prior year due primarily to the issuance of 11,080,000 shares of Common Stock in June, 1993. REVENUE The Company's oil and gas sales revenue increased by 13% to $87,588,000 for the nine months ended September 30, 1994 from $77,598,000 in the comparable period of 1993. Natural gas production levels for the 1994 period increased over the 1993 period by 20% due primarily to property acquisitions. Oil production levels for the 1994 period increased slightly from the 1993 period. The average sales price for natural gas in the first nine months of 1994 was $1.92 per MCF, an increase of $.02 per MCF or 1% over the average sales price of $1.90 in the first nine months of the prior year. The average sales price for oil in the first nine months of 1994 of $14.60 per barrel represented a decrease of $2.56 per barrel or 15% compared to the average sales price of $17.16 in the same period of the prior year. The production volumes and weighted average sales prices during the periods were as follows:
Three Months Ended Nine Months Ended ----------------------------- ----------------------------- September 30, September 30, September 30, September 30, 1994 1993 1994 1993 ------------- ------------- ------------- ------------- (In Thousands) Natural Gas Production under long-term fixed price contracts (MMCF) (1) 4,048 5,493 13,057 14,053 Average contract sales price (per MCF) (1) $ 1.78 1.73 1.78 1.63 Production sold on the spot market (MMCF)(2) 7,323 5,226 23,571 16,363 Spot sales price received (per MCF) $ 1.71 2.11 1.98 2.25 Effects of energy swaps (per MCF) (2) .14 (.12) .02 (.11) --------- --------- --------- --------- Average spot sales price (per MCF) $ 1.85 1.99 2.00 2.14 Total production (MMCF) 11,371 10,719 36,628 30,416 Average sales price (per MCF) $ 1.82 1.86 1.92 1.90 Oil and condensate (3) Total production (MBBLS) 365 369 1,152 1,146 Average sales price (per BBL) $ 15.97 15.75 14.60 17.16 (1) Production under long-term fixed price contracts includes scheduled deliveries under volumetric production payments, net of royalties. See "Volumetric Production Payments" below. (2) Energy swaps were entered into to hedge the price of spot market volumes against price fluctuation. Hedged volumes were 3,458 MMCF and 2,094 MMCF for the three months ended September 30, 1994 and 1993, respectively, and 8,840 MMCF and 6,004 MMCF for the nine months ended September 30, 1994 and 1993, respectively. (3) Oil and condensate production is sold primarily on the spot market. An immaterial amount of production is covered by long-term fixed price contracts, including scheduled deliveries under volumetric production payments, net of royalties.
-8- Miscellaneous net revenue increased to $2,299,000 in the first nine months of 1994 from $1,717,000 in the comparable 1993 period. The 1994 amount includes income from the sale of miscellaneous pipeline systems and equipment and the reversal of an accounts receivable reserve. The 1993 amount included an adjustment to reduce accrued severance taxes based on communications with the applicable state taxing authority. EXPENSES Oil and gas production expense increased 21% to $16,647,000 in the first nine months of 1994 from $13,789,000 in the comparable period of 1993. The increase was due to increased natural gas production. On an MCFE basis, production expense was $.38 per MCFE in the first nine months of 1994 and $.37 in the first nine months of 1993. General and administrative expense was $7,553,000 in the first nine months of 1994, a slight decrease from $7,556,000 in the first nine months of 1993. Total overhead costs (capitalized and expensed general and administrative costs) of $13,076,000 in the first nine months of 1994 increased 6% from $12,387,000 in the comparable period in 1993, primarily due to employee relocation expenses and increased insurance expense attributable to a larger asset base. The Company's salaried workforce was 142 at September 30, 1994 and 133 at September 30, 1993. The following table summarizes the total overhead costs incurred during the periods:
Three Months Ended Nine Months Ended ------------------------------ ----------------------------- September 30, September 30, September 30, September 30, 1994 1993 1994 1993 ------------- ------------- -------------- ------------- (In Thousands) Overhead costs capitalized $ 1,947 1,750 5,523 4,831 General and administrative costs expensed 2,964 2,582 7,553 7,556 --------- --------- --------- --------- Total overhead costs $ 4,911 4,332 13,076 12,387 --------- --------- --------- --------- --------- --------- --------- ---------
Interest expense of $20,077,000 in the first nine months of 1994 increased 5% from $19,068,000 in the comparable period in 1993 due to higher loan balances as a result of recent capital spending. Depreciation and depletion expense increased 15% to $51,473,000 in the first nine months of 1994 from $44,730,000 in the first nine months of 1993 due to increased production in the 1994 period. The depletion rate per unit of production averaged $1.17 per MCFE for the first nine months of 1994 and $1.18 per MCFE for the first nine months of 1993. At September 30, 1994 the Company had undeveloped properties with a cost basis of approximately $41,824,000 which were excluded from depletion, compared to $18,305,000 at September 30, 1993. The increase is attributable primarily to the acquisition of undeveloped properties in 1992 and 1993. As described previously, the Company was required to record a $30,000,000 writedown of the carrying value of its oil and gas properties at September 30, 1994. Additional writedowns of the full cost pool may be required if prices decrease, undeveloped property values decrease, estimated proved reserve volumes are revised downward or costs incurred in exploration, development, or acquisition activities exceed the discounted future net cash flows from the additional reserves, if any. As of December 31, 1993, there were no remaining deferred tax liabilities. No tax benefits for operating loss carryforwards have been recorded in the first nine months of 1994. -9- CAPITAL RESOURCES AND LIQUIDITY CASH FLOW Historically, one of the Company's primary sources of capital has been funds provided by operations, which has varied dramatically in prior periods depending upon factors such as natural gas contract settlements and price fluctuations, which are difficult to predict. The following summary table reflects comparative cash flows for the Company for the periods ended September 30, 1994 and 1993:
Nine Months Ended September 30, ------------------------------- 1994 1993 ------ ------ (In Thousands) Funds provided by operations (A) (B) $ 48,811 41,174 Net cash provided by operating activities (B) 45,440 25,497 Net cash used by investing activities (15,398) (45,148) Net cash provided (used) by financing activities (B) (35,128) 104,191 (A) Funds provided by operations consists of net cash provided by operating activities adjusted for the changes in working capital items. (B) Includes $22,625,000 and $23,865,000 associated with the Company's volumetric production payments for the nine months ended September 30, 1994 and 1993, respectively.
SHORT-TERM LIQUIDITY AND WORKING CAPITAL DEFICIT The Company has a secured master credit facility (the Credit Facility) with The Chase Manhattan Bank, N.A. (Chase) as agent for a group of banks. Under the Credit Facility, the Company is able to borrow up to $17,500,000 for acquisition or development of proved oil and gas reserves, and up to $32,500,000 for working capital and general corporate purposes, subject to semi-annual redetermination at the banks' discretion. The total borrowing capacity of the Company under the Credit Facility is $50,000,000. The Credit Facility is secured by a lien on, and a security interest in, a majority of the Company's proved oil and gas properties and related assets (subject to prior security interests granted to holders of volumetric production payment agreements), a pledge of accounts receivable, material contracts and the stock of material subsidiaries, and a negative pledge on remaining assets. The maturity date of the Credit Facility is December 31, 1996. Under the terms of the Credit Facility, the Company is subject to certain covenants, including restrictions or requirements with respect to working capital, net cash flow, additional debt, asset sales, mergers, cash dividends on capital stock and reporting responsibilities. At September 30, 1994, the outstanding balance under the Credit Facility was $27,000,000 and the Company was in compliance with the covenants of the Credit Facility. On June 24, 1994 the Company's affiliate, CanEagle Resources Corporation (CanEagle), sold a significant portion of its oil and gas properties in Canada to a third party. In conjunction with this transaction, the Company received payment of approximately $4,400,000 ($6,124,000 CDN) representing principal and unpaid interest on the CanEagle subordinated debenture held by the Company. In addition, the Company exchanged its remaining investment in CanEagle for preferred shares of a newly formed entity, Archean Energy, Ltd. The Company believes that it currently has adequate sources of short-term liquidity to meet its working capital needs and to fund planned capital expenditures. The Company continues to explore additional sources of short-term liquidity, however, including sales of additional non-strategic properties and excess equipment, and other measures. -10- LONG-TERM LIQUIDITY The Company has taken several significant steps to improve its long-term liquidity. In 1993 the Company issued Common Stock and subordinated debt, the proceeds of which were used in part, together with available cash, to redeem the Company's long-term notes and debentures. In February 1994, the Company redeemed the remaining $7,171,000 principal amount of its 5 1/2% Convertible Subordinated Debentures. On December 30, 1993, the Company entered into a nonrecourse secured loan agreement (the Enron loan) arranged by Enron Finance Corp., an affiliate of Enron Gas Services. For a further discussion of the Enron loan, see "Nonrecourse Secured Loan and Dollar-Denominated Production Payment" below. This financing provided acquisition capital, as well as capital to execute Forest's exploitation strategy. Many of the factors which may affect the Company's future operating performance and long-term liquidity are beyond the Company's control, including, but not limited to, oil and natural gas prices, governmental actions and taxes, the availability and attractiveness of properties for acquisition, the adequacy and attractiveness of financing and operational results. The Company continues to examine alternative sources of long-term liquidity, including public and private issuances of equity and refinancing debt with equity. VOLUMETRIC PRODUCTION PAYMENTS As of September 30, 1994, deferred revenue relating to production payments was $43,791,000. As of September 30, 1994, the annual amortization of deferred revenue and the corresponding delivery and net sales volumes are set forth below:
Net sales volumes Volumes required to be attributable to production delivered to Enron payment deliveries (1) ----------------------- -------------------------- Natural Natural Annual amortization Oil Gas Oil Gas of deferred revenue (MBBLS) (MMCF) (MBBLS) (MMCF) ------------------- ------- ------- ------- ------- (In Thousands) Remainder of 1994 $ 7,885 51 4,365 43 3,522 1995 20,772 174 11,045 146 8,913 1996 7,579 87 3,721 73 3,003 1997 2,474 -- 1,410 -- 1,138 Thereafter 5,081 -- 2,886 -- 2,329 --------- ------ ------ ----- ------- $ 43,791 312 23,427 262 18,905 --------- ------ ------ ----- ------- --------- ------ ------ ----- ------- (1) Represents volumes required to be delivered to Enron net of estimated royalty volumes.
NONRECOURSE SECURED LOAN AND DOLLAR-DENOMINATED PRODUCTION PAYMENT Under the terms of the Enron loan entered into in December 1993 and a dollar-denominated production payment sold to a bank in February 1992, the Company is required to make payments based on the net proceeds, as defined, from certain subject properties. The Enron loan, which bears annual interest at the rate of 12.5%, was recorded at a discounted amount to reflect the conveyance to the lender of a 20% interest in the net profits, as defined, of the Company's Loma Vieja properties located in south Texas. At September 30, 1994 the principal amount of the loan was $59,833,000 and the recorded liability was $56,381,000. Under the terms of the Enron loan, additional funds may be advanced to fund a portion of the development projects which will be undertaken by the Company on the properties pledged as security for the loan. Payments of principal -11- and interest under the Enron loan are due monthly and are equal to 90% of total net operating income from the secured properties, reduced by 80% of allowable capital expenditures, as defined. The Company currently estimates that the loan balance will be increased by approximately $1,500,000 in the fourth quarter of 1994 and by approximately $1,600,000 in 1995 due to planned capital expenditures and the effects of depressed natural gas prices. Estimated liability reductions for 1996 through 1998, based on expected production and prices, budgeted capital expenditure levels and expected discount amortization, are approximately $2,600,000, $14,800,000 and $15,800,000, respectively. Payments, if any, under the net profits conveyance will commence upon repayment of the principal amount of the Enron loan and will cease when the lender has received an internal rate of return, as defined, of 18% (15.25% through December 31, 1995). The original amount of the dollar-denominated production payment was $37,550,000, which was recorded as a liability of $28,805,000 after a discount to reflect a market rate of interest. At September 30, 1994 the remaining recorded liability was $18,911,000. Under the terms of the dollar-denominated production payment, the Company must make a monthly cash payment which is the greater of a base amount or 85% of the net proceeds from the subject properties, as defined, except that the amount required to be paid in any given month cannot exceed 100% of the net proceeds from the subject properties. Forest retains a management fee equal to 10% of sales from the properties, which is deducted in the calculation of net proceeds. The Company's current estimate, based on expected production and prices, budgeted capital expenditure levels and expected discount amortization, is that remaining 1994 payments will reduce the recorded liability by approximately $235,000. Estimated liability reductions for 1995 through 1998, under the same production, pricing, capital expenditure and discount scenario are approximately $2,600,000, $780,000, $1,700,000 and $3,500,000, respectively. HEDGING PROGRAM In addition to the volumes of natural gas and oil dedicated to volumetric production payments, the Company has also used energy swaps and other financial agreements to hedge against the effects of fluctuations in the sales prices for oil and natural gas. In a typical swap agreement, the Company 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, the Company pays the difference. The Company's current swaps are settled on a monthly basis. At September 30, 1994, the Company had natural gas swaps and collars for an aggregate of approximately 38 BBTU (billion British Thermal Units) per day of natural gas during the remainder of 1994 at fixed prices and floors (NYMEX basis) ranging from $1.90 to $2.33 per MMBTU (million British Thermal Units) with a weighted average of $2.04 per MMBTU and an aggregate of approximately 27.5 BBTU per day of natural gas during 1995 at fixed prices and floors ranging from $1.90 to $2.40 per MMBTU with a weighted average of $2.02 per MMBTU. Under the terms of the nonrecourse secured loan, the Company also has the option to pay $0.10 per MMBTU in December 1994 to buy a floor for 1995 at $1.70 per MMBTU on 11.8 BBTU per day. At September 30, 1994, the Company had oil swaps for an aggregate of approximately 2,000 barrels per day of oil during the remainder of 1994 at fixed prices ranging from $16.70 to $18.75 (NYMEX basis) with a weighted average of $17.64 per barrel and an aggregate of approximately 1,300 barrels per day of oil during 1995 at fixed prices ranging from $16.70 to $17.75 per barrel with a weighted average of $17.23 per barrel. SUMMARY OF CASH FLOW CONSIDERATIONS AND EXPOSURE TO PRICE AND RESERVE RISK As a result of volumetric production payments, energy swaps and fixed contracts, the Company currently estimates that approximately 62% of its natural gas production and 50% of its oil production will not be subject to price fluctuations in the fourth quarter of 1994. It is estimated that existing volumetric production payments, energy swaps, collars and fixed contracts currently cover approximately 48% (excluding the option to purchase the $1.70 floor described above) of the Company's anticipated natural gas production and 43% of its oil production for the year ending December 31, 1995. Currently, it is the Company's intention to commit no more than 75% of its anticipated production to such arrangements at any point in time. See "Hedging Program" above. -12- CAPITAL EXPENDITURES The Company's expenditures for property acquisition, exploration and development for the first nine months of 1994 and 1993, including overhead related to these activities which was capitalized, were as follows:
Nine months ended September 30, 1994 1993 ------------- ------------- (In Thousands) Property acquisition costs: Proved properties $ 8,835 32,347 Undeveloped properties -- -- -------- -------- 8,835 32,347 Exploration costs: Direct costs 5,501 3,983 Overhead capitalized 414 442 -------- -------- 5,915 4,425 Development costs: Direct costs 6,693 4,609 Overhead capitalized 5,109 4,389 -------- -------- 11,802 8,998 -------- -------- $ 26,552 45,770 -------- -------- -------- --------
The Company's exploration and development expenditures for the last three months of 1994 are expected to be significantly higher than in the first nine months of the year as a result of higher levels of drilling activity. The Company's expenditures for exploration and development for the remainder of 1994 are currently expected to be approximately $7,934,000 and $9,655,000, respectively, including capitalized overhead of $109,000 and $1,705,000, respectively. It is possible that some of these costs may be incurred in the first quarter of 1995. Planned levels of capital expenditures are subject to substantial revision. During the remainder of 1994, the Company intends to continue a strategy of acquiring reserves that meet its investment criteria; however, no assurance can be given that the Company can locate or finance any property acquisitions. In order to finance future acquisitions, the Company is exploring many options including, but not limited to: a variety of debt instruments; the issuance of net profits interests; sales of non-strategic properties, prospects and technical information; joint venture financing; the issuance of common or preferred equity of the Company; sale of production payments and other nonrecourse financing; as well as additional bank financing. Availability of these sources of capital will depend upon a number of factors, some of which are beyond the control of the Company. DIVIDENDS The Company was required to pay dividends on its $.75 Convertible Preferred Stock, when and if declared, in shares of Common Stock through 1993. On February 1, 1994, a cash dividend of $.1875 per share on its $.75 Convertible Preferred Stock was paid to holders of record on January 14, 1994. On May 1, 1994, a cash dividend of $.1875 per share on the $.75 Convertible Preferred Stock was paid to holders of record on April 8, 1994. On August 1, 1994, a cash dividend of $.1875 per share on the $.75 Convertible Preferred Stock was paid to holders of record on July 8, 1994. On November 1, 1994, a cash dividend of $.1875 per share on the $.75 Convertible Preferred Stock was paid to holders of record on October 7, 1994. The Indenture executed in connection with the 11 1/4% Senior Subordinated Notes due 2003 and the Credit Facility contain restrictive provisions governing dividend payments. Under the -13- Credit Facility restrictions, the Company estimates that it may be prohibited from paying preferred stock dividends in cash after the first quarter of 1995. GAS BALANCING It is customary in the industry for various working interest partners to produce more or less than their entitlement share of natural gas from time to time. The Company's net overproduced position decreased in the first nine months of 1994 to approximately 8.5 BCF from approximately 10 BCF at December 31, 1993. The Company currently estimates that approximately 1 BCF will be repaid in the remainder of 1994 and 3 BCF will be repaid in 1995 under such agreements. In the absence of a gas balancing agreement, the Company is unable to determine when its partners may choose to make up their share of production. If and when the Company's partners do make up their share of production, the Company's deliverable natural gas volumes could decrease, adversely affecting gas revenue and cash flow. -14- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits *Exhibit 4.1 Amendment No. 2 dated as of August 31, 1994 to the Security Agreement dated as of December 1, 1993 between Forest Oil Corporation and The Chase Manhattan Bank (National Association), as agent. Exhibit 10.1 Description of Employee Overriding Royalty Bonuses, incorporated herein by reference to Exhibit 10.1 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1990 (File No. 0-4597). Exhibit 10.2 Description of Executive Life Insurance Plan, incorporated herein by reference to Exhibit 10.2 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1991 (File No. 0-4597). Exhibit 10.3 Form of non-qualified Executive Deferred Compensation Plan (File No. 0-4597), incorporated herein by reference to Exhibit 10.3 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 1994 (File No. 0-4597). Exhibit 10.4 Form of non-qualified Supplemental Executive Retirement Plan, incorporated herein by reference to Exhibit 10.4 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1990 (File No. 0-4597). Exhibit 10.5 Form of Executive Retirement Agreement, incorporated herein by reference to Exhibit 10.5 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1990 (File No. 0-4597). Exhibit 10.6 Forest Oil Corporation 1992 Stock Option Plan and Option Agreement, incorporated herein by reference to Exhibit 10.7 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1991 (File No. 0-4597). Exhibit 10.7 Letter Agreement with Richard B. Dorn relating to a revision to Exhibit 10.5 hereof, incorporated herein by reference to Exhibit 10.11 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1991 (File No. 0-4597). Exhibit 10.8 Forest Oil Corporation Annual Incentive Plan effective as of January 1, 1992, incorporated herein by reference to Exhibit 10.8 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1992 (File No. 0- 4597). Exhibit 10.9 Form of Executive Severance Agreement, incorporated herein by reference to Exhibit 10.9 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1993 (File No. 0-4597). Exhibit 10.10 Form of Settlement Agreement and General Release between John F. Dorn and Forest Oil Corporation dated March 7, 1994, incorporated herein by reference to Exhibit 10.10 to Form 10-K for Forest Oil Corporation for the year ended December 31, 1993 (File No. 0-4597). *Exhibit 11 Forest Oil Corporation and Subsidiaries - Calculation of Earnings per Share of Common Stock. *Exhibit 27 Financial Data Schedule. *Exhibit 99 Second Amendment dated October 24, 1994 to the Retirement Savings Plan of Forest Oil Corporation (File No. 0-4597). * Filed with this report. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed by Forest during the quarter for which this report is filed. 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 thereunto duly authorized. FOREST OIL CORPORATION (Registrant) Date: November 14, 1994 /s/ Daniel L. McNamara ------------------------------------------ Daniel L. McNamara Corporate Counsel and Secretary (Signed on behalf of the registrant) /s/ David H. Keyte ------------------------------------------ David H. Keyte Vice President and Chief Accounting Officer (Principal Accounting Officer) EX-4.1 2 EXHIBIT 4.1 AMENDMENT NO. 2 TO SECURITY AGREEMENT AMENDMENT NO. 2 TO SECURITY AGREEMENT dated as of August 31, 1994, between FOREST OIL CORPORATION, a corporation duly and validly existing under the laws of the State of New York (the "Company") and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, as agent for the Banks (as defined below) (in such capacity, together with its successors in such capacity, the "Agent"). The Company, the lenders signatory thereto (the "Banks") and the Agent are parties to a Credit Agreement dated as of December 1, 1993, as amended by Amendment No. 1 dated as of December 28, 1993, Amendment No. 2 dated as of January 27, 1994 and Amendment No. 3 dated as of June 3, 1994 (as amended, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for loans to be made by said Banks to the Company in an aggregate principal amount not exceeding $50,000,000. The Company and the Agent entered into a Security Agreement dated as of December 1, 1993, as amended by Amendment No. 1 to Security Agreement dated as of December 28, 1993 (as amended, the "Security Agreement"), as a condition to the obligation of the Banks to make loans to the Company pursuant to the Credit Agreement. The Company and the Agent, with the consent of the Banks, wish to amend the Security Agreement to release from the Lien of the Security Agreement certain properties, rights and interests and accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 2 to Security Agreement, terms defined in the Security Agreement and the Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 below, but effective as of August 31, 1994, the Security Agreement shall be amended as follows: A. The following definition shall be added in alphabetical order in Section 1 of the Security Agreement: "Amendment No. 2 to Security Agreement" shall mean Amendment No. 2 to this Agreement dated as of August 31, 1994. B. Section 3 of the Security Agreement is hereby amended by adding the following at the end of such Section: "Notwithstanding any provision of Section 3 hereof to the contrary, pursuant to Section 11.09 of the Credit Agreement, the Properties of the Company described in Exhibit A to Amendment No. 2 to Security Agreement are excluded from the definition of 'Collateral'." Section 3. Representations and Warranties. The Company represents and warrants to the Agent and the Banks that the representations and warranties set forth in Section 8 of the Credit Agreement and Section 2 of the Security Agreement are true and complete on the date hereof as if made on and as of the date hereof. Section 4. Conditions Precedent. As provided in Section 2 above, the amendments to the Security Agreement set forth in said Section 2 shall become effective, as of August 31, 1994, upon the satisfaction of the following conditions precedent. A. Execution by All Parties. This Amendment No. 2 to Security Agreement shall have been executed and delivered by each of the parties hereto. B. Certificate. The Agent shall have received the certificate provided for in Section 11.09 of the Credit Agreement in form and substance satisfactory to the Agent. Section 5. Release of Collateral. To the extent that the Security Agreement covers any Property of the Company described in Exhibit A hereto, such Property is hereby released and any security interests or Liens in favor of or held by the Agent are terminated and at the Company's request, and at the Company's expense, the Agent shall take such other actions as are necessary to evidence the release and termination evidenced by this Amendment No. 2 to Security Agreement. Section 6. Miscellaneous. Except as herein provided, the Security Agreement shall remain unchanged and in full force and effect. This Amendment No. 2 to Security Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 to Security Agreement by signing any such counterpart. This Amendment No. 2 to Security Agreement shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to Security Agreement to be duly executed and delivered as of August 31, 1994. FOREST OIL CORPORATION By___________________________ Name: Kenton M. Scroggs Title: Vice President THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By___________________________ Name: Title: IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to Security Agreement to be duly executed and delivered as of August 31, 1994. FOREST OIL CORPORATION By___________________________ Name: Kenton M. Scroggs Title: Vice President THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By___________________________ Name: Richard F. Betz Title: Vice President EXHIBIT A TO UCC-3 FILING NO. 932089275 E X H I B I T "A" Attached to and made a part of that certain Sales Agreement dated the 28th day of June, 1994, by and between Forest Oil Corporation, as Seller, and Sandel Energy, Inc., as Buyer. Murry No. 1 and No. 2 Unit Property No. 293015-010 and 293015-020 Waller County, Texas OPERATOR: FOREST OIL CORPORATION FOC WI: 30.00% FOC NRI: 26.25% Forest's interest in the above designated property is derived from Forest's ownership of the leasehold estate created by the following lease:
RECORDATION LEASE NO. LESSOR LESSEE COUNTY DATE VOLUME PAGE ________________________________________________________________________________________________________________________ Mary P. Bingham, et al Stanolind Oil and Gas Company, et al Waller 12/23/42 88 386
INSOFAR AND ONLY INSOFAR as the above described leasehold is located in Section 94, Block 1, H&TCRR Co. Survey, Waller County, Texas, LESS AND EXCEPT 40.74 acres contained within the Katy Gas Consolidated Unit the current boundaries of which are shown on Exhibit "B" of that certain Unit Agreement dated 5/2/66 a counterpart of which is recorded in Volume 203, Page 638, Ded Records of Waller County, Texas, INSOFAR AND ONLY INSOFAR as it pertains to the depths of 10, 000' below the suface down to and including the stratigraphic equivalent of 11,400' in the ARCO Murry No. 1 Unit, Well #1, located in said Section 94. Subject to the Following Related Agreements: 1. Farmout Agreement (AR-72669) dated June 17, 1983, by and between Amerada Hess Corporation, as Farmor, and ARCO Oil and Gas Company, as Farmee, as amended by,but not necessarily limited to, Letter Agreements dated Septem- ber 8, 1983, October 13, 1983, December 19, 1983 and December 21, 1983. 2. Operating Agreement (AR-72771) dated December 15, 1983 by and between Atlantic Richfield Company,as Operator and Amoco Production Company,et al, as Non-Operator. 3. Conveyance of Overriding Royalty between Forest Oil Corporation, "Grantor" and Cactus Hydrocarbon III Limited Partnership, "Grantee", dated December 10, 1993, recorded in Volume 486, Page 295, Files No. 186399 of the Waller County Records. 4. The obligations set out in the above described lease. EXHIBIT A TO UCC-3 FILING NO. 932089275 EXHIBIT "A" Attached to and made a part of that certain Farmout Agreement between Forest Oil Corporation and Enterprise Exploration & Production, Inc., dated April 20, 1994. MONTY PROSPECT/P#-187011 PECOS AND TERRELL COUNTIES, TEXAS
FOC RECORDING LEASE NO. LESSOR LESSEE DATE DESCRIPTION DATA ________________ ____________________________ _____________ _______ ___________ ______________________________ TX-187011-000001 Abilene Christian University Delmon Hodges 6/28/89 All of Section 34, BlK102, Book 648,Page 32-Pecos County (4351-1) JHGibson Survey,Pecos Co.,TX TX-187011-000002 Abilene Christian University Delmon Hodges 12/01/89 All of Section 32, Blk 102, Book 652,Page371-Pecos County (4351-2) JHGibson Survey,Pecos Co.,TX TX-187011-000003 Abilene Christian University Delmon Hodges 12/01/89 S/2 of Section 35, Blk 102, Book 80,Page479-Terrell County (4351-3) JHGibson Survey,Terrell Co.,TX TX-187011-000004 Abilene Christian University Delmon Hodges 12/01/89 S/2 of Section 33, Blk 102, Book 652,Page 376-Pecos County (4351-4) JHGibson Survey,Pecos., TX TX-187011-000011A Bowden Enterprises Delmon Hodges 12/14/89 N/2 of Section35,Blk102, (4351-11A) J.H.Gibson Survey Book 652,Page 405-Pecos County Pecos & Terrell Counties,TX Book 85,Page15-Terrell County TX-187011-000011B Patricia A. Barry Delmon Hodges 12/11/89 Same as above Book 652,Page 407-Pecos County (4351-11B) Book 85,Page 12-Terrell County TX-187011-000011C Garon D. Cagle, Sr., et ux Delmon Hodges 12/14/89 Same as above Book 652,Page 410-Pecos County (4351-11C) Book 85,Page 19-Terrell County TX-187011-000011D John F. Schneider, et ux Delmon Hodges 12/14/89 Same as above Book 652,Page 412-Pecos County (4351-11D) Book 85,Page 17-Terrell County TX-187011-000011E Jane Anne Stinnett Delmon Hodges 12/14/89 Same as above Book 652,Page 414-Pecos County (4351-11E) Book 85,Page 21-Terrell County TX-187011-000011F R. S. Tapp & Company Delmon Hodges 12/14/89 Same as above Book 652,Page 416-Pecos County (4351-11F) Book 85,Page 23-Terrell County TX-187011-000011G Celeste Lucille Elsner,widow Delmon Hodges 12/11/89 Same as above Book 652,Page 418-Pecos County (4351-11G) Book 85,Page 25-Terrell County
Page 1 of 2 MONTY PROSPECT/P#-187011 PECOS AND TERRELL COUNTIES, TEXAS
FOC RECORDING LEASE NO. LESSOR LESSEE DATE DESCRIPTION DATA ________________ ____________________________ _____________ _______ ___________ ______________________________ TX-187011-000011H Exch. Natl. Bank of Jefferson Delmon Hodges 12/11/89 N/2 of Section35,Blk102, (4351-11H) City, Missouri & Wm. H. Bates, JHGibson Survey, Book 652,Page 421-Pecos County Co-Trustees of the Thomas Price Pecos & Terrell Counties,TX Book 85,Page 28-Terrell County Gibson Trust Number 1 TX-187011-000011I Exch. Natl. Bank of Jefferson Delmon Hodges 12/11/89 Same as above Book 652,Page 424-Pecos County (4351-11I) City, Missouri & Wm. H. Bates, Book 85,Page 31-Terrell County Co-Trustees of Gaverne Gibson Meade Trust Number 1 TX-187011-000011J Lucille R. Turner, a widow Delmon Hodges 12/11/89 Same as above Book 652,Page 427-Pecos County (4351-11J) Book 85,Page 34-Terrell County TX-187011-000012 Abilene Christian University Forest Oil 12/01/94 All of Section 32,Blk102, (Top Lease of TX-187011-000002)** Corporation JHGibson Survey, currently being recorded in Pecos County, Texas Pecos County TX-187011-000013 Abilene Christian University Forest Oil 12/01/94 S/2 of Section 35,Blk102, (Top Lease of TX-187011-000003)** Corporation JHGibson Survey, currently being recorded in Pecos County, Texas Pecos County TX-187011-000014 Abilene Christian University Forest Oil 12/01/94 S/2 of Section 33,Blk102, (Top Lease of TX-187011-000004)** Corporation JHGibson Survey, currently being recorded in Pecos County, Texas Pecos County
** These leases only take effect should TX-187011-02, 03, & 04 expire by their own terms on 12/1/94. Page 2 of 2 EXHIBIT A TO UCC-3 FILING NO. 932089275 North Oakvale Prospect 179027 Jefferson Davis County, Mississippi Page 1 of 3 EXHIBIT "A" SCHEDULE OF LEASES
FOC RECORDING DATA LEASE # LESSOR LESSEE DATE DESCRIPTION BOOK PAGE _______ ______ ______ ____ ___________ ____ ____ 7046-4A Christine Dyess W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 249 7046-4B Gay Lloyd Dyess W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 252 7046-4C Charlene Dyess McPail W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 255 7046-4D Virginia Dyess W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 258 7046-4E Thomas Victor Dyess W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 261 7046-4F Peggy Dyess Wilson W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 264 7046-4G Pauline D. Jenkins W. Tingle Savell 01/03/80 Sec. 17,20,21, T6N-R18W 133 267 7046-4H Arthur Lee Dyess W. Tingle Savell 01/10/80 Sec. 17,20,21, T6N-R18W 133 269 7046-4I Delphie Mae D. Martin W. Tingle Savell 01/10/80 Sec. 17,20,21, T6N-R18W 133 271 7046-4J Robert Dyess W. Tingle Savell 01/10/80 Sec. 17,20,21, T6N-R18W 133 436 139 257 7046-4K Irene D. Jones W. Tingle Savell 01/10/80 Sec. 17,20,21, T6N-R18W 133 273 7046-4L Mrs. Mae Beil Dyess W. Tingle Savell 01/10/80 Sec. 17,20,21, T6N-R18W 133 275 7046-4M Bennie Ran Dyess W. Tingle Savell 01/30/80 Sec. 17,20,21, T6N-R18W 133 448 7046-4N Mildred D. Ford W. Tingle Savell 01/21/80 Sec. 17,20,21, T6N-R18W 133 460
Page 2 of 3
FOC RECORDING DATA LEASE # LESSOR LESSEE DATE DESCRIPTION BOOK PAGE _______ ______ ______ ____ ___________ ____ ____ 7046-4O Merlyn D. Chance W. Tingle Savell 01/30/80 Sec. 17,20,21, T6N-R18W 133 450 7046-4Q Bobbie D. Speights W. Tingle Savell 02/11/80 Sec. 17,20,21, T6N-R18W 133 521 7046-4R Nevis L. Dyess W. Tingle Savell 02/11/80 Sec. 17,20,21, T6N-R18W 133 523 7046-4S Mary Nell D. Bass W. Tingle Savell 02/11/80 Sec. 17,20,21, T6N-R18W 133 525 7046-4T Christine Dyess,Guard. W. Tingle Savell 03/24/80 Sec. 17,20,21, T6N-R18W 134 238 7046-5 Pauline Jenkins W. Tingle Savell 01/10/80 Sec. 17, T6N-R18W 133 277 7046-10B The Rankin Company Jacksoco Oil Company 03/12/74 Sec. 22, SE/4SW/4, T6N-R18W 86 243 7046-25A Delton Dyess, et ux Amoco Production Company 03/23/78 Sec. 17, T6N-R18W 119 122 7046-25B Toxie Dyess, et ux Pruet & Hughes Company 06/29/76 Sec. 17, T6N-R18W 97 209 7046-27A Maurice Smith1 Amoco Production Company 03/22/78 Sec. 17, T6N-R18W 119 100 7046-27B Ruby Etheredge Gillham Pruet & Hughes Company 08/02/76 Sec. 17, T6N-R18W 98 446 7046-27C Leonora Martinez Pruet & Hughes Company 08/18/76 Sec. 17, T6N-R18W 103 700 Kennington Myers 7046-27D Fred J. Lotterhos Pruet & Hughes Company 08/04/76 Sec. 17, T6N-R18W 99 413 7046-27E Grace B. Moss Marital Pruet & Hughes Company 08/18/76 Sec. 17, T6N-R18W 99 419 Trust 7046-27F Clyde E Moss Residuary Pruet & Hughes Company 08/18/76 Sec. 17, T6N-R18W 99 415 Trust
Page 3 of 3
FOC RECORDING DATA LEASE # LESSOR LESSEE DATE DESCRIPTION BOOK PAGE _______ ______ ______ ____ ___________ ____ ____ 7046-27G Suco Company Pruet & Hughes Company 08/18/76 Sec. 17, T6N-R18W 99 417 7046-27H Mabel McGehee Lillie Forest Oil Corporation 03/01/82 Sec. 17, T6N-R18W 155 515 7046-27I F. C. Atkinson, Indv., Forest Oil Corporation 01/02/82 Sec. 17, T6N-R18W 157 325 as Executor and Trustee 7046-27J Mrs. Fannie Kate M. Forest Oil Corporation 03/01/82 Sec. 17, T6N-R18W 155 517 Catchings 7046-27K Mrs. Fannie Kate M. Lee W. Cline 03/29/82 Sec. 17, T6N-R18W 155 603 Catchings, Guardian 7046-27L Lucille S. Chichester Forest Oil Corporation 07/08/82 Sec. 17, T6N-R18W 159 272 7046-28 Percy Dyess, et ux Amoco Production Company 03/15/78 Sec. 17, T6N-R18W 119 110 7046-29A Lonnie S. Dyess, Sr. Amoco Production Company 03/15/78 Sec. 17, T6N-R18W 119 112 7046-29B Roy G. Dyess Amoco Production Company 03/15/78 Sec. 17, T6N-R18W 119 114 7046-29C Edwin G. Dyess, et ux Amoco Production Company 03/15/78 Sec. 17, T6N-R18W 119 116 7046-30 Sammie L. Dyess, et ux Amoco Production Company 03/23/78 Sec. 17, T6N-R18W 119 120 7046-33 United State Lumber Co. Shubuta Oil Corporation 01/07/72 Sec. 17, N/2Ne/4, E/2SE/4NE/4, 83 495 N/2NW/4, NE/4SW/4 and SW/4SW/4, T6N-R18W Sec. 18, Entire section except NE/4SE/4 and SE/4SW/4, T6N-R18W
EXHIBIT "A" TO UCC-3 FILING NO. 932089275
FOC Lease No. Lessor Lessee Date Description Recording Data ________ ______ ______ ____ ___________ ______________ 9064-5 U.S.A. Forest Oil Corporation 6/1/62 Block 309 Eugene Island Area, South Serial No. OCS-G-0997 Addition, OCS Lease Map, La. No. 4-A, INSOFAR AND ONLY INSOFAR as said lease lies within the confines of the following described aliquots: W/2; limited to the interval from the surface of the earth to the stratigraphic equivalent of 7014' (identified as the total depth of the Columbia Gas Development Corporation OCS-G-1981 J-1 S/T #1 being 7,014' TVD and 8,385' MD) LESS AND EXCEPT the "C-I" formation as seen in the interval from 4,170' to 4,330' MD in the OCS-G-0997 No. 4 Unit Well. 192236-000001 U.S.A. Tenneco Oil Co. 10/1/79 That portion of Block 18 seaward Serial No. OCS-G-4082 et. al. of the Three Marine League line measured from the historic shoreline described in the United States vs. Louisiana, No. 9 original (394 U.S. 836), Sabine Pass Area, as shown on OCS Official Leasing Map, Texas Map No. 8, INSOFAR AND ONLY INSOFAR as said lease lies within the confines of the following described aliquots: All 192242-000001 U.S.A. Texaco, Inc., et al 7/1/90 Block 280, Main Pass Area, South and Serial No. OCS-G-12102 East Addition, OCS Leasing Map, Louisiana No. 10A, INSOFAR AND ONLY INSOFAR as said lease lies within the confines of the following described aliquots: All
EXHIBIT A TO UCC-3 FILING NO. 932089275 EXHIBIT "A" Attached to and made a part of Farmout Agreement dated June 14, 1993 between Forest Oil Corporation and Anglo-Suisse Inc. _________________________________________________________________ Oil & Gas Lease Subject To Farmout Agreement ____________________________________________ 1) FOC Lease No. 1594-1 Lessor: A. A. McAllen, et al Lessee: Hale Schaleben Gross Acres: 26,597.00 acres, more or less Lease Date: June 15, 1954 Recording Data: Volume 159, Page 347-350 of the Oil & Gas Records of Hidalgo County, Texas Interest Subject to Farmout Agreement _____________________________________ Approximately 320 acres, more or less, in the Santa Anita Grant, Hidalgo County, Texas, out of that certain 3000.00 acres described in that Partial Assignment of Oil, Gas and Mineral Lease, dated July 25, 1956, between Delhi-Taylor Oil Corporation, as Assignor, and Forest Oil Corporation, as Assignee, recorded in Volume 189, Page 507-511 of the Oil and Gas Records of Hidalgo County, Texas, beginning at the Northeast Corner of the 3000 acres, thence Southeast 2500 feet along east line of said lease, thence Westerly 5576 feet parallel to the North line of lease, thence Northerly 2500 feet parallel to East line of lease, thence Easterly along North line of lease, 5576 feet to point of beginning. EXHIBIT A TO UCC-3 FILING NO. 932089275 EXHIBIT "A" Attached to and made a part of Farmout Agreement dated June 28, 1993 between Forest Oil Corporation and Anglo-Suisse Inc. _______________________________________________________________________________ Oil & Gas Lease Subject To Farmout Agreement ____________________________________________ 1) FOC Lease No. 1594-1 Lessor: A. A. McAllen, et al Lessee: Hale Schaleben Gross Acres: 26,597.00 acres, more or less Lease Date: June 15, 1954 Recording Data: Volume 159, Page 347-350 of the Oil & Gas Records of Hidalgo County, Texas Interest Subject to Farmout Agreement _____________________________________ Approximately 1076.29 acres, more or less, in the Santa Anita Grant, Hidalgo County, Texas, out of that certain 3000.00 acre tract described in that Partial Assignment of Oil, Gas and Mineral Lease, dated July 25, 1956, between Delhi-Taylor Oil Corporation, as Assignor, and Forest Oil Corporation, as Assignee, recorded in Volume 189, Page 507-511 of the Oil and Gas Records of Hidalgo County, Texas, said 1076.29 acres described as beginning at the Southeast corner of said 3000 acre tract; thence in a Northerly direction parallel to East line of said tract, a distance of 5800 feet; thence in a Westerly direction parallel to the South line of said tract, a distance of 8083.3 feet to a point on the West line of said 3000 acre tract; thence in a Southerly direction parallel to the West line of said tract a distance of 5800 feet to the Southwest corner of said 3000 acre tract; thence in a Easterly direction along the South line of said 3000 acre tract a distance of 8083.3 feet to the point of beginning. EX-11 3 EXHIBIT 11 Exhibit 11 FOREST OIL CORPORATION Calculation of Loss Per Share of Common Stock (Unaudited)
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- September 30, September 30, September 30, September 30, 1994 1993 1994 1993 ------------- ------------- ------------- -------------- (In Thousands Except Per Share Amounts) PRIMARY LOSS PER SHARE: Net loss $ (33,739) (13,102) (35,892) (16,429) Less dividends payable on Convertible Preferred Stock (541) (551) (1,621) (1,708) ---------- ---------- ---------- ---------- Net loss attributable to common stock for primary loss per share calculation $ (34,280) (13,653) (37,513) (18,137) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Weighted average number of common shares outstanding 28,135 27,525 28,072 20,032 ---------- ---------- ---------- ---------- Primary loss per share $ (1.22) (.50) (1.34) (.91) ---------- ---------- ---------- ---------- FULLY DILUTED LOSS PER SHARE: Net loss attributable to common stock, as above $ (33,739) (13,102) (35,892) (16,429) Add: Interest expensed on 5-1/2% Convertible Subordinated Debentures -- 103 -- 309 Expenses related to the 5-1/2% Convertible Subordinated Debentures -- 2 -- 5 Less: Additional Federal income taxes -- 36 -- 107 ---------- ---------- ---------- ---------- Loss applicable to fully diluted calculation $ (33,739) (13,033) (35,892) (16,222) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Common shares applicable to fully diluted calculation: Weighted average number of common shares outstanding, as above 28,135 27,525 28,072 20,032 Add: Weighted average number of shares issuable upon assumed conversion of 5-1/2% Convertible Subordinated Debentures -- 714 -- 584 Weighted average number of shares issuable upon assumed conversion of Convertible Preferred Stock 10,083 10,273 10,083 10,618 ---------- ---------- ---------- ---------- Common shares applicable to fully diluted calculation 38,218 38,512 38,155 31,234 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Fully diluted loss per share* $ (.88) (.34) (.94) (.52) ---------- ---------- ---------- ----------
*The fully diluted loss per share is not presented in the Company's financial statements because the effects of assumed exercises and conversions were anti- dilutive. EX-27 4 EXHIBIT 27
5 This schedule contains summary financial information extracted from the condensed consolidated statements of income and condensed consolidated balance sheets on pages 2 and 3 of the Company's Form 10-Q for the quarterly period ending September 30, 1994, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1994 JAN-1-1994 SEP-30-1994 2,027 0 22,918 0 0 27,601 1,172,431 870,100 352,574 32,362 200,911 2,829 0 15,854 32,556 352,574 87,588 89,887 16,647 24,200 81,473 0 20,077 (35,863) 29 (35,892) 0 0 0 (35,892) (1.34) (1.34)
EX-99 5 EXHIBIT 99 SECOND AMENDMENT TO RETIREMENT SAVINGS PLAN OF FOREST OIL CORPORATION WHEREAS, FOREST OIL CORPORATION(the "Company") has heretofore adopted the RETIREMENT SAVINGS PLAN OF FOREST OIL CORPORATION(the "Plan") for the benefit of its eligible employees; and WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, the Plan shall be amended as follows: I. Effective as of January 1,1992, clause(2)of the last sentence of Section 3.6(b) of the Plan shall be deleted and the following shall be substituted therefor: "(2) amounts held in the suspense account shall be invested and reinvested by the Trustee as directed by the Committee and the suspense account shall share in the earnings or losses of such investment; and" II. Effective as of April 1, 1992, the following shall be added to the end of Section 4.3 of the Plan: "Further, notwithstanding any provision herein to the contrary, the Committee may establish from time to time minimum percentage increments pursuant to which elections and directions by Participants with respect to the investment of their accounts shall be made." III. Effective as of January 1, 1993: 1. The following new Sections 1.11A, 1.12A, 1.13A and 1.13B shall be added to Article I of the Plan: "1.11A `Direct Rollover' means a payment by the Plan to an Eligible Retirement Plan specified by a Distributee. 1.12A `Distributee' means each (a) Participant entitled to an Eligible Rollover Distribution,(b) Participant's surviving spouse with respect to the interest of such surviving spouse in an Eligible Rollover Distribution, and (c) former spouse of a Participant who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code,with regard to the interest of such former spouse in an Eligible Rollover Distribution. 1.13A `Eligible Retirement Plan' means (a) with respect to a Distributee other than a surviving spouse, an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified plan described in Section 401(a) of the Code,which under its provis- ions accepts such Distributee's Eligible Rollover Distribution and (b) with respect to a Distributee who is a surviving spouse, an individual retirement account described in Section 408(a)of the Code or an individual retirement annuity described in Section 408(b) of the Code. 1.13B `Eligible Rollover Distribution' means any distribution of all or any portion of the accounts of a Distributee other than (a) a distribution that is one of a series of substantially equal periodic payment (not less frequently than annually)made for the life (or life expectancy)of the Distributee or the joint lives(or joint life expect- ancies)of the Distributee and the Distributee's designated beneficiary or for a specified period of ten years or more, (b) a distribution to the extent such distribution is required under Section 401(a)(9)of the Code,(c)the portion of a distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities), (d) a loan treated as a distribution under Section 72(p) of the Code and not excepted by Section 72(p)(2), (e)a loan in default that is a deemed distribution, (f) any corrective distribution provided in Sections 3.4 and 3.6, and (g) any other distribution so designated by the Internal Revenue Service in revenue rulings, notices, and other guidance of general applicability." 2. Section 3.7 of the Plan shall be deleted and the following shall be substituted therefor: "3.7.Rollover Contributions. Qualified rollover contributions("Rollover Contributions") may be made to the Plan by any Participant of amounts that are "eligible rollover distributions" within the meaning of section 402(f)(2)(A) of the Code from an employees' trust described in section 401(a) of the Code,which is exempt from tax under section 501(a) of the Code. A Rollover Contribution may be made to the Plan irrespective of whether such eligible rollover distribution was paid to the Participant or paid to the Plan as a "direct" Rollover Contribution, but only if any such Rollover Contribution is made pursuant to and in accordance with applicable provisions of the Code and Treasury regulations promulgated thereunder. A direct Rollover Contribution to the Plan may be effectuated only by wire transfer directed to the Trustee or by issuance of a check made payable to the Trustee,which is negotiable only by the Trustee and which identifies the Participant for whose benefit the Rollover Contribution is being made. Any Participant desiring to effect a Rollover Contribution to the Plan must execute and file with the Committee the form prescribed by the Committee for such purpose. The Committee may require as a condition to accepting any Rollover Contribution that such Participant furnish any evidence that the Committee in its discretion deems satisfactory to establish that the proposed Rollover Contribution is in fact such an eligible rollover distribution and is made pursuant to and in accordance with applicable provisions of the Code and Treasury regulations. All Rollover Contributions to the Plan must be made in cash. A separate account (a "Rollover Account" ) shall be maintained under the Plan for each Participant who has made a Rollover Con- tribution. A Rollover Contribution shall be credited to the Rollover Account of the Participant for whose benefit such Rollover Contribution is being made as of the Valuation Date coincident with or next succeeding the date the contribution is paid to the Trust. Amounts held in a Rollover Account shall be fully vested at all times,shall be subject to withdrawal in the same manner as amounts held in a Supplemental Contributions Account,and shall be treated as though they were a part of the Participant's Supplemental Contributions Account for all other purposes of the Plan." 3. Section 7.6 of the Plan shall be deleted and the following shall be substituted therefor: "7.6 Direct Rollover Election. This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section,a Distributee may elect,at the time and in the manner prescribed by the Committee, to have all or any portion of an Eli- gible Rollover Distribution(other than any portion attributable to the offset of an outstanding loan balance pursuant to the Plan's loan procedure) paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. The preceding sentence notwithstanding,a Distributee may elect a Direct Rollover pursuant to this Section only if such Distributee's Eligible Rollover Distributions during the Plan Year are reasonably expected to total $200 or more. Furthermore, if less than 100% of the Distributee's Eligible Rollover Distribution is to be a Direct Rollover, the amount of the Direct Rollover must be $500 or more. Prior to any Direct Rollover pursuant to this Section, the Distributee shall furnish the Committee with a statement from the plan, account, or annuity to which the benefit is to be transferred verifying that such plan, account, or annuity is or is intended to be,an Eligible Retirement Plan." 4. The following new Section 8.6 shall be added to the end of Article VIII of the Plan: "8.6. Direct Rollover of Withdrawals. Any withdrawal under this Article VIII shall be subject to the Direct Rollover election described in Section 7.6." 5. The following shall be added to the end of Section 14.13(b) of the Plan: "No less than 30 days and no more than 90 days before a Participant's benefit pursuant to Sections 6.1,6.2,6.3, or 7.4 is to begin to be paid,the Committee shall inform the Participant(or his Beneficiary, if applicable) of his right to defer his benefit commencement date and shall describe the Participant's(or Beneficiary's,if applicable) Direct Rollover election rights pursuant to Section 7.6." IV. Effective as of January 1, 1994, the third and fourth sentences of Section 1.10 of the Plan shall be deleted and the following shall be substituted therefor: "Notwithstanding the preceding provisions of this Section 1.10, (a) for purposes of determining each Employee's Actual Contribution Per- centage and Actual Deferral Percentage hereunder, `Compensation' shall mean the Employee's compensation(within the meaning of Section 3.6(c)(3)), determined prior to reduction thereof for elective deferrals made by the Company on behalf of the Employee to a plan or arrangement described in Section 125 or Section 401(k) of the Code, and(b)for purposes of allocating the Company Profit-Sharing Contri- bution for any Plan Year pursuant to Section 5.2, `Compensation' shall mean the total of all wages, salaries, fees for professional service and other amounts received in cash or in kind by a Participant for services actually rendered or labor performed for the Company while a Participant to the extent such amounts are includable in gross income, subject to the following adjustments and limitations: (i) the following shall be excluded: 1. reimbursements and other expense allowances; 2. cash and noncash fringe benefits; 3. moving expenses; 4. Company contributions to or payments from this or any other deferred compensation program, whether such program is qualified under Section 401(a) of the Code or nonqualified; 5. welfare benefits; 6. amounts realized from the receipt or exercise of a stock option that is not an incentive stock option within the meaning of Section 422 of the Code; 7. amounts realized at the time property described in Section 83 of the Code is freely transferable or no longer subject to a substantial risk of forfeiture; 8. amounts realized as a result of an election described in Section 83(b) of the Code; 9. any amount realized as a result of a disqualifying disposition within the meaning of Section 421(a) of the Code; 10. any other amounts that receive special tax benefits under the Code but are not hereinafter included;and (ii) the following shall be included: 1. elective contributions made on a Participant's behalf by the Company that are not includable in income under Section 125, Section 402(e)(3), Section 402(h) or Section 403(b) of the Code; 2. compensation deferred under an eligible deferred compensation plan within the meaning of Section 457(b) of the Code; and 3. employee contributions described in Section 414(h) of the Code that are picked up by the employing unit and are treated as employer contributions. The Compensation of any Participant taken into account for purposes of the Plan shall be limited to $200,000 ($150,000 for Plan Years beginning after December 31, 1993) for any Plan Year with such limitation to be: (A) adjusted automatically to reflect any amendments to Section 401(a)(17) of the Code and any cost-of-living increases authorizedby Section 401(a)(17) of the Code; (B) prorated for a Plan Year of less than twelve months and to the extent otherwise required by applicable law; and (C) in the case of a Participant who is either a five- percent owner of the Company (within the meaning of Section 416(i)(1)(A)(iii) of the Code) or is one of the ten most Highly Compensated Employees for the Plan Year and who has a spouse and/or lineal descendants who are under the age of nineteen as of the end of a Plan Year who receive Compensation during such Plan Year prorated and allocated among such Participant, his spouse,and/or lineal descendants under the age of nineteen based on the Compensation for such Plan Year of each such indi- vidual." V. Effective as of August 10, 1994: 1. Section 1.4 of the Plan shall be deleted and the following shall be substituted therefor: "1.4 `Committee' means the Forest Oil Corporation Employee Benefits Committee." 2. The first two sentences of Section 10.4 of the Plan shall be deleted. 3. In each place where the word "shall" appears in the first sentence of Section 10.6 of the Plan and in Section 10.7 of the Plan,such word shall be deleted and the word "may" shall be substituted therefor. VI. As amended hereby the Plan is specifically ratified and reaffirmed. IN WITNESS WHEREOF, the undersigned has caused these presents to be executed on this ______ day of ______________, 1994. FOREST OIL CORPORATION By:______________________ -----END PRIVACY-ENHANCED MESSAGE-----