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): October
29, 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 October 29, 2012, Forest Oil Corporation issued a press release, attached hereto as Exhibit 99.1, announcing its financial and operational results for the third 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 October 29, 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: |
October 29, 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 October 29, 2012. |
Page 4
Exhibit 99.1
Forest Oil Announces Third Quarter 2012 Results
Third Quarter 2012 Average Net Sales Volumes of 339 MMcfe/d (34% Liquids compared to 27% Liquids in Third Quarter 2011)
Third Quarter 2012 Average Net Oil Sales Volumes of 8.9 MBbls/d; Organically Increased 29% from Third Quarter 2011 and 7% Sequentially
Extended Hogshooter Fairway with Successful Well at Camp South with an Average 24-Hour Maximum Production Rate of 1,600 Boe/d (71% Oil)
Completed Two Unrestricted Rate Eagle Ford Shale Wells with an Average 24-Hour Maximum Production Rate of 638 Boe/d
Completed Four Restricted Rate Eagle Ford Shale Wells with an Average 24-Hour Maximum Production Rate of 542 Boe/d
Continued Progress on Deleveraging Plan with Agreements to Sell Approximately $277 Million of Assets
Recent $500 Million Senior Notes Offering Increases Financial Flexibility
DENVER--(BUSINESS WIRE)--October 29, 2012--Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced financial and operational results from continuing operations for the third quarter of 2012.
Forest noted the following results for the three months ended September 30, 2012:
Due primarily to a non-cash ceiling test write-down of $330 million and an $80 million impairment charge, Forest reported a net loss of $459 million, or $(3.97) per share, for the three months ended September 30, 2012.
Patrick R. McDonald, President and CEO, stated, “During the third quarter Forest made significant progress towards achieving the strategic objectives that we have communicated to our shareholders. Our divestiture program is off to a good start, with approximately $277 million in sales closed or pending. We will continue to focus on other non-core divestitures to improve our financial position and flexibility. We opportunistically took advantage of favorable high-yield market conditions to complete a $500 million Senior Notes offering, with proceeds used to redeem 50% of our outstanding Senior Notes due 2014. Importantly, our capital program is now closely aligned with our expected cash flow. Forest entered the fourth quarter operating five drilling rigs, all targeting oil or liquids-rich opportunities in our three core development areas. These actions have resulted in measurable achievements designed to better position Forest for the long-term.
“Operationally, we continue to execute on our development program by targeting higher-margin oil opportunities within our core Panhandle and Eagle Ford areas. During the third quarter, we opened up a new area of the Hogshooter play with a successful completion in the Camp South Area and we completed our first well targeting the Douglas oil horizon. These results continue to demonstrate the resource potential that exists within the oil zones of the Panhandle. In the Eagle Ford, we have introduced a drilling rig equipped with a “rig-walking” system that will allow for multi-well pad drilling in the central fairway. This should result in more efficient operations, while driving well costs lower and increasing our overall returns. Our focus on oil projects continues to generate positive results, as third quarter oil volumes increased 7% sequentially and 29% as compared to the third quarter of 2011.
“Forest made significant strides on all fronts during the most recent quarter; continued execution is critical in bringing forward the value of our assets. Everyone at Forest is focused on building upon the operational and financial momentum gained during the third quarter for the remainder of 2012 and into 2013.”
THIRD QUARTER 2012 RESULTS
For the three months ended September 30, 2012, Forest reported a net loss of $459 million, or $(3.97) per diluted share. This compares to Forest's net earnings from continuing operations of $60 million, or $0.52 per diluted share, in the corresponding 2011 period. The net loss in the third quarter of 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 September 30, 2012 decreased to $12 million, or $0.10 per diluted share, compared to $29 million, or $0.25 per diluted share, in the corresponding 2011 period. The decrease in adjusted earnings was primarily due to higher depletion expense in the third quarter of 2012 compared to the third quarter of 2011. Forest's adjusted EBITDA for the three months ended September 30, 2012 decreased to $134 million compared to $142 million in the corresponding 2011 period. Forest's adjusted discretionary cash flow for the three months ended September 30, 2012 decreased to $97 million compared to $106 million in the corresponding 2011 period.
Average Net Sales Volumes, Average Realized Prices, and Revenues
Forest's average net sales volumes for the three months ended September 30, 2012 increased 5% and 1% from the corresponding 2011 period and from the second quarter of 2012, respectively. The following table details the components of average net sales volumes, average realized prices, and revenues for the three months ended September 30, 2012:
Three Months Ended September 30, 2012 | ||||||||||||
Gas | Oil | NGLs | Total | |||||||||
(MMcf/d) | (MBbls/d) | (MBbls/d) | (MMcfe/d) | |||||||||
Average Net Sales Volumes | 224.9 | 8.9 | 10.1 | 339.1 | ||||||||
Average Realized Prices |
Gas
($/Mcf) |
Oil
($/Bbl) |
NGLs
($/Bbl) |
Total ($/Mcfe) |
||||||||
Average realized prices not including realized derivative gains | $ | 2.48 | $ | 94.34 | $ | 29.48 | $ | 5.00 | ||||
Realized gains on NYMEX derivatives | 1.10 | 2.56 | 1.59 | 0.84 | ||||||||
Average realized prices including realized derivative gains | $ | 3.57 | $ | 96.90 | $ | 31.07 | $ | 5.84 | ||||
Revenues (in thousands) | Gas | Oil | NGLs | Total | ||||||||
Revenues not including realized derivative gains | $ | 51,241 | $ | 77,359 | $ | 27,414 | $ | 156,014 | ||||
Realized gains on NYMEX derivatives | 22,664 | 2,097 | 1,481 | 26,242 | ||||||||
Revenues including realized derivative gains | $ | 73,905 | $ | 79,456 | $ | 28,895 | $ | 182,256 | ||||
Total Cash Costs
Forest's total cash costs for the third quarter of 2012 decreased 38% to $52 million, compared to $84 million in the corresponding 2011 period. Total cash costs per-unit for the third quarter of 2012 decreased 41% to $1.67 per Mcfe, compared to $2.83 per Mcfe in the corresponding 2011 period.
Total cash costs per-unit for the third quarter of 2012, pro forma for the current income tax credit associated with an income tax-carryback for cash taxes paid in 2009, decreased 3% to $2.74 per Mcfe, compared to $2.83 per Mcfe in the corresponding 2011 period.
The following table details the components of total cash costs for the comparative periods:
Three Months Ended September 30, | ||||||||||||||
2012 | Per Mcfe | 2011 | Per Mcfe | |||||||||||
(In thousands, except per-unit amounts) | ||||||||||||||
Production expense | $ | 39,848 | $ | 1.28 | $ | 34,603 | $ | 1.16 | ||||||
General and administrative expense (excluding stock-based compensation of $3,474 and $8,832, respectively) | 9,942 | 0.32 | 11,110 | 0.37 | ||||||||||
Interest expense | 36,223 | 1.16 | 37,225 | 1.25 | ||||||||||
Current income tax expense | (33,830 | ) | (1.08 | ) | 1,172 | 0.04 | ||||||||
Total cash costs | $ | 52,183 | $ | 1.67 | $ | 84,110 | $ | 2.83 | ||||||
Current income tax credit/income tax-carryback | 33,327 | 1.07 | - | - | ||||||||||
Pro forma total cash costs | $ | 85,510 | $ | 2.74 | $ | 84,110 | $ | 2.83 | ||||||
_________________________
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 September 30, 2012 increased 30% to $2.37 per Mcfe compared to $1.83 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, Property Impairments, and Deferred Tax Asset Valuation Allowance
Forest recorded a non-cash ceiling test write-down of $330 million in the third 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 $0.32 per Mcf decrease in the natural gas price used and lower natural gas liquids price used in the ceiling test calculation in the third quarter of 2012 compared to the second quarter of 2012.
Forest recorded a $67 million impairment of its unproved properties in South Africa during the third quarter of 2012 as it was determined that the Company would likely not recover the carrying amount of its investment in the South Africa properties. Forest also recorded an impairment of $13 million related to the recently-announced sale of its East Texas natural gas gathering assets which reduced the carrying amount of the assets to the final expected sales price.
Primarily as a result of this quarter’s ceiling test write-down and property impairments, Forest recorded a valuation allowance against its deferred tax assets of $170 million.
Total Capital Expenditures
Forest's exploration and development capital expenditures for the three months ended September 30, 2012 were $166 million, compared to $182 million in the corresponding 2011 period. For the second half of 2012, Forest intends to invest between $240 million and $260 million for capital expenditures.
Forest’s land and leasehold acquisition costs for the three months ended September 30, 2012 were $7 million, compared to $76 million in the corresponding 2011 period. The land and leasehold acquisitions in 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 September 30, | ||||||
2012 | 2011 | |||||
Exploration and development | $ | 165,885 | $ | 181,822 | ||
Land and leasehold acquisitions | 6,977 | 75,804 | ||||
172,862 | 257,626 | |||||
Add: | ||||||
ARO, capitalized interest, and capitalized equity compensation | 6,455 | 11,844 | ||||
Total capital expenditures | $ | 179,317 | $ | 269,470 | ||
Asset Divestiture Update
Since embarking on its deleveraging plan in early July, Forest has completed, or has under contract, transactions totaling approximately $277 million. This includes the recently-announced agreement to sell South Louisiana properties for $220 million; the sale of East Texas natural gas gathering assets for $34 million; approximately 5,600 net acres in the Eagle Ford Shale for approximately $15 million; and other miscellaneous properties for approximately $8 million. Forest will continue to focus on non-core asset divestitures to improve the Company’s financial flexibility. The following table details the third quarter of 2012 average daily production volumes for the divested properties as well as the proved reserves associated with these properties as of December 31, 2011.
Estimated |
3Q12 |
Proved Reserves at |
||||
Transaction | ($MM) | (MMcfe/d) | (Bcfe) | |||
South Louisiana Properties | 220 | 20 | 45 | |||
East Texas Natural Gas Gathering Assets | 34 | - | - | |||
Eagle Ford Shale Acreage | 15 | - | - | |||
Miscellaneous Properties | 8 | 2 | 7 | |||
Total | 277 | 22 | 52 | |||
OPERATIONAL PROJECT UPDATE
Panhandle Area
Forest holds approximately 178,000 gross acres (108,000 net) in the Panhandle Area. The Company continues to focus drilling activities on the Missourian Wash (Hogshooter), Cleveland, Tonkawa, and Douglas oil formations. Forest entered the third quarter of 2012 operating five rigs in the Panhandle Area and is currently running a two-rig drilling program.
Highlighting drilling activity since Forest’s last earnings release, the productive boundary of the Hogshooter play was successfully extended with a completion in the Camp South Area, which is located north of the Frye Ranch Area. The initial well (100% WI) came online with an average 24-hour maximum production rate of 1,128 Bbls/d of oil, 216 Bbls/d of NGLs, and 1.4 MMcf/d of natural gas, for a total equivalent rate of 1,600 Boe/d (71% oil).
In addition, a Missourian Wash Hogshooter well (98% working interest) was completed in the Frye Ranch Area with an average 24-hour maximum production rate of 1,357 Bbls/d of oil, 442 Bbls/d of NGLs, and 1.4 MMcf/d of natural gas, for a total equivalent rate of 2,030 Boe/d (67% oil). To date, Forest has completed seven Hogshooter wells in the Frye Ranch Area that have had an average 24-hour maximum production rate of 2,600 Boe/d (68% oil).
Forest completed its first well targeting the Douglas interval during the third quarter in Hemphill County, Texas. This well (57% working interest) had an average 24-hour maximum production rate of 715 Boe/d (62% oil). The Douglas interval is one of the shallowest oil zones located in the Panhandle and a development well is expected to cost approximately $4.5 million. Forest has 25 Douglas locations identified, with additional acreage being reviewed for prospectivity.
Eagle Ford Shale
Forest holds approximately 100,000 gross acres (91,000 net) in the oil-bearing section of the Eagle Ford Shale play.
Drilling in the Eagle Ford continues to be 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. Forest is currently operating a two-rig drilling program and expects to hold approximately 40,000 net acres over the next several years.
Forest continues to make progress on reducing well costs and recently equipped one of its drilling rigs with a “rig-walking” system that will allow for multi-well pad drilling in the central fairway. It is expected that a four-well pad location can be drilled in 65 days as compared to four single-well site locations requiring 84 drill days. As a result of the drilling efficiencies and other synergies, it is expected that the cost to drill an Eagle Ford pad well can be reduced to between $5.5 million and $6.0 million depending on the lateral length, number of fracture stimulation stages, and the amount of sand that is used. This results in per-well savings of approximately 8-15% over a single-well approach and is expected to enhance the economics of Forest’s Eagle Ford program.
Since Forest’s last earnings release, two Eagle Ford wells were completed within the central fairway that had an average 24-hour maximum production rate of 638 Boe/d (95% oil). In an effort to optimize reserve recovery and well productivity, while lowering wells costs, Forest completed four wells as part of a restricted-rate pilot program that began producing at an average 24-hour maximum production rate of 542 boe/d (95% oil). Early results from the restricted-rate initiative are being evaluated, and the Company will continue to monitor the performance of the pilot wells before making a decision to implement the program more broadly.
Average net sales volumes from the Eagle Ford in the third quarter of 2012 increased 50% to 1,800 Boe/d as compared to second quarter 2012 volumes of 1,200 Boe/d.
East Texas
Forest holds approximately 163,000 gross acres (123,000 net) in the East Texas / North Louisiana area.
Since Forest's last earnings release, one horizontal Cotton Valley well (100% working interest) in East Texas was completed with an average 24-hour maximum production rate of 13 MMcfe/d (39% liquids).
The Company plans to continue a one-rig drilling program targeting the liquids-rich Cotton Valley formation in the fourth quarter.
NATURAL GAS, NATURAL GAS LIQUIDS, AND OIL DERIVATIVES
As of October 29, 2012, Forest had natural gas, natural gas liquids, and oil derivatives in place for the remainder of 2012 through 2014 covering the aggregate average daily volumes and weighted average prices shown below. Since the last earnings release, Forest added 4 MBbls/d of Calendar 2013 oil swaps at $95.53 per barrel and 40 Bbtu/d of Calendar 2014 natural gas swaps at $4.50 per MMBtu.
Oct - Dec | |||||||||
2012 | 2013 | 2014 | |||||||
Natural gas swaps: | |||||||||
Contract volumes (Bbtu/d) | 155.0 | 160.0 | 40.0 | ||||||
Weighted average price (per MMBtu) | $ | 4.63 | $ | 3.98 | $ | 4.50 | |||
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 | 4.0 | - | ||||||
Weighted average price (per Bbl) | $ | 97.26 | $ | 95.53 | $ | - | |||
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 October 29, 2012:
2013 | 2014 | 2015 | |||||||
Natural gas swaptions: | |||||||||
Contract volumes (Bbtu/d) | 40.0 | 40.0 | - | ||||||
Weighted average price (per MMBtu) | $ | 4.02 | $ | 4.50 | $ | - | |||
Oil swaptions: | |||||||||
Contract volumes (MBbls/d) | 2.0 | 5.0 | 3.0 | ||||||
Weighted average price (per Bbl) | $ | 95.00 | $ | 105.80 | $ | 100.00 | |||
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 |
||||||||
2012 | 2011 | |||||||
Net earnings (loss) from continuing operations | $ | (458,552 | ) | $ | 59,610 | |||
Ceiling test write-down of oil and natural gas properties, net of tax | 210,480 | - | ||||||
Change in valuation allowance on deferred tax assets | 170,065 | - | ||||||
Impairment of properties, net of tax | 50,731 | - | ||||||
Stock-based compensation expense attributable to the spin-off, net of tax | - | 4,228 | ||||||
Rig stacking, net of tax | 1,750 | - | ||||||
Unrealized losses (gains) on derivative instruments, net of tax | 33,048 | (34,831 | ) | |||||
Legal proceeding costs, net of tax | 4,085 | - | ||||||
Adjusted net earnings | $ | 11,607 | $ | 29,007 | ||||
Earnings attributable to participating securities | 274 | 1,256 | ||||||
Adjusted net earnings for diluted earnings per share | $ | 11,333 | $ | 27,751 | ||||
Weighted average number of diluted shares outstanding | 115,417 | 112,162 | ||||||
Adjusted diluted earnings per diluted share | $ | 0.10 | $ | 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 |
||||||||
2012 | 2011 | |||||||
Net earnings (loss) from continuing operations | $ | (458,552 | ) | $ | 59,610 | |||
Income tax expense | 7,280 | 34,556 | ||||||
Interest expense | 36,223 | 37,225 | ||||||
Ceiling test write-down of oil and natural gas properties | 329,957 | - | ||||||
Impairment of properties | 79,529 | - | ||||||
Depreciation, depletion, and amortization | 73,845 | 54,323 | ||||||
Unrealized losses (gains) on derivative instruments, net | 51,795 | (54,548 | ) | |||||
Stock-based compensation | 2,970 | 9,732 | ||||||
Accretion of asset retirement obligations | 1,719 | 1,539 | ||||||
Legal proceeding costs | 6,404 | - | ||||||
Rig stacking | 2,744 | - | ||||||
Adjusted EBITDA | $ | 133,914 | $ | 142,437 | ||||
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 continuing operations | $ | 109,401 | $ | 111,765 | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 10,007 | 3,255 | ||||||
Other current assets | (2,121 | ) | 2,179 | |||||
Accounts payable and accrued liabilities | (22,783 | ) | (3,527 | ) | ||||
Accrued interest and other | 29,669 | (7,617 | ) | |||||
Current income tax credit/income tax-carryback (1) | (33,327 | ) | - | |||||
Legal proceeding costs(1) | 6,404 | - | ||||||
Adjusted discretionary cash flow | $ | 97,250 | $ | 106,055 |
(1) | The current income tax credit/income tax-carryback and legal proceeding costs are non-recurring cash-settled items. Including the effect of these items, adjusted discretionary cash flow for the three months ended September 30, 2012 would have been $124 million. | ||
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):
September 30, 2012 | June 30, 2012 | |||||||||||
Principal | Book(1) | Principal | Book(1) | |||||||||
Credit facility | $ | - | $ | - | $ | 348,000 | $ | 348,000 | ||||
7% Senior subordinated notes due 2013 | 12 | 12 | 12 | 12 | ||||||||
8 1/2% Senior notes due 2014 (2) | 600,000 | 591,980 | 600,000 | 590,513 | ||||||||
7 1/4% Senior notes due 2019 | 1,000,000 | 1,000,379 | 1,000,000 | 1,000,393 | ||||||||
7 1/2% Senior notes due 2020 (2) | 500,000 | 500,000 | - | - | ||||||||
Total debt | 2,100,012 | 2,092,371 | 1,948,012 | 1,938,918 | ||||||||
Less: cash and cash equivalents | 39,169 | 39,169 | 680 | 680 | ||||||||
Net debt | $ | 2,060,843 | $ | 2,053,202 | $ | 1,947,332 | $ | 1,938,238 |
(1) | Book amounts include the principal amount of debt adjusted for unamortized net discounts on the issuance of certain senior notes of $(8) million and $(9) million at September 30, 2012 and June 30, 2012, respectively. | ||
(2) | In September 2012, Forest issued $500 million in 7 1/2% senior notes due September 15, 2020. A portion of the proceeds were used in October 2012 to redeem 50% of our $600 million 8 1/2% senior notes due February 15, 2014. | ||
TELECONFERENCE CALL
A conference call is scheduled for Tuesday, October 30, 2012, at 9:00 AM MT to discuss the release. You may access the call by dialing toll-free 866.700.6067 (for U.S./Canada) and 617.213.8834 (for International) and request the Forest Oil teleconference (ID # 24150095). 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 November 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 # 59332773. 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.
October 29, 2012
FOREST OIL CORPORATION |
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September 30, | December 31, | |||||||
2012 | 2011 | |||||||
ASSETS | (In thousands) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 39,169 | $ | 3,012 | ||||
Accounts receivable | 77,210 | 79,089 | ||||||
Derivative instruments | 43,853 | 89,621 | ||||||
Other current assets | 16,278 | 38,950 | ||||||
Total current assets | 176,510 | 210,672 | ||||||
Net property and equipment | 2,260,562 | 2,651,116 | ||||||
Deferred income taxes | 9,851 | 231,116 | ||||||
Goodwill | 239,420 | 239,420 | ||||||
Derivative instruments | 5,273 | 10,422 | ||||||
Other assets | 90,762 | 38,405 | ||||||
$ | 2,782,378 | $ | 3,381,151 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 189,753 | $ | 247,880 | ||||
Accrued interest | 29,663 | 23,259 | ||||||
Derivative instruments | 7,759 | 28,944 | ||||||
Deferred income taxes | 9,851 | 20,172 | ||||||
Current portion of long-term debt | 296,002 | - | ||||||
Other current liabilities | 20,743 | 20,582 | ||||||
Total current liabilities | 553,771 | 340,837 | ||||||
Long-term debt | 1,796,369 | 1,693,044 | ||||||
Asset retirement obligations | 79,133 | 77,898 | ||||||
Derivative instruments | 16,640 | - | ||||||
Other liabilities | 93,688 | 76,259 | ||||||
Total liabilities |
2,539,601 | 2,188,038 | ||||||
Shareholders' equity: | ||||||||
Common stock | 11,823 | 11,454 | ||||||
Capital surplus | 2,538,129 | 2,486,994 | ||||||
Accumulated deficit | (2,289,461 | ) | (1,287,063 | ) | ||||
Accumulated other comprehensive loss | (17,714 | ) | (18,272 | ) | ||||
Total shareholders' equity | 242,777 | 1,193,113 | ||||||
$ | 2,782,378 | $ | 3,381,151 | |||||
FOREST OIL CORPORATION |
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Three Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per share amounts) | ||||||||
Revenues: | ||||||||
Oil, gas, and NGL sales | $ | 156,014 | $ | 174,012 | ||||
Interest and other | 54 | 109 | ||||||
Total revenues |
156,068 | 174,121 | ||||||
Costs, expenses, and other: | ||||||||
Lease operating expenses | 27,426 | 23,480 | ||||||
Production and property taxes | 8,842 | 7,926 | ||||||
Transportation and processing costs | 3,580 | 3,197 | ||||||
General and administrative expense | 13,416 | 19,942 | ||||||
Depreciation, depletion, and amortization | 73,845 | 54,323 | ||||||
Ceiling test write-down of oil and natural gas properties | 329,957 | - | ||||||
Impairment of properties | 79,529 | - | ||||||
Interest expense | 36,223 | 37,225 | ||||||
Realized and unrealized losses (gains) on derivative instruments, net | 22,795 | (65,961 | ) | |||||
Other, net | 11,727 | (177 | ) | |||||
Total costs, expenses, and other | 607,340 | 79,955 | ||||||
Earnings (loss) from continuing operations before income taxes | (451,272 | ) | 94,166 | |||||
Income tax | 7,280 | 34,556 | ||||||
Net earnings (loss) from continuing operations | (458,552 | ) | 59,610 | |||||
Net earnings from discontinued operations | - | 28,108 | ||||||
Net earnings (loss) | (458,552 | ) | 87,718 | |||||
Less: net earnings attributable to noncontrolling interest | - | 4,923 | ||||||
Net earnings (loss) attributable to Forest Oil Corporation common shareholders | $ | (458,552 | ) | $ | 82,795 | |||
Weighted average number of common shares outstanding: | ||||||||
Basic | 115,417 | 111,810 | ||||||
Diluted | 115,417 | 112,162 | ||||||
Basic and diluted earnings (loss) per common share attributable to Forest Oil Corporation common shareholders: | ||||||||
Earnings (loss) from continuing operations | $ | (3.97 | ) | $ | 0.52 | |||
Earnings from discontinued operations | - | 0.20 | ||||||
Basic and diluted earnings (loss) per common share | $ | (3.97 | ) | $ | 0.72 | |||
FOREST OIL CORPORATION |
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Three Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
(In thousands) | ||||||||
Operating activities: | ||||||||
Net earnings (loss) | $ | (458,552 | ) | $ | 87,718 | |||
Less: net earnings from discontinued operations | - | 28,108 | ||||||
Net earnings (loss) from continuing operations | (458,552 | ) | 59,610 | |||||
Adjustments to reconcile net earnings (loss) from continuing operations to net cash provided by operating activities of continuing operations: | ||||||||
Depreciation, depletion, and amortization | 73,845 | 54,323 | ||||||
Deferred income tax | 41,110 | 33,384 | ||||||
Unrealized losses (gains) on derivative instruments, net | 51,795 | (54,548 | ) | |||||
Ceiling test write-down of oil and natural gas properties |
329,957 | - | ||||||
Impairment of properties | 79,529 | - | ||||||
Stock-based compensation | 2,970 | 9,732 | ||||||
Accretion of asset retirement obligations | 1,719 | 1,539 | ||||||
Other, net | 1,800 | 2,015 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (10,007 | ) | (3,255 | ) | ||||
Other current assets | 2,121 | (2,179 | ) | |||||
Accounts payable and accrued liabilities | 22,783 | 3,527 | ||||||
Accrued interest and other | (29,669 | ) | 7,617 | |||||
Net cash provided by operating activities of continuing operations | 109,401 | 111,765 | ||||||
Investing activities: | ||||||||
Capital expenditures for property and equipment: | ||||||||
Exploration, development, acquisition, and leasehold costs | (203,101 | ) | (282,256 | ) | ||||
Other fixed assets | (1,101 | ) | (811 | ) | ||||
Proceeds from sales of assets | 7,800 | 322 | ||||||
Net cash used by investing activities of continuing operations | (196,402 | ) | (282,745 | ) | ||||
Financing activities: | ||||||||
Proceeds from bank borrowings | 208,000 | - | ||||||
Repayments of bank borrowings | (556,000 | ) | - | |||||
Issuance of senior notes, net of issuance costs | 491,250 | - | ||||||
Change in bank overdrafts | (17,050 | ) | (35,013 | ) | ||||
Other, net | (710 | ) | 105 | |||||
Net cash provided (used) by financing activities of continuing operations | 125,490 | (34,908 | ) | |||||
Cash flows of discontinued operations: | ||||||||
Operating cash flows | - | 44,058 | ||||||
Investing cash flows | - | (50,196 | ) | |||||
Financing cash flows | - | 3,957 | ||||||
Net cash used by discontinued operations | - | (2,181 | ) | |||||
Effect of exchange rate changes on cash | - | (126 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 38,489 | (208,195 | ) | |||||
Net decrease in cash and cash equivalents of discontinued operations | - | 4,145 | ||||||
Net increase (decrease) in cash and cash equivalents of continuing operations | 38,489 | (204,050 | ) | |||||
Cash and cash equivalents of continuing operations at beginning of period | 680 | 474,139 | ||||||
Cash and cash equivalents of continuing operations at end of period | $ | 39,169 | $ | 270,089 |
CONTACT:
Forest Oil Corporation
Larry C. Busnardo,
303-812-1441
Director – Investor Relations