-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RSxYZi0dnOYpiG0A13lKVvDndHzjbaWZR0UO3nLDQgjKUR1C70dsHvIWZN694jlW gcg1ykj2mcIert8Mihq+bg== 0001047469-99-029227.txt : 19990802 0001047469-99-029227.hdr.sgml : 19990802 ACCESSION NUMBER: 0001047469-99-029227 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST OIL CORP CENTRAL INDEX KEY: 0000038079 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 250484900 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13515 FILM NUMBER: 99674318 BUSINESS ADDRESS: STREET 1: 1600 BROADWAY STREET 2: 2200 COLORADO STATE BANK BLDG CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3038121400 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 June 30, 1999 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 1-13515 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.) 1600 Broadway Suite 2200 Denver, Colorado 80202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 812-1400 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 July 23, 1999 - ------------------------------ ---------------- Common Stock, Par Value $.10 Per Share 44,700,378 - ------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION FOREST OIL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31, 1999 1998 -------- ------------ (In Thousands) ASSETS Current assets: Cash and cash equivalents $ 2,413 3,415 Accounts receivable 53,754 55,587 Other current assets 4,299 2,374 ------- ------- Total current assets 60,466 61,376 Net property and equipment, at cost 666,480 663,310 Goodwill and other intangible assets, net 22,617 22,689 Other assets 9,397 12,361 ------- ------- $ 758,960 759,736 ------- ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 48,044 49,389 Accrued interest 9,240 9,970 Other current liabilities 4,784 1,669 ------- ------- Total current liabilities 62,068 61,028 Long-term debt 502,671 505,450 Other liabilities 14,375 16,181 Deferred income taxes 7,587 8,086 Shareholders' equity: Common stock 4,465 4,465 Capital surplus 590,010 589,972 Accumulated deficit (410,557) (415,050) Accumulated other comprehensive loss (11,210) (9,948) Treasury stock, at cost (449) (448) ------- ------- Total shareholders' equity 172,259 168,991 ------- ------- $ 758,960 759,736 ------- ------- ------- -------
See accompanying notes to condensed consolidated financial statements. -1- FOREST OIL CORPORATION Condensed Consolidated Statements of Production and Operations (Unaudited)
Three Months Ended Six Months Ended ------------------------ ----------------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 -------- -------- -------- -------- (In Thousands Except Production and Per Share Amounts) PRODUCTION Natural gas (mmcf) 15,751 14,297 32,745 27,962 ------ ------ ------ ------ ------ ------ ------ ------ Oil, condensate and natural gas liquids (thousands of barrels) 1,118 1,026 2,174 2,001 ------ ------ ------ ------ ------ ------ ------ ------ STATEMENTS OF CONSOLIDATED OPERATIONS Revenue: Marketing and processing $ 40,514 33,839 88,020 68,842 Oil and gas sales: Gas 32,291 28,900 65,253 56,507 Oil, condensate and natural gas liquids 14,782 12,434 24,666 25,320 ------ ------ ------ ------ Total oil and gas sales 47,073 41,334 89,919 81,827 ------ ------ ------ ------ Total revenue 87,587 75,173 177,939 150,669 Operating expenses: Marketing and processing 39,664 32,096 83,851 65,264 Oil and gas production 12,438 9,362 23,703 18,204 General and administrative 3,883 4,922 7,981 9,177 Depreciation and depletion 21,767 23,862 44,366 47,195 ------ ------ ------ ------ Total operating expenses 77,752 70,242 159,901 139,840 ------ ------ ------ ------ Earnings from operations 9,835 4,931 18,038 10,829 Other income and expense: Other (income) expense, net 683 (6,704) (97) (6,782) Interest expense 10,407 9,755 21,064 18,261 Translation (gain) loss on subordinated debt (4,301) 4,186 (6,517) 3,162 ------ ------ ------ ------ Total other income and expense 6,789 7,237 14,450 14,641 ------ ------ ------ ------ Earnings (loss) before income taxes and extraordinary item 3,046 (2,306) 3,588 (3,812) Income tax expense (benefit): Current 78 603 (81) 949 Deferred (1,075) 1,495 (824) 646 ------ ------ ------ ------ (997) 2,098 (905) 1,595 ------ ------ ------ ------ Earnings (loss) before extraordinary item 4,043 (4,404) 4,493 (5,407) Extraordinary item - gain on extinguishment of debt - 6,196 - 6,196 ------ ------ ------ ------ Net earnings $ 4,043 1,792 4,493 789 ------ ------ ------ ------ ------ ------ ------ ------ Weighted average number of common shares outstanding 44,655 37,721 44,651 37,350 ------ ------ ------ ------ ------ ------ ------ ------ Basic and diluted earnings (loss) per common share: Earnings (loss) attributable to common stock before extraordinary item $ .09 (.11) .10 (.14) Extraordinary item - gain on extinguishment of debt - .16 - .16 ------ ------ ------ ------ Earnings attributable to common stock $ .09 .05 .10 .02 ------ ------ ------ ------ ------ ------ ------ ------
See acompanying notes to condensed consolidated financial statements. -2- FOREST OIL CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, ------------------------------- 1999 1998 --------- ------- (In Thousands) Cash flows from operating activities: Net earnings (loss) before extraordinary item $ 4,493 (5,407) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and depletion 44,366 47,195 Translation (gain) loss on subordinated debt (6,517) 3,162 Amortization of deferred debt costs 610 420 Deferred income tax expense (benefit) (824) 646 Other, net (3,210) 232 Decrease in accounts receivable 3,087 9,593 Increase in other current assets (2,093) (5,513) Increase (decrease) in accounts payable (381) 1,370 Increase in accrued interest and other current liabilities 291 5,381 ------ ------ Net cash provided by operating activities 39,822 57,079 Cash flows from investing activities: Capital expenditures for property and equipment (48,656) (389,422) Less stock issued for acquisition - 81,784 ------ ------ (48,656) (307,638) Proceeds from sales of assets 14,781 4,411 Increase in other assets, net (976) (1,554) ------ ------ Net cash used by investing activities (34,851) (304,781) Cash flows from financing activities: Proceeds from bank borrowings 66,151 380,504 Repayments of bank borrowings (168,780) (211,652) Issuance of 10 1/2% senior subordinated notes, net of issuance costs 98,825 - Issuance of 8 3/4% senior subordinated notes, net of issuance costs - 74,620 Redemption of 11 1/2% senior subordinated notes (45) - Decrease in other liabilities, net (2,081) (552) ------ ------ Net cash provided (used) by financing activities (5,930) 242,920 Effect of exchange rate changes on cash (43) 19 ------ ------ Net decrease in cash and cash equivalents (1,002) (4,763) Cash and cash equivalents at beginning of period 3,415 18,191 ------ ------ Cash and cash equivalents at end of period $2,413 13,428 ------ ------ ------ ------ Cash paid during the period for: Interest $23,286 12,051 ------ ------ ------ ------ Income taxes $470 1,312 ------ ------ ------ ------
See acompanying notes to condensed consolidated financial statements. -3- (1) BASIS OF PRESENTATION The condensed 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 Forest at June 30, 1999 and the results of operations for the three and six month periods ended June 30, 1999 and 1998. 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, and related notes thereto, filed with Forest's annual report on Form 10-K for the year ended December 31, 1998, previously filed with the Securities and Exchange Commission. The components of total comprehensive income (loss) for the periods consist of net earnings (loss), foreign currency translation and changes in the unfunded pension liability and are as follows:
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- (In Thousands) Net earnings $4,043 1,792 4,493 789 Other comprehensive loss (881) (1,239) (1,262) (1,003) ----- ----- ----- ----- Total comprehensive loss $3,162 553 3,231 (214) ----- ----- ----- ----- ----- ----- ----- -----
(2) ACQUISITIONS In February 1998, Forest purchased interests in oil and natural gas properties in 13 fields located onshore Louisiana (the Louisiana Acquisition) from a private company for total consideration of approximately $230,776,000. The consideration consisted of approximately $216,557,000 of cash, funded primarily from the bank credit facility, and the issuance of $75,000,000 principal amount of 8 3/4% subordinated notes (see Note 6) and 1,000,000 shares of Common Stock. Estimated proved reserves acquired in the Louisiana Acquisition were approximately 189 BCFE at the time of purchase. In June 1998, Forest issued 5,950,000 shares of common stock to The Anschutz Corporation (Anschutz) in exchange for certain oil and gas assets (the Anschutz Acquisition). The oil and gas assets acquired included an interest in The Anschutz Ranch East Field located in Utah and Wyoming. Forest's interest in this field had net proved developed producing reserves estimated at approximately 72 BCFE at the date of acquisition. Forest acquired all of Anschutz's Canadian oil and gas assets, comprised primarily of approximately 170,000 net acres of undeveloped land, as well as 5.2 BCFE of estimated proved reserves. The acquisition also included certain of Anschutz's international oil and gas assets comprised of 13 international projects encompassing approximately 18 million net acres of undeveloped land. (3) SUBSIDIARIES SAXON PETROLEUM INC. In December 1995, Forest purchased a 56% economic (49% voting) interest in Saxon Petroleum Inc. (Saxon) for approximately $22,000,000. Saxon was a Canadian exploration and production company with headquarters in Calgary, Alberta and operations concentrated in western Alberta. Since Forest had majority voting control over Saxon as a result of the voting common shares owned and proxies that it held, it accounted for Saxon as a consolidated subsidiary from the date of its acquisition. During 1997 Forest converted -4- (3) SUBSIDIARIES, CONTINUED preferred shares of Saxon into common shares and acquired additional common shares of Saxon pursuant to an equity participation agreement. These transactions increased Forest's ownership in Saxon to a 65% economic (49% voting) interest. In August 1998, Forest acquired all of the outstanding common shares of Saxon not previously owned by Forest in exchange for 1,081,256 shares of Forest Common Stock. A former officer of Saxon returned 9,922 shares of Forest Common Stock to Saxon in exchange for extinguishment of a loan. These shares held by Saxon have been recorded as treasury stock at June 30, 1999. In October 1998 ownership of Saxon was transferred from Forest to its wholly owned subsidiary, Canadian Forest Oil Ltd. In June 1999 Saxon was liquidated into Canadian Forest. CANADIAN FOREST OIL LTD. In January 1996, Forest acquired ATCOR Resources Ltd. of Calgary, Alberta for approximately $136,000,000, including acquisition costs of approximately $1,000,000. The purchase was funded by the net proceeds of a Common Stock offering and approximately $8,300,000 drawn under the Company's bank credit facility. The exploration and production business of ATCOR was renamed Canadian Forest Oil Ltd. (Canadian Forest). Canadian Forest's principal reserves and producing properties are located in Alberta and British Columbia, Canada. As part of the Canadian Forest acquisition, Forest also acquired ATCOR's natural gas marketing business, which was renamed Producers Marketing Ltd. (ProMark). Canadian Forest is the issuer of the 8 3/4% Senior Subordinated Notes (the 8 3/4% Notes) (see Note 6). Forest has not presented separate financial statements and other disclosures concerning Canadian Forest because management has determined that such information is not material to holders of the 8 3/4% Notes; however, the following summarized consolidated financial information is being provided for Canadian Forest as of June 30, 1999 and December 31, 1998 and for the six months ended June 30, 1999 and 1998. These amounts include the effects of the transfer of the investment in Saxon to Canadian Forest effective October 1998. -5- (3) SUBSIDIARIES, CONTINUED
June 30, December 31, CANADIAN FOREST OIL LTD. 1999 1998 -------- ----------- (In Thousands) Summarized Consolidated Balance Sheet Information: ASSETS Current assets $ 21,622 22,240 Net property and equipment 143,186 132,081 Goodwill and other intangible assets, net 22,617 22,689 Investment in affiliate 18,477 95 Note receivable from parent 8,887 42,266 Other assets 3,315 3,384 -------- -------- $ 218,104 222,755 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities $ 27,767 27,646 Long-term debt 30,181 35,398 8 3/4% Senior Subordinated Notes 199,977 199,976 Other liabilities 329 345 Deferred income taxes 8,979 9,656 Shareholder's equity (deficit) (49,129) (50,266) -------- -------- $ 218,104 222,755 -------- -------- -------- -------- Six Months Ended June 30, ------------------------- 1999 1998 ---- ---- (In Thousands) Summarized Consolidated Statements of Operations Information: Revenue $ 102,051 78,179 -------- -------- -------- -------- Income (loss) before income taxes $ 1,919 (5,815) -------- -------- -------- -------- Net income (loss) $ 3,063 (5,529) -------- -------- -------- --------
(4) NET PROPERTY AND EQUIPMENT Components of net property and equipment are as follows:
June 30, December 31, 1999 1998 -------- ------------ (In Thousands) Oil and gas properties $ 2,078,925 2,029,352 Buildings, transportation and other equipment 13,271 12,356 --------- --------- 2,092,196 2,041,708 Less accumulated depreciation, depletion and valuation allowance 1,425,716 1,378,398 -------- -------- $ 666,480 663,310 -------- -------- -------- --------
-6- (5) GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets recorded by Forest's gas marketing subsidiary consist of the following:
June 30, December 31, 1999 1998 -------- ------------ (In Thousands) Goodwill $ 15,562 14,980 Gas marketing contracts 13,578 13,070 ------ ------ 29,140 28,050 Less accumulated amortization (6,523) (5,361) ------ ------ $ 22,617 22,689 ------ ------ ------ ------
Goodwill is being amortized on a straight line basis over twenty 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. (6) LONG-TERM DEBT Components of long-term debt are as follows: June 30, December 31, 1999 1998 -------- ------------ (In Thousands) Global Credit Facility: U.S. borrowings $ 165,000 261,400 Canadian borrowings 30,181 10,456 Saxon Credit Facility - 24,942 8 3/4% Senior Subordinated Notes 199,977 199,976 10 1/2% Senior Subordinated Notes 98,882 - 11 1/4% Senior Subordinated Notes 8,631 8,676 ------- ------- $ 502,671 505,450 ------- ------- ------- -------
In February 1998, Canadian Forest issued $75,000,000 principal amount of 8 3/4% subordinated notes which were sold at 100.375%. Net proceeds were used to provide funds for the Louisiana Acquisition. The notes issued in 1998 were subsequently exchanged for notes of the same series of 8 3/4% Notes issued in September 1997. 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 increase in the value of the Canadian dollar relative to the U.S. dollar during the second quarter and first six months of 1999, Forest reported translation gains of approximately $4,301,000 and $6,517,000, respectively, compared to translation losses of $4,186,000 and $3,162,000 in the second quarter and first six months of 1998, respectively. -7- (6) LONG-TERM DEBT, CONTINUED In June 1998, Forest settled its remaining nonrecourse production payment obligation for 271,214 shares of Common Stock. The stock was valued at $3,750,000 based upon the weighted average trading price for the 10 day trading period preceding the closing date. The obligation, which originated in May 1992, had a remaining book value of approximately $9,966,000. As a result of this settlement, Forest recorded an extraordinary gain on extinguishment of debt of $6,196,000 (net of related expenses) in the second quarter of 1998. In February 1999 Forest completed a public offering, at 98.811% of par, of $100,000,000 principal amount of 10 1/2% Senior Subordinated Notes due 2006. (7) EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to common stock by the weighted average number of common shares outstanding during each period, excluding treasury shares. Diluted earnings (loss) per share is computed by adjusting the average number of common shares outstanding for the dilutive effect, if any, of stock options. The effect of potentially dilutive securities is based on earnings (loss) before extraordinary items. The following sets forth the calculation of basic and diluted earnings per share:
Three Months Ended Six Months Ended June 30, June 30, ------------------- --------------------- 1999(1) 1998(2) 1999(1) 1998(2) -------- -------- -------- -------- (In Thousands Except Per Share Amounts) Income (loss) before extraordinary item $ 4,043 (4,404) 4,493 (5,407) Weighted average common shares outstanding during the period 44,655 37,721 44,651 37,350 Add dilutive effects of employee stock options 348 - 96 - -------- -------- -------- -------- Weighted average common shares outstanding including the effects of dilutive securities 45,003 37,721 44,747 37,350 -------- -------- -------- -------- -------- -------- -------- -------- Basic earnings (loss) per share before extraordinary item $ .09 (.11) .10 (.14) -------- -------- -------- -------- -------- -------- -------- -------- Diluted earnings (loss) per share before extraordinary item $ .09 (.11) .10 (.14) -------- -------- -------- -------- -------- -------- -------- --------
(1) At June 30, 1999, options to purchase 1,758,000 shares of common stock at prices ranging from $11.25 to $25.00 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 periods. These options expire at various dates from 2003 through 2008. (2) At June 30, 1998, options to purchase 1,915,000 shares of common stock at prices ranging from $11.25 to $25.00 per share were outstanding, but were not included in the computation of diluted earnings per share because the effect of the assumed exercise of these stock options was antidilutive. These options expire at various dates from 2003 through 2007. -8- (8) 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 five reportable segments: oil and gas operations in the Gulf Coast Offshore Region, Gulf Coast Onshore Region, Western Region and in 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 June 30, 1999 - -------------------------------- Oil and Gas Operations --------------------------------------------------------- Marketing Gulf Coast Region and ----------------- Western Total Procesing Total Offshore Onshore Region U.S. Canada Total Canada Company -------- ------- ------- ------- -------- ------- -------- ------- (In Thousands) Revenue $ 19,576 10,445 7,004 37,025 10,133 47,158 40,429 87,587 Marketing and processing expense - - - - - - 39,664 39,664 Oil and gas production expense 3,810 4,227 1,172 9,209 3,229 12,438 - 12,438 General and administrative expense 1,090 830 625 2,545 685 3,230 653 3,883 Depreciation and depletion expense 10,510 4,446 2,236 17,192 3,833 21,025 480 21,505 ------- ------- ------- ------- ------- ------- ------- ------- Earnings (loss) from operations $ 4,166 942 2,971 8,079 2,386 10,465 (368) 10,097 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Capital expenditures $ 5,446 9,141 1,222 15,809 7,496 23,305 - 23,305 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Property and equipment, net $112,300 266,985 100,053 479,338 161,355 640,693 - 640,693 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Information for Forest's reportable segments relates to the three months ended June 30, 1999 consolidated totals as follows:
(In Thousands) -------------- EARNINGS BEFORE INCOME TAXES: Earnings from operations for reportable segments $ 10,097 Administrative asset depreciation (262) Other income, net (683) Interest expense (10,407) Translation gain on subordinated debt 4,301 -------- Earnings before income taxes $ 3,046 -------- -------- CAPITAL EXPENDITURES: Reportable segments $ 23,305 International interests 4,563 Administrative assets and other 827 -------- Total capital expenditures $ 28,695 -------- -------- PROPERTY AND EQUIPMENT, NET: Reportable segments $ 640,693 International interests 19,175 Administrative assets, net and other 6,612 -------- Total property and equipment, net $ 666,480 -------- --------
-9- (8) BUSINESS AND GEOGRAPHICAL SEGMENTS, CONTINUED
Three months ended June 30, 1998 - -------------------------------- Oil and Gas Operations --------------------------------------------------------- Marketing Gulf Coast Region and ----------------- Western Total Procesing Total Offshore Onshore Region U.S. Canada Total Canada Company -------- ------- ------- ------- -------- ------- -------- ------- (In Thousands) Revenue $ 16,248 11,812 4,036 32,096 9,361 41,457 33,716 75,173 Marketing and processing expense - - - - - - 32,096 32,096 Oil and gas production expense 3,052 2,505 1,020 6,577 2,785 9,362 - 9,362 General and administrative expense 1,423 1,047 430 2,900 1,328 4,228 694 4,922 Depreciation and depletion expense 10,933 5,532 1,176 17,641 5,414 23,055 504 23,559 ------- ------- ------- ------- ------- ------- ------- ------- Earnings (loss) from operations $ 840 2,728 1,410 4,978 (166) 4,812 422 5,234 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Capital expenditures $ 25,500 19,574 67,089 112,163 16,223 128,386 (10) 128,376 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Property and equipment, net $180,307 320,218 142,265 642,790 201,883 844,673 5,014 849,687 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Information for Forest's reportable segments relates to the three months ended June 30, 1998 consolidated totals as follows:
(In Thousands) -------------- LOSS BEFORE INCOME TAXES: Earnings from operations for reportable segments $ 5,234 Administrative asset depreciation (303) Other income, net 6,704 Interest expense (9,755) Translation loss on subordinated debt (4,186) -------- Loss before income taxes $ (2,306) -------- -------- CAPITAL EXPENDITURES: Reportable segments $ 128,376 Administrative assets and other 418 -------- Total capital expenditures $ 128,794 -------- -------- PROPERTY AND EQUIPMENT, NET: Reportable segments $ 849,687 Administrative assets, net and other 5,276 -------- Total property and equipment, net $ 854,963 -------- --------
-10- (8) BUSINESS AND GEOGRAPHICAL SEGMENTS, CONTINUED
Six months ended June 30, 1999 - ------------------------------ Oil and Gas Operations --------------------------------------------------- Marketing Gulf Coast Region and ----------------- Western Total Procesing Total Offshore Onshore Region U.S. Canada Total Canada Company -------- ------- ------- ------- -------- ------- -------- ------- (In Thousands) Revenue $ 39,838 17,880 13,931 71,649 18,464 90,113 87,826 177,939 Marketing and processing expense - - - - - - 83,851 83,851 Oil and gas production expense 6,894 8,595 2,593 18,082 5,621 23,703 - 23,703 General and administrative expense 2,361 1,705 1,196 5,262 1,414 6,676 1,305 7,981 Depreciation and depletion expense 22,650 8,174 4,335 35,159 7,730 42,889 945 43,834 ------- ------- ------- ------- ------- ------- ------- ------- Earnings (loss) from operations $ 7,933 (594) 5,807 13,146 3,699 16,845 1,725 18,570 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Capital expenditures $ 7,813 15,092 2,386 25,291 17,289 42,580 - 42,580 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Property and equipment, net $112,300 266,985 100,053 479,338 161,355 640,693 - 640,693 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Information for Forest's reportable segments relates to the six months ended June 30, 1999 consolidated totals as follows:
(In Thousands) -------------- EARNINGS BEFORE INCOME TAXES: Earnings from operations for reportable segments $ 18,570 Administrative asset depreciation (532) Other income, net 97 Interest expense (21,064) Translation gain on subordinated debt 6,517 -------- Earnings before income taxes $ 3,588 -------- -------- CAPITAL EXPENDITURES: Reportable segments $ 42,580 International interests 4,771 Administrative assets and other 1,305 -------- Total capital expenditures $ 48,656 -------- -------- PROPERTY AND EQUIPMENT, NET: Reportable segments $ 640,693 International interests 19,175 Administrative assets, net and other 6,612 -------- Total property and equipment, net $ 666,480 -------- --------
-11- (8) BUSINESS AND GEOGRAPHICAL SEGMENTS, CONTINUED
Six months ended June 30, 1998 - ------------------------------ Oil and Gas Operations --------------------------------------------------- Marketing Gulf Coast Region and ----------------- Western Total Procesing Total Offshore Onshore Region U.S. Canada Total Canada Company -------- ------- ------- ------- -------- ------- -------- ------- (In Thousands) Revenue $ 34,778 20,069 6,353 61,200 20,904 82,104 68,565 150,669 Marketing and processing expense - - - - - - 65,264 65,264 Oil and gas production expense 6,196 4,364 1,889 12,449 5,755 18,204 - 18,204 General and administrative expense 2,217 2,172 689 5,078 2,658 7,736 1,441 9,177 Depreciation and depletion expense 23,128 9,279 1,334 33,741 11,831 45,572 975 46,547 ------- ------- ------- ------- ------- ------- ------- ------- Earnings from operations $ 3,237 4,254 2,441 9,932 660 10,592 885 11,477 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Capital expenditures $ 37,022 251,621 72,692 361,335 27,403 388,738 (10) 388,728 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Property and equipment, net $180,307 320,218 142,265 642,790 201,883 844,673 5,014 849,687 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Information for Forest's reportable segments relates to the six months ended June 30, 1998 consolidated totals as follows:
(In Thousands) -------------- LOSS BEFORE INCOME TAXES: Earnings from operations for reportable segments $ 11,477 Administrative asset depreciation (648) Other income, net 6,782 Interest expense (18,261) Translation loss on subordinated debt (3,162) -------- Loss before income taxes $ (3,812) -------- -------- CAPITAL EXPENDITURES: Reportable segments $ 388,728 Administrative assets and other 694 -------- Total capital expenditures $ 389,422 -------- -------- PROPERTY AND EQUIPMENT, NET: Reportable segments $ 849,687 Administrative assets, net and other 5,276 -------- Total property and equipment, net $ 854,963 -------- --------
-12- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with Forest's Consolidated Financial Statements and Notes thereto. FORWARD-LOOKING STATEMENTS Certain of the statements set forth in this Form 10-Q, such as the statements regarding planned capital expenditures and the availability of capital resources to fund capital expenditures, are forward-looking and are based on our current belief as to the outcome and timing of such future events. There are numerous risks and uncertainties that can affect the outcome and timing of such events, including many factors which are beyond our control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the actual results and plans for 1999 and beyond could differ materially from those expressed in the forward-looking statements. For a description of risks affecting Forest's business, see "Item 1 - Business - Forward-Looking Statements and Risk Factors" in the 1998 Annual Report on Form 10-K. RESULTS OF OPERATIONS FOR THE SECOND QUARTER OF 1999 Net earnings for the second quarter of 1999 were $4,043,000 or $.09 per basic and diluted common share compared to $1,792,000 or $.05 per basic and diluted common share in the corresponding period of 1998. The 1999 period includes a gain on foreign currency translation of $4,301,000 related to subordinated debt issued by a Canadian subsidiary. The 1998 period included a $4,186,000 foreign currency translation loss, $6,603,000 of income related to settlement of a Canadian gas contract and an extraordinary gain on extinguishment of debt of $6,196,000. Marketing and processing revenue increased by 20% to $40,514,000 in the second quarter of 1999 from $33,839,000 in the second quarter of 1998 and the related marketing and processing expense increased by 24% to $39,664,000 in the second quarter of 1999 from $32,096,000 in the same period of the previous year. The gross margin reported for marketing and processing activities decreased to $850,000 in the second quarter of 1999 from $1,743,000 in the second quarter of 1998. The decrease resulted primarily from the effects of a more competitive market which caused trading margins to tighten. Oil and gas sales revenue increased by 14% to $47,073,000 in the second quarter of 1999 from $41,334,000 in the second quarter of 1998 due primarily to higher production and higher oil prices. Production volumes for natural gas and liquids (consisting of oil, condensate and natural gas liquids) in the second quarter of 1999 increased 10% from the comparable 1998 period, due primarily to discoveries in the Gulf of Mexico being brought on line as well as production attributable to property acquisitions in June 1998. The average sales price received for natural gas in the second quarter of 1999 increased slightly compared to the average sales price received in the corresponding 1998 period. The average sales price received for liquids production during the second quarter of 1999 increased 9% compared to the average sales price received during the comparable 1998 period. Oil and gas production expense of $12,438,000 in the second quarter of 1999 increased 33% from $9,362,000 in the comparable period of 1998 primarily as a result of increased workover expense in the Onshore Gulf Coast area as well as additional production expense related to acquired properties. On an MCFE basis (MCFE means thousands of cubic feet of natural gas equivalents, using conversion ratio of one barrel of oil to six MCF of natural gas), production expense increased approximately 20% in the second quarter of 1999 to $.55 per MCFE from $.46 MCFE in the second quarter of 1998. -13- The following tables set forth production volumes, weighted average sales prices and production expenses during the periods as follows:
Three Months Ended June 30, 1999 -------------------------------------------------------------------- Offshore Onshore Gulf of Gulf Total Total Mexico Coast Western U.S. Canada Company -------- ------- ------- ------ ------ ------- NATURAL GAS Production (MMCF) 7,258 2,777 2,634 12,669 3,082 15,751 Sales price received (per MCF) $ 2.23 2.24 1.91 2.17 1.52 2.04 Effects of energy swaps (per MCF)(1) .02 .06 .03 .03 (.08) .01 ------ ------ ------ ------ ------ ------ Average sales price (per MCF) $ 2.25 2.30 1.94 2.20 1.44 2.05 LIQUIDS Oil and condensate: Production (MBBLS) 211 233 49 493 318 811 Sales price received (per BBL) $ 15.50 16.59 17.20 16.18 15.19 15.79 Effects of energy swaps (per BBL)(1) - (2.51) - (1.18) (.35) (.86) ------ ------ ------ ------ ------ ------ Average sales price (per BBL) $ 15.50 14.08 17.20 15.00 14.84 14.93 Natural gas liquids: Production (MBBLS) 4 51 146 201 106 307 Average sales price (per BBL) $ 6.75 7.53 8.81 8.44 9.19 8.70 Total liquids production (MBBLS) 215 284 195 694 424 1,118 Average liquids sales price (per BBL) $ 15.33 12.90 10.92 13.10 13.42 13.22 TOTAL PRODUCTION: Production volumes (MMCFE) 8,548 4,481 3,804 16,833 5,626 22,459 Average sales price (per MCFE) $ 2.30 2.24 1.91 2.20 1.80 2.09 Operating expense (per MCFE) .45 .94 .31 .55 .57 .55 ------ ------ ------ ------ ------ ------ Netback (per MCFE) $ 1.85 1.30 1.60 1.65 1.23 1.54 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(1) Energy swaps were entered into to hedge the price of spot market volumes against price fluctuations. Hedged natural gas volumes were 8,724 MMCF in the three months ended June 30, 1999. Hedged oil and condensate volumes were 608,000 barrels in the three months ended June 30, 1999. The aggregate net loss under energy swap agreements was $526,000 for the period and was accounted for as a decrease to oil and gas sales. -14-
Three Months Ended June 30, 1998 -------------------------------------------------------------------- Offshore Onshore Gulf of Gulf Total Total Mexico Coast Western U.S. Canada Company -------- ------- ------- ------ ------ ------- NATURAL GAS Production (MMCF) 5,972 3,566 1,352 10,890 3,407 14,297 Sales price received (per MCF) $ 2.24 2.29 2.22 2.26 1.24 2.01 Effects of energy swaps (per MCF)(1) (.02) .08 - .01 (.01) .01 ------ ------ ------ ------ ------ ------ Average sales price (per MCF) $ 2.22 2.37 2.22 2.27 1.23 2.02 LIQUIDS Oil and condensate: Production (MBBLS) 225 227 50 502 346 848 Sales price received (per BBL) $ 11.88 13.12 13.30 12.59 11.28 12.06 Effects of energy swaps (per BBL)(1) 1.15 - - .51 1.66 .98 ------ ------ ------ ------ ------ ------ Average sales price (per BBL) $ 13.03 13.12 13.30 13.10 12.94 13.04 Natural gas liquids: Production (MBBLS) - 33 53 86 92 178 Average sales price (per BBL) $ - 8.73 7.06 7.70 7.80 7.75 Total liquids production (MBBLS) 225 260 103 588 438 1,026 Average liquids sales price (per BBL) $ 13.03 12.57 10.09 12.31 11.86 12.12 TOTAL PRODUCTION Production volumes (MMCFE) 7,322 5,126 1,970 14,418 6,035 20,453 Average sales price (per MCFE) $ 2.22 2.29 2.05 2.22 1.55 2.02 Operating expense (per MCFE) .42 .49 .52 .46 .46 .46 ------ ------ ------ ------ ------ ------ Netback (per MCFE) $ 1.80 1.80 1.53 1.76 1.09 1.56 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(1) Energy swaps were entered into to hedge the price of spot market volumes against price fluctuations. Hedged natural gas volumes were 7,430 MMCF in the three months ended June 30, 1998. Hedged oil and condensate volumes were 136,000 barrels in the three months ended June 30, 1998. The aggregate net gain under energy swap agreements was $939,000 for the period and was accounted for as an increase to oil and gas sales. General and administrative expense decreased to $3,883,000 in the second quarter of 1999 compared to $4,922,000 in the comparable period of 1998. Total overhead costs (capitalized and expensed general and administrative costs) were $5,748,000 in the second quarter of 1999 compared to $7,023,000 in the comparable period of 1998. The 1998 period included non-recurring expenses of Saxon as a result of its decision to investigate strategic alternatives, whereas the 1999 period reflects the efficiencies achieved by combining Saxon's operations with those of Canadian Forest. -15- Depreciation and depletion expense decreased 9% to $21,767,000 in the second quarter of 1999 from $23,862,000 in the second quarter of 1998. On a per-unit basis, depletion expense was approximately $.94 per MCFE in the second quarter of 1999 compared to $1.13 per MCFE in the corresponding 1998 period. The decline in the depletion rate during 1999 is attributable to favorable per-unit costs associated with 1998 acquisitions and Gulf of Mexico discoveries, as well as to the writedowns of oil and gas properties in the third and fourth quarters of 1998. Other income was $6,704,000 in the second quarter of 1998. This amount includes $6,603,000 of income related to settlement of a Canadian gas contract. Interest expense increased 7% to $10,407,000 in the second quarter of 1999 compared to $9,755,000 in the corresponding 1998 period, due primarily to higher debt levels. The foreign currency translation gain was $4,301,000 in the second quarter of 1999, compared to a loss of $4,186,000 in the second quarter of 1998. Foreign currency translation gains and losses relate to translation of the 8 3/4% Notes issued by Canadian Forest, and are attributable to the increases and decreases in the value of the Canadian dollar relative to the U.S. dollar during the period. The value of the Canadian dollar was $.6789 at June 30, 1999 compared to $.6628 at March 31, 1999. Forest is required to recognize the noncash 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. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 Net earnings for the first six months of 1999 were $4,493,000 or $.10 per basic and diluted common share compared to $789,000 or $.02 per basic and diluted common share in the first six months of 1998. The 1999 period includes a gain on foreign currency translation of $6,517,000. The 1998 period included a $3,162,000 loss on foreign currency translation, $6,603,000 of income related to settlement of a Canadian gas contract and an extraordinary gain on extinguishment of debt of $6,196,000. Marketing and processing revenue increased 28% to $88,020,000 in the first six months of 1999 from $68,842,000 in the first six months of 1998. The related marketing and processing expense also increased by 28% to $83,851,000 in the 1999 period from $65,264,000 in the previous year. The gross margin reported for marketing and processing activities of $4,169,000 in the first six months of 1999 was higher than the gross margin of $3,578,000 in the first six months of 1998. The increase in the gross margin resulted primarily from a gain of $3,238,000 on sale of processing facilities in the first quarter of 1999, offset to some extent by the effects of a more competitive market which caused trading margins to tighten. Oil and gas sales revenue increased by 10% to $89,919,000 in the first six months of 1999 compared to $81,827,000 in the first six months of 1998. Production volumes for natural gas and liquids in the first six months of 1999 increased 17% and 9%, respectively, from the comparable 1998 period. The increases in production are due primarily to discoveries in the Gulf of Mexico being brought on production, as well as production attributable to property acquisitions in February and June of 1998. The average sales price received for natural gas in the first six months of 1999 decreased slightly compared to the corresponding 1998 period. The average sales price received for liquids during the first six months of 1999 decreased 10% compared to the average sales price received during the comparable 1998 period. Oil and gas production expense of $23,703,000 in the first six months of 1999 increased 30% from $18,204,000 in the comparable period of 1998, primarily as a result of increased workover expense in the Onshore Gulf Coast area as well as additional production expense related to acquired properties. On an MCFE basis, production expense increased approximately 13% in the first six months of 1999 to $.52 per MCFE from $.46 per MCFE in the first six months of 1998. -16- The following tables set forth production volumes, weighted average sales prices and production expenses during the periods as follows:
Six Months Ended June 30, 1999 -------------------------------------------------------------------- Offshore Onshore Gulf of Gulf Total Total Mexico Coast Western U.S. Canada Company -------- ------- ------- ------ ------ ------- NATURAL GAS Production (MMCF) 15,530 5,398 5,352 26,280 6,465 32,745 Sales price received (per MCF) $ 2.01 1.97 1.81 1.97 1.40 1.85 Effects of energy swaps (per MCF) (1) .18 .24 .16 .18 (.05) .14 ------ ------ ------ ------ ------ ------ Average sales price (per MCF) $ 2.19 2.21 1.97 2.15 1.35 1.99 LIQUIDS Oil and condensate: Production (MBBLS) 466 404 110 980 623 1,603 Sales price received (per BBL) $ 11.87 14.26 14.46 13.14 12.96 13.06 Effects of energy swaps (per BBL)(1) - (1.22) - (.50) (.18) (.37) ------ ------ ------ ------ ------ ------ Average sales price (per BBL) $ 11.87 13.04 14.46 12.64 12.78 12.69 Natural gas liquids: Production (MBBLS) 5 90 258 353 218 571 Average sales price (per BBL) $ 7.40 7.39 7.05 7.14 8.23 7.56 Total liquids production (MBBLS) 471 494 368 1,333 841 2,174 Average liquids sales price (per BBL) $ 11.82 12.01 9.27 11.19 11.60 11.35 TOTAL PRODUCTION: Production volumes (MMCFE) 18,356 8,362 7,560 34,278 11,511 45,789 Average sales price (per MCFE) $ 2.16 2.14 1.84 2.09 1.61 1.96 Operating expense (per MCFE) .38 1.03 .34 .53 .49 .52 ------ ------ ------ ------ ------ ------ Netback (per MCFE) $ 1.78 1.11 1.50 1.56 1.12 1.44 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(1) Energy swaps were entered into to hedge the price of spot market volumes against price fluctuations. Hedged natural gas volumes were 17,212 MMCF in the six months ended June 30, 1999. Hedged oil and condensate volumes were 678,000 barrels in the six months ended June 30, 1999. The aggregate net gain under energy swap agreements was $3,946,000 for the period and was accounted for as an increase to oil and gas sales. -17-
Six Months Ended June 30, 1998 -------------------------------------------------------------------- Offshore Onshore Gulf of Gulf Total Total Mexico Coast Western U.S. Canada Company -------- ------- ------- ------ ------ ------- NATURAL GAS Production (MMCF) 12,182 6,252 2,274 20,708 7,254 27,962 Sales price received (per MCF) $ 2.24 2.25 2.15 2.23 1.24 1.97 Effects of energy swaps (per MCF) (1) .08 .06 - .07 - .05 ------ ------ ------ ------ ------ ------ Average sales price (per MCF) $ 2.32 2.31 2.15 2.30 1.24 2.02 LIQUIDS Oil and condensate: Production (MBBLS) 469 374 78 921 731 1,652 Sales price received (per BBL) $ 12.40 13.56 13.63 12.98 12.46 12.74 Effects of energy swaps (per BBL)(1) .99 - - .50 1.37 .89 ------ ------ ------ ------ ------ ------ Average sales price (per BBL) $ 13.39 13.56 13.63 13.48 13.83 13.63 Natural gas liquids: Production (MBBLS) - 72 56 128 221 349 Average sales price (per BBL) $ - 8.08 7.09 7.65 8.24 8.02 Total liquids production (MBBLS) 469 446 134 1,049 952 2,001 Average liquids sales price (per BBL) $ 13.39 12.68 10.90 12.77 12.53 12.65 TOTAL PRODUCTION: Production volumes (MMCFE) 14,996 8,928 3,078 27,002 12,966 39,968 Average sales price (per MCFE) $ 2.30 2.25 2.06 2.26 1.61 2.05 Operating expense (per MCFE) .41 .49 .61 .46 .44 .46 ------ ------ ------ ------ ------ ------ Netback (per MCFE) $ 1.89 1.76 1.45 1.80 1.17 1.59 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(1) Energy swaps were entered into to hedge the price of spot market volumes against price fluctuations. Hedged natural gas volumes were 11,799 MMCF in the six months ended June 30, 1998. Hedged oil and condensate volumes were 316,000 barrels in the six months ended June 30, 1998. The aggregate net gain under energy swap agreements was $2,851,000 for the period and was accounted for as an increase to oil and gas sales. -18- General and administrative expense was $7,981,000 in the first six months of 1999 compared to $9,177,000 in the comparable period of 1998. Total overhead costs (capitalized and expensed general and administrative costs) were $12,043,000 in the first six months of 1999 compared to $13,187,000 in the comparable period of 1998. The 1998 period included non-recurring expenses of Saxon as a result of its decision to investigate strategic alternatives, whereas the 1999 period reflects the efficiencies achieved by combining Saxon's operations with those of Canadian Forest. The following table summarizes the total overhead costs incurred during the periods:
Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 1999 1998 1999 1998 ------ ------ ------ ------ (In Thousands) Overhead costs capitalized $1,865 2,101 4,062 4,010 General and administrative costs expensed (1) 3,883 4,922 7,981 9,177 ----- ----- ------ ------ Total overhead costs $5,748 7,023 12,043 13,187 ----- ----- ------ ------ ----- ----- ------ ------
(1) Includes $653,000 and $694,000 related to marketing and processing operations for the three month periods ended June 30, 1999 and 1998, respectively, and $1,305,000 and $1,441,000 for the six month periods ended June 30, 1999 and 1998, respectively. Depreciation and depletion expense decreased 6% to $44,366,000 in the first six months of 1999 from $47,195,000 in the first six months of 1998. On a per-unit basis, depletion expense was approximately $.94 per MCFE in the first six months of 1999 compared to $1.14 per MCFE in the corresponding 1998 period. The decline in the depletion rate during 1999 is attributable to favorable per-unit costs associated with 1998 acquisitions and Gulf of Mexico discoveries, as well as to the writedowns of oil and gas properties in the third and fourth quarters of 1998. At June 30, 1999 Forest had undeveloped properties with a cost basis of approximately $56,841,000 in the U.S. and $33,841,000 in Canada which were not subject to depletion, compared to approximately $66,860,000 in the U.S. and $19,280,000 in Canada at June 30, 1998. The decrease in the U.S. is attributable primarily to impairment of undeveloped properties. The increase in Canada is attributable primarily to the purchase of undeveloped acreage. At June 30, 1999 Forest also had approximately $19,175,000 of costs related to international interests. These costs are not being depleted pending the establishment of proved reserves. Other income was $97,000 in the first six months of 1999 and was $6,782,000 in the first six months of 1998. The 1998 period includes $6,603,000 of income related to settlement of a Canadian gas purchase contract. Interest expense increased 15% to $21,064,000 in the first six months of 1999 compared to $18,261,000 in the corresponding 1998 period, due primarily to higher debt levels. The foreign currency translation gain was $6,517,000 in the first six months of 1999, compared to a loss of $3,162,000 in the first six months of 1998. Foreign currency translation gains and losses relate to translation of the 8 3/4% Notes issued by Canadian Forest, and are attributable to the increases and decreases in the value of the Canadian dollar relative to the U.S. dollar during the period. The value of the Canadian dollar was $.6789 at June 30, 1999 compared to $.6535 at December 31, 1998. Forest is required to recognize the noncash 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. The extraordinary gain on extinguishment of debt in the first six months of 1998 resulted from settlement of the Company's remaining nonrecourse production payment obligation in exchange for 271,214 shares of Common Stock valued at $3,750,000. The obligation had a remaining book value of approximately $9,966,000. As a result of this settlement, the Company recorded an extraordinary gain on extinguishment of debt of $6,196,000 (net of related expenses). -19- LIQUIDITY AND CAPITAL RESOURCES Forest has historically addressed its long-term liquidity needs through the issuance of debt and equity securities, when market conditions permit, and through the use of bank credit facilities and cash provided by operating activities. In 1998 and early 1999, we completed several transactions that improved our financial position: - In February 1998 Canadian Forest issued $75,000,000 principal amount of 8 3/4% Notes, an add-on to the issue of 8 3/4% Notes completed in September 1997. The net proceeds funded a portion of our purchase of interests in oil and natural gas properties in 13 fields located onshore Louisiana from a private company for total consideration of approximately $230,776,000. The consideration consisted of approximately $216,557,000 in cash and 1,000,000 shares of Common Stock. - In June 1998 Forest issued 5,950,000 shares of common stock to Anschutz in exchange for certain oil and gas assets located in the United States and Canada, as well as 13 international projects. - In June 1998 we settled our only remaining nonrecourse production payment loan by issuing 271,214 shares of common stock to the lender. The loan, which originated in May 1992, had a remaining principal amount of approximately $14,600,000 and a book value of approximately $9,966,000. The loan was secured primarily by certain oil and gas properties in Oklahoma and the Gulf of Mexico. As a result of the settlement, we recorded an extraordinary gain of $6,196,000 in 1998. - In February 1999 we issued, at 98.811% of par, $100,000,000 of 10 1/2% Senior Subordinated Notes (the 10 1/2% Notes) due 2006. We continue to examine alternative sources of long-term capital, including bank borrowings, the issuance of debt instruments, the sale of common stock, preferred stock or other equity securities of Forest, the issuance of net profits interests, sales of non-strategic assets, prospects and technical information, and joint venture financing. Availability of these sources of capital and, therefore, our ability to execute our operating strategy will depend upon a number of factors, some of which are beyond Forest's control. In addition, the prices we receive for future oil and natural gas production and the level of production will significantly impact future operating cash flows. At current production and borrowing levels, Forest's sensitivity to price declines is significantly increased compared to prior periods. No prediction can be made as to the prices we will receive for our future oil and gas production. Additionally, we have four offshore Gulf of Mexico wells whose combined production currently represents approximately 25% of our consolidated daily deliverability. Our production, revenue and cash flow could be adversely affected if production from these properties decreases significantly. BANK CREDIT FACILITIES. Forest and its subsidiaries, Canadian Forest and ProMark, have a $300,000,000 global credit facility which currently provides for a global borrowing base of $250,000,000 through a syndicate of banks led by The Chase Manhattan Bank and The Chase Manhattan Bank of Canada. At July 23, 1999 the maximum credit facility allocations in the United States and Canada are $200,000,000 and $50,000,000, respectively. The borrowing base is subject to semi-annual redeterminations. Funds borrowed under the global credit facility can be used for general corporate purposes. Under the terms of the global credit facility, Forest, Canadian Forest and ProMark are subject to certain covenants and financial tests, including restrictions or requirements with respect to cash dividends, including cash dividends on preferred stock, working capital, cash flow, additional debt, liens, asset sales, investments, mergers and reporting responsibilities. The global credit facility is secured by a lien on, and a security interest in, a portion of our U.S. proved oil and gas properties, related assets, pledges of accounts receivable, and a pledge of 66% of the capital stock of Canadian Forest. The global credit facility is also indirectly secured by substantially all of the assets of Canadian Forest. We may increase the number of properties that are pledged under the facility. At June 30, 1999, the outstanding borrowings under the global credit facility were $165,000,000 in the U.S. and $30,181,000 in Canada. At July 23, 1999, the outstanding borrowings were $174,700,000 in the U.S. and $30,044,000 in Canada, with an average effective interest rate of 6.74%. At July 23, 1999 Forest had also used the global credit facility for letters of credit in the amount of $233,000 in the United States and $1,144,000 CDN in Canada. -20- WORKING CAPITAL. Forest had a working capital deficit of approximately $1,602,000 at June 30, 1999 compared to a surplus of approximately $348,000 at December 31, 1998. Forest periodically reports working capital deficits at the end of a period. Such working capital deficits are principally the result of accounts payable for capitalized exploration and development costs. Settlement of these payables is funded by cash flow from operations or, if necessary, by drawdowns on long-term bank credit facilities. For cash management purposes, drawdowns on the credit facilities are not made until the due dates of the payables. CASH FLOW. Historically, one of Forest's primary sources of capital has been net cash provided by operating activities. Net cash provided by operating activities decreased to $39,822,000 in 1999 compared to $57,079,000 in 1998. The 1999 period included working capital changes of $904,000, whereas such changes amounted to $10,831,000 in 1998. We used $34,851,000 for investing activities in 1999 compared to $304,781,000 in 1998. The 1998 period included the purchase of properties in the Louisiana Acquisition for approximately $230,776,000. The 1999 capital expenditures were primarily for exploration and development activities. Net cash used by financing activities in 1999 was $5,930,000 compared to net cash provided of $242,920,000 in 1998. The 1999 period included net repayments of bank borrowings of $102,629,000 and net proceeds of $98,825,000 from the issuance of the 10 1/2% Notes. The 1998 period included net bank borrowings of $168,852,000 and net proceeds of $74,620,000 from the issuance of the 8 3/4% Notes. CAPITAL EXPENDITURES. Expenditures for property acquisition, exploration and development for the first six months of 1999 and 1998 were as follows:
Six Months Ended -------------------------------- June 30, 1999 June 30, 1998 ------------- ------------- (In Thousands) Property acquisition costs: Proved properties $ (1,169) 276,165 Undeveloped properties 79 43,933 --------- -------- (1,090) 320,098 Exploration costs: Direct costs 27,813 34,419 Overhead capitalized 1,539 1,814 --------- -------- 29,352 36,233 Development costs: Direct costs 16,582 30,201 Overhead capitalized 2,523 2,196 --------- -------- 19,105 32,397 --------- -------- $ 47,367 388,728 --------- -------- --------- --------
-21- Forest's anticipated 1999 direct expenditures for exploration and development are approximately $90,000,000. We intend to meet our 1999 capital expenditure financing requirements using cash flows generated by operations, sales of non-strategic assets and borrowings under existing lines of credit. There can be no assurance, however, that we will have access to sufficient capital to meet these capital requirements. The planned levels of capital expenditures could be reduced if we experience lower than anticipated net cash provided by operations or other liquidity needs or could be increased if we experience increased cash flow or access additional sources of capital. In addition, while Forest intends to continue a strategy of acquiring reserves that meet our investment criteria, no assurance can be given that we can locate or finance any property acquisitions. LONG-TERM SALES CONTRACTS. A significant portion of Canadian Forest's natural gas production is sold through the ProMark Netback Pool. At June 30, 1999 the ProMark Netback Pool had entered into fixed price contracts to sell approximately 1.2 BCF of natural gas through the remainder of 1999 at an average price of $2.69 CDN per MCF and approximately 5.4 BCF of natural gas in 2000 at an average price of approximately $2.24 CDN per MCF. Canadian Forest, as one of the producers in the ProMark Netback Pool, is obligated to deliver a portion of this gas. In 1998 Canadian Forest supplied 27% of the gas for the Netback Pool. HEDGING PROGRAM. 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. Our current swaps are settled on a monthly basis. As of July 23, 1999 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 BBL ------- ------------ ------- ------------ July through September 1999 89.7 $ 2.20 8,505 $ 16.80 October through December 1999 69.6 $ 2.29 5,679 $ 16.28 2000 30.9 $ 2.39 166 $ 19.44 2001 21.7 $ 2.45 - $ - 2002 16.7 $ 2.48 - $ -
YEAR 2000 ISSUES. The Year 2000 issue results from computer programs being written using two digits (rather than four) to define the applicable year. As a result, certain of Forest's computer applications that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This situation could result in system failure, miscalculations and disruption of operations including, among other things, a temporary inability to process transactions, operate equipment with date-sensitive computer controls or communicate electronically with other parties. Forest has instituted a Year 2000 Project that addresses the effects the Year 2000 will have on software applications and analyzes upgrades and purchases that may be required. In addition, the Year 2000 Project assesses the potential impact on Forest in the event that other parties with whom we do business do not implement systems which are Year 2000 compliant. We commenced our Year 2000 Project in 1996, in conjunction with a review of the functionality of the hardware and software in certain existing systems. Replacement of the lease and land system with Year 2000 compliant software was completed in early 1997. Review of systems solutions for our primary business applications, including those used for accounting, production reporting and oil and gas reserve reporting, was completed during 1997 and early 1998. Possible solutions explored by Forest included modification of existing systems to make them Year 2000 compliant, replacement of existing systems with new systems which were Year 2000 compliant and/or provided greater functionality and, in certain areas, replacement of systems by outsourcing processes to a third party. -22- Forest completed its review of accounting systems in early 1998, deciding to replace its U.S. accounting system with a new system that will be Year 2000 compliant and also provide greater functionality. The identification of necessary enhancements to the base product was completed in mid-1998, after which the programming and data conversion processes commenced. In Canada, we plan to upgrade to a newer release of our existing oil and gas accounting software in order to be Year 2000 compliant. We expect to be fully operational on our new accounting systems in the U.S. and Canada in the third quarter of 1999. We are also installing an updated version of our U.S. production accounting software. The new version is Year 2000 compliant and also provides greater functionality. Installation of this software commenced in mid-1998. Completion of this project, which also requires updated interface programming to the accounting and reserve systems, was substantially completed in the second quarter of 1999. The Company does not use an automated production reporting system in Canada. Forest's U.S. oil and gas reserve software will also be updated to a version that is Year 2000 compliant. This upgrade, which requires some revision to interface programming, is expected to be complete by the third quarter of 1999. In Canada, we installed new oil and gas reserve software that is Year 2000 compliant. The new systems described above are expected to make Forest's business computer systems Year 2000 compliant in all material respects during the third quarter of 1999. Remaining business systems have also been reviewed for Year 2000 compliance. To date, no significant instances of noncompliance have been noted. During the course of the projects described above, there have been and will continue to be significant time requirements placed on Forest's managers and staff in the affected areas. Wherever possible, we have contracted additional personnel to supplement programming efforts and to "backfill" critical positions so that normal workflow is not adversely affected. However, the ability of Forest's information technology staff to respond to new issues is expected to be hampered during the remainder of the year due to the difficulty encountered in attracting and retaining qualified personnel. A Year 2000 Steering Committee was formed in early 1998 consisting of representatives from the Finance, Accounting, Legal, Operations and Information Systems disciplines. Based on the Committee's recommendations, Forest entered into contracts with several consultants to provide additional support to our efforts to ensure Year 2000 compliance. In the U.S., a national consulting firm was engaged to assist in the identification, classification and itemization of Year 2000 issues not previously identified. This effort encompassed a review of all field operations (operated and non-operated), significant vendor and customer relationships and business systems not included in the projects described above. The consulting firm has also been assisting Forest personnel in the assessment and remediation of Year 2000 issues. The consultants commenced their work in November 1998 and expect to complete the project in the third quarter of 1999. Canadian Forest has engaged a consultant to review its business systems and has retained outside legal counsel to provide support to management in the review of third party relationships. Forest believes that its Year 2000 project is approximately 90% complete as of July 1999. The internal and external costs associated with implementation of business systems for accounting, production reporting and oil and gas reserve reporting during 1998 and 1999 are expected to be between $2,500,000 and $3,000,000. Of this amount, approximately 20% to 30% would have been required to make our old systems Year 2000 compliant, and the remainder is for upgraded hardware and software. The cost of the reviews being undertaken by outside consultants contracted by the Year 2000 Steering Committee in the U.S. and Canada is expected to be $200,000 to $300,000. The remediation cost of non-compliant items noted in such reviews is not expected to exceed $300,000. Forest believes that a failure to complete Year 2000 compliance, or a failure by parties with whom Forest has material relationships to complete Year 2000 compliance, could have a material adverse effect on our financial condition and results of operations. We believe we can provide the resources necessary to ensure Year 2000 compliance prior to 2000, and thereby reduce the possibility of significant interruptions of normal business operations. We also believe that a sufficient number of alternate customers and suppliers exist if current customers or suppliers are delayed in their efforts to achieve Year 2000 compliance. -23- Forest has not, to date, implemented a Year 2000 Contingency Plan because we believe all major issues have been resolved or will be resolved. If, however, any remaining portions of Forest's Year 2000 Project fall behind schedule, we would expect to develop and implement contingency plans addressing non-compliant items in the third quarter of 1999. RECENT ACCOUNTING PRONOUNCEMENT. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement No.133), effective beginning with the first quarter of fiscal years beginning after June 15, 2000. Statement No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Company has not determined the impact Statement No. 133 will have on its financial statements and believes that such determination will not be meaningful until closer to the date of initial adoption. -24- PART II. OTHER INFORMATION ITEM 2c. RECENT SALE OF UNREGISTERED SECURITIES There were no sales of unregistered securities during the second quarter of 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits * Exhibit 4.1 Amendment No. 1 dated as of June 24, 1999 to the Fourth Amended and Restated Credit Agreement dated as of March 4, 1999 between Forest Oil Corporation and Subsidiary Guarantors and The Chase Manhattan Bank, as agent. * Exhibit 27 Financial Data Schedule. * Filed with this report. (b) Reports on Form 8-K The following report on Form 8-K was filed by Forest during the first quarter of 1999:
Date of Report Item Reported Financial Statements Filed -------------- ------------- --------------------------------- January 22, 1999 Item 5, 7 Condensed Pro Forma Combined Statement of Operations of Forest Oil Corporation for the year ended December 31, 1998.
There were no reports on Form 8-K filed by Forest during the second quarter of 1999. -25- 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: July 30, 1999 /s/ Joan C. Sonnen --------------------------------------------------- Joan C. Sonnen Vice President - Controller and Corporate Secretary (Signed on behalf of the registrant) /s/ David H. Keyte --------------------------------------------------- David H. Keyte Executive Vice President and Chief Financial Officer (Principal Financial Officer) -26- EX-4.1 2 EXHIBIT 4.1 EXECUTION COUNTERPART AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of June 24, 1999 (this AMENDMENT NO.1) between: FOREST OIL CORPORATION, a corporation duly organized and validly existing under the laws of the State of New York (the "COMPANY"); CANADIAN FOREST OIL LTD., a corporation duly organized and validly existing under the laws of the Province of Alberta, Canada ("CANADIAN FOREST OIL"); each of the SUBSIDIARY BORROWERS identified under the heading "SUBSIDIARY BORROWERS" on the signature pages hereto and each Subsidiary of Canadian Forest Oil that becomes a Canadian Borrower pursuant to Section 9.16 of the Credit Agreement (as defined below) (individually, a "SUBSIDIARY BORROWER" and collectively, the "SUBSIDIARY BORROWERS", and together with Canadian Forest Oil, the "CANADIAN BORROWERS"); each of the Subsidiaries of the Company that becomes a guarantor pursuant to Section 9.16 of the Credit Agreement (individually, a "SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS"); each of the lenders that is a signatory hereto identified under the caption "U.S. BANKS" on the signature pages hereto (including, without limitation, the New Banks referred to below) or which, pursuant to Section 12.06(b) of the Credit Agreement, shall become a "U.S. Bank" thereunder (individually, a "U.S. BANK" and, collectively, the "U.S. BANKS"); each of the lenders that is a signatory hereto identified under the caption "CANADIAN BANKS" on the signature pages hereto or which, pursuant to Section 12.06(b) of the Credit Agreement, shall become a "Canadian Bank" under the Credit Agreement (individually, a "CANADIAN BANK" and, collectively, the "CANADIAN BANKS", and together with the U.S. Banks, the "BANKS" and individually, a "BANK"); THE CHASE MANHATTAN BANK, as global administrative agent for the Banks (in such capacity, together with its successors in such capacity, the "GLOBAL ADMINISTRATIVE AGENT") and as lead arranger and sole book manager (in such capacity, together with its successors in such capacity, the "ARRANGER"); SALOMON BROTHERS HOLDING COMPANY INC, as syndication agent for the Banks (in such capacity, together with its successors in such capacity, the "SYNDICATION AGENT"); CHRISTIANIA BANK OG KREDITKASSE and SOCIETE GENERALE, SOUTHWEST AGENCY, as co-agents for the U.S. Banks (each in such capacity, together with their respective successors in such capacity, a "CO-AGENT" and together with the Global Administrative Agent, the "U.S. CO-AGENTS"); THE CHASE MANHATTAN BANK OF CANADA, as administrative agent for the Canadian Banks (in such capacity, together with its successors in such capacity, the "CANADIAN AGENT"); and BANK OF MONTREAL, as documentation agent for the Banks (in such capacity, together with its successors in such capacity, the "DOCUMENTATION AGENT") and as co-agent for the Canadian Banks (in such capacity, together with its successors in such capacity, the "CANADIAN CO-AGENT" and together with the Canadian Agent, the "CANADIAN CO-AGENTS" and together with the U.S. Co-Agents, the Documentation Agent and the Syndication Agent, the "AGENTS" and individually, an "AGENT"). WHEREAS (A) The Company, Canadian Forest Oil, the Subsidiary Borrowers, the Subsidiary Guarantors, the Banks (other than the New Banks), the U.S. Co-Agents and the Canadian Agent are parties to a Fourth Amended and Restated Credit Agreement dated as of March 4, 1999 (as in effect on the date hereof, the "CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof, for extensions of credit to be made by said Banks to the Company and the Canadian Borrowers in an aggregate principal or face amount not exceeding $300,000,000. Page 1 (B) Each of Salomon Brothers Holding Company Inc and General Electric Capital Corporation (each, a "NEW BANK" and collectively, the "NEW BANKS") wishes to become a party to the Credit Agreement, as amended hereby, as a "U.S. Bank" thereunder. (C) Certain of the Banks wish to increase or reduce their Commitments in accordance with Annex I attached hereto. (D) Certain of the Banks wish to terminate their Commitments and are executing this Amendment No. 1 solely for purposes of obtaining the acknowledgement of the Company and the Canadian Borrowers of such termination and to evidence such termination. (E) The Company and Canadian Forest Oil wish to obtain a waiver of Section 9.05 of the Credit Agreement from the Banks to the extent necessary with respect to the reconveyance by the Company of all of its Hydrocarbon Properties in Canada to Canadian Forest Oil pursuant to one or more petroleum, natural gas and general rights conveyances by the Company in favor of Canadian Forest Oil. (F) The Combined Supermajority Banks and the Company have requested the Global Administrative Agent to redetermine the Borrowing Base in accordance with Section 1.03(d) of the Credit Agreement. (G) The Company contributed all of the capital stock of Saxon Petroleum Inc. (SAXON) to Canadian Forest Oil, making it a wholly-owned direct Subsidiary of Canadian Forest Oil; Saxon had been previously designated as an Unrestricted Subsidiary, but has been redesignated as a Restricted Subsidiary and has amalgamated with Canadian Forest Oil, with Canadian Forest Oil being the continuing corporation. (H) The Company, Canadian Forest Oil, the Subsidiary Borrowers, the Subsidiary Guarantors, the Banks and the Agents wish to amend the Credit Agreement in certain other respects, and accordingly, the parties hereto hereby agree as follows: Section 1. DEFINITIONS. Except as otherwise defined in this Amendment No.1, terms defined in the Credit Agreement are used herein as defined therein. Section 2. AMENDMENTS. Subject to the satisfaction of the conditions precedent set forth in Section 5 below, the Credit Agreement shall be amended as follows effective immediately on the date hereof upon the execution and delivery of this Amendment No.1 by the parties hereto: A. References in the Credit Agreement to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") and the "Notes" shall be deemed to be references to the Credit Agreement, as amended hereby and as the same may from time to time be further amended or supplemented, and to the Notes (including the New Notes under and as defined in Section 5(B)(1) hereof), respectively. B. The New Banks shall each be deemed to be a "U.S. Bank" (and hence, for the avoidance of doubt, a "Bank") under and for all purposes of the Credit Agreement, as amended hereby, and each reference therein to "U.S. Bank" or "Bank" shall be deemed to include each of the New Banks. C. Each reference in the Credit Agreement to "U.S. Agent" is amended to read "Global Administrative Agent". Page 2 D. Each of the lenders that is a signatory hereto identified under the caption "U.S. BANKS" on the signature pages hereto shall be deemed to be, as of the date hereof, a "U.S. Bank" under and for all purposes of the Credit Agreement, as amended hereby, and each lender which is identified under the caption "EXITING U.S. BANKS" on the signature pages hereto shall, as of the date hereof, cease to be a U.S. Bank (an "EXITING U.S. BANK") under and for all purposes of the Credit Agreement, as amended hereby upon the payment in full by the Company of all U.S. Loans, U.S. Letter of Credit Liabilities and all other fees, expenses and indemnities owing by the Company to such Banks and each such Exiting U.S. Bank shall have its Commitment reduced to zero and cease to have any liabilities or obligations hereunder or under the Credit Agreement. E. Each of the lenders that is a signatory hereto identified under the caption "CANADIAN BANKS" on the signature pages hereto shall be deemed to be, as of the date hereof, a "Canadian Bank" under and for all purposes of the Credit Agreement, as amended hereby, and the lender which is identified under the caption "EXITING CANADIAN BANK" on the signature pages hereto shall, as of the date hereof, cease to be a Canadian Bank (an "EXITING CANADIAN BANK") under and for all purposes of the Credit Agreement, as amended hereby upon the payment in full by the Canadian Borrowers of all Canadian Obligations and all other fees, expenses and indemnities owing by the Canadian Borrowers to such Exiting Canadian Bank and such Bank shall have its Commitment reduced to zero and cease to have any liabilities or obligations under the Credit Agreement. F. The first paragraph of the recitals to the Credit Agreement setting out the parties thereto is deleted in its entirety and the following paragraph shall be substituted therefor: "FOREST OIL CORPORATION, a corporation duly organized and validly existing under the laws of the State of New York (the "COMPANY"); CANADIAN FOREST OIL LTD., a corporation duly organized and validly existing under the laws of the Province of Alberta, Canada ("CANADIAN FOREST OIL"); each of the SUBSIDIARY BORROWERS identified under the heading "SUBSIDIARY BORROWERS" on the signature pages hereto and each Subsidiary of Canadian Forest Oil that becomes a Canadian Borrower pursuant to Section 9.16 hereof (individually, a "SUBSIDIARY BORROWER" and collectively, the "SUBSIDIARY BORROWERS", and together with Canadian Forest Oil, the "CANADIAN BORROWERS" and individually, a "CANADIAN BORROWER" and together with the Company, the "BORROWERS" and individually, a "BORROWER"); each of the Subsidiaries of the Company that becomes a guarantor pursuant to Section 9.16 hereof (individually, a "SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and, together with the Company and the Canadian Borrowers, the "OBLIGORS" and individually, an "OBLIGOR"); each of the lenders that is a signatory hereto identified under the caption "U.S. BANKS" on the signature pages hereto or which, pursuant to Section 12.06(b) hereof, shall become a "U.S. Bank" hereunder (individually, a "U.S. BANK" and, collectively, the "U.S. BANKS"); each of the lenders that is a signatory hereto identified under the caption "CANADIAN BANKS" on the signature pages hereto or which, pursuant to Section 12.06(b) hereof, shall become a "Canadian Bank" hereunder (individually, a "CANADIAN BANK" and, collectively, the "CANADIAN BANKS", and together with the U.S. Banks, the "BANKS" and individually, a "BANK"); THE CHASE MANHATTAN BANK, as global administrative agent for the Banks (in such capacity, together with its successors in such capacity, the "GLOBAL ADMINISTRATIVE AGENT") and as lead arranger and sole book manager (in such capacity, Page 3 together with its successors in such capacity, the "ARRANGER"); SALOMON BROTHERS HOLDING COMPANY INC, as syndication agent for the Banks (in such capacity, together with its successors in such capacity, the "SYNDICATION AGENT"); CHRISTIANIA BANK OG KREDITKASSE and SOCIETE GENERALE, SOUTHWEST AGENCY, as co-agents for the U.S. Banks (each in such capacity, together with the respective successors in such capacity, a "CO-AGENT" and together with the Global Administrative Agent, the "U.S. CO-AGENTS"); THE CHASE MANHATTAN BANK OF CANADA, as administrative agent for the Canadian Banks (in such capacity, together with its successors in such capacity, the "CANADIAN AGENT"); and BANK OF MONTREAL, as documentation agent for the Banks (in such capacity, together with its successors in such capacity, the "DOCUMENTATION AGENT") and as co-agent for the Canadian Banks (in such capacity, together with its successors in such capacity, the "CANADIAN CO-AGENT" and together with the Canadian Agent, the "CANADIAN CO-AGENTS" and together with the U.S. Co-Agents, the Documentation Agent and the Syndication Agent, the "AGENTS" and individually, an "AGENT")." G. Section 1.01 of the Credit Agreement is amended by adding the following defined term: ""FACILITY AGENTS" has the meaning specified in Section 11.05 hereof." H. The reference in Section 2.01(a)(i) of the Credit Agreement to "U.S.$275,000,000" is amended to read "U.S.$250,000,000." I. The reference in Section 2.01(b)(i) of the Credit Agreement to "U.S.$25,000,000" is amended to read "U.S.$50,000,000." J. Each reference in Section 2.11 of the Credit Agreement to "U.S.$25,000,000" is amended to read "U.S.$50,000,000" and each reference in such Section to "U.S.$225,000,000" is amended to read "U.S.$200,000,000". K. Section 2.11(b) of the Credit Agreement is amended by adding the following after the phrase "by an amount in proportion to its Commitment Percentage" in the 15th line thereof: "; PROVIDED that notwithstanding any provision of this Agreement to the contrary, no such increase or decrease shall become effective until the Company or the Canadian Borrowers, as applicable, have reduced the U.S. Loans and U.S. Letter of Credit Liabilities or the Canadian Obligations, as the case may be, to an amount not in excess of the revised Allocated U.S. Borrowing Base or Canadian Borrowing Base, as applicable." L. Section 8.16 of the Credit Agreement is amended by inserting the word "Restricted" in front of the word "Subsidiary" in the first line thereof. M. Section 11.04 of the Credit Agreement is deleted in its entirety and the following shall be substituted therefor: "11.04 RIGHTS AS A BANK. With respect to its Commitment, the Loans made by it, its Letters of Credit Interest and the Bankers' Acceptances held by it, each of Chase (and any successor acting as Global Administrative Agent or Arranger), Christiania Bank OG Page 4 Kreditkasse and Societe Generale, Southwest Agency, as U.S. Co-Agents (and any successor acting as a U.S. Co-Agent), Chase Canada and Bank of Montreal (and any successor acting as a Canadian Co-Agent or as successor to Bank of Montreal as Documentation Agent), and Salomon Brothers Holding Company Inc (and any successor acting as Syndication Agent), in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as such Agent, and the term "U.S. Bank", "U.S. Banks", "Canadian Bank", "Canadian Banks", "Relevant Bank", "Relevant Banks", "Bank" or "Banks" shall, unless the context otherwise indicates, include each Agent, as applicable, in its individual capacity. Each of Chase (and any successor acting as Global Administrative Agent or Arranger), Christiania Bank OG Kreditkasse and Societe Generale, Southwest Agency, as U.S. Co-Agents (and any successor acting as a U.S. Co-Agent), Chase Canada and Bank of Montreal (and any successor acting as a Canadian Co-Agent or as successor to Bank of Montreal as Documentation Agent), Salomon Brothers Holding Company Inc (and any successor acting as Syndication Agent) and their respective affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to, make investments in and generally engage in any kind of banking, trust or other business with the Obligors (and any of their Subsidiaries or Affiliates) as if it were not acting as such Agent, and Chase, Christiania Bank OG Kreditkasse, Societe Generale, Southwest Agency, Chase Canada, Bank of Montreal, Salomon Brothers Holding Company Inc and their respective affiliates may accept fees and other consideration from the Obligors for services in connection with this Agreement or otherwise without having to account for the same to the Banks." N. Section 11.05 of the Credit Agreement is deleted in its entirety and the following shall be substituted therefor: "11.05 INDEMNIFICATION. The U.S. Banks agree to indemnify the U.S. Co-Agents, the Canadian Banks agree to indemnify the Canadian Co-Agents and each of the Banks agrees to indemnify the Syndication Agent and the Documentation Agent (the "FACILITY AGENTS") (in each case, to the extent not reimbursed under Sections 12.03 and 12.07 hereof, but without limiting the obligations of the Borrowers under said Sections 12.03 and 12.07, and including in any event any payments under any indemnity that either U.S. Co-Agent is required to issue to any bank referred to in Section 4.02 of the Security Agreement to which remittances in respect of Accounts, as defined therein, are to be made), in the case of the U.S. Co-Agents, ratably in accordance with the aggregate Principal Amount of the U.S. Loans and U.S. Reimbursement Obligations held by the U.S. Banks (or, if no U.S. Loans or U.S. Reimbursement Obligations are at the time outstanding, ratably in accordance with their respective U.S. Commitments or, if no U.S. Loans, U.S. Reimbursement Obligations or U.S. Commitments are at the time outstanding or in effect, ratably in accordance with their respective U.S. Commitments as most recently in effect), (collectively, for the purposes of this section the "U.S. OBLIGATIONS"), in the case of the Canadian Agent, ratably in accordance with the Equivalent Amount in U.S. Dollars of the aggregate Principal Amount of the Canadian Loans and Canadian Reimbursement Obligations and Bankers' Acceptances held by the Canadian Banks (or, if no Canadian Loans, Canadian Reimbursement Obligations or Bankers' Acceptances are at the time outstanding, ratably in accordance with their respective Canadian Commitments or, if no Canadian Loans, Canadian Reimbursement Obligations, Bankers' Acceptances or Canadian Commitments are at the time outstanding or in effect, ratably in accordance with their respective Canadian Commitments as most recently in effect), (collectively for the purposes of this Section, Page 5 the "CANADIAN OBLIGATIONS") and, in the case of the Facility Agents, ratably in accordance with the Equivalent Amount in U.S. Dollars of the aggregate of the U.S. Obligations and Canadian Obligations held by each Bank for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against such Agent (including by any Bank) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Basic Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses that the Borrowers are obligated to pay under Sections 12.03 and 12.07 hereof, and including also any payments under any indemnity that the U.S. Co-Agents, or either of them is required to issue to any bank referred to in Section 4.02 of the Security Agreement to which remittances in respect of Accounts, as defined therein, are to be made, but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, PROVIDED that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified." O. Section 11.08 of the Credit Agreement is deleted in its entirety and the following shall be substituted therefor: "11.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, any Agent may resign at any time by giving notice thereof to the U.S. Banks, the other U.S. Co-Agents and the Company, in the case of a U.S. Co-Agent, to the Canadian Banks, the other Canadian Co-Agent and the Canadian Borrowers, in the case of a Canadian Co-Agent, and, in the case of the Facility Agents, to each Bank, each other Agent, the Company and the Canadian Borrowers and any Agent may be removed at any time with or without cause by the Majority U.S. Banks, in the case of a U.S. Co-Agent, the Majority Canadian Banks, in the case of a Canadian Co-Agent and the Combined Majority Banks in the case of a Facility Agent. Upon any such resignation or removal, the Majority U.S. Banks shall have the right to appoint a successor U.S. Co-Agent, the Majority Canadian Banks shall have the right to appoint a successor Canadian Co-Agent and the Combined Majority Banks shall have the right to appoint a successor Facility Agent. If no successor Agent shall have been so appointed by the Majority U.S. Banks, the Majority Canadian Banks or the Combined Majority Banks, as the case may be, and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or the Majority U.S. Banks', Majority Canadian Banks' or the Combined Majority Banks (as the case may be) removal of the retiring Agent, then the retiring Agent may, on behalf of the U.S. Banks, in the case of retiring U.S. Co-Agent, the Canadian Banks, in the case of a retiring Canadian Co-Agent, or the Banks, in the case of a retiring Facility Agent, appoint (i) in the case of the U.S. Co-Agent, a successor U.S. Co-Agent, that shall be a bank which has an office in New York, New York with a combined capital and surplus of at least U.S.$1,000,000,000, (ii) in the case of the Canadian Co-Agent, a successor Canadian Co-Agent, that shall be a bank that has an office in Toronto or Calgary, Canada with a combined capital and surplus of at least C$75,000,000, provided that no such successor shall be required if there remains at least one U.S. Co-Agent or Canadian Co-Agent or (iii) in the case of a Facility Agent, a successor to such Facility Agent that shall be a bank that has an office in New York, New York, Toronto, Canada Page 6 or Calgary, Canada that has a combined capital and surplus of at least U.S.$1,000,000,000. Until the acceptance of any appointment as U.S. Co-Agent, Canadian Co-Agent, or Facility Agent, as the case may be, hereunder by a successor U.S. Co-Agent, Canadian Co-Agent or Facility Agent, as the case may be, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring U.S. Co-Agent, Canadian Co-Agent, or Facility Agent, as the case may be, and such retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as U.S. Co-Agent, Canadian Co-Agent, or Facility Agent, as the case may be, the provisions of this Section 11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as such Agent." P. Section 11.11 of the Credit Agreement is deleted in its entirety and the following shall be substituted therefor: "11.11 CO-AGENTS. If at any time the Canadian Banks shall appoint more than one agent under this Agreement or the other Loan Documents, all references to "Canadian Agent" in this Section 11 shall be deemed to be a reference to the "Canadian Co-Agents"." Q. Annex I to the Credit Agreement shall be deleted in its entirety and replaced with Annex I hereto. R. Schedule III to the Credit Agreement is deleted in its entirety and Schedule III to this Amendment No. 1 is hereby inserted in lieu thereof. The Agents and the Banks hereby consent to the contribution by the Company of all of the stock of Saxon to Canadian Forest Oil, the redesignation of Saxon as a Restricted Subsidiary and the amalgamation of Saxon with Canadian Forest Oil. Section 3. COMMITMENT FEE. Notwithstanding that the amendment of the Commitments contemplated by Section 2(Q) hereof shall not become effective until the satisfaction of the conditions precedent specified in Section 5 hereof, for purposes of calculating the amount of commitment fee payable under Section 2.05 of the Credit Agreement, the Commitments of the New Banks shall be deemed to have become effective immediately upon the execution of this Amendment No. 1 by each of the Banks (including the New Banks). Section 4. REPRESENTATIONS AND WARRANTIES. Each of the Obligors represents and warrants to the Banks and the Agents that (unless specifically limited to an earlier date) the representations and warranties set forth in Section 8 of the Credit Agreement are true and complete on and as of the date hereof with the same force and effect as if made on and as of such date, and as if each reference in said Section 8 to "this Agreement" and "the Notes" included reference to this Amendment No.1 and to the New Notes. Section 5. CONDITIONS PRECEDENT. As provided in Section 2, the amendments to the Credit Agreement set forth in said Section 2 shall become effective, as of the date hereof, upon the satisfaction of the following conditions precedent: A. EXECUTION BY ALL PARTIES. This Amendment No.1 shall have been executed and delivered by each of the parties hereto. Page 7 B. DOCUMENTS. The Agents shall have received the following documents, each of which shall be satisfactory to the Agents in form and substance: (1) NOTES. (i) The Company shall have delivered to the Global Administrative Agent for each U.S. Bank whose U.S. Commitment is increased or reduced pursuant to Section 2(Q) hereof (other than the Exiting U.S. Banks), in exchange for the Note heretofore delivered to such Bank pursuant to Section 2.08(a) of the Credit Agreement, a new promissory note substantially in the form of Exhibit A-1 to the Credit Agreement, dated the date of the Note being exchanged, payable to such U.S. Bank in a Principal Amount equal to the amount of its U.S. Commitment (as altered hereby) and otherwise duly completed and shall have delivered to the Global Administrative Agent for each New Bank a promissory note substantially in the form of Exhibit A-1 to the Credit Agreement, dated the date of the Notes delivered pursuant to Section 2.08(a) of the Credit Agreement, payable to the order of each such New Bank in a Principal Amount equal to the amount of such Bank's U.S. Commitment (as specified in Annex I hereto) and otherwise duly completed; and (ii) each of the Canadian Borrowers shall have delivered to the Canadian Agent for each Canadian Bank whose Canadian Commitment is altered pursuant to Section 2(Q) hereof (other than the Exiting Canadian Bank), in exchange for the Note heretofore delivered to such Canadian Bank pursuant to Section 2.08(b) of the Credit Agreement, a new promissory note substantially in the form of Exhibit A-2 to the Credit Agreement, dated the date of the Note being exchanged, payable to such Canadian Bank in a Principal Amount equal to the amount of its Canadian Commitment (as altered hereby) and otherwise duly completed. Each of the promissory notes (a "NEW NOTE") delivered to the Banks (including, without limitation, each New Bank) pursuant to clauses (i) and (ii) above shall constitute a "Note" under the Credit Agreement, as amended hereby. (2) LOANS. (i) The Obligors shall have borrowed from, received from or issued to the Banks, respectively, Loans, Letters of Credit or Bankers' Acceptances (as the case may be), (ii) each of the Banks shall have made to, issued to or received from the Obligors, respectively, Loans, Letters of Credit or Bankers' Acceptances (as the case may be), and (iii) the Obligors (notwithstanding the provisions of Section 4.02 of the Credit Agreement requiring that prepayments be made ratably in accordance with the Principal Amounts of the Loans held by the Banks) shall have prepaid all U.S. Loans, U.S. Letter of Credit Liabilities and the Canadian Obligations made by the U.S. Exiting Banks and Canadian Exiting Bank; IN EACH CASE in such amounts as shall be necessary, together with accrued interest and any other amounts payable under the Credit Agreement, so that, after giving effect to such payments, issuances and prepayments, the U.S. Loans, U.S. Letter of Credit Liabilities and the Canadian Obligations shall be held by the Banks pro rata in accordance with the respective amounts of their Commitments (as set out in Annex I hereto). (3) OBLIGOR CORPORATE DOCUMENTS. (i) A certificate of the Secretary or Assistant Secretary of each Obligor other than Canadian Forest Oil (A) that since March 4, 1999, there have been no changes to the charter and by-laws (or Page 8 equivalent documents) of such Obligor and (B) as to all corporate authority for such Obligor (including, without limitation, board of director resolutions and evidence of the incumbency of officers) with respect to the execution, delivery and performance of this Amendment No.1 and the Credit Agreement as amended hereby and the extensions of credit under the Credit Agreement as amended hereby, the New Notes and each other document to be delivered by such Obligor from time to time in connection with the Credit Agreement as amended hereby (and each Bank and Agent may conclusively rely on such certificate until it receives notice in writing from the relevant Obligor to the contrary) and (ii) a certificate of the Secretary or Assistant Secretary of Canadian Forest Oil certifying as to its Certificate and Articles of Amalgamation and by-laws (or equivalent documents) and as to the matters in clause (i)(B) above. (4) OPINIONS OF COUNSEL TO THE OBLIGORS. (i) An opinion, dated the date hereof, of Vinson & Elkins L.L.P., counsel to each of the U.S. Obligors, substantially in the form of Exhibit C-1 hereto and covering such other matters as any Agent or any Bank may reasonably request (and the Company hereby instructs such counsel to deliver such opinion to the Banks and the Agents), (ii) an opinion, dated the date hereof, of Macleod Dixon, Canadian counsel of each of the Canadian Borrowers, substantially in the form of Exhibit C-2 hereto and covering such other matters as any Agent or any Bank may reasonably request (and each Canadian Borrower hereby instructs such counsel to deliver such opinion to the Banks and the Agents) and (iii) an opinion, dated the date hereof, of the General Counsel of the Company, substantially in the form of Exhibit C-3 hereto and covering such other matters as any Agent or any Bank may reasonably request (and the Company hereby instructs such General Counsel to deliver such opinion to the Banks and the Agents). (5) ALBERTA CERTIFICATE. A certificate from the Registrar of Corporations of Alberta evidencing the amalgamation of Saxon Petroleum Inc. and Canadian Forest Oil Ltd. as Canadian Forest Oil pursuant to Section 178 of the Business Corporations Act (Alberta). (6) OTHER DOCUMENTS. Such other documents as (i) any Agent or Bank, (ii) Freshfields LLP, special New York counsel to Chase or (iii) Burnet, Duckworth & Palmer, special Canadian counsel to Chase Canada, may reasonably request. C. TERMINATION OF SAXON FACILITY. Evidence that (i) the $40,000,000 Demand, Revolving Credit Facility (the "Saxon Facility") entered into between Saxon and Bank of Montreal pursuant to the Letter Agreement dated October 28, 1997 has been duly terminated as of the date hereof in form and substance satisfactory to each Bank and Burnet, Duckworth & Palmer, special Canadian counsel to Chase Canada and (ii) all Liens created pursuant to the Saxon Facility have been terminated. Section 6. DEEMED NOTICE TO COMPANY AND CANADIAN FOREST OIL. The Company and Canadian Forest Oil hereby acknowledge that the execution and delivery of this Amendment No.1 shall constitute notice in accordance with Section 1.03(d) of the Credit Agreement that the Borrowing Base has been redetermined by the Combined Supermajority Banks to be U.S.$250,000,000 and has been reallocated in accordance with Section 2(J) above and that such Page 9 redetermined Borrowing Base shall become effective immediately upon the effectiveness of this Amendment No.1. Section 7. FEES; EXPENSES; BREAKAGE COSTS. (a) The U.S. Obligors agree to pay all reasonable out-of-pocket costs and expenses of the Agents (including, without limitation, the reasonable fees and expenses of (i) Freshfields LLP, special New York counsel to Chase and (ii) Burnet, Duckworth & Palmer, special Canadian counsel to Chase Canada) in connection with the negotiation, preparation, execution and delivery of this Amendment No.1. (b) The Company and the Canadian Borrowers agree jointly and severally to pay all amounts required pursuant to Section 5.05 of the Credit Agreement as shall be sufficient to compensate each Bank for any loss, cost or expense (including, without limitation, cost of breakage and redeployment of funds) that such Bank determines is attributable to (i) any payment, mandatory or optional prepayment or Conversion made by an Obligor in respect of a Eurodollar Loan, BA Loan or a Bankers' Acceptance, as the case may be, or (ii) any failure by the Company to borrow a Eurodollar Loan from such Bank or by any Canadian Borrower to accept an extension of credit under the Credit Agreement, in each case due to the contemplated increases and decreases of U.S. Loans, U.S. Letter of Credit Liabilities and Canadian Obligations, as applicable among the Banks, provided for herein as if all such contemplated increases and decreases of U.S. Loans, U.S. Letter of Credit Liabilities and Canadian Obligations became effective on June 24, 1999. Section 8. WAIVER OF SECTION 9.05 OF THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedent specified in Section 5 above, but with effect on and after the date hereof, each of the Banks and Agents hereby waives compliance by the Company and Canadian Forest with the terms of Section 9.05 of the Credit Agreement but only to the extent necessary to permit the Company to convey all of its Hydrocarbon Properties in Canada to Canadian Forest Oil pursuant to one or more petroleum, natural gas and general rights conveyances by the Company in favor of Canadian Forest Oil and each U.S. Bank authorizes the Global Administrative Agent and the Canadian Agent to execute such documents and agreements as are required to release the Property from any Lien granted by the Company and subject such Property to the Lien of Canadian Security Documents. Section 9. ACKNOWLEDGEMENT OF OBLIGORS. Each Obligor hereby (a) consents to the amalgamation of Saxon and Canadian Forest Oil, (b) agrees that each reference to the Credit Agreement and words of similar import in each Loan Document to which such Obligor is party shall be a reference to the Credit Agreement as amended by this Amendment No. 1, and (c) confirms that its obligations (including, without limitation, with respect to the indebtedness, obligations and liabilities of Canadian Forest Oil under the Loan Documents to which Canadian Forest Oil was a party immediately prior to its amalgamation with Saxon) under each Loan Document to which it is party remain in full force and effect after giving effect both to the amalgamation of Saxon and Canadian Forest Oil and the amendment of the Credit Agreement by this Amendment No. 1. Section 10. MISCELLANEOUS. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No.1 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.1 by signing any such counterpart. This Amendment No.1 shall be governed by, and construed in accordance with, the law of the State of New York. Page 10 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.1 to be duly executed and delivered as of the day and year first above written. FOREST OIL CORPORATION By -------------------- Title: Page 11 CANADIAN FOREST OIL LTD. By ---------------------- Title: Page 12 SUBSIDIARY BORROWERS PRODUCERS MARKETING LTD. By ---------------------- Title: Page 13 CONFIRMED AND AGREED IN ITS CAPACITY AS OBLIGOR AS PROVIDED IN SECTION 9 HEREOF: 3189503 CANADA LTD. By ---------------------------- Title: Page 14 U.S. BANKS THE CHASE MANHATTAN BANK By ---------------------------- Title: Page 15 SALOMON BROTHERS HOLDING COMPANY INC By ---------------------------- Title: Page 16 CHRISTIANIA BANK OG KREDITKASSE By ---------------------------- Title: Page 17 SOCIETE GENERALE, SOUTHWEST AGENCY By ---------------------------- Title: Page 18 TORONTO DOMINION (TEXAS), INC. By ---------------------------- Title: Page 19 HIBERNIA NATIONAL BANK By ---------------------------- Title: Page 20 PARIBAS By ---------------------------- Title: By ---------------------------- Title: Page 21 GENERAL ELECTRIC CAPITAL CORPORATION By ---------------------------- Title: Page 22 CREDIT LYONNAIS NEW YORK BRANCH By ---------------------------- Title: Page 23 ROYAL BANK OF CANADA By ---------------------------- Title: Page 24 EXITING U.S. BANKS DEN NORSKE BANK ASA By ---------------------------- Title: By ---------------------------- Title: Page 25 BANK OF MONTREAL By ---------------------------- Title: Page 26 CANADIAN BANKS THE CHASE MANHATTAN BANK OF CANADA By ---------------------------- Title: By ---------------------------- Title: Page 27 BANK OF MONTREAL By ---------------------------- Title: Page 28 ROYAL BANK OF CANADA By ---------------------------- Title: Page 29 EXITING CANADIAN BANK CREDIT LYONNAIS CANADA By ---------------------------- Title: By ---------------------------- Title: Page 30 THE CHASE MANHATTAN BANK, as Global Administrative Agent and Arranger By ---------------------------- Title: Page 31 SALOMON BROTHERS HOLDING COMPANY INC as Syndication Agent By ---------------------------- Title: Page 32 BANK OF MONTREAL, as Canadian Co-Agent and Documentation Agent By ---------------------------- Title: Page 33 CHRISTIANIA BANK OG KREDITKASSE, as U.S. Co-Agent By ---------------------------- Title: Page 34 SOCIETE GENERALE, SOUTHWEST AGENCY, as U.S. Co-Agent By ---------------------------- Title: Page 35 THE CHASE MANHATTAN BANK OF CANADA, as Canadian Agent By ---------------------------- Title: By ---------------------------- Title: Page 36 ANNEX I Banks and Commitments
U.S. Banks U.S. Commitments - ---------- ---------------- The Chase Manhattan Bank U.S.$40,000,000 Salomon Brothers Holding Company Inc U.S.$40,000,000 Christiania Bank OG Kreditkasse U.S.$35,000,000 Societe Generale, Southwest Agency U.S.$35,000,000 Toronto Dominion (Texas), Inc. U.S.$25,000,000 Hibernia National Bank U.S.$20,000,000 Paribas U.S.$15,000,000 Credit Lyonnais New York Branch U.S.$15,000,000 General Electric Capital Corporation U.S.$15,000,000 Royal Bank of Canada U.S.$10,000,000 Canadian Banks Canadian Commitments - -------------- -------------------- Bank of Montreal U.S.$40,000,000 The Chase Manhattan Bank Of Canada U.S.$5,000,000 Royal Bank of Canada U.S.$5,000,000
Page 37 EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ON PAGES 1 THROUGH 12 OF THE COMPANY'S FORM 10-Q FOR THE SIX MONTH PERIOD ENDING JUNE 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JUN-30-1999 2,413 0 53,754 0 0 60,466 2,092,196 1,425,716 758,960 62,068 502,671 0 0 4,465 168,243 758,960 177,939 177,939 107,554 115,535 37,752 0 21,064 3,588 (905) 4,493 0 0 0 4,493 .10 .10
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