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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
Commission File Number: 0-4597
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
State of incorporation: New York I.R.S. Employer Identification No. 25-0484900
1600 Broadway
Suite 2200
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-812-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
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Common Stock, Par Value $.10 Per Share
Warrants to purchase shares of Common Stock
$.75 Convertible Preferred Stock, Par Value $.01 Per Share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by persons other than
non-affiliates of the registrant was approximately $231,371,978 as of February
29, 1996 (based on the last sale price of such stock as quoted on the NASDAQ
National Market).
There were 24,527,575 shares of the registrant's Common Stock, Par Value
$.10 Per Share outstanding as of February 29, 1996.
Document incorporated by reference: Proxy Statement of Forest Oil
Corporation relative to the Annual Meeting of Shareholders to be held on May 8,
1996, which is incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS
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Page No.
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PART I
Item 1. Business 1
Item 2. Properties 9
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 4A. Executive Officers of Forest 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 17
Item 6. Selected Financial and Operating Data 20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 21
Item 8. Financial Statements and Supplementary Data 31
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 31
PART III
Item 10. Directors and Executive Officers of the Registrant 67
Item 11. Executive Compensation 67
Item 12. Security Ownership of Certain Beneficial Owners and Management 67
Item 13. Certain Relationships and Related Transactions 67
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 67
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PART I
ITEM 1. BUSINESS
THE COMPANY
Forest Oil Corporation and its subsidiaries (Forest or the Company) are engaged
in the acquisition, exploration, development, production and marketing of
natural gas and crude oil in North America. The Company was incorporated in
New York in 1924, the successor to a company formed in 1916, and has been a
publicly held company since 1969. The Company is active in several of the
major exploration and producing areas in and offshore the United States and,
following two recent acquisitions, in Canada. Forest's principal reserves and
producing properties are located in the Gulf of Mexico, Texas, Oklahoma and
Canada. The Company currently operates 43 offshore platforms in the Gulf and
Mexico, and 1995 production from this area accounted for approximately 78% of
the Company's reported historical production on an MCFE basis. (An MCF is one
thousand cubic feet of natural gas. MMCF is used to designate one million
cubic feet of natural gas and BCF refers to one billion cubic feet of natural
gas. MCFE means thousands of cubic feet of natural gas equivalents, using a
conversion ratio of one barrel of liquids to 6 MCF of natural gas. BCFE means
billions of cubic feet of natural gas equivalents. With respect to liquids,
the term BBL means one barrel of liquids whereas MBBLS is used to designate one
thousand barrels of liquids. The term liquids is used to describe oil,
condensate and natural gas liquids.
The Company operates from production offices located in Lafayette, Louisiana
and Denver, Colorado. In January 1996 the Company established an
administrative and production office in Calgary, Alberta, Canada. Forest's
corporate headquarters are located in Denver, Colorado. On December 31, 1995,
Forest had 173 employees, of whom 115 were salaried and 58 were hourly. On
March 20, 1996, Forest had 177 employees in the United States, of whom 119
were salaried and 58 were hourly, Canadian Forest had 51 salaried employees,
and ProMark had 16 salaried employees.
OPERATING STRATEGY
The Company's objective is to increase value through sustained profitable
growth of its oil and gas reserves and production by pursuing a combined
strategy of focused acquisitions, exploration and development, while reducing
operating and financial risk.
In recent years, the Company has grown primarily by acquiring reserves with
exploitation potential, increasing production from existing fields and
participating in exploration through farmout arrangements. The Company seeks to
acquire interests in properties in which it would have a significant working
interest and which it can operate. From January 1, 1991 through December 31,
1995 the Company acquired approximately 281 BCFE of estimated proved reserves,
located primarily in the Gulf of Mexico, Texas and western Canada.
During 1995, the Company's acquisitions totaled 44.0 BCFE at an average
property acquisition cost of $.61 per MCFE. These amounts represent primarily
the reserves of Saxon Petroleum Inc. (Saxon), a consolidated subsidiary of the
Company in which the Company purchased a 56% economic interest on December 20,
1995. Saxon is an Alberta, Canada corporation engaged in oil and gas
exploration and production primarily in western Canada.
On January 31, 1996 Forest acquired ATCOR Resources Ltd. for approximately
$134,900,000, exclusive of acquisition costs of approximately $1,800,000.
This company, which has been renamed Canadian Forest Oil Ltd. (Canadian
Forest), is a Canadian corporation engaged in oil and gas exploration,
production and processing in western Canada. Estimated proved reserves
acquired in the Canadian Forest transaction were approximately 154 BCFE at an
average property acquisition cost of $.66 per MCFE net of related deferred
taxes. As part of the ATCOR acquisition, Forest separated ATCOR's natural
gas marketing operation from its exploration and production business and
renamed the marketing business Producers Marketing Ltd. (ProMark). In
addition to marketing Canadian Forest's own gas production, ProMark provides
a full range of gas marketing and management services to outside parties.
On a pro forma basis, the Company had estimated proved reserves of 455 BCFE at
December 31, 1995 of which approximately 73% were natural gas reserves. This
represents an increase of 56% compared to estimated proved reserves of 292 BCFE
at December 31, 1994, of which approximately 85% was natural gas.
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Throughout the remainder of 1996, the Company intends to continue to pursue
its strategy of acquiring additional reserves that satisfy its investment
criteria and are within the limits of its capital constraints. Forest
continues to evaluate potential acquisitions, as well as various types of
business combinations and joint ventures.
The Company's operating strategy also includes exploitation activities in the
areas of reservoir management and development drilling. Reservoir management
involves the effort to enhance value by a combination of reduced costs and the
use of techniques such as workovers to increase hydrocarbon recovery. The
Company engages in development drilling for additional reserves that offset
existing production with the objective of either increasing the density in
which wells are drilled or extending reservoirs. The Company believes that it
can increase production from, and otherwise enhance the value of, existing
fields by utilizing its technical expertise to undertake selective workovers,
recompletions and development drilling.
The Company participates in exploration activities through selective drilling
for its own account, as well as through farmout arrangements. Farmouts enable
Forest to participate in its exploration prospects without incurring additional
exploration costs, although with a reduced ownership in each prospect. For
further information concerning the Company's farmout activity, see Item 2.
Properties.
As a part of its operating strategy, the Company also conducts an ongoing
disposition program of its non-strategic assets. Assets with little value or
which are not consistent with the Company's ongoing operating strategy are
identified for sale or trade. During 1995, the Company disposed of properties
with estimated proved reserves of approximately 2.4 BCF of natural gas and
6,000 barrels of oil for total net proceeds of $8,715,000.
In recent years, the Company has not been able to exploit the full potential of
its acquisitions due to financial constraints resulting from its highly
leveraged capital structure and low natural gas prices. During 1995, the
Company sold equity securities to The Anschutz Corporation (Anschutz) for
$45,000,000 and restructured $62,400,000 of indebtedness to Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership the
general partner of which is an affiliate of Enron Corp. (JEDI). In December
1995, the Company agreed to exchange 1,680,000 shares of common stock for
$22,400,000 of JEDI indebtedness and warrants to acquire Forest common stock.
In January 1996, the Company completed the purchase of Canadian Forest using
the proceeds of a common stock offering and approximately $8,300,000 of
borrowings under its bank credit facility. Forest also established a
$60,000,000 CDN credit facility secured by the oil and gas properties of
Canadian Forest. As a result of these transactions, the Company has improved
its financial flexibility significantly. The Company believes such improved
financial flexibility should allow Forest to exploit its expanded property base
more effectively. During the remainder of 1996, the Company intends to pursue
its acquisition and exploitation strategy while continuing its efforts to
improve its balance sheet and liquidity. The Company has also significantly
increased the amount of capital expenditures it has budgeted for exploration
activities. For further information concerning the Company's acquisitions and
operations, see Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and Notes thereto.
SALES AND MARKETS
Forest's U.S. production is generally sold at the wellhead to oil and natural
gas purchasing companies in the areas where it is produced. Crude oil and
condensate are typically sold at prices which are based upon posted field
prices. For the month of March 1996, approximately 19% of the Company's U.S.
natural gas was committed to both interstate and intrastate natural gas
pipeline companies, primarily under volumetric production payment agreements
and long-term contracts. The remainder of the Company's U.S. natural gas was
sold at the wellhead at spot market prices. The term "spot market" as used
herein refers to contracts with a term of six months or less or contracts which
call for a redetermination of sales prices every six months or earlier.
In Canada, Canadian Forest's production is sold primarily through the ProMark
Netback Pool. The Netback Pool matches major end users with providers of gas
supply through arranged transportation channels and uses a netback
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pricing mechanism to establish the wellhead price paid to producers. The
Netback Pool gas sales in 1995 averaged 118 MMCF per day, of which Canadian
Forest supplied approximately 40 MMCF per day or approximately 80% of its
current natural gas production.
In addition to operating the Netback Pool, ProMark provides two other marketing
services for producers and purchasers of natural gas. ProMark manages
long-term gas supply contracts for its industrial customers by providing
full-service purchasing, accounting and gas nomination services for these
customers on a fee-for-services basis. ProMark also buys and sells gas in its
trading operation for terms as short as one day and as long as one to two
years. Profits generated by trading are derived from the spread between the
prices of gas purchased and sold.
For much of the past decade, the markets for oil and natural gas have been
volatile. The Company anticipates that such markets will continue to be
volatile over the next year. Price fluctuations in the natural gas spot market
have a significant impact on the Company's business because most of the
Company's reserves are attributable to natural gas, most of its current
production consists of natural gas and a large portion of its natural gas
production is sold in the spot market. At December 31, 1995, approximately 86%
of Forest's estimated proved reserves in the U.S., including volumes
attributable to volumetric production payments, consisted of natural gas on an
MCFE basis. During 1995, 83% of the Company's total U.S. production on the
same basis consisted of natural gas. Approximately 72% of such 1995 natural
gas production was sold in the spot market. On a pro forma basis at December
31, 1995, approximately 55% of Forest's estimated proved reserves in Canada
consisted of natural gas on an MCFE basis. During 1995, 63% of Forest's pro
forma Canadian production consisted of natural gas.
In order to attempt to minimize the product price volatility to which the
Company is subject, the Company, from time to time, enters into energy swap
agreements and other financial arrangements with third parties to attempt to
reduce the Company's exposure to anticipated fluctuations in future oil and
natural gas prices. The volumetric production payments that the Company has
entered into further minimize the price volatility to which the Company is
subject. For further information concerning market conditions, production
payments and energy swap agreements, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and Notes 5, 6 and
13 of Notes to Consolidated Financial Statements.
Demand for natural gas is highly seasonal, with demand generally higher in the
colder winter months and in hot summer months. As a result, the price received
for spot market natural gas may vary significantly between seasonal periods.
To date, the Company generally has been able to sell all of its available spot
market natural gas at prevailing spot market prices; thus, the volumes sold by
the Company have not fluctuated materially with seasonality. There is no
assurance, however, that the Company will be able to continue to achieve this
result.
The Company believes that the loss of one or more of its current natural gas
spot purchasers should not have a material adverse effect on the Company's
business in the United States because any individual spot purchaser could be
readily replaced by another spot purchaser who would pay approximately the same
sales price. In Canada, the majority of Canadian Forest's natural gas
production is sold under the ProMark Netback Pool to long-term buyers. The
loss of one or more of such long-term buyers could have an adverse effect on
Canadian Forest and ProMark. Substantially all of Forest's oil is sold under
short-term contracts at prices which are based upon posted field prices. For
information concerning sales to major customers, see Note 14 of Notes to
Consolidated Financial Statements.
COMPETITION
The oil and natural gas industry is intensely competitive. Competition is
particularly intense in the acquisition of prospective oil and natural gas
properties and oil and gas reserves. Forest's competitive position depends on
its geological, geophysical and engineering expertise, on its financial
resources, its ability to develop its properties and its ability to select,
acquire and develop proved reserves. Forest competes with a substantial number
of other companies having larger technical staffs and greater financial and
operational resources. Many such companies not only engage in the acquisition,
exploration, development and production of oil and natural gas reserves, but
also carry on refining operations, generate electricity and market refined
products. The Company also competes with major and independent oil and gas
companies in the marketing and sale of oil and gas to transporters,
distributers and end users. There is also competition between the oil and
natural gas industry and other industries supplying energy and fuel to
industrial, commercial and individual consumers. Forest also competes with
other oil
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and natural gas companies in attempting to secure drilling rigs and other
equipment necessary for drilling and completion of wells. Such equipment may
be in short supply from time to time, although there is no current shortage of
such equipment. Finally, companies not previously investing in oil and natural
gas may choose to acquire reserves to establish a firm supply or simply as an
investment. Such companies will also provide competition for Forest.
Forest's business is affected not only by such competition, but also by general
economic developments, governmental regulations and other factors that affect
its ability to market its oil and natural gas production. The prices of oil
and natural gas realized by Forest are highly volatile. The price of oil is
generally dependent on world supply and demand, while the price Forest receives
for its natural gas is tied to the specific markets in which such gas is sold.
Declines in crude oil prices or natural gas prices adversely impact Forest's
activities. The Company's financial position and resources may also adversely
affect the Company's competitive position. Lack of available funds or
financing alternatives will prevent the Company from executing its operating
strategy and from deriving the expected benefits therefrom. For further
information concerning the Company's financial position, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ProMark also faces significant competition from other gas marketers, some of
whom are significantly larger in size and have greater financial resources than
ProMark, Canadian Forest or the Company.
REGULATION - UNITED STATES
Various aspects of the Company's oil and natural gas operations are regulated
by administrative agencies under statutory provisions of the states where such
operations are conducted and by certain agencies of the Federal government for
operations on Federal leases. The Federal Energy Regulatory Commission (FERC)
regulates the transportation and sale for resale of natural gas in interstate
commerce pursuant to the Natural Gas Act of 1938 (NGA) and the Natural Gas
Policy Act of 1978 (NGPA). In the past, the Federal government has regulated
the prices at which oil and gas could be sold. While sales by producers of
natural gas, and all sales of crude oil, condensate and natural gas liquids can
currently be made at uncontrolled market prices, Congress could reenact price
controls in the future. Deregulation of wellhead sales in the natural gas
industry began with the enactment of the NGPA in 1978. In 1989, Congress
enacted the Natural Gas Wellhead Decontrol Act (the Decontrol Act). The
Decontrol Act removed all NGA and NGPA price and nonprice controls affecting
wellhead sales of natural gas effective January 1, 1993.
Commencing in April 1992, the FERC issued Order Nos. 636, 636-A, and 636-B
(Order No. 636), which require interstate pipelines to provide transportation
separate, or "unbundled", from the pipelines' sales of gas. Also, Order No. 636
requires pipelines to provide open-access transportation on a basis that is
equal for all gas supplies. Although Order No. 636 does not directly regulate
the Company's activities, the FERC has stated that it intends for Order No. 636
to foster increased competition within all phases of the natural gas industry.
It is unclear what impact, if any, increased competition within the natural gas
industry under Order No. 636 will have on the Company's activities. Although
Order No. 636, assuming it is upheld in its entirety, could provide the Company
with additional market access and more fairly applied transportation service
rates, Order No. 636 could also subject the Company to more restrictive
pipeline imbalance tolerances and greater penalties for violation of those
tolerances. Numerous parties have filed petitions for review of Order No. 636,
as well as orders in individual pipeline restructuring proceedings. Upon such
judicial review, these orders may be remanded or reversed in whole or in part.
With Order No. 636 subject to court review, it is difficult to predict with
precision its ultimate effects.
The FERC has announced its intention to re-examine certain of its
transportation-related policies, including the appropriate manner in which
interstate pipelines release transportation capacity under Order No. 636, and
the use of market-based rates for interstate gas transmission. While any
resulting FERC action would affect the Company only indirectly, the FERC's
current rules and policy statement may have the effect of enhancing competition
in natural gas markets by, among other things, encouraging non-producer natural
gas marketers to engage in certain purchase and sale transactions. The Company
cannot predict what action the FERC will take on these matters, nor can it
accurately predict whether the FERC's actions will achieve the goal of
increasing competition in
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markets in which the Company's natural gas is sold. However, the Company does
not believe that it will be treated materially differently than other natural
gas producers and marketers with which it competes.
Recently, the FERC issued a policy statement on how interstate natural gas
pipelines can recover the costs of new pipeline facilities. While this policy
statement affects the Company only indirectly, in its present form, the new
policy should enhance competition in natural gas markets and facilitate
construction of gas supply laterals. However, requests for rehearing of this
policy statement are currently pending. The Company cannot predict what action
the FERC will take on these requests.
Commencing in October 1993, the FERC issued a series of rules (Order Nos. 561
and 561-A) establishing an indexing system under which oil pipelines will be
able to change their transportation rates, subject to prescribed ceiling
levels. The indexing system, which allows or may require pipelines to make
rate changes to track changes in the Producer Price Index for Finished Goods,
minus one percent, became effective January 1, 1995. The FERC's decision in
this matter is currently the subject of various petitions for judicial review.
The Company is not able at this time to predict the effects of Order Nos. 561
and 561-A, if any, on the transportation costs associated with oil production
from the Company's oil producing operations.
The Outer Continental Shelf Lands Act (OCSLA) requires that all pipelines
operating on or across the Outer Continental Shelf (the OCS) provide
open-access, non-discriminatory service. Although the FERC has opted not to
impose the regulations of Order No. 509, in which the FERC implemented the
OCSLA, on gatherers and other non-jurisdictional entities, the FERC has
retained the authority to exercise jurisdiction over those entities if
necessary to permit non-discriminatory access to service or the OCS.
Certain operations the Company conducts are on federal oil and gas leases,
which the Minerals Management Service (MMS) administers. The MMS issues such
leases through competitive bidding. These leases contain relatively
standardized terms and require compliance with detailed MMS regulations and
orders pursuant to the OCSLA (which are subject to change by the MMS). For
offshore operations, lessees must obtain MMS approval for exploration plans and
development and production plans prior to the commencement of such operations.
In addition to permits required from other agencies (such as the Coast Guard,
the Army Corps of Engineers and the Environmental Protection Agency), lessees
must obtain a permit from the MMS prior to the commencement of drilling. The
MMS has promulgated regulations requiring offshore production facilities
located on the OCS to meet stringent engineering and construction
specifications. The MMS proposed additional safety-related regulations
concerning the design and operating procedures for OCS production platforms and
pipelines. These proposed regulations were withdrawn pending further
discussions among interested federal agencies. The MMS also has regulations
restricting the flaring or venting of natural gas, and has recently proposed to
amend such regulations to prohibit the flaring of liquid hydrocarbons and oil
without prior authorization. Similarly, the MMS has promulgated other
regulations governing the plugging and abandonment of wells located offshore
and the removal of all production facilities. To cover the various obligations
of lessees on the OCS, the MMS generally requires that lessees post substantial
bonds or other acceptable assurances that such obligations will be met. The
cost of such bonds or other surety can be substantial and there is no assurance
that the Company can continue to obtain bonds or other surety in all cases.
In addition, the MMS is conducting an inquiry into certain contract agreements
from which producers on MMS leases have received settlement proceeds that are
royalty bearing and the extent to which producers have paid the appropriate
royalties on those proceeds. The Company believes that this inquiry will not
have a material impact on its financial condition, liquidity or results of
operations.
The MMS has recently issued a notice of proposed rulemaking in which it
proposes to amend its regulations governing the calculation of royalties and
the valuation of natural gas produced from federal leases. The principal
feature in the amendments, as proposed, would establish an alternative
market-index based method to calculate royalties on certain natural gas
production sold to affiliates or pursuant to non-arm's-length sales contracts.
The MMS has proposed this rulemaking to facilitate royalty valuation in light
of changes in the gas marketing environment. The Company cannot predict what
action the MMS will take on these matters, nor can it predict at this stage of
the rulemaking proceeding how the Company might be affected by amendments to
the regulations.
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Additional proposals and proceedings that might affect the oil and gas industry
are pending before the FERC and the courts. The Company cannot predict when or
whether any such proposals may become effective. In the past, the natural gas
industry has been heavily regulated. There is no assurance that the regulatory
approach currently pursued by the FERC will continue indefinitely.
Notwithstanding the foregoing, the Company does not anticipate that compliance
with existing federal, state and local laws, rules and regulations will have a
material or significantly adverse effect upon the capital expenditures,
earnings or competitive position of the Company or its subsidiaries. No
material portion of Forest's business is subject to renegotiation of profits or
termination of contracts or subcontracts at the election of the Federal
government.
OIL SPILL FINANCIAL RESPONSIBILITY REQUIREMENTS - UNITED STATES
In August 1993, the MMS published an advance notice of its intention to adopt a
rule under the Oil Pollution Act of 1990 (OPA 90) that would require owners and
operations of oil and gas facilities located on or adjacent to waters of the
United States to establish $150,000,000 in financial responsibility to cover
oil spill related liabilities. Compliance with the proposed rule could be
financially burdensome for many small oil and gas companies, and in June 1995,
the U.S. House of Representatives approved a bill that would amend OPA 90 to
reduce the level of financial responsibility to $35,000,000. The Clinton
Administration has expressed its support for the pending legislation, but the
U.S. Senate has not yet taken any action on the bill approved by the House of
Representatives. The Company cannot predict whether Congress will reduce the
level of financial responsibility required under OPA 90 nor can it predict the
final form of any financial responsibility rule that might be adopted, but any
such action has the potential to result in the imposition of substantial
additional annual costs on the Company or otherwise materially adversely affect
the Company. The impact of the rule should not be any more adverse to the
Company than it will be to other similarly situated or less capitalized owners
or operators in the Gulf of Mexico and other affected regions. The MMS has
indicated that it will not move forward with the adoption of the rule until the
United States Congress has had an opportunity to act on the pending amendments
to OPA 90.
REGULATION - CANADA
The oil and natural gas industry in Canada is subject to extensive controls and
regulations imposed by various levels of government. It is not expected that
any of these controls or regulations will affect the operations of the Company
in a manner materially different than they would affect other oil and gas
companies of similar size.
In Canada, producers of oil negotiate sales contracts directly with oil
purchasers, with the result that the market determines the price of oil. The
price depends in part on oil quality, prices of competing fuels, distance to
market and the value of refined products. Oil exports may be made pursuant to
export contracts with terms not exceeding one year in the case of light crude,
and not exceeding two years in the case of heavy crude, provided that an order
approving any such export has been obtained from the National Energy Board
(NEB). Any oil export to be made pursuant to a contract of longer duration
requires an exporter to obtain an export license from the NEB and the issue of
such a license requires the approval of the Canadian federal government.
In Canada, the price of natural gas sold in interprovincial and international
trade is determined by negotiation between buyers and sellers. Natural gas
exported from Canada is subject to regulation by the Government of Canada
through the NEB. Producers and exporters are free to negotiate prices and
other terms with purchasers, provided that the export contracts must continue
to meet certain criteria prescribed by the NEB. As is the case with oil,
natural gas exports for a term of less than two years must be made pursuant to
an NEB order, or, in the case of exports for a longer duration, pursuant to an
NEB license and Canadian federal government approval.
The provincial governments of Alberta, British Columbia and Saskatchewan also
regulate the volume of natural gas which may be removed from those provinces
for consumption elsewhere based on such factors as reserve availability,
transportation arrangements and market considerations.
On January 1, 1994 the North American Free Trade Agreement (NAFTA) among the
governments of Canada, the United States and Mexico became effective. NAFTA
carries forward most of the material energy terms contained in the Canada-U.S.
Free Trade Agreement. In the context of energy resources, Canada continues to
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remain free to determine whether exports to the United States or Mexico will be
allowed provided that any export restrictions do not: (i) reduce the
proportion of energy resource exported relative to domestic use, (ii) impose an
export price higher than the domestic price, and (iii) disrupt normal channels
of supply. All three countries are prohibited from imposing minimum export or
import price requirements. NAFTA contemplates clearer disciplines on
regulators to ensure fair implementation of any regulatory changes and to
minimize disruption of contractual arrangements, which is important for
Canadian natural gas exports.
In addition to federal regulation, each province has legislation and
regulations which govern land tenure, royalties, production rates,
environmental protection and other matters. The royalty regime is a
significant factor in the profitability of oil and natural gas production.
Royalties payable on production from lands other than Crown lands are
determined by negotiations between the mineral owner and the lessee. Crown
royalties are determined by government regulation and are generally calculated
as a percentage of the value of the gross production, and the rate of royalties
payable generally depends in part on prescribed reference prices, well
productivity, geographical location, field discovery date and the type or
quality of the petroleum product produced.
From time to time the governments of Canada, Alberta, British Columbia and
Saskatchewan have established incentive programs which have included royalty
rate deductions, royalty holidays and tax credits for the purpose of
encouraging oil and natural gas exploration or enhanced recovery projects.
In Alberta, a producer of oil or natural gas is entitled to a credit against
the royalties payable to the Crown by virtue of the ARTC (Alberta royalty tax
credit) program. The ARTC program is based on a price sensitive formula, and
the ARTC rate varies between 75%, at prices for oil below $100 per cubic meter,
and 25%, at prices above $210 per cubic meter. The ARTC rate is applied to a
maximum of $2,000,000 of Alberta Crown royalties payable for each producer or
associated group of producers. Crown royalties on production from producing
properties acquired from corporations claiming maximum entitlement to ARTC will
generally not be eligible for ARTC. The rate is established quarterly based on
the average "par price", as determined by the Alberta Department of Energy for
the previous quarterly period. Canadian Forest is not eligible for any ARTC
credits on its existing properties.
Oil and natural gas royalty holidays and reductions for specific wells reduce
the amount of Crown royalties paid by the Company to the provincial
governments. The ARTC program provides a rebate on Crown royalties paid in
respect of eligible producing properties.
OPERATING HAZARDS AND ENVIRONMENTAL MATTERS
The oil and gas business involves a variety of operating risks, including the
risk of fire, explosions, blow-outs, pipe failure, casing collapse, abnormally
pressured formations and environmental hazards such as oil spills, gas leaks,
ruptures and discharges of toxic gases, the occurrence of any of which could
result in substantial losses to the Company due to injury or loss of life,
severe damage to or destruction of property, natural resources and equipment,
pollution or other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In addition, the
Company currently operates offshore and is subject to the additional hazards of
marine operations, such as capsizing, collision and adverse weather and sea
conditions. Such hazards may hinder or delay drilling, development and on-line
production operations.
Extensive federal, state, provincial and local laws govern oil and natural gas
operations regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment. Numerous governmental
departments issue rules and regulations to implement and enforce such laws
which are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. Some laws, rules and regulations relating to
protection of the environment may, in certain circumstances, impose "strict
liability" for environmental contamination, rendering a person liable for
environmental damages and cleanup costs without regard to negligence or fault
on the part of such person. Other laws, rules and regulations may restrict the
rate of oil and natural gas production below the rate that would otherwise
exist. The regulatory burden on the oil and natural gas industry increases its
cost of doing business and consequently affects its profitability. These laws,
rules and regulations affect the operations of the Company. Compliance with
environmental requirements generally could have a material adverse effect upon
the capital expenditures, earnings or competitive position of Forest and
7
<PAGE>
its subsidiaries. The Company believes that it is in substantial compliance
with current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse impact
on the Company. Nevertheless, changes in environmental law have the potential
to adversely affect the Company's operations. For instance, at least two
separate courts have recently ruled that certain wastes associated with the
production of crude oil may be classified as hazardous substances under the
Comprehensive Environmental Response, Compensation, and Liability Act (commonly
called Superfund) and thus the Company could become subject to the burdensome
cleanup and liability standards established under the federal Superfund program
if significant concentrations of such wastes were determined to be present at
the Company's properties or to have been produced as a result of the Company's
operations. Alternately, pending amendments to Superfund presently under
consideration by the U.S. Congress could relax many of the burdensome cleanup
and liability standards established under the Statute.
In Canada, the oil and natural gas industry is currently subject to
environmental regulation pursuant to provincial and federal legislation.
Environmental legislation provides for restrictions and prohibitions on
releases or emissions of various substances produced or utilized in association
with certain oil and gas industry operations. In addition, legislation
requires that well and facility sites be abandoned and reclaimed to the
satisfaction of provincial authorities. A breach of such legislation may
result in the imposition of fines and penalties.
Although the Company maintains insurance against some, but not all, of the
risks described above, including insuring the costs of clean-up operations,
public liability and physical damage, there is no assurance that such insurance
will be adequate to cover all such costs or that such insurance will continue
to be available in the future or that such insurance will be available at
premium levels that justify its purchase. The occurrence of a significant
event not fully insured or indemnified against could have a material adverse
effect on the Company's financial condition and operations.
The Company has established guidelines to be followed to comply with
environmental laws, rules and regulations. The Company has designated a
compliance officer whose responsibility is to monitor regulatory requirements
and their impacts on the Company and to implement appropriate compliance
procedures. The Company also employs an environmental manager whose
responsibilities include causing Forest's operations to be carried out in
accordance with applicable environmental guidelines and implementing adequate
safety precautions. Although the Company maintains pollution insurance against
the costs of clean-up operations, public liability and physical damage, there
is no assurance that such insurance will be adequate to cover all such costs or
that such insurance will continue to be available in the future.
OTHER FOREIGN OPERATIONS
In 1992, the Company sold substantially all of its former Canadian operations
to CanEagle Resources Corporation (CanEagle). In June 1994, CanEagle sold a
significant portion of its oil and gas properties in Canada to a third party.
In conjunction with this transaction, the Company exchanged its investment in
CanEagle for shares of preferred stock of a newly formed entity, Archean
Energy, Ltd. (Archean). In connection with the Saxon transaction, the Company
transferred its Archean preferred stock to Saxon.
Forest considers, from time to time, certain oil and gas opportunities in other
foreign countries. Foreign oil and natural gas operations are subject to
certain risks, such as nationalization, confiscation, terrorism, renegotiation
of existing contracts and currency fluctuations. Forest monitors the
political, regulatory and economic developments in any foreign countries in
which it operates.
8
<PAGE>
ITEM 2. PROPERTIES
Forest's principal reserves and producing properties are oil and gas properties
located in the Gulf of Mexico, Texas, Oklahoma and western Canada.
RESERVES
Information regarding the Company's proved and proved developed oil and gas
reserves and the standardized measure of discounted future net cash flows and
changes therein is included in Note 16 of Notes to Consolidated Financial
Statements.
Since January 1, 1995, Forest has not filed any oil or natural gas reserve
estimates or included any such estimates in reports to any Federal or foreign
governmental authority or agency, other than the Securities and Exchange
Commission (SEC), the MMS and the Department of Energy (DOE). The reserve
estimate report filed with the MMS related to Forest's Gulf of Mexico reserves
and there were no differences between the reserve estimates included in the MMS
report, the SEC report, the DOE report and those included herein, except for
production and additions and deletions due to the difference in the "as of"
dates of such reserve estimates.
PRODUCTION
The following table shows net liquids and natural gas production for Forest and
its subsidiaries on a historical basis for the years ended December 31, 1995,
1994 and 1993 and on a pro forma basis including Saxon and Canadian Forest for
the year ended 1995:
<TABLE>
<CAPTION>
Net Natural Gas and Liquids Production (1)(2)
---------------------------------------------
Pro forma
1995 1995 (3) 1994 (4) 1993
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
United States:
Natural Gas (MMCF) 33,342 33,342 48,048 41,114
Liquids (MBBLS) 1,173 1,173 1,543 1,493
Canada:
Natural Gas (MMCF) 18,428 -- -- --
Liquids (MBBLS) 1,828 -- -- --
</TABLE>
(1) Includes amounts delivered pursuant to volumetric production payments. See
Note 6 of Notes to Consolidated Financial Statements.
(2) Volumes reported for natural gas include immaterial amounts of sulfur
production on the basis that one long ton of sulfur is equivalent to 15 MCF
of natural gas. Liquids volumes include both oil and condensate and
natural gas liquids.
(3) Does not include any production relating to the acquisition of Saxon on
December 20, 1995 as the amounts involved are not significant.
(4) Effective January 1, 1994 the Company changed its method of accounting for
oil and gas sales from the sales method to the entitlements method. See
Note 1 of Notes to Consolidated Financial Statements.
9
<PAGE>
AVERAGE SALES PRICES AND PRODUCTION COSTS PER UNIT OF PRODUCTION
The following table sets forth the average sales prices per MCF of natural gas
and per barrel of liquids and the average production cost per equivalent unit
of production in the United States on a historical basis for the years ended
December 31, 1995, 1994 and 1993 for Forest and its subsidiaries and on a pro
forma basis including Saxon and Canadian Forest for the year ended 1995:
<TABLE>
<CAPTION>
Canada United States
----------- --------------------------------
Pro forma
1995 1995 1994 1993
----------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Sales Prices:
Natural Gas
Production under long-term fixed
price contracts (MMCF) (1) (3) 9,414 16,656 19,065
Average contract sales price (per MCF) $ 1.75 1.78 1.65
Production sold on the spot market (MMCF) (3) 23,928 31,392 22,049
Spot sales price received (per MCF) $ 1.79 1.90 2.21
Effects of energy swaps (per MCF) (2) .17 .06 (.13)
------- ------- --------
Average spot sales price (per MCF) $ 1.96 1.96 2.08
Total production (MMCF) 18,428 33,342 48,048 41,114
Average sales price (per MCF) $ 1.16 1.90 1.90 1.88
Liquids:
Oil and condensate
Total production (MBBLS) 1,450 1,121 1,482 1,464
Sales price received (per BBL) $ 15.44 16.36 14.97 16.25
Effects of energy swaps (per BBL) (2) -- (.50) (.14) .58
------- ------- ------- --------
Average sales price (per BBL) $ 15.44 15.86 14.83 16.83
Natural Gas Liquids
Total production (MBBLS) 378 52 61 29
Average sales price (per BBL) $ 8.76 15.81 14.79 24.02
Total liquids
Total production (MBBLS) 1,828 1,173 1,543 1,493
Average sales price (per BBL) $ 14.05 15.86 14.83 16.97
Average production cost (per MCFE) (4) $ .51 .56 .39 .39
</TABLE>
- ---------------------
(1) Production under long-term fixed price contracts includes scheduled
deliveries under volumetric production payments, net of royalties. For
further information concerning volumes and prices recorded under volumetric
production payments, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 6 of Notes to
Consolidated Financial Statements.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged natural gas volumes were 10,146 MMCF,
12,184 MMCF and 8,057 MMCF for the years ended December 31, 1995, 1994 and
1993, respectively. Hedged oil and condensate volumes were 498,000 BBLS,
370,000 BBLS and 720,000 BBLS for the years ended December 31, 1995, 1994
and 1993, respectively.
(3) Pro forma data concerning volumes sold under long-term fixed price contracts
versus volumes sold on the spot market is not available.
(4) Production costs were converted to common units of measure using a
conversion ratio of one barrel of oil to six MCF of natural gas and one
long ton of sulfur to 15 MCF of natural gas. Such production costs exclude
all depreciation, depletion and provision for impairment associated with
property and equipment.
10
<PAGE>
PRODUCTIVE WELLS
The following summarizes total gross and net productive wells of the Company
and its subsidiaries on a historical basis, including the wells owned by Saxon,
at December 31, 1995 and on a pro forma basis including Canadian Forest for the
year ended December 31, 1995:
<TABLE>
<CAPTION>
Productive Wells (1)
-------------------------
United States Canada
------------- ------
<S> <C> <C>
HISTORICAL
Gross (2)
Gas 290 99
Oil 170 510
----- -----
Totals (3) 460 609
----- -----
----- -----
Net (4)
Gas 93.3 16.4
Oil 116.3 95.8
----- -----
Totals 209.6 112.2
----- -----
----- -----
PRO FORMA
Gross (2)
Gas 290 383
Oil 170 1,036
----- -----
Totals (3) 460 1,419
----- -----
----- -----
Net (4)
Gas 93.3 109.6
Oil 116.3 208.4
----- -----
Totals 209.6 318.0
----- -----
----- -----
</TABLE>
(1) Productive wells are producing wells and wells capable of production,
including wells that are shut-in.
(2) A gross well is a well in which a working interest is owned. The number
of gross wells is the total number of wells in which a working interest
is owned.
(3) Includes 32 dual completions in the United States on a historical and pro
forma basis and 3 dual completions on a pro forma basis in Canada. Dual
completions are counted as one well. If one completion is an oil
completion, the well is classified as an oil well.
(4) A net well is deemed to exist when the sum of fractional ownership
working interests in gross wells equals one. The number of net wells is
the sum of the fractional working interests owned in gross wells
expressed as whole numbers and fractions thereof.
DEVELOPED AND UNDEVELOPED ACREAGE
Forest and its subsidiaries held acreage on a historical basis, including the
acreage held by Saxon, as set forth below at December 31, 1995 and 1994 and on
a pro forma basis including Canadian Forest at December 31, 1995. A majority
of the developed acreage is subject to mortgage liens securing either the bank
indebtedness or nonrecourse secured debt of the Company and its subsidiaries.
A portion of the developed acreage is also subject to production payments. See
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations and Notes 5 and 6 of Notes to Consolidated Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
Developed Acreage (1) Undeveloped Acreage (2)
--------------------- -----------------------
Gross (3) Net (4) Gross (3) Net (4)
--------- ------- --------- -------
<S> <C> <C> <C> <C>
United States:
Louisiana Offshore 138,636 62,265 63,245 28,306
Oklahoma 63,015 21,661 8,142 1,456
Texas Onshore 122,117 47,452 14,473 9,844
Texas Offshore 39,622 29,483 11,520 8,640
Wyoming 8,477 4,484 54,204 24,367
Other 25,553 10,999 3,610 1,577
------- ------- --------- -------
397,420 176,344 155,194 74,190
Canada 99,060 35,271 17,160 8,816
------- ------- --------- -------
Total acreage at December 31, 1995 496,480 211,615 172,354 83,006
------- ------- --------- -------
------- ------- --------- -------
Total acreage at December 31, 1994 465,045 204,071 219,730 155,563
------- ------- --------- -------
------- ------- --------- -------
Pro forma acreage at December 31, 1995 802,521 313,308 1,008,475 316,989
------- ------- --------- -------
------- ------- --------- -------
</TABLE>
(1) Developed acres are those acres which are spaced or assigned to
productive wells.
(2) Undeveloped acres are considered to be those acres on which wells have
not been drilled or completed to a point that would permit the production
of commercial quantities of oil or natural gas, regardless of whether
such acreage contains proved reserves. It should not be confused with
undrilled acreage held by production under the terms of a lease.
(3) A gross acre is an acre in which a working interest is owned. The number
of gross acres is the total number of acres in which a working interest
is owned.
(4) A net acre is deemed to exist when the sum of the fractional ownership
working interests in gross acres equals one. The number of net acres is
the sum of the fractional working interests owned in gross acres
expressed as whole numbers and fractions thereof.
During 1995, the Company's gross and net developed acreage increased
approximately 7% and 4%, respectively, primarily as a result of the Saxon
acquisition, offset in part by the sale of developed acreage as well as lease
expirations. The Company's gross and net undeveloped acreage decreased
approximately 22% and 47%, respectively, primarily due to lease expirations,
offset partially by the acquisition of Saxon.
Approximately 26% of the Company's total net undeveloped acreage is under
leases that have terms expiring in 1996, if not held by production, and another
approximately 7% of net undeveloped acreage will expire in 1997 if not also
held by production.
12
<PAGE>
DRILLING ACTIVITY
Forest and its subsidiaries owned interests in net exploratory and net
development wells for the years ended December 31, 1995, 1994 and 1993 as set
forth below. This information does not include wells drilled under farmout
agreements, nor does it include any data with respect to wells drilled by Saxon
or Canadian Forest.
<TABLE>
<CAPTION>
United States
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Exploratory Wells: (1)
Dry (2) 1.3 2.0 1.2
Productive (3) .3 1.3 .3
--- --- ---
1.6 3.3 1.5
--- --- ---
--- --- ---
Net Development Wells: (1)
Dry (2) -- -- --
Productive (3) .6 2.1 3.0
--- --- ---
.6 2.1 3.0
--- --- ---
--- --- ---
</TABLE>
(1) A net well is deemed to exist when the sum of fractional ownership
working interests in gross wells equals one. The number of net wells is
the sum of the fractional working interests owned in gross wells
expressed as whole numbers and fractions thereof.
(2) A dry well (hole) is a well found to be incapable of producing either oil
or natural gas in sufficient quantities to justify completion as an oil
or natural gas well.
(3) Productive wells are producing wells and wells capable of production,
including wells that are shut-in.
FARMOUT AGREEMENTS
Under a farmout agreement, outside parties undertake exploration activities
using prospects owned by Forest. This enables the Company to participate in the
exploration prospects without incurring additional capital costs, although with
a substantially reduced ownership interest in each prospect.
In 1995, two development wells and 14 exploratory wells were drilled under
farmout agreements. The two development wells were productive. Six of the
exploratory wells were productive, of which three were subsequently sold; seven
were dry holes; and one is in the process of being drilled at year-end.
PRESENT ACTIVITIES
At December 31, 1995, Forest and its subsidiaries had two exploratory wells
that were in the process of being drilled. One of these two wells was
determined to be productive in January, 1996 and the other is currently being
evaluated.
DELIVERY COMMITMENTS
At December 31, 1995 Forest and its subsidiaries were obligated to deliver,
or to make cash settlement with respect to, approximately 8.0 BCF of natural
gas and 87,000 barrels of oil under the terms of volumetric production
payments. The delivery commitments cover approximately 14% and 4% of the
estimated net proved reserves of natural gas and oil, respectively,
attributable to the subject properties. The production payments are
nonrecourse to other properties owned by the Company. The Company is further
obligated to deliver approximately .8 BCF of natural gas under existing
long-term contracts. Canadian Forest markets approximately 100 MMCF/day
under medium- and long-term gas sales contracts to a number of Canadian and
United States resale markets. Canadian Forest, on behalf of ProMark, has
currently contracted with 23 Canadian producers to purchase a quantity of gas
which, when aggregated with gas produced by Canadian Forest, constitutes the
Netback Pool which is sufficient to serve the requirements of all the resale
markets. For further information concerning the Company's volumetric
production payment agreements, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and Notes 6 and 16
of Notes to Consolidated Financial Statements.
13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Royalty owners have filed two separate class action lawsuits against the
Company in the State District Court of Caddo County, Oklahoma. In each case
the plaintiff has alleged unjust enrichment, breach of fiduciary duty,
constructive fraud and breach of contract. The claims in both suits are based
on the allegation that the Company underpaid royalties on the consideration
received pursuant to settlement agreements with ONEOK, Inc. in 1990 and 1992.
In MODRALL V. FOREST OIL CORPORATION, Case No. CJ-95-67, filed on March 24,
1995, the Court, on September 13, 1995, certified a class comprised of the
royalty and overriding royalty owners in the three wells involved in the 1992
ONEOK, Inc. settlement. No class has been certified as yet in MERCO OF
OKLAHOMA, INC. V. FOREST OIL CORPORATION, Case No. CJ-95-230, which suit was
filed on September 27, 1995. This suit involves the 1990 ONEOK, Inc.
settlement. The plaintiffs in both suits seek actual damages in excess of
$10,000, punitive damages in excess of $10,000, an accounting, interest and
costs. There has been no specific determination of the amount in controversy
in either case.
The plaintiffs allege in both cases that they are entitled to share in all
value received by the Company under the aforesaid settlements, including
proceeds not attributable to actual gas production. The Company believes that
it was not required to pay a royalty on such proceeds, and therefore intends to
vigorously resist these claims.
The Company entered into a Settlement Agreement and Release with El Paso
Natural Gas Company ("El Paso"), effective May 15, 1987, which was later
modified by a Partial Termination of Settlement Agreement and Release and Gas
Purchase Agreement, effective January 1, 1989. These agreements settled the
parties' disputes concerning take-or-pay deficiencies under eight gas purchase
contracts covering 16 wells located in Washita County, Oklahoma. The Company
received a demand letter dated November 22, 1995, from the same attorney who
represents Modrall and Merco, on behalf of a royalty owner in one of the wells
covered by the El Paso settlements. A class action petition was filed January
19, 1996 in WRIGHT v. FOREST OIL CORPORATION, et al., Case No. CJ-96-6 in the
State District Court of Washita County, Oklahoma. Like the plaintiffs in the
MODRALL and MERCO cases, the plaintiff in this case contends that Forest
underpaid royalties on the consideration it received under the El Paso
settlement. He has asserted claims for breach of contract, unjust enrichment,
breach of fiduciary duty, constructive fraud and bad faith breach of contract,
and seeks an accounting and an unspecified amount of actual and punitive
damages, interest and costs.
The Company, in the ordinary course of business, is a party to various other
legal actions. In the opinion of management, none of these actions, or those
discussed above, either individually or in the aggregate, will have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF FOREST
The following information with respect to the executive officers of Forest is
furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>
Years with
Name (A) Age Forest Office (B)
-------- --- ---------- ----------
<S> <C> <C> <C>
William L. Dorn* 47 24 Chairman of the Board and Chairman of the Executive Committee since
July 1991 and Chief Executive Officer from February 1990 until
December 1995. Chairman of the Nominating Committee since July
1995. Member of the Executive Committee since August 1988.
President from February 1990 until November 1993.
Robert S. Boswell* 46 10 President since November 1993 and Chief Executive Office since
December 1995. Vice President from May 1991 until November 1993
and Chief Financial Officer since May 1991. Financial Vice
President from September 1989 until May 1991. Member of the
Executive Committee since July 1991. Director of Franklin Supply
Company Ltd. and Saxon Petroleum Inc.
David H. Keyte 39 8 Vice President and Chief Financial Officer since December 1995.
Vice President and Chief Accounting Officer from December 1993
until December 1995. Prior thereto Corporate Controller since
January 1989. Chairman of the Company's Employee Benefits
Committee. Director of Saxon Petroleum, Inc.
Bulent A. Berilgen 47 11 Vice President of Operations since December 1993. Prior thereto
Vice President - Engineering and Development since January 1992.
Prior thereto Regional Reservoir Engineer. Director of Saxon
Petroleum Inc.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Years with
Name (A) Age Forest Office (B)
-------- --- ---------- ----------
<S> <C> <C> <C>
Forest D. Dorn 41 18 Vice President since February 1991 and General Business Manager since
December 1993. Prior thereto General Manager - Operations since
January 1992. Prior thereto Assistant Division Manager of the
Southern Division.
V. Bruce Thompson 48 1 Vice President and General Counsel since August 1994. Vice
President - Legal of Mid-America Dairymen, Inc. from November
1993 to August 1994. Chief of Staff for Oklahoma Congressman
James M. Imhofe from February 1990 to November 1993.
Kenton M. Scroggs 43 12 Vice President since December 1993 and Treasurer since May 1988.
Member of the Company's Employee Benefits Committee.
Daniel L. McNamara 50 24 Secretary and Corporate Counsel since January 1991. Member of the
Company's Employee Benefits Committee.
Joan C. Sonnen 42 6 Controller since December 1993. Prior thereto Director of Financial
Accounting and Reporting since April 1991 and Manager of Financial
Systems and Reporting since July 1989.
</TABLE>
- -------------------------
*Also a Director
(A) William L. Dorn and Forest D. Dorn are brothers.
(B) The term of office of each officer is one year from the date of his or
her election immediately following the last annual meeting of
shareholders and until the officer's respective successor has been
elected and qualified or until his or her earlier death, resignation or
removal from office whichever occurs first. Each of the named persons
has held the office indicated since the last annual meeting of
shareholders, except as otherwise indicated.
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
Forest Oil Corporation has one class of common equity securities outstanding,
its Common Stock, par value $.10 per share (Common Stock). On January 5, 1996,
the Company's shareholders approved a reverse stock split of the Common Stock.
The reverse stock split resulted in the reclassification of each five shares of
Common Stock outstanding into one share.
On February 29, 1996, 24,527,575 shares of Common Stock were held by 1,854
holders of record.
Forest's Common Stock is traded on the Nasdaq National Market. The high and
low sales prices of the Common Stock for each quarterly period of the years
presented as reported by the Nasdaq National Market are listed in the chart
below. All of the following quotations have been adjusted to reflect the 5 to
1 reverse stock split of the Common Stock that occurred on January 8, 1996.
There were no dividends on Common Stock in 1994, 1995 or in the first quarter
of 1996.
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
1994
----
First Quarter $23-3/4 $17-3/16
Second Quarter 22-13/16 17-3/16
Third Quarter 22-3/16 16-9/16
Fourth Quarter 17-3/16 10-5/8
1995
----
First Quarter $11-7/8 $ 7-1/2
Second Quarter 11-7/8 7-1/2
Third Quarter 14-11/16 8-1/8
Fourth Quarter 16-1/4 11-1/4
1996
----
First Quarter (through February 29) $16 $11-1/4
</TABLE>
On February 29, 1996, the last reported sales price of the Common Stock as
quoted on the Nasdaq National Market was $11.25 per share.
PUBLIC WARRANTS
The Company has outstanding 1,244,715 warrants to purchase shares of its Common
Stock (the Public Warrants). Each Public Warrant entitles the holder to
purchase one-fifth share of Common Stock at a price of $3.00, is non-callable
and expires on October 1, 1996. On February 29, 1996 the Public Warrants were
held by 75 holders of record.
17
<PAGE>
The Public Warrants are traded on the Nasdaq National System. The high and low
sales prices of the Public Warrants for each quarterly period of the years
presented as reported by the Nasdaq National Market are listed in the chart
below.
<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C>
1994
----
First Quarter $2-3/4 $1-7/8
Second Quarter 2-1/2 1-3/4
Third Quarter 2-1/8 1-5/8
Fourth Quarter 1-5/8 1/2
1995
----
First Quarter $ 5/8 $ 3/8
Second Quarter 1/2 5/16
Third Quarter 27/32 5/16
Fourth Quarter 15/16 9/16
1996
----
First Quarter (through February 29) $15/16 $ 1/2
</TABLE>
On February 29, 1996, the last reported sales price of the Public Warrants as
quoted on the Nasdaq National Market was $.50 per Warrant.
$.75 CONVERTIBLE PREFERRED STOCK
As of February 29, 1996, 2,877,673 shares of the Company's $.75 Convertible
Preferred Stock were held by 74 holders of record.
The $.75 Convertible Preferred Stock is traded on the Nasdaq National Market.
The high and low sales prices of the $.75 Convertible Preferred Stock for each
quarterly period of the years presented as reported by the Nasdaq National
Market are listed in the chart below.
<TABLE>
<CAPTION>
Cash Stock
Dividends Dividends
High Low Paid (1) Paid (1)
-------- ------- ----------- ---------------
<S> <C> <C> <C> <C>
1994
- ----
First Quarter $17 $13-1/2 $ .1875 --
Second Quarter 16-1/2 13-1/4 .1875 --
Third Quarter 16 12-1/2 .1875 --
Fourth Quarter 13 8-3/4 .1875 --
1995
- ----
First Quarter $ 9-1/8 $ 6-1/2 $ .1875 --
Second Quarter 8-3/4 7 -- .018939 shares
Third Quarter 11-9/32 7-1/4 -- .022409 shares
Fourth Quarter 11-1/2 8-7/8 -- .014980 shares
1996
- ----
First Quarter (through
February 29) $12 $ 9-1/4 -- .013605 shares
</TABLE>
(1) In 1994 the dividends on the $.75 Convertible Preferred Stock were paid
in cash. On February 1, 1995, a cash dividend of $.1875 was paid to
holders of record on January 10, 1995. Thereafter, each dividend was
paid in shares of Common Stock. Amounts shown as dividends paid for such
periods represent the fractional number of shares of Common Stock payable
on each share of outstanding $.75 Convertible Preferred Stock. On
February 22, 1996, the Board of Directors declared a dividend payable in
shares of Common Stock on May 1, 1996 to holders of record of the $.75
Convertible Preferred Stock on April 10, 1996. The number of shares of
Common Stock to be issued per share of the $.75 Convertible Preferred
Stock will be determined in accordance with the formula for determining
dividends payable.
18
<PAGE>
On February 29, 1996, the last reported sales price of the $.75 Convertible
Preferred Stock as quoted on the Nasdaq National Market was $9.75 per share.
DIVIDEND RESTRICTIONS
Subject to the prior right of the holders of Forest's $.75 Convertible
Preferred Stock and the Second Series Preferred Stock, the only restrictions on
its present or future ability to pay dividends are (i) the provisions of the
New York Business Corporation Law (NYBCL), (ii) certain restrictive provisions
in the Indenture executed in connection with Forest's 11 1/4% Senior
Subordinated Notes due September 1, 2003, and (iii) the Company's Amended and
Restated Credit Agreement dated August 31, 1995 with The Chase Manhattan Bank
(National Association), as agent, under which the Company is restricted in
amounts it may pay as dividends (other than dividends payable in common stock).
Under the dividend restrictions in the Credit Agreement, as of March 15, 1996
the Company was not prohibited from paying cash dividends on its Common Stock
or its $.75 Convertible Preferred Stock. There is no assurance that Forest
will pay any dividends. For further information on Forest's ability to pay
dividends on its Common Stock and $.75 Convertible Preferred Stock, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Notes 5, 8, and 9 of Notes to Consolidated Financial
Statements.
For further information regarding the Company's equity securities and related
stockholder matters, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements and Notes thereto.
19
<PAGE>
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected data regarding the Company on a
historical basis as of and for each of the years in the five-year period
ended December 31, 1995 and on a pro forma basis for the year ended
December 31, 1995 giving effect to the Saxon and Canadian Forest
acquisitions. This data should be read in conjunction with Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
Years Ended December 31,
Pro forma -----------------------------------------------------
1995 (1) 1995 1994 (2) 1993 1992 (3) 1991
--------- ------- ---------- ------- ---------- -------
(In Thousands Except per Share Amounts and Volumes)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA
Revenue $ 269,781 82,456 115,947 105,148 113,186 69,897
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Earnings (loss) before income taxes,
cumulative effects of changes in
accounting principles and
extraordinary items $ (7,768) (18,003) (67,844) (10,705) 11,286 (52,262)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Earnings (loss) before cumulative
effects of changes in accounting
principles and extraordinary items $ (14,117) (17,996) (67,853) (9,355) 7,298 (34,850)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Earnings (loss) before extraordinary items $ (14,117) (17,996) (81,843) (10,478) 7,298 (34,850)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Net earnings (loss) $ (14,117) (17,996) (81,843) (21,213) 7,298 (25,348)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Weighted average number of common shares
outstanding 22,301 7,360 5,619 4,399 2,755 2,499
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Net earnings (loss) attributable to
common stock $ (16,277) (20,156) (84,004) (23,463) 4,950 (30,557)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Primary earnings (loss) per share: (4)
Earnings (loss) before cumulative effects
of changes in accounting principles and
extraordinary items $ (.73) (2.74) (12.46) (2.64) 1.80 (16.03)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Earnings (loss) before extraordinary items $ (.73) (2.74) (14.95) (2.90) 1.80 (16.03)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Net earnings (loss) attributable to common stock $ (.73) (2.74) (14.95) (5.34) 1.80 (12.23)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
Total assets $ 517,990 321,043 324,832 426,755 378,532 296,189
Long-term obligations $ 237,650 236,155 271,128 288,588 250,672 203,136
Shareholders' equity $ 180,241 44,297 6,086 88,156 59,881 54,840
OPERATING DATA
Annual production (5):
Gas (MMCF) 51,770 33,342 48,048 41,114 29,174 23,877
Liquids (MBBLS) 3,001 1,173 1,543 1,493 1,450 847
Average price received (5):
Gas (per MCF) $ 1.64 1.90 1.90 1.88 1.70 1.84
Liquids (per Barrel) $ 14.76 15.86 14.83 16.97 18.14 25.31
Capital expenditures $ 77,368 52,744 42,544 170,821 106,627 35,664
Proved Reserves (5) (6):
Gas (MMCF) 330,166 238,128 246,996 273,382 194,655 193,471
Liquids (MBBLS) 20,788 10,541 7,532 8,198 7,560 5,315
Standardized measure of discounted future net
cash flows relating to proved oil and gas
reserves (6) $ 333,676 256,917 207,549 262,176 190,971 166,454
Total discounted future net cash flows
relating to proved oil and gas reserves,
including amounts attributable to
volumetric production payments (6) $ 342,152 265,393 230,149 299,053 227,009 188,069
</TABLE>
(1) The pro forma financial and operating data as of December 31, 1995 gives
effect to the public offering of Common Stock and the Canadian Forest
acquisition as if they occurred on that date and the pro forma financial
and operating data for the year ended December 31, 1995 assumes the
acquisitions of Saxon and Canadian Forest occurred as of January 1, 1995.
See Notes 2 and 9 of Notes to Consolidated Financial Statements.
(2) Effective January 1, 1994 the Company changed its method of accounting for
oil and gas sales from the sales method to the entitlements method. See
Note 1 of Notes to Consolidated Financial Statements.
(3) Financial data for the year ended December 31, 1992 include the effects
of a gas contract settlement which increased total revenue by $37,541,000
and net earnings by $24,043,000 or $8.73 per share. The average price
received for natural gas for the year ended December 31, 1992 excludes the
effects of the settlement.
(4) Fully diluted earnings (loss) per share was the same as primary earnings
(loss) per share in all years except 1992. In 1992, fully diluted earnings
per share was $1.45.
(5) Includes amounts attributable to required deliveries under volumetric
production payments. See Notes 6 and 16 of Notes to Consolidated
Financial Statements.
(6) The 1995 and pro forma 1995 amounts include 100% of the reserves owned by
Saxon, a consolidated subsidiary in which the Company holds a 56% economic
interest. See Note 2 of Notes to Consolidated Financial Statements.
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
NET EARNINGS (LOSS). The net loss for 1995 was $17,996,000 compared to a net
loss of $81,843,000 in 1994. The 1995 loss was primarily due to decreased oil
and natural gas volumes and lower natural gas prices, offset by $4,263,000 of
income associated with the resolution of a bankruptcy claim. The net loss for
1994 was $81,843,000 compared to a net loss of $21,213,000 in 1993. The 1994
loss includes a $58,000,000 writedown of the book value of the Company's oil
and gas properties due to a ceiling test limitation and a charge of $13,990,000
relating to the change in the method of accounting for oil and gas sales from
the sales method to the entitlements method. See "Changes in Accounting".
REVENUE. Total revenue decreased 29% to $82,456,000 in 1995 from $115,947,000
in 1994, and increased 10% in 1994 from $105,148,000 in 1993.
Oil and gas sales decreased to $82,275,000 from $114,541,000, or by
approximately 28% in 1995 compared to 1994. Oil and gas sales in 1995
includes $4,263,000 of income associated with the resolution of a bankruptcy
claim. In 1995, natural gas and oil production volumes were down 31% and
24%, respectively, compared to 1994. These decreases result primarily from
limited capital expenditures in 1994 and 1995 that did not allow the Company
to replace existing production through acquisitions and drilling. The
Company expects this trend to reverse in 1996 as a result of the Saxon and
Canadian Forest acquisitions coupled with planned increases in its domestic
capital investment program. The average sales price for natural gas in 1995
decreased 7% compared to 1994, exclusive of the effects of the income
associated with the resolution of the bankruptcy claim, which increased the
average sales price for natural gas by $.13 per Mcf. The average sales price
for oil in 1995 increased 7% compared to 1994.
Oil and gas sales increased to $114,541,000 from $102,883,000, or by
approximately 11%, in 1994 compared to 1993 due primarily to increased natural
gas production from properties acquired throughout 1993 and the effects of the
change in method of accounting for oil and gas sales, partially offset by
normal production declines. The change in method of accounting increased
earnings from operations (oil and gas sales less oil and gas production
expenses) by $3,584,000 in 1994. In 1994, natural gas production volumes
increased 17% compared to 1993 while oil production volumes were 3% higher.
The increase in revenue attributable to increased production was partially
offset by a 13% decrease in the average sales price for oil. The average sales
price for natural gas in 1994 did not differ significantly from the 1993 price.
21
<PAGE>
The production volumes and average sales prices for the years ended December
31, 1995, 1994 and 1993 for Forest and its subsidiaries were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
NATURAL GAS
Production under long-term fixed price
contracts (MMCF) (1) 9,414 16,656 19,065
Average contract sales price (per MCF) $ 1.75 1.78 1.65
Production sold on the spot market (MMCF) 23,928 31,392 22,049
Spot sales price received (per MCF) $ 1.79 1.90 2.21
Effects of energy swaps (per MCF) (2) .17 .06 (.13)
------- ------ ------
Average spot sales price (per MCF) $ 1.96 1.96 2.08
Total production (MMCF) 33,342 48,048 41,114
Average sales price (per MCF) $ 1.90 1.90 1.88
LIQUIDS
Oil and condensate:
Total production (MBBLS) 1,121 1,482 1,464
Sales price received (per BBL) $ 16.36 14.97 16.25
Effects of energy swaps (per BBL) (2) (.50) (.14) .58
------- ------ ------
Average sales price (per BBL) $ 15.86 14.83 16.83
Natural gas liquids:
Total production (MBBLS) 52 61 29
Average sales price (per BBL) $ 15.81 14.79 24.02
Total liquids production (MBBLS) 1,173 1,543 1,493
Average sales price (per BBL) $ 15.86 14.83 16.97
</TABLE>
- -----------------
(1) Production under long-term fixed price contracts includes scheduled
deliveries under volumetric production payments, net of royalties. For
further information concerning volumes and prices recorded under volumetric
production payments, see Notes 6 and 16 of Notes to Consolidated Financial
Statements.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged volumes were 10,146 MMCF, 12,184 MMCF and
8,057 MMCF for the years ended December 31, 1995, 1994 and 1993,
respectively. Hedged oil and condensate volumes were 498,000 BBLS,
370,000 BBLS and 720,000 BBLS for the years ended December 31, 1995,
1994 and 1993.
Natural gas delivered pursuant to volumetric production payment agreements and
other long-term fixed price contracts represented approximately 28% of total
production in 1995 versus 35% in 1994 and 46% in 1993.
Miscellaneous net revenue was $181,000 in 1995. Miscellaneous net revenue of
$1,406,000 in 1994 included income from the sale of miscellaneous pipeline
systems and equipment and the reversal of an accounts receivable reserve,
partially offset by a reserve for settlement of a royalty dispute and a
payment of deferred maintenance costs of a real estate complex formerly used
for general business purposes. Miscellaneous net revenue of $2,265,000 in
1993 included $1,380,000 of interest income on short-term investments and an
adjustment to reduce accrued severance taxes based on discussions with the
applicable state taxing authorities.
OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense increased
slightly to $22,463,000 in 1995 from $22,384,000 in 1994. On an MCFE basis,
production expense increased to $.56 per MCFE in 1995 from $.39 per MCFE in
1994. The increased cost per MCFE is directly attributable to fixed components
of oil and gas production expense being allocated over a smaller production
base. The Company expects production expense to
22
<PAGE>
decrease in 1996, on a per unit basis, as a result of the Saxon and Canadian
Forest acquisitions and increased levels of capital investment. Oil and gas
production expense increased 15% to $22,384,000 in 1994 compared to $19,540,000
in 1993 due primarily to increased natural gas production as a result of
property acquisitions throughout 1993, partially offset by a decrease in
workover expenses and a general decrease in expenses due to the sale of
properties. In 1994 and 1993, production expense was approximately $.39 on an
MCFE basis.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased 19% to $9,081,000 in 1995 compared to $11,166,000 in 1994 due
primarily to a reduction in the size of the Company's workforce on March 1,
1995. General and administrative expense decreased 7% to $11,166,000 in 1994
compared to $12,003,000 in 1993. Decreases in salaries, wages and burden from
the termination of executives and middle level managers and increases in
production operation credits were partially offset by increases in insurance
and office and storage rental expenses. The capitalization rate remained
relatively constant from 1993 to 1995.
Total overhead costs, including amounts related to exploration and development
activities, were $15,857,000 in 1995, $18,719,000 in 1994 and $19,561,000 in
1993. Total overhead costs were approximately 15% lower in 1995 than in 1994.
The Company's salaried workforce in the United States was 115 at December 31,
1995 compared to 143 at December 31, 1994. The decreases in total overhead
costs and personnel were due primarily to a reduction in the size of the
Company's workforce effective March 1, 1995. Excluding the severance and
employee relocation costs in 1993, which are described below, total overhead
costs were approximately 8% higher in 1994 than in 1993. This increase is
primarily due to an increase in storage rentals and higher insurance expense
attributable to a larger asset base, partially offset by a decrease in
salaries, wages and burden from the termination of executives and middle level
managers. Severance and employee relocation costs of approximately $2,300,000
in 1993 resulted from the termination of 10 executives and middle level
managers and a loss incurred on the sale of an employee's former residence in
accordance with the Company's relocation policy. The following table
summarizes the total overhead costs incurred during the periods:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1995 1994 1993
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Overhead costs capitalized $ 6,776 7,553 7,558
General and administrative costs expensed 9,081 11,166 12,003
------- ------- -------
Total overhead costs $15,857 18,719 19,561(1)
------- ------- -------
------- ------- -------
</TABLE>
(1) Includes approximately $2,300,000 of severance and employee relocation
costs.
INTEREST EXPENSE. Interest expense of $25,323,000 in 1995 decreased $1,450,000
or 5% compared to 1994 due primarily to lower effective interest rates related
to the nonrecourse secured loan and the dollar denominated production payment.
Interest expense of $26,773,000 in 1994 increased $3,044,000 or 13% compared to
1993 due to higher loan balances as a result of borrowings for capital
expenditures.
DEPRECIATION AND DEPLETION EXPENSE. Depreciation and depletion expense
decreased 33% to $43,592,000 in 1995 from $65,468,000 in 1994 due to the
decrease in production, as well as a decrease in the depletion rate per unit of
production. The depletion rate decreased to $1.06 per MCFE for U.S. production
in 1995 compared to $1.13 for U.S. production in 1994 due to writedowns of the
Company's oil and gas properties taken in the third and fourth quarters of
1994. Depreciation and depletion expense increased 8% to $65,468,000 in 1994
from $60,581,000 in 1993 due to increased production in the 1994 period as a
result of property acquisitions. The depletion rate was $1.19 for U.S.
production in 1993. At December 31, 1995, the Company had undeveloped
properties with a cost basis of approximately $28,380,000 which were excluded
from depletion compared to $30,441,000 at December 31, 1994 and $41,216,000 at
December 31, 1993. The decrease from 1993 to 1994 and 1995 is attributable to
exploration and development work, as well as lease expirations and property
sales.
23
<PAGE>
IMPAIRMENT OF OIL AND GAS PROPERTIES. The Company was not required to record a
writedown of the carrying value of its oil and gas properties in 1995 or 1993.
The Company recorded a writedown of its oil and gas properties of $58,000,000
in 1994 due primarily to a decrease in spot market prices for natural gas.
Additional writedowns of the full cost pool may be required if prices decrease,
undeveloped property values decrease, estimated proved reserve volumes are
revised downward or costs incurred in exploration, development, or acquisition
activities exceed the discounted future net cash flows from the additional
reserves, if any.
The average Gulf Coast spot price received by the Company for natural gas
increased from $2.31 per MCF at December 31, 1995 to $2.83 per MCF at March 1,
1996. The West Texas Intermediate price for crude oil was $17.50 per barrel at
both December 31, 1995 and March 1, 1996.
ACCOUNTING POLICIES. The Company changed its method of accounting for oil
and gas sales from the sales method to the entitlements method effective
January 1, 1994. Under the sales method previously used by the Company, all
proceeds from production credited to the Company were recorded as revenue until
such time as the Company had produced its share of related reserves. Under the
entitlements method, revenue is recorded based upon the Company's share of
volumes sold, regardless of whether the Company has taken its proportionate
share of volumes produced. Under the entitlements method, the Company records
a receivable or payable to the extent it receives less or more than its
proportionate share of the related revenue. The Company believes that the
entitlements method is preferable because it allows for recognition of revenue
based on the Company's actual share of jointly owned production and provides a
better matching of revenue and related expenses. The cumulative effect of the
change for the periods through December 31, 1993, was a charge of $13,990,000.
The effect of this change on 1994 was an increase in earnings from operations
of $3,584,000 and an increase in production volumes of 1,555,000 MCF. There
were no related income tax effects in 1994.
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (SFAS No. 106) required the
Company to accrue expected costs of providing postretirement benefits to
employees and the employees' beneficiaries and covered dependents. The Company
adopted the provisions of SFAS No. 106 in the first quarter of 1993. The
estimated accumulated postretirement benefit obligation as of January 1, 1993
was approximately $4,822,000. This amount, reduced by applicable income tax
benefits, was charged to operations in the first quarter of 1993 as the
cumulative effect of a change in accounting principle. The annual net
postretirement benefit cost (included in total overhead costs) was
approximately $504,000 for 1995, $510,000 for 1994 and $483,000 for 1993.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (SFAS No. 109), required the Company to adopt the liability method of
accounting for income taxes. The Company adopted such method on a prospective
basis as of January 1, 1993. The cumulative effect of adopting SFAS No. 109 as
of January 1, 1993 resulted in a reduction of the net amount of deferred income
taxes recorded as of December 31, 1992 of approximately $2,060,000. This
amount was credited to operations in the first quarter of 1993 as the
cumulative effect of a change in accounting principle.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121).
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
Oil and gas properties accounted for under the full cost method of accounting
are excluded from the scope of SFAS No. 121, but will continue to be subject
to the ceiling test limitation. SFAS No. 121 requires that impairment losses
be recorded on other long-lived assets used in operations when indicators of
impairment are present and either the undiscounted future cash flows estimated
to be generated by those assets or the fair market value are less than the
assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will
adopt SFAS No. 121 effective January 1, 1996. The effect of such adoption is
not expected to be material.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation," (SFAS No. 123) was issued by the Financial Accounting
Standards Board in October 1995. SFAS No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation
plans as well as transactions in which an entity issues its equity instruments
to acquire goods or services from non-employees. The Company will include
the disclosures required by SFAS No. 123 in the notes to future financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, the Company took various steps and committed to various actions
to improve its liquidity and capital resources. In early 1995, in response
to market conditions, the Company reduced its general and administrative
expenditures through a workforce reduction effective March 1, 1995. As a
result, total overhead for 1995 decreased by approximately $2,862,000
compared to 1994 or by approximately 15%. In addition, the Company reduced
its budgeted capital expenditures during the first six months of 1995 to
those required to maintain its producing oil and gas properties as well as
certain essential development, drilling and other activities.
In July 1995, the Company received $45,000,000 of equity capital from Anschutz
and restructured the JEDI loan. As a result, the Company was able to resume
its capital expenditure program and to increase its levels of capital
spending during the last six months of 1995.
24
<PAGE>
The Company completed two acquisitions of Canadian oil and gas companies,
Saxon in December 1995 and Canadian Forest in January 1996. For a
description of these transactions, see Item 1. Business "Operating Strategy."
The Saxon acquisition was financed using Forest Common Stock, cash and the
transfer to Saxon of shares of preferred stock of Archean Energy Ltd. The
Canadian Forest acquisition was financed through a public offering of common
stock and borrowings under the Company's Credit Facility.
The Company has historically addressed its long-term liquidity needs through
the issuance of debt and equity securities, when market conditions permit,
and through the use of nonrecourse production-based financing. On January
31, 1996, the Company issued 13,200,000 shares of Common Stock for $11.00 per
share in a public offering. Of this amount, 1,060,000 shares were sold by
Saxon and 12,140,000 were sold by Forest. The net proceeds to Forest from the
issuance of the shares totalled approximately $125,600,000 after deducting
issuance costs and underwriting fees and were used, along with an additional
approximately $8,300,000 drawn from the Company's Credit Facility, to
complete the purchase of Canadian Forest.
The pro forma effect of the acquisitions and the public offering was to
increase total assets to $517,990,000 compared to $321,043,000 at December 31,
1995; to increase shareholders' equity to $180,241,000 compared to $44,297,000
at December 31, 1995; and to reduce the Company's debt-to-capitalization ratio
to 53% compared to 98% at December 31, 1994.
As a result of the above, Forest's financial position and liquidity have
improved considerably. The Company expects to be able to meet its 1996
capital expenditure financing requirements using cash flows generated by
operations and borrowings under existing lines of credit. However, there can
be no assurance that the Company will have access to sufficient capital to
meet its capital requirements. The planned levels of capital expenditures
could be reduced if the Company experiences lower than anticipated net cash
provided by operations or other liquidity needs or could be increased if the
Company experiences increased cash flow. The prices the Company receives for
its future oil and natural gas production will significantly impact future
operating cash flows. No prediction can be made as to the prices the Company
will receive for its future oil and gas production.
Many of the factors which may affect the Company's future operating
performance and long-term liquidity are beyond the Company's control,
including, but not limited to, oil and natural gas prices, governmental
actions and taxes, the availability and attractiveness of properties for
acquisition, the adequacy and attractiveness of financing and operational
results. The Company continues to examine alternative sources of long-term
capital, including bank borrowings or the issuance of debt instruments, the
sale of production payments or other nonrecourse financing, the sale of
common stock, preferred stock or other equity securities of the Company, the
issuance of net profits interests, sales of non-strategic properties,
prospects and technical information, or joint venture financing.
Availability of these sources of capital and, therefore, the Company's
ability to execute its operating strategy will depend upon a number of
factors, some of which are beyond the control of the Company.
CASH FLOW. Historically, one of the Company's primary sources of capital has
been funds provided by operations. During 1995, the Company's operating cash
flows and working capital were adversely affected by a significant decline in
production.
25
<PAGE>
The following summary table reflects comparative cash flows for the Company for
the periods ended December 31, 1995, 1994 and 1993. Funds provided by
operations consists of net cash provided (used) by operating activities
exclusive of adjustments for working capital items, proceeds from volumetric
production payments and amortization of deferred revenue. This information is
being presented in accordance with industry practice and is not intended to be
a substitute for cash provided by operating activities, a measure of
performance prepared in accordance with generally accepted accounting
principles, and should not be relied upon as such.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1994 1993
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Funds provided by operations $ 28,899 60,987 52,667
Net cash provided (used) by operating activities (3,062) 42,546 41,722
Net cash used by investing activities (17,219) (32,307) (170,134)
Net cash provided (used) by financing activities 20,698 (14,231) 71,886
</TABLE>
Lower production volumes coupled with decreased prices for natural gas resulted
in a 53% decrease in funds provided by operations to $28,899,000 in 1995 from
$60,987,000 in 1994. The Company experienced a net use of cash for operating
activities of $3,062,000 in 1995 compared to $42,546,000 of net cash provided
by operating activities in the corresponding prior year, also attributable to
the lower production volumes and decreased prices. The Company used
$17,219,000 for investing activities in 1995 compared to $32,307,000 in the
prior year due to lower direct capital expenditures, offset in part by lower
proceeds from property sales. Cash provided by financing activities of
$20,698,000 in 1995 included the net proceeds from the issuance of stock and
warrants to Anschutz, partially offset by repayments of the Company's Credit
Facility and a decrease in other liabilities. In 1994, the Company used cash
for financing activities of $14,231,000, primarily consisting of the redemption
of subordinated debentures and a decrease in other liabilities, offset by
borrowings under the Company's Credit Facility.
HEDGING PROGRAM. In addition to the volumes of natural gas and oil dedicated
to volumetric production payments, the Company has also used energy swaps and
other financial agreements to hedge against the effects of fluctuations in
the sales prices for oil and natural gas. In a typical swap agreement, the
Company receives the difference between a fixed price per unit of production
and a price based on an agreed upon third-party index if the index price is
lower. If the index price is higher, the Company pays the difference. The
Company's current swaps are settled on a monthly basis. At December 31,
1995, the Company had natural gas swaps and collars (including those of
Saxon) for an aggregate of approximately 35.0 BBTU (billion British Thermal
Units) per day of natural gas during 1996 at fixed prices and floors ranging
from $1.03 per MMBTU (million British Thermal Units) on an Alberta Energy
Company "C" (AECO "C") basis to $2.48 PER MMBTU on a New York Mercantile
Exchange (NYMEX) basis and an aggregate of approximately 27.4 BBTU per day of
natural gas during 1997 at fixed prices and floors ranging from $1.03 (AECO "C"
basis) to $2.54 (NYMEX basis) per MMBTU. At December 31, 1995 the Company had
oil swaps for an aggregate of 927 barrels per day of oil during 1996 at fixed
prices ranging from $16.70 to $17.90 (NYMEX basis). The Company currently has
no material oil swaps in place for 1997. For further information on the
Company's outstanding energy swaps, see Note 13 of Notes to Consolidated
Financial Statements.
26
<PAGE>
CAPITAL EXPENDITURES. The Company's expenditures for property acquisition,
exploration and development for the past three years, were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1995 1994 1993
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Property acquisition costs (1):
Proved properties $26,487 9,553 121,882
Undeveloped properties 320 209 23,034
------- ------ -------
26,807 9,762 144,916
Exploration costs:
Direct costs 11,528 15,229 4,923
Overhead capitalized 1,211 464 510
------- ------ -------
12,739 15,693 5,433
Development costs:
Direct costs 7,633 10,000 13,424
Overhead capitalized 5,565 7,089 7,048
------- ------ -------
13,198 17,089 20,472
------- ------ -------
$52,744 42,544 170,821
------- ------ -------
------- ------ -------
</TABLE>
(1) 1995 amounts consist primarily of the allocation of purchase price to
the oil and gas properties acquired in the purchase of Saxon.
In 1995, the Company's property acquisition expenditures of $26,807,000
resulted in proved reserve additions of an estimated 17.6 BCF of natural gas
and 4,397,000 barrels of oil, as measured at the closing dates of the
acquisitions for financial accounting purposes. In 1994, the Company's
property acquisition expenditures of $9,762,000 resulted in proved reserve
additions of an estimated 8.2 BCF of natural gas and 17,000 barrels of oil, as
measured at the closing dates of the acquisitions for financial accounting
purposes. In 1993, the Company's property acquisition expenditures of
$144,916,000 resulted in proved reserve additions of an estimated 94.7 BCF of
natural gas and 1.7 million barrels of oil, as measured at the closing dates,
as well as eight exploitation prospects and three exploratory offshore blocks.
The Company's 1996 budgeted expenditures for exploration and development are
approximately $20,500,000 and $41,500,000, respectively, including
capitalized overhead of $7,500,000.
During 1996, the Company intends to continue a strategy of acquiring reserves
that meet its investment criteria; however, no assurance can be given that
the Company can locate or finance any property acquisitions. If adequate
sources of capital are not available to the Company in 1996, the amount
invested in exploration, development and reserve acquisitions will be
required to be reduced significantly.
27
<PAGE>
BANK CREDIT FACILITIES. The Company has a secured credit facility (the Credit
Facility) with The Chase Manhattan Bank, NA. (Chase) as agent for a group of
banks. Under the Credit Facility as amended, the Company may borrow up to
$40,000,000 for working capital and/or general corporate purposes. The
borrowing base is subject to formal redeterminations semi-annually, but may be
changed at the banks' discretion at any time.
The Credit Facility is secured by a lien on, and a security interest in, a
majority of the Company's proved oil and gas properties and related assets
(subject to prior security interests granted to holders of volumetric
production payment agreements), a pledge of accounts receivable, material
contracts and the stock of material subsidiaries. The maturity date of the
Credit Facility is July 1, 1998. Under the terms of the Credit Facility, the
Company is subject to certain covenants and financial tests, including
restrictions or requirements with respect to working capital, cash flow,
additional debt, liens, asset sales, investments, mergers, cash dividends and
reporting responsibilities. At December 31, 1995 the outstanding balance
under this facility was $23,800,000. The Company has also used the facility
for a $1,500,000 letter of credit.
On February 8, 1996 a newly-formed Canadian subsidiary of Forest entered into
a credit agreement (the Canadian Credit Facility) with The Chase Manhattan
Bank of Canada for the benefit of Canadian Forest and ProMark. The initial
borrowing base under the Canadian Credit Facility is $60,000,000 CDN. The
borrowing base is subject to formal redeterminations semi-annually, but may
be changed by the bank at its discretion at any time. The Canadian Credit
Facility has a three-year term and is indirectly secured by substantially all
the assets of Canadian Forest. Funds drawn under the Canadian Credit
Facility can be used for general corporate purposes. Under the terms of the
Canadian Credit Facility, the three Canadian subsidiaries are subject to
certain covenants and financial tests, including restrictions or
requirements with respect to working capital, cash flow, additional debt,
liens, asset sales, investments, mergers, cash dividends and reporting
responsibilities.
In addition to the credit facilities described above, Saxon has a demand
revolving operating loan and a demand revolving production loan with
borrowing bases of $2,000,000 CDN and $20,000,000 CDN, respectively. The
loans are subject to semi-annual review and have demand features; however,
repayments are not required provided that borrowings are not in excess of the
borrowing base and Saxon complies with other existing covenants. At
December 31, 1995 there were outstanding borrowings of $929,000 CDN and
$14,000,000 CDN under the operating loan and the production loan,
respectively. Saxon also had an outstanding bridge loan at this date which
was repaid in full using the proceeds of the sale of the Forest Common Stock
held by Saxon.
At February 29, 1996, the amount outstanding under the Credit Facility was
$8,300,000, the amount outstanding under the Canadian Credit Facility was
$44,680,000 CDN, and the amounts outstanding under the Saxon operating loan
and production loan were $1,267,000 CDN and $7,000,000 CDN, respectively.
Management believes the Company and Saxon will have adequate sources of
short-term liquidity to meet working capital needs, fund capital expenditures
at budgeted levels, and meet current debt service obligations.
OTHER FINANCING. Under the terms of volumetric production payments, the
Company is required to deliver the scheduled volumes from the subject
properties or to make a cash payment for volumes produced but not delivered, in
combination not to exceed a specified percentage of monthly production. If
production levels are not sufficient to meet scheduled delivery commitments,
the Company must account for and make up such shortages, at market-based
prices, from future production. Amounts received for volumetric production
payments are recorded as deferred revenue, which is amortized as sales are
recorded based upon the scheduled deliveries under the production payment
agreements. As of December 31, 1995, the volumes remaining to be delivered
were approximately 8.0 BCF of natural gas and 87,000 barrels of oil, and the
related deferred revenue was $15,137,000.
Under the terms of a nonrecourse secured loan from JEDI, the Company is
required to make payments based on the net proceeds, as defined, from certain
subject properties. The outstanding loan balance as of December 31, 1995 was
$40,322,000. Properties to which approximately 19% of the Company's
estimated proved reserves are attributable, on an MCFE equivalent basis, are
dedicated to repayment of the nonrecourse secured loan.
28
<PAGE>
Under the terms of a production payment obligation, the Company must make a
monthly cash payment based on net proceeds from the subject properties. This
obligation has been recorded at a discount to reflect a market rate of
interest. At December 31, 1995 the remaining principal amount was $20,701,000
and the recorded liability was $16,218,000. Properties to which approximately
6% of the Company's estimated proved reserves are attributable, on an MCFE
basis, are dedicated to this production payment financing.
For further information on the Company's volumetric production payments,
nonrecourse secured loan, and production payment obligation, see Notes 5 and
6 of Notes to Consolidated Financial Statements.
ANSCHUTZ AND JEDI TRANSACTIONS. During 1995, following receipt of shareholder
approval, the Company consummated transactions with Anschutz and with JEDI.
Pursuant to a purchase agreement between the Company and Anschutz, Anschutz
purchased 3,760,000 shares of the Company's Common Stock and shares of a new
series of preferred stock that are convertible into 1,240,000 additional
shares of Common Stock for a total consideration of $45,000,000. In
addition, Anschutz received the A Warrant, which entitles it to purchase
3,888,888 shares of the Company's Common Stock for $10.50 per share. The A
Warrant expires on July 27, 1998. Anschutz also received from JEDI an option
to purchase from JEDI up to 2,250,000 shares of Common Stock that JEDI had
the right to acquire from the Company upon exercise of the B Warrant referred
to below (the Anschutz Option). The Anschutz Option expires on July 27, 1998.
On July 27, 1995, Forest and JEDI restructured JEDI's existing loan which had
a principal balance of approximately $62,368,000 before unamortized discount
of $4,984,000. As a part of the restructuring, the existing JEDI loan
balance was divided into two tranches: a $40,000,000 tranche, which bears
interest at the rate of 12.5% per annum and is due and payable in full on
December 31, 2000; and an approximately $22,400,000 tranche, which did not
bear interest and was due and payable in full on December 31, 2002. In
consideration, JEDI received the B Warrant, which entitled it to purchase
2,250,000 shares of the Company's Common Stock for $10.00 per share. JEDI
also granted the Anschutz Option to Anschutz, pursuant to which Anschutz was
entitled to purchase from JEDI up to 2,250,000 shares at a purchase price per
share equal to the lesser of (a) $10.00 plus 18% per annum from July 27, 1995
to the date of exercise of the option, or (b) $15.50. JEDI was to satisfy
its obligations under the Anschutz Option by exercising the B Warrant.
As a result of the loan restructuring and the issuance of the B Warrant, the
Company reduced the recorded amount of the related liability to approximately
$45,493,000 and annual interest expense by approximately $2,000,000. The
Company also agreed to use the proceeds from the exercise of the A Warrant to
pay principal and interest on the $40,000,000 tranche of the JEDI loan.
In December 1995, JEDI entered into an agreement to exchange the $22,400,000
tranche and the B Warrant for 1,680,000 shares of Common Stock (the JEDI
Exchange). As a result of the JEDI Exchange, the Company expects that non-cash
interest expense will be reduced by an additional $1,500,000 per year. The
JEDI Exchange also provided for other changes to the JEDI loan agreement that
will have the effect of increasing the Company's flexibility with respect to
the development of the properties securing the JEDI indebtedness.
29
<PAGE>
Pursuant to the JEDI Exchange, the Company assumed JEDI's obligations under the
Anschutz Option. Under the Anschutz Option, the Company is now obligated to
issue shares directly to Anschutz that previously would have been issued to
JEDI pursuant to the B Warrant. Upon the exercise of the Anschutz Option,
instead of the B Warrant price of $10.00 per share, the Company will receive an
amount equal to the lesser of (a) $10.00 plus 18% per annum from July 27, 1995
to the date of exercise of the option, or (b) $15.50. The Company is permitted
to use proceeds from the exercise of the Anschutz Option for any corporate
purpose. For further information on the Anschutz and JEDI transactions, see
Note 3 of Notes to Consolidated Financial Statements.
30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information concerning this Item begins on the following page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Forest Oil Corporation:
We have audited the accompanying consolidated balance sheets of Forest Oil
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Forest Oil
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for oil and gas sales from the sales method to
the entitlements method effective January 1, 1994. As discussed in Notes 7
and 10 of Notes to Consolidated Financial Statements, the Company adopted the
provisions of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" and Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in 1993.
KPMG PEAT MARWICK LLP
Denver, Colorado
February 20, 1996
32
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
1995 (NOTE 2) DECEMBER 31,
(Unaudited) 1995 1994
------------- ------- -------
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,287 3,287 2,869
Accounts receivable 35,763 17,395 20,418
Other current assets 4,612 2,557 2,231
-------- ------- -------
Total current assets 43,662 23,239 25,518
Net property and equipment, at cost (Note 5) 429,584 277,599 276,609
Investment in affiliate (Note 4) 11,301 11,301 11,652
Other assets 33,443 8,904 11,053
-------- ------- -------
$517,990 321,043 324,832
-------- ------- -------
-------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 2,055 2,055 4,445
Current portion of long-term debt (Note 5) 2,263 2,263 1,636
Current portion of gas balancing liability 4,700 4,700 5,735
Accounts payable 37,561 17,456 26,557
Accrued interest 4,219 4,029 4,318
Other current liabilities 1,917 1,917 4,927
-------- ------- -------
Total current liabilities 52,715 32,420 47,618
Commitments and contingencies (Notes 10, 12 and 13)
Long-term debt (Notes 3 and 5) 192,848 193,879 207,054
Gas balancing liability 3,841 3,841 8,525
Other liabilities 25,824 23,298 19,641
Deferred revenue (Note 6) 15,137 15,137 35,908
Deferred income taxes 38,502 -- --
Minority interest (Note 2) 8,882 8,171 --
Shareholders' equity (Notes 2, 3, 5, 8 and 9):
Preferred stock 24,359 24,359 15,845
Common stock 2,280 1,066 566
Capital surplus 366,431 241,241 192,337
Common shares to be issued in debt restructuring 6,073 6,073 --
Accumulated deficit (217,495) (217,495) (199,499)
Foreign currency translation (1,407) (1,407) (1,337)
Treasury stock, at cost -- (9,540) (1,826)
-------- ------- -------
Total shareholders' equity 180,241 44,297 6,086
-------- ------- -------
$517,990 321,043 324,832
-------- ------- -------
-------- ------- -------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
33
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
-------- -------- ---------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
Revenue:
Oil and gas sales:
Gas $ 63,347 91,309 77,249
Oil and condensate 18,602 22,874 25,341
Products and other 326 358 293
-------- ------- --------
82,275 114,541 102,883
Miscellaneous, net 181 1,406 2,265
-------- ------- --------
Total revenue 82,456 115,947 105,148
Expenses:
Oil and gas production 22,463 22,384 19,540
General and administrative 9,081 11,166 12,003
Interest 25,323 26,773 23,729
Depreciation and depletion 43,592 65,468 60,581
Provision for impairment of oil and gas properties -- 58,000 --
-------- ------- --------
Total expenses 100,459 183,791 115,853
-------- ------- --------
Loss before income taxes, cumulative effects of changes in
accounting principles and extraordinary item (18,003) (67,844) (10,705)
Income tax expense (benefit) (Note 7):
Current (7) 9 254
Deferred -- -- (1,604)
-------- ------- --------
(7) 9 (1,350)
-------- ------- --------
Loss before cumulative effects of changes in
accounting principles and extraordinary item (17,996) (67,853) (9,355)
Cumulative effects of changes in accounting principles:
Oil and gas sales (Note 1) -- (13,990) --
Postretirement benefits, net of income tax benefit of $1,639,000 (Note 10) -- -- (3,183)
Income taxes (Note 7) -- -- 2,060
-------- ------- --------
-- (13,990) (1,123)
-------- ------- --------
Loss before extraordinary item (17,996) (81,843) (10,478)
Extraordinary item - loss on extinguishment of debt, net of income tax
benefit of $4,652,000 (Note 5) -- -- (10,735)
-------- ------- --------
Net loss $(17,996) (81,843) (21,213)
-------- ------- --------
-------- ------- --------
Weighted average number of common shares outstanding 7,360 5,619 4,399
-------- ------- --------
-------- ------- --------
Net loss attributable to common stock $(20,156) (84,004) (23,463)
-------- ------- --------
-------- ------- --------
Pro forma amounts assuming the change in accounting for
oil and gas sales is applied retroactively:
Loss before cumulative effects of changes in
accounting principles and extraordinary item $ (3,962)
--------
--------
Net loss $(15,820)
--------
--------
</TABLE>
(continued on following page)
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
-------- -------- ---------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
Primary and fully diluted loss per common share:
Loss before cumulative effects of changes in accounting
principles and extraordinary item $ (2.74) (12.46) (2.64)
Cumulative effects of changes in accounting principles -- (2.49) (.26)
-------- ------- --------
Loss before extraordinary item (2.74) (14.95) (2.90)
Extraordinary item - loss on extinguishment of debt -- -- (2.44)
-------- ------- --------
Net loss attributable to common stock $ (2.74) (14.95) (5.34)
-------- ------- --------
-------- ------- --------
Pro forma amounts assuming the change in accounting for oil and
gas sales is applied retroactively:
Primary and fully diluted loss per common share:
Loss before cumulative effects of changes in
accounting principles and extraordinary item $ (1.41)
--------
--------
Net loss attributable to common stock $ (4.11)
--------
--------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
35
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
COMMON SHARES TO BE
STOCK AND ISSUED ACCUMU- FOREIGN
PREFERRED CLASS B CAPITAL IN DEBT LATED CURRENCY TREASURY
STOCK STOCK SURPLUS RESTRUCTURING DEFICIT TRANSLATION STOCK
--------- --------- ------- ------------- --------- ----------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 $ 17,214 300 146,592 -- (96,443) (427) (7,355)
Net loss -- -- -- (21,213) -- --
Issuance of common stock,
net of offering costs (Note 9) -- 222 51,284 -- -- -- --
$.75 Convertible Preferred Stock
dividends paid in common
stock (Note 8) -- 13 (13) -- -- -- --
Conversion of $.75 Convertible
Preferred Stock to common stock
(Note 8) (1,369) 17 1,352 -- -- -- --
Reclassification of Class B to
common stock (Note 9) -- 7 (7) -- -- -- --
Exercise of employee stock options
(Note 9) -- 3 393 -- -- -- --
Common stock issued and treasury
stock contributed to the
Retirement Savings Plan and
other (Note 10) -- 3 (586) -- -- -- 1,565
Unfunded pension liability (Note 10) -- -- (3,038) -- -- -- --
Foreign currency translation -- -- -- -- -- (358) --
-------- ----- ------- ----- -------- ------- ------
Balance December 31, 1993 15,845 565 195,977 -- (117,656) (785) (5,790)
Net loss -- -- -- -- (81,843) -- --
Exercise of employee stock
options (Note 9) -- 1 104 -- -- -- --
$.75 Convertible Preferred Stock
dividends paid in cash (Note 8) -- -- (2,161) -- -- -- --
Treasury stock contributed to the
Retirement Savings Plan and other
(Note 10) -- -- (1,583) -- -- -- 3,964
Foreign currency translation -- -- -- -- -- (552) --
-------- ----- ------- ----- -------- ------- ------
Balance December 31, 1994 15,845 566 192,337 -- (199,499) (1,337) (1,826)
Net loss -- -- -- -- (17,996) -- --
Issuance of common stock, net of
offering costs (Notes 3 and 9) -- 376 23,856 -- -- -- --
Issuance of Second Series
Convertible Preferred Stock
(Notes 3 and 8) 8,518 -- -- -- -- -- --
Issuance of warrants (Notes 3
and 9) -- -- 20,427 -- -- -- --
Common stock issued in
acquisition (Notes 2 and 9) -- 106 9,434 -- -- -- (9,540)
Common stock issued and treasury
stock contributed to the
Retirement Savings Plan
(Note 10) -- 2 (1,425) -- -- -- 1,826
$.75 Convertible Preferred Stock
dividends paid in cash (Note 8) -- -- (540) -- -- -- --
$.75 Convertible Preferred Stock
dividends paid in common stock
(Note 8) -- 16 (16) -- -- -- --
Conversion of $.75 Convertible
Preferred Stock to common stock
(Note 8) (4) -- 4 -- -- -- --
Common shares to be issued in debt
restructuring (Note 3) -- -- -- 6,073 -- -- --
Unfunded pension liability (Note 10) -- -- (2,836) -- -- -- --
Foreign currency translation -- -- -- -- -- (70) --
-------- ----- ------- ----- -------- ------- ------
Balance December 31, 1995 $ 24,359 1,066 241,241 6,073 (217,495) (1,407) (9,540)
-------- ----- ------- ----- -------- ------- ------
-------- ----- ------- ----- -------- ------- ------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
36
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
-------- ------- --------
(In Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss before cumulative effects of changes in
accounting principles and extraordinary item $(17,996) (67,853) (9,355)
Adjustments to reconcile loss before cumulative effects of
changes in accounting principles and extraordinary item
to net cash provided (used) by operating activities:
Depreciation and depletion 43,592 65,468 60,581
Provision for impairment of oil and gas properties -- 58,000 --
Deferred Federal income tax benefit -- -- (1,604)
Other, net 3,303 5,372 3,045
Decrease in accounts receivable 4,285 4,839 2,264
(Increase) decrease in other current assets (152) 1,078 375
Increase (decrease) in accounts payable (11,458) 4,021 (12,668)
Increase (decrease) in accrued interest and other
current liabilities (3,865) 2,941 (1,078)
Proceeds from volumetric production payments -- 4,353 40,468
Amortization of deferred revenue (20,771) (35,673) (40,306)
-------- ------- --------
Net cash provided (used) by operating activities (3,062) 42,546 41,722
Cash flows from investing activities:
Capital expenditures for property and equipment (27,098) (42,780) (171,166)
Cash paid for acquisition of subsidiary (1,121) -- --
Proceeds of sales of property and equipment, net 8,715 12,941 2,997
Decrease (increase) in other assets, net 2,285 (2,468) (1,965)
-------- ------- --------
Net cash used by investing activities (17,219) (32,307) (170,134)
Cash flows from financing activities:
Proceeds from bank borrowings 82,600 31,500 25,000
Repayments of bank borrowings (91,800) (23,500) --
Proceeds from nonrecourse secured loan -- 1,400 57,400
Repayments of nonrecourse secured loan (1,143) -- --
Repayments of production payment obligation (2,316) (2,771) (5,980)
Issuance of senior subordinated notes, net of offering costs -- -- 95,827
Redemptions and repurchases of subordinated debentures and secured notes -- (7,171) (148,918)
Proceeds from capital stock and warrants issued, net of issuance costs 41,060 -- 51,506
Payment of preferred stock dividends (540) (2,161) --
Debt issuance costs (491) (772) (1,336)
Increase (decrease) in cash overdraft (2,390) 551 (1,347)
Decrease in other liabilities, net (4,282) (11,307) (266)
-------- ------- --------
Net cash provided (used) by financing activities 20,698 (14,231) 71,886
Effect of exchange rate changes on cash 1 (88) (12)
-------- ------- --------
Net increase (decrease) in cash and cash equivalents 418 (4,080) (56,538)
Cash and cash equivalents at beginning of year 2,869 6,949 63,487
-------- ------- --------
Cash and cash equivalents at end of year $ 3,287 2,869 6,949
-------- ------- --------
-------- ------- --------
Cash paid during the year for:
Interest $ 22,138 23,989 23,123
-------- ------- --------
-------- ------- --------
Income taxes $ -- 9 452
-------- ------- --------
-------- ------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
37
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- -------------------------------------------------------------------------------
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION - Forest Oil Corporation
is engaged in the acquisition, exploration, development, production and
marketing of natural gas and crude oil in North America. The Company was
incorporated in New York in 1924, the successor to a company formed in 1916, and
has been publicly held since 1969. The Company is active in several of the
major exploration and producing areas in and offshore the United States and,
following two recent acquisitions, in Canada.
The consolidated financial statements include the accounts of Forest Oil
Corporation and its subsidiaries (Forest or the Company). Significant
intercompany balances and transactions are eliminated. In the course of
preparing the consolidated financial statements, management makes various
assumptions and estimates to determine the reported amounts of assets,
liabilities, revenue and expenses, and in the disclosures of commitments and
contingencies. Changes in these assumptions and estimates will occur as a
result of the passage of time and the occurrence of future events and,
accordingly, actual results could differ from amounts estimated.
Unless otherwise indicated, all share amounts, share prices and per share
amounts have been adjusted to give effect to a 5-to-1 reverse stock split
that was effective on January 8, 1996.
CASH EQUIVALENTS - For purposes of the statements of cash flows, the Company
considers all debt instruments with original maturities of three months or less
to be cash equivalents.
PROPERTY AND EQUIPMENT - The Company uses the full cost method of accounting for
oil and gas properties. During 1995, 1994 and 1993, the Company's oil and gas
operations were conducted in the United States. All costs incurred in the
acquisition, exploration and development of properties (including costs of
surrendered and abandoned leaseholds, delay lease rentals, dry holes and
overhead related to exploration and development activities) are capitalized.
Capitalized costs are depleted using the units of production method. A reserve
is provided for estimated future costs of site restoration, dismantlement and
abandonment activities as a component of depletion. Unusually significant
investments in unproved properties, including related capitalized interest
costs, are not depleted pending the determination of the existence of proved
reserves. As of December 31, 1995, 1994 and 1993, there were undeveloped
property costs of $28,380,000, $30,441,000 and $41,216,000, respectively, in
the United States which were not being depleted. Of the undeveloped costs not
being depleted at December 31, 1995, approximately 20% were incurred in 1995,
4% in 1994, 71% in 1993 and 5% in 1992.
Depletion per unit of production was determined based on conversion to common
units of measure using one barrel of oil as an equivalent to six thousand cubic
feet (MCF) of natural gas. Depletion per unit of production (MCFE) for the
years ended December 31, 1995, 1994 and 1993 was $1.06, $1.13 and $1.19,
respectively.
Pursuant to full cost accounting rules, capitalized costs less related
accumulated depletion and deferred income taxes may not exceed the sum of
(1) the present value of future net revenue from estimated production of proved
oil and gas reserves; plus (2) the cost of properties not being amortized, if
any; plus (3) the lower of cost or estimated fair value of unproved properties
included in the costs being amortized, if any; less (4) income tax effects
related to differences in the book and tax basis of oil and gas properties. As
a result of this limitation on capitalized costs, the accompanying financial
statements include a provision for impairment of oil and gas property costs of
$58,000,000 in 1994. There was no impairment of oil and gas property costs in
1995 or 1993.
Gain or loss is recognized only on the sale of oil and gas properties involving
significant reserves.
Buildings, transportation and other equipment are depreciated on the
straight-line method based upon estimated useful lives of the assets ranging
from five to forty-five years.
38
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
- -------------------------------------------------------------------------------
Net property and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Oil and gas properties $1,216,027 1,171,887
Buildings, transportation and
other equipment 10,502 12,649
---------- ---------
1,226,529 1,184,536
Less accumulated depreciation,
depletion and valuation
allowance 948,930 907,927
---------- ---------
$ 277,599 276,609
---------- ---------
---------- ---------
</TABLE>
OIL AND GAS SALES - The Company changed its method of accounting for oil and gas
sales from the sales method to the entitlements method effective January 1,
1994. Under the sales method previously used by the Company, all proceeds from
production credited to the Company were recorded as revenue until such time as
the Company had produced its share of related reserves. Under the entitlements
method, revenue is recorded based upon the Company's share of volumes sold,
regardless of whether the Company has taken its proportionate share of volumes
produced.
Under the entitlements method, the Company records a receivable or payable to
the extent it receives less or more than its proportionate share of the related
revenue. The Company believes that the entitlements method is preferable
because it allows for recognition of revenue based on the Company's actual share
of jointly owned production and provides a better matching of revenue and
related expenses.
The cumulative effect of the change for the periods through December 31, 1993
was a charge of $13,990,000. The effect of this change on 1994 was an increase
in earnings from operations of $3,584,000 and an increase in production volumes
of 1,555,000 MCF. There were no related income tax effects in 1994. The pro
forma amounts shown on the consolidated statements of operations have been
adjusted for the effect of the retroactive application of the change, including
the related income tax effects.
As of December 31, 1995 the Company had produced approximately 5 BCF more than
its entitled share of production. The estimated value of this imbalance of
approximately $8,541,000 is included in the accompanying consolidated balance
sheet as a short-term liability of $4,700,000 and a long-term liability of
$3,841,000.
HEDGING TRANSACTIONS - In order to minimize exposure to fluctuations in oil and
natural gas prices, the Company hedges the price of future oil and natural gas
production by entering into certain contracts and financial arrangements. Gains
and losses related to these hedging transactions are recognized as adjustments
to revenue recorded for the related production. Costs associated with the
purchase of certain hedge instruments are deferred and amortized against revenue
related to hedged production.
INCOME TAXES - The adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS No. 109), effective January 1,
1993 changed the Company's method of accounting for income taxes from the
deferred method to an asset and liability method. Previously, the Company
the tax effects of
39
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
- -------------------------------------------------------------------------------
timing differences between financial reporting and taxable income. The asset
and liability method requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
financial accounting bases and tax bases of assets and liabilities.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities related to Canadian
investments are generally translated at current exchange rates, and related
translation adjustments are reported as a component of shareholders' equity.
Income statement accounts are translated at the average rates during the
period.
EARNINGS (LOSS) PER SHARE - Primary earnings (loss) per share is computed by
dividing net earnings (loss) attributable to common stock by the weighted
average number of common shares and common share equivalents outstanding during
each period, excluding treasury shares. Net earnings (loss) attributable to
common stock represents net earnings (loss) less preferred stock dividend
requirements of $2,160,000 in 1995, $2,161,000 in 1994 and $2,250,000 in 1993.
Common share equivalents include, when applicable, dilutive stock options and
warrants using the treasury stock method.
Fully diluted earnings (loss) per share is computed assuming, in addition to the
above, (i) that convertible debentures were converted at the beginning of each
period or date of issuance, if later, with earnings being increased for interest
expense, net of taxes, that would not have been incurred had conversion taken
place, (ii) that convertible preferred stock was converted at the beginning of
each period or date of issuance, if later, and (iii) any additional dilutive
effect of stock options and warrants. The effects of these assumptions were
anti-dilutive in 1995, 1994 and 1993.
RECLASSIFICATIONS - Certain amounts in the 1994 and 1993 financial statements
have been reclassified to conform to the 1995 financial statement presentation.
(2) ACQUISITIONS:
- -------------------------------------------------------------------------------
In May and December, 1993, the Company purchased interests in properties from
Atlantic Richfield Company (ARCO) for approximately $60,862,000. In conjunction
with the ARCO acquisitions, the Company sold volumetric production payments from
certain of the ARCO properties for approximately $40,468,000 (net of fees). In
December 1993, the Company purchased interests in offshore properties for
approximately $24,050,000 and interests in properties in south Texas for
approximately $59,458,000. In conjunction with these acquisitions, the Company
entered into a nonrecourse secured loan agreement for $51,600,000.
The Company's results of operations include the effects of the first ARCO
acquisition since May 1, 1993, the offshore properties and the second ARCO
acquisition since December 1, 1993 and the south Texas properties since
January 1, 1994.
During 1994, the Company completed acquisitions totaling $9,762,000, including
additional interests in properties acquired in 1993. In order to finance one of
the acquisitions, the Company sold a volumetric production payment for
approximately $4,353,000 (net of fees).
During 1995, the Company completed acquisitions totaling $26,807,000. The most
significant of these was the purchase on December 20, 1995 of a 56% economic
(49% voting) interest in Saxon Petroleum Inc. (Saxon) for approximately
$26,000,000. In the transaction, Forest received from Saxon 32,000,000 voting
common shares, 12,300,000 nonvoting common shares, 15,500,000 convertible
preferred shares and warrants to purchase 5,300,000 common shares. In exchange,
Forest transferred to Saxon its preferred shares of Archean Energy, Ltd., issued
to Saxon 1,060,000 common shares of Forest and paid Saxon $1,500,000 CDN.
The Forest common shares held by Saxon were recorded as treasury stock on
Forest's consolidated balance sheet at December 31, 1995. In January 1996,
Saxon sold these shares in a public offering of Forest common stock and used the
proceeds to reduce its bank debt.
40
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(2) ACQUISITIONS (CONTINUED):
- -------------------------------------------------------------------------------
Saxon is a Canadian exploration and production company with headquarters in
Calgary, Alberta and operations concentrated in western Alberta. Saxon had
estimated proved reserves at December 31, 1995 of 16.2 BCF of natural gas and
4.3 million barrels of oil.
The consolidated balance sheet of Forest includes the accounts of Saxon at
December 31, 1995. The Company has not recorded any production or results of
operations of Saxon for the period from December 20 to December 31, 1995 as the
results of operations for such period are not significant.
On January 31, 1996 the Company completed the acquisition of ATCOR Resources
Ltd. of Calgary, Alberta for approximately $134,900,000, exclusive of
acquisition costs of approximately $1,800,000. The purchase was funded by
the net proceeds of a common stock offering and approximately $8,300,000
drawn under the Company's bank credit facility. The exploration and
production business of ATCOR was renamed Canadian Forest Oil Ltd. (Canadian
Forest). Canadian Forest's principal reserves and producing properties are
located in Alberta and British Columbia. At December 31, 1995 Canadian Forest
had estimated proved reserves of 92.0 BCF of natural gas and 10.2 million
barrels of oil.
As part of the Canadian Forest acquisition, Forest also acquired ATCOR's
natural gas marketing business which was renamed Producers Marketing Ltd.
(ProMark).
The pro forma consolidated balance sheet at December 31, 1995 gives effect to
the public offering of common stock and the Canadian Forest acquisition as if
both had occurred on that date. The following pro forma consolidated
statement of operations information assumes that the common stock offering
and the acquisitions of Saxon and Canadian Forest occurred as of January 1,
1995:
<TABLE>
<CAPTION>
Pro Forma Year Ended
December 31, 1995
--------------------
(In Thousands Except
Per Share Amounts)
<S> <C>
Revenue:
Oil and gas sales $ 129,778
Marketing and processing 139,815
Miscellaneous, net 188
----------
Total revenue $ 269,781
----------
----------
Loss before income taxes,
cumulative effect of changes in
accounting principles and
extraordinary item $ (7,768)
----------
----------
Net loss $ (14,117)
----------
----------
Primary and fully diluted
loss per share $ (.73)
----------
----------
</TABLE>
(3) ANSCHUTZ AND JEDI TRANSACTIONS:
- -------------------------------------------------------------------------------
During 1995, following receipt of shareholder approval, the Company consummated
transactions with The Anschutz Corporation (Anschutz) and with Joint Energy
Development Investments Limited Partnership (JEDI), a Delaware limited
partnership the general partner of which is an affiliate of Enron Corp (Enron).
Pursuant to a purchase agreement between the Company and Anschutz, Anschutz
purchased 3,760,000 shares of the Company's common stock and 620,000 shares
of a new series of preferred stock that are convertible into 1,240,000
additional shares of common
41
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(3) ANSCHUTZ AND JEDI TRANSACTIONS (CONTINUED):
- -------------------------------------------------------------------------------
stock for a total consideration of $45,000,000. The preferred stock has a
liquidation preference of $18.00 per share and receives dividends ratably with
the common stock. In addition, Anschutz received a warrant that entitles it to
purchase 3,888,888 shares of the Company's common stock for $10.50 per share
(the A Warrant). The A Warrant expires July 27, 1998.
The Anschutz investment was made in two closings. At the first closing,
which occurred on May 19, 1995, Anschutz loaned the Company $9,900,000. The
loan carried interest at 8% per annum. The loan was nonrecourse to the
Company and was secured by oil and gas properties owned by the Company, the
preferred stock of Archean Energy Ltd., and a cash collateral account with an
initial balance of $2,000,000. At the second closing, which occurred in July
1995, Anschutz converted the loan into 1,100,000 shares of common stock and
purchased an additional 2,660,000 shares of common stock, the convertible
preferred stock and the A Warrant for $35,100,000. At the second closing,
Anschutz also received from JEDI an option to purchase from JEDI up to
2,250,000 shares of common stock that JEDI had the right to acquire from the
Company upon exercise of the B Warrant referred to below (the Anschutz
Option). The Anschutz Option terminates on July 27, 1998. The Company has
entered into a shareholders agreement with Anschutz pursuant to which
Anschutz agreed to certain voting, acquisition, and transfer limitations
regarding shares of common stock for five years after the second closing.
At the second closing on July 27, 1995, Forest and JEDI restructured JEDI's
existing loan which had a principal balance of approximately $62,368,000
before unamortized discount of $4,984,000. As a part of the restructuring,
the existing JEDI loan balance was divided into two tranches: a $40,000,000
tranche, which bears interest at the rate of 12.5% per annum and is due and
payable in full on December 31, 2000; and an approximately $22,400,000
tranche, which did not bear interest and was due and payable in full on
December 31, 2002. JEDI also relinquished the net profits interest that it
held in certain properties of the Company. In consideration, JEDI received a
warrant (the B Warrant) that entitled it to purchase 2,250,000 shares of the
Company's common stock for $10.00 per share. Also at the second closing,
JEDI granted the Anschutz Option to Anschutz, pursuant to which Anschutz was
entitled to purchase from JEDI up to 2,250,000 shares of the Company's common
stock at a purchase price per share equal to the lesser of (a) $10.00 plus
18% per annum from July 27, 1995 to the date of exercise of the option, or
(b) $15.50. JEDI was to satisfy its obligations under the Anschutz Option by
exercising the B Warrant.
As a result of the loan restructuring and the issuance of the B Warrant, the
Company reduced the recorded amount of the related liability to approximately
$45,493,000. The Company also agreed to use the proceeds from the exercise
of the A Warrant to pay principal and interest on the $40,000,000 tranche of
the JEDI loan.
In December 1995, JEDI exchanged the $22,400,000 tranche and the B Warrant
for 1,680,000 shares of common stock (the JEDI Exchange). Pursuant to the
JEDI Exchange, the Company assumed JEDI's obligations under the Anschutz
Option. Under the Anschutz Option, the Company is now obligated to issue
shares directly to Anschutz that previously would have been issued to JEDI
pursuant to the B Warrant. Upon the exercise of the Anschutz Option, instead
of the original B Warrant price of $10.00 per share, the Company will receive
an amount per share equal to the lesser of (a) $10.00 plus 18% per annum from
July 27, 1995 to the date of exercise of the option, or (b) $15.50. The
Company is permitted to use proceeds from the exercise of the Anschutz Option
for any corporate purpose. Pursuant to the JEDI Exchange, JEDI entered into a
shareholders agreement with the Company that limits JEDI's right to vote its
shares of common stock and, except in certain circumstances, to transfer its
shares before July 27, 1998.
42
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(4) INVESTMENT IN AFFILIATE:
- -------------------------------------------------------------------------------
In 1992, the Company sold its Canadian assets and related operations to
CanEagle Resources Corporation (CanEagle) for approximately $51,250,000 in
Canadian funds ($41,000,000 U.S.). In the transaction, the Company received
cash of approximately $28,000,000 CDN ($22,400,000 U.S.), net of expenses,
and provided financing in the aggregate principal amount of $22,000,000 CDN
($17,600,000 U.S.). On June 24, 1994, CanEagle sold a significant portion of
its oil and gas properties to a third party. In conjunction with this
transaction, the Company received $6,124,000 CDN ($4,400,000 U.S.) and
exchanged its investment in CanEagle for shares of preferred stock of a newly
formed entity, Archean Energy, Ltd. (Archean). The Company accounted for the
proceeds from the 1992 and 1994 transactions as reductions in the carrying
value of its investment in CanEagle. The preferred shares of Archean were
recorded at an amount equal to the remaining carrying value of the Company's
investment in CanEagle.
The Company accounted for its investment in Archean (and CanEagle prior to June
24, 1994) in a manner analagous to equity accounting. Losses were recognized to
the extent that losses were attributable to the Company's interest. Earnings
were recognized only if realization was assured. Under this method, no earnings
or losses were recognized in 1995, 1994 or 1993.
In December, 1995, in connection with the Saxon acquisition, the Company
transferred its Archean preferred stock to Saxon. In consolidation, the Company
is accounting for the investment in Archean at its historical carrying value.
(5) LONG-TERM DEBT:
- -------------------------------------------------------------------------------
Long-term debt at December 31 for the years presented consists of the
following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Credit facility $ 23,800 33,000
Saxon credit facilities 16,437 -
Nonrecourse secured loan 40,322 57,840
Production payment obligation 16,218 18,534
11-1/4% Senior Subordinated Notes 99,365 99,316
-------- -------
196,142 208,690
Less current portion (2,263) (1,636)
-------- -------
Long-term debt $193,879 207,054
-------- -------
-------- -------
</TABLE>
CREDIT FACILITY:
The Company has a secured credit facility (the Credit Facility) with The Chase
Manhattan Bank, NA. (Chase) as agent for a group of banks. Under the Credit
Facility, as amended, the Company may borrow up to $40,000,000 for working
capital and/or general corporate purposes. Advances under this facility
bear interest at rates ranging from the banks' prime rate plus 1/4% to prime
plus 1% or, alternately, Eurodollar prime plus 1 1/2% to prime plus 2 1/4%,
depending on amounts outstanding under the Credit Facility. The borrowing
base is subject to formal redeterminations semi-annually, but may be changed
at the banks' discretion at any time.
43
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(5) LONG-TERM DEBT (CONTINUED):
- -------------------------------------------------------------------------------
The Credit Facility is secured by a lien on, and a security interest in, a
majority of the Company's domestic proved oil and gas properties and related
assets (subject to prior security interests granted to holders of volumetric
production payment agreements), a pledge of accounts receivable, material
contracts and the stock of material subsidiaries. The maturity date of the
Credit Facility is July 1, 1998. Under the terms of the Credit Facility, the
Company is subject to certain covenants and financial tests, including
restrictions or requirements with respect to working capital, cash flow,
additional debt, liens, asset sales, investments, mergers, cash dividends on
capital stock and reporting responsibilities. At December 31, 1995, notes
payable of $23,800,000 were outstanding under the Credit Facility with
interest at rates ranging from 7.38% to 9.0% per annum. The Company has also
used the Credit Facility for a $1,500,000 letter of credit.
SAXON CREDIT FACILITIES
At December 31, 1995, Saxon has credit facilities with Canadian banks which
include a demand revolving operating loan, a demand revolving production loan
and a bridge loan.
The operating loan facility has a borrowing base of $2,000,000 CDN. Advances
made under this facility bear interest at the bank prime rate and are secured
by a fixed and floating charge debenture and a general assignment of book
debts. The loan is subject to semi-annual review and has a demand feature;
however, repayments are not required provided that borrowings are not
in excess of the borrowing base and Saxon complies with other existing
covenants. At December 31, 1995 the amount outstanding under the operating
loan facility was $929,000 CDN and the interest rate was 8 1/4%.
The production loan facility has a borrowing base of $20,000,000 CDN.
Advances made under this facility bear interest at the bank prime rate or
the bankers acceptance rate plus a stamping fee at the option of the Company
and are secured by a fixed and floating charge debenture and a general
assignment of book debts. The loan is subject to semi-annual review and has a
demand feature; however, repayments are not required provided that borrowings
are not in excess of the borrowing base and Saxon complies with other existing
covenants. At December 31, 1995 the amount outstanding under the production
loan facility was $14,000,000 CDN and the interest rate was 8 1/2%.
The bridge loan of $7,500,000 CDN outstanding at December 31, 1995 was
a term loan due December 18, 1996. The loan bore interest at the bank prime
rate plus 1 1/2% (9% at December 31, 1995) and was secured by Saxon's
marketable securities, including its shares of Forest common stock.
On January 31, 1996, using proceeds from the sale of its Forest common stock,
Saxon repaid the bridge loan and reduced the balance outstanding under the
production loan.
CANADIAN CREDIT FACILITY
On February 8, 1996 a newly-formed Canadian subsidiary of Forest entered into
a credit agreement (the Canadian Credit Facility) with The Chase Manhattan
Bank of Canada for the benefit of Canadian Forest and ProMark. The initial
borrowing base under the Canadian Credit Facility is $60,000,000 CDN. The
borrowing base is subject to formal redeterminations semi-annually, but may
be changed by the bank at its discretion at any time. The Canadian Credit
Facility has a three-year term and is indirectly secured by substantially all
the assets of Canadian Forest. Under the terms of the Canadian Credit
Facility, the three Canadian subsidiaries are subject to certain covenants
and financial tests including restrictions or requirements with respect to
working capital, cash flow, additional debt, liens, asset sales, investments,
mergers, cash dividends and reporting responsibilities.
44
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(5) LONG-TERM DEBT (CONTINUED):
- -------------------------------------------------------------------------------
NONRECOURSE SECURED LOANS:
On December 30, 1993, the Company entered into a nonrecourse secured loan
agreement with JEDI. The terms of the JEDI loan were restructured in 1995 as
described in Note 3. Under the terms of the restructured JEDI loan, the
Company is required to make payments based on the net proceeds, as defined,
from certain subject properties. Payments under the JEDI loan are due monthly
and are equal to 90% of total net operating income from the secured
properties, reduced by 80% of allowable capital expenditures, as defined.
Under the restructured loan, the Company is required to pay interest at 12.5%
per annum on the outstanding loan balance. Payments are applied first to
interest and then to principal. Principal payments will be applied to reduce
the outstanding balance as will the proceeds, if any, from the exercise of
the A Warrant. The outstanding loan balance as of December 31, 1995, was
$40,322,000. The Company's current estimate, based on expected production and
prices and budgeted capital expenditure levels, is that the liability will
increase by approximately $4,018,000 in 1996 and $812,000 in 1997, and that
the liability will decrease by approximately $10,756,000 in 1998, $12,314,000
in 1999, and $13,772,000 in 2000. Properties to which approximately 19% of
the Company's estimated proved reserves are attributable, on an MCFE
equivalent basis, are dedicated to repayment of the JEDI loan.
PRODUCTION PAYMENT OBLIGATION:
The dollar-denominated production payment was entered into in 1992 to finance
property acquisitions. The original amount of the dollar-denominated
production payment was $37,550,000, which was recorded as a liability of
$28,805,000 after a discount to reflect a market rate of interest of 15.5%.
At December 31, 1995 the remaining principal amount was $20,701,000 and the
recorded liability was $16,218,000. Under the terms of this production
payment, the Company must make a monthly cash payment which is the greater of
a base amount or 85% of net proceeds from the subject properties, as defined,
except that the amount required to be paid in any given month shall not
exceed 100% of the net proceeds from the subject properties. The Company
retains a management fee equal to 10% of sales from the properties, which is
deducted in the calculation of net proceeds. The Company's current estimate,
based on expected production and prices, budgeted capital expenditure levels
and expected discount amortization, is that 1996 payments will reduce the
recorded liability by approximately $1,942,000, which amount is included in
current liabilities, and by approximately $1,931,000 in 1997, $1,002,000 in
1998, $3,824,000 in 1999 and $3,235,000 in 2000. Properties to which
approximately 6% of the Company's estimated proved reserves are attributable,
on an MCFE basis, are dedicated to this production payment financing.
11-1/4% SENIOR SUBORDINAtED NOTES:
On September 8, 1993 the Company completed a public offering of $100,000,000
aggregate principal amount of 11-1/4% Senior Subordinated Notes due September
1, 2003. The Senior Subordinated Notes were issued at a price of 99.259%
yielding 11.375% to the holders. The Company used the net proceeds from the
sale of the Senior Subordinated Notes of approximately $95,827,000, together
with approximately $19,400,000 of available cash, to redeem all of its
outstanding Senior Secured Notes and long-term subordinated debentures. The
redemptions resulted in a loss of $15,387,000 which was recorded as an
extraordinary loss of $10,735,000 (net of income tax benefit of $4,652,000).
The Senior Subordinated Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after September 1, 1998 initially at a
redemption price of 105.688%, plus accrued interest to the date of
redemption, declining at the rate of 1.896% per year to September 9, 2000 and
at 100% thereafter. In addition, the Company may, at its option, redeem
prior to September 1, 1996 up to 30% of the initially outstanding principal
amount of the Notes at 110% of the principal amount thereof, plus accrued
interest to the date of redemption, with the net proceeds of any future
public offering of its common stock.
45
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(5) LONG-TERM DEBT (CONTINUED):
- -------------------------------------------------------------------------------
Under the terms of the Senior Subordinated Notes, the Company must meet
certain tests before it is able to pay cash dividends (other than dividends on
the Company's $.75 Convertible Preferred Stock) or make other restricted
payments, incur additional indebtedness, engage in transactions with its
affiliates, incur liens and engage in certain sale and leaseback arrangements.
The terms of the Senior Secured Notes also limit the Company's ability to
undertake a consolidation, merger or transfer of all or substantially all of
its assets. In addition, the Company is, subject to certain conditions,
obligated to offer to repurchase Senior Subordinated Notes at par value plus
accrued and unpaid interest to the date of repurchase, with the net cash
proceeds of certain sales or dispositions of assets. Upon a change in control,
as defined, the Company will be required to make an offer to purchase the Senior
Subordinated Notes at 101% of the principal amount thereof, plus accrued
interest to the date of purchase.
(6) DEFERRED REVENUE:
- -------------------------------------------------------------------------------
From April 1991 through May 1993, the Company entered into four volumetric
production payments with entities affiliated with Enron for net proceeds of
$121,498,000. Under the terms of these production payments, the Company was
required to deliver 70.1 BCF of natural gas and 770,000 barrels of oil over
periods ranging from three to six years.
Effective November 1, 1993, the four separate volumetric payment financings
described above between the Company and Enron were consolidated into one
production payment. The delivery schedules from the previously separate
production payments were not adjusted; however, delivery shortfalls on any
property can now be made up from excess production from any other property which
is dedicated to the production payment obligation. The consolidation also
provided that certain acreage previously committed to the production payments
was released and can be developed by the Company unburdened by the delivery
obligations of the production payment.
In connection with the purchase of interests in properties from ARCO in December
1993, a volumetric production payment from certain of the ARCO properties was
sold to Enron for net proceeds of $13,207,000. This production payment covered
approximately 7.3 BCF of natural gas to be delivered over 8 years.
In July 1994, the Company purchased additional interests in the properties
acquired from ARCO in December 1993. In connection with this transaction, a
volumetric production payment was sold to Enron for net proceeds of $4,353,000.
This production payment covered approximately 2.7 BCF of natural gas to be
delivered over 8 years.
The Company is required to deliver the scheduled volumes from the subject
properties or to make a cash payment for volumes produced but not delivered, in
combination not to exceed a specified percentage of monthly production. If
production levels are not sufficient to meet scheduled delivery commitments,
the Company must account for and make up such shortages, at market-based prices,
from future production.
The Company is responsible for royalties and for production costs associated
with operating the properties subject to the production payment agreements. The
Company may grant liens on properties subject to the production payment
agreements, but it must notify prospective lienholders that their rights are
subject to the prior rights of the production payment owner.
Amounts received under the production payments were recorded as deferred
revenue. Volumes associated with amortization of deferred revenue for the
years ended December 31, 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Net sales volume
attributable to production
Volumes delivered (1) payment deliveries (2)
--------------------- --------------------------
Natural Natural
Gas Oil Gas Oil
(MMCF) (MBBLS) (MMCF) (MBBLS)
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995 11,045 173 9,120 145
1994 19,985 218 16,005 182
1993 23,392 221 18,731 185
(1) Amounts settled in cash in lieu of volumes were $1,276,000, $1,611,381 and
$3,138,628 for the years ended December 31, 1995, 1994, and 1993,
respectively.
(2) Represents volumes required to be delivered to Enron affiliates net of
estimated royalty volumes.
</TABLE>
46
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(6) DEFERRED REVENUE (CONTINUED):
- -------------------------------------------------------------------------------
Future amortization of deferred revenue, based on the scheduled deliveries under
the production payment agreements, is as follows:
<TABLE>
<CAPTION>
Net sales volumes
Volumes required to be attributable to production
delivered to Enron payment deliveries (1)
---------------------- --------------------------
Annual Natural Gas Oil Natural Gas Oil
Amortization (MMCF) (MBBLS) (MMCF) (MBBLS)
------------ ----------- ------- ----------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
1996 $ 7,546 3,721 87 2,895 74
1997 2,439 1,410 - 1,097 -
1998 1,592 892 - 694 -
Thereafter 3,560 1,994 - 1,552 -
------- ----- -- ----- --
$15,137 8,017 87 6,238 74
------- ----- -- ----- --
------- ----- -- ----- --
(1) Represents volumes required to be delivered to Enron net of estimated
royalty volumes.
</TABLE>
(7) INCOME TAXES:
- -------------------------------------------------------------------------------
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," (SFAS No. 109) on a prospective basis effective
January 1, 1993. The cumulative effect of this change in accounting for income
taxes of $2,060,000 was determined as of January 1, 1993 and was reported
separately in the consolidated statement of operations for the year ended
December 31, 1993.
The income tax expense (benefit) is different from amounts computed by applying
the statutory Federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Tax benefit at 35% of loss before
income taxes, cumulative effects of
changes in accounting principles and
extraordinary item $(6,367) (23,749) (3,747)
Change in the balance of the valuation
allowance for deferred tax assets
attributable to loss before income
taxes, cumulative effects of changes in
accounting principles and extraordinary item 5,732 23,220 2,034
Expiration of tax carryforwards 535 455 318
Other 93 83 45
------- ------- ------
Total income tax expense (benefit) $ (7) 9 (1,350)
------- ------- ------
------- ------- ------
</TABLE>
Deferred income taxes generally result from recognizing income and expenses at
different times for financial and tax reporting. These differences result in
part from capitalization of certain development, exploration and other costs
under the full cost method of accounting, recording proceeds from the sale of
properties in the full cost pool, and the provision for impairment of oil and
gas properties for financial accounting purposes.
47
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(7) INCOME TAXES (CONTINUED):
The components of the net deferred tax liability at December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 283 308
Accrual for retirement benefits 1,229 1,447
Accrual for medical benefits 2,216 2,037
Accrual for sales recorded on the entitlements method 2,990 3,642
Net operating loss carryforward 39,204 21,976
Depletion carryforward 6,958 6,958
Investment tax credit carryforward 3,219 3,674
Alternative minimum tax credit carryforward 2,206 2,206
Other 375 455
-------- -------
Total gross deferred tax assets 58,680 42,703
Less valuation allowance (46,524) (40,792)
-------- -------
Net deferred tax assets 12,156 1,911
Deferred tax liabilities:
Oil and gas properties, due to full cost method of accounting (12,156) (1,911)
-------- -------
Net deferred tax liability $ -- --
-------- -------
-------- -------
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1995 was an increase of $5,732,000.
The Alternative Minimum Tax (AMT) credit carryforward available to reduce
future Federal regular taxes aggregated $2,206,000 at December 31, 1995.
This amount may be carried forward indefinitely. Regular and AMT net
operating loss carryforwards at December 31, 1995 were $112,015,000 and
$109,779,000, respectively, and will expire in the years indicated below:
Regular AMT
-------- -------
(In Thousands)
2000 $ 2,665 4,143
2005 8,307 --
2008 28,999 31,800
2009 22,817 22,964
2010 49,227 50,872
-------- -------
$112,015 109,779
-------- -------
-------- -------
AMT net operating loss carryforwards can be used to offset 90% of AMT income
in future years.
Investment tax credit carryforwards available to reduce future Federal income
taxes aggregated $3,219,000 at December 31, 1995 and expire at various dates
through the year 2001. Percentage depletion carryforwards available to
reduce future Federal taxable income aggregated $19,879,000 at December 31,
1995. This amount may be carried forward indefinitely.
48
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(7) INCOME TAXES (CONTINUED):
The availability of some of these tax attributes to reduce current and future
taxable income of the Company is subject to various limitations under the
Internal Revenue Code. In particular, the Company's ability to utilize such
tax attributes could be limited due to the occurrence of an "ownership
change" within the meaning of Section 382 of the Internal Revenue Code
resulting from the Anschutz transaction in 1995. Under the general
provisions of Section 382 of the Code, the Company's net operating loss
carryforwards will be subject to an annual limitation as to their use of
approximately $5,700,000. Even though the Company is limited in its ability
to use the net operating loss carryovers under these provisions of Section
382, it may be entitled to use these net operating loss carryovers to offset
(a) gains recognized in the five years following the ownership change on the
disposition of certain assets, to the extent that the value of the assets
disposed of exceeds their tax basis on the date of the ownership change or
(b) any item of income which is properly taken into account in the five years
following the ownership change but which is attributable to periods before
the ownership change ("built-in gain"). The ability of the Company to use
these net operating loss carryovers to offset built-in gain first requires
that the Company have total built-in gains at the time of the ownership
change which are greater than a threshold amount. In addition, the use of
these net operating loss carryforwards to offset built-in gain cannot exceed
the amount of the total built-in gain. The Company has not finalized its
calculation of the amount of built-in gains at the date of the ownership
change, but estimates that its ability to fully utilize its net operating
loss carryforwards may be limited by these provisions.
Due to limitations in the Internal Revenue Code, other than the Section 382
limitations discussed above, the Company believes it is unlikely that it will
be able to use any significant portion of its investment tax credit
carryforwards before they expire.
(8) PREFERRED STOCK:
$.75 CONVERTIBLE PREFERRED STOCK:
The Company has 10,000,000 shares of $.75 Convertible Preferred Stock
authorized, par value $.01 per share, of which there were 2,880,173 shares
outstanding at December 31, 1995 and 2,880,973 shares outstanding at December
31, 1994, with an aggregate liquidation preference of $28,801,730 at December
31, 1995 and $28,809,730 at December 31, 1994. This stock is convertible at
any time, at the option of the holder, at the rate of .7 shares of common
stock for each share of $.75 Convertible Preferred Stock, subject to
adjustment upon occurrence of certain events. During 1995, 800 shares of
$.75 Convertible Preferred Stock were converted into 560 shares of common
stock; there were no conversions in 1994; and during 1993, 248,817 shares of
$.75 Convertible Preferred Stock were converted into 174,172 shares of common
stock. The $.75 Convertible Preferred Stock is redeemable, in whole or in
part, at the option of the Company, at any time after the earlier of (i) July
1, 1996 or (ii) the date on which the last reported sales price of the common
stock will have been $37.50 or higher for at least 20 of the prior 30 trading
days, at a redemption price of $10.17 per share during the twelve-month
period which began July 1, 1995 and declining to $10.00 per share at July 1,
1996 and thereafter, including accumulated and unpaid dividends. Cumulative
annual dividends of $.75 per share are payable quarterly, in arrears, on the
first day of February, May, August and November, when and as declared. Until
December 31, 1993, the Company was required to pay such dividends in shares
of common stock. After such date, dividends may be paid in cash or, at the
Company's election, in shares of common stock or in a combination of cash and
common stock. However, the Company was prohibited from paying cash dividends
on its $.75 Convertible Preferred Stock after the February 1, 1995 dividend
due to restrictions contained in the Credit Facility with its lending banks.
Common stock delivered in payment of dividends is valued for dividend payment
purposes at between 75% and 90%, depending on trading volume, of the average
last reported sales price of the common stock during a specified period prior
to the record date for the dividend payment. During any period in which
dividends on preferred stock are in arrears, no dividends or distributions,
except for dividends paid in shares of common stock, may be paid or declared
on the common stock, nor may any shares of common stock be acquired by the
Company.
49
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(8) PREFERRED STOCK (CONTINUED):
SECOND SERIES PREFERRED STOCK:
The Company has 620,000 shares of Second Series Preferred Stock authorized,
par value $.01 per share, of which there were 620,000 shares outstanding at
December 31, 1995, with an aggregate liquidation preference of $11,160,000 at
December 31, 1995. Each share of Second Series Preferred Stock (1) is
convertible into 2 shares of common stock, which conversion may be made from
time to time on or before July 27, 2000, but which in any event shall be made
on July 27, 2000, (2) has no right to vote, (3) has the right to receive
dividends on the dates and in the form that dividends are payable on the
common stock, in each case in an amount equal to the amount of such dividend
payable on the number of shares of common stock into which such share of
Second Series Preferred Stock shall be convertible immediately preceding the
record date for the determination of the shareholders entitled to receive
such dividend, and (4) has the right, upon any liquidation, dissolution or
winding up of the Company, before any distribution is made on any shares of
common stock, to be paid the amount of $18.00 and, after there shall have
been paid to each share of common stock the amount of $9.00, has the right to
receive distributions on the dates and in the form that distributions are
payable on the common stock, in each case in an amount equal to the amount of
such distributions payable on the number of shares of common stock into which
such share of Second Series Preferred Stock is convertible (assuming for such
purpose that such conversion were possible) immediately preceding the record
date for the determination of the shareholders entitled to receive such
distribution. The rights of the holders of the Second Series Preferred Stock
to receive dividends are junior and subordinate to the rights of the holders
of the $.75 Convertible Preferred Stock to the same extent that the rights of
the holders of the common stock are subordinate in right to receive dividends
to the rights of the holders of the $.75 Convertible Preferred Stock to
receive dividends, and the rights of the holders of the Second Series
Preferred Stock rank pari passu with the Company's $.75 Convertible Preferred
Stock as to liquidation preference.
(9) COMMON STOCK:
COMMON STOCK:
The Company has 200,000,000 shares of common stock authorized, par value $.10
per share. On January 5, 1996 a 5-to-1 reverse stock split was approved by
the Company's shareholders. The reverse split became effective on January 8,
1996. Unless otherwise indicated, all share amounts have been adjusted to
give effect to the 5-to-1 reverse stock split.
There were 10,660,291 and 5,659,042 shares of common stock issued at December
31, 1995 and 1994, respectively, with 1,060,000 and 21,188 shares held by the
Company as treasury shares at December 31, 1995 and 1994, respectively. The
common stock is entitled to one vote per share. Prior to May 1993 the
Company also had Class B stock which had superior voting rights to the
Company's common stock, had limited transferability and was not traded in any
public market but was convertible at any time into shares of common stock on
a share-for-share basis. The Company's Restated Certificate of Incorporation
was amended on May 12, 1993 to reclassify each share of Class B stock into
1.1 shares of common stock.
On January 31, 1996, 13,200,000 shares of common stock were sold for $11.00
per share in a public offering. Of this amount 1,060,000 shares were sold by
Saxon and 12,140,000 were sold by Forest. The net proceeds to Forest from the
issuance of shares totalled approximately $125,600,000 after deducting
issuance costs and underwriting fees.
On June 15, 1993, the Company issued 2,216,000 shares of common stock for
$25.00 per share in a public offering. The net proceeds from the issuance of
the shares totalled approximately $51,506,000 after deducting issuance costs
and underwriting fees.
In October 1993, the Board of Directors adopted a shareholders' rights plan
(the Plan) and entered into the Rights Agreement. The Company paid a dividend
distribution of one Preferred Share Purchase Right (the Rights) on each
outstanding share of the Company's common stock. The Rights are exercisable
only if a person or group acquires 20% or more of the Company's common stock
or announces a tender offer which would result in ownership by a person or
group of 20% or more of the common stock. Each Right initially entitles each
shareholder to buy 1/100th of a share of a new series of Preferred Stock at
an exercise price of $30.00, subject to adjustment upon certain occurrences.
Each 1/100th of a share of such new Preferred Stock that can be purchased
upon exercise of a Right has economic terms designed to approximate the value
of one share of common stock. The Rights will expire on October 29, 2003,
unless extended or terminated earlier. In connection with the Anschutz
transaction, the Company amended the Rights Agreement to exempt from the
provisions of the Rights Agreement shares of common stock acquired by
Anschutz and JEDI in the Anschutz and JEDI transactions (including shares
later acquired pursuant to the conversion of the Second Series Preferred
Stock or the exercise of the A Warrant or the Anschutz option. The amendment
to the Rights Agreement did not exempt other shares of common stock acquired
by Anschutz or JEDI from the provisions of the Rights Agreement.
50
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(9) COMMON STOCK (continued):
WARRANTS:
The Company has outstanding 1,244,715 warrants to purchase shares of its
common stock (the Public Warrants). Each Public Warrant entitles the holder
to purchase one-fifth share of common stock at a price of $3.00, is
non-callable and expires on October 1, 1996.
The Company has outstanding the A Warrant that is held by Anschutz. The A
Warrant entitles the holder to purchase 3,888,888 shares of common stock at a
price of $10.50 per share and expires on July 27, 1998.
In December 1995, the Company assumed JEDI's obligations under an option to
purchase 2,250,000 shares of Common Stock (the Anschutz Option). Upon the
exercise of the Anschutz Option, the Company will receive an amount per share
equal to the lesser of (a) $10.00 plus 18% per annum from July 27, 1995 to
the date of exercise of the option, or (b) $15.50. The Anschutz Option
expires on July 27, 1998.
STOCK OPTIONS:
In March 1992, the Company adopted the 1992 Stock Option Plan under which
non-qualified stock options may be granted to key employees and non-employee
directors. The aggregate number of shares of common stock which the Company
may issue under options granted pursuant to this plan may not exceed 10% of
the total number of shares outstanding or issuable at the date of grant
pursuant to outstanding rights, warrants, convertible or exchangeable
securities or other options. The exercise price of an option may not be less
than 85% of the fair market value of one share of the Company's common stock
on the date of grant. The options vest 20% on the date of grant and an
additional 20% on each grant anniversary date thereafter. A summary of stock
option activity related to the Plan is as follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
-------- -------------
<S> <C> <C>
Options outstanding at December 31, 1992 348,000 $ 15.00
Granted 305,000 25.00
Exercised (26,400) 15.00
Cancelled or surrendered (15,800) 15.00
------- ------------
Options outstanding at December 31, 1993 610,800 $15.00-25.00
Granted 62,000 25.00
Exercised (7,000) 15.00
Cancelled or surrendered (7,000) 25.00
------- ------------
Options outstanding at December 31, 1994 658,800 $15.00-25.00
GRANTED -- --
EXERCISED -- --
CANCELLED OR SURRENDERED (30,800) --
------- ------------
OPTIONS OUTSTANDING AT DECEMBER 31, 1995 628,000 $15.00-25.00
------- ------------
------- ------------
OPTIONS EXERCISABLE AT DECEMBER 31, 1995 461,200 $15.00-25.00
------- ------------
------- ------------
</TABLE>
On February 1, 1996 the Company offered option holders employed by the
Company the opportunity to surrender their existing options exercisable at
$15.00 to $25.00 per share in exchange for options exercisable at $11.25 per
share. Pursuant to this offer, options to purchase 491,800 shares of common
stock at $15.00 to $25.00 per share were cancelled and options to purchase
474,400 shares at $11.25 per share were granted. Concurrently, the Company
granted certain employees additional options to purchase 99,000 shares at
$11.25 per share.
51
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(10) EMPLOYEE BENEFITS:
PENSION PLANS:
The Company has a qualified defined benefit pension plan (Pension Plan). The
Pension Plan has been curtailed and all benefit accruals were suspended
effective May 31, 1991.
The benefits under the Pension Plan are based on years of service and the
employee's average compensation during the highest consecutive sixty-month
period in the fifteen years prior to retirement. No contribution was made to
the Plan in 1995, 1994 or 1993. The following table sets forth the Pension
Plan's funded status and amounts recognized in the Company's consolidated
financial statements at December 31:
<TABLE>
<CAPTION>
1995 1994
-------- -------
(In Thousands)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
(all benefits are vested) $(27,485) (23,953)
-------- -------
-------- -------
Projected benefit obligation for service rendered to date $(27,485) (23,953)
Plan assets at fair market value, consisting primarily of listed stocks,
bonds and other fixed income obligations 24,270 23,443
-------- -------
Unfunded pension liability (3,215) (510)
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions 4,133 1,468
-------- -------
Pension asset recognized in the balance sheet $ 918 958
-------- -------
-------- -------
</TABLE>
For 1995, the discount rate used in determining the actuarial present value
of the projected benefit obligation was 7.25% and the expected long-term rate
of return on assets was 9%. For 1994 the discount rate used in determining
the actuarial present value of the projected benefit obligation was 9% and
the expected long-term rate of return on assets was 9%. For 1993, the
discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and the expected long-term rate of
return on assets was 9%.
The components of net pension expense (benefit) for the years ended December
31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
(In Thousands)
<S> <C> <C> <C>
Net pension expense (benefit) included the following components:
Interest cost on projected benefit obligation $ 2,049 1,976 2,039
Actual return on plan assets (3,243) (245) (3,534)
Net amortization and deferral 1,234 (1,955) 1,441
------- ------ ------
Net pension expense (benefit) $ 40 (224) (54)
------- ------ ------
------- ------ ------
</TABLE>
The Company has a non-qualified unfunded supplementary retirement plan that
provides certain officers with defined retirement benefits in excess of
qualified plan limits imposed by Federal tax law. Benefit accruals under this
plan were suspended effective May 31, 1991 in connection with suspension of
benefit accruals under the Pension Plan. At December 31, 1995 the projected
benefit obligation under this plan totaled $639,000, which amount is included
in other liabilities in the accompanying balance sheet. The projected
benefit obligation is determined using the same discount rate as is used for
calculations for the Pension Plan.
52
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(10) EMPLOYEE BENEFITS (CONTINUED):
In 1993 as a result of the change in the discount rate for the Pension Plan
and the supplementary retirement plan, the Company recorded a liability of
$3,038,000, representing the unfunded pension liability, and a corresponding
decrease in capital surplus. As a result of the increase in the discount
rate for the Pension Plan and the supplementary retirement plan in 1994, the
Company reduced the liability representing the unfunded pension liability by
approximately $1,570,000, with a corresponding increase in capital surplus.
As a result of the decrease in the discount rate for the Pension Plan and the
supplementary retirement plan in 1995, the Company increased the liability
representing the pension liability by approximately $2,836,000, with a
corresponding decrease in capital surplus.
RETIREMENT SAVINGS PLAN:
The Company sponsors a qualified tax deferred savings plan in accordance with
the provisions of Section 401(k) of the Internal Revenue Code. Employees may
defer up to 10% of their compensation, subject to certain limitations. The
Company matches the employee contributions up to 5% of employee compensation.
In the first six months of 1995 and in 1994 and 1993, Company contributions
were made using treasury stock. In the last six months of 1995, Company
contributions were made by issuing authorized but unissued shares. The
expense associated with the Company's contribution was $423,000 in 1995,
$516,000 in 1994 and $367,000 in 1993.
Effective January 1, 1992 the plan was amended to include profit-sharing
contributions by the Company. In 1995 and 1994, the Company did not make any
profit sharing contributions. The Company's profit-sharing contributions
were made using common stock valued at $276,000 in 1993.
ANNUAL INCENTIVE PLAN:
The Forest Oil Corporation Annual Incentive Plan (the Incentive Plan), which
became effective January 1, 1992, permitted participating employees to earn
annual bonus awards payable in cash or in shares of the Company's Common
Stock, generally based in part upon the Company attaining certain levels of
performance. In 1995 and 1994, no bonuses were awarded. In 1993, the
Company accrued bonuses of $426,000 under the Incentive Plan. Amounts
awarded are disbursed in equal annual installments over the succeeding
three-year period. This plan was terminated effective January 1, 1996.
EXECUTIVE RETIREMENT AGREEMENTS:
The Company entered into agreements in December 1990 (the Agreements) with
certain former executives and directors (the Retirees) whereby each executive
retired from the employ of the Company as of December 28, 1990. Pursuant to
the terms of the Agreements, the Retirees are entitled to receive
supplemental retirement payments from the Company in addition to the amounts
to which they are entitled under the Company's retirement plan. In addition,
the Retirees and their spouses are entitled to lifetime coverage under the
Company's group medical and dental plans, tax and other financial services,
and payments by the Company in connection with certain club membership dues.
The Retirees also continued to participate in the Company's royalty bonus
program until December 31, 1995. The Company has also agreed to maintain
certain life insurance policies in effect at December 1990, for the benefit
of each of the Retirees.
The Company's obligation to one retiree under a revised retirement agreement
is payable in Common Stock or cash, at the Company's option, in May of each
year from 1993 through 1996 at approximately $190,000 per year with the
balance of $149,000 payable in May 1997. The Agreements for the other six
Retirees provide for supplemental retirement payments totalling approximately
$970,000 per year through 1998 and approximately $770,000 per year in 1999
and 2000.
The $3,617,000 present value of the amounts due under the agreements,
discounted at 13%, is included in other current and long-term liabilities.
53
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(10) EMPLOYEE BENEFITS (CONTINUED):
LIFE INSURANCE:
The Company provides life insurance benefits for certain key employees and
retirees under split dollar life insurance plans. The premiums paid for the
life insurance policies were $921,000, $916,000 and $861,000 in 1995, 1994
and 1993, respectively, including $831,000, $831,000 and $766,000 paid for
policies for retired executives. Under the life insurance plans, the Company
is assigned a portion of the benefits which is designed to recover the
premiums paid.
POSTRETIREMENT BENEFITS:
The Company accrues expected costs of providing postretirement benefits to
employees, their beneficiaries and covered dependents in accordance with
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," (SFAS No. 106). The Company
adopted the provisions of SFAS No. 106 in the first quarter of 1993. The
estimated accumulated postretirement benefit obligation as of January 1, 1993
was approximately $4,822,000. This amount, reduced by applicable income tax
benefits, was charged to operations in the first quarter of 1993 as the
cumulative effect of a change in accounting principle.
The following table sets forth the status of the postretirement benefit plan
and the amounts recognized in the Company's consolidated financial statements
at December 31:
1995 1994
------ -----
(In Thousands)
Retired participants $4,803 4,427
Active participants fully eligible for benefits 201 156
Other active participants 1,026 873
------ -----
Accumulated postretirement benefit obligation (APBO) 6,030 5,456
Plan assets at fair market value -- --
------ -----
APBO in excess of plan assets 6,030 5,456
Unrecognized loss (595) (330)
------ -----
Accrued postretirement benefit liability $5,435 5,126
------ -----
------ -----
The discount rates used in determining the actuarial present value of the
APBO at December 31, 1995, 1994 and 1993 were 7.25%, 9% and 7.5%,
respectively.
The components of postretirement benefit expense for the years ended December
31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
---- ---- ----
(In Thousands)
Service cost $ 83 103 86
Interest cost on APBO 421 407 397
---- ---- ----
Postretirement benefit cost $504 510 483
---- ---- ----
---- ---- ----
54
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
For 1995, a 1% increase in health care cost trends would have increased the
APBO by $793,000 and the service interest costs by $62,000.
(11) RELATED PARTY TRANSACTIONS:
Prior to 1995, the Company used a real estate complex (the Complex) owned
directly or indirectly by certain stockholders and members of the Board of
Directors for Company-sponsored seminars, the accommodation of business
guests, the housing of personnel attending corporate meetings and for other
general business purposes. In 1994, in connection with the Company's
termination of usage, the Company paid $662,000 on account of the business
use of such property, and an additional $300,000 as a partial reimbursement
of deferred maintenance costs. The Company incurred expenses for its use of
the Complex of $635,000 in 1993.
John F. Dorn resigned as an executive officer and director of the Company in
1993. The Company agreed to pay Mr. Dorn his salary at the time of his
resignation through September 30, 1996. In addition, the Company provided
certain other benefits and services to Mr. Dorn. The present value of the
severance package was estimated at $500,000, which amount was recorded as an
expense and a liability at December 31, 1993. In March 1994, the Company
sold certain non-strategic oil and gas properties to an entity controlled by
Mr. Dorn and another former executive officer of the Company for net
proceeds, after costs of sale and purchase price adjustments, of $3,661,000.
The Company established the sales price based upon an opinion from an
independent third party.
(12) COMMITMENTS AND CONTINGENCIES:
Future rental payments for office facilities and equipment under the
remaining terms of noncancelable leases are $1,154,000, $962,000, $953,000,
$985,000 and $851,000 for the years ending December 31, 1996 through 2000,
respectively. These amounts include future rentals payable by Saxon.
Net rental payments applicable to exploration and development activities and
capitalized in the oil and gas property accounts aggregated $972,000 in 1995,
$851,000 in 1994 and $688,000 in 1993. Net rental payments charged to
expense amounted to $3,529,000 in 1995, $3,512,000 in 1994 and $3,098,000 in
1993. Rental payments include the short-term lease of vehicles. None of the
leases are accounted for as capital leases.
The Company, in the ordinary course of business, is a party to various legal
actions. In the opinion of management, none of these actions, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition, liquidity or results of operations.
(13) FINANCIAL INSTRUMENTS:
The Company is exposed to off-balance-sheet risks associated with energy swap
agreements arising from movements in the prices of oil and natural gas and
from the unlikely event of non-performance by the counterparty to the swap
agreements.
In order to hedge against the effects of declines in oil and natural gas
prices, the Company enters into energy swap agreements with third parties and
accounts for the agreements as hedges based on analogy to the criteria set
forth in Statement of Financial Accounting Standards No. 80, "Accounting for
Futures Contracts". In a typical swap agreement, the Company receives the
difference between a fixed price per unit of production and a price based on
an agreed-upon third party index if the index price is lower. If the index
price is higher, the Company pays the difference. The Company's current
swaps are settled on a monthly basis. For the years ended December 31, 1995,
1994 and 1993, the Company's gains (losses) under its swap agreements were
$3,536,000, $1,810,000 and $(2,050,000) respectively.
55
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(13) FINANCIAL INSTRUMENTS (Continued):
The following table indicates outstanding energy swaps of the Company at
December 31, 1995:
<TABLE>
<CAPTION>
Product Volume Fixed Price Duration
----------- ------------------------- ----------------- -----------
<S> <C> <C> <C>
Natural Gas 194 to 7,091 MMBTU/day $2.1875 to $2.535 1/96 -12/99
Natural Gas 10,000 MMBTU/day $2.00 to $2.37 1/96 -12/97
Natural Gas 100 to 300 MMBTU/day $2.1855 to $3.003 1/96 -12/02
Natural Gas 5,000 to 10,000 MMBTU/day $1.90 to $2.0225 1/96 -12/96
Natural Gas 5,000 MMBTU/day $1.9225 4/96 -12/96
Natural Gas 1,500 to 2,000 MMBTU/day $1.0282 (1) 1/96 -6/98
Oil 661 BBLS/day $16.70 1/96 -4/96
Oil 659 BBLS/day $17.75 1/96 -6/96
Oil 332 BBLS/day $17.90 5/96 -12/96
Oil 325 BBLS/day $16.7345 1/96 -6/96
</TABLE>
________________________
(1) Based on Alberta Energy Company "C" (AECO "C") basis. All other swaps
are settled on the basis of New York Mercantile Exchange (NYMEX) prices.
Set forth below is the estimated fair value of certain on and off-balance
sheet financial instruments, along with the methods and assumptions used to
estimate such fair values as of December 31, 1995:
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLE:
The carrying amount of these instruments approximates fair value due to their
short maturity.
NONRECOURSE SECURED LOAN:
The fair value of the Company's nonrecourse secured loan has been estimated
as approximately $43,147,000 by discounting the projected future cash
payments required under the agreement by 10.5%.
PRODUCTION PAYMENT OBLIGATION:
The fair value of the Company's production payment obligation has been
estimated as approximately $15,188,000 by discounting the projected future
cash payments required under the agreement by 10.5%.
SENIOR SUBORDINATED NOTES:
The fair value of the Company's 11 1/4% Senior Subordinated Notes was
approximately $104,000,000, based upon quoted market prices of the Notes.
ENERGY SWAP AGREEMENTS:
The fair value of the Company's energy swap agreements was approximately
$1,007,000, based upon the estimated net amount the Company would have to pay
to terminate the agreements.
56
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(14) MAJOR CUSTOMERS:
The Company's sales of oil and natural gas to individual customers which
exceeded 10% of the Company's total sales (exclusive of the effects of energy
swaps and hedges) were:
1995 1994 1993
---- ---- ----
(In Thousands)
Enron Affiliates (A) $30,916 58,805 63,075
Chevron USA Production Company 11,893 12,829 --
(A) The amount shown for Enron Affiliates includes oil and natural gas sales
to Enron Gas Marketing Inc., Enron Oil & Gas Company, EOTT Energy
Corporation, Cactus Funding Corporation, Cactus Hydrocarbon III Limited
Partnership, Enron Gas Services Corporation and Enron Reserve Acquisition.
Approximately $17,217,000, $29,046,000 and $32,702,000 represent sales
recorded for deliveries under volumetric production payments in the years
ended December 31, 1995, 1994 and 1993, respectively.
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- ------- ------- -------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C>
1995
- ----
REVENUE $ 22,361 20,550 17,617 21,928
-------- ------ ------- -------
-------- ------ ------- -------
EARNINGS FROM OPERATIONS $ 14,900 12,740 10,177 12,914
-------- ------ ------- -------
-------- ------ ------- -------
NET LOSS $ (3,144) (4,815) (6,574) (3,463)
-------- ------ ------- -------
-------- ------ ------- -------
NET LOSS ATTRIBUTABLE TO COMMON STOCK $ (3,684) (5,355) (7,114) (4,003)
-------- ------ ------- -------
-------- ------ ------- -------
PRIMARY AND FULLY DILUTED LOSS PER SHARE $ (.65) (.94) (.84) (.42)
-------- ------ ------- -------
-------- ------ ------- -------
1994
- ----
Revenue $ 32,543 32,977 28,207 22,220
-------- ------ ------- -------
-------- ------ ------- -------
Earnings from operations $ 24,241 23,600 19,387 13,763
-------- ------ ------- -------
-------- ------ ------- -------
Income (loss) before cumulative effects of changes in
accounting principles and extraordinary item $ 236 (265) (32,873) (34,951)
-------- ------ ------- -------
-------- ------ ------- -------
Net loss $(13,754) (265) (32,873) (34,951)
-------- ------ ------- -------
-------- ------ ------- -------
Net loss attributable to common stock $(14,294) (805) (33,414) (35,491)
-------- ------ ------- -------
-------- ------ ------- -------
Primary and fully diluted loss per share before
cumulative effects of changes in accounting
principles and extraordinary item $ (.05) (.14) (5.94) (6.30)
-------- ------ ------- -------
-------- ------ ------- -------
Primary and fully diluted loss per share $ (2.55) (.14) (5.94) (6.30)
-------- ------ ------- -------
-------- ------ ------- -------
</TABLE>
57
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED):
- --------------------------------------------------------------------------------
The following information is presented in accordance with Statement of
Financial Accounting Standards No. 69, "Disclosure about Oil and Gas
Producing Activities," (SFAS No. 69), except as noted.
(A) COSTS INCURRED IN OIL AND GAS EXPLORATION AND DEVELOPMENT ACTIVITIES -
The following costs were incurred in oil and gas exploration and
development activities during the years ended December 31, 1995, 1994 and
1993:
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
-------- ------ -------
(In Thousands)
<S> <C> <C> <C>
1995
- ----
Property acquisition costs (undeveloped
leases and proved properties) $ 844 25,963(1) 26,807
Exploration costs 12,739 - 12,739
Development costs 13,198 - 13,198
-------- ------ -------
Total $ 26,781 25,963 52,744
-------- ------ -------
-------- ------ -------
1994
- ----
Property acquisition costs (undeveloped
leases and proved properties) $ 9,762 - 9,762
Exploration costs 15,693 - 15,693
Development costs 17,089 - 17,089
-------- ------ -------
Total $ 42,544 - 42,544
-------- ------ -------
-------- ------ -------
1993
- ----
Property acquisition costs (undeveloped
leases and proved properties) $144,916 - 144,916
Exploration costs 5,433 - 5,433
Development costs 20,472 - 20,472
-------- ------ -------
Total $170,821 - 170,821
-------- ------ -------
-------- ------ -------
</TABLE>
(1) Consists of the allocation of purchase price to the oil and gas
properties acquired in the purchase of Saxon.
(B) AGGREGATE CAPITALIZED COSTS - The aggregate capitalized costs relating
to oil and gas activities were incurred as of the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993
---------- ------------ ---------
(In Thousands)
<S> <C> <C> <C>
Costs related to proved properties $1,169,636 1,109,158 1,066,855
Costs related to unproved properties:
Costs subject to depletion 18,011 32,288 32,585
Costs not subject to depletion 28,380 30,441 41,216
---------- ------------ ---------
1,216,027 1,171,887 1,140,656
Less accumulated depletion and valuation allowance 941,482 895,335 778,226
---------- ------------ ---------
$ 274,545 276,552 362,430
---------- ------------ ---------
---------- ------------ ---------
</TABLE>
58
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(C) RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES - Results of operations
from producing activities for 1995, 1994 and 1993 are presented below.
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Oil and gas sales $82,275 114,541 102,883
Production expense 22,463 22,384 19,540
Depletion expense 42,973 64,883 59,759
Provision for impairment of oil and
gas properties - 58,000 -
------- -------- -------
65,436 145,267 79,299
------- -------- -------
Results of operations from producing activities $16,839 (30,726) 23,584
------- -------- -------
------- -------- -------
</TABLE>
59
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(D) ESTIMATED PROVED OIL AND GAS RESERVES - The Company's estimate of its
proved and proved developed future net recoverable oil and gas reserves and
changes for 1993, 1994 and 1995 follows. The Canadian reserves at December
31, 1995 represent 100% of the reserves owned by Saxon, a consolidated
subsidiary in which the Company holds a 56% economic interest.
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions; i.e.,
prices and costs as of the date the estimate is made. Prices include
consideration of changes in existing prices provided only by contractual
arrangement, including energy swap agreements (see Note 13), but not on
escalations based on future conditions.
Proved developed oil and gas reserves are reserves that can be expected to be
recovered through existing wells with existing equipment and operating
methods. Additional oil and gas expected to be obtained through the
application of fluid injection or other improved mechanisms of primary
recovery are included as "proved developed reserves" only after testing by a
pilot project or after the operation of an installed program has confirmed
through production response that increased recovery will be achieved.
The Company's presentation of estimated proved oil and gas reserves excludes,
for each of the years presented, those quantities attributable to future
deliveries required under volumetric production payments. In order to
calculate such amounts, the Company has assumed that deliveries under
volumetric production payments are made as scheduled at expected BTU factors,
and that delivery commitments are satisfied through delivery of actual
volumes as opposed to cash settlements.
The Company has also presented, as additional information, proved oil and gas
reserves including quantities attributable to future deliveries required
under volumetric production payments. The Company believes that this
information is informative to readers of its financial statements as the
related oil and gas property costs and deferred revenue are included on the
Company's balance sheets for each of the years presented. This additional
information is not presented in accordance with SFAS No. 69; however, the
Company believes this additional information is useful in assessing its
reserve acquisitions and financial position on a comprehensive basis.
60
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIQUIDS GAS
--------------------------- ----------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 6,973 - 6,973 164,421 - 164,421
Revisions of previous estimates 507 - 507 17,874 - 17,874
Extensions and discoveries 201 - 201 8,395 - 8,395
Production (1,308) - (1,308) (22,383) - (22,383)
Sales of reserves in place (280) - (280) (18,941) - (18,941)
Purchases of reserves in place 1,704 - 1,704 94,730 - 94,730
------ ------ ------ ------- ------- -------
Balance at December 31, 1993 7,797 - 7,797 244,096 - 244,096
Additional disclosures:
Volumes attributable to volumetric
production payments 401 - 401 29,286 - 29,286
------ ------ ------ ------- ------- -------
Balance at December 31, 1993, including
volumes attributable to volumetric
production payments 8,198 - 8,198 273,382 - 273,382
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
Balance at December 31, 1993 7,797 - 7,797 244,096 - 244,096
Revisions of previous estimates 989 - 989 7,848 - 7,848
Extensions and discoveries 41 - 41 9,894 - 9,894
Production (1,361) - (1,361) (32,043) - (32,043)
Sales of reserves in place (170) - (170) (6,377) - (6,377)
Purchases of reserves in place 17 - 17 8,220 - 8,220
------ ------ ------ ------- ------- -------
Balance at December 31, 1994 7,313 - 7,313 231,638 - 231,638
Additional disclosures:
Volumes attributable to volumetric
production payments 219 - 219 15,358 - 15,358
------ ------ ------ ------- ------- -------
Balance at December 31, 1994, including
volumes attributable to volumetric
production payments 7,532 - 7,532 246,996 - 246,996
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
Balance at December 31, 1994 7,313 - 7,313 231,638 - 231,638
REVISIONS OF PREVIOUS ESTIMATES (227) - (227) 2,398 - 2,398
EXTENSIONS AND DISCOVERIES 18 - 18 6,861 - 6,861
PRODUCTION (1,028) - (1,028) (24,222) - (24,222)
SALES OF RESERVES IN PLACE (6) - (6) (2,438) - (2,438)
PURCHASES OF RESERVES IN PLACE 59 4,338 4,397 1,435 16,218 17,653
------ ------ ------ ------- ------- -------
BALANCE AT DECEMBER 31, 1995 6,129 4,338 10,467 215,672 16,218 231,890
ADDITIONAL DISCLOSURES:
VOLUMES ATTRIBUTABLE TO VOLUMETRIC
PRODUCTION PAYMENTS 74 - 74 6,238 - 6,238
------ ------ ------ ------- ------- -------
BALANCE AT DECEMBER 31, 1995, INCLUDING
VOLUMES ATTRIBUTABLE TO VOLUMETRIC
PRODUCTION PAYMENTS 6,203 4,338 10,541 221,910 16,218 238,128
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
PRO FORMA RESERVES, INCLUDING VOLUMES
ATTRIBUTABLE TO VOLUMETRIC PRODUCTION PAYMENTS,
AFTER GIVING EFFECT TO THE CANADIAN FOREST
ACQUISITION (SEE NOTE 2) 6,203 14,585 20,788 221,910 108,256 330,166
------ ------ ------ ------- ------- -------
------ ------ ------ ------- ------- -------
</TABLE>
Purchases of reserves in place represent volumes recorded on the closing
dates of the acquisitions for financial accounting purposes. The revisions
of previous estimates for natural gas in 1994 include 5,833 MMCF for an
adjustment related to the change in accounting for oil and gas sales from the
sales method to the entitlements method.
61
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(D) ESTIMATED PROVED OIL AND GAS RESERVES (CONTINUED)
<TABLE>
<CAPTION>
OIL AND CONDENSATE GAS
--------------------------- ----------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
------ ------ ----- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Proved developed reserves at:
December 31, 1992 5,831 - 5,831 146,048 - 146,048
December 31, 1993 6,377 - 6,377 187,534 - 187,534
December 31, 1994 6,775 - 6,775 179,574 - 179,574
DECEMBER 31, 1995 5,678 3,188 8,866 156,471 14,184 170,655
Pro forma proved developed reserves
after giving effect to the Canadian
Forest acquisition (see Note 2) 5,678 13,435 19,113 156,471 106,222 262,693
</TABLE>
The Company's proved developed reserves, including amounts attributable to
volumetric production payments, are shown below. This disclosure is
presented as additional information and is not intended to represent required
disclosure pursuant to SFAS No. 69.
<TABLE>
<CAPTION>
OIL AND CONDENSATE GAS
--------------------------- ----------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
------ ------ ----- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Proved developed reserves, including
amounts attributable to volumetric
production payments at:
December 31, 1992 6,418 - 6,418 176,282 - 176,282
December 31, 1993 6,778 - 6,778 216,820 - 216,820
December 31, 1994 6,994 - 6,994 194,932 - 194,932
DECEMBER 31, 1995 5,752 3,188 8,940 162,709 14,184 176,893
Pro forma proved developed reserves,
including amounts attributable to
volumetric production payments after
giving effect to the Canadian Forest
acquisition (see Note 2) 5,752 13,435 19,187 162,709 106,222 268,931
</TABLE>
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS - Future oil
and gas sales and production and development costs have been estimated using
prices and costs in effect at the end of the years indicated, except in those
instances where the sale of oil and natural gas is covered by contracts,
energy swap agreements or volumetric production payments. At December 31,
1995, Canadian disclosures represents 100% of amounts attributable to the
reserves owned by Saxon, a consolidated subsidiary in which the Company holds
a 56% economic interest. All of the estimated reserves at December 31, 1994
and 1993 were in the United States. In the case of contracts, the applicable
contract prices, including fixed and determinable escalations, were used for
the duration of the contract. Thereafter, the current spot price was used.
Future oil and gas sales also include the estimated effects of existing
energy swap agreements as discussed in Note 13.
62
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (CONTINUED)
Future income tax expenses are estimated using the statutory tax rate of 35%.
Estimates for future general and administrative and interest expenses have
not been considered.
Changes in the demand for oil and natural gas, inflation and other factors
make such estimates inherently imprecise and subject to substantial revision.
This table should not be construed to be an estimate of the current market
value of the Company's proved reserves. Management does not rely upon the
information that follows in making investment decisions.
The Company's presentation of the standardized measure of discounted future
net cash flows and changes therein excludes, for each of the years presented,
amounts attributable to future deliveries required under volumetric
production payments. In order to calculate such amounts, the Company has
assumed that deliveries under volumetric production payments are made as
scheduled, that production costs corresponding to the volumes delivered are
incurred by the Company at average rates for the properties subject to the
production payments, and that delivery commitments are satisfied through
delivery of actual volumes as opposed to cash settlements.
The Company has also presented, as additional information, the standardized
measure of discounted future net cash flows and changes therein including
amounts attributable to future deliveries required under volumetric
production payments. The Company believes that this information is
informative to readers of its financial statements because the related oil
and gas property costs and deferred revenue are shown on the Company's
balance sheets for each of the years presented. This additional information
is not required to be presented in accordance with SFAS No. 69; however, the
Company believes this additional information is useful in assessing its
reserve acquisitions and financial position on a comprehensive basis.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------
UNITED
STATES CANADA TOTAL
--------- ------- --------
(In Thousands)
<S> <C> <C> <C>
Future oil and gas sales $ 554,609 93,021 647,630
Future production and development costs (195,399) (43,060) (238,459)
--------- ------- --------
Future net revenue 359,210 49,961 409,171
10% annual discount for estimated timing of cash flows (122,528) (19,108) (141,636)
--------- ------- --------
Present value of future net cash flows before income taxes 236,682 30,853 267,535
Present value of future income tax expense (8,855) (1,763) (10,618)
--------- ------- --------
Standardized measure of discounted future net cash flows 227,827 29,090 256,917
Additional disclosures:
Amounts attributable to volumetric production payments 8,476 - 8,476
--------- ------- --------
Total discounted future net cash flows, including amounts
attributable to volumetric production payments $ 236,303 29,090 265,393
--------- ------- --------
--------- ------- --------
Pro forma standardized measure of discounted future net
cash flows, including amounts attributable to
volumetric production payments, after giving
effect to the Canadian Forest acquisition (see Note 2) $ 236,303 105,849 342,152
--------- ------- --------
--------- ------- --------
</TABLE>
63
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (CONTINUED)
Undiscounted future income tax expense was $22,316,000 in the United States
and $2,924,000 in Canada at December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
--------- --------
(In Thousands)
<S> <C> <C>
Future oil and gas sales $ 502,186 662,265
Future production and development costs (193,376) (240,145)
--------- --------
Future net revenue 308,810 422,120
10% annual discount for estimated timing of cash flows (100,480) (138,917)
--------- --------
Present value of future net cash flows before income taxes 208,330 283,203
Present value of future income tax expense (781) (21,027)
--------- --------
Standardized measure of discounted future net cash flows 207,549 262,176
Additional disclosures:
Amounts attributable to volumetric production payments 22,600 36,877
--------- --------
Total discounted future net cash flows, including amounts
attributable to volumetric production payments $ 230,149 299,053
--------- --------
--------- --------
</TABLE>
Undiscounted future income tax expense was $1,348,000 at December 31, 1994
and $35,028,000 at December 31, 1993.
64
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (CONTINUED)
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES - An analysis of the changes in the
standardized measure of discounted future net cash flows during each of the
last three years is as follows. At December 31, 1995, Canadian disclosures
represent amounts attributable to 100% of the reserves owned by Saxon, a
consolidated subsidiary in which the Company holds a 56% economic interest.
All of the estimated reserves at December 31, 1994 and 1993 were in the
United States.
<TABLE>
<CAPTION>
United
States Canada Total
-------- ------- -------
<S> <C> <C> <C>
1995
- ----
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, at beginning of year $207,549 - 207,549
Changes resulting from:
Sales of oil and gas, net of production costs (48,090) - (48,090)
Net changes in prices and future production costs 43,991 - 43,991
Net changes in future development costs (3,392) - (3,392)
Extensions, discoveries and improved recovery 7,231 - 7,231
Previously estimated development costs incurred during the period 7,633 - 7,633
Revisions of previous quantity estimates 127 - 127
Sales of reserves in place (3,114) - (3,114)
Purchases of reserves in place 865 30,853 31,718
Accretion of discount on reserves at beginning of year before
income taxes 23,102 - 23,102
Net change in income taxes (8,075) (1,763) (9,838)
-------- ------- -------
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, at end of year 227,827 29,090 256,917
Additional disclosures:
Amounts attributable to volumetric production payments 8,476 - 8,476
-------- ------- -------
Total discounted future net cash flows relating to proved
oil and gas reserves, including amounts attributable to
volumetric production payments, at end of year $236,303 29,090 265,393
-------- ------- -------
-------- ------- -------
Proforma standardized measure of discounted future net
cash flows, including amounts attributable to
volumetric production payments, after giving effect to
the Canadian Forest acquisition (see Note 2) $236,303 105,849 342,152
-------- ------- -------
-------- ------- -------
</TABLE>
65
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED) (CONTINUED):
- --------------------------------------------------------------------------------
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
1994 1993
-------- -------
(In Thousands)
<S> <C> <C>
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, at beginning of year $262,176 190,971
Changes resulting from:
Sales of oil and gas, net of production costs (69,607) (59,572)
Net changes in prices and future production costs (80,526) (22,010)
Net changes in future development costs 7,432 (18,724)
Extensions, discoveries and improved recovery 10,817 15,322
Previously estimated development costs incurred during the period 10,000 13,424
Revisions of previous quantity estimates 16,840 25,262
Sales of reserves in place (10,630) (28,802)
Purchases of reserves in place 8,467 127,418
Accretion of discount on reserves at beginning of year before
income taxes 32,334 24,558
Net change in income taxes 20,246 (5,671)
-------- -------
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, at end of year 207,549 262,176
Additional disclosures:
Amounts attributable to volumetric production payments 22,600 36,877
-------- -------
Total discounted future net cash flows relating to proved
oil and gas reserves, including amounts attributable to
volumetric production payments, at end of year $230,149 299,053
-------- -------
-------- -------
</TABLE>
66
<PAGE>
PART III
For information concerning Item 10 - Directors and Executive Officers of the
Registrant, Item 11 - Executive Compensation, Item 12 - Security Ownership of
Certain Beneficial Owners and Management and Item 13 - Certain Relationships
and Related Transactions, see the definitive Proxy Statement of Forest Oil
Corporation relative to the Annual Meeting of Shareholders to be held on May 8,
1996, which will be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference. For information concerning
Item 10 - Executive Officers of Registrant, see Part I - Item 4A.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements
1. Independent Auditors' Report
2. Consolidated Balance Sheets - December 31, 1995
and 1994
3. Consolidated Statements of Operations - Years
ended December 31, 1995, 1994 and 1993
4. Consolidated Statements of Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993
5. Consolidated Statements of Cash Flows - Years
ended December 31, 1995, 1994 and 1993
6. Notes to Consolidated Financial Statements -
Years ended December 31, 1995, 1994 and 1993
(2) Financial Statement Schedules
All schedules have been omitted because the information
is either not required or is set forth in the financial
statements or the notes thereto.
(3) Exhibits - Forest shall, upon written request to Daniel
L. McNamara, Corporate Secretary of Forest, addressed
to Forest Oil Corporation, 1600 Broadway, Suite 2200,
Denver, CO 80202, provide copies of each of the
following Exhibits:
Exhibit 3(i) Restated Certificate of Incorporation of Forest Oil
Corporation dated October 14, 1993, incorporated herein by reference to Exhibit
3(i) to Form 10-Q for Forest Oil Corporation for the quarter ended September
30, 1993 (File No. 0-4597).
Exhibit 3(i)(a) Certificate of Amendment of the Restated Certificate
of Incorporation dated as of July 20, 1995, incorporated herein by reference to
Exhibit 3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).
Exhibit 3(i)(b) Certificate of Amendment of Restated Certificate of
Incorporation dated as of July 26, 1995, incorporated herein by reference to
Exhibit 3(i)(b) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).
Exhibit 3(i)(c) Certificate of Amendment of the Restated Certificate
of Incorporation dated as of January 5, 1996, incorporated herein by reference
to Exhibit 3(i)(c) to Forest Oil Corporation's Registration Statement on Form
S-2 (File No. 33-64949).
67
<PAGE>
Exhibit 3(ii) Restated By-Laws of Forest Oil Corporation as of May
9, 1990, Amendment No. 1 to By-Laws dated as of April 2, 1991, Amendment No. 2
to By-Laws dated as of May 8, 1991, Amendment No. 3 to By-Laws dated as of July
30, 1991, Amendment No. 4 to By-Laws dated as of January 17, 1992, Amendment
No. 5 to By-Laws dated as of March 18, 1993 and Amendment No. 6 to By-Laws
dated as of September 14, 1993, incorporated herein by reference to Exhibit
3(ii) to Form 10-Q for Forest Oil Corporation for the quarter ended September
30, 1993 (File No. 0-4597).
Exhibit 3(ii)(a) Amendment No. 7 to By-Laws dated as of
December 3, 1993, incorporated herein by reference to Exhibit 3(ii)(a) to Form
10-K for Forest Oil Corporation for the year ended December 31, 1993 (File No.
0-4597).
Exhibit 3(ii)(b) Amendment No. 8 to By-Laws dated as of
February 24, 1994, incorporated herein by reference to Exhibit 3(ii)(b) to Form
10-K for Forest Oil Corporation for the year ended December 31, 1993 (File No.
0-4597).
Exhibit 3(ii)(c) Amendment No. 9 to By-Laws dated as of May
15, 1995, incorporated herein by reference to Exhibit 3(ii)(c) to Form 10-Q for
Forest Oil Corporation for the quarter ended June 30, 1995 (File No. 0-4597).
Exhibit 3(ii)(d) Amendment No. 10 to By-Laws dated as of July
27, 1995, incorporated herein by reference to Exhibit 3(ii)(d) to Form 10-Q for
Forest Oil Corporation for the quarter ended June 30, 1995 (File No. 0-4597).
Exhibit 4.1 Indenture dated as of September 8, 1993 between Forest
Oil Corporation and Shawmut Bank, Connecticut, (National Association),
incorporated herein by reference to Exhibit 4.1 to Form 10-Q for Forest Oil
Corporation for the quarter ended September 30, 1993 (File No. 0-4597).
*Exhibit 4.2 First Supplemental Indenture dated as of February 8,
1996 among Forest Oil Corporation, 611852 Saskatchewan Ltd. and Fleet National
Bank of Connecticut (formerly known as Shawmut Bank, Connecticut, National
Association, which was formerly known as The Connecticut Bank).
Exhibit 4.3 Loan Agreement between Forest Oil Corporation and
Joint Energy Development Investments Limited Partnership dated as of December
28, 1993, incorporated herein by reference to Exhibit 4.1 to Form 8-K for
Forest Oil Corporation dated December 30, 1993 (File No. 0-4597).
Exhibit 4.4 First Amendment dated as of December 28, 1993 to the
Loan Agreement between Forest Oil Corporation and Joint Energy Development
Investments Limited Partnership, incorporated herein by reference to Exhibit
4.3 to Form 10-Q for Forest Oil Corporation for the quarter ended June 30, 1994
(File No. 0-4597).
Exhibit 4.5 Second Amendment dated as of July 27, 1995 to the Loan
Agreement between Forest Oil Corporation and Joint Energy Development
Investments Limited Partnership, incorporated by reference to Exhibit 99.4 to
Form 8-K for Forest Oil Corporation dated October 11, 1995 (File No. 0-4597).
*Exhibit 4.6 Third Amendment dated January 24, 1996 to the Loan
Agreement between Forest Oil Corporation and Joint Energy Development
Investments Limited Partnership.
Exhibit 4.7 Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of December 28, 1993 by and between
Forest Oil Corporation and Joint Energy Development Investments Limited
Partnership, incorporated herein by reference to Exhibit 4.2 to Form 8-K for
Forest Oil Corporation dated December 30, 1993 (File No. 0-4597).
68
<PAGE>
Exhibit 4.8 First Amendment dated as of June 15, 1994 to the Deed
of Trust, Assignment of Production, Security Agreement and Financing Statement
between Forest Oil Corporation and Joint Energy Development Investments Limited
Partnership, incorporated herein by reference to Exhibit 4.4 to Form 10-Q for
Forest Oil Corporation for the quarter ended June 30, 1994 (File No. 0-4597).
Exhibit 4.9 Second Amendment effective as of July 27, 1995 to Deed
of Trust, Assignment of Production, Security Agreement and Financing Statement
between Forest Oil Corporation and Joint Energy Development Investments Limited
Partnership, incorporated herein by reference to Exhibit 99.9 to Form 8-K for
Forest Oil Corporation dated October 11, 1995 (File No. 0-4597).
Exhibit 4.10 Act of Mortgage, Assignment of Production, Security
Agreement and Financing Statement dated as of December 28, 1993 between Forest
Oil Corporation and Joint Energy Development Investments Limited Partnership,
incorporated herein by reference to Exhibit 4.3 to Form 8-K for Forest Oil
Corporation dated December 30, 1993 (File No. 0-4597).
Exhibit 4.11 Amended and Restated Credit Agreement dated as of
August 31, 1995 between Forest Oil Corporation and Subsidiaries, Borrower and
Subsidiary Guarantors and the Chase Manhattan Bank (National Association), as
agent, incorporated herein by reference to Exhibit 4.1 to Form 10-Q for Forest
Oil Corporation for the quarter ended September 30, 1995 (File No. 0-4597).
Exhibit 4.12 Deed of Trust, Mortgage, Security Agreement,
Assignment of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated as of December 1, 1993, incorporated
herein by reference to Exhibit 4.6 to Form 10-K for Forest Oil Corporation for
the year ended December 31, 1993.
Exhibit 4.13 Amendment No. 1 dated as of June 3, 1994 to the Deed
of Trust, Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing dated
as of December 1, 1993 between Forest Oil Corporation and The Chase Manhattan
Bank (National Association), as agent, incorporated herein by reference to
Exhibit 4.9 of Form 10-K for Forest Oil Corporation for the year ended December
31, 1994 (File No. 0-4597).
*Exhibit 4.14 Amendment No. 2 dated as of August 31, 1995 to the
Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property including Hydrocarbons) and Fixture
Filing dated as of December 1, 1993 between Forest Oil Corporation and The
Chase Manhattan Bank (National Association), as agent.
Exhibit 4.15 Deed of Trust, Mortgage, Security Agreement,
Assignment of Production, Financing Statement (Personal Property including
Hydrocarbons) and Fixture Filing dated as of June 3, 1994 between Forest Oil
Corporation and The Chase Manhattan Bank (National Association), as agent,
incorporated herein by reference to Exhibit 4.9 of Form 10-K for Forest Oil
Corporation for the year ended December 31, 1994 (File No. 0-4597).
*Exhibit 4.16 Amendment No. 1 dated as of August 31, 1995 to Deed of
Trust, Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property Including Hydrocarbons), and Fixture Filing dated
June 3, 1994.
Exhibit 4.17 Warrant Agreement dated as of December 3, 1991 between
Forest Oil Corporation and The Chase Manhattan Bank (National Association), as
Warrant Agent (including Form of Warrant), incorporated herein by reference to
Exhibit 4.7 to Form 10-K for Forest Oil Corporation for the year ended December
31, 1991 (File No. 0-4597).
Exhibit 4.18 Rights Agreement between Forest Oil Corporation and
Mellon Securities Trust Company, as Rights Agent dated as of October 14, 1993,
incorporated herein by reference to Exhibit 4.3 to Form 10-Q for Forest Oil
Corporation for the quarter ended September 30, 1993 (File No. 0-4597).
69
<PAGE>
Exhibit 4.19 Amendment No. 1 dated as of July 27, 1995 to Rights
Agreement dated as of October 14, 1993 between Forest Oil Corporation and
Mellon Securities Trust Company, incorporated herein by reference to Exhibit
99.5 of Form 8-K for Forest Oil Corporation dated October 11, 1995 (File No.
0-4597).
Exhibit 10.1 Description of Employee Overriding Royalty Bonuses,
incorporated herein by reference to Exhibit 10.1 to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1990 (File No. 0-4597).
Exhibit 10.2 Description of Executive Life Insurance Plan,
incorporated herein by reference to Exhibit 10.2 to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1991 (File No. 0-4597).
Exhibit 10.3 Form of non-qualified Executive Deferred Compensation
Agreement, incorporated herein by reference to Exhibit 10.3 to Form 10-Q for
Forest Oil Corporation for the years ended December 31, 1990 (File No. 0-4597).
Exhibit 10.4 Form of non-qualified Supplemental Executive
Retirement Plan, incorporated herein by reference to Exhibit 10.4 to Form 10-K
for Forest Oil Corporation for the year ended December 31, 1990 (File No.
0-4597).
Exhibit 10.5 Form of Executive Retirement Agreement, incorporated
herein by reference to Exhibit 10.5 to Form 10-K for Forest Oil Corporation for
the year ended December 31, 1990 (File No. 0-4597).
Exhibit 10.6 Forest Oil Corporation 1992 Stock Option Plan and
Option Agreement, incorporated herein by reference to Exhibit 10.7 to Form 10-K
for Forest Oil Corporation for the year ended December 31, 1991 (File No.
0-4597).
Exhibit 10.7 Letter Agreement with Richard B. Dorn relating to a
revision to Exhibit 10.5, incorporated herein by reference to Exhibit 10.11 to
Form 10-K for Forest Oil Corporation for the year ended December 31, 1991 (File
No. 0-4597).
Exhibit 10.8 Forest Oil Corporation Annual Incentive Plan effective
as of January 1, 1992, incorporated herein by reference to Exhibit 10.8 to Form
10-K for Forest Oil Corporation for the year ended December 31, 1992 (File No.
0-4597).
Exhibit 10.9 Form of Executive Severance Agreement, incorporated
herein by reference to Exhibit 10.9 to Form 10-K for Forest Oil Corporation for
the year ended December 31, 1993 (File No. 0-4597).
Exhibit 10.10 Shareholders Agreement dated as of July 27, 1995
between Forest Oil Corporation and The Anschutz Corporation incorporated by
reference to Exhibit 99.7 to Form 8-K for Forest Oil Corporation dated October
11, 1995 (File No. 0-4597).
Exhibit 10.11 Tranche A Warrant to Purchase 3,888,888 shares of
Common Stock issued to The Anschutz Corporation dated July 27, 1995
incorporated by reference to Exhibit 99.6 to Form 8-K for Forest Oil
Corporation dated October 11, 1995 (File No. 0-4597).
*Exhibit 10.12 Shareholders Agreement dated as of January 24, 1996
between Forest Oil Corporation and Joint Energy Development Investments Limited
Partnership.
*Exhibit 10.13 Option dated July 27, 1995 from Joint Energy
Development Investments Limited Partnership to The Anschutz Corporation.
*Exhibit 10.14 Assumption of Option dated January 24, 1996 between
Forest Oil Corporation and The Anschutz Corporation.
*Exhibit 11 Computation of Earnings Per Share of Common Stock.
Forest Oil Corporation and Subsidiaries.
70
<PAGE>
*Exhibit 21.1 List of Subsidiaries of the Registrant.
*Exhibit 23 Consent of KPMG Peat Marwick LLP.
*Exhibit 24 Powers of Attorney of the following Officers and
Directors: Philip F. Anschutz, Robert S. Boswell, Richard J. Callahan, Dale F.
Dorn, William L. Dorn, David H. Keyte, James H. Lee, Craig D. Slater, Joan C.
Sonnen, Drake S. Tempest, Michael B. Yanney.
*Exhibit 27 Financial Data Schedule
- -------------------
* filed herewith.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by
Forest during the last quarter of 1995:
<TABLE>
<CAPTION>
Date of Report Item Reported Financial Statements Filed
- -------------- ------------- --------------------------
<S> <C> <C>
October 11, 1995 Item 5 None
December 12, 1995 Item 5 None
December 20, 1995 Item 5 None
December 29, 1995 Item 5 None
</TABLE>
71
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FOREST OIL CORPORATION
(Registrant)
Date: March 29, 1996 By: /s/ Daniel L. McNamara
------------------------------
Daniel L. McNamara
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
Robert S. Boswell* President and Chief Executive Officer March 29, 1996
(Robert S. Boswell) (Principal Executive Officer)
David H. Keyte* Vice President and Chief Financial Officer March 29, 1996
(David H. Keyte) (Principal Financial Officer)
Joan C. Sonnen* Controller
(Joan C. Sonnen) (Chief Accounting Officer) March 29, 1996
Directors of the Registrant March 29, 1996
Philip F. Anschutz*
(Philip F. Anschutz)
Robert S. Boswell*
(Robert S. Boswell)
Richard J. Callahan*
(Richard J. Callahan)
Dale F. Dorn*
(Dale F. Dorn)
William L. Dorn*
(William L. Dorn)
James H. Lee*
(James H. Lee)
Craig D. Slater*
(Craig D. Slater)
Drake S. Tempest*
(Drake S. Tempest)
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
Directors of the Registrant March 29, 1996
Michael B. Yanney*
(Michael B. Yanney)
*By /s/ Daniel L. McNamara March 29, 1996
---------------------------
Daniel L. McNamara
(as attorney-in-fact for
each of the persons indicated)
</TABLE>
73
<PAGE>
EXHIBIT 4.2
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE is dated as of February 8, 1996 among
FOREST OIL CORPORATION, a New York corporation as Issuer (the "Company"),
611852 Saskatchewan Ltd., a Saskatchewan, Canada corporation (the
"Guarantor"), and Fleet National Bank of Connecticut (formerly known as
Shawmut Bank Connecticut, National Association, which was formerly known as
The Connecticut National Bank), a national banking association, as trustee
(the "Trustee").
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated as
of September 8, 1993 (the "Indenture"), pursuant to which the Company issued
$100,000,000 in principal amount of 11 1/4% Senior Subordinated Notes due
2003 (the "Securities") (capitalized terms used herein without definition
shall have the respective meanings ascribed to them in the Indenture); and
WHEREAS, Section 11.03 of the Indenture provides that any Person that
was not a Subsidiary Guarantor on the date of the Indenture may become a
Guarantor by executing and delivering to the Trustee, among other things, a
supplemental indenture in form and substance satisfactory to the Trustee;
WHEREAS, Section 9.01 of the Indenture provides, among other things,
that the Company and the Subsidiary Guarantors when authorized by a Board
Resolution of their respective Boards of Directors, and the Trustee, may
amend or supplement the Indenture without notice to or consent of any Holder
to make any change that would provide any additional benefit or rights to the
Holders or that does not adversely affect the rights of any Holders;
WHEREAS, the Company, the Guarantor and the Trustee desire to supplement
the Indenture to include the Guarantor as a Subsidiary Guarantor under the
Indenture, and the Guarantor has agreed to guarantee the Securities pursuant
to Article Eleven of the Indenture;
WHEREAS, all acts and things prescribed by the Indenture, by corporate
action of the Company, the Guarantor and the Trustee necessary to make this
First Supplemental Indenture a valid instrument legally binding on the
Company, the Guarantor and the Trustee, in accordance with its terms, have
been duly done and performed.
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Guarantor and the
Trustee covenant and agree for the equal and proportionate benefit of the
respective Holders of the Securities as follows:
<PAGE>
ARTICLE 1
SECTION 1.01 This First Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be
construed in connection with and as part of, the Indenture for any and all
purposes, including but not limited to, discharge of the Indenture as
provided in Article 8 of the Indenture.
SECTION 1.02. Subject to the provisions of Article Eleven of the
Indenture, the Guarantor agrees that it will duly and punctually perform and
observe all of the covenants and conditions in the Indenture to be performed
by a Subsidiary Guarantor as if the Guarantor had been an original Subsidiary
Guarantor of the Securities. Any Guarantee endorsed on any Security
delivered after the date of this First Supplemental Indenture in substitution
or exchange for any outstanding Security as provided in the Indenture shall
be executed and delivered by the Guarantor and such Guarantee on each such
Security shall constitute an obligation of the Guarantor; PROVIDED, HOWEVER,
that each Guarantee hereunder shall be effective without such notation.
SECTION 1.03. This First Supplemental Indenture shall become effective
immediately upon its execution and delivery by each of the Company, the
Guarantor and the Trustee.
ARTICLE 2
SECTION 2.01. Except as specifically modified herein, the Indenture,
the Securities and the Guarantees are in all respects ratified and confirmed
and shall remain in full force and effect in accordance with their terms.
SECTION 2.02. Except as otherwise expressly provided herein, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this First Supplemental Indenture. This
First Supplemental Indenture is executed and accepted by the Trustee subject
to all the terms and conditions set forth in the Indenture with the same
force and effect as if those terms and conditions were repeated at length
herein and made applicable to the Trustee with respect hereto.
SECTION 2.03. The laws of New York shall govern this First Supplemental
Indenture without regard to principles of conflicts of law. The Trustee, the
Company and the Guarantor agree to submit to the jurisdiction of the courts
of the State of New York in any action or proceeding arising out of or
relating to this First Supplemental Indenture.
SECTION 2.04. The parties may sign any number of copies of this First
Supplemental Indenture. Each signed copy shall be an original, but all of
such executed copies together shall represent the same agreement.
SECTION 2.05. The recitals to this First Supplemental Indenture shall
not be construed as representations of the Trustee and the Trustee makes no
representation as to the accuracy of such recitals.
SECTION 2.06. The Trustee enters into this Supplemental Indenture in
its capacity as Trustee under the Indenture and in reliance on an Opinion of
Counsel and an Officers' Certificate.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused the First
Supplemental Indenture to be duly executed, all as of the date first written
above.
FOREST OIL CORPORATION
as the Company
By: /s/ Kenton M. Scroggs
--------------------------------
Title: Vice President & Treasurer
--------------------------------
611852 SASKATCHEWAN LTD.
as Guarantor
By: /s/ Kenton M. Scroggs
--------------------------------
Title: Vice President & Treasurer
--------------------------------
FLEET NATIONAL BANK OF CONNECTICUT,
as Trustee
By:
--------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT 4.6
THIRD AMENDMENT TO LOAN AGREEMENT
This Third Amendment to Loan Agreement (this "Amendment") is made and
entered into as of January __, 1996 ("Third Amendment Date"), by and between
FOREST OIL CORPORATION, a New York corporation, with principal offices at
1600 Broadway, Suite 2200, Denver, Colorado 80202 (the "Borrower"), and JOINT
ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited
partnership, with offices at 1400 Smith Street, Houston, Texas 77002 (the
"Lender").
WHEREAS, reference for all purposes is hereby made to that certain Loan
Agreement dated December 28, 1993, between the Borrower and the Lender, as
amended by the First Amendment to Loan Agreement dated as of December 28,
1993, and the Second Amendment to Loan Agreement dated as of July 27, 1995
(as so amended, the "Agreement");
WHEREAS, the Borrower and the Lender desire to amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, for and in consideration of ten dollars ($10.00) and
other good and valuable consideration, the Borrower and the Lender hereby
agree as follows:
1. Borrower and Lender hereby acknowledge and agree to the following:
(a) As of even date herewith and prior to the consummation of the
transactions provided for herein, the Tranche B Loan had an outstanding
principal balance of $22,368,185.88. On even date herewith, Lender has
conveyed to Borrower the Tranche B Warrant and its rights and obligations
under the Anschutz Option and in exchange therefor Borrower has, in full
repayment of the outstanding principal balance due under the Tranche B Loan,
issued to Lender the Shares, all as contemplated by the Second Restructure
Agreement. To evidence the repayment of the Tranche B Loan, Lender shall
make an appropriate notation on the ledger forming a part of the Note or if
no ledger is attached to the Note, otherwise reflect the payment of the
Tranche B Loan in its records.
(b) As of the Third Amendment Date and after giving effect to this
Amendment, the Loan has an outstanding principal balance of $40,322,183.40
together with accrued but unpaid interest thereon in the amount of
$302,967.22.
(c) Lender hereby acknowledges that for purposes of the Agreement
(i) the Conveyance Expiration Date shall be deemed to have occurred; (ii) the
Anschutz Option shall be deemed to have expired; and (iii) the Tranche B
Loan shall be deemed to have been fully repaid by Borrower.
2. All references within the Agreement to either "110%" or "115%"
shall be modified to read "125%".
<PAGE>
3. Section 1.01 of the Agreement is amended by replacing or inserting
the following defined terms, as appropriate:
"PARTIAL RELEASE OF LIENS" shall mean an instrument or instruments in
recordable form pursuant to which Lender shall release the appropriate
interest in the Mortgaged Properties from the Liens granted pursuant to the
terms of the Security Instruments. Such instruments shall expressly state
that they are partial release of liens only and that such release will not
affect any other Liens securing the Mortgaged Properties or release any
other property from such Liens.
"SECOND RESTRUCTURE AGREEMENT" shall mean the Second Restructure
Agreement dated as of December 29, 1995 by and between Borrower and
Lender, as the same may be amended from time to time.
"SHARES" shall have the meaning given such term in the Second
Restructure Agreement.
"WARRANTS" shall mean the Tranche A Warrant.
4. Section 2.02(c) of the Agreement is deleted.
5. Section 2.03(a) of the Agreement is amended in its entirety to read as
follows:
(a) With respect to any Capital Operation, if Borrower elects or
is required to submit an AFE to Lender pursuant to the terms of this
Agreement, such AFE shall set forth among other things, the estimated
commencement date, the proposed depth, the objective zone or zones to be
tested, the surface and bottom hole locations, applicable details regarding
directional drilling, the equipment to be used and the estimated costs of the
operation, and such other information as Lender reasonably may request.
6. Section 2.03(c) of the Agreement is amended in its entirety to read
as follows:
(c) With respect to any AFEs submitted pursuant to the terms of
Sections 2.02(b), 2.03(b), 2.18, 2.20, and as provided in Footnote 1 to
Exhibit I, Lender shall have ten (10) Business Days (48 hours if the rig is
on location and Borrower notifies Lender of such circumstance at the time the
AFE or Supplemental AFE is submitted for approval, or sixty (60) Business
Days if the AFE involves the construction of a platform and/or facilities
either as a part of the well proposal or as a separate proposal) after
receipt of such AFE and all other information requested by Lender within
which to approve the proposed AFE and the related operation. Failure of
Lender to notify
-2-
<PAGE>
Borrower in writing within such period of time of such approval shall be
deemed disapproval of the proposed AFE and the related operation. If,
however, Lender notifies Borrower in writing prior to the expiration of such
period that it consents to Borrower's AFE, Lender shall be deemed to have
consented to the commencement and completion by Borrower of such operation
pursuant to such AFE. In addition, if within 60 days after Borrower's
receipt from Lender of a consent as provided for pursuant to the terms of
this Section 2.03 Borrower has not commenced the operation covered by such
consent, such consent shall be void; provided, however, Borrower may resubmit
the applicable AFE and operation to Lender for its approval.
7. Section 2.03(d) of the Agreement is amended in its entirety to read
as follows:
(d) If at any time Lender elects not to consent or is deemed to
have elected not to consent to a Capital Operation and the related AFE
submitted by Borrower pursuant to Section 2.02(b) or 2.03(b), then Borrower
shall have the following options: (x) Borrower may elect not to perform such
Capital Operation, and if such Capital Operation is a Scheduled Capital
Operation, Borrower's obligation to complete such Scheduled Capital Operation
shall terminate and Exhibit J to this Agreement shall be revised as provided
for in Section 2.17; or (y) Borrower may complete at its sole cost and
expense the operation provided for in such AFE ("Excluded Operation")
pursuant to the terms of this Section 2.03(d) and the zone or zones targeted
in such Capital Operation (as specified in the AFE) shall be released from
the Liens granted to Lender pursuant to the Security Instruments. To obtain
such a release, the Borrower must commence the operation proposed in the
rejected AFE within 60 days after the first to occur of the date on which
Borrower received written notice of Lender's election not to consent or the
date on which Lender is deemed to have elected not to consent to the
applicable Capital Operation. For purposes of all Scheduled Capital
Operations providing for the drilling of a well, such operation shall be
deemed to have commenced on the date the well is spudded, for purposes of all
recompletion operations, such operation shall be deemed to have commenced on
the date the workover rig is on-site and operations using such rig are
underway, and for purposes of all other Capital Operations, such operations
shall be deemed to have commenced on the date on which on-site operations
with respect to such Capital Operation have commenced and costs in excess of
10% of costs set out in the AFE have been incurred. Once the Borrower has
commenced a Capital Operation in accordance with the terms of the immediately
preceding sentence, Borrower shall so notify Lender and Lender shall, within
10 Business Days following receipt of such notice, execute and deliver to
Borrower a Partial Release of Liens pursuant to which the Lender releases
only the zone or zones targeted pursuant to the terms of the AFE.
Notwithstanding the delivery of the Partial Release, Borrower shall
thereafter be obligated to conduct such operation as a reasonable and
prudent operator.
8. Sections 2.08(d), (e) and (f) of the Agreement are hereby deleted.
-3-
<PAGE>
9. Section 2.16 of the Agreement is hereby deleted.
10. Section 2.17(a) of the Agreement is hereby modified in its entirety to
read as follows:
(a) If Lender does not consent to an AFE with respect to a
Scheduled Capital Operation, or if an adjustment to Exhibit J is required
pursuant to Sections 2.18 or 2.20, then in any such case Borrower and Lender
shall attempt to mutually agree on an appropriate adjustment to the Scheduled
Principal Amount and the Required Trailing Twelve Month Cash Flow. If
Borrower and Lender are unable to agree on an appropriate adjustment to such
amounts, then the Scheduled Principal Amount and the Required Trailing Twelve
Month Cash Flow shall instead be adjusted as provided for on Attachment 1 to
Exhibit J.
11. Section 2.18 of the Agreement is hereby modified in its entirety to
read as follows:
Section 2.18 COST OVERRUNS.
If Borrower anticipates incurring Overrun Expenses in connection
with any Capital Operation, Borrower shall have the right to submit a
Supplemental AFE ("Supplemental AFE") to Lender, which Supplemental AFE shall
set forth the estimated amount of the Overrun Expenses, a copy of the
original AFE for such operation, the status of the work on the operation
including the depth drilled, any objective zone or zones that have been
tested, the expenses incurred, the work remaining to be completed, the
estimated costs necessary to complete such work and such other information as
Lender may reasonably request. Lender shall respond to any such Supplemental
AFE within the time period provided for in Section 2.03(c). If Lender
approves such Supplemental AFE then the costs set forth in the Supplemental
AFE shall be the only Overrun Expenses approved with respect to such
operation and such costs shall be used in calculating the Approved Overrun
Expenses. If Lender elects not to consent to the Supplemental AFE or is
deemed to have elected not to consent to the Supplemental AFE, Borrower shall
have the right to either (i) terminate its participation in the operation
covered by the Supplemental AFE or (ii) continue its participation in such
operation. If Borrower elects the option set forth in either clause (i) or
clause (ii) above, then Borrower's obligation to complete such operation
shall terminate and Exhibit J attached hereto shall be revised as provided
for in Section 2.17. If Borrower elects to continue with its participation
as provided for in clause (ii), then Borrower shall so notify Lender and
within 10 Business Days thereafter (if the operations subject to the
Supplemental AFE have already been commenced as of the date of Borrower's
notification), or within 10 Business Days following commencement of the
operations subject to the Supplemental AFE, Lender shall execute and deliver
to Borrower a Partial Release of Liens releasing only the objective zone or
zones designated in the Supplemental AFE. Notwithstanding the delivery of
the Partial Release, Borrower shall thereafter be obligated to conduct such
operation as a reasonable and prudent operator. Borrower shall not have the
right to
-4-
<PAGE>
propose a Supplemental AFE with respect to Overrun Expenses incurred in
connection with any Scheduled Capital Operation if Borrower's share of the
initial AFE submitted to the working interest owners prior to the
commencement of such Scheduled Capital Operation was more than 125% of the
Schedule I amount for such operation and such initial AFE was not submitted
to Lender prior to the commencement of such operation pursuant to the terms
of Section 2.02(b).
12. Section 2.20 of the Agreement is hereby modified in its entirety to
read as follows:
Section 2.20 MANDATORY CAPITAL EXPENSES. From and after the Third
Amendment Date and subject to the terms of this Section 2.20, Borrower shall
maintain the leases described on Exhibit S attached hereto in full force and
effect. If Borrower determines at any time that in order to maintain any
lease described on Exhibit S it anticipates incurring expenses in excess of
125% of the amount set forth on Exhibit S as the projected cost of extending
or renewing such lease for the time period specified on Exhibit S, then
Borrower shall have the right to submit a request for approval (a "Lease
Extension AFE") to Lender setting forth the amount of such excess.
Borrower's Lease Extension AFE shall include information relating to the
consideration being requested by the lessor and such other information as
Lender may reasonably request. Lender shall respond to any such request
within the time period provided for in Section 2.03(c) with respect to AFEs.
If Lender consents to Borrower's Lease Extension AFE, then Exhibit S shall be
deemed modified to increase the applicable amount set forth on Exhibit S by
the excess amount approved by Lender. If Lender elects not to consent to
Borrower's request or is deemed to have elected not to consent to such
request, Borrower shall have the right to either (i) allow the lease in
question to terminate or (ii) make the payments provided for in its request.
If Borrower elects the option set forth in either clause (i) or clause (ii)
above, then Borrower's obligation with respect to any Scheduled Capital
Operations attributable to the lease in question shall terminate and Exhibit
J attached hereto shall be revised as provided for in Section 2.17. If
Borrower elects to extend the lease in question as provided for in clause
(ii), then provided Borrower pays to the lessor of such lease an amount equal
to or in excess of the amount set forth in the Lease Extension AFE, Lender
shall execute a Partial Release of Liens releasing the lease in question.
Such Partial Release of Liens shall be delivered by Lender to Borrower within
10 Business Days after receiving evidence of Borrower's payment of the
amounts required to effect the extension.
13. Section 4.01(g) of this Agreement is amended in its entirety to
read as follows:
(g) MONTHLY PAYMENT AMOUNT REPORT. As soon as available and in
any event no later than the twentieth day of the second month following each
month (unless such twentieth day is not a Business Day in which case then the
first Business Day following the twentieth day), a statement of the
calculation of the Monthly Payment Amount for such month in the form of
Exhibit L, and a lease operating statement for each Mortgaged Property
setting forth quantities or volume
-5-
<PAGE>
of production, pricing and operating expenses, a capital expenditure summary
setting forth capital expenditures for each Mortgaged Property, and such
other information with respect thereto as the Lender may require.
14. Section 4.17 of this Agreement is amended in its entirety to read
as follows:
Section 4.17 CAPITAL EXPENDITURES. Subject to the terms of
this Section 4.17 and to Lender's approval rights as set forth in Section
2.02 and 2.03(a), Borrower agrees to make the capital expenditures involved
in and to drill, complete, and equip for production, or recomplete and
rework, as the case may be, each of the wells and to conduct each of the
other Scheduled Capital Operations and Prior Capital Operations described or
referred to on Exhibit I hereto. Borrower shall commence each Scheduled
Capital Operation at any time after the Third Amendment Date and no later
than twelve (12) months after the last day of, the month specified on Exhibit
I with respect to such Scheduled Capital Operation (such time period, with
respect to a particular Scheduled Operation being herein referred to as the
"Window Period") and shall thereafter conduct such operation as a reasonable
and prudent operator. For purposes of all Scheduled Capital Operations
providing for the drilling of a well, such operation shall be deemed to have
commenced on the date the well is spudded. Notwithstanding the foregoing or
any other provision within this Agreement to the contrary, Borrower shall not
be required to commence a Scheduled Capital Operation with respect to which
(i) Borrower submits an AFE pursuant to Section 2.02(b) and Lender does not
consent thereto or is deemed to have elected not to consent thereto; (ii)
Lender elects not to or is deemed to have elected not to consent to a
Supplemental AFE with respect to such operation pursuant to Section 2.18;
(iii) Borrower's obligations have terminated pursuant to Section 2.20; or
(iv) Borrower provides evidence satisfactory to the Lender that such
operation is not reasonably necessary and Lender has consented in writing to
delay or elimination thereof.
15. Section 4.19 of the Agreement is hereby modified by deleting the
reference to "Sections 2.08(c), (d) and (e)" and inserting therefor the
following: "Section 2.08(c)".
-6-
<PAGE>
16. Section 5.13 of the Agreement is hereby amended by deleting the two
references in such Section to "Sections 2.08(c) and (d)" and inserting
therefor "Section 2.08(c)".
17. The Borrower represents and warrants to the Lender that as of the
date of this Amendment:
(a) Each of the representations and warranties contained in (i)
Sections 3.01 through 3.04, 3.13 through 3.16, and 3.21 through 3.27 are true
and correct in all material respects;
(b) After giving effect to the amendments hereunder and the waiver
provided in Section 5.7 of the Second Restructure Agreement, there exists no
Default or Event of Default; and
(c) the Agreements described in Sections 3.18(a) and 3.18(b)
(other than the gas purchase agreement referenced in Section 3.18(a)) have
not been modified, terminated, assigned or pledged by Borrower, are in full
force and effect and Borrower, and to the best of Borrower's knowledge, no
other party, is in default in the performance of its obligations thereunder.
18. Except as amended and modified hereby, the Agreement, including,
without limitation, the terms and provisions of Section 6.03 thereof, shall
remain in full force and effect and the Borrower and the Lender hereby
ratify, adopt, and confirm the Agreement as hereby amended. The amendments
to the Agreement effected under this Amendment shall be effective as of the
date of this Amendment. The execution of this Amendment shall not waive,
modify, release or limit any of Lender's existing rights, claims or remedies.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER:
FOREST OIL CORPORATION
By:
-----------------------------
Kenton M. Scroggs
Vice President
LENDER:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its general partner
By: Enron Capital Corp., its general partner
By:
-----------------------------
Clifford P. Hickey
Vice President
-8-
<PAGE>
EXHIBIT 4.14
FILED
WYOMING
Secretary of State
AMENDMENT NO. 2 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT
(PERSONAL PROPERTY INCLUDING HYDROCARBONS),
AND FIXTURE FILING
THIS AMENDMENT NO. 2 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT (PERSONAL PROPERTY
INCLUDING HYDROCARBONS) AND FIXTURE FILING (this "AMENDMENT") is entered into
as of August 31, 1995 at 9:00 a.m., Mountain Time (the "EFFECTIVE DATE") by
and between FOREST OIL CORPORATION, a New York corporation with an address
for notice hereunder of 1500 Colorado National Building, 950 17th Street,
Denver, Colorado 80202 ("MORTGAGOR") to:
1. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
with an address at One Chase Manhattan Plaza, New York,
New York 10081, as agent for each bank referred to
below (in such capacity, the "AGENT") (the Agent,
together with its successors in such capacity, is
hereinafter referred to as the "SECURED PARTY"), as to
any and all portions of the Collateral EXCEPT those
portions of the Collateral which (i) are located in the
State of Texas or in offshore waters adjacent to the
State of Texas and subject to the laws of the State of
Texas and (ii) constitute interests in or to real
property under the law of the State of Texas (the "DT
COLLATERAL"); and
2. Ian G.P. Schottlaender, with an address at One
Chase Manhattan Plaza, New York, New York 10081, as
trustee (successor to Bettylou J. Robert) (in such
capacity, together with her successors and assigns in
such capacity, the "TRUSTEE"), but only as to the DT
Collateral.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN
STATES, A POWER OF SALE MAY ALLOW THE SECURED PARTY TO TAKE THE
COLLATERAL AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE
ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS INSTRUMENT.
R E C I T A L S
A. Mortgagor, certain banks (collectively, the
"EXISTING BANKS"), and the Agent are parties to a Credit
Agreement dated as of December 1, 1993 (as heretofore modified
and supplemented and in effect on the date hereof (the "ORIGINAL
CREDIT AGREEMENT").
<PAGE>
B. Mortgagor, certain banks (collectively, the "BANKS"), and the
Agent have agreed to amend and restate the Original Credit Agreement pursuant
to an Amended and Restated Credit Agreement dated as of August 31, 1995 (the
Original Credit Agreement as so amended and restated and as the same may be
further amended and restated and in effect from time to time, being referred
to herein as the "CREDIT AGREEMENT")
C. The Original Credit Agreement is secured by, among other
things, that certain Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated as of December 1, 1993 from Mortgagor
to Secured Party and Trustee (as heretofore modified and supplemented, the
"DEED OF TRUST").
D. The Deed of Trust was duly recorded as set forth on Schedule 1
attached hereto.
E. Mortgagor and Secured Party now desire to amend the Deed of
Trust to provide for the continuation of the mortgage lien and security
interest provided under the Deed of Trust by Mortgagor to the Secured Party,
for the benefit of itself and the Banks.
NOW, THEREFORE, in view of the foregoing, Mortgagor and Secured
Party do hereby agree as follows:
1. All capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Deed of Trust.
2. All references in the Deed of Trust to "this Instrument", as
defined in the opening paragraph of the Deed of Trust shall mean the Deed of
Trust as amended hereby and as the same may from time to time be further
amended or supplemented.
3. The Deed of Trust is hereby amended by deleting Recital 1 in
its entirety and substituting the following therefor:
"1. Pursuant to the terms of the Amended and
Restated Credit Agreement dated as of August 31, 1995
among Mortgagor, certain banks (collectively, the
"BANKS"), the Subsidiary Borrowers, the Subsidiary
Guarantors and the Secured Party (as amended,
supplemented and otherwise modified and in effect from
time to time, the "CREDIT AGREEMENT"), the Banks have
agreed to make loans from time to time under a
revolving credit facility Mortgagor the aggregate
principal or stated amount of which shall not exceed
$50,000,000.00 at any one time (maturing July 1, 1998),
2
<PAGE>
and issue or acquire participation interests in letters
of credit for account of Mortgagor the aggregate amount
of the liabilities of the Banks under which shall not
exceed $10,000,000.00."
4. Mortgagor hereby confirms that pursuant to and subject to the
terms of the Deed of Trust, it has heretofore absolutely and unconditionally
granted, bargained, sold, assigned, transferred and conveyed the DT
Collateral to the Trustee and granted to the Secured Party a security
interest in those portions of the Collateral which (i) are located in the
State of Texas or in offshore waters adjacent to the State of Texas and
subject to the laws of the State of Texas and (ii) do not constitute DT
Collateral.
5. Mortgagor hereby confirms that pursuant to and subject to the
Deed of Trust, it has heretofore absolutely and unconditionally granted,
bargained, sold, assigned, transferred, pledged, mortgaged, warranted and
conveyed to the Secured Party and granted the Secured Party a security
interest in all of the Collateral (except the DT Collateral), including,
without limitation, all severed and extracted Hydrocarbons and other minerals
produced from or attributable to the Mortgaged Property, including, without
limitation, all of the proceeds thereof.
6. The parties hereto hereby acknowledge and agree that except as
specifically amended, changed or modified hereby, the Deed of Trust shall
remain in full force and effect in accordance with its terms. None of the
rights, titles and interests existing and to exist under the Deed of Trust
are hereby released, diminished or impaired, and Mortgagor hereby reaffirms
all agreements and covenants and acknowledges and agrees that, except as
previously disclosed by Mortgagor under the Deed of Trust (except to the
extent same relate to Collateral that is no longer owned by Mortgagor and
other than the representation and warranty set forth in the first sentence of
Section 2.02(c) of the Deed of Trust) are true and correct in all material
respects as of the date hereof. Mortgagor also represents and warrants to
the Banks that the current net overproduced position of the Mortgagor with
respect to Hydrocarbons produced from the Mortgaged Properties (expressed in
volumetric terms) is not materially greater than the overproduced position of
the Mortgagor with respect to the Mortgaged Properties as of December 1, 1993.
7. INSOFAR AS PERMITTED BY OTHERWISE APPLICABLE LAW, THIS
AMENDMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW RULES). MORTGAGOR
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND EACH OTHER STATE WHERE
THE COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY
BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AMENDMENT, THE BASIC
DOCUMENTS OR THE OBLIGATIONS IN THE CASE OF A
3
<PAGE>
PROCEEDING IN ANY OF SUCH STATES, BY SERVING THE SECRETARY OF STATE OF SUCH
STATE IN ACCORDANCE WITH ANY APPLICABLE PROVISIONS OF SUCH STATE'S LAW
GOVERNING SERVICE OF PROCESS UPON FOREIGN CORPORATIONS OR ENTITIES.
8. This Amendment may be executed in two or more counterparts,
and it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof.
4
<PAGE>
EXECUTED as of the 31st day of August, 1995 (the
"EFFECTIVE DATE").
MORTGAGOR:
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
-------------------------------
Name: Kenton M. Scroggs
Title: Vice President & Treasurer
SECURED PARTY:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By: /s/ Ian G.P. Schottlaender
-------------------------------
Name: Ian G.P. Schottlaender
Title: Managing Director
TRUSTEE:
By: /s/ Ian G.P. Schottlaender
-------------------------------
Name: Ian G.P. Schottlaender
Title: Managing Director
5
<PAGE>
ACKNOWLEDGEMENT
STATE OF COLORADO )
: ss.
COUNTY OF DENVER )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on Sept. 7, 1995 there personally appeared
before me, the following person, being the designated officer of the
corporation set opposite his name, and such corporation being a party to the
foregoing Amendment:
Kenton M. Scroggs, the Vice President & Treasurer of Forest Oil
Corporation,
This Amendment was acknowledged before me on this 7th day of Sept.,
1995 by Kenton M. Scroggs, of Forest Oil Corporation, a New York corporation,
on behalf of said corporation.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said corporation described in and which executed the
foregoing Amendment, that he signed his name thereto by order of the Board of
Directors of said corporation, and acknowledged to me that he executed the
same for the purposes and consideration therein expressed, in the capacity
therein stated, and as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of Denver, State of Colorado, this 7th day of
Sept., 1995.
/s/ Teresa J. Marano
----------------------------------------
Notary Public, State of Colorado
(NOTARY
SEAL) Notary's Printed Name: Teresa J. Marano
My Commission expires: Aug. 11, 1996
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on September 5, 1995 there personally
appeared before me, the following person, being the designated officer of the
national banking association set opposite his name, and such corporation
being a party to the foregoing Amendment:
Ian G.P. Schottlaender, a Managing Director of The Chase Manhattan
Bank (National Association),
This Amendment was acknowledged before me on this 5th day of
September, 1995 by Ian G.P. Schottlaender, of The Chase Manhattan Bank
(National Association), a national banking association, on behalf of said
national banking association.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said national banking association described in and
which executed the foregoing Amendment, that he signed his name thereto by
order of the Board of Directors of said national banking association, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as the
free act and deed of said national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of New York, State of New York, this 5th day of
September, 1995.
/s/ Joyce I. Francis
---------------------------------------
Notary Public, State of New York
Notary's Printed Name: Joyce I. Francis
My Commission expires: 12/27/96
JOYCE I. FRANCIS
Notary Public, State of New York
No. 01FR5037511
Qualified in New York County
Certificate Filed in New York County
Commission Expires December 27, 1996
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on September 5, 1995 there personally
appeared before me, the following person, being a party to the foregoing
Amendment:
This Amendment was acknowledged before me on this 5th day of
September, 1995 by Ian G.P. Schottlaender.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the Trustee
described in the foregoing Amendment, that he signed his name thereto, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as him
free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of New York, State of New York, this 5th day of
September, 1995.
/s/ JOYCE I. FRANCIS
----------------------------------------
Notary Public, State of New York
Notary's Printed Name: Joyce I. Francis
My Commission expires: 12/27/96
JOYCE I. FRANCIS
Notary Public, State of New York
No. 01FR5037511
Qualified in New York County
Certificate Filed in New York County
Commission Expires December 27, 1996
<PAGE>
Schedule 1
SCHEDULE OF RECORDING INFORMATION
FOREST OIL CORPORATION
and
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
as Agent
1. Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing executed by Forest Oil
Corporation ("Forest") in favor of Bettylou J. Robert, as
Trustee, for the benefit of The Chase Manhattan Bank
(National Association), as Agent (all recording references
are to the Real Property Records):
RECORDED IN THE STATE OF TEXAS
COUNTY DATE FILED RECORDING INFORMATION
------ ---------- ---------------------
Arkansas 12/8/93 Recorded 12/10/93 as
#192065
Brazoria 12/8/93 Recorded 12/8/93 as
#93-044178
Calhoun 12/8/93 Recorded 12/8/93 in
Volume 116, Page 73
Chambers 12/8/93 Recorded 12/10/93 in
Volume 93-225, Page 522
Galveston 12/16/93 Recorded 12/16/93 as
# 9353245
Hidalgo 12/8/93 Recorded 12/8/93 as
# 357731
Jefferson 12/8/93 Recorded 12/8/93 as
#93-41412
Loving 12/8/93 Recorded 12/8/93 in
Volume 45, Page 688
Matagorda 12/8/93 Recorded 12/8/93 in
Volume 366, Page 787
<PAGE>
Pecos 12/8/93 Recorded 12/8/93 in
Volume 272, Page 25
Reeves 12/8/93 Recorded 12/8/93 in
Volume 533, Page 315
Ward 12/8/93 Recorded 12/9/93 in
Volume 175, Page 524
RECORDED IN THE STATE OF OKLAHOMA
COUNTY DATE FILED RECORDING INFORMATION
------ ---------- ---------------------
Caddo 12/8/93 Recorded 12/8/93 as
No. 93 9150
Oklahoma 12/8/93 Recorded 12/8/93 as
No. 03908
Washita 12/8/93 Recorded 12/8/93 as
E-1333
RECORDED IN THE STATE OF WYOMING
COUNTY DATE FILED RECORDING INFORMATION
------ ---------- ---------------------
Natrona 12/8/93 Recorded 12/8/93 as
Instrument #535014
RECORDED IN THE STATE OF LOUISIANA
A. PARISH DATE FILED RECORDING INFORMATION
------ ---------- ---------------------
Iberia 12/7/93 Entry No. 93-8912
MOB A-633, folio _____
Vermilion 12/7/93 Entry No. 9311419
MOB _____, folio _____
St. Mary 12/7/93 Entry No. 206,342
MOB 677, folio 650
Cameron 12/7/93 Entry No. 233834
MOB 197, folio _____
Plaquemines 12/7/93 MOB 231, folio 1
LaFourche 12/7/93 Entry No. 759883
MOB 657, folio _____
Terrebonne 12/7/93 Entry No. 927906
MOB 959, folio _____
2
<PAGE>
Jefferson 12/8/93 Entry No. 9368844
MOB 3629, folio 248
B. Minerals Management Service
Gulf of Mexico Region
December 7, 1993
Lease Files:
OCS-G 0900, OCS-G 0986, OCS-G 0987, OCS-G 0991,
OCS-G 0992, OCS-G 0993, OCS-G 0994, OCS-G 0995,
OCS-G 0996, OCS-G -997, OCS-G 1216, OCS-G 1217,
OCS-G 1979, OCS-G 1980, OCS-G 1981, OCS-G 1982,
OCS-G 5517, OCS-G 5625, OCS-G 7793, OCS-G 8434,
OCS-G 8457, OCS-G 9627, OCS-G 9651, OCS-G 10742,
OCS-G 10785
2. Financing Statement executed by Forest in connection with
item # 1 above and filed as follows:
LOCATION DATE FILED FILING INFORMATION
-------- ---------- ------------------
Secretary of 12/8/93 #230027
State of Texas
3
<PAGE>
EXHIBIT 4.16
AMENDMENT NO. 1 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT
(PERSONAL PROPERTY INCLUDING HYDROCARBONS),
AND FIXTURE FILING
THIS AMENDMENT NO. 1 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT (PERSONAL PROPERTY
INCLUDING HYDROCARBONS) AND FIXTURE FILING (this "AMENDMENT") is entered into
as of August 31, 1995 at 9:00 a.m., Mountain Time (the "EFFECTIVE DATE") by
and between FOREST OIL CORPORATION, a New York corporation with an address
for notice hereunder of 1500 Colorado National Building, 950 17th Street,
Denver, Colorado 80202 ("MORTGAGOR") to:
1. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), with an address
at One Chase Manhattan Plaza, New York, New York 10081, as agent for
each bank referred to below (in such capacity, the "AGENT") (the
Agent, together with its successors in such capacity, is hereinafter
referred to as the "SECURED PARTY"), as to any and all portions of the
Collateral EXCEPT those portions of the Collateral which (i) are
located in the State of Texas or in offshore waters adjacent to the
State of Texas and subject to the laws of the State of Texas and (ii)
constitute interests in or to real property under the law of the State
of Texas (the "DT COLLATERAL"); and
2. Richard F. Betz, with an address at One Chase Manhattan Plaza,
New York, New York 10081, as trustee (successor to Bettylou J.
Robert) (in such capacity, together with her successors and assigns in
such capacity, the "TRUSTEE"), but only as to the DT Collateral.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A POWER
OF SALE MAY ALLOW THE SECURED PARTY TO TAKE THE COLLATERAL AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS
INSTRUMENT.
R E C I T A L S
A. Mortgagor, certain banks (collectively, the "EXISTING BANKS"),
and the Agent are parties to a Credit Agreement dated as of December 1, 1993 (as
heretofore modified and supplemented and in effect on the date hereof (the
"ORIGINAL CREDIT AGREEMENT").
<PAGE>
B. Mortgagor, certain banks (collectively, the "BANKS"), and the
Agent have agreed to amend and restate the Original Credit Agreement pursuant
to an Amended and Restated Credit Agreement dated as of August 31, 1995 (the
Original Credit Agreement as so amended and restated and as the same may be
further amended and restated and in effect from time to time, being referred
to herein as the "CREDIT AGREEMENT")
C. The Original Credit Agreement is secured by, among other
things, that certain Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated as of June 3, 1994 from Mortgagor to
Secured Party and Trustee (as heretofore modified and supplemented, the "DEED
OF TRUST").
D. The Deed of Trust was duly recorded as set forth on Schedule 1
attached hereto.
E. Mortgagor and Secured Party now desire to amend the Deed of
Trust to provide for the continuation of the mortgage lien and security
interest provided under the Deed of Trust by Mortgagor to the Secured Party,
for the benefit of itself and the Banks.
NOW, THEREFORE, in view of the foregoing, Mortgagor and Secured
Party do hereby agree as follows:
1. All capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Deed of Trust.
2. All references in the Deed of Trust to "this Instrument", as
defined in the opening paragraph of the Deed of Trust shall mean the Deed of
Trust as amended hereby and as the same may from time to time be further
amended or supplemented.
3. The Deed of Trust is hereby amended by deleting Recital 1 in
its entirety and substituting the following therefor:
"1. Pursuant to the terms of the Amended and Restated Credit
Agreement dated as of August 31, 1995 among Mortgagor, certain banks
(collectively, the "BANKS"), the Subsidiary Borrowers, the Subsidiary
Guarantors and the Secured Party (as amended, supplemented and
otherwise modified and in effect from time to time, the "CREDIT
AGREEMENT"), the Banks have agreed to make loans from time to time
under a revolving credit facility Mortgagor the aggregate principal or
stated amount of which shall not exceed $50,000,000.00 at any one time
(maturing July 1, 1998),
2
<PAGE>
and issue or acquire participation interests in letters of credit for
account of Mortgagor the aggregate amount of the liabilities of the
Banks under which shall not exceed $10,000,000.00."
4. Mortgagor hereby confirms that pursuant to and subject to the
terms of the Deed of Trust, it has heretofore absolutely and unconditionally
granted, bargained, sold, assigned, transferred and conveyed the DT
Collateral to the Trustee and granted to the Secured Party a security
interest in those portions of the Collateral which (i) are located in the
State of Texas or in offshore waters adjacent to the State of Texas and
subject to the laws of the State of Texas and (ii) do not constitute DT
Collateral.
5. Mortgagor hereby confirms that pursuant to and subject to the
Deed of Trust, it has heretofore absolutely and unconditionally granted,
bargained, sold, assigned, transferred, pledged, mortgaged, warranted and
conveyed to the Secured Party and granted the Secured Party a security
interest in all of the Collateral (except the DT Collateral), including,
without limitation, all severed and extracted Hydrocarbons and other minerals
produced from or attributable to the Mortgaged Property, including, without
limitation, all of the proceeds thereof.
6. The parties hereto hereby acknowledge and agree that except as
specifically amended, changed or modified hereby, the Deed of Trust shall
remain in full force and effect in accordance with its terms. None of the
rights, titles and interests existing and to exist under the Deed of Trust
are hereby released, diminished or impaired, and Mortgagor hereby reaffirms
all agreements and covenants and acknowledges and agrees that, except as
previously disclosed by Mortgagor under the Deed of Trust (except to the
extent same relate to Collateral that is no longer owned by Mortgagor and
other than the representation and warranty set forth in the first sentence of
Section 2.02(c) of the Deed of Trust) are true and correct in all material
respects as of the date hereof. Mortgagor also represents and warrants to
the Banks that the current net overproduced position of the Mortgagor with
respect to Hydrocarbons produced from the Mortgaged Properties (expressed in
volumetric terms) is not materially greater than the overproduced position of
the Mortgagor with respect to the Mortgaged Properties as of December 1, 1993.
7. INSOFAR AS PERMITTED BY OTHERWISE APPLICABLE LAW, THIS
AMENDMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW RULES). MORTGAGOR
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND EACH OTHER STATE WHERE
THE COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY
BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AMENDMENT, THE BASIC
DOCUMENTS OR THE OBLIGATIONS IN THE CASE OF A
3
<PAGE>
PROCEEDING IN ANY OF SUCH STATES, BY SERVING THE SECRETARY OF STATE OF SUCH
STATE IN ACCORDANCE WITH ANY APPLICABLE PROVISIONS OF SUCH STATE'S LAW
GOVERNING SERVICE OF PROCESS UPON FOREIGN CORPORATIONS OR ENTITIES.
8. This Amendment may be executed in two or more counterparts,
and it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof.
4
<PAGE>
IN WITNESS WHEREOF, Mortgagor has, on the date set forth in the
acknowledgement hereto but effective as of the date first above written,
caused this Amendment to be duly executed before me, the undersigned Notary
Public, in and for the County of Denver, State of Colorado, in the presence
of the competent witnesses, after due reading of the whole.
MORTGAGOR:
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
--------------------------
Name: Kenton M. Scroggs
Title: Vice President & Treasurer
WITNESSES:
/s/ XXXXXXXXXXXXXXXXXXX
- -------------------------
/s/ Marti J. Valentine
- -------------------------
Teresa J. Marano
___________________________ (NOTARY
Notary Public SEAL)
(Notary Stamp)
5
<PAGE>
IN WITNESS WHEREOF, Secured Party and Trustee have, on the date set
forth in the acknowledgement hereto but effective as of the date first above
written, caused this Amendment to be duly executed before me, the undersigned
Notary Public, in and for the County of New York, State of New York, in the
presence of the competent witnesses, after due reading of the whole.
SECURED PARTY:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By: /s/ Richard F. Betz
------------------------
Name: Richard F. Betz
Title: Vice President
TRUSTEE:
By: /s/ Richard F. Betz
-----------------------
Name: Richard F. Betz
Title: Vice President
WITNESSES:
/s/ XXXXXXXXXXXXXXXXXX
________________________
/s/ XXXXXXXXXXXXXXXXXXX
________________________
/s/ Joyce I. Francis
___________________________
Notary Public
JOYCE I. FRANCIS
Notary Public, State of New York
No. 01FR5037511
Qualified in New York County
Certificate Filed in New York County
Commission Expires December 27, 1996
6
<PAGE>
ACKNOWLEDGEMENT
STATE OF COLORADO )
: ss.
COUNTY OF DENVER )
------
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on Sept. 13, 1995 there personally appeared
before me, the following person, being the designated officer of the
corporation set opposite his name, and such corporation being a party to the
foregoing Amendment:
Kenton M. Scroggs, the Vice President/Treasurer of Forest Oil
Corporation,
This Amendment was acknowledged before me on this 13th day of
Sept., 1995 by Kenton M. Scroggs, of Forest Oil Corporation, a New York
corporation, on behalf of said corporation.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said corporation described in and which executed the
foregoing Amendment, that he signed his name thereto by order of the Board of
Directors of said corporation, and acknowledged to me that he executed the
same for the purposes and consideration therein expressed, in the capacity
therein stated, and as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of Denver, State of Colorado, this 13th day of Sept., 1995.
/s/ Teresa J. Marano
----------------------------------------
Notary Public, State of Colorado
(NOTARY
SEAL) Notary's Printed Name: Teresa J. Marano
My Commission expires: August 11, 1996
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on September 14, 1995 there personally
appeared before me, the following person, being the designated officer of the
national banking association set opposite his name, and such corporation
being a party to the foregoing Amendment:
Richard F. Betz, a Vice President of The Chase Manhattan Bank
(National Association),
This Amendment was acknowledged before me on this 14th day of
September, 1995 by Richard F. Betz, of The Chase Manhattan Bank (National
Association), a national banking association, on behalf of said national
banking association.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said national banking association described in and
which executed the foregoing Amendment, that he signed his name thereto by
order of the Board of Directors of said national banking association, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as the
free act and deed of said national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of New York, State of New York, this 14th day of
September, 1995.
/s/ Joyce I. Francis
----------------------------------------
Notary Public, State of New York
Notary's Printed Name: Joyce I. Francis
My Commission expires: 12/27/96
JOYCE I. FRANCIS
Notary Public, State of New York
No. 01FR5037511
Qualified in New York County
Certificate Filed in New York County
Commission Expires December 27, 1996
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on September 14, 1995 there personally
appeared before me, the following person, being a party to the foregoing
Amendment:
This Amendment was acknowledged before me on this 14th day of
September, 1995 by Richard F. Betz.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the Trustee
described in the foregoing Amendment, that he signed his name thereto, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as him
free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of New York, State of New York, this 14th day of
September, 1995.
/s/ Joyce I. Francis
----------------------------------------
Notary Public, State of New York
Notary's Printed Name: Joyce I. Francis
My Commission expires: 12/27/96
JOYCE I. FRANCIS
Notary Public, State of New York
No. 01FR5037511
Qualified in New York County
Certificate Filed in New York County
Commission Expires December 27, 1996
<PAGE>
EXHIBIT 10.12
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (the "Agreement") dated as of January 24, 1996
is between FOREST OIL CORPORATION, a New York corporation (the "Company"), and
JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited
partnership ("JEDI").
RECITALS
A. The parties have entered into the Second Restructure Agreement
(the "Second Restructure Agreement") dated as of December 29, 1995.
B. Pursuant to the Second Restructure Agreement, JEDI has acquired
1,680,000 (the "JEDI Shares") of the Company's common stock, par value $.10 per
share, together with the associated Rights (as defined in the Second
Restructure Agreement) (the "Common Stock").
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS
The following terms have the following meanings:
"Action" against a person means an action, suit, investigation, complaint
or other proceeding, whether civil or criminal, in law or equity or before any
arbitrator or Governmental Body, pending against or affecting the person or its
property.
<PAGE>
"Affiliate" of a person means any other person (i) that directly or
indirectly controls, is controlled by or is under common control with, the
person or any of its Subsidiaries, (ii) that directly or indirectly
beneficially owns or holds 5% or more of any class of voting stock of the
person or any of its Subsidiaries or (iii) 5% or more of the voting stock of
which is directly or indirectly beneficially owned or held by the person or any
of its Subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise; PROVIDED that in relation to JEDI, "Affiliate" shall
not include (i) any Affiliate of Enron Corp. that is not wholly owned,
directly or indirectly, by Enron Corp., unless such Affiliate (a) beneficially
owns any of the JEDI Shares or (b) is a member of a Group in which any person
that beneficially owns any of the JEDI Shares is a member or (ii) the
California Public Employees Retirement System.
"Anschutz" means The Anschutz Corporation, a Kansas corporation.
"Anschutz Shareholders Agreement" means the Shareholders Agreement entered
into between the Company and Anschutz dated May 17, 1995.
"beneficial ownership" has the meaning assigned to that term under Section
13(d) of the Exchange Act, unless otherwise specified herein.
"Board of Directors" means the board of directors of the Company, from
time to time.
"Business Combination Transaction" means a merger, consolidation or
similar transaction and each transaction that constitutes a "Change of Control"
within the meaning of the Indenture dated as of September 8, 1993 between the
Company and Shawmut Bank Connecticut, N.A. (giving effect to other terms and
provisions of such indenture that are directly or indirectly incorporated or
referenced by the definition therein of "Change of Control").
"Common Stock" has the meaning ascribed to it in Paragraph B of the
Recitals hereof.
"Equity Securities" of a person means the capital stock of such person and
all other securities convertible into or exchangeable or exercisable for any
shares of its capital stock, all rights to subscribe for or to purchase, all
options for the purchase of, and all calls, commitments, or claims of any
character relating to any shares of its capital stock and any securities
convertible into or exchangeable or exercisable for any of the foregoing.
"Excess JEDI Shares" means, at any time of determination and with respect
to the matter subject to the vote or consent for which the Excess JEDI Shares
are then being determined,
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(i) the Equity Securities of the Company owned by any of JEDI and its
Affiliates and the Groups in which any of them may be members that may then be
voted or with respect to which consent may then be given, in each case with
respect to such matter less (ii) the Non-Restricted Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the related rules and regulations.
"Governmental Body" means any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other instrumentality
of any government, whether federal, state, county or local, domestic or foreign.
"Group" has the meaning given such term in Section 13(d)(3) of the
Exchange Act.
"Independent Director" means any director who is not and has not been
during the preceding two years an officer or employee of the Company or a
director, officer or employee of a beneficial owner of 5% or more of the shares
of Common Stock then issued and outstanding or of any Affiliate of such
beneficial owner.
"JEDI Registration Rights Agreement" means the Registration Rights
Agreement dated July 27, 1995 between JEDI and the Company, as amended the date
hereof.
"JEDI Designee" shall have the meaning ascribed to it in Section 2.1(a).
"JEDI Shares" has the meaning set forth in Paragraph B of the Recitals
hereof.
"Material Adverse Change" means any of (i) the average price for a share
of Common Stock over a period of thirty trading days being less than or equal
to $1.75, such number being subject to adjustment for any stock or other
non-cash dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like; or (ii) (a) any
downgrading by any "nationally recognized statistical rating organization" (as
that term is defined by the SEC for purposes of Rule 436(g)(2) under the
Securities Act of 1933, as amended) in the rating accorded to any debt security
of the Company by two or more ratings (including the relative standings within
a major rating category) (x) below the rating existing as of the date hereof or
(y) if not issued as of the date hereof, below the rating accorded thereto at
the time of its initial issuance, or (b) any such downgrading which results in
any debt security being accorded a rating of CCC or below by Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., or a rating of Caa or below by
Moody's Investors Service, Inc. or their respective equivalents by any other
such nationally recognized statistical rating organization.
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<PAGE>
"Non-Restricted Shares" means those shares of Common Stock, calculated by
multiplying (i) the number of Equity Securities of the Company owned by any of
JEDI and its Affiliates and the Groups in which any of them may be members that
may then be voted or with respect to which consent may then be given by (ii)
the quotient of (x) the number of Effective Equity Securities (as defined in
the Anschutz Shareholders Agreement) less the number of Excess Purchaser
Securities (as defined in the Anschutz Shareholders Agreement) divided by (y)
the sum of the number of Effective Equity Securities and the shares of Common
Stock issuable to Anschutz or its Affiliates or Groups upon conversion of the
shares of Second Series Convertible Preferred Stock owned by Anschutz;
PROVIDED, HOWEVER, that if the Excess Purchaser Securities is equal to zero,
the Effective Equity Securities shall be deemed to include such number of
shares of Common Stock issuable upon conversion of the shares of Second Series
Convertible Preferred Stock owned by Anschutz or its Affiliates or Groups,
which when added to the Effective Equity Securities would result in Anschutz
and its Affiliates and Groups having voting power at the time of determination
equal to 19.99% of the aggregate voting power of all Equity Securities of the
Company then issued and outstanding.
"Permitted Transfer Date" means the earlier to occur of (i) July 27, 1998
or (ii) the date on which Anschutz and its Affiliates or Groups shall have sold
50% or more of the shares of Common Stock beneficially owned by Anschutz and
its Affiliates or Groups, which figure shall include shares of Common Stock
issuable pursuant to the Second Series Convertible Preferred Stock, the
JEDI/Anschutz Option and the Tranche A Warrants (as each such term is defined
in the Second Restructure Agreement), held by Anschutz and its Affiliates or
Groups on the date hereof, but excluding any shares of Common Stock issuable
pursuant to the JEDI/Anschutz Option or the Tranche A Warrants if such option
or warrants expires or is canceled or terminated during the period between the
date hereof and July 27, 1998.
"Related Transaction" means, with respect to any acquisition or
disposition, or deemed acquisition or disposition, of any securities, a
transaction that (i) has been disclosed in a document filed with the SEC with
respect to the Company (that is then available for inspection at the offices of
the SEC) or has been otherwise publicly announced and (ii) by its terms is
effective upon, or immediately before or after giving effect to, the occurrence
of such acquisition or disposition or deemed acquisition or disposition.
"Rights Agreement" has the meaning ascribed to it in the Second
Restructure Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Second Restructure Agreement" has the meaning set forth in Paragraph A of
the Recitals hereof.
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<PAGE>
"Section 16(b) Liability" means liability under Section 16(b) of the
Exchange Act with respect to or as a consequence, directly or indirectly, of
JEDI's or JEDI's Affiliate's acquisition (or deemed acquisition) or disposition
(or deemed disposition) of "beneficial ownership" of, or a "pecuniary interest"
or "indirect pecuniary interest" in, any of the JEDI Shares that shall have
been issued or otherwise created, acquired (or deemed to have been acquired) or
disposed of (or deemed to have been disposed of) by or pursuant to the Second
Restructure Agreement.
"Section 16(b) Matter" means each matter or series of matters (including,
without limitation, a proposed transaction or series of transactions involving
any stock or other non-cash dividend, split-up, reverse split-up,
reclassification, recapitalization, reorganization, combination, subdivision,
conversion, exchange of shares or Business Combination Transaction) which,
directly or indirectly, as a result of the taking of action with respect
thereto by the Company, its Board of Directors or shareholders or any
Governmental Body having jurisdiction thereover, or the conclusion of any such
matter will or may, directly or indirectly, whether taken alone or together
with other facts or events, result in Section 16(b) Liability; PROVIDED,
HOWEVER, that a Section 16(b) Matter shall not include any of the foregoing
matters that will or may, directly or indirectly, result in Section 16(b)
Liability with respect to or as a consequence of the transfer by JEDI or any of
its Affiliates of any JEDI Shares in violation of the provisions of Section 3.2
or in transfers that would violate the provisions of Section 3.2 but for
clauses (a), (d) and (e) thereof (collectively, "Excluded Transfers").
"Significant Transactions" means any one or more of the following:
(i) the approval of the annual budget of the Company and any
amendments thereto;
(ii) the incurrence of any indebtedness (excluding the indebtedness
represented by the Loan Agreement (as defined in the Second Restructure
Agreement)) by the Company or any Subsidiary in an amount in excess of
$20,000,000 in the aggregate, in a single transaction or series of related
transactions, or any amendment to any material term of any agreement
representing such indebtedness;
(iii) the issuance, redemption or repurchase of 20% of the Equity
Securities of the Company then outstanding, in one transaction or a
series of transactions, whether or not pursuant to a recapitalization,
reorganization, merger or consolidation of the Company;
(iv) the sale, lease, exchange, transfer or other disposition,
directly or indirectly, of the Company's or any Subsidiary's assets, in a
single transaction or series of transactions, if such assets constitute or
would constitute Substantial Assets;
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<PAGE>
the merger or consolidation of the Company or the adoption of a plan of
liquidation or dissolution of the Company; any motion by the Company to
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or making a general assignment for the benefit of its creditors; and
(v) any purchase, lease, exchange or other acquisition, directly
or indirectly, of assets (including securities) by the Company or any
Subsidiary, in a single transaction or series of related transactions, if
such assets constitute or would constitute Substantial Assets, except
purchases of equipment made in the ordinary course of business.
"Subsidiary" of a person means (i) any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the person or (ii) a
partnership in which the person or a Subsidiary of the person is, at the date
of determination, a general or limited partner of such partnership, but only if
the person or its Subsidiary is entitled to receive more than fifty percent of
the assets of such partnership upon its dissolution. For purpose of the
foregoing definition, an arrangement by which a person who owns an oil and gas
interest is subject to a joint operating agreement, processing agreement, net
profits interest, overriding royalty interest, farmout agreement, development
agreement, area of mutual interest agreement, joint bidding agreement,
unitization agreement, pooling arrangement or other similar agreement or
arrangement shall not, by reason of such agreement or arrangement alone, be
considered a Subsidiary. Unless the context otherwise requires, references to
one or more Subsidiaries shall be references to Subsidiaries of the Company.
"Substantial Assets" means assets having a fair market value that, or
assets to be acquired for a consideration that, equals or exceeds 10% of the
amount of the Consolidated Tangible Net Assets of the Company, as reflected on
the most recent audited consolidated balance sheet of the Company existing at
the time the Board makes the determination whether or not to approve, adopt or
authorize the Significant Transaction involved. The term "Consolidated
Tangible Net Assets" means, as of any date of determination, the amount of
total assets on a consolidated balance sheet of the Company, determined in
accordance with generally accepted accounting principles in
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the United States as in effect from time to time consistently applied ("GAAP"),
less the sum of the amounts of all intangible assets determined in accordance
with GAAP.
"Transaction Documents" has the meaning ascribed to it in the Second
Restructure Agreement.
ARTICLE II
COMPANY COVENANTS
Section 2.1 BOARD OF DIRECTORS.
(a) At any time during the period of 90 days following the
occurrence of a Material Adverse Change, JEDI may, in writing, request that the
Company take all actions necessary (including, without limitation, the
amendment of the bylaws of the Company and other applicable agreements,
including the Anschutz Shareholders Agreement) to cause (1) the election as a
director of the Company of a person selected by JEDI who may lawfully serve as
a director and who shall be reasonably satisfactory to the Company (the "JEDI
Designee"), (2) if the JEDI Designee shall cease to be a director for any
reason, the filling of the vacancy resulting thereby with another JEDI Designee
and (3) the calling of meetings of the Board of Directors upon the written
request of the JEDI Designee. JEDI shall only be entitled to one JEDI Designee
at any given time. The term of the JEDI Designee shall be until the second
annual meeting of the Company's shareholders following the date of such
Material Adverse Change (which term may be extended by JEDI for consecutive
periods of one year each if a Material Adverse Change is in existence or
continuing on the date of such second annual meeting). Upon termination of
this Agreement, the Company may remove the JEDI Designee as a director.
(b) At any time during which a JEDI Designee is not serving as
a director of the Company, one individual who shall be designated from time to
time in writing by JEDI to the Company and who shall be reasonably satisfactory
to the Company (each such individual, during the period of such designation, a
"JEDI Observer") shall be entitled to (1) receive prior notice (at the time
given to members of the Board of Directors) of any meeting of the Board of
Directors of the Company at which the authorization or approval of a
Significant Transaction is proposed to be considered, (2) attend such portion
of such meeting at which such Significant Transaction shall be so considered
and (3) receive all written management reports relating to any Significant
Transaction that shall be considered for authorization and approval at such
meeting; PROVIDED, HOWEVER, that (x) JEDI and each JEDI Observer shall agree to
keep strictly confidential all information relating to the Company, whether or
not related to any Significant Transaction, that JEDI and such JEDI Observer
shall obtain in connection with the foregoing and shall acknowledge his, her or
its responsibilities
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<PAGE>
under securities laws and other laws in connection therewith, (y) JEDI and each
such JEDI Observer shall not be entitled to receive any such notice, attend any
such meeting (or portion thereof) or receive such written management reports if
doing so could, in the judgment of the Company, violate any obligation or duty
(whether contractual, statutory, fiduciary or otherwise) to which the Company
or its officers, directors or employees were then subject (including, without
limitation, obligations of confidentiality) or otherwise subject the Company or
any of such persons to any liability or otherwise materially and adversely
affect the interests of the Company and (z) JEDI and each such JEDI Observer
shall not be entitled to attend such portion of such meeting if, in the
judgment of the Chairman of the Board of Directors or a majority of the
directors of the Company, such attendance would impair the due consideration by
the Board of Directors of any matter.
(c) If at any time when permitted to be appointed by JEDI
pursuant to Section 2.1(a) the JEDI Designee shall not be elected to the Board
of Directors by the shareholders of the Company (notwithstanding JEDI and its
Affiliates having voted all shares of Common Stock owned by them in favor of
such election) and the JEDI Designee shall not otherwise have been elected to
the Board of Directors before a date that is 10 days after the date of such
vote by the shareholders of the Company and, in any event, before any other
material action or matter is considered and resolved by the Board of Directors,
the provisions set forth in Article III shall thereafter be of no further force
or effect.
Section 2.2 EXCHANGE ACT SECTION 16(b).
(a) Without the prior written consent of JEDI, for a period of
six months from the date hereof, the Company shall take no action with respect
to a Section 16(b) Matter that will or may, directly or indirectly, whether
taken alone or together with other facts or events, result in JEDI or an
Affiliate of JEDI having Section 16(b) Liability, PROVIDED that the Company may
take any such action (1) with respect to a Section 16(b) Matter if there shall
have been entered a final judgment to the effect that JEDI and its Affiliates
do not and will not, directly or indirectly, have any Section 16(b) Liability,
which judgment shall not be subject to appeal and is RES JUDICATA as to all
matters that may give rise to Section 16(b) Liability in connection therewith,
or (2) that may, directly or indirectly, result in any such liability with
respect to or as a consequence of any Excluded Transfer.
(b) The Company may seek to determine by an Action brought
against JEDI in the United States District Court in the Southern District of
New York, or other jurisdiction approved by the Company and JEDI, the
respective rights and obligations of the parties under Section 2.2(a).
Section 2.3 RESTRICTIONS ON JEDI. Without the prior written consent of
JEDI, the Company shall not take or recommend to its shareholders any action
which would impose
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limitations on the legal rights to be enjoyed by JEDI or Affiliates of JEDI as
a shareholder of the Company, other than those imposed by the express terms of
this Agreement and the Transaction Documents including, without limitation, any
action which would impose or increase restrictions on JEDI or Affiliates of
JEDI (a) based upon the size of its security holdings, the business in which it
is engaged or other considerations applicable to it and not to security holders
generally, (b) by means of the issuance of or proposal to issue any other class
of securities having voting power disproportionately greater than the equity
investment in the Company represented by such securities or by charter or
by-law amendment or (c) by reducing by any means (including, without
limitation, by split-up, reverse split-up, reclassification, recapitalization,
reorganization, combination, redemption, repurchase, or cancellation of
securities or rights or by a Business Combination Transaction) the number of
shares of Common Stock that are then issued and outstanding or are then subject
to issuance upon the conversion of or exercise or exchange for any Equity
Securities (including securities exchangeable or convertible into Equity
Securities) of the Company then outstanding, excepting only (i) the reduction
in such number of shares of Common Stock then issued and outstanding or subject
to issuance resulting from the conversion of, exercise or exchange for, or
cancellation, termination or modification of, Equity Securities of the Company
and adjustments in the number of shares of Common Stock subject to issuance
under the outstanding stock options issued by the Company to current and former
employees of the Company and its Subsidiaries pursuant to which 3,059,000
shares of Common Stock are reserved for issuance or under other Equity
Securities of the Company, or (ii) the reduction in the number of shares of
Common Stock issued and outstanding as a result of the one-for-five reverse
stock split contemplated by the Company to be approved by shareholders of the
Company at a special meeting to be held January 5, 1996.
Section 2.4 ACCESS TO INFORMATION.
(a) The Company shall promptly furnish to JEDI all information
that is required by GAAP to enable JEDI to account for its investment in the
Company. To the extent reasonably requested by JEDI, the Company shall, and
shall cause its employees, independent public accountants and other
representatives to, provide information regarding the Company to, and otherwise
cooperate with, JEDI and the representatives of JEDI so as to enable JEDI to
prepare financial statements in accordance with GAAP.
(b) Upon reasonable notice, JEDI may from time to time request
that the Company (1) promptly disclose to JEDI the number of shares of Common
Stock issued and outstanding on a date not more than five days prior to the
date of such request and the number of shares of Common Stock subject to
issuance upon the conversion of or exercise or exchange for the Equity
Securities of the Company outstanding on such date and (2) give JEDI reasonable
access to all books and records of the Company, including its minute books.
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<PAGE>
ARTICLE III
JEDI RESTRICTIONS
Section 3.1 VOTING RESTRICTIONS.
(a) In connection with each vote or written consent of the
holders of Common Stock, JEDI and its Affiliates shall vote, or consent with
respect to, and cause each of its Affiliates and each Group of which it is a
member, to vote or consent with respect to, all Excess JEDI Shares in respect
of the matters subject to such vote or consent in the same proportion that all
other Equity Securities of the Company (other than Equity Securities of the
Company owned by JEDI, Anschutz, any of their respective Affiliates or any
Group of which any such entity is a member) are voted or with respect to which
such consent is given by holders of such Equity Securities with respect to such
matter; PROVIDED, HOWEVER, that notwithstanding the foregoing, each of JEDI,
its Affiliates and such Groups at all times may vote, or consent with respect
to, Excess Purchaser Securities (1) for the election of the JEDI Designee, (2)
as JEDI, such Affiliate or such Group shall determine with respect to each
Section 16(b) Matter with respect to which (A) any of JEDI and its Affiliates
and the respective Groups in which any of them may be members will have or may,
directly or indirectly, have Section 16(b) Liability and (B) there shall not
have been entered, as of the date such vote or consent shall be required to be
given, a final judgment to the effect that JEDI and its Affiliates and the
respective Groups in which any of them may be members do not and will not,
directly or indirectly, have any Section 16(b) Liability, which judgment shall
not be subject to appeal and is RES JUDICATA as to all matters that may give
rise to Section 16(b) Liability in connection therewith, and (3) as otherwise
approved by the Board of Directors of the Company, including a majority of
Independent Directors, with respect to the matter subject to such vote or
consent.
(b) Notwithstanding anything contained in this Agreement, JEDI
and its Affiliates and the respective Groups in which any of them may be
members shall not be restricted in any manner whatsoever from voting, or
consenting with respect to, Equity Securities of the Company owned by any of
them that are not Excess JEDI Shares with respect to the matter subject to such
vote or consent.
(c) The provisions of Section 3.1(a) shall terminate
contemporaneously with the termination of the restrictions contained in the
Anschutz Shareholders Agreement on the voting by Anschutz of its Excess
Purchaser Securities (as defined in the Anschutz Shareholders Agreement).
Section 3.2 TRANSFER RESTRICTIONS. Unless otherwise permitted under
the JEDI Registration Rights Agreement to include Registrable Shares (as
defined in the JEDI Registration
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<PAGE>
Rights Agreement) in an offering of the Company's Equity Securities, prior to
the Permitted Transfer Date JEDI shall not, and shall not cause or permit its
Affiliates to, transfer the beneficial ownership of any JEDI Shares, except in
one or more of the following transactions:
(a) each transfer approved by the Board of Directors, including
a majority of Independent Directors; and
(b) each transfer in a Business Combination Transaction
approved by the Board of Directors, including a majority of Independent
Directors, or by two-thirds of the shares of Common Stock voted with respect to
the transaction (in which the JEDI Shares are voted in accordance with the
restrictions contained in Section 3.1, if applicable); and
(c) each transfer pursuant to a tender or exchange offer for
outstanding Common Stock by any person other than JEDI, any of its Affiliates
or any Group including JEDI or any of its Affiliates (1) which the Board of
Directors, including a majority of the Independent Directors, does not oppose,
or (2) which the Board of Directors or a majority of Independent Directors
opposes if after completion of such tender or exchange offer securities not
tendered or exchanged may be treated less favorably than securities tendered;
PROVIDED that no tender, indication or arrangement to tender Common Stock may
be made in the case of the preceding clause (2) until forty-eight hours prior
to the expiration of any time after which securities tendered may be treated
less favorably than securities tendered prior thereto; and
(d) each bona fide pledge of or the granting of a security
interest in or any other mortgage, deed of trust, lien, hypothecation, charge,
deposit, arrangement, preference, priority, or encumbrance ("Lien") relating to
the JEDI Shares to secure a bona fide loan, guarantee or other financial
support, the foreclosure of such pledge or security interest or any Lien that
may be placed involuntarily upon any JEDI Shares, or the subsequent sale or
other disposition of such JEDI Shares by such lender or its agent, provided
that such lender is not a member of a Group with respect to Common Stock which
Group includes JEDI or Affiliates of JEDI; and
(e) each transfer of JEDI Shares to any Affiliate of JEDI, or a
bona fide pledge of or the granting of a security interest in or any other Lien
relating to such JEDI Shares to an Affiliate of JEDI, provided in each case
that such Affiliate shall expressly assume by written instrument satisfactory
to the Company and JEDI all of the obligations and restrictions contained in
this Agreement to which such JEDI Shares shall be subject immediately before
such transfer; and
(f) a transfer upon the liquidation or dissolution of the
Company or a transfer which is effected by operation of law.
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<PAGE>
ARTICLE IV
TERMINATION
Section 4.1 TERMINATION. This Agreement shall terminate on the earlier
of (i) the date of termination of the Anschutz Shareholders Agreement and
(ii) the date on which JEDI has beneficial ownership of JEDI Shares
constituting less than 3% of the issued and outstanding shares of Common Stock.
ARTICLE V
MISCELLANEOUS
Section 5.1 LEGENDS. Certificates representing the JEDI Shares shall
bear the legends set forth in Exhibit C to the Second Restructure Agreement;
PROVIDED, HOWEVER, that after (a) the transfer of any JEDI Shares in
accordance with Section 3.2 or (b) the termination of this Agreement, the third
paragraph of such legend shall be removed with respect to such JEDI Shares and
all JEDI Shares, respectively.
Section 5.2 NOTICES. All notices, requests and other communications
given under this Agreement shall be in writing. Each communication shall be
given to such party at its address stated on the signature pages of this
Agreement or at any other address as such party may from time to time specify
in writing to the other party. Each communication shall be effective (a) if
given by telecopy, when the telecopy is transmitted to the proper address and
the receipt of the transmission is confirmed, (b) if given by mail, 72 hours
after the communication is deposited in the mails properly addressed with first
class postage prepaid, or (c) if given by any other means, when delivered to
the proper address and a written acknowledgment of delivery is received.
Section 5.3 NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
(a) No failure or delay by either party in exercising any
right, power or privilege under this Agreement shall operate as a waiver of
such right, power or privilege. A single or partial exercise of any right,
power or privilege shall not preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies available at law or in
equity.
(b) In view of the uniqueness of the agreements contained in
this Agreement and the transactions contemplated hereby and the fact that each
party would not have an
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<PAGE>
adequate remedy at law for money damages in the event that any obligation under
this Agreement is not performed in accordance with its terms, each party
therefore agrees that the other party to this Agreement shall be entitled to
specific enforcement of the terms of this Agreement in addition to any other
remedy to which either of them may be entitled, at law or in equity.
Section 5.4 AMENDMENTS, ETC. No amendment, modification, termination,
or waiver of any provision of this Agreement, and no consent to any departure
by a party from any provision of this Agreement, shall be effective unless it
shall be in writing and signed and delivered by the other party to this
Agreement, and then it shall be effective only in the specific instance and for
the specific purpose for which it is given.
Section 5.5 SUCCESSORS AND ASSIGNS.
(a) Except as expressly contemplated by this Agreement, no
party may assign its rights or delegate its obligations under this Agreement
without the prior written consent of the other party; PROVIDED that JEDI may
assign its rights and delegate its responsibilities under this Agreement (other
than those set forth in Article II) pursuant to Sections 3.2(d) or (e) without
the consent of the Company; provided, further, that the consent of the Company
shall not be unreasonably withheld with respect to an assignment and delegation
of JEDI's rights and obligations under Article II if all of the JEDI Shares
then owned are transferred pursuant to Section 3.2(e). Any assignment or
delegation in contravention of this Section 5.5 shall be void AB INITIO and
shall not relieve the delegating party of any of its obligations under this
Agreement.
(b) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
permitted successors and assigns.
(c) Notwithstanding anything herein to the contrary, each
transferee of JEDI Shares transferred in one or more of the transactions
specified in any of clauses (a) through (f), inclusive, of Section 3.2 shall
acquire such JEDI Shares free and clear of any restrictions or obligations
contained in this Agreement.
Section 5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. All
rights and obligations of the parties shall be in addition to and not in
limitation of those provided by applicable law.
Section 5.7 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if all signatures were on the same instrument.
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<PAGE>
Section 5.8 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of the provision in any
other jurisdiction.
Section 5.9 HEADINGS AND REFERENCES. Article and section headings in
this Agreement are included for the convenience of reference only and do not
constitute a part of this Agreement for any other purpose. References to
parties and articles and sections in this Agreement are references to the
parties to or the articles and sections of this Agreement, as the case may be,
unless the context shall require otherwise.
Section 5.10 ENTIRE AGREEMENT. Except for the Second Restructure
Agreement and the agreements referred to therein, this Agreement embodies the
entire agreement and understanding of the parties and supersedes all prior
agreements or understandings with respect to the subject matters of this
Agreement.
Section 5.11 SURVIVAL. Except as otherwise specifically provided in
this Agreement, each representation, warranty or covenant of each party
contained in this Agreement shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary.
Section 5.12 WAIVER OF JURY TRIAL. Each party waives any right to a
trial by jury in any action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered, or which in the
future may be delivered, in connection with this Agreement and agrees that any
action shall be tried before a court and not before a jury.
Section 5.13 AFFILIATE. Nothing contained in this Agreement shall cause
JEDI to be or be deemed an "affiliate"of any of the Company and its
Subsidiaries within the meaning of Rule 13e-3 under the Exchange Act.
[The remainder of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Shareholders Agreement as of the date first written above.
FOREST OIL CORPORATION
By: s/ Daniel L. McNamara
---------------------
Name: Daniel L. McNamara
Title: Secretary
Address: 1600 Broadway
Suite 2200
Denver, Colorado 80202
Telecopy: (303) 812-1510
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
By: Enron Capital Management Limited
Partnership, its General Partner
By: Enron Capital Corp., its
General Partner
By: s/ Clifford P. Hickey
---------------------
Clifford P. Hickey
Vice President
Address: 1200 17th Street, Suite 2750
Denver, Colorado 80202
Telecopy: (303) 534-2205
with a copy to:
Joint Energy Development Investments
Limited Partnership
c/o Enron Capital Corp.
Attention: Keith Power/Brenda McGee
1400 Smith Street, Room 2940
Houston, Texas 77002
Telecopy: (713) 646-4485
Enron Capital & Trade Resources Corp.
Attention: Lance Schuler
1400 Smith Street, 38th Floor
Houston, Texas 77002
Telecopy: (713) 646-3393
<PAGE>
EXHIBIT 10.13
JEDI/ANSCHUTZ OPTION
THIS JEDI/ANSCHUTZ OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH SAID ACT. THIS JEDI/ANSCHUTZ OPTION AND
THE TRANCHE B WARRANT SHARES (AS DEFINED HEREIN) ARE ALSO SUBJECT TO THE
RESTRICTIONS CONTAINED IN A REGISTRATION RIGHTS AGREEMENT DATED AS OF MAY 19,
1995 AND THE RESTRICTIONS CONTAINED IN A SHAREHOLDERS AGREEMENT DATED AS OF
JULY 27, 1995, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE SECRETARY OF
FOREST OIL CORPORATION.
JEDI/ANSCHUTZ OPTION dated as of July 27, 1995 by JOINT ENERGY
DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited partnership
("OPTIONOR"), in favor of THE ANSCHUTZ CORPORATION, a Kansas corporation, and
its successors and assigns ("OPTIONEE").
Optionor agrees as follows:
SECTION 1. DEFINITIONS. The following terms have the following
meanings:
"ACTION" against a person means an action, suit, investigation,
complaint or other proceeding threatened or pending against or affecting the
person or its property, whether civil or criminal, in law or in equity or
before any arbitrator or Governmental Body.
"APPROVAL" means an authorization, consent, approval or waiver of,
clearance by, notice to or registration or filing with, or any other similar
action by or with respect to a Governmental Body or any other person and the
expiration or termination of all prescribed waiting, review or appeal periods
with respect to any of the foregoing.
"COMMON STOCK" means the common stock, $.10 par value per share,
together with the associated Rights, of the Company.
"COMPANY" means Forest Oil Corporation, a New York corporation,
and its successors.
<PAGE>
"CONVEYANCE ELECTION DATE" means the date on which the Company
elects to exercise the Conveyance Option (as defined in the Loan Agreement)
which Conveyance Option has been approved in writing by the Optionee.
"EXERCISE NOTICE" has the meaning stated in Section 2(b).
"GOVERNMENTAL BODY" means any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other instrumentality
of any government, whether federal, state, county or local, domestic or
foreign.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related rules, regulations and
published interpretations thereunder.
"LIEN" means any mortgage, deed of trust, lien (statutory or
otherwise), pledge, hypothecation, charge, deposit arrangement, preference,
priority, security interest or encumbrance of any kind (including, but not
limited to, any conditional sale agreement or other title retention agreement,
any capitalized lease or financing lease having substantially the same
economic effect as the foregoing and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction to evidence any of the foregoing).
"LOAN AGREEMENT" means the Loan Agreement dated as of December 28,
1993 between the Company and the Optionor, as amended through the date hereof.
"OPTION" has the meaning stated in Section 2(a).
"OPTION PRICE" means a dollar amount per Tranche B Warrant Share
equal to the amount set forth on Schedule A hereto with respect to the month
in which the Exercise Notice is received by the Optionor, as such price per
share may be adjusted pursuant to the terms of the Tranche B Warrant.
"REGULATION" means (1) any applicable law, rule, regulation,
judgment, decree, ruling, order, award, injunction, recommendation or other
official action of any Governmental Body and (2) any official change in the
interpretation or administration of any of the foregoing by the Governmental
Body or by any other Governmental Body or other person responsible for the
interpretation or administration of any of the foregoing.
"RIGHTS" means the rights distributed or to be distributed to the
holders of shares of Common Stock pursuant to the Rights Agreement dated as of
October 14, 1993 between the Company and Securities Trust Corporation, as
Rights Agent, as amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
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<PAGE>
"TERMINATION DATE" means the earlier of (1) the Conveyance
Election Date and (2) July 27, 1998.
"TRANCHE B WARRANT SHARES" means 11,250,000 shares of Common Stock
that may be issued, sold and delivered by the Company upon exercise of the
Tranche B Warrants (as such number of shares of Common Stock may be adjusted
pursuant to the terms of the Tranche B Warrants) and the other shares of
capital stock, securities, cash and property receivable upon exercise of the
Tranche B Warrants.
"TRANCHE B WARRANTS" means the warrants to purchase 11,250,000
Tranche B Warrant Shares from the Company at a purchase price of $2.00 per
Tranche B Warrant Share (as such number of shares and price per share may be
adjusted pursuant to the terms of the Tranche B Warrants).
"TRANSFER" means the offer, transfer, sale, assignment, pledge,
hypothecation or other disposition, whether directly or indirectly, of the
subject of the transaction or any interest therein or to offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of the subject of the
transaction, as the context requires.
SECTION 2. TERM OF OPTION; EXERCISE OF OPTION; REDUCTION OF
OPTION.
(a) TERM OF OPTION. Subject to the conditions and on the
terms of this JEDI/Anschutz Option, Optionee shall have the right (the
"OPTION") until 5:00 P.M., Denver time, on the Termination Date, to purchase
from Optionor any or all of the Tranche B Warrant Shares on exercise of the
Option and the payment of the Option Price for the number of Tranche B Warrant
Shares so purchased. The Option shall be void, have no value and be of no
further effect with respect to any Exercise Notice delivered to Optionor after
the Termination Date.
(b) EXERCISE OF OPTION. The Option may be exercised in
whole or in part at any time and from time to time by (1) delivery by Optionee
to Optionor (no later than concurrently with delivery to the Company of the
instruments and certificate required under Section 3.2(a) of the Tranche B
Warrant) of the Anschutz Notice (as defined in the Loan Agreement) (the
"EXERCISE NOTICE") stating the Optionee is exercising the Option in respect of
the number of Tranche B Warrant Shares specified therein, (2) payment to
Optionor of the Option Price with respect to such Tranche B Warrant Shares and
(3) delivery to the Secretary of the Company of a duly completed copy of the
Election to Purchase attached to the Tranche B Warrant and a certificate of
the President or chief financial officer of Optionee to the effect that
Optionee has exercised the Option with respect to a specified number of
Tranche B Warrant Shares and has paid to the Optionor the aggregate Option
Price with respect to such shares, as required by Section 3.2(a) of the
Tranche B Warrants. Payment of the aggregate Option Price shall be made by
wire transfer of immediately available funds in accordance with written wire
instructions to be provided by Optionor. It is the intention of Optionor and
Optionee that in all events the Optionee
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shall be entitled to receive upon exercise of the Option only the capital
stock, other securities, cash and other property receivable upon exercise of
the Tranche B Warrants. Except as specifically set forth in the Tranche B
Warrant, Optionor shall have no obligation to take any action upon exercise
of the Option.
(c) REDUCTION OF OPTION. The number of Tranche B Warrant
Shares subject to the Option shall be reduced, effective after the issuance of
the Tranche B Warrant Shares specified in the Exercise Notice, by the number
of Tranche B Warrant Shares specified in the Exercise Notice.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF OPTIONOR. Optionor
represents and warrants to Optionee as follows:
(a) EXISTENCE AND POWER. Optionor (1) is a Delaware
limited partnership duly formed, validly existing and in good standing under
the laws of Delaware and (2) has all necessary partnership power and authority
to execute and deliver the JEDI/Anschutz Option.
(b) AUTHORIZATION; CONTRAVENTION. The execution and
delivery of the JEDI/Anschutz Option by Optionor and, except as noted in
Section 3(c), the performance of Optionor's obligations under the
JEDI/Anschutz Option, have been duly authorized by all necessary partnership
action and do not and will not contravene, violate, result in a breach of or
constitute a default under, (1) the Optionor's agreement of limited
partnership, (2) any Regulation of any Governmental Body or any decision,
ruling, order or award of any arbitrator by which Optionor or any of its
properties may be bound or affected, including, but not limited to, the Hart-
Scott-Rodino Act, (3) any agreement, indenture or other instrument to which it
is a party or by which Optionor or its properties may be bound or affected or
(4) result in or require the creation or imposition of any Lien on any of the
properties which it now owns or hereafter acquires.
(c) APPROVALS. Except for Approvals, if any, that may be
required under the Hart-Scott-Rodino Act or state securities laws upon
exercise of the Option, all Approvals required to be obtained by Optionor have
been obtained by Optionor for (1) the due execution and delivery by Optionor
of the JEDI/Anschutz Option, and (2) the performance by Optionor of its
obligations under the JEDI/Anschutz Option.
(d) BINDING EFFECT. The JEDI/Anschutz Option, when
executed and delivered by Optionor, is a legal, valid and binding obligation,
enforceable against Optionor in accordance with its terms.
(e) OWNERSHIP. Optionor owns all the Tranche B Warrants
and as of the date of each Exercise Notice will own all the Tranche B Warrants
other than Tranche B Warrants previously exercised, in each case free and
clear of all Liens.
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<PAGE>
(f) CONTINUING REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties made by Optionor in the JEDI/Anschutz
Option as of any date other than the date on which the Optionor first executes
the JEDI/Anschutz Option shall be true and correct on and as of each date
Tranche B Warrant Shares are transferred to Optionee pursuant to the
JEDI/Anschutz Option.
SECTION 4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
OPTIONEE. Upon acceptance hereof, Optionee represents and warrants to and
covenants and agrees with Optionor as follows:
(a) INVESTMENT INTENT. Optionee is acquiring the
JEDI/Anschutz Option for investment and not with any view toward distribution
of the Option or any portion thereof to any other person in violation of the
Securities Act or any state securities law; Optionee will not transfer the
Option or any interest therein except in compliance with the registration
requirements under the Securities Act and applicable state securities laws or
available exemptions therefrom; and before any transfer of the Option or any
interest therein the Optionee shall deliver to the Optionor the legal opinion
referred to in Section 7(a) hereof.
(b) TRANSFER TAXES. Optionee shall pay any documentary
stamp taxes or other taxes, if any, attributable to the initial issuance of
Tranche B Warrant Shares pursuant to the exercise of the Option.
(c) TRANSFEREE ASSUMPTION AGREEMENT. Upon receipt of the
Transferee Assumption Agreement in the form of Annex 1 hereto duly executed
and delivered to Optionee, Optionee shall, at the request of the person
executing the Transferee Assumption Agreement deliver the JEDI/Anschutz Option
to Optionor marked "cancelled" upon receipt of a replacement option identical
in all respects to the JEDI/Anschutz Option except for the replacement of the
name of the Optionor to the name of such transferee in the replacement option.
(d) FURTHER AGREEMENTS OF OPTIONEE. Without the prior
written approval of the Optionor, which approval may be granted or withheld in
the discretion of the Optionor, the Optionee shall not (1) take any action
(other than the exercise of the Option) that could in any manner whatsoever
adversely affect the right of the Holder (as defined in the Tranche B
Warrants) to exercise any of the Tranche B Warrants or restrict the Company
from issuing to the Holder the securities or other property issuable to the
Holder upon the exercise of the Tranche B Warrants or (2) take any action to
amend, supplement, replace or otherwise modify the terms of the Tranche A
Warrants to permit the exercise of the Tranche A Warrants on a date occurring
after the Expiration Date (as defined in the Tranche A Warrant as in effect on
even date herewith).
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<PAGE>
SECTION 5. COVENANTS OF OPTIONOR.
(a) SURRENDER AND EXERCISE OF TRANCHE B WARRANTS. At all
times before the Termination Date, (1) Optionor shall comply with the
requirement to surrender Tranche B Warrants pursuant to Section 3.2(a) thereof
and (2) Optionor shall not exercise any Tranche B Warrants except in
accordance with the terms hereof.
(b) TRANSFER OF TRANCHE B WARRANTS. Optionor shall not
transfer any Tranche B Warrants (or any interest therein) or the Tranche B
Loan (as defined in the Loan Agreement) to which the Tranche B Warrants are
attached (or any interest therein) including, without limitation, in
connection with the liquidation, dissolution or merger of Optionor, on or
prior to the Termination Date except in connection with a permitted transfer
of the Tranche B Warrants in accordance with the terms thereof as in effect on
the date hereof and then only as and when the transferee thereof executes and
delivers to Optionee the Transferee Assumption Agreement attached hereto as
Annex 1. Upon transfer of any Tranche B Warrants in accordance with the
provisions of this Section 5(b), Optionor shall be released from and shall
have no further obligation under this JEDI/Anschutz Option with respect to the
Tranche B Warrant Shares issuable upon exercise of the Tranche B Warrants so
transferred.
(c) FURTHER AGREEMENTS OF OPTIONOR. Without the prior
written approval of Optionee, which approval may be granted or withheld at the
discretion of the Optionee, Optionor shall not take any action (1) that could
in any manner whatsoever adversely affect the right of the Holder (as defined
in the Tranche A Warrants) to exercise any of the Tranche A Warrants, (2) on
or prior to the Termination Date, that could in any manner whatsoever
adversely affect the right of the Holder (as defined in the Tranche B Warrant)
to exercise any of the Tranche B Warrants, (3) that would prohibit or
otherwise restrict the Company from issuing the securities or other property
issuable upon exercise of the Tranche A Warrants or, on or prior to the
Termination Date, the Tranche B Warrants or (4) on or prior to the Termination
Date waive, surrender or otherwise extinguish any of the Optionor's rights
with respect to the Tranche B Warrants; PROVIDED, HOWEVER, that nothing
contained in this Section 5(c) shall limit in any manner whatsoever the right
of Optionor under the Loan Documents (as defined in the Loan Agreement) to
exercise its remedies thereunder in accordance with the terms thereof.
(d) COMPLIANCE WITH LAWS. Optionor shall comply in all
respects with all Regulations of each Governmental Body and all decisions,
rulings, orders and awards of each arbitrator applicable to it or its
business, properties or operations, including, but not limited to, all of the
provisions of the Hart-Scott-Rodino Act, in connection with the JEDI/Anschutz
Option.
(e) BEST EFFORTS. Optionor shall use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, and to
assist and cooperate with Optionee in doing all things necessary, proper or
advisable under applicable Regulations to
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<PAGE>
ensure that the sale of Tranche B Warrant Shares pursuant to the
JEDI/Anschutz Option are concluded, without interference or delay, in the
most expeditious manner practicable.
(f) FURTHER ASSURANCES. Promptly upon request by
Optionee, Optionor shall correct any defect or error that may be discovered in
the JEDI/Anschutz Option or in the execution of the JEDI/Anschutz Option and
execute, acknowledge, deliver, file, re-file, register and re-register, any
and all such further acts, certificates, assurances and other instruments as
Optionee may require from time to time in order (1) to carry out more
effectively the purposes of the JEDI/Anschutz Option, (2) to enable Optionee
to exercise and enforce its rights and remedies and collect any payments and
proceeds under the JEDI/Anschutz Option and (3) to better transfer, preserve,
protect and confirm to Optionee the rights granted or now or hereafter
intended to be granted to Optionee under the JEDI/Anschutz Option or under
each other instrument executed in connection with or pursuant to the
JEDI/Anschutz Option.
SECTION 6. TRANSFERABILITY OF JEDI/ANSCHUTZ OPTION.
(a) TRANSFER. The JEDI/Anschutz Option shall be
transferable in whole or in part. No such transfer shall occur without
delivery to the Optionor of an opinion of that such transfer may be made
without registration under the Securities Act and applicable state securities
laws.
(b) EXCHANGE. The JEDI/Anschutz Option may be exchanged
at the election of Optionee for one or more JEDI/Anschutz Option(s) entitling
Optionee(s) thereof to purchase a like aggregate number of Tranche B Warrant
Shares as the JEDI/Anschutz Option surrendered then entitles such Optionee to
purchase. Any Optionee desiring to exchange a JEDI/Anschutz Option shall make
such request in writing delivered to the Secretary of Optionor, and shall
surrender, duly endorsed or with separate assignment and stock powers duly
endorsed, the JEDI/Anschutz Option to be so exchanged at the office of the
Secretary of the Optionor. Thereupon, one or more new JEDI/Anschutz
Option(s), as so requested, shall be delivered to the person entitled thereto.
SECTION 7. POWER OF ATTORNEY.
(a) Optionor hereby irrevocably appoints the Optionee
(acting in its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-
FACT") as the true and lawful attorney-in-fact and agent of Optionor, with
power of substitution and resubstitution, to act in the name, place and stead
of Optionor solely with respect to the following:
(1) to exercise the Tranche B Warrants on behalf of Optionor;
and
(2) to instruct the Company, on behalf of Optionor, to issue and
deliver the Tranche B Warrant Shares acquired upon exercise of the
Tranche B Warrant pursuant to Section 3.2(a) thereof to the Optionee or
its assigns.
7
<PAGE>
(b) Optionor hereby acknowledges and confirms that the
Power of Attorney granted pursuant to this Section 7 is coupled with an
interest and, therefore, shall be irrevocable and shall not be terminated by
any act of Optionor or by operation of law, whether by the liquidation or
dissolution of the Optionor or by the occurrence of any other event or events,
and if, after the execution hereof, Optionor is liquidated or dissolved, or if
any other such event or events shall occur before the completion of the
transactions contemplated by this Section 7 and Section 3.2(a) of the Tranche
B Warrant, the Attorney-in-Fact shall nevertheless be authorized and directed
to complete all such transactions as if such liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Power of Attorney granted under this Section 7
shall terminate at 5:00 P.M., Denver time, on the Termination Date.
SECTION 8. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, requests and other
communications to Optionor or any Optionee under the JEDI/Anschutz Option
shall be in writing. Communications may be made by telecopy or similar
writing. Each communication to Optionor shall be given to the Optionor at its
address stated on the signature page of the JEDI/Anschutz Option (or at any
other address as Optionor may specify in writing to each Optionee at the time
of such notice) for this purpose by notice to the Optionor. Each
communication to the Optionee shall be given to Optionee at 2400 Anaconda
Tower, 555 - 17th Street, Denver, Colorado 80202 (telecopy number: 303-298-
8881) or such address as communicated to Optionor in writing (or, in each
case, at any other address as Optionee may specify to Optionor at the time of
such notice). Each communication shall be effective (1) if given by telecopy,
when the telecopy is transmitted to the proper address and the receipt of the
transmission is confirmed, (2) if given by mail, 72 hours after the
communication is deposited in the mails properly addressed with first class
postage prepaid or (3) if given by any other means, when delivered to the
proper address and a written acknowledgement of delivery is received.
(b) NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
(1) Prior to the Termination Date no failure or delay by
Optionee in exercising any right, power or privilege under the
JEDI/Anschutz Option shall operate as a waiver of the right, power or
privilege. A single or partial exercise of any right, power or
privilege shall not preclude any other or further exercise of the right,
power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in the JEDI/Anschutz Option
shall be cumulative and not exclusive of any rights or remedies provided
by law.
(2) In view of the uniqueness of the agreements contained in the
JEDI/Anschutz Option and the transactions contemplated hereby and the
fact that Optionee would not have an adequate remedy at law for money
damages in the
8
<PAGE>
event that any obligation under the JEDI/Anschutz Option is not
performed in accordance with its terms, Optionor therefore agrees
that Optionee shall be entitled to specific enforcement of the terms of
the JEDI/Anschutz Option in addition to any other remedy to which any of
them may be entitled, at law or in equity.
(c) AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of the JEDI/Anschutz Option, and no
consent to any departure by Optionor or Optionee from any provision of the
JEDI/Anschutz Option, shall be effective unless it shall be in writing and
signed and delivered by Optionor and such Optionee, and then it shall be
effective only in the specific instance and for the specific purpose for which
it is given.
(d) SUCCESSORS AND ASSIGNS.
(1) Optionee may assign any of its rights under the
JEDI/Anschutz Option. Optionor may not assign any of its rights or
delegate any of its obligations under the JEDI/Anschutz Option except
pursuant to Section 5(b). Any assignment or delegation in contravention
of this Section shall be void AB INITIO and shall not relieve the
delegating party of any obligation under the JEDI/Anschutz Option.
(2) The provisions of the JEDI/Anschutz Option shall be binding
upon and inure to the benefit of Optionor and Optionee and their
respective permitted successors and assigns.
(e) GOVERNING LAW. The JEDI/Anschutz Option shall be
governed by and construed in accordance with the internal laws of the State of
New York. All rights and obligations of Optionor and Optionee shall be in
addition to and not in limitation of those provided by applicable law.
(f) SEVERABILITY OF PROVISIONS. Any provision of the
JEDI/Anschutz Option that is prohibited or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of the
prohibition or unenforceability without invalidating the remaining provisions
of the JEDI/Anschutz Option or affecting the validity or enforceability of the
provision in any other jurisdiction.
(g) HEADINGS AND REFERENCES. Section headings in the
JEDI/Anschutz Option are included for the convenience of reference only and do
not constitute a part of the JEDI/Anschutz Option for any other purpose.
References to sections in the JEDI/Anschutz Option are references to sections
of the JEDI/Anschutz Option unless the context shall require otherwise.
(h) ENTIRE AGREEMENT. The JEDI/Anschutz Option embodies
the entire agreement and understanding of Optionor and Optionee and supersedes
all prior
9
<PAGE>
agreements or understandings with respect to the subject matters of
the JEDI/Anschutz Option.
(i) SURVIVAL. Except as otherwise specifically provided
in the JEDI/Anschutz Option, each representation, warranty or covenant
contained in the JEDI/Anschutz Option shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary or any waiver by
any other party of a related condition precedent to the performance by the
other party of an obligation under the JEDI/Anschutz Option.
(j) NON-EXCLUSIVE JURISDICTION. Each of Optionor and
Optionee, by acceptance hereof, (1) agrees that any legal action with respect
to the JEDI/Anschutz Option or transactions contemplated by the JEDI/Anschutz
Option may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, (2) accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts and (3) irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based
on the grounds of FORUM NON CONVENIENS, which it may now or hereafter have to
the bringing of any legal action in those jurisdictions.
(k) WAIVER OF JURY TRIAL. Each of Optionor and Optionee,
by acceptance hereof, waives any right to a trial by jury in any Action to
enforce or defend any right under the JEDI/Anschutz Option or any amendment,
instrument, document or agreement delivered, or which in the future may be
delivered, in connection with the JEDI/Anschutz Option and agrees that any
Action shall be tried before a court and not before a jury.
10
<PAGE>
ANNEX 1 TO JEDI/ANSCHUTZ OPTION
FORM OF TRANSFEREE ASSUMPTION AGREEMENT
[Date]
Name of Optionee
Address of Optionee
Re: JEDI/ANSCHUTZ OPTION
Gentlemen:
This letter is delivered to you pursuant to Section 5(b) of the
JEDI/Anschutz Option dated July 27, 1995 (the "JEDI/ANSCHUTZ OPTION").
Concurrently with the execution and delivery of this letter, the undersigned
has become the holder of Tranche B Warrants entitling the holder thereof to
purchase up to Tranche B Warrant Shares (as each term is defined in the
JEDI/Anschutz Option).
The undersigned hereby agrees that for so long as it holds Tranche
B Warrants it shall be deemed to be an Optionor under the terms of the
JEDI/Anschutz Option and shall be bound by all of the terms and provisions of
the JEDI/Anschutz Option including, without limitation, Section 7 (Power of
Attorney). The undersigned hereby assumes all obligations of _________ under
the JEDI/Anschutz Option with respect to the number of Tranche B Warrant
Shares specified above. The undersigned further agrees that until the
Termination Date (as defined in the JEDI/Anschutz Option) it shall not
transfer (as defined in the JEDI/Anschutz Option) the Tranche B Warrants or
any interest therein except in accordance with the provisions of the Tranche B
Warrants and then only as and when the transferee executes and delivers to the
Optionee the Transferee Assumption Agreement attached as Annex 1 to the
JEDI/Anschutz Option.
----------------------------
(Name of Transferee)
By: ------------------------
Name:
Title:
A-1
<PAGE>
SCHEDULE A
OPTION PRICE
DURING
MONTH
FOLLOWING DATE
OF
JEDI/ANSCHUTZ OPTION AMOUNT
-------------------- ------
<TABLE>
<CAPTION>
<S> <C>
0(1) $2.0000
1 $2.0278
2 $2.0559
3 $2.0845
4 $2.1134
5 $2.1428
6 $2.1726
7 $2.2027
8 $2.2333
9 $2.2643
10 $2.2958
11 $2.3277
12 $2.3600
13 $2.3928
14 $2.4260
15 $2.4597
16 $2.4939
17 $2.5285
18 $2.5636
19 $2.5992
20 $2.6353
21 $2.6719
22 $2.7090
23 $2.7467
24 $2.7848
25 $2.8235
26 $2.8627
27 $2.9024
28 $2.9428
29 $2.9836
30 $3.0251
31 $3.0671
32 $3.1000
33 $3.1000
34 $3.1000
35 $3.1000
36 $3.1000
</TABLE>
(1) Month in which JEDI/Anschutz Option is issued.
A-2
<PAGE>
IN WITNESS WHEREOF, Optionor has executed the JEDI/Anschutz Option
as of the date first written above in New York, New York.
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Corp.,
its General Partner
By: CLIFFORD HICKEY
----------------------
Title: Attorney-in-fact
Address: 1400 Smith Street
Houston, Texas 77002
Attention: Keith Power
Telecopy: (713) 646-3602
with a copy to:
Enron Capital & Trade Resources Corp.
1200 17th Street, Suite 2750
Denver, Colorado 80202
Attention: Mr. Clifford Hickey
Telecopy: (303) 534-2205
S-1
<PAGE>
EXHIBIT 10.14
FOREST OIL CORPORATION
1600 Broadway, Suite 2200
Denver, Colorado 80202
January ___, 1996
The Anschutz Corporation
2400 Anaconda Tower
555 Seventeenth Street
Denver, Colorado 80202
Re: JEDI/ANSCHUTZ OPTION
Gentlemen:
This letter is delivered to you pursuant to Section 5(b) of the
JEDI/Anschutz Option dated July 27, 1995 (the "JEDI/ANSCHUTZ OPTION").
Concurrently with the execution and delivery of this letter, the undersigned
has become the holder of Tranche B Warrants entitling the holder thereof to
purchase up to 2,250,000 Tranche B Warrant Shares (as each term is defined in
the JEDI/Anschutz Option).
The undersigned hereby agrees that for so long as it holds Tranche B
Warrants it shall be deemed to be the Optionor under the terms of the
JEDI/Anschutz Option and shall be bound by all of the terms and provisions of
the JEDI/Anschutz Option including, without limitation, Section 7 (Power of
Attorney). The undersigned hereby assumes all obligations of Joint Energy
Development Investments Limited Partnership under the JEDI/Anschutz Option with
respect to the number of Tranche B Warrant Shares specified above. The
undersigned further agrees that until the Termination Date (as defined in the
JEDI/Anschutz Option) it shall not transfer (as defined in the JEDI/Anschutz
Option) the Tranche B Warrants or any interest therein except in accordance
with the provisions of the Tranche B Warrants and then only as and when the
transferee executes and delivers to the Optionee the Transferee Assumption
Agreement attached as Annex 1 to the JEDI/Anschutz Option.
FOREST OIL CORPORATION
By: _____________________________
Name: Daniel L. McNamara
Title: Secretary
ACKNOWLEDGED AND ACCEPTED
as of the ___ day of January, 1996:
THE ANSCHUTZ CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
Exhibit 11
FOREST OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES
CALCULATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1995 1994 1993
---- ---- ----
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
Primary earnings (loss) per share:
Net earnings (loss) $(17,996) (81,843) (21,213)
Less dividend requirements on:
$.75 Convertible Preferred Stock (2,160) (2,161) (2,250)
-------- ------- -------
Net earnings (loss) attributable to common stock
for primary earnings (loss) per share calculation $(20,156) (84,004) (23,463)
-------- ------- -------
-------- ------- -------
Weighted average number of common
shares outstanding 7,360 5,619 4,399
-------- ------- -------
-------- ------- -------
Primary earnings (loss) per share of common stock $ (2.74) (14.95) (5.34)
-------- ------- -------
-------- ------- -------
Fully diluted earnings (loss) per share:
Net earnings (loss) attributable to common stock, as above $(20,156) (84,004) (23,463)
Add:
Dividend requirements on:
$.75 Convertible Preferred Stock 2,160 2,161 2,250
Interest expense on 5-1/2% Convertible
Subordinated Debentures -- -- 409
Expenses related to the 5-1/2% Convertible
Subordinated Debentures -- -- 6
Less:
Additional Federal income taxes -- -- (141)
-------- ------- -------
Net earnings (loss) attributable to common stock for
fully diluted earnings (loss) per share calculation $(17,996) (81,843) (20,939)
-------- ------- -------
-------- ------- -------
Common shares applicable to fully diluted calculation:
Weighted average number of common shares
outstanding, as above 7,360 5,619 4,399
Add weighted average number of shares:
Issuable upon assumed conversion of:
$.75 Convertible Preferred Stock 2,017 2,017 2,098
Issuable upon assumed conversion of 5-1/2%
Convertible Subordinated Debentures -- -- 122
-------- ------- -------
Common shares applicable to fully diluted calculation 9,377 7,636 6,619
-------- ------- -------
-------- ------- -------
Fully diluted earnings (loss) per share of common stock $ (1.92)* (10.72)* (3.16)*
-------- ------- -------
-------- ------- -------
</TABLE>
* The fully diluted loss per share is not presented in the Company's financial
statements because the effects of assumed exercises and conversions were
anti-dilutive.
<PAGE>
Exhibit 21.1
FOREST OIL CORPORATION
List of Subsidiaries of the Registrant
Name of Subsidiary Jurisdiction in Which Organized
------------------------ -------------------------------
Saxon Petroleum Inc. Alberta
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
FOREST OIL CORPORATION
We consent to the incorporation by reference in (i) the Registration
Statements (Nos. 2-74151, 2-76946, 33-2748 and 33-59504) on Form S-8 of
Forest Oil Corporation -- Retirement Savings Plan of Forest Oil Corporation,
(ii) the Registration Statement (No. 33-48440) on Form S-8 of Forest Oil
Corporation -- 1992 Stock Option Plan of Forest Oil Corporation, (iii) the
Registration Statement (No. 33-43292) on Form S-3 of Forest Oil Corporation
- -- Common Stock issuable upon exercise of the Warrants of Forest Oil
Corporation and (iv) the Registration Statements (Nos. 33-47477 and 33-47478)
on Forms S-2 and S-3 of Forest Oil Corporation -- Common Stock issuable to
Richard Dorn and resales thereof, of our report dated February 20, 1996
relating to the consolidated balance sheets of Forest Oil Corporation and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 1995, which report
appears in the December 31, 1995 annual report on Form 10-K of Forest Oil
Corporation.
Our report on the consolidated financial statements refers to a change in the
method of accounting for oil and gas sales from the sales method to the
entitlements method effective January 1, 1994 and to changes in the method of
accounting for postretirement benefits and income taxes in 1993.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 29, 1996
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ Philip F. Anschutz
------------------------------
Philip F. Anschutz
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ Robert S. Boswell
----------------------------------
Robert S. Boswell
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 8th day of February, 1996.
/s/ Richard J. Callahan
--------------------------------
Richard J. Callahan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ Dale F. Dorn
-------------------------------
Dale F. Dorn
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ William L. Dorn
--------------------------------
William L. Dorn
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ David H. Keyte
------------------------------
David H. Keyte
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ James H. Lee
--------------------------------
James H. Lee
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ Craig D. Slater
---------------------------------
Craig D. Slater
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 27th day of March, 1996.
/s/ Joan C. Sonnen
---------------------------------
Joan C. Sonnen
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ Drake S. Tempest
------------------------------
Drake S. Tempest
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
or director, or both, of FOREST OIL CORPORATION, a New York corporation
(the "Company"), does hereby constitute and appoint Daniel L. McNamara and
Barbara E. Chesebro his true and lawful attorneys and agents (each with
authority to act alone), to do any and all acts and things and to execute
any and all instruments which said attorneys and agents deem necessary
or advisable to enable the Company to comply with the Securities Exchange
Act of 1934, as amended, and any rules, regulations, and requirements of the
Securities and Exchange Commission in respect thereof, in connection with
the preparation and filing of the Form 10-K--Annual Report for the year
ended December 31, 1995 pursuant to Section 13 of the Securities Exchange
Act of 1934, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer or director, or both,
of the Company to a Form 10-K--Annual Report for the year ended December
31, 1995, pursuant to Section 13 of the Securities Exchange Act of 1934 or
to any amendment thereto filed with the Securities and Exchange Commission
and to any instrument or document filed as a part of, as an exhibit to or
in connection with said Form 10-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 8th day of February, 1996.
/s/ Michael B. Yanney
----------------------------------
Michael B. Yanney
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated statements of income and condensed consolidated balance
sheets on pages 33 through 35 of the Company's Form 10-K for the year ended
December 31, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,287
<SECURITIES> 0
<RECEIVABLES> 17,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,239
<PP&E> 1,226,529
<DEPRECIATION> 948,930
<TOTAL-ASSETS> 321,043
<CURRENT-LIABILITIES> 32,420
<BONDS> 193,879
0
24,359
<COMMON> 1,066
<OTHER-SE> 18,872
<TOTAL-LIABILITY-AND-EQUITY> 321,043
<SALES> 82,275
<TOTAL-REVENUES> 82,456
<CGS> 22,463
<TOTAL-COSTS> 31,544
<OTHER-EXPENSES> 43,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,323
<INCOME-PRETAX> (18,003)
<INCOME-TAX> (7)
<INCOME-CONTINUING> (17,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,996)
<EPS-PRIMARY> (2.74)
<EPS-DILUTED> (2.74)
</TABLE>
