8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): December 21, 2009

FOREST OIL CORPORATION

(Exact name of registrant as specified in its charter)

New York

(State or other jurisdiction of incorporation)

1-13515	25-0484900
(Commission File Number)	(IRS Employer Identification No.)

707 17th Street, Suite 3600, Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)

303.812.1400

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01Completion of Acquisition or Disposition of Assets.

Forest Oil Corporation, a New York corporation (the “Company”) and Forest Oil Permian Corporation, a Delaware corporation and wholly-owned subsidiary of Forest (“Forest Permian” and together with the Company, the “Sellers”), announced the completion on December 21, 2009, of their previously announced sale of oil and gas properties located in the states of Texas and New Mexico (the “Oil and Gas Assets”) and various other related interests, rights, receivables, wells and leasehold interests, records, fixtures, equipment, and other assets (together with the Oil and Gas Assets, the “Assets”) to SandRidge Exploration and Production, LLC (“Buyer”), a wholly-owned subsidiary of SandRidge Energy, Inc.  No material relationship exists between Buyer, on the one hand, and the Company or any of its affiliates, officers or directors (or any associate of such officers or directors), on the other hand.

The total consideration received by the Sellers for the Assets was approximately $800 million in cash.  The consideration was adjusted to reflect an effective date of November 1, 2009, and remains subject to adjustment in accordance with the terms of the agreement governing the sale of Assets.  See Item 9.01(b) below for pro forma financial information related to the sale of the Assets.

In connection with the closing of the Assets sale, the global borrowing base under the Company’s combined U.S. and Canadian senior credit facilities (the “Senior Credit Facilities”) has been reduced to $1.3 billion (to be allocated $1.155 billion for the U.S. credit facility and $145 million for the Canadian credit facility).  The Company has no current outstanding balances under the Senior Credit Facilities.

Item 2.04Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

The Company has also announced that it is redeeming all of the $150,000,000 principal amount outstanding of its 7¾% Senior Notes due 2014 (the “Notes”).  The redemption will occur on January 27, 2010 (the “Redemption Date”) and will be undertaken in accordance with Section 3.03 of the indenture dated as of April 25, 2002, governing the Notes (the “Indenture”) and Section 5 of the Notes.  The Company will pay 101.292% of the principal amount of, plus accrued and unpaid interest on, the Notes up to (but not including) the Redemption Date, for an aggregate redemption price of $154,715,083.33 in cash.   In accordance with Section 3.03 of the Indenture, notice of the proposed redemption will be given by the Trustee (as defined in the Indenture) to the holders of the Notes at least 30 days but not more than 60 days prior to the Redemption Date.

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Item 9.01Financial Statements and Exhibits.

(b)Pro Forma Financial Information.

The pro forma financial statements of Forest Oil Corporation and its subsidiaries reflecting the closing of the sale of the Assets are filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

(d)Exhibits.

Exhibit	Description
99.1	Pro forma Financial Information

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FOREST OIL CORPORATION
	(Registrant)
Dated: December 24, 2009	By	/s/ CYRUS D. MARTER IV
		Cyrus D. Marter IV
		Senior Vice President, General Counsel and Secretary

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INDEX TO EXHIBITS FILED WITH THE CURRENT REPORT ON FORM 8-K

Exhibit	Description
99.1	Pro Forma Financial Information

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EX-99.1

Exhibit 99.1

FOREST OIL CORPORATION

INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On November 25, 2009, Forest Oil Corporation and its wholly-owned subsidiary, Forest Oil Permian Corporation, entered into an Agreement for Purchase and Sale of Assets (the “Agreement”) with SandRidge Exploration and Production, LLC (“SandRidge”), a wholly-owned subsidiary of SandRidge Energy, Inc.  Pursuant to the Agreement, SandRidge purchased from Forest Oil Corporation and Forest Oil Permian Corporation oil and gas properties located in the states of Texas and New Mexico (the “Oil and Gas Assets”), and various other related interests, rights, receivables, wells, leasehold interests, records, fixtures, equipment, and other assets (together with the Oil and Gas Assets, the “Assets”).  The effective date of the purchase and sale of the Assets is November 1, 2009 and the transaction closed on December 21, 2009.  The purchase price for the Assets was $800 million, which is subject to customary post-closing adjustments which, when complete, are estimated to yield a final sales price of approximately $795 million.

The following unaudited pro forma condensed consolidated financial statements and explanatory notes present how the financial statements of Forest Oil Corporation and its subsidiaries (“Forest”) may have appeared had the sale of the Assets occurred as of September 30, 2009 (with respect to the balance sheet information) or as of January 1, 2008 (with respect to statements of operations information).

The unaudited pro forma condensed consolidated financial statements have been derived from and should be read together with the historical consolidated financial statements and the related notes of Forest included in its Annual Report on Form 10-K for the year ended December 31, 2008 and its Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2009.

The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to represent what the results of operations or financial position of Forest would actually have been had the transaction described above occurred on the dates noted above, or to project the results of operations or financial position of Forest for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments are directly attributable to the transaction and are expected to have a continuing impact on the results of operations of Forest. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made.

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FOREST OIL CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2009

	Historical		Pro Forma Adjustments		Pro Forma
	(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents	5,153		178,052	(a)	183,205
Accounts receivable	95,537		—		95,537
Derivative instruments	76,744		—		76,744
Inventory	68,567		(8,602	)(b)	59,965
Other current assets	56,000		—		56,000
Total current assets	302,001		169,450		471,451
Property and equipment, at cost:
Oil and gas properties, full cost method of accounting:
Proved, net of accumulated depletion	2,097,696		(775,923	)(c)	1,321,773
Unproved	843,243		(11,602	)(c)	831,641
Net oil and gas properties	2,940,939		(787,525	)	2,153,414
Other property and equipment, net of accumulated depreciation and amortization	117,022		(313	)(d)	116,709
Net property and equipment	3,057,961		(787,838	)	2,270,123
Deferred income taxes	293,704		67,791	(e)	359,662
			(1,833	)(f)
Goodwill	255,604		—		255,604
Derivative instruments	2,782		—		2,782
Other assets	47,383		(57	)(g)	46,396
			(930	)(h)
	3,959,435		(553,417	)	3,406,018
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	193,785		—		193,785
Income taxes payable	—		67,791	(e)	67,791
Accrued interest	39,872		(5,151	)(i)	34,721
Derivative instruments	30,589		—		30,589
Deferred income taxes	12,404		—		12,404
Asset retirement obligations	3,456		(387	)(j)	3,069
Other current liabilities	22,943		—		22,943
Total current liabilities	303,049		62,253		365,302
Long-term debt	2,475,413		(610,497	)(k)	1,864,916
Asset retirement obligations	95,696		(8,207	)(j)	87,489
Derivative instruments	11,148		—		11,148
Other liabilities	68,541		(204	)(h)	68,337
Total liabilities	2,953,847		(556,655	)	2,397,192
Shareholders’ equity:
Preferred stock, none issued and outstanding	—		—		—
Common stock	11,228		—		11,228
Capital surplus	2,630,769		—		2,630,769
Accumulated deficit	(1,697,614	)	3,238	(f)	(1,694,376	)
Accumulated other comprehensive income	61,205		—		61,205
Total shareholders’ equity	1,005,588		3,238		1,008,826
	3,959,435		(553,417	)	3,406,018

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

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FOREST OIL CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

	Historical		Pro Forma Adjustments		Pro Forma
	(In Thousands, Except Per Share Amounts)
Revenues:
Oil and gas sales	553,473		(64,351	)(l)	489,122
Interest and other	602		—		602
Total revenues	554,075		(64,351	)	489,724
Costs, expenses, and other:
Lease operating expenses	114,205		(15,367	)(l)	98,838
Production and property taxes	34,359		(4,820	)(l)	29,539
Transportation and processing costs	15,918		(582	)(l)	15,336
General and administrative	49,050		—		49,050
Depreciation, depletion, and amortization	237,964		(20,323	)(m)	217,641
Accretion of asset retirement obligations	6,195		(452	)(n)	5,743
Ceiling test write-down of oil and gas properties	1,575,843		(36,928	)(o)	1,538,915
Interest expense	122,373		(15,788	)(p)	106,585
Realized and unrealized gains on derivative instruments, net	(112,212	)	—		(112,212	)
Other, net	(1,098	)	—		(1,098	)
Total costs, expenses, and other	2,042,597		(94,260	)	1,948,337
Loss before income taxes	(1,488,522	)	29,909		(1,458,613	)
Income tax	(520,201	)	10,812	(q)	(509,389	)
Net loss	(968,321	)	19,097		(949,224	)
Basic loss per common share	(9.46	)			(9.27	)
Diluted loss per common share	(9.46	)			(9.27	)
Weighted average shares outstanding:
Basic	102,366				102,366
Diluted	102,366				102,366

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

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FOREST OIL CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2008

	Historical		Pro Forma Adjustments		Pro Forma
	(In Thousands, Except Per Share Amounts)
Revenues:
Oil and gas sales	1,647,171		(192,020	)(l)	1,455,151
Interest and other	3,589		—		3,589
Total revenues	1,650,760		(192,020	)	1,458,740
Costs, expenses, and other:
Lease operating expenses	167,830		(24,633	)(l)	143,197
Production and property taxes	82,147		(12,994	)(l)	69,153
Transportation and processing costs	19,472		(855	)(l)	18,617
General and administrative	74,732		—		74,732
Depreciation, depletion, and amortization	532,181		(47,322	)(m)	484,859
Accretion of asset retirement obligations	7,602		(624	)(n)	6,978
Ceiling test write-down of oil and gas properties	2,369,055		(304,892	)(o)	2,064,163
Interest expense	125,679		(31,264	)(p)	94,415
Realized and unrealized gains on derivative instruments, net	(165,529	)	—		(165,529	)
Gain on sale of assets	(21,063	)	—		(21,063	)
Other, net	59,655		—		59,655
Total costs, expenses, and other	3,251,761		(422,584	)	2,829,177
Loss before income taxes	(1,601,001	)	230,564		(1,370,437	)
Income tax	(574,678	)	83,303	(q)	(491,375	)
Net loss	(1,026,323	)	147,261		(879,062	)
Basic loss per common share	(11.46	)			(9.81	)
Diluted loss per common share	(11.46	)			(9.81	)
Weighted average shares outstanding:
Basic	89,591				89,591
Diluted	89,591				89,591

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

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FOREST OIL CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 and DECEMBER 31, 2008

Note 1   Basis of Presentation

The accompanying unaudited pro forma condensed consolidated financial statements and explanatory notes present how the financial statements of Forest may have appeared had the sale of certain oil and gas properties located in the states of Texas and New Mexico (the “Oil and Gas Assets”), and various other related interests, rights, receivables, wells, leasehold interests, records, fixtures, equipment, and other assets (together with the Oil and Gas Assets, the “Assets”) occurred as of September 30, 2009 (with respect to the balance sheet information) or as of January 1, 2008 (with respect to statements of operations information). The transaction for which these pro forma financial statements are presented is explained in more detail in the introductory paragraph to the accompanying pro forma financial information.

Following are descriptions of certain columns included in the accompanying unaudited pro forma condensed consolidated financial statements:

Historical—Represents the historical condensed consolidated balance sheet of Forest as of September 30, 2009 and the historical condensed consolidated statements of operations of Forest for the nine months ended September 30, 2009 and the year ended December 31, 2008. Certain amounts in the historical condensed consolidated statement of operations for the year ended December 31, 2008 have been reclassified to conform to the 2009 financial statement presentation.

Pro Forma Adjustments—Represents the adjustments to the historical condensed consolidated financial statements necessary to arrive at the pro forma financial position of Forest as of September 30, 2009, as if the sale of the Assets occurred as of September 30, 2009, and the pro forma results of operations of Forest for the nine months ended September 30, 2009 and the year ended December 31, 2008, as if the sale of the Assets occurred as of January 1, 2008.

Note 2    Pro Forma Adjustments for the Sale of Assets

Condensed Consolidated Balance Sheet

(a)To record excess cash remaining after using a portion of the estimated final sales proceeds of $789 million, net of $6 million of transaction costs, to repay Forest’s indebtedness under its credit facilities ($453 million) and 7.75% senior notes due 2014 ($150 million) as well as the related accrued interest on both ($5 million) and the call premium associated with the 7.75% senior notes due 2014 ($2 million).

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

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

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

(e)To reflect the current income tax liability generated as a result of the sale of the Assets.

(f)To record the income tax and retained earnings impact of the unamortized discount and debt issue costs ($1 million), unamortized deferred gain from the previous termination of interest rate swaps ($8 million), and call premium ($2 million), all of which would be charged, as a net credit, to income, in connection with the redemption of the 7.75% senior notes due 2014.

(g)To eliminate debt issue costs associated with Forest’s 7.75% senior notes due 2014 that were redeemed using a portion of the sales proceeds.

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FOREST OIL CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 and DECEMBER 31, 2008

(h)To eliminate gas balancing receivables and payables included in the Assets.

(i)To eliminate the accrued interest associated with Forest’s indebtedness under its credit facilities and 7.75% senior notes due 2014 that were redeemed using a portion of the sales proceeds.

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

(k)To eliminate the outstanding balances under Forest’s credit facilities ($453 million) and the carrying amount of Forest’s 7.75% senior notes due 2014 ($157 million), which were redeemed using a portion of the sales proceeds.

Condensed Consolidated Statements of Operations

(l)To eliminate the revenues and direct operating expenses associated with the Oil and Gas Assets.

(m)To adjust depletion to give effect to the reduction in Forest’s pro forma full cost pool, total estimated proved reserves, and production volumes as a result of the sale of the Oil and Gas Assets and to adjust depreciation to give effect to the reduction in other property and equipment included in the Assets.

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

(o)To adjust the ceiling test write-down of oil and gas properties to give effect to the reduction in Forest’s pro forma future net revenues from estimated production of proved oil and gas properties, properties not being amortized, and capitalized costs used in the ceiling test calculation due to the sale of the Oil and Gas Assets.

(p)To adjust interest expense to give effect to the redemption of Forest’s indebtedness under its credit facilities and 7.75% senior notes due 2014.

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

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