<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number 0-4597
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
New York 25-0484900
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Broadway
Suite 2200
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 812-1400
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.
Yes X No
--- ---
Number of Shares
Outstanding
TITLE OF CLASS OF COMMON STOCK JULY 31, 1997
- ------------------------------ -------------
Common Stock, Par Value $.10 Per Share 32,797,662
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<PAGE>
PART I. FINANCIAL INFORMATION
FOREST OIL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
1997 1996
---------- ----------
(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 5,615 8,626
Accounts receivable 48,944 55,462
Other current assets 4,678 4,996
--------- ---------
Total current assets 59,237 69,084
Net property and equipment, at cost 497,030 458,242
Goodwill and other intangible assets, net 28,196 29,439
Other assets 7,549 6,693
--------- ---------
$ 592,012 563,458
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 903 4,682
Current portion of long-term debt - 2,091
Accounts payable 51,174 64,811
Accrued interest 4,801 4,584
Other current liabilities 3,601 5,565
--------- ---------
Total current liabilities 60,479 81,733
Long-term debt 223,884 168,859
Other liabilities 17,921 19,844
Deferred revenue - 7,591
Deferred income taxes 35,097 33,716
Minority interest 12,985 9,272
Shareholders' equity:
Preferred stock - 15,827
Common stock 3,279 3,053
Capital surplus 456,617 438,556
Accumulated deficit (212,861) (214,190)
Foreign currency translation (2,572) (803)
Treasury stock at cost (2,817) -
--------- ---------
Total shareholders' equity 241,646 242,443
--------- ---------
$ 592,012 563,458
--------- ---------
--------- ---------
See accompanying notes to condensed consolidated financial statements.
-1-
<PAGE>
FOREST OIL CORPORATION
Condensed Consolidated Statements of Production and Operations
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
------------------------ -------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands Except Production and Per Share Amounts)
<S> <C> <C> <C> <C>
PRODUCTION
Natural gas (mmcf) 11,218 10,202 23,033 19,444
-------- -------- --------- ---------
-------- -------- --------- ---------
Oil, condensate and natural gas
liquids (thousands of barrels) 802 610 1,491 1,233
-------- -------- --------- ---------
-------- -------- --------- ---------
STATEMENTS OF CONSOLIDATED OPERATIONS
Revenue:
Marketing and processing $44,747 50,842 98,209 83,589
Oil and gas sales:
Gas 19,654 17,533 45,700 35,467
Oil, condensate and natural gas liquids 13,254 11,330 26,809 21,055
-------- -------- --------- ---------
Total oil and gas sales 32,908 28,863 72,509 56,522
Miscellaneous, net 807 (161) 1,650 303
-------- -------- --------- ---------
Total revenue 78,462 79,544 172,368 140,414
Expenses:
Marketing and processing 42,998 48,986 93,906 79,165
Oil and gas production 9,026 8,369 18,671 15,856
General and administrative 5,081 3,607 8,547 6,337
Interest 5,259 6,423 10,033 12,220
Depreciation and depletion 18,319 14,051 36,756 26,989
Minority interest in earnings (loss) of
subsidiary 59 (216) 161 (171)
-------- -------- --------- ---------
Total expenses 80,742 81,220 168,074 140,396
-------- -------- --------- ---------
Earnings (loss) before income taxes (2,280) (1,676) 4,294 18
Income tax expense (benefit):
Current (92) 1,453 1,273 2,567
Deferred 1,008 (228) 1,695 738
-------- -------- --------- ---------
916 1,225 2,968 3,305
-------- -------- --------- ---------
Net earnings (loss) $(3,196) (2,901) 1,326 (3,287)
-------- -------- --------- ---------
-------- -------- --------- ---------
Weighted average number of common and
common equivalent shares outstanding 32,578 24,576 33,353 22,477
-------- -------- --------- ---------
-------- -------- --------- ---------
Earnings (loss) attributable to common stock $(3,196) (3,441) 1,137 (4,367)
-------- -------- --------- ---------
-------- -------- --------- ---------
Primary and fully diluted earnings (loss) per
common and common equivalent share $ (.10) (.14) .03 (.19)
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
FOREST OIL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------
June 30, June 30,
1997 1996
-------- ---------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,326 (3,287)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and depletion 36,756 26,989
Amortization of deferred debt costs 349 481
Deferred income tax expense 1,695 738
Minority interest in earnings (loss) of subsidiary 161 (171)
Other, net (63) 1,075
(Increase) decrease in accounts receivable 6,871 (5,771)
Decrease in other current assets 103 488
Increase (decrease) in accounts payable (6,020) 5,764
Increase (decrease) in accrued interest and other
current liabilities (8,532) 799
Settlement of volumetric production payment obligation (6,832) -
Amortization of deferred revenue (1,524) (5,152)
-------- ---------
Net cash provided by operating activities 24,290 21,953
Cash flows from investing activities:
Acquisition of subsidiaries:
Current assets - (22,304)
Property and equipment - (144,099)
Goodwill and other intangible assets - (31,163)
Current liabilities - 23,562
Long-term debt - 696
Other liabilities - 1,542
Deferred taxes - 35,575
-------- ---------
Cash paid for acquisitions of subsidiaries - (136,191)
Capital expenditures for property and equipment (81,877) (27,490)
Proceeds from sales of assets 8,096 2,965
Increase in other assets, net (51) (511)
-------- ---------
Net cash used by investing activities (73,832) (161,227)
Cash flows from financing activities:
Proceeds from bank borrowings 101,136 118,704
Repayments of bank borrowings (46,464) (111,814)
Repayments of production payment obligation (1,716) (1,589)
Proceeds from common stock offering, net of offering costs - 136,591
Proceeds from the exercise of options 1,589 -
Costs of preferred stock conversion (800) -
Deferred debt costs (326) -
Payment of preferred stock dividends (540) -
Decrease in cash overdraft (3,779) (1,045)
Decrease in other liabilities, net (2,517) (647)
-------- ---------
Net cash provided by financing activities 46,583 140,200
Effect of exchange rate changes on cash (52) (37)
-------- ---------
Net increase (decrease) in cash and cash equivalents (3,011) 889
Cash and cash equivalents at beginning of period 8,626 3,287
-------- ---------
Cash and cash equivalents at end of period $ 5,615 4,176
-------- ---------
-------- ---------
Cash paid during the period for:
Interest $ 9,406 10,352
-------- ---------
-------- ---------
Income taxes $ 4,288 1,492
-------- ---------
-------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
FOREST OIL CORPORATION
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1997 and 1996
(Unaudited)
(1) Basis of Presentation
The condensed consolidated financial statements included herein are
unaudited. In the opinion of management, all adjustments, consisting of
normal recurring accruals, have been made which are necessary for a fair
presentation of the financial position of the Company at June 30, 1997
and the results of operations for the three and six month periods ended
June 30, 1997 and 1996. Quarterly results are not necessarily indicative
of expected annual results because of the impact of fluctuations in
prices received for liquids and natural gas and other factors. For a
more complete understanding of the Company's operations and financial
position, reference is made to the consolidated financial statements of
the Company, and related notes thereto, filed with the Company's annual
report on Form 10-K for the year ended December 31, 1996, previously
filed with the Securities and Exchange Commission.
(2) Acquisitions
On December 20, 1995 the Company purchased a 56% economic (49% voting)
interest in Saxon Petroleum Inc. (Saxon) for approximately $22,000,000.
Saxon is a Canadian exploration and production company with headquarters
in Calgary, Alberta and operations concentrated in western Alberta. In
the transaction, Forest received from Saxon 40,800,000 voting common
shares, 12,300,000 nonvoting common shares which are convertible to
voting common shares at any time, 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 preferred shares of Archean Energy, Ltd. were
recorded at their historical carrying value of $11,301,000. The Forest
common shares issued to Saxon were recorded at their estimated fair
value determined by reference to the quoted market price of the shares
immediately preceding the announcement of the acquisition. In January
1996, Saxon sold these shares in a public offering of Forest Common
Stock and used the proceeds to reduce its bank debt.
Since Forest has majority voting control over Saxon as a result of the
voting common shares that it owns and proxies that it holds, it has
accounted for Saxon as a consolidated subsidiary from the date of its
acquisition.
In September 1996, the preferred shares of Archean were redeemed for
cash at their approximate carrying value.
On January 31, 1996 the Company acquired ATCOR Resources Ltd. of
Calgary, Alberta for approximately $136,000,000 including acquisition
costs of approximately $1,000,000. 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).
As part of the Canadian Forest acquisition, Forest also acquired ATCOR's
natural gas marketing business, which was renamed Producers Marketing
Ltd. (ProMark). Goodwill and other intangibles recorded in the
acquisition included approximately $15,000,000 associated with certain
natural gas marketing contracts, which is being amortized over the
average life of the contracts of 12 years and approximately $17,000,000
of goodwill associated with the gas marketing business acquired which is
being amortized over 20 years.
On January 21, 1997 Forest converted its preferred shares of Saxon into
27,192,983 nonvoting common shares. On March 13, 1997 Forest acquired
3,158,142 voting common shares and 2,380,608 nonvoting common shares of
Saxon in exchange for 131,489 common shares of Forest pursuant to an
equity participation agreement. These transactions increased Forest's
economic interest in Saxon to 66%.
-4-
<PAGE>
(2) Acquisitions (continued)
The consolidated balance sheet of Forest includes the accounts of Saxon
and Canadian Forest at December 31, 1996 and June 30, 1997. The
consolidated statements of operations include the results of operations
of Saxon effective January 1, 1996 and the results of operations of
Canadian Forest effective February 1, 1996. The following pro forma
consolidated statement of operations information for the six months
ended June 30, 1996 assumes that the Common Stock offering and the
acquisition of Canadian Forest occurred as of January 1, 1996.
Pro Forma Six Months
Ended June 30, 1996
---------------------
(In Thousands, Except
Per Share Amounts)
Revenue:
Marketing and processing $ 96,930
Oil and gas sales 60,232
Miscellaneous, net 303
--------
Total revenue $157,465
--------
--------
Net loss $ (2,905)
--------
--------
Primary and fully diluted loss per common share $ (.18)
--------
--------
(3) 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 shares were sold by Forest. The net
proceeds to Forest and Saxon from the issuance of shares totaled
approximately $136,000,000 after deducting issuance costs and
underwriting fees.
On August 1, 1996 The Anschutz Corporation (Anschutz) exercised its
option to purchase 2,250,000 shares of Forest's Common Stock for
$26,200,000 or approximately $11.64 per share.
On November 5, 1996 the Company exchanged 2,000,000 shares of Common
Stock plus approximately $13,500,000 in cash to extinguish approximately
$43,000,000 of nonrecourse secured debt owed to Joint Energy Development
Investments Limited Partnership (JEDI), a Delaware limited partnership
whose general partner is an affiliate of Enron Corp. (Enron). In
connection with this transaction, Anschutz acquired 1,628,888 shares of
Common Stock by exercising warrants to purchase 388,888 shares of Common
Stock at $10.50 per share and by converting 620,000 shares of Forest's
Second Series Preferred Stock into 1,240,000 shares of Common Stock.
On November 14, 1996 the Company filed a shelf registration with the
Securities and Exchange Commission to issue up to $250,000,000 in one or
more forms of debt or equity securities. Except as otherwise provided
in an applicable prospectus supplement, the net proceeds from the sale
of the securities will be used for the acquisition of oil and gas
properties, capital expenditures, the repayment of subordinated
debentures or other debt, repayments of borrowings under revolving
credit agreements, or for other general corporate purposes.
On February 7, 1997 the Company called for redemption all 2,877,673
shares of its $.75 Convertible Preferred Stock. This conversion
eliminated all outstanding preferred stock from Forest's capital
structure. In response to its call for redemption, 2,783,945 shares or
96.7% of the shares outstanding were
-5-
<PAGE>
(3) Common Stock (continued)
tendered for conversion into Common Stock on or before the February 21,
1996 deadline. The remaining 93,728 preferred shares were redeemed by
the Company at the redemption price of $10.06 per share (at a total cost
of $942,904) on February 28, 1997. Lehman Brothers Inc. purchased
65,616 shares of Common Stock to fund the cash requirement of the
redemption in accordance with the terms of its standby purchase
agreement with Forest. Redemption of the $.75 Convertible Preferred
Stock eliminated approximately $2,200,000 of annual preferred dividend
payments.
(4) Net Property and Equipment
The components of net property and equipment are as follows:
June 30, December 31,
1997 1996
---------- ------------
(In Thousands)
Oil and gas properties $1,532,501 1,457,212
Buildings, transportation and
other equipment 10,008 10,993
---------- ---------
1,542,509 1,468,205
Less accumulated depreciation,
depletion and valuation allowance 1,045,479 1,009,963
---------- ---------
$ 497,030 458,242
---------- ---------
---------- ---------
(5) Goodwill and Other Intangible Assets
Goodwill and other intangible assets recorded in the acquisition of
ProMark consist of the following:
June 30, December 31,
1997 1996
------- ------------
(In Thousands)
Goodwill $16,599 16,728
Gas marketing contracts 14,482 14,594
------- ------
31,081 31,322
Less accumulated amortization 2,885 1,883
------- ------
$28,196 29,439
------- ------
------- ------
Goodwill is being amortized on a straight line basis over twenty years.
The amount attributed to the value of gas marketing contracts acquired
is being amortized on a straight line basis over the average life of
such contracts of twelve years.
-6-
<PAGE>
(6) Long-term Debt
The components of long-term debt are as follows:
June 30, December 31,
1997 1996
-------- ------------
(In Thousands)
Credit Facility $ 58,500 26,400
Canadian Credit Facility 32,948 32,500
Saxon Credit Facility 22,104 -
Production payment obligation 10,880 12,596
11-1/4% Subordinated debentures 99,452 99,421
-------- -------
223,884 170,917
Less current portion - 2,058
-------- -------
Long-term debt $223,884 168,859
-------- -------
-------- -------
(7) Deferred Revenue
From 1991 to 1994, the Company sold volumetric production payments to
Enron to fund capital expenditures and property acquisitions. On June
30, 1997 the Company purchased from Enron the obligation related to its
last remaining volumetric production payment. The purchase price of
approximately $6,832,000 plus expenses was funded by the Company's bank
credit facility. Reserves of approximately 3.5 BCFE, which were
dedicated to repayment of this volumetric production payment, reverted
to the Company's interest.
(8) 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. Common share equivalents include, when
applicable, dilutive stock options and warrants using the treasury stock
method.
Fully diluted earnings (loss) per share assumes, in addition to the
above, (i) that convertible preferred stock was converted at the
beginning of each period or date of issuance, if later, and (ii) any
additional dilutive effect of stock options and warrants. The assumed
exercises and conversions were antidilutive for the three and six months
ended June 30, 1997 and 1996.
-7-
<PAGE>
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.
FORWARD-LOOKING STATEMENTS
Certain of the statements set forth in this Form 10-Q, such as the
statements regarding planned capital expenditures and the availability of
capital resources to fund capital expenditures, are forward-looking and are
based upon the Company's current belief as to the outcome and timing of such
future events. There are numerous risks and uncertainties that can affect
the outcome and timing of such events, including many factors which are
beyond the control of the Company. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, the
Company's actual results and plans for 1997 and beyond could differ
materially from those expressed in the forward-looking statements. For a
description of risks affecting the Company's business, see "Item 1 - Business
- - Forward-Looking Statements and Risk Factors" in the Company's 1996 Annual
Report on Form 10-K.
RESULTS OF OPERATIONS FOR THE SECOND QUARTER OF 1997
The net loss for the second quarter of 1997 was $3,196,000 or $.10 per
common share compared to a net loss of $2,901,000 or $.14 per common share in
the second quarter of 1996.
The Company's marketing and processing revenue decreased by 12% to
$44,747,000 in the second quarter of 1997 from $50,842,000 in the second
quarter of 1996 and the related marketing and processing expense decreased by
12% to $42,998,000 in the 1997 quarter from $48,986,000 in the previous year.
The gross margin reported for marketing and processing activities decreased
to $1,749,000 in the second quarter of 1997 from $1,856,000 in the second
quarter of 1996, due primarily to processing plant downtime in the second
quarter of 1997 for turnaround and inspection.
The Company's oil and gas sales revenue increased by 14% to $32,908,000
in the second quarter of 1997 from $28,863,000 in the second quarter of 1996.
Production volumes for natural gas in the second quarter of 1997 increased
10% from the comparable 1996 period due primarily to new production from Gulf
of Mexico properties. The average sales price received for natural gas in
the second quarter of 1997 increased 2% compared to the average sales price
received in the corresponding 1996 period. Production volumes for liquids
(consisting of oil, condensate and natural gas liquids) were 31% higher in
the second quarter of 1997 than in the second quarter of 1996 due primarily
to new production from Gulf of Mexico and Canadian properties. The average
sales price received by the Company for its liquids production during the
second quarter of 1997 decreased 10% compared to the average sales price
received during the comparable 1996 period.
Oil and gas production expense of $9,026,000 in the second quarter of
1997 increased 8% from $8,369,000 in the comparable period of 1996 due
primarily to temporary transportation expenses associated with the Bigoray
field. On an MCFE basis (MCFE means thousands of cubic feet of natural gas
equivalents, using conversion ratio of one barrel of oil to six MCF of
natural gas), production expense decreased approximately 7% in the second
quarter of 1997 to $.56 per MCFE from $.60 MCFE in the second quarter of 1996.
-8-
<PAGE>
Production volumes, average sales prices and production expenses during
the periods were as follows:
<TABLE>
Three Months Ended
-----------------------------------------------------------------------------------
June 30, June 30,
1997 1996
-------------------------------------- ---------------------------------------
United United
States Canada Total States Canada Total
------ ------ ----- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
NATURAL GAS
Total production (MMCF) (1) (3) 7,592 3,626 11,218 6,667 3,535 10,202
Sales price received (per MCF) $ 2.01 1.20 1.75 2.18 1.22 1.85
Effects of energy swaps (per MCF) (2) - .01 - (.17) (.05) (.13)
------- ------ ------- ------ ------ -------
Average sales price (per MCF) (3) $ 2.01 1.21 1.75 2.01 1.17 1.72
LIQUIDS
Oil and condensate:
Total production (MBBLS) 249 412 661 199 323 522
Sales price received (per BBL) $17.51 17.96 17.80 19.48 21.89 20.98
Effects of energy swaps (per BBL) (2) .04 .02 .02 (2.11) (2.66) (2.45)
------- ------ ------- ------ ------ -------
Average sales price (per BBL) (4) $17.55 17.98 17.82 17.37 19.23 18.53
Natural gas liquids:
Total production (MBBLS) 40 101 141 29 59 88
Average sales price (per BBL) (4) $ 7.38 11.71 10.48 9.44 22.05 17.88
Total liquids production (MBBLS) 289 513 802 228 382 610
Average sales price (per BBL) (4) $16.14 16.74 16.53 16.37 19.66 18.44
Total production (MMCFE) 9,326 6,704 16,030 8,035 5,827 13,862
Operating expenses (per MCFE) $ .54 .60 .56 .62 .59 .60
</TABLE>
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 327 MMCF and 868 MMCF in the
1997 and 1996 periods, respectively. Natural gas delivered pursuant to
volumetric production payment agreements represented approximately 3%
and 9% of total natural gas production in the 1997 and 1996 periods,
respectively. On June 30, 1997 the Company repurchased its last
remaining volumetric production payment.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuations. Hedged natural gas volumes were 3,110 MMCF
and 3,058 MMCF for the 1997 and 1996 periods, respectively. Hedged oil
and condensate volumes were 233,000 barrels and 357,000 barrels for the
1997 and 1996 periods, respectively. The aggregate gain under energy
swap agreements was $60,000 in the second quarter of 1997 and the
aggregate loss under such agreements was $2,556,000 in the second
quarter of 1996.
(3) Natural gas production in the United States for the second quarter of 1996
includes 532 MMCF attributable to a gas balancing adjustment. This
adjustment had no effect on the average sales price reported for the
quarter.
(4) Natural gas royalty adjustments in Canada increased the reported average
sales price for oil and condensate to $19.23 per barrel from $17.33, or
by approximately 11% in the quarter ended June 30, 1996 and increased
the reported average sales price for natural gas liquids to $22.05 per
barrel from $9.34 or by approximately 136%. The effect on the average
sales price for total liquids production was an increase to $19.66 per
barrel from $15.24, or approximately 29%.
-9-
<PAGE>
General and administrative expense was $5,081,000 in the second quarter
of 1997 compared to $3,607,000 in the comparable period of 1996. Total
overhead costs (capitalized and expensed general and administrative costs)
were $6,962,000 in the second quarter of 1997 compared to $5,627,000 in the
comparable period of 1996. Approximately one-half of the increase in total
overhead costs is attributable to a larger number of technical and operating
employees who were hired in support of the Company's expanded capital budget
for exploration and development. Direct exploration and development
expenditures in the second quarter of 1997 were approximately $64,000,000
compared to approximately $15,000,000 in the second quarter of 1996.
Interest expense decreased 18% to $5,259,000 in the second quarter of
1997 compared to $6,423,000 in the corresponding 1996 period, due primarily
to the extinguishment of the nonrecourse secured loan with JEDI in the fourth
quarter of 1996, offset in part by increased interest charges on higher
outstanding balances under bank credit facilities.
Depreciation and depletion expense increased 30% to $18,319,000 in the
second quarter of 1997 from $14,051,000 in the second quarter of 1996 due to
higher production and higher per-unit expense. On a per-unit basis,
depletion expense was approximately $1.09 per MCFE in the second quarter of
1997 compared to $.93 per MCFE in the corresponding 1996 period. The
increase in per-unit depletion expense results primarily from higher
estimated future development costs in the U.S. due to expected increased
costs for services.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997
Net earnings for the first six months of 1997 were $1,326,000 or $.03 per
common share compared to a net loss of $3,287,000 or $.19 per common share in
the first six months of 1997. The improved results for the first six months
of 1997 were attributable primarily to increased production as well as higher
natural gas and liquids prices.
The Company's marketing and processing revenue increased 17% to
$98,209,000 in the first six months of 1997 from $83,589,000 in the five
months of operations of ProMark subsequent to its purchase on January 31,
1996. The related marketing and processing expense increased by 19% to
$93,906,000 in the 1997 period from $79,165,000 in the previous year. The
gross margin reported for marketing and processing activities of $4,303,000
in the first six months of 1997 was slightly lower than the gross margin of
$4,424,000 in the first six months of 1996 because the 1996 period included a
non-recurring income item of approximately $350,000 and also had higher third
party contract processing volumes.
The Company's oil and gas sales revenue increased by 28% to $72,509,000
in the first six months of 1997 compared to $56,522,000 in the first six
months of 1996. The 1996 period includes five months of operations of
Canadian Forest subsequent to its purchase on January 31, 1996. The increase
in 1997 is also attributable to increased production in the U.S. as well as
higher natural gas and liquids prices. Production volumes for natural gas in
the first six months of 1997 increased 18% from the comparable 1996 period
due primarily to new production from Gulf of Mexico properties and to
recording six months of activity for Canadian Forest in 1997 compared to only
five months in 1996. The average sales price received for natural gas in the
first six months of 1997 increased 9% compared to the average sales price
received in the corresponding 1996 period. Production volumes for liquids
(consisting of oil, condensate and natural gas liquids) were 21% higher in
the first six months of 1997 than in the first six months of 1996, due
primarily to new production from Gulf of Mexico and Canadian properties. The
average sales price received by the Company for its liquids production during
the first six months of 1997 increased 6% compared to the average sales price
received during the comparable 1996 period.
Oil and gas production expense of $18,671,000 in the first six months of
1997 increased 18% from $15,856,000 in the comparable period of 1996 due
primarily to expenses relating to use of a mobile production unit at High
Island 274 and temporary transportation expenses associated with the Bigoray
field. On an MCFE basis, production expense decreased approximately 2% in
the first six months of 1997 to $.58 per MCFE from $.59 per MCFE in the first
six months of 1996.
-10-
<PAGE>
Production volumes, weighted average sales prices and production expenses
during the periods were as follows:
<TABLE>
SIX MONTHS ENDED
-----------------------------------------------------------------------------------
June 30, June 30,
1997 1996
-------------------------------------- ---------------------------------------
United United
States Canada Total States Canada Total
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
NATURAL GAS
Total production (MMCF) (1) 16,090 6,943 23,033 13,092 6,352 19,444
Sales price received (per MCF) $ 2.37 1.54 2.12 2.27 1.43 1.99
Effects of energy swaps (per MCF) (2) (.19) (.01) (.14) (.24) (.03) (.17)
-------- ------- ------- ------- ------- -------
Average sales price (per MCF) $ 2.18 1.53 1.98 2.03 1.40 1.82
LIQUIDS
Oil and condensate:
Total production (MBBLS) 498 748 12.46 435 621 1,056
Sales price received (per BBL) $ 19.41 19.32 19.35 18.20 19.83 19.16
Effects of energy swaps (per BBL) (2) (.61) (.35) (.45) (1.61) (1.58) (1.59)
-------- ------- ------- ------- ------- -------
Average sales price (per BBL) $ 18.80 18.97 18.90 16.59 18.25 17.57
Natural gas liquids:
Total production (MBBLS) 53 192 245 46 131 177
Average sales price (per BBL) $ 9.00 13.28 14.46 9.31 15.20 13.66
Total liquids production (MBBLS) 551 940 1,491 481 752 1,233
Average sales price (per BBL) $ 17.86 18.05 17.98 15.90 17.72 17.01
Total production (MMCFE) 19,396 12,583 31,979 15,978 10,864 26,842
Operating expense (per MCFE) $ .55 .64 .58 .63 .54 .59
</TABLE>
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 801 MMCF and 2,082 MMCF in the
1997 and 1996 periods, respectively. Natural gas delivered pursuant to
volumetric production payment agreements represented approximately 4%
and 11% of total natural gas production in the 1997 and 1996 periods,
respectively. On June 30, 1997 the Company repurchased its last
remaining volumetric production payment.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuations. Hedged natural gas volumes were 5,919 MMCF
and 5,525 MMCF for the 1997 and 1996 periods, respectively. Hedged oil
and condensate volumes were 437,000 barrels and 597,000 barrels for the
1997 and 1996 periods, respectively. Aggregate losses under energy swap
agreements were $3,741,000 and $5,009,000 in the 1997 and 1996 periods,
respectively.
-11-
<PAGE>
General and administrative expense was $8,547,000 in the first six months
of 1997 compared to $6,337,000 in the comparable period of 1996. Total
overhead costs (capitalized and expensed general and administrative costs)
were $12,612,000 in the first six months of 1997 compared to
$10,171,000 in the comparable period of 1996. The increase is primarily
attributable to the inclusion of six months of costs for Canadian Forest and
ProMark in 1997 versus only five months in 1996, as well as to a larger
number of technical and operating employees who were hired in support of the
Company's expanded capital budget for exploration and development. Direct
exploration and development expenditures in the first six months of 1997 were
approximately $72,000,000 compared to approximately $20,000,000 in the first
six months of 1996.
The following table summarizes the total overhead costs incurred during
the periods:
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Overhead costs capitalized $1,881 2,020 4,065 3,834
General and administrative costs
expensed (1) 5,081 3,607 8,547 6,337
------ ----- ------ ------
Total overhead costs $6,962 5,627 12,612 10,171
------ ----- ------ ------
------ ----- ------ ------
</TABLE>
(1) Includes $751,000 and $908,000 related to marketing and processing
operations for the three month periods ended June 30, 1997 and 1996 and
$1,462,000 and $1,457,000 for the six month periods ended June 30, 1997 and
1996.
Interest expense decreased 18% to $10,033,000 in the first six months of
1997 compared to $12,220,000 in the corresponding 1996 period, due primarily
to the extinguishment of the nonrecourse secured loan with JEDI in the fourth
quarter of 1996, offset in part by increased interest charges on higher
outstanding balances under bank credit facilities.
Depreciation and depletion expense increased 36% to $36,756,000 in the
first six months of 1997 from $26,989,000 in the first six months of 1996 due
to higher production and higher per-unit expense. On a per-unit basis,
depletion expense was approximately $1.09 per MCFE in the first six months of
1997 compared to $.94 per MCFE in the corresponding 1996 period. The
increase in per-unit depletion results primarily from higher estimated future
development costs in the U.S. due to expected increased costs for services.
At June 30, 1997 the Company had undeveloped properties with a cost basis of
approximately $64,000,000 which were excluded from depletion, compared to
approximately $49,000,000 at June 30, 1996. The increase is attributable
primarily to costs of acquiring undeveloped acreage.
The Company was not required to record a writedown of the carrying value
of its United States or Canadian oil and gas properties in the first half of
1997 or 1996. Writedowns of the full cost pools in the United States and
Canada may be required, however, if prices decline, undeveloped property
values decrease, estimated proved reserve volumes are revised downward or
costs incurred in exploration, development, or acquisition activities in the
respective full cost pools exceed the discounted future net cash flows from
the additional reserves, if any, attributable to each of the cost pools.
CHANGES IN ACCOUNTING. In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings Per Share" (SFAS No.
128), which revises the calculation and presentation provisions of Accounting
Principles Board Opinion 15 and related interpretations. SFAS No. 128 is
effective for the Company's fiscal year ending December 31, 1997.
Retroactive application will be required but early adoption is not permitted.
The Company believes the adoption of SFAS No. 128 will not have a
significant effect on its reported earnings per share.
LIQUIDITY AND CAPITAL RESOURCES
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.
-12-
<PAGE>
In 1996 and early 1997, the Company completed several transactions that
improved its financial position considerably. On January 31, 1996 the
Company and Saxon sold 13,200,000 shares of Common Stock for $11.00 per share
in a public offering (the 1996 Public Offering). Of this amount, 1,060,000
shares were sold by Saxon and 12,140,000 shares were sold by Forest. The net
proceeds to Forest from the issuance of the shares totaled approximately
$125,000,000 after deducting issuance costs and underwriting fees, and were
used, along with an additional approximately $8,300,000 drawn under the
Company's Credit Facility, to complete the purchase of Canadian Forest and
ProMark. The net proceeds to Saxon of approximately $11,000,000 were used to
reduce its bank debt.
On August 1, 1996 Anschutz exercised an option to purchase 2,250,000
shares of Common Stock for $26,200,000 or approximately $11.64 per share.
Proceeds received by Forest were used primarily to fund a portion of 1996
capital expenditures.
On November 5, 1996 the Company exchanged 2,000,000 shares of Common
Stock plus approximately $13,500,000 in cash to extinguish approximately
$43,000,000 of nonrecourse secured debt owed to JEDI. In connection with this
transaction, Anschutz acquired 1,628,888 shares of Common Stock by exercising
warrants to purchase 388,888 shares of Common Stock at $10.50 per share and
by converting 620,000 shares of Forest's Second Series Preferred Stock into
1,240,000 shares of Common Stock.
On November 14, 1996 the Company filed a shelf registration with the
Securities and Exchange Commission to issue up to $250,000,000 in one or more
forms of debt or equity securities. Except as otherwise provided in an
applicable prospectus supplement, the net proceeds from the sale of the
securities will be used for the acquisition of oil and gas properties,
capital expenditures, the repayment of subordinated debentures or other debt,
repayments of borrowings under revolving credit agreements, or for other
general corporate purposes.
On February 7, 1997 the Company called for redemption all 2,877,673
shares of its $.75 Convertible Preferred Stock. This conversion eliminated
all outstanding preferred stock from Forest's capital structure. In response
to its call for redemption, 2,783,945 shares or 96.7% of the shares
outstanding were tendered for conversion into Common Stock on or before the
February 21, 1996 deadline. The remaining 93,728 preferred shares were
redeemed by the Company at the redemption price of $10.06 per share (at a
total cost of $942,904) on February 28, 1997. Lehman Brothers Inc. purchased
65,616 shares of Common Stock to fund the cash requirement of the redemption
in accordance with the terms of its standby purchase agreement with Forest.
Redemption of the $.75 Convertible Preferred Stock eliminates approximately
$2,200,000 of annual preferred dividend payments.
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, the issuance of debt instruments, the
sale of common stock, preferred stock or other equity securities of the
Company, the issuance of net profits interests, sales of non-strategic
assets, 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. In addition,
the prices the Company receives for its future oil and natural gas production
and the level of the Company's 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. At July 31, 1997 the
Company has two offshore Gulf of Mexico properties whose combined production
represents approximately 20% of the Company's consolidated daily
deliverability. The Company's production, revenue and cash flow could be
adversely affected if production from these properties decreases to a
significant degree.
BANK CREDIT FACILITIES. Under the Company's Credit Facility with a
syndicate of banks led by The Chase Manhattan Bank (the Credit Facility), the
Company may borrow up to $67,000,000 for working capital and/or general
corporate purposes. The borrowing base is subject to scheduled
redetermination 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 U.S. proved oil and gas properties
and related assets and a pledge of accounts receivable. The maturity date of
the Credit Facility is January 31, 2000. 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 July 31, 1997 the outstanding
balance under this facility was $63,500,000. The Company has also used the
facility for a $1,500,000 letter of credit.
A Canadian subsidiary of Forest has a credit agreement (the Canadian
Credit Facility) with a syndicate of Canadian banks led by The Chase
Manhattan Bank of Canada for the benefit of Canadian Forest and ProMark. The
borrowing base under the
-13-
<PAGE>
Canadian Credit Facility is $67,000,000 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 maturity date of the Canadian Credit
Facility is February 7, 1999. The Canadian Credit Facility 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. At July 31, 1997 the outstanding
balance under this facility was $51,272,000 CDN. The Company has also used
this facility for a letter of credit in the amount of $3,022,242 CDN.
The Company is currently in the process of amending both its Credit
Facility and its Canadian Credit Facility. The primary purpose of the
amendments is to create one Global Borrowing Base for both facilities. The
initial Global Borrowing Base is expected to be set at $130,000,000,
representing an increase of approximately $20,000,000 from the combined
existing borrowing bases under the facilities. Under the facilities as
amended, the Company will be able to allocate the Global Borrowing Base
between the U.S. and Canada, subject to the limitation that borrowings in
either the U.S. or Canada cannot exceed $100,000,000. In addition to
increasing the Company's global borrowing capability, the amendments will
provide for a much less restricted ability to move funds between the U.S. and
Canada, an extension of the maturity date for both facilities to August 2001
and will require the Company to guarantee the Canadian Credit Facility.
Other major provisions of the credit facilities remain largely unchanged.
Execution of documentation for these amendments is expected to be completed
prior to the end of August 1997.
In addition to the credit facilities described above, Saxon has a demand
credit facility (the Saxon Credit Facility) with a borrowing base of
$35,000,000 CDN. The loan is subject to semi-annual review and has 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 July 31, 1997 the outstanding balance under this facility was
$30,650,000 CDN.
WORKING CAPITAL. The Company had a working capital deficit of
approximately $1,242,000 at June 30, 1997 compared to a deficit of
approximately $12,649,000 at December 31, 1996. The decrease in the deficit
was funded by borrowings under the Company's bank credit facilities.
The Company generally reports a working capital deficit at the end of a
period. The working capital deficit is principally the result of accounts
payable for capitalized exploration and development costs. Settlement of
these payables is funded by cash flow from the Company's operations or, if
necessary, by drawdowns on the Company's long-term bank credit facilities.
For cash management purposes, drawdowns on the credit facilities are not made
until the due dates of the payables.
At June 30, 1997 the Company had available borrowing capacity of
approximately $16,000,000 under its existing bank credit facilities. The
Company's available credit at June 30, 1997 was adequate to fund the working
capital deficit at that date.
CASH FLOW. Historically, one of the Company's primary sources of
short-term capital has been net cash provided by operating activities
(operating cash flow). The following summary table reflects comparative cash
flow data for the Company for the periods ended June 30, 1997 and 1996.
Six Months Ended
-----------------------
June 30, June 30,
1997 1996
---- ----
(In Thousands)
Net cash provided by operating activities $ 24,290 21,953
Net cash used by investing activities (73,832) (161,227)
Net cash provided by financing activities 46,583 140,200
Net cash provided by operating activities increased to $24,290,000 in
1997 compared to $21,953,000 in 1996, due primarily to increased production
as well as higher natural gas and liquids prices. The Company used
$73,832,000 for investing activities in 1997 compared to $161,227,000 in
1996. The 1996 outlays included $136,191,000 for the acquisition of Canadian
Forest, whereas the 1997 outlays consisted primarily of exploration
-14-
<PAGE>
and development costs. Cash provided by financing activities was $46,583,000
in 1997 compared to $140,200,000 in 1996. The 1996 period included
$136,591,000 of net proceeds from a common stock offering.
CAPITAL EXPENDITURES. The Company's expenditures for property
acquisition, exploration and development for the first six months of 1997 and
1996 were as follows:
Six Months Ended
----------------------------
June 30, June 30,
1997 1996
---- ----
(In Thousands)
Property acquisition costs:
Proved properties $ 3,048 121,992
Undeveloped properties 3,087 17,808
--------- -------
6,135 139,800
Exploration costs:
Direct costs 44,181 9,713
Overhead capitalized 1,776 1,196
--------- -------
45,957 10,909
Development costs:
Direct costs 28,266 10,468
Overhead capitalized 2,289 2,638
--------- -------
30,555 13,106
--------- -------
$ 82,647 163,815
--------- -------
--------- -------
Acquisition of proved properties in the six months ended June 30, 1996
consists primarily of the allocation of purchase price to the oil
and gas properties acquired in the purchase of Canadian Forest. Direct
exploration costs of $44,181,000 incurred in the six months ended June 30,
1997 includes approximately $15,000,000 of land and seismic costs, primarily
for acquisition of leases in the Gulf of Mexico, as well as approximately
$29,000,000 expended for drilling, completion and production facilities on
exploratory wells in the first six months of 1997, of which a significant
portion (approximately 50%) relates to work at the Company's Eugene Island 53
field.
Direct development spending of $28,266,000 in the first six months of
1997 includes approximately $16,000,000 for wells and plant facilities at the
Bigoray field operated by Saxon Petroleum, approximately $3,000,000 in the
Western region of U.S. operations and approximately $3,000,000 in the Gulf of
Mexico.
The Company's expected 1997 expenditures for exploration and development
are approximately $120,000,000 to $130,000,000. The Company expects to be
able to meet its 1997 capital expenditure financing requirements using cash
flows generated by operations, sales of non-strategic assets 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 or accesses additional sources of capital.
In addition, while the Company intends to continue a strategy of
acquiring reserves that meet its investment criteria, no assurance can be
given that the Company can locate or finance any property acquisitions.
LONG-TERM SALES CONTRACTS. A significant portion of Canadian Forest's
natural gas production is sold through the ProMark Netback Pool. At June 30,
1997 the ProMark Netback Pool had entered into fixed price contracts to sell
approximately 4.8 BCF of natural gas through the remainder of 1997 at an
average price of $1.64 CDN per MCF and approximately 5.4 BCF of natural gas
in 1998 at an average price of approximately $1.90 CDN per MCF. Canadian
Forest is obligated to deliver approximately 27% of the volumes of natural
gas subject to these contracts.
HEDGING PROGRAM. In addition to the volumes of natural gas and oil sold
under long-term sales contracts, the Company also uses energy swaps and other
financial agreements to hedge against the effects of fluctuations in the
sales prices for oil and natural gas produced. In a typical swap agreement,
the Company receives the difference
-15-
<PAGE>
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 June 30, 1997 the Company had natural gas
swaps and collars for an aggregate of approximately 33 BBTU (billion British
Thermal Units) per day of natural gas during the remainder of 1997 at fixed
prices ranging from $1.16 per MMBTU (million British Thermal Units) on an
Alberta Energy Company "C" (AECO "C") basis to $2.54 per MMBTU on a New York
Mercantile Exchange (NYMEX) basis and an aggregate of approximately 10 BBTU
per day of natural gas during 1998 at fixed prices ranging from $1.16 (AECO
"C" basis) to $2.62 (NYMEX basis) per MMBTU. The weighted average hedged
price for natural gas under such agreements is $2.15 and $2.13 per MMBTU in
1997 and 1998, respectively. At June 30, 1997 the Company had oil swaps for
an aggregate of 2,534 barrels per day of oil during the remainder of 1997 at
fixed prices ranging from $18.65 to $23.67 (NYMEX basis) and an aggregate of
547 barrels per day during 1998 at fixed prices of $20.00 and $20.52 (NYMEX
basis). The weighted average hedged price for oil under such agreements is
$20.21 and $20.29 per barrel in 1997 and 1998, respectively.
Subsequent to June 30, 1997 the Company entered into three natural gas
swaps. One hedges 10,000 MMBTU of natural gas per day from March 1998
through October 1998 at a fixed price of $2.15 per MMBTU (NYMEX basis).
Another hedges 7,500 MMBTU of natural gas per day for September 1997 and
October 1997 at a fixed price of $2.465 per MMBTU (NYMEX basis). Another
hedges 7,500 MMBTU of natural gas per day for September 1997 and October 1997
at a fixed price of $2.50 per MMBTU (NYMEX basis).
GAS BALANCING. It is customary in the industry for various working
interest partners to produce more or less than their entitlement share of
natural gas from time to time. The Company's net overproduced position
decreased in the first six months of 1997 to approximately 2.5 BCF from
approximately 2.6 BCF at December 31, 1996. At June 30, 1997 the
undiscounted value of this imbalance is approximately $5,065,000, of which
$500,000 is recorded as a short-term liability and the remaining $4,565,000
is included in other long-term liabilities. In the absence of a gas
balancing agreement, the Company is unable to determine when its partners
will make up their share of production. If and when the Company's partners
do make up their share of production, the Company's deliverable natural gas
volumes could decrease, adversely affecting cash flow.
-16-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting held on May 14, 1997, the shareholders
of the Company (a) elected three (3) Class III directors; (b) approved the
Company's Stock Incentive Plan; and (c) ratified the appointment of KPMG Peat
Marwick as independent auditors for the Company in 1997.
With respect to the election of the Class III directors, votes for and
withheld with respect to each director are as follows:
Jordan L. Haines
For 27,318,311 votes
Withheld 1,541,138 votes
J. J. Simmons, III
For 28,696,695 votes
Withheld 162,754 votes
Michael B. Yanney
For 28,724,022 votes
Withheld 135,427 votes
In all such cases, there were no broker non-votes.
The terms of the following directors continued after the meeting: Philip
F. Anschutz, Robert S. Boswell, William L. Britton, Cortlandt S. Dietler,
William L. Dorn, James H. Lee, Craig D. Slater and Drake S. Tempest.
20,822,470 votes were cast in favor of approval of the Stock Incentive
Plan. 3,991,881 votes were cast against the amendment and 47,734 votes
abstained. There were no broker non-votes.
With respect to the ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors for the Company for 1997, 28,823,480 votes were cast
in favor of such ratification, 14,249 votes were cast against such ratification,
21,720 votes abstained from voting and there were no broker non-votes.
Under New York law and the Company's By-laws, abstentions and broker non-
votes have no effect on the outcome of the vote on any of the matters considered
at the Annual Meeting. A broker non-vote occurs if a broker or other nominee
does not have discretionary authority and has not received instructions with
respect to a particular item.
-17-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*Exhibit 11 Forest Oil Corporation and Subsidiaries -
Calculation of Earnings per
Share of Common Stock.
*Exhibit 27 Financial Data Schedule.
* Filed with this report.
(b) Reports on Form 8-K
The following report on Form 8-K was filed by Forest during the second
quarter of 1997:
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
May 9, 1997 Item 5, 7 and 9 None.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOREST OIL CORPORATION
(Registrant)
Date: August 14, 1997 /s/ Daniel L. McNamara
---------------------------------------
Daniel L. McNamara
Corporate Counsel and Secretary
(Signed on behalf of the registrant)
/s/ David H. Keyte
---------------------------------------
David H. Keyte
Vice President and Chief
Financial Officer
(Principal Financial Officer)
-19-
<PAGE>
Exhibit 11
FOREST OIL CORPORATION
Calculation of Loss Per Share of Common Stock
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- --------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- ------- ------- -------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C>
Primary earnings (loss) per share:
Net earnings (loss) $ (3,196) (2,901) 1,326 (3,287)
Less dividend requirements on
$.75 Convertible Preferred Stock - (540) (189) (1,080)
-------- ------- ------- -------
Net earnings (loss) attributable to common stock
for primary earnings (loss) per share calculation $ (3,196) (3,441) 1,137 (4,367)
-------- ------- ------- -------
-------- ------- ------- -------
Weighted average number of common
shares outstanding 32,578 24,576 32,169 22,477
Dilutive effect of:
Anschutz Warrants - - 1,007 -
Employee stock options - - 177 -
-------- ------- ------- -------
Weighted average number of common
shares outstanding, as adjusted 32,578 24,576 33,353 22,477
-------- ------- ------- -------
-------- ------- ------- -------
Primary earnings (loss) per share of common stock $ (.10) (.14) .03 (.19)
-------- ------- ------- -------
-------- ------- ------- -------
Fully diluted earnings (loss) per share:
Net earnings (loss) attributable to common stock,
as above $ (3,196) (3,441) 1,137 (4,367)
Add dividend requirements on $.75 Convertible
Preferred Stock - 540 189 1,080
-------- ------- ------- -------
Net earnings (loss) attributable to common stock for
fully diluted earnings (loss) per share calculation $ (3,196) (2,901) 1,326 (3,287)
-------- ------- ------- -------
-------- ------- ------- -------
Weighted average number of common shares
outstanding 32,578 24,576 32,169 22,477
Dilutive effect of:
Anschutz Warrants - - 1,007 -
Employee stock options - - 177 -
$.75 Convertible Preferred Stock - 2,014 938 2,014
-------- ------- ------- -------
Weighted average number of common shares
outstanding, as adjusted 32,578 26,590 34,291 24,491
-------- ------- ------- -------
-------- ------- ------- -------
*Fully diluted earnings (loss) per share of common
stock $ (.10) (.11) .04 (.13)
-------- ------- ------- -------
-------- ------- ------- -------
</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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheets and condensed consolidated statements of
income and notes to condensed consolidated financial statements on pages 1
through 7 of the Company's Form 10-Q for the quarterly period ending June 30,
1997, and is qualified in its entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,615
<SECURITIES> 0
<RECEIVABLES> 48,944
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59,237
<PP&E> 1,542,509
<DEPRECIATION> 1,045,479
<TOTAL-ASSETS> 592,012
<CURRENT-LIABILITIES> 60,479
<BONDS> 223,884
3,279
0
<COMMON> 0
<OTHER-SE> 238,367
<TOTAL-LIABILITY-AND-EQUITY> 592,012
<SALES> 170,718
<TOTAL-REVENUES> 172,368
<CGS> 112,577
<TOTAL-COSTS> 121,124
<OTHER-EXPENSES> 36,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,033
<INCOME-PRETAX> 4,294
<INCOME-TAX> 2,968
<INCOME-CONTINUING> 1,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,326
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
