STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

(3) STOCK-BASED COMPENSATION

Equity Incentive Plans

In April 2011, Lone Pine adopted the Lone Pine Resources Inc. 2011 Stock Incentive Plan (the “Lone Pine Plan”) under which qualified and non-qualified stock options, restricted stock, performance, and phantom stock awards may be granted by Lone Pine to its employees, consultants, and non-employee directors.  Forest continues to maintain its 2001 and 2007 Stock Incentive Plans (the “Forest Oil Plans”) under which similar awards may be granted to the employees, consultants and non-employee directors of Forest and its subsidiaries.

Compensation Costs

The table below sets forth total stock-based compensation recorded during the three and six months ended June 30, 2011 and 2010, and the remaining unamortized amounts and weighted average amortization period as of June 30, 2011.

	Stock Options			Restricted Stock			Performance Units			Phantom Stock Units			Total(1)(2)
	(In Thousands)
Three months ended June 30, 2011:
Total stock-based compensation costs	$	278		$	4,782		$	799		$	(1,588	)	$	4,271
Less: stock-based compensation costs capitalized	(155		)	(1,937		)	(265		)	902			(1,455		)
Stock-based compensation costs expensed	$	123		$	2,845		$	534		$	(686	)	$	2,816
Six months ended June 30, 2011:
Total stock-based compensation costs	$	441		$	11,151		$	1,470		$	(270	)	$	12,792
Less: stock-based compensation costs capitalized	(226		)	(4,528		)	(457		)	277			(4,934		)
Stock-based compensation costs expensed	$	215		$	6,623		$	1,013		$	7		$	7,858
Unamortized stock-based compensation costs	$	—		$	40,084		$	10,491		$	8,912	(3)	$	59,487
Weighted average amortization period remaining	—			2.4 years			2.2 years			1.7 years			2.2 years
Three months ended June 30, 2010:
Total stock-based compensation costs	$	8		$	5,892		$	741		$	1,261		$	7,902
Less: stock-based compensation costs capitalized	(3		)	(1,806		)	(230		)	(543		)	(2,582		)
Stock-based compensation costs expensed	$	5		$	4,086		$	511		$	718		$	5,320
Six months ended June 30, 2010:
Total stock-based compensation costs	$	230		$	12,713		$	741		$	2,529		$	16,213
Less: stock-based compensation costs capitalized	(96		)	(4,497		)	(230		)	(1,132		)	(5,955		)
Stock-based compensation costs expensed	$	134		$	8,216		$	511		$	1,397		$	10,258

(1) The Company also maintains an employee stock purchase plan (which is not included in the table) under which $.1 million and $.3 million of compensation cost was recognized for the three and six month periods ended June 30, 2011, respectively, and $.1 million and $.3 million of compensation cost was recognized for the three and six month periods ended June 30, 2010, respectively.

(2) In addition to the compensation costs set forth in the table above, in June 2011 the Company granted a cash-based long-term incentive award under which $9,000 in compensation cost was recognized and $.5 million remains as unamortized stock-based compensation costs at June 30, 2011.  The award is comprised of time-based and performance-based components.  Under the time-based component, a cash payment will be made after three years dependent on the change in value of Forest’s common stock during the three-year period, and under the performance-based component, a cash payment will be made after three years dependent on the total shareholder return on Forest’s common stock in comparison to that of a peer group during the three-year period.

(3) $4.6 million of the unamortized stock-based compensation cost is based on the closing price of Forest’s common stock on June 30, 2011, and $4.3 million of the unamortized stock-based compensation cost is based on the closing price of Lone Pine’s common stock on June 30, 2011.

If Forest proceeds with the spin-off of its remaining shares of Lone Pine common stock to its shareholders, Lone Pine’s employees will be deemed to have been involuntarily terminated under the terms of their phantom stock unit and performance unit agreements awarded under the Forest Oil Plans, and their awards under those agreements will vest in full and be paid, subject to adjustment to account for the distribution, in accordance with those terms.

Stock Options

The following table summarizes stock option activity in the Forest Oil Plans for the six months ended June 30, 2011.  No stock options have been granted under the Lone Pine Plan as of June 30, 2011.

	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value (In Thousands)(1)		Number of Options Exercisable
Outstanding at January 1, 2011	1,327,695		$	21.67	$	22,531	1,283,232
Granted	—		—
Exercised	(18,306	)	19.05		303
Cancelled	(1,200	)	42.41
Outstanding at June 30, 2011	1,308,189		$	21.69	$	9,381	1,308,189

(1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock, as of the date outstanding or exercised, exceeds the exercise price of the option.

Restricted Stock, Performance Stock Units, and Phantom Stock Units

The following table summarizes the restricted stock, performance stock unit, and phantom stock unit activity in the Company’s stock-based compensation plans for the six months ended June 30, 2011.

	Restricted Stock						Performance Units					Phantom Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value		Vest Date Fair Value (In Thousands)		Number of Units(1)	Weighted Average Grant Date Fair Value		Vest Date Fair Value (In Thousands)		Number of Units(2)		Weighted Average Grant Date Fair Value		Vest Date Fair Value (In Thousands)
Unvested at January 1, 2011	2,272,321		$	32.71			264,500	$	31.63			510,609		$	24.79
Awarded	1,006,514		27.28				226,000	27.53				460,885		12.38
Vested	(593,581	)	61.92		$	18,042	—			$	—	(39,787	)	62.65		$	1,203
Forfeited	(38,205	)	26.62				—					(3,122	)	18.06
Unvested at June 30, 2011	2,647,049		$	24.18			490,500	$	29.74			928,585		$	17.03

(1) Forest granted 226,000 performance units on June 10, 2011, with a grant date fair value of $27.53 each. Under the terms of the award agreements, each performance unit represents a contractual right to receive one share of Forest’s common stock; provided that the actual number of shares that may be deliverable under an award will range from 0% to 200% of the number of performance units awarded, depending on Forest’s relative total shareholder return in comparison to an identified peer group during the thirty-six month performance period ending on March 31, 2014.

(2) Of the unvested phantom stock units at June 30, 2011, 248,321 units can be settled in cash, shares of common stock, or a combination of both, while the remaining 680,264 units can only be settled in cash. The phantom stock units have been accounted for as a liability within the Condensed Consolidated Financial Statements. Of the 39,787 phantom stock units that vested during the six months ended June 30, 2011, 5,500 units were settled in shares of common stock and 34,287 units were settled in cash. Of the 460,885 phantom stock units granted, 460,385 were granted under the Lone Pine Plan and the remaining 500 were granted to a Lone Pine employee under the Forest Oil Plans.