<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) -January 28, 1997
FOREST OIL CORPORATION
(Exact name of registrant as specified in charter)
New York 0-4597 25-0484900
(State or other juris- (Commission (IRS Employer
diction of incorporation) file number) Identification No.)
2200 Colorado State Bank Building, 1600 Broadway, Denver, CO 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 812-1400
- -------------------------------------------------------------------------------
<PAGE>
ITEM 5. OTHER EVENTS
Filed herewith are financial statements of ATCOR Resources Ltd. which was
acquired by the Company on January 31, 1996 and pro forma financial statements
of the Company giving effect to the ATCOR acquisition and certain other
transactions as described in such statements.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements of ATCOR Resources Ltd. at
December 31, 1995 and for each of the years in the three
year period ended December 31, 1995.
(b) Condensed pro forma combined financial statements of Forest
Oil Corporation at September 30, 1996 and for the nine
months ended September 30, 1996 and the year ended December
31, 1995.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FOREST OIL CORPORATION
(Registrant)
Dated: January 28, 1997 By /s/ DANIEL L. MCNAMARA
--------------------------
Daniel L. McNamara
Secretary
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
On December 20, 1995, Forest Oil Corporation (Forest) purchased an interest in
Saxon Petroleum Inc. (Saxon) of Calgary, Alberta. In the transaction, Forest
received Saxon common shares, preferred shares and warrants to purchase common
shares. In exchange, Saxon received cash, Forest common stock and Forest's
investment in Archean Energy Ltd. (Archean).
On December 29, 1995, Forest entered into an agreement with Joint Energy
Development Investments Limited Partnership (JEDI), a Delaware partnership
whose general partner is an affiliate of Enron Corp., to exchange Forest
common stock for debt and warrants to purchase Forest common stock (the JEDI
Exchange).
On January 31, 1996, Forest acquired ATCOR Resources, Ltd. (ATCOR) of
Calgary, Alberta. The purchase was funded by the net proceeds of a public
offering (the 1996 Public Offering) and drawdowns under the Company's bank
credit facility. The exploration and production business of ATCOR was
renamed Canadian Forest Oil Ltd. (Canadian Forest).
On August 1, 1996, The Anschutz Corporation (Anschutz) exercised its option
to purchase Forest common stock (the Anschutz Option).
On November 5, 1996, Forest exchanged common stock plus cash to extinguish
nonrecourse secured debt owed to JEDI (the JEDI Extinguishment). In
connection with this transaction, Anschutz exercised warrants to purchase
Forest common stock (the Anschutz Warrant Exercise) and converted its Forest
Second Series Preferred Stock into common stock (the Anschutz Conversion).
The following unaudited condensed pro forma combined balance sheet assumes
that the JEDI Extinguishment, the Anschutz Warrant Exercise and the Anschutz
Conversion occurred on September 30, 1996 and reflects the September 30, 1996
historical consolidated balance sheet of Forest giving pro forma effect to
these transactions. The unaudited condensed pro forma combined balance sheet
should be read in conjunction with the historical statements and related
notes of Forest.
The following unaudited condensed pro forma combined statements of operations
for the nine months ended September 30, 1996 and for the year ended December
31, 1995 assume that the Saxon transaction, the JEDI Exchange, the ATCOR
acquisition, the Anschutz transactions and the JEDI Extinguishment occurred
as of January 1, 1995. The pro forma results of operations are not
necessarily indicative of the results of operations that would actually have
been attained if the transactions had occurred as of January 1, 1995. These
statements should be read in conjunction with the historical statements and
related notes of Forest and ATCOR.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED BALANCE SHEET (NOTE A)
SEPTEMBER 30, 1996
(UNAUDITED)
ASSETS
<TABLE>
Anschutz
JEDI Warrant Anschutz Pro Forma
Forest Extinguishment Exercise Conversion Combined
Historical (Note F) (Note G) (Note H) Forest
---------- -------------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 7,676 (12,946)(1) 4,083 7,676
8,863 (2)
Accounts receivable 46,768 46,768
Other current assets 4,268 4,268
---------- ------- ----- ------ --------
Total current assets 58,712 (4,083) 4,083 58,712
Property and equipment, at cost:
Oil and gas properties-full
cost accounting method 1,417,102 1,417,102
Buildings, transportation and
other equipment 10,756 10,756
---------- ------- ----- ------ --------
1,427,858 1,427,858
Less accumulated depreciation,
depletion and valuation
allowance 991,457 991,457
---------- ------- ----- ------ --------
Net property and equipment 436,401 436,401
Goodwill and other intangible
assets, net 30,138 30,138
Other assets 7,915 (272)(1) 7,643
---------- ------- ----- ------ --------
$ 533,166 (4,355) 4,083 - 532,894
---------- ------- ----- ------ --------
---------- ------- ----- ------ --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 2,186 2,186
Current portion of long-term
debt 2,149 2,149
Current portion of gas
balancing liability 2,240 2,240
Accounts payable 50,583 50,583
Accrued interest 1,506 1,506
Other current liabilities 4,717 4,717
---------- ------- ----- ------ --------
Total current liabilities 63,381 63,381
Long-term debt 189,652 (42,446)(1) 156,069
8,863 (2)
Gas balancing liabilities 3,340 3,340
Other liabilities 21,962 21,962
Deferred revenue 8,569 8,569
Deferred income taxes 33,463 33,463
Minority interest 8,547 8,547
Shareholders' equity:
Preferred stock 24,345 (8,518) 15,827
Common stock 2,686 200(1) 39 124 3,049
Capital surplus 397,117 26,862(1) 4,044 8,394 436,417
Accumulated deficit (219,906) 2,166(1) (217,740)
Foreign currency translation 10 10
---------- ------- ----- ------ --------
Total shareholders' equity 204,252 29,228 4,083 - 237,563
---------- ------- ----- ------ --------
$ 533,166 (4,355) 4,083 - 532,894
---------- ------- ----- ------ --------
---------- ------- ----- ------ --------
</TABLE>
See accompanying notes to condensed pro forma
combined financial statements.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS (NOTE A)
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
ATCOR ATCOR JEDI Pro Forma
Forest Historical Adjustments Extinguishment Combined
Historical (Note D) (Note D) (Note F) Forest
---------- ---------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
Revenue:
Marketing and processing $ 135,614 14,448 (1,107)(1) 148,955
Oil and gas sales 88,062 3,710 91,772
Miscellaneous, net 707 6 (6)(2) 707
---------- ------- ------- ------ -------
Total revenue 224,383 18,164 (1,113) 241,434
Expenses:
Marketing and processing 129,115 13,567 (885)(1) 141,797
Oil and gas production 23,224 869 24,093
General and administrative 9,526 727 (36)(3) 10,217
Interest 18,042 150 (3,898)(3) 14,294
Depreciation and depletion 43,862 1,973 (407)(5) 45,599
171 (6)
---------- ------- ------- ------ -------
Total expenses 223,769 17,286 (1,157) (3,898) 236,000
---------- ------- ------- ------ -------
Income before income taxes
and minority interest 614 878 44 3,898 5,434
Income tax expense 3,250 359 181 (7) 3,790
Minority interest in loss of
subsidiary 228 228
---------- ------- ------- ------ -------
Net earnings (loss) $ (2,408) 519 (137) 3,898 1,872
---------- ------- ------- ------ -------
---------- ------- ------- ------ -------
Weighted average number of
common shares outstanding
(Note I) 23,698 31,471
---------- -------
---------- -------
Net earnings (loss) attributable to
common stock $ (4,027) 253
---------- -------
---------- -------
Primary and fully diluted
earnings (loss) per share $ (.17) .01
---------- -------
---------- -------
</TABLE>
See accompanying notes to condensed pro forma
combined financial statements.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS (NOTE A)
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
JEDI
Saxon JEDI ATCOR ATCOR Extinguish- Pro Forma
Forest Historical Exchange Historical Adjustments ment Combined
Historical (Note B) (Note C) (Note D) (Note D) (Note F) Forest
---------- ---------- -------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Marketing and processing $ 148,424 (8,980) (1) 139,444
Oil and gas sales 81,949 9,719 37,658 129,326
Miscellaneous, net 507 (1,040) (221) (2) 514
1,268 (8)
-------- ----- ------ ------- ------- ------ -------
Total revenue 82,456 9,719 185,042 (7,933) 269,284
Expenses:
Marketing and processing 139,766 (6,574) (1) 133,192
Oil and gas production 22,463 4,280 10,769 37,512
General and administrative 9,081 871 3,468 (471) (3) 12,949
Interest 25,323 767 (1,500) 2,432 (1,647) (4) (4,018)(3) 21,357
Depreciation and depletion 43,592 3,506 42,019 (23,129) (5) 68,047
2,059 (6)
-------- ----- ------ ------- ------- ------ -------
Total expenses 100,459 9,424 (1,500) 198,454 (29,762) (4,018) 273,057
Income (loss) before income taxes,
minority interest and extraordinary
item (18,003) 295 1,500 (13,412) 21,829 4,018 (3,773)
Income tax expense (benefit) (7) 278 (2,158) 11,617 (7) 6,325
(3,405) (9)
Minority interest in net earnings of
subsidiary (7) (7)
-------- ----- ------ ------- ------- ------ -------
Income (loss) before extraordinary item (17,996) 10 1,500 (11,254) 13,617 4,018 (10,105)
Extraordinary item - gain on extinguishment
of debt 2,166 (1) 2,166
-------- ----- ------ ------- ------- ------ -------
Net earnings (loss) $(17,996) 10 1,500 (11,254) 13,617 6,184 (7,939)
-------- ----- ------ ------- ------- ------ -------
-------- ----- ------ ------- ------- ------ -------
Weighted average number of common shares
outstanding (Note J) 7,360 28,119
-------- -------
-------- -------
Net loss attributable to common stock $(20,156) (10,099)
-------- -------
-------- -------
Primary and fully diluted loss per share:
Loss before extraordinary item $ (2.74) (.44)
Extraordinary item - gain on
extinguishment of debt - .08
-------- -------
Net loss attributable to common stock $ (2.74) (.36)
-------- -------
-------- -------
</TABLE>
See accompanying notes to condensed pro forma combined financial statements.
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
A. BASIS OF PRESENTATION
The following unaudited condensed pro forma combined balance sheet assumes
that the JEDI Extinguishment, the Anschutz Warrant Exercise and the Anschutz
Conversion occurred on September 30, 1996 and reflects the September 30, 1996
historical consolidated balance sheet of Forest giving pro forma effect to
these transactions. The unaudited condensed pro forma combined balance sheet
should be read in conjunction with the historical statements and related
notes of Forest.
The following unaudited condensed pro forma combined statements of operations
for the nine months ended September 30, 1996 and for the year ended December
31, 1995 assume that the Saxon transaction, the JEDI Exchange, the ATCOR
acquisition, the Anschutz transactions and the JEDI Extinguishment occurred
as of January 1, 1995. The pro forma results of operations are not
necessarily indicative of the results of operations that would actually have
been attained if the transactions had occurred as of January 1, 1995. These
statements should be read in conjunction with the historical statements and
related notes of Forest and ATCOR.
The historical financial statements of ATCOR for the month ended January 31,
1996 have been translated at the average historical exchange rate of
approximately $1.37 CDN to $1.00.
The historical financial statements of Saxon and ATCOR for the year ended
December 31, 1995 have been translated at the average historical exchange
rate during the period of approximately $1.37 CDN to $1.00.
B. ACQUISITION OF SAXON PETROLEUM, INC.
On December 20, 1995, Forest purchased a 56% economic (49% voting) interest
in Saxon for approximately $22,000,000. In the transaction, Forest received
from Saxon 40,800,000 voting common shares, 12,300,000 nonvoting common
shares, 15,500,000 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.
A pro forma adjustment has been made to the accompanying historical statement
of operations for the year ended December 31, 1995 to record the historical
results of operations of Saxon for the period and to recognize the minority
interest in the net earnings of Saxon.
C. JEDI EXCHANGE
On December 29, 1995, Forest entered into an agreement with JEDI to exchange
1,680,000 shares of Forest's common stock for approximately $22,400,000
principal amount of debt and warrants to purchase 2,250,000 shares of
Forest's common stock held by JEDI.
The accompanying condensed pro forma combined statement of operations for the
year ended December 31, 1995 includes a pro forma adjustment to reduce
interest expense by $1,500,000 to give effect to the reduction of the JEDI
debt.
<PAGE>
D. ACQUISITION OF ATCOR
On January 31, 1996 Forest acquired ATCOR for approximately $136,000,000. The
purchase was funded by the net proceeds of the 1996 Public 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.
The accompanying condensed pro forma combined statements of operations for
the nine months ended September 30, 1996 and the year ended December 31, 1995
have been adjusted to include the historical results of operations for ATCOR
prior to the acquisition. In addition, the following pro forma adjustments
have been made to the accompanying historical statements of operations for
ATCOR for the nine months ended September 30, 1996 and year ended December
31, 1995:
1. To eliminate the income and expense associated with certain assets that
were sold to the controlling shareholders of ATCOR.
2. To eliminate dividend income on the investment in Trilon Financial
Corporation (Trilon) which was sold to the controlling shareholders
of ATCOR.
3. To adjust general and administrative expense of ATCOR to reflect
the elimination of administrative and financial and management fees
charged by a controlling shareholder of ATCOR.
4. To adjust interest expense of ATCOR to reflect the payment of
outstanding long-term debt using proceeds of the sale of certain
assets to the controlling shareholders of ATCOR.
5. To adjust depletion and depreciation expense of ATCOR to reflect
Forest's basis in the properties acquired.
6. To record amortization of goodwill and other intangible assets.
7. To record the income tax effects of the pro forma adjustments for the
ATCOR acquisition.
8. To eliminate writedown of investment in Trilon.
9. To record the adjustment necessary to restate the historical financial
statements of ATCOR to conform to U.S. generally accepted accounting
principles by providing for income taxes under the asset and liability
method.
<PAGE>
E. ANSCHUTZ OPTION
On August 1, 1996, 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.
The option was scheduled to expire on July 27, 1998.
F. JEDI EXTINGUISHMENT
On November 5, 1996 Forest exchanged 2,000,000 shares of its common stock
plus approximately $13,500,000 cash to extinguish approximately $43,000,000
of nonrecourse secured debt owed to JEDI. The JEDI debt bore interest at the
rate of 12-1/2% per annum.
The following pro forma adjustments have been made to the accompanying
historical balance sheet at September 30, 1996 and to the accompanying
historical statements of operations for the nine months ended September 30,
1996 and the year ended December 31, 1995:
1. To record issuance of 2,000,000 shares of Forest common stock with an
estimated fair value of $27,062,000 (determined by reference to the
quoted market price of the shares, less a discount to reflect the
restrictions placed upon the sale of such shares), and use of
$12,946,000 of cash to repay the outstanding JEDI debt of $42,446,000.
This transaction resulted in a gain of $2,166,000 after the write-off
of unamortized debt costs in the amount of $272,000.
2. To record additional borrowing of $8,863,000 on the Company's line of
credit to finance the JEDI Extinguishment.
3. To record a net reduction of interest expense of $3,898,000 for the
nine months ended September 30, 1996 and $4,018,000 for the year ended
December 31, 1995, as a result of the extinguishment of the JEDI debt.
G. ANSCHUTZ WARRANT EXERCISE
On November 5, 1996 Anschutz acquired 388,888 shares of Forest's common stock
by exercising warrants which allowed it to purchase such shares at $10.50 per
share.
A pro forma adjustment has been made to the accompanying historical balance
sheet at September 30, 1996 to record the proceeds of $4,083,000 and the
issuance of common stock.
H. ANSCHUTZ CONVERSION
On November 5, 1996 Anschutz converted 620,000 shares of Forest's Second
Series Preferred Stock into 1,240,000 shares of common stock.
A pro forma adjustment has been made to the accompanying historical balance
sheet at September 30, 1996 to record the conversion by reclassifying the
historical value of the preferred stock ($8,518,000) to common stock and
capital surplus.
<PAGE>
I. The weighted average number of common shares outstanding for the nine
months ended September 30, 1996 has been adjusted as follows:
Forest historical 23,698
Weighted average effect of shares issued in:
1996 Public Offering 1,349
JEDI Extinguishment 2,000
Anschutz Option Exercise 1,747
Anschutz Warrant Exercise 389
Anschutz Conversion 1,240
Common stock equivalents (1) 1,048
------
Pro forma weighted average shares 31,471
------
------
(1) The remaining Anschutz Warrants and employee stock options were in the
money during the period, and therefore were required to be included in
the primary earnings per share calculation since they had a dilutive
effect.
J. The weighted average number of common shares outstanding for the year ended
December 31, 1995 has been adjusted as follows:
Forest historical 7,360
Shares issued in:
Saxon acquisition 1,060
JEDI Exchange 1,680
1996 Public Offering (ATCOR acquisition) 12,140
Anschutz Option Exercise 2,250
JEDI Extinguishment 2,000
Anschutz Warrant Exercise 389
Anschutz Conversion 1,240
------
Pro forma weighted average shares 28,119
------
------
<PAGE>
AUDITORS' REPORT
FEBRUARY 1, 1996
To the Directors of
ATCOR Resources Ltd.
We have audited the consolidated balance sheets of ATCOR Resources Ltd.
as at December 31, 1995 and 1994, and the consolidated statements of earnings
and retained earnings and changes in financial position for each of the years
in the three year period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
1995 and 1994 and the results of its operations and the changes in its
financial position for each of the years in the three year period ended
December 31, 1995 in accordance with Canadian generally accepted accounting
principles.
Accounting principles generally accepted in Canada vary in certain
significant respects from accounting principles generally accepted in the
United States. In our opinion, the application of the latter would have
affected the determination of consolidated net earnings/income and changes in
consolidated financial position expressed in Canadian dollars for each of the
three years in the period ended December 31, 1995 and the determination of
consolidated deficit also expressed in Canadian dollars at December 31, 1995
and 1994 to the extent summarized in Note 17 to the consolidated financial
statements.
PRICE WATERHOUSE
Chartered Accountants
Calgary, Alberta
<PAGE>
ATCOR RESOURCES LIMITED
CONSOLIDATED BALANCE SHEET
<TABLE>
<S> <C> <C>
AS AT DECEMBER 31 ($000'S OF CANADIAN DOLLARS) 1995 1994
- ---------------------------------------------------------------------------------------
(Restated - Note 4)
ASSETS
- ---------------------------------------------------------------------------------------
Current Assets
Accounts receivable $ 25,300 $ 30,451
Inventories 1,616 1,502
Prepaid expenses 1,214 1,786
-----------------------------------------------------------------------------------
28,130 33,739
Investment in Securities (Note 9) 3,250 4,985
Property, Plant and Equipment (Note 10) 223,961 258,014
- ---------------------------------------------------------------------------------------
$255,341 $296,738
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------
Current Liabilities
Due to bank (Note 11) $ 5,000 $ 5,000
Accounts payable and accrued liabilities 24,752 30,601
- ---------------------------------------------------------------------------------------
29,752 35,601
Other Liabilities 3,479 3,084
Due to Bank (Note 11) 18,763 34,005
Deferred Income Taxes 45,116 50,421
Shareholders' Equity
Class A and Class B shares (Note 12) 135,787 135,787
Retained earnings 22,444 37,840
- ---------------------------------------------------------------------------------------
158,231 173,627
Commitments and contingencies (Note 16)
- ---------------------------------------------------------------------------------------
$255,341 $296,738
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATCOR RESOURCES LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<S> <C> <C> <C>
Year Ended December 31 ($000's of Canadian dollars) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
(Restated - Note 4)
Revenues
Sales $261,234 $191,007 $124,344
Investment and other income 312 504 258
Settlement fee (Note 5) - 3,178 -
- ---------------------------------------------------------------------------------------------------------------
261,546 194,689 124,602
Expenses
Cost of gas 177,374 105,732 41,695
Operating and gas transportation 28,570 30,827 31,953
Royalties 8,009 10,119 8,972
Alberta royalty tax credit (1,350) (1,621) (1,580)
General and administrative (Note 10(c)) 4,744 4,743 4,385
Depletion and depreciation (Note 10(a) and (b)) 34,486 28,137 22,990
Write down of petroleum and natural gas assets (Note 10(a)) 23,000 - -
Gain on sale of interest in ethane extraction plant (Note 3(a)) - - (7,326)
Interest (long term portion $2,767; 1994 - $3,552; 1993 - $520) 3,327 4,009 2,767
Write down (recovery) of investment in securities (Note 9) 1,735 - (83)
- ---------------------------------------------------------------------------------------------------------------
279,895 181,946 103,773
- ---------------------------------------------------------------------------------------------------------------
(Loss) Earnings Before Income Taxes (18,349) 12,743 20,829
Income Taxes (Note 7)
Current 2,352 4,325 1,969
Deferred (5,305) 2,662 8,622
- ---------------------------------------------------------------------------------------------------------------
(2,953) 6,987 10,591
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Net (Loss) Earnings (15,396) 5,756 10,238
Dividends on Preferred shares - - 591
- ---------------------------------------------------------------------------------------------------------------
Net (Loss) Earnings Attributable to Class A and Class B shares (Note 8) (15,396) 5,756 9,647
- ---------------------------------------------------------------------------------------------------------------
Retained Earnings, beginning of year as previously reported 32,521 22,874
Prior Year restatement (Note 4) - 437 -
- ---------------------------------------------------------------------------------------------------------------
Beginning of year as restated 37,840 32,084 22,874
- ---------------------------------------------------------------------------------------------------------------
Retained Earnings, end of year $ 22,444 $ 37,840 $ 32,521
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATCOR RESOURCES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
YEAR ENDED DECEMBER 31 ($000'S OF CANADIAN DOLLARS) 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided from Operations
Net (Loss) Earnings $(15,396) $ 5,756 $ 10,238
Depletion and depreciation 34,486 28,137 22,990
Write down of petroleum and natural gas assets 23,000 - -
Gain on sale of asset - - (7,326)
Write down (recovery) of investment in securities 1,735 - (83)
Deferred income taxes (5,305) 2,662 8,622
- -----------------------------------------------------------------------------------------
Cash flow from Operating activities 38,520 36,555 34,441
(Increase) Decrease in working capital other
than cash (240) 12,507 (16,739)
Other (529) (409) (56)
- -----------------------------------------------------------------------------------------
37,751 48,653 17,646
Cash Provided from Financing Activities
Issue of shares to acquire Altex Resources Ltd. - - 22,202
Issue of shares net of costs - - 9,623
Proceeds from sale of investments - - 618
Dividends on preferred shares - - (591)
Redemption of preferred shares - - (12,000)
Long term borrowing repaid (15,242) (12,246) (5,446)
- -----------------------------------------------------------------------------------------
Cash Available for Investing activities 22,509 36,407 32,052
- -----------------------------------------------------------------------------------------
Investment
Acquisition of Altex Resources Ltd., net of
working capital deficiency of $4,822 - - 27,387
Capital expenditures, net of oil and gas
dispositions 22,550 26,164 24,023
Net proceeds from sale of non-oil and gas
fixed assets (41) (7) (10,255)
- -----------------------------------------------------------------------------------------
22,509 26,157 41,155
- -----------------------------------------------------------------------------------------
Increase in Cash * $ - $10,250 $ (9,103)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
* For the purposes of this statement, cash represents the current portion of
the amount due to the bank.
<PAGE>
ATCOR RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1995
(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT WHERE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles. Certain
amounts have been reclassified to conform to the current presentation.
Property, Plant and Equipment
PETROLEUM AND NATURAL GAS PROPERTIES
The Company follows the full cost method of accounting, as prescribed by
the guideline issued by The Canadian Institute of Chartered Accountants,
whereby all costs related to the exploration for and development of
petroleum and natural gas are capitalized. Such costs, including tangible
equipment and directly related general and administrative expenses, are
accumulated in one cost centre for each country. Interest costs are
capitalized on major development projects.
Costs of petroleum and natural gas properties (except for those relating to
significant unproved properties and major development projects) are
depleted by the unit of production method based on gross (before royalties)
proved reserves and production. Oil and natural gas liquids reserves and
production are converted to natural gas equivalents using the relative
energy content of 6.5 thousand cubic feet of gas equalling one barrel of
oil. Sulphur reserves and production are converted to natural gas
equivalents at one ton to 15 thousand cubic feet of gas.
The net book value, less related deferred income taxes and accrued future
removal and site restoration costs, is limited to a ceiling amount which
represents the aggregate of (a) proved reserves at current prices and costs
and (b) the cost less impairment of significant unproved properties and
major development projects, less (c) future estimated general and
administrative expenses, financing costs and income taxes.
Proceeds of disposals are credited to cost and no gains or losses are
recognized unless such treatment alters the depletion rate by more than 20
percent.
Substantially all of the Company's exploration and production activities
are conducted jointly with others and the consolidated financial statements
reflect only the Company's proportionate interest in such activities.
ETHANE EXTRACTION PLANT
The Company has a working interest in a joint venture which owns and
operates a plant to extract ethane and other natural gas liquids from
natural gas. The consolidated financial statements reflect the Company's
proportionate interest in this joint venture.
The Company's investment in this plant is depreciated on a straight-line
basis over the estimated useful life of the plant.
FUTURE REMOVAL AND SITE RESTORATION COSTS
Provision for estimated future removal and site restoration costs is made
by the unit of production method. The related charge is included with
depletion and depreciation and is reflected in other liabilities.
INVENTORIES
Inventories, consisting of natural gas and equipment, are valued at the
lower of cost or net realizable value.
<PAGE>
INVESTMENT IN SECURITIES
Investment in securities is carried at cost less any permanent impairment
in value.
INCOME TAXES
The Company provides for deferred income taxes, which principally arise
from the excess of capital cost allowance and exploration and development
costs claimed for tax purposes over related depletion and depreciation.
PER SHARE INFORMATION
Earnings and cash flow per share are calculated using the weighted average
number of Class A and Class B Shares outstanding.
PENSIONS
The Company's employees are members of a non-contributory defined benefit
plan. The cost of pension benefits is determined using the accrued benefit
actuarial cost method and reflects management's best estimates of
investment returns, wage and salary increases, mortality rates,
terminations and age at retirement. Adjustments resulting from plan
enhancements, experience gains and losses and changes in assumptions are
amortized over the estimated average remaining service life of employees.
2. ACQUISITION OF ALTEX RESOURCES LTD.
On January 1, 1993, the Company acquired all of the Common Shares of Altex
Resources Ltd. ("Altex"), an oil and gas exploration and development
company. As consideration, the Company issued 6,343,400 Class A Non-Voting
shares.
The acquisition was recorded January 1, 1993 at $3.50 per share, using the
purchase method, and the allocation of the purchase price and related costs
of $363,000 was as follows:
Assets
Current $ 2,400
Property, plant and equipment 29,941
-------
32,341
-------
Liabilities
Due to bank $ 4,070
Other current 3,151
Other liabilities 204
Deferred income taxes 2,351
-------
9,776
-------
$22,565
-------
-------
3. SALE OF INTEREST IN ETHANE EXTRACTION PLANT
(a) Effective December 1, 1993 (the transaction closed on January 17,
1994), the Company sold a 16.67 percent working interest (leaving the
Company with a remaining interest of 33.33 percent) in the plant to CU
Gas Limited, a subsidiary of Canadian Utilities Limited. Proceeds of
the sale, after related costs, were $10,250,000 and a before tax gain
of $7,326,000 was recorded. The estimated after tax gain was
$3,683,000. The effect of the gain was to increase earnings by $0.10
per share.
(b) Effective December 1, 1993, the estimated useful life of the plant was
extended from 1998 to 2013, which represents the Company's estimate of
the period over which a significant customer will utilize the plant
for processing.
<PAGE>
4. PRIOR YEAR RESTATEMENT
A joint venture audit of the Edmonton Ethane Extraction Plant identified
errors in processing fees charged and in the allocations of product volumes
for the period 1989 through 1993. As a result, a prior period adjustment
was recorded which reduced retained earnings and working capital by
$437,000.
5. SETTLEMENT FEE
During the year ended December 31, 1994, a company which had contracted to
purchase gas from the Company and other suppliers paid these companies to
suspend deliveries under the contracts until 2001. In the interim period,
the Company is selling the related gas into other markets. Since the
Company had no remaining obligation under the suspended contracts, the
entire amount of the settlement fee was recognized as revenue in 1994.
6. HEDGING
The Company enters into contracts from time to time to lock in prices for
future oil production. Gains or losses from these contracts are included
in income when the related production is sold. During the year the Company
made a hedging a gain of $296,000 (1994 loss of $110,000 and 1993 gain of
$507,000).
The Company enters into forward exchange contracts from time to time to fix
the exchange rate of the Canadian dollar against the U.S. dollar.
At December 31, 1995, 1994 and 1993, no such contracts were outstanding.
7. INCOME TAXES
The actual income tax provision differs from that which would be expected
as follows:
YEAR ENDED DECEMBER 31 1995 1994 1993
----------------------------------------------------------------------------
(Loss) Earnings before income taxes $(18,349) $12,743 $20,829
----------------------------------------------------------------------------
Income taxes at the statutory rates (8,179) 5,650 9,236
Crown payments (net of Alberta Royalty Tax Credit) 2,190 2,885 2,479
Resource allowance (2,513) (3,182) (2,909)
Depletion of assets with no tax value 2,279 2,045 1,393
Write down of assets with no tax value 1,607 - -
Large corporation tax 655 539 530
Provision for loss in value of securities 773 - -
Manufacturing and processing credit - (1,006) (1,110)
Dividend income (135) (102) (122)
Amortization of deferred tax benefits 315 315 1,316
Other 55 (157) (222)
----------------------------------------------------------------------------
$ (2,953) $ 6,987 $10,591
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<PAGE>
Deferred tax benefits relating to certain earnings under a cost of service
contract were previously recognized. The related benefits of $943,000 at
December 31, 1995 (1994 - $1,258,000; 1993 - $1,573,000) are being
amortized over the life of a related contract.
Assets with a net book value of $30,913,000 (1994 - $39,212,000; 1993 -
$43,387,000) have no tax base and related depletion results in an increased
tax rate.
8. (LOSS)/EARNINGS PER SHARE
YEAR ENDED DECEMBER 31 1995 1994 1993
----------------------------------------------------------------------------
(Loss) Earnings per share $ (0.40) $ 0.15 $ 0.26
----------------------------------------------------------------------------
The average number of shares used in the above calculations was 38,107,952
for the years ended December 31, 1995 and 1994 and 36,774,618 for the year
ended December 31, 1993.
9. INVESTMENT IN SECURITIES
On February 1, 1996 the investment which consisted of 200,000 Class I
preferred shares of Trilon Corporation was sold for net proceeds of
$3,250,000. The previous book value of $4,985,450 has been reduced
accordingly.
10. PROPERTY, PLANT AND EQUIPMENT
1995 1994 1993
----------------------------------------------------------------------------
COST
Petroleum and natural gas properties $459,216 $437,215 $412,464
Ethane extraction plant and other
related processing equipment 23,436 23,324 23,186
Administrative assets 6,466 6,133 4,882
----------------------------------------------------------------------------
489,118 466,672 440,532
----------------------------------------------------------------------------
ACCUMULATED DEPLETION AND DEPRECIATION
Petroleum and natural gas properties 242,575 186,955 160,609
Ethane extraction plant and other
related processing equipment 17,965 17,666 17,366
Administrative assets 4,617 4,037 3,377
----------------------------------------------------------------------------
265,157 208,658 181,352
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net property, plant and equipment $223,961 $258,014 $259,180
----------------------------------------------------------------------------
----------------------------------------------------------------------------
a) As explained in Note 1, the Company applies a ceiling test to the net
book value of its petroleum and natural gas assets. In applying this
ceiling test, the Company used the following approximate product prices:
1995 1994 1993
Oil (per barrel)............................ $ 21.00 $ 19.40 $ 13.17
Natural Gas (per MCF)....................... $ 1.62 $ 1.60 $ 2.35
As a result of applying the ceiling test a charge to income of $15,579,000
was recorded in 1995, consisting of a write down of $23,000,000 net of
related deferred income taxes of $7,421,000.
<PAGE>
b) Significant volumes of recoverable oil and gas reserves have been
established in the Beaufort-Mackenzie Delta area, but they have not been
categorized as proved reserves at this time due to current economic
conditions. Effective October 1, 1993 the cost of these properties
of $36,032,000 commenced being depleted. This was a result of a planned
well being deferred indefinitely. Costs of $77,222,000 relating to a
major development project (Caroline) were not depleted in 1992; the
Corporation commenced depletion of these costs effective April 1993.
Costs of $4,000,000 relating to other unproved properties were not
subject to depletion in any of the periods presented.
c) General and administrative (G & A) details are described in the
following table:
YEAR ENDED DECEMBER 31 1995 1994 1993
----------------------------------------------------------------------------
G & A net of reimbursements of $1,271,000
(1994 - $1,318,000; 1993 - $1,383,000) $ 8,306 $ 8,278 $ 8,411
Less: Allocated as Marketing - Processing
Operating Expense (2,434) (2,434) (2,927)
Capitalized (1,128) (1,101) (1,099)
----------------------------------------------------------------------------
Net G & A $ 4,744 $ 4,743 $ 4,385
----------------------------------------------------------------------------
----------------------------------------------------------------------------
d) Interest expense is described in the following table:
YEAR ENDED DECEMBER 31 1995 1994 1993
----------------------------------------------------------------------------
Interest expensed $ 3,327 $ 4,009 $ 2,767
Interest capitalized - - 1,825
----------------------------------------------------------------------------
Total interest expense $ 3,327 $ 4,009 $ 4,592
----------------------------------------------------------------------------
----------------------------------------------------------------------------
11. DUE TO BANK
Amounts due to bank at December 31, 1995 represent amounts outstanding
under the Revolving Credit Facility ($5,013,000) and the Caroline Term Loan
($18,750,000). The Company has fixed the interest rate at approximately
10.3 percent on $30 million of debt by entering into three interest rate
swap agreements of $10 million each to 1998. Under these swap agreements
the Company is obligated to pay the interest spread between the swap rate
and the three month rate for Bankers Acceptances. No provision has been
recorded in relation to the unutilized portion of the total swaps as the
decline in debt is considered temporary in nature. Any remaining amounts
bear interest at approximately the prime rate.
Management has the option to June 30, 1996 which can be extended subject to
an annual review by the bank, to convert the indebtedness under the
Revolving Credit Facility (maximum facility $25,000,000) to a term loan
repayable in equal annual installments over five years. Management's
intention in 1995 is to make no principal repayments of this facility and,
accordingly, all of this indebtedness has been classified as long term.
The Caroline Term Loan is repayable in equal quarterly installments
amounting to $5 million per year.
A general security agreement has been granted to the bank. As further
security, the Company's interest in the Caroline property, its other
hydrocarbon properties, and its interest in the Ethane Extraction Plant are
to be pledged at the request of the bank.
<PAGE>
12. CLASS A AND CLASS B SHARES
Authorized
An unlimited number of Class A Non-Voting Shares
An unlimited number of Class B Common Shares
Issued
CLASS A CLASS B
NON-VOTING SHARES COMMON SHARES
----------------------------------------------------------------------------
TOTAL AMOUNT NUMBER AMOUNT NUMBER AMOUNT
----------------------------------------------------------------------------
Balance at December 31,
1992 $103,752 18,179,612 $63,370 11,584,940 $40,382
Acquisition of Altex
Resources Ltd. (Note 2) 22,202 6,343,400 22,202 - -
Issue (net of costs and
related tax benefit) 9,833 2,000,000 9,833 - -
Conversions - 497,162 1,778 (497,162) (1,778)
----------------------------------------------------------------------------
Balance at December 31,
1993 $135,787 27,020,174 $97,183 11,087,778 $38,604
Conversions - 23,150 83 (23,150) (83)
----------------------------------------------------------------------------
Balance at December 31,
1994 $135,787 27,043,324 $97,266 11,064,628 $38,521
Conversions 229,212 824 (229,212) (824)
----------------------------------------------------------------------------
Balance at December 31,
1995 $135,787 27,272,536 $98,090 10,835,416 $37,697
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SHAREHOLDER RIGHTS
The holders of the Class A Non-Voting Shares are entitled to share
equally, on a share for share basis, with the holders of the Class B
Common Shares, in all dividends declared by the Company on Common Shares
as well as in the remaining property of the Company upon dissolution.
The holders of the Class B Common Shares are entitled to vote and to
exchange each Class B Common Share held for one Class A Non-Voting Share.
If a take over bid is made for the Class B Common Shares, holders of
Class A Non-Voting Shares are entitled in certain circumstances, for the
duration of the bid, to exchange each Class A Non-Voting Share for one
Class B Common Share, and to tender such Class B Common Shares pursuant
to the terms of the take-over bid. Such right of exchange is conditional
upon the completion of the take-over bid giving rise to the right of
exchange, and if the take-over bid is not completed, then the right of
exchange shall be deemed never to have existed.
DIVIDENDS
The Company currently has no intention of paying dividends on either the
Class A Non-Voting Shares or the Class B Common Shares in the near future.
STOCK OPTION PLAN
On November 19, 1990, a resolution to establish a stock option plan
(relating to the Class A Non-Voting Shares) was approved on such terms
and conditions as the directors may determine. As at December 31, 1995,
1994 and 1993, no options have been granted.
<PAGE>
13. RELATED PARTY TRANSACTIONS
The following transactions were carried out between the Company and
corporations (including Canadian Utilities Limited) controlled by the same
shareholder who controls the Company.
1995 1994 1993
----------------------------------------------------------------------------
Cost of administration and financial management $ 645 $ 974 $ 848
Sale of natural gas 14,779 20,043 9,285
Cost of transportation 11,412 8,370 8,880
Sale of interest in Ethane Extraction Plant - - 10,350
Sale of undeveloped petroleum rights 1,277 - -
Purchase of petroleum and natural gas properties 800 - -
Cost of storage 66 51 95
Costs of drilling wells and related services 365 761 1,308
Cost of power 305 352 433
Payment of processing fees for facilities 290 313 254
Revenue related to processing fees 550 453 -
Cost of rental and leasehold improvements 9 8 16
Accounts payable at period end 29 47 64
----------------------------------------------------------------------------
These related party transactions are considered by management to be in the
normal course of business and at market value.
14. PENSIONS
Pension costs for the year amounted to $200,107 (1994 - $102,961; 1993 -
$358,826). The following table shows the present value of the accrued
pension benefits and the net assets available to provide for those
benefits, measured on a basis adjusted to market over three years, based
on an actuarial appraisal dated December 31, 1993 and projected to
December 31, 1995.
DECEMBER 31 1995 1994 1993
----------------------------------------------------------------------------
Estimated market related value of assets $6,302 $5,836 $5,533
Estimated accrued pension benefits 5,900 5,318 4,851
----------------------------------------------------------------------------
Surplus $ 402 $ 518 $ 682
----------------------------------------------------------------------------
----------------------------------------------------------------------------
<PAGE>
15. SEGMENTED INFORMATION
The oil and gas segment includes exploration, development and production
of oil and natural gas while the natural gas marketing and processing
segment includes the operations of the natural gas marketing business
and of the Ethane Extraction Plant. Included in oil and gas production
revenues are sales to customers in the United States of approximately
$12,500,000 (1994 - $11,900,000; 1993 - $11,840,000).
<TABLE>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------------------
NATURAL GAS
OIL & GAS MARKETING &
PRODUCTION PROCESSING CORPORATE TOTAL
($) ($) ($) ($)
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Revenues 58,178 203,056 - 261,234
----------------------------------------------------------------------------------
Cost of Gas - 177,374 - 177,374
Operating & Gas Transportation 14,733 13,837 - 28,570
Royalties 8,009 - - 8,009
Alberta Royalty Tax Credit (1,350) - - (1,350)
Depletion and Depreciation 33,495 349 642 34,486
Write down of petroleum
and natural gas assets 23,000 - - 23,000
----------------------------------------------------------------------------------
77,887 191,560 642 270,089
- -------------------------------------------------------------------------------------------
(19,709) 11,496 (642) (8,855)
------------------------------------------------------------------------
Investment Income 312
General and Administrative (4,744)
Interest (3,327)
Write down of investment
in securities (1,735)
Income Taxes 2,953
----------------------------------------------------------------------------------
Net Loss $ (15,396)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Identifiable Assets $ 224,411 $ 25,458 $ 5,472 $ 255,341
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Capital Expenditures $ 22,000 $ 112 $ 438 $ 22,550
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------------------------
NATURAL GAS
OIL & GAS MARKETING &
PRODUCTION PROCESSING CORPORATE TOTAL
($) ($) ($) ($)
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------
Revenues 58,807 132,200 - 191,007
---------------------------------------------------------------------------------
Cost of Gas - 105,732 - 105,732
Operating & Gas Transportation 12,863 17,964 - 30,827
Royalties 10,119 - - 10,119
Alberta Royalty Tax Credit (1,621) - - (1,621)
Depletion and Depreciation 27,160 300 677 28,137
---------------------------------------------------------------------------------
48,521 123,996 677 173,194
---------------------------------------------------------------------------------
10,286 8,204 (677) 17,813
----------------------------------------------------------------------
----------------------------------------------------------------------
Investment Income 504
Settlement Fee 3,178
General and Administrative (4,743)
Interest (4,009)
Income Taxes (6,987)
---------------------------------------------------------------------------------
Net Earnings $ 5,756
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Identifiable Assets $ 259,554 $29,959 $ 7,225 $296,738
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Capital Expenditures $ 24,750 $ 138 $ 1,276 $ 26,164
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------------------------------------
Natural Gas
OIL & GAS MARKETING &
PRODUCTION PROCESSING CORPORATE TOTAL
($) ($) ($) ($)
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------
Revenues 51,528 72,816 - 124,344
---------------------------------------------------------------------------------
Cost of Gas - 41,695 - 41,695
Operating & Gas Transportation 13,331 18,622 - 31,953
Royalties 8,972 - - 8,972
Alberta Royalty Tax Credit (1,580) - - (1,580)
Depletion and Depreciation 20,629 1,915 446 22,990
---------------------------------------------------------------------------------
41,352 62,232 446 104,030
---------------------------------------------------------------------------------
10,176 10,584 (446) 20,314
---------------------------------------------------------------------
---------------------------------------------------------------------
Investment Income 258
General and Administrative (4,385)
Gain on sale of interest Ethane
Extraction Plant 7,326
Recovery of loss in value of securities 83
Interest (2,767)
Income Taxes (10,591)
---------------------------------------------------------------------------------
Net Earnings $ 10,238
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Identifiable Assets $ 262,127 $ 37,476 $ 6,599 $306,202
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Capital Expenditures $ 23,335 $ (140) $ 828 $ 24,023
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
<PAGE>
16. COMMITMENTS AND CONTINGENCIES
a) ATCOR has various commitments including those to buy, sell and
transport natural gas. These commitments are considered to be in the
normal course of business and, in the opinion of management, no
material losses are anticipated in fulfilling such commitments.
b) Effective January 31, 1996, the Company was purchased by Forest Oil
Corporation. As part of this transaction various assets owned by the
Company were sold to its then principal shareholders. These assets
included 50% of its frontier assets for $8,000,000 which resulted in
a write down (Note 10(a)). In addition the Company's investment in
securities was sold resulting in a loss of $1,735,450 (Note 9) and an
18% interest in the Ethane Extraction Plant was sold resulting in an
estimated before tax gain of $6,500,000.
17. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in
Canada. These principles differ from United States GAAP; the
principal differences are as follows:
(a) Under U.S. GAAP the carrying value of petroleum and natural gas
properties, net of deferred income taxes, is limited to the 10%
present value of after-tax future net revenue from proved reserves
(based on prices and costs at the balance sheet date) and the
unimpaired cost of unproved properties (the "U.S. ceiling test").
Under Canadian GAAP, future net revenue is not discounted but
projected financing costs and general and administrative costs are
deducted. These differences result in ceiling test write-downs under
U.S. GAAP.
(b) U.S. GAAP requires that deferred tax assets or liabilities be
computed on the difference between financial statement and income tax
bases of assets and liabilities. Deferred tax provisions are based
on the change during the period in the related deferred tax asset or
liability accounts (Financial Accounting Standard 109 ("FAS 109")).
FAS 109 effects are shown from December 31, 1992.
(c) The Ethane Extraction Plant was sold to a related party. Under U.S.
GAAP, the gain would be credited to contributed capital in the year
the sale closed - 1994.
(d) Under U.S. GAAP, the excess of book value over quoted or fair value
of investments would be written off if the impairment is other than
temporary. Accordingly, a writedown was recorded for U.S. GAAP at
December 31, 1992 and a charge recorded under Canadian GAAP in 1995
was reversed.
(e) In 1994, disclosure was made of a contingency which was anticipated
to be settled in 1995 and recorded as a prior period adjustment.
Under U.S. GAAP, this possible charge would have been accounted for
as a charge against earnings in the year the amount was determined to
be probable rather than as a prior period adjustment. Some $800,000
of the possible charge was determined probable in 1994 and the
estimated after tax effect is reflected below.
(f) Under U.S. GAAP the portion of the Company's interest rate swaps that
exceed the amount of the outstanding debt constitute trading
securities and are recorded at fair value and the corresponding
unrealized gains and losses are included in earnings.
<PAGE>
The effects of the differences between Canadian and U.S. GAAP on
the consolidated statement of earnings are as follows:
<TABLE>
Year ended
December 31
--------------------------------
1995 1994 1993
---------- -------- ---------
<S> <C> <C> <C>
Net (loss) income as reported $ (15,396) $ 5,756 $ 10,238
(Increase) decrease in depletion, net of
tax (a) 3,971 (12,414) (15,187)
Income taxes - liability method (b) 1,723 1,264 918
Elimination of gain on sale of interest in
Ethane Extraction Plant, net of tax (c) - (3,683)
Write-down of investment in securities (d) 1,735 - -
Probable charge related to correction of a prior
period error, net of tax (e) - (448) -
Unrealized loss on interest rate swaps, net
of tax (f) (291) - -
-------- --------- ---------
Net loss under U.S. GAAP $(8,258) $ (5,842) $ (7,714)
-------- --------- ---------
-------- --------- ---------
Net loss available to common shareholders
under U.S. GAAP $(8,258) $ (5,842) $ (8,305)
-------- --------- ---------
-------- --------- ---------
Loss per share available to common shareholders
under U.S. GAAP $ (0.22) $ (0.15) $ (0.23)
-------- --------- ---------
-------- --------- ---------
</TABLE>
The reported cash flows in the consolidated statement of changes in
financial condition under U.S. GAAP are as follows:
Year ended
December 31
-------------------------------
1995 1994 1993
--------- -------- ---------
Operating activities $ 36,749 $ 37,021 $ 27,388
Financing activities (15,242) (11,798) 14,406
Investing activities (21,507) (14,973) (50,897)
The effect of U.S. GAAP on retained earnings is as follows:
Retained earnings under Canadian GAAP, December 31, 1992 $ 22,874
Charge on adoption for FAS 109 (3,263)
Impairment of investments (2,689)
Write-down of oil and gas assets required under U.S.
ceiling test at December 31, 1992 (19,803)
-----------
Deficit at December 31, 1992 restated under
U.S. GAAP $ (2,881)
Net income (loss) under U.S. GAAP for the years ended
December 31, 1993 (7,714)
December 31, 1994 (5,842)
December 31, 1995 (8,258)
-----------
(24,695)
Dividends declared during the years ended
December 31, 1993 (591)
December 31, 1994 -
December 31, 1995 -
-----------
(591)
-----------
Deficit at December 31, 1995 under U.S. GAAP $ (24,995)
-----------
-----------
<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 and (iii) 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 1, 1996 relating to the consolidated
balance sheets of ATCOR Resources Ltd. at December 31, 1995 and 1994, and the
consolidated statements of earnings and retained earnings and changes in
financial position for each of the years in the three-year period ended
December 31, 1995, which report appears in the Current Report on Form 8-K of
Forest Oil Corporation, dated January 28, 1997.
PRICE WATERHOUSE
Calgary, Alberta
January 28, 1997
