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): July
30, 2012
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):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. |
Results of Operations and Financial Condition. |
On July 30, 2012, Forest Oil Corporation issued a press release, attached hereto as Exhibit 99.1, announcing its financial and operational results for the second quarter 2012. The press release contains certain non-GAAP financial information. The reconciliation of such information to GAAP financial measures is included in the release.
The information in this Current Report, including Exhibit 99.1, is being furnished pursuant to item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liabilities of that section.
Item 9.01. |
Financial Statements and Exhibits. |
||
(d) | Exhibits. | ||
Exhibit |
Description |
||
99.1 | Forest Oil Corporation earnings release dated July 30, 2012. |
Page 2
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: |
July 30, 2012 |
By: |
/s/ Cyrus D. Marter IV |
||
Cyrus D. Marter IV |
|||||
Senior Vice President, General |
|||||
Counsel and Secretary |
Page 3
INDEX TO EXHIBITS FILED WITH THE CURRENT REPORT ON FORM 8-K
Exhibit |
Description |
99.1 |
Forest Oil Corporation earnings release dated July 30, 2012. |
Page 4
Exhibit 99.1
Forest Oil Announces Second Quarter 2012 Results
Second Quarter 2012 Net Sales Volumes of 335 MMcfe/d; Unchanged from Second Quarter 2011
Second Quarter 2012 Oil Net Sales Volumes of 8.3 MBbls/d; Organically Increased 27% from Second Quarter 2011
Continued Success in the Panhandle Area Oil Zones; Completed One Hogshooter Well with a 24-Hour Maximum Production Rate of 2,800 Boe/d (54% Oil) and Two Cleveland Wells with an Average 24-Hour Maximum Production Rate of 1,000 Boe/d (71% Oil)
Completed Four Eagle Ford Wells with an Average 24-Hour Maximum Production Rate of 817 Boe/d
DENVER--(BUSINESS WIRE)--July 30, 2012--Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced financial and operational results for the second quarter of 2012.
The comparative second quarter of 2011 information contained in this press release, unless otherwise indicated, relates only to the retained operations of Forest and excludes the operations of Lone Pine Resources Inc. (NYSE:LPR) (TSX:LPR), which was spun-off to Forest shareholders on September 30, 2011.
Forest noted the following results for the three months ended June 30, 2012:
Due to a non-cash ceiling test write-down of $349 million and a related non-cash increase in the valuation allowance on deferred tax assets of $290 million, Forest reported a net loss of $511 million, or $(4.44) per share, for the three months ended June 30, 2012.
Patrick R. McDonald, Interim CEO, stated, “The second quarter represented an operational and strategic realignment of priorities at Forest. We have increased focus on our oil projects, and we saw good results during the quarter from the Hogshooter and Cleveland oil plays in the Panhandle Area and from our Eagle Ford program. These high-quality assets form the foundation of our core oil portfolio.
“Strategically we are committed and have taken the first step to improve our financial strength by adjusting our second half capital program to be near projected cash flow. With our remaining 2012 capital budget mainly targeting higher-margin oil opportunities, we expect to deliver second half oil volume growth that is 10-15% higher than the first half of the year. We have reduced spending in, and will have lower production from, lower-return liquids and natural gas projects.
“Operational execution is critical in bringing forward the value of our assets as their quality has not been adequately reflected in our recent results. The entire Forest team is focused on and committed to delivering this value to our shareholders.”
SECOND QUARTER 2012 RESULTS
For the three months ended June 30, 2012, Forest reported a net loss of $511 million, or $(4.44) per diluted share. This compares to Forest's net earnings from continuing operations of $29 million, or $0.26 per diluted share, in the corresponding 2011 period. The net loss for the three months ended June 30, 2012 was affected by the following items:
Without the effect of these items, Forest's adjusted net earnings and earnings per share on a diluted basis for the three months ended June 30, 2012 decreased 76% to $7 million, or $0.06 per diluted share, compared to $29 million, or $0.25 per diluted share, in the corresponding 2011 period. Forest's adjusted EBITDA for the three months ended June 30, 2012 decreased 14% to $122 million compared to $142 million in the corresponding 2011 period. Forest's adjusted discretionary cash flow for the three months ended June 30, 2012 decreased 15% to $89 million compared to $106 million in the corresponding 2011 period. The decrease in each of these three items was primarily attributable to a significant decrease in natural gas prices over the reported periods.
Net Sales Volumes, Average Realized Prices, and Revenues
Forest's net sales volumes for the three months ended June 30, 2012 were unchanged from the corresponding 2011 period and decreased 1% from the first quarter of 2012. Net sales volumes were negatively impacted by 8 MMcfe/d in the second quarter of 2012 due primarily to downtime associated with a fire at Eagle Rock’s Phoenix-Arrington Ranch natural gas processing facility in Hemphill County, Texas. The facility returned to operations on July 3, 2012. The following table details the components of net sales volumes, average realized prices, and revenues for the three months ended June 30, 2012:
Three Months Ended June 30, 2012 | |||||||||||||||||||||||
Gas | Oil | NGLs | Total | ||||||||||||||||||||
(MMcf/d) | (MBbls/d) | (MBbls/d) | (MMcfe/d) | ||||||||||||||||||||
Net Sales Volumes | 229.4 | 8.3 | 9.3 | 335.4 | |||||||||||||||||||
|
|
|
|
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Average Realized Prices |
Gas
($/Mcf) |
Oil
($/Bbl) |
NGLs
($/Bbl) |
Total ($/Mcfe) |
|||||||||||||||||||
Average realized prices not including realized |
$ | 1.85 | $ | 95.37 | $ | 29.07 | $ | 4.45 | |||||||||||||||
Realized gains on NYMEX derivatives | 1.34 | 2.84 | 0.99 | 1.02 | |||||||||||||||||||
Average realized prices including realized |
$ | 3.20 | $ | 98.21 | $ | 30.06 | $ | 5.46 | |||||||||||||||
Revenues (in thousands) | Gas | Oil | NGLs | Total | |||||||||||||||||||
Revenues not including realized derivative gains | $ | 38,693 | $ | 72,291 | $ | 24,710 | $ | 135,694 | |||||||||||||||
Realized gains on NYMEX derivatives | 28,067 | 2,155 | 845 | 31,067 | |||||||||||||||||||
Revenues including realized derivative gains | $ | 66,760 | $ | 74,446 | $ | 25,555 | $ | 166,761 | |||||||||||||||
Total Cash Costs
Forest's total cash costs and per-unit cash costs decreased 29% in the second quarter of 2012 compared to the corresponding 2011 period due primarily to a decrease in current income tax expense. Production expense also decreased 5% in the second quarter of 2012 over the corresponding 2011 period due to a decrease in production taxes.
The following table details the components of total cash costs for the comparative periods:
Three Months Ended June 30, | |||||||||||||||||||||||||||
2012 | Per Mcfe | 2011 | Per Mcfe | ||||||||||||||||||||||||
(In thousands, except per-unit amounts) | |||||||||||||||||||||||||||
Production expense | $ | 37,689 | $ | 1.23 | $ | 39,553 | $ | 1.30 | |||||||||||||||||||
General and administrative expense (excluding |
10,714 | 0.35 | 10,303 | 0.34 | |||||||||||||||||||||||
Interest expense | 34,317 | 1.12 | 37,819 | 1.24 | |||||||||||||||||||||||
Current income tax expense | 327 | 0.01 | 29,443 | 0.97 | |||||||||||||||||||||||
Total cash costs | $ | 83,047 | $ | 2.72 | $ | 117,118 | $ | 3.85 | |||||||||||||||||||
Current income tax expense associated with |
- | - | (28,921 | ) | (0.95 | ) | |||||||||||||||||||||
Pro forma total cash costs | $ | 83,047 | $ | 2.72 | $ | 88,197 | $ | 2.90 | |||||||||||||||||||
_________________________
Total cash costs is a non-GAAP measure
that is used by management to assess the Company’s cash operating
performance. Forest defines total cash costs as all cash
operating costs, including production expense; general and
administrative expense (excluding stock-based compensation); interest
expense; and current income tax expense.
Depreciation and Depletion Expense
Forest's per-unit depreciation and depletion expense for the three months ended June 30, 2012 increased 39% to $2.39 per Mcfe compared to $1.72 per Mcfe in the corresponding 2011 period. The increase was primarily the result of higher finding and development costs associated with Forest's oil and liquids focused capital expenditure program.
Ceiling Test Write-Down and Deferred Tax Asset Valuation Allowance
Forest recorded a non-cash ceiling test write-down of $349 million in the second quarter of 2012 pursuant to the ceiling test limitation prescribed by the Securities and Exchange Commission for companies using the full cost method of accounting. The write-down was primarily a result of a significant decline in natural gas prices used in the ceiling test calculation to $3.15 per Mcf in the second quarter of 2012 from $3.73 per Mcf in the first quarter of 2012. Based on current commodity prices, Forest expects further decreases in the natural gas and NGL prices used in the ceiling test calculation which will likely result in a ceiling test write-down in the third quarter of 2012. As a result of this quarter’s ceiling test write-down and the anticipated ceiling test write-down next quarter, Forest recorded a valuation allowance of $290 million against its deferred tax assets.
Total Capital Expenditures
Forest's exploration and development capital expenditures for the three months ended June 30, 2012 were $198 million compared to $193 million in the corresponding 2011 period.
Forest’s land and leasehold acquisition costs for the three months ended June 30, 2012 were $9 million compared to $52 million in the corresponding 2011 period. The land and leasehold acquisitions in 2012 and 2011 were a result of Forest's decision to expand exposure to prospective oil and liquids-rich areas.
The following table summarizes total capital expenditures for the comparative periods (in thousands):
Three Months Ended June 30, | |||||||||||
2012 | 2011 | ||||||||||
Exploration and development | $ | 197,574 | $ | 192,525 | |||||||
Land and leasehold acquisitions | 8,937 | 51,801 | |||||||||
206,511 | 244,326 | ||||||||||
Add: | |||||||||||
ARO, capitalized interest, and capitalized equity |
4,863 | 5,378 | |||||||||
Total capital expenditures | $ | 211,374 | $ | 249,704 | |||||||
OPERATIONAL PROJECT UPDATE
Panhandle Area
Forest holds approximately 179,000 gross acres (109,000 net) in the Panhandle Area.
Since Forest's last earnings release, one Missourian Wash Hogshooter well (63% working interest) was completed with a 24-hour maximum production rate of 1,500 Bbls/d of oil, 570 Bbls/d of NGLs, and 4.4 MMcf/d of natural gas, for a total equivalent rate of 2,800 Boe/d (54% oil). To date, the Company has completed five Hogshooter wells that have had an average 24-hour maximum production rate of 3,050 Boe/d.
Forest also continues to have success in its Cleveland oil program. Since the Company’s last earnings release, two wells (88% working interest) were completed in the Kelln field of the Panhandle Area with an average 24-hour maximum production rate of 1,000 Boe/d (71% oil).
By the fourth quarter of 2012, Forest plans to further reduce its operated rigs from four to two in the Panhandle Area. These rigs will target the Hogshooter and other higher-return oil intervals.
Eagle Ford Shale
Forest holds approximately 112,000 gross acres (103,000 net) in the oil-bearing section of the Eagle Ford Shale play.
Drilling in the Eagle Ford is focused in the central fairway of Forest’s acreage position, where the Company has experienced the most consistent results and has the largest, most contiguous block of acreage. As highlighted in the Company’s July 9th press release, Forest has initiated a development plan that should allow the Company to hold approximately 40,000 net acres over the next several years by employing a two-rig drilling program. Importantly, this acreage position has 500 total locations identified based on 80-acre spacing. The Company will look to monetize a portion of the remaining acreage through small divestitures or farm-outs.
Since the recent Eagle Ford operational update on July 9th, the Company has completed one additional horizontal well (100% working interest), which reached a 24-hour maximum production rate of 907 Boe/d (98% oil).
East Texas / North Louisiana - Cotton Valley & Haynesville / Bossier Shale
Forest holds approximately 163,000 gross acres (123,000 net) in the East Texas / North Louisiana area.
Since Forest's last earnings release, four horizontal Cotton Valley wells (100% working interest) in East Texas were completed with an average 24-hour maximum production rate of 8.7 MMcfe/d, including 580 Bbls/d of oil and natural gas liquids or 40% of total equivalent production.
By the fourth quarter of 2012, Forest plans to reduce its operated rigs from two to one targeting the Cotton Valley liquids interval.
NATURAL GAS, NATURAL GAS LIQUIDS, AND OIL DERIVATIVES
As of July 30, 2012, Forest had natural gas, natural gas liquids, and oil derivatives in place for 2012 and 2013 covering the aggregate average daily volumes and weighted average prices shown below. Since the last earnings release, Forest added an additional 25.8 Bbtu/d of Calendar 2013 natural gas swaps at $3.78 per MMBtu.
Jul - Dec | |||||||||||
2012 | 2013 | ||||||||||
Natural gas swaps: | |||||||||||
Contract volumes (Bbtu/d) | 155.0 | (1) | 160.0 | ||||||||
Weighted average price (per MMBtu) | $ | 4.63 | $ | 3.98 | |||||||
Natural gas liquids swaps: | |||||||||||
Contract volumes (MBbls/d) | 2.0 | - | |||||||||
Weighted average price (per Bbl) | $ | 45.22 | $ | - | |||||||
Oil swaps: | |||||||||||
Contract volumes (MBbls/d) | 4.5 | - | |||||||||
Weighted average price (per Bbl) | $ | 97.26 | $ | - | |||||||
(1) |
50 Bbtu/d of 2012 gas swaps (with a weighted average hedged price per MMBtu of $5.30) are layered with a written put of $3.53 and a call spread of $4.00-to-$4.50. Together with the put and call spread, Forest will receive the swap price of $5.30 on the 50 Bbtu/d except as follows: Forest will receive (i) NYMEX Henry Hub (HH) plus $1.77 when NYMEX HH is below $3.53; (ii) $5.30 plus the value of the call spread when NYMEX HH is between $4.00 and $4.50; and (iii) $5.80 when NYMEX HH is $4.50 or above.
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In connection with entering into certain 2012 gas swaps with premium hedged prices, Forest granted oil puts to the counterparties, giving the counterparties the option to put 5 MBbls/d to Forest at $75.00 per Bbl on a monthly basis during the period July 2012 through December 2012. | |||||
In connection with several swaps shown in the table above, Forest granted swaption instruments to counterparties in exchange for Forest receiving premium hedged prices on the swaps. The table below sets forth the outstanding swaptions as of July 30, 2012:
2013 | 2014 | |||||||||
Natural gas swaptions: | ||||||||||
Contract volumes (Bbtu/d) | 40.0 | - | ||||||||
Weighted average price (per MMBtu) | $ | 4.02 | $ | - | ||||||
Oil swaptions: | ||||||||||
Contract volumes (MBbls/d) | 5.0 | 5.0 | ||||||||
Weighted average price (per Bbl) | $ | 97.00 | $ | 105.80 | ||||||
NON-GAAP FINANCIAL MEASURES
Adjusted Net Earnings
In addition to reporting net earnings (loss) from continuing operations as defined under generally accepted accounting principles (GAAP), Forest also presents adjusted net earnings from continuing operations (adjusted net earnings), which is a non-GAAP performance measure. Adjusted net earnings consists of net earnings (loss) from continuing operations after adjustment for those items shown in the table below. Adjusted net earnings does not represent, and should not be considered an alternative to, GAAP measurements such as net earnings (loss) from continuing operations (its most comparable GAAP financial measure), and Forest's calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items shown below, Forest believes that the measure is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in the oil and gas industry. Forest's management does not view adjusted net earnings in isolation and also uses other measurements, such as net earnings (loss) from continuing operations and revenues to measure operating performance. The following table provides a reconciliation of net earnings (loss) from continuing operations, the most directly comparable GAAP measure, to adjusted net earnings for the periods presented (in thousands):
Three Months Ended |
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2012 | 2011 | ||||||||||||
Net earnings (loss) from continuing operations | $ | (511,173 | ) | $ | 29,104 | ||||||||
Ceiling test write-down of oil and natural gas |
222,612 | - | |||||||||||
Change in valuation allowance on deferred tax |
289,898 | - | |||||||||||
Severance and stock-based compensation |
3,829 | - | |||||||||||
Non-deductible stock-based compensation costs | 1,702 | - | |||||||||||
Unrealized gains on derivative instruments, net of tax | (61 | ) | (22,860 | ) | |||||||||
Legal proceeding costs, net of tax | - | 4,149 | |||||||||||
Canadian dividend tax, net of tax | - | 18,460 | |||||||||||
Adjusted net earnings | $ | 6,807 | $ | 28,853 | |||||||||
Earnings attributable to participating securities | (166 | ) | (537 | ) | |||||||||
Adjusted net earnings for diluted earnings per share | $ | 6,641 | $ | 28,316 | |||||||||
Weighted average number of diluted shares |
115,109 | 112,176 | |||||||||||
Adjusted diluted earnings per diluted share | $ | 0.06 | $ | 0.25 | |||||||||
Adjusted EBITDA
In addition to reporting net earnings (loss) from continuing operations as defined under GAAP, Forest also presents adjusted net earnings before interest, income taxes, depreciation, depletion, and amortization from continuing operations (adjusted EBITDA), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings (loss) from continuing operations after adjustment for those items shown in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to, GAAP measurements such as net earnings (loss) from continuing operations (its most comparable GAAP financial measure), and Forest's calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items shown below, Forest believes the measure is useful in evaluating its fundamental core operating performance. Forest also believes that adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in the oil and gas industry. Forest's management uses adjusted EBITDA to manage its business, including in preparing its annual operating budget and financial projections. Forest's management does not view adjusted EBITDA in isolation and also uses other measurements, such as net earnings (loss) from continuing operations and revenues to measure operating performance. The following table provides a reconciliation of net earnings (loss) from continuing operations, the most directly comparable GAAP measure, to adjusted EBITDA for the periods presented (in thousands):
Three Months Ended |
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2012 | 2011 | ||||||||||||
Net earnings (loss) from continuing operations | $ | (511,173 | ) | $ | 29,104 | ||||||||
Income tax expense | 167,074 | 46,757 | |||||||||||
Interest expense | 34,317 | 37,819 | |||||||||||
Ceiling test write-down of oil and natural gas |
348,976 | - | |||||||||||
Depreciation, depletion, and amortization | 72,987 | 52,360 | |||||||||||
Unrealized gains on derivative instruments, net | (111 | ) | (35,774 | ) | |||||||||
Stock-based compensation | 6,240 | 3,604 | |||||||||||
Accretion of asset retirement obligations | 1,597 | 1,508 | |||||||||||
Legal proceeding/severance costs | 1,851 | 6,500 | |||||||||||
Adjusted EBITDA | $ | 121,758 | $ | 141,878 | |||||||||
Adjusted Discretionary Cash Flow
In addition to reporting net cash provided by operating activities of continuing operations as defined under GAAP, Forest also presents adjusted discretionary cash flow of continuing operations (adjusted discretionary cash flow), which is a non-GAAP liquidity measure. Adjusted discretionary cash flow consists of net cash provided by operating activities of continuing operations after adjustment for those items shown in the table below. This measure does not represent, and should not be considered an alternative to, GAAP measurements such as net cash provided by operating activities of continuing operations (its most comparable GAAP financial measure), and Forest's calculations thereof may not be comparable to similarly titled measures reported by other companies. Forest's management uses adjusted discretionary cash flow as a measure of liquidity and believes it provides useful information to investors because it assesses cash flow from operations before changes in operating assets and liabilities, which fluctuate due to the timing of collections of receivables and the settlements of liabilities, and other items. Forest's management uses adjusted discretionary cash flow to manage its business, including in preparing its annual operating budget and financial projections. This measure does not represent the residual cash flow available for discretionary expenditures. Forest’s management does not view adjusted discretionary cash flow in isolation and also uses other measurements, such as net cash provided by operating activities of continuing operations to measure operating performance. The following table provides a reconciliation of net cash provided by operating activities of continuing operations, the most directly comparable GAAP measure, to adjusted discretionary cash flow for the periods presented (in thousands):
Three Months Ended |
|||||||||||||
2012 | 2011 | ||||||||||||
Net cash provided by operating activities of |
$ | 82,865 | $ | 73,951 | |||||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | (12,722 | ) | (12,633 | ) | |||||||||
Other current assets | (2,729 | ) | (10,607 | ) | |||||||||
Accounts payable and accrued liabilities | 9,063 | 5,478 | |||||||||||
Accrued interest and other current liabilities | 11,068 | 14,128 | |||||||||||
Canadian dividend tax (1) | - | 28,921 | |||||||||||
Legal proceeding/severance costs(1) | 1,851 | 6,500 | |||||||||||
Adjusted discretionary cash flow | $ | 89,396 | $ | 105,738 | |||||||||
(1) |
The Canadian dividend tax, legal proceeding costs, and severance costs are non-recurring cash-settled items. Including the effect of these items, adjusted discretionary cash flow for the three months ended June 30, 2012 and June 30, 2011 would have been $88 million and $70 million, respectively. |
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Net Debt
In addition to reporting total debt as defined under GAAP, Forest also presents net debt, which is a non-GAAP debt measure. Net debt consists of the principal amount of debt adjusted for cash and cash equivalents at the end of the period. Forest's management uses net debt to assess Forest's indebtedness. The following table sets forth the components of net debt (in thousands):
June 30, 2012 | March 31, 2012 | |||||||||||||||||||||
Principal | Book(1) | Principal | Book(1) | |||||||||||||||||||
Credit facility | $ | 348,000 | $ | 348,000 | $ | 215,000 | $ | 215,000 | ||||||||||||||
7% Senior subordinated notes due 2013 | 12 | 12 | 12 | 12 | ||||||||||||||||||
8 1/2% Senior notes due 2014 | 600,000 | 590,513 | 600,000 | 589,062 | ||||||||||||||||||
7 1/4% Senior notes due 2019 | 1,000,000 | 1,000,393 | 1,000,000 | 1,000,407 | ||||||||||||||||||
Total debt | 1,948,012 | 1,938,918 | 1,815,012 | 1,804,481 | ||||||||||||||||||
Less: cash and cash equivalents | 680 | 680 | 877 | 877 | ||||||||||||||||||
Net debt | $ | 1,947,332 | $ | 1,938,238 | $ | 1,814,135 | $ | 1,803,604 | ||||||||||||||
(1) |
Book amounts include the principal amount of debt adjusted for unamortized net discounts on the issuance of certain senior notes of $(9) million and $(11) million at June 30, 2012 and March 31, 2012, respectively. |
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TELECONFERENCE CALL
A conference call is scheduled for Tuesday, July 31, 2012, at 12:00 PM MT to discuss the release. You may access the call by dialing toll free 800.706.7745 (for U.S./Canada) and 617.614.3472 (for International) and request the Forest Oil teleconference (ID # 59802625). The conference call will also be webcast live on the Internet and can be accessed by going to the Forest Oil website at www.forestoil.com in the “Investor Relations” section of the website. A Q&A period will follow.
A replay of the conference call will be available through August 14, 2012. You may access the replay by dialing toll free 888.286.8010 (for U.S./Canada) and 617.801.6888 (for International), conference ID # 72934546. An archive of the conference call webcast will also be available at www.forestoil.com in the “Investor Relations” section of the website.
FORWARD-LOOKING STATEMENTS
This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, that address activities that Forest assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements provided in this press release are based on management's current belief, based on currently available information, as to the outcome and timing of future events. Forest cautions that future natural gas and liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing of capital expenditures, and other forward-looking statements relating to Forest are subject to all of the risks and uncertainties normally incident to their exploration for and development and production and sale of liquids and natural gas.
These risks relating to Forest include, but are not limited to, liquids and natural gas price volatility, its level of indebtedness, its ability to replace production, its ability to compete with larger producers, environmental risks, drilling and other operating risks, regulatory changes, credit risk of financial counterparties, risks of using third-party transportation and processing facilities and other risks as described in reports that Forest files with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Any of these factors could cause Forest's actual results and plans to differ materially from those in the forward-looking statements.
Forest Oil Corporation is engaged in the acquisition, exploration, development, and production of natural gas and liquids in the United States and selected international locations. Forest's estimated proved reserves and producing properties are located in the United States in Arkansas, Louisiana, Oklahoma, Texas, Utah, and Wyoming. Forest's common stock trades on the New York Stock Exchange under the symbol FST. For more information about Forest, please visit its website at www.forestoil.com.
FOREST OIL CORPORATION Condensed Consolidated Balance Sheets (Unaudited) |
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June 30, | December 31, | |||||||||||
2012 | 2011 | |||||||||||
ASSETS | (In thousands) | |||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 680 | $ | 3,012 | ||||||||
Accounts receivable | 60,012 | 79,089 | ||||||||||
Derivative instruments | 85,545 | 89,621 | ||||||||||
Deferred income taxes | 69,220 | - | ||||||||||
Other current assets | 33,617 | 38,950 | ||||||||||
Total current assets | 249,074 | 210,672 | ||||||||||
Net property and equipment | 2,578,329 | 2,651,116 | ||||||||||
Deferred income taxes | - | 231,116 | ||||||||||
Goodwill | 239,420 | 239,420 | ||||||||||
Derivative instruments | 15,392 | 10,422 | ||||||||||
Other assets | 35,115 | 38,405 | ||||||||||
$ | 3,117,330 | $ | 3,381,151 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued liabilities | $ | 212,284 | $ | 247,880 | ||||||||
Accrued interest | 23,469 | 23,259 | ||||||||||
Derivative instruments | 16,670 | 28,944 | ||||||||||
Deferred income taxes | 28,130 | 20,172 | ||||||||||
Current portion of long-term debt | 12 | - | ||||||||||
Other current liabilities | 41,518 | 20,582 | ||||||||||
Total current liabilities | 322,083 | 340,837 | ||||||||||
Long-term debt | 1,938,906 | 1,693,044 | ||||||||||
Asset retirement obligations | 77,993 | 77,898 | ||||||||||
Derivative instruments | 7,745 | - | ||||||||||
Other liabilities | 74,478 | 76,259 | ||||||||||
Total liabilities | 2,421,205 | 2,188,038 | ||||||||||
Shareholders' equity: | ||||||||||||
Common stock | 11,824 | 11,454 | ||||||||||
Capital surplus | 2,533,109 | 2,486,994 | ||||||||||
Accumulated deficit | (1,830,909 | ) | (1,287,063 | ) | ||||||||
Accumulated other comprehensive loss | (17,899 | ) | (18,272 | ) | ||||||||
Total shareholders' equity |
696,125 | 1,193,113 | ||||||||||
$ | 3,117,330 | $ | 3,381,151 | |||||||||
FOREST OIL CORPORATION Condensed Consolidated Statements of Operations (Unaudited) |
|||||||||||||
Three Months Ended | |||||||||||||
June 30, | |||||||||||||
2012 | 2011 | ||||||||||||
(In thousands, except per share |
|||||||||||||
Revenues: | |||||||||||||
Oil, gas, and NGL sales | $ | 135,694 | $ | 186,593 | |||||||||
Interest and other | 37 | 278 | |||||||||||
Total revenues |
135,731 | 186,871 | |||||||||||
Costs, expenses, and other: | |||||||||||||
Lease operating expenses | 27,134 | 23,483 | |||||||||||
Production and property taxes | 6,940 | 12,655 | |||||||||||
Transportation and processing costs | 3,615 | 3,415 | |||||||||||
General and administrative expense | 16,421 | 13,360 | |||||||||||
Depreciation, depletion, and amortization | 72,987 | 52,360 | |||||||||||
Ceiling test write-down of oil and natural gas properties | 348,976 | - | |||||||||||
Interest expense | 34,317 | 37,819 | |||||||||||
Realized and unrealized gains on derivative instruments, net | (34,015 | ) | (40,917 | ) | |||||||||
Other, net | 3,455 | 8,835 | |||||||||||
Total costs, expenses, and other | 479,830 | 111,010 | |||||||||||
Earnings (loss) from continuing operations before income taxes | (344,099 | ) | 75,861 | ||||||||||
Income tax | 167,074 | 46,757 | |||||||||||
Net earnings (loss) from continuing operations | (511,173 | ) | 29,104 | ||||||||||
Net earnings from discontinued operations | - | 9,870 | |||||||||||
Net earnings (loss) | (511,173 | ) | 38,974 | ||||||||||
Less: net earnings attributable to noncontrolling interest | - | 64 | |||||||||||
Net earnings (loss) attributable to Forest Oil Corporation | $ | (511,173 | ) | $ | 38,910 | ||||||||
Weighted average number of common shares outstanding: | |||||||||||||
Basic | 115,107 | 111,636 | |||||||||||
Diluted | 115,107 | 112,176 | |||||||||||
Basic and diluted earnings (loss) per common share: | |||||||||||||
Earnings (loss) from continuing operations | $ | (4.44 | ) | $ | 0.26 | ||||||||
Earnings from discontinued operations | - | 0.08 | |||||||||||
Basic and diluted earnings (loss) per common share |
$ | (4.44 | ) | $ | 0.34 | ||||||||
FOREST OIL CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||||||||
Three Months Ended | |||||||||||||
June 30, | |||||||||||||
2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||
Operating activities: | |||||||||||||
Net earnings (loss) | $ | (511,173 | ) | $ | 38,974 | ||||||||
Less: net earnings from discontinued operations | - | 9,870 | |||||||||||
Net earnings (loss) from continuing operations | (511,173 | ) | 29,104 | ||||||||||
Adjustments to reconcile net earnings (loss) from continuing
operations to |
|||||||||||||
Depreciation, depletion, and amortization | 72,987 | 52,360 | |||||||||||
Deferred income tax | 166,747 | 17,314 | |||||||||||
Unrealized gains on derivative instruments, net | (111 | ) | (35,774 | ) | |||||||||
Ceiling test wite-down of oil and natural gas properties | 348,976 | - | |||||||||||
Stock-based compensation | 6,240 | 3,604 | |||||||||||
Accretion of asset retirement obligations | 1,597 | 1,508 | |||||||||||
Other, net | 2,282 | 2,201 | |||||||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | 12,722 | 12,633 | |||||||||||
Other current assets | 2,729 | 10,607 | |||||||||||
Accounts payable and accrued liabilities | (9,063 | ) | (5,478 | ) | |||||||||
Accrued interest and other current liabilities | (11,068 | ) | (14,128 | ) | |||||||||
Net cash provided by operating activities of continuing |
82,865 | 73,951 | |||||||||||
Investing activities: | |||||||||||||
Capital expenditures for property and equipment: | |||||||||||||
Exploration, development, acquisition, and leasehold costs | (208,659 | ) | (206,472 | ) | |||||||||
Other fixed assets | (2,398 | ) | (1,684 | ) | |||||||||
Proceeds from sales of assets | 203 | 109,020 | |||||||||||
Net cash used by investing activities of continuing operations |
(210,854 | ) | (99,136 | ) | |||||||||
Financing activities: | |||||||||||||
Proceeds from bank borrowings | 241,000 | 12,000 | |||||||||||
Repayments of bank borrowings | (108,000 | ) | (12,000 | ) | |||||||||
Change in bank overdrafts | (3,382 | ) | (2,130 | ) | |||||||||
Other, net | (1,826 | ) | (12,796 | ) | |||||||||
Net cash provided (used) by financing activities of continuing |
127,792 | (14,926 | ) | ||||||||||
Cash flows of discontinued operations: | |||||||||||||
Operating cash flows | - | 30,981 | |||||||||||
Investing cash flows | - | (147,483 | ) | ||||||||||
Financing cash flows | - | 475,928 | |||||||||||
Net cash provided by discontinued operations | - | 359,426 | |||||||||||
Effect of exchange rate changes on cash | - | (3,474 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents | (197 | ) | 315,841 | ||||||||||
Net increase in cash and cash equivalents of discontinued operations | - | (2,627 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents of continuing |
(197 | ) | 313,214 | ||||||||||
Cash and cash equivalents of continuing operations at beginning of period | 877 | 160,925 | |||||||||||
Cash and cash equivalents of continuing operations at end of period | $ | 680 | $ | 474,139 |
CONTACT:
Forest Oil Corporation
Larry C. Busnardo,
303-812-1441
Director – Investor Relations