<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 3, 1998
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
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 3, 1998, Forest Oil Corporation completed the acquisition of 13
oil and natural gas properties located onshore Louisiana. The properties were
acquired from LLOG Exploration Company and its related entities. Total
consideration of approximately $230,776,000 included one million shares of
Forest's common stock and $216,557,000 of cash. The cash portion of the
consideration was financed with the net proceeds from the sale of $75 million
of the Company's 8 3/4% Senior Subordinated Notes due 2007, 1998 Series and
borrowings under the Company's Credit Facility, the agent of which is The
Chase Manhattan Bank.
Filed herewith are financial statements of the oil and gas properties
acquired by the Company on February 3, 1998 and pro forma financial
statements of the Company giving effect to such acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited Statement of Oil and Gas Revenue and Direct Operating and
Production Expenses of the acquired properties for the year ended
December 31, 1997.
(b) Condensed pro forma combined financial statements of Forest Oil
Corporation at December 31, 1997 and for the year ended December
31, 1997.
(c) Consent of Arthur Andersen LLP.
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: April 9, 1998 By /s/ Daniel L. McNamara
---------------------------
Daniel L. McNamara
Secretary
<PAGE>
FOREST OIL CORPORATION
STATEMENT OF OIL AND GAS
REVENUE AND DIRECT OPERATING
AND PRODUCTION EXPENSES FOR THE
YEAR ENDED DECEMBER 31, 1997
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
LLOG Exploration Company:
We have audited the accompanying statement of oil and gas revenue and direct
operating and production expenses relating to Forest Oil Corporation's
interest in certain oil and gas producing properties (the Properties) for the
year ended December 31, 1997. This statement is the responsibility of
management. Our responsibility is to express an opinion on this statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statement. We believe our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for
inclusion in a Form 8-K/A filed by Forest Oil Corporation) and is not
intended to be a complete presentation of the revenue and expenses of the
Properties mentioned above.
In our opinion, the statement referred to above presents fairly, in all
material respects, the oil and gas revenue and direct operating and production
expenses of the Properties for the year ended December 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
February 12, 1998
<PAGE>
FOREST OIL CORPORATION'S INTEREST IN
CERTAIN OIL AND GAS PRODUCING PROPERTIES
STATEMENT OF OIL AND GAS REVENUE AND
DIRECT OPERATING AND PRODUCTION EXPENSES
<TABLE>
Year Ended
December 31, 1997
-----------------
<S> <C>
OIL AND GAS REVENUE $ 30,439,567
LESS: Direct operating and production
expenses (including production taxes) 5,261,844
------------
REVENUE IN EXCESS OF DIRECT OPERATING AND
PRODUCTION EXPENSES $ 25,177,723
------------
------------
</TABLE>
See accompanying notes to financial statement.
<PAGE>
FOREST OIL CORPORATION'S INTEREST IN CERTAIN
OIL AND GAS PRODUCING PROPERTIES
NOTES TO STATEMENT OF OIL AND GAS REVENUE AND
DIRECT OPERATING AND PRODUCTION EXPENSES
1. BASIS OF PRESENTATION:
Forest Oil Corporation (the Company), acquired interests in certain oil and gas
producing properties (the Properties) owned by LLOG Exploration Company (LLOG)
and its affiliates. The closing date of the acquisition was February 3, 1998
and the net purchase price, subject to future adjustments as provided by the
purchase and sale agreement, was approximately $230.8 million in cash and stock
of the Company.
The accompanying statement of oil and gas revenue and direct operating and
production expenses, which is prepared on the accrual basis of accounting,
relates to the interests in producing oil and gas properties described above and
may not be representative of future operations. The statement does not include
Federal and state income taxes, interest, depletion, depreciation and
amortization or general and administrative expenses because such amounts would
not be indicative of those expenses which would be incurred by the Company. The
statement includes oil and gas revenue and direct operating and production
expenses, including production taxes of $1,792,875, for the entire period
presented.
Generally, LLOG sells its oil and gas production to other affiliates of LLOG,
who resell to other parties. Crude oil prices are based on the Louisiana Light
Sweet posted field prices for crude oil purchases in the area. Gas prices are
based on Inside FERC published prices.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenue and expenses during the reported period.
Actual results could differ from those estimates.
2. SUPPLEMENTAL INFORMATION ON OIL AND GAS RESERVES (UNAUDITED):
The Company's internal reserve engineers prepared an estimate of the future net
oil and gas reserves of the Properties as of February 3, 1998. The reserve
quantity information has been derived from this estimate. There are numerous
uncertainties inherent in estimating quantities of proved reserves and in
projecting the future rates of production and timing of development
expenditures. The following reserve data represent estimates only and should
not be constructed as the current market value of the property or the cost that
would be incurred to obtain equivalent reserves.
Estimated quantities of proved net reserves include only those quantities that
can be expected to be commercially recoverable at prices and costs in effect at
the effective date of the acquisition, under existing regulatory practices and
with conventional equipment and operating methods. Proved developed reserves
represent only those reserves expected to be recovered through existing wells
with existing equipment and operating methods. Proved undeveloped reserves
include those reserves expected to be recovered from new wells on undrilled
acreage or from existing wells on which relatively major expenditures are
required for recompletion.
<PAGE>
An analysis of the estimated changes in quantities of proved reserves for the
year ended December 31, 1997 is shown below.
Estimated Quantities of Proved Reserves
<TABLE>
Gas Oil
(Mmcf) (Mbbl)
------ ------
<S> <C> <C>
Proved Reserves:
January 1, 1997 116,223,100 13,272,710
Production (6,839,155) (602,929)
Revision of estimates and other 37,055 1,219
----------- ----------
December 31, 1997 109,421,000 12,671,000
----------- ----------
----------- ----------
Proved Developed Reserves:
January 1, 1997 91,669,690 9,724,476
----------- ----------
----------- ----------
December 31, 1997 84,865,030 9,122,336
----------- ----------
----------- ----------
</TABLE>
The following is a summary of a standardized measure of discounted future net
cash flows related to the proved oil and gas reserves of the Properties. For
these calculations, estimated future cash flows from estimated future production
or proved reserves were computed using oil and gas prices as of the end of each
period presented. Future development and production costs attributable to the
proved reserves were estimated assuming that existing conditions would continue
over the economic life of the properties, and costs were not escalated for the
future. The Properties are not a separate tax paying entity. Accordingly, the
standardized measure of discounted future net cash flows from proved reserves is
presented before deduction of federal income taxes. The information presented
below should not be viewed as an estimate of the fair value of the Properties,
nor should it be considered indicative of any future trends.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
<TABLE>
1997
-------------
<S> <C>
Future cash inflows $ 503,840,460
Future production and development costs (99,514,360)
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Future net cash flows 404,326,100
10% annual discount for estimated timing of cash flows (132,191,500)
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Standardized measure of discounted future net cash
flows relating to proved reserves $ 272,134,600
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</TABLE>
An analysis of the sources of changes in the standardized measure of discounted
future net cash flows relating to proved reserves on the pricing basis described
above of the Properties for the year ended December 31, 1997 is shown below:
<TABLE>
<S> <C>
Balance, January 1, 1997 $ 423,532,000
Increase (decrease) in discounted future net cash flows:
Sales of oil and gas, net of production expenses (25,177,723)
Accretion of discount 42,353,200
Net change in sales price and production costs (153,622,291)
Revisions of estimates and other (14,950,586)
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Balance, December 31, 1997 $ 272,134,600
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</TABLE>
The weighted average prices of oil and gas used with the above tables at
January 1, 1997 were $23.62 per barrel and $4.10 per Mcf, respectively,
and at December 31, 1997 were $16.82 per barrel and $2.66 per Mcf, respectively.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
On February 3, 1998, Forest Oil Corporation (Forest) purchased interests in 13
oil and gas properties located onshore Louisiana (the Louisiana Acquisition)
from a private company for total consideration of approximately $230,776,000.
The consideration consisted of 1,000,000 shares of Forest Common Stock and
approximately $216,557,000 of cash. The cash portion of the consideration was
funded by borrowings under the Company's bank credit facility and from the
issuance of $75,000,000 principal amount of 8 3/4% Senior Subordinated
Debentures.
The following unaudited condensed pro forma combined balance sheet assumes that
the Louisiana Acquisition occurred on December 31, 1997 and reflects the
historical consolidated balance sheet of Forest giving pro forma effect to this
transaction using the purchase method of accounting. 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 statement of operations for
the year ended December 31, 1997 assumes that the Louisiana Acquisition occurred
as of January 1, 1997. 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, 1997. These statements should
be read in conjunction with the historical financial statements and related
notes of Forest and the Statement of Oil and Gas Revenue and Direct Operating
and Production Expenses of the properties acquired included herein.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED BALANCE SHEET (NOTE A)
DECEMBER 31, 1997
(UNAUDITED)
ASSETS
<TABLE>
Louisiana Pro Forma
Forest Acquisition Combined
Historical (Note B) Forest
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 18,191 - 18,191
Accounts receivable 65,720 - 65,720
Other current assets 4,649 - 4,649
---------- ------- -------
Total current assets 88,560 - 88,560
Net property and equipment, at cost 521,293 230,776 752,069
Goodwill and other intangible assets, net 26,243 - 26,243
Other assets 11,686 - 11,686
---------- ------- -------
$ 647,782 230,776 878,558
---------- ------- -------
---------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 59,719 - 59,719
Accrued interest 4,152 - 4,152
Other current liabilities 2,627 - 2,627
---------- ------- -------
Total current liabilities 66,498 - 66,498
Long-term debt 254,760 216,557 471,317
Other liabilities 17,020 - 17,020
Deferred income taxes 34,767 - 34,767
Minority interest 12,910 - 12,910
Shareholders' equity:
Common stock 3,632 100 3,732
Capital surplus 485,686 14,119 499,805
Accumulated deficit (223,460) - (223,460)
Foreign currency translation (4,031) - (4,031)
---------- ------- -------
Total shareholders' equity 261,827 14,219 276,046
---------- ------- -------
$ 647,782 230,776 878,558
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---------- ------- -------
</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, 1997
(UNAUDITED)
<TABLE>
Louisiana
Louisiana Acquisition Pro Forma
Forest Acquisition Adjustments Combined
Historical Historical (Note B) Forest
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Marketing and processing $184,399 - - 184,399
Oil and gas sales:
Gas 100,993 19,146 - 120,139
Oil, condensate and natural gas liquids 54,249 11,294 - 65,543
-------- ------ ------ -------
Total oil and gas sales 155,242 30,440 - 185,682
-------- ------ ------ -------
Total revenue 339,641 30,440 - 370,081
Operating expenses:
Marketing and processing 175,847 - - 175,847
Oil and gas production 36,284 5,262 - 41,546
General and administrative 16,864 - 750 (1) 17,614
Depreciation and depletion 79,991 - 12,917 (2) 92,908
-------- ------ ------ -------
Total operating expenses 308,986 5,262 13,667 327,915
-------- ------ ------ -------
Earnings from operations 30,655 25,178 (13,667) 42,166
Other income and expense:
Other (income) expense, net (1,289) - - (1,289)
Interest expense 21,403 - 16,896 (3) 38,299
Minority interest in earnings (loss) of subsidiary 108 - - 108
Translation loss on subordinated debt 4,051 - - 4,051
-------- ------ ------ -------
Total other income and expense 24,273 - 16,896 41,169
-------- ------ ------ -------
Earnings before income taxes and extraordinary item 6,382 25,178 (30,563) 997
Income tax expense (benefit) 3,293 - - 3,293
-------- ------ ------ -------
Income (loss) from continuing operations $ 3,089 25,178 (30,563) (2,296)
-------- ------ ------ -------
-------- ------ ------ -------
Weighted average number of common shares outstanding 33,669 - 1,000 (4) 34,669
-------- ------ ------ -------
-------- ------ ------ -------
Income (loss) from continuing operations attributable to
common stock $ 2,900 - - (2,485)
-------- ------ ------ -------
-------- ------ ------ -------
Basic income (loss) per share from continuing operations $ .09 - - (.07)
-------- ------ ------ -------
-------- ------ ------ -------
Diluted income (loss) per share from continuing operations $ .08 - - (.07)
-------- ------ ------ -------
-------- ------ ------ -------
</TABLE>
See accompanying notes to condensed pro forma combined financial statements.
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited condensed pro forma combined balance sheet assumes
that the Louisiana Acquisition occurred on December 31, 1997 and reflects the
December 31, 1997 historical consolidated balance sheet of Forest giving pro
forma effect to this transaction. The unaudited condensed pro forma combined
balance sheet should be read in conjunction with the historical statements
and related notes of Forest.
The accompanying unaudited condensed pro forma combined statement of
operations for the year ended December 31, 1997 assumes that the Louisiana
Acquisition occurred as of January 1, 1997. The pro forma results of
operations are not necessarily indicative of the results of operations that
would actually have been attained if the transaction had occurred as of
January 1, 1997. These statements should be read in conjunction with the
historical statements and related notes of Forest and the Statement of Oil
and Gas Revenue and Direct Operating and Production Expenses of the acquired
properties.
B. ACQUISITION OF LOUISIANA PROPERTIES
On February 3, 1998, Forest purchased interests in 13 oil and gas properties
located onshore Louisiana from a private company for total consideration of
approximately $230,776,000. The consideration consisted of 1,000,000 shares
of Forest Common Stock and approximately $216,557,000 of cash. The cash
portion of the consideration was funded by borrowings under the Company's
bank credit facility and from the issuance of $75,000,000 principal amount of
8 3/4% Senior Subordinated Debentures.
A pro forma adjustment has been made to the accompanying historical balance
of Forest at December 31, 1997 to record the purchase price of the properties
acquired and the related borrowings and stock issuance. The Common Stock
issued was valued at $14,219,000 determined by reference to the quoted market
price of Forest common shares during the period two days preceding and two
days following execution of a definitive purchase and sale agreement.
The accompanying condensed pro forma combined statement of operations for the
year ended December 31, 1997 has been adjusted to include the historical
revenue and direct operating expenses of the Louisiana properties prior to
the acquisition. In addition, the following pro forma adjustments have been
made to the accompanying historical revenue and direct operating expenses of
the Louisiana properties for the year ended December 31, 1997:
1. To adjust general and administrative expense to reflect increased costs
associated with the Louisiana Acquisition.
2. To adjust depletion expense to reflect the pro forma combined depletion
rate for the properties.
3. To increase interest expense for interest associated with the debt incurred
in connection with the Louisiana Acquisition.
4. To adjust the weighted average shares outstanding to reflect shares issued
in connection with the Louisiana Acquisition.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in (i) the Registration Statements (Nos. 2-74151, 2-76946, 33-2748
and 33-59504) on Form S-8 of Forest Oil Corporation - Retirement Savings Plan
of Forest Oil Corporation, (ii) the Registration Statement (No. 33-48440) on
Form S-8 of Forest Oil Corporation - 1992 Stock Option Plan of Forest Oil
Corporation, (iii) the Registration 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, (iv) the Registration Statement (No.
333-45839) on Form S-3 of Forest Oil Corporation of Common Stock issuable to
LLOG Exploration Company and resales thereof, and (v) the Registration
Statement (No. 333-30973) on Form S-3 of Forest Oil Corporation of Common
Stock issuable to Saxon Petroleum Inc. and resales thereof, of our report
dated February 12, 1998 relating to the statement of oil and gas revenue and
direct operating and production expenses of Forest Oil Corporation's interest
in certain oil and gas producing properties for the year ended December 31,
1997, which report appears on Form 8-K/A of Forest Oil Corporation dated
February 3, 1998.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
April 9, 1998
