<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) June 25, 1998
FOREST OIL CORPORATION
(Exact name of registrant as specified in charter)
New York 0-13515 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 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 9, 1998 Forest entered into an agreement in principle with The
Anschutz Corporation (Anschutz) to purchase certain oil and gas property
interests in exchange for shares of Forest Common Stock. On April 6, 1998 a
definitive purchase and sale agreement was executed. The properties include an
interest in The Anschutz Ranch Field which is located in Utah and Wyoming,
prospects and producing acreage in Canada, and interests in projects in various
other countries (the Anschutz Properties). Forest's consideration consists of
5,950,000 shares of Common Stock. On June 25 and 29, 1998, in two separate
closings, Forest acquired substantially all of the Anschutz Properties.
As a result of this transaction, Anschutz increased its ownership from 30.7% to
approximately 39.5% of the outstanding shares of Forest Common Stock.
Filed herewith are financial statements of the Anschutz Ranch Field acquired by
the Company and pro forma financial statements of the Company giving effect to
the acquisitions described above.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited Statement of Oil and Gas Revenue and Direct Lease
Operating Expenses of the Anschutz Ranch Field for each of the
years in the three year period ended December 31, 1997.
(b) Condensed pro forma combined financial statements of Forest Oil
Corporation at March 31, 1998 and for the three months then
ended, and for the year ended December 31, 1997.
(c) Exhibits
(23) Consent of KPMG Peat Marwick LLP;
(99.1) Amendment No. 2 to Rights Agreement by and between
Forest Oil Corporation and ChaseMellon Shareholder Services
L.L.C. dated June 25, 1998;
(99.2) Amendment No. 2 to Registration Rights Agreement by and
between Forest Oil Corporation and The Anschutz Corporation dated
June 25, 1998; and
(99.3) Second Amendment to Shareholders Agreement by and
between Forest Oil Corporation and The Anschutz Corporation dated
June 25, 1998.
(99.4) Forest Oil Corporation press release announcing that
its shareholders approved the proposed transaction between the
Company and The Anschutz Corporation to acquire certain oil and
gas properties from Anschutz in exchange for 5.95 million shares
of its Common Stock.
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: July 8, 1998 By /s/ Daniel L. McNamara
-------------------------
Daniel L. McNamara
Secretary
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
ANSCHUTZ RANCH EAST CORPORATION:
We have audited the accompanying statement of oil and gas revenue and direct
lease operating expenses of an oil and gas property (the Anschutz Ranch Field)
of Anschutz Ranch East Corporation (AREC) acquired by Forest Oil Corporation for
each of the years in the three-year period ended December 31, 1997. This
financial statement is the responsibility of AREC's management. Our
responsibility is to express an opinion on this financial statement based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of oil and gas revenue and
direct lease operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of oil and gas revenue and direct lease operating
expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying statement of oil and gas revenue and direct lease operating
expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and excludes material
expense, that would not be comparable to those resulting from the proposed
future operations of the oil and gas properties as described in Note 1 to the
Financial Statement, and thus is not intended to be a complete presentation of
the revenue and expenses of the Anschutz Ranch Field.
In our opinion, the statement of oil and gas revenue and direct lease operating
expenses referred to above presents fairly, in all material respects, the oil
and gas revenue and direct lease operating expenses of the Anschutz Ranch Field
as described in Note 1 for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 12, 1998
<PAGE>
ANSCHUTZ RANCH EAST CORPORATION
ANSCHUTZ RANCH FIELD
STATEMENT OF OIL AND GAS REVENUE
AND DIRECT LEASE OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
--------------- ------------------------
(unaudited)
1998 1997 1997 1996 1995
------ ------ ------- ------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Operating Revenue:
Sales of natural gas $3,104 3,340 13,541 9,247 6,978
Sales of condensate 819 1,347 4,700 5,163 4,870
Sales of natural gas liquids 1,013 1,670 5,827 6,440 3,600
------ ------ ------- ------- ------
Total Operating Revenue 4,936 6,357 24,068 20,850 15,448
Direct Lease Operating Expenses 863 983 4,035 3,390 7,056
------ ------ ------- ------- ------
Net Operating Revenue $4,073 5,374 20,033 17,460 8,392
------ ------ ------- ------- ------
------ ------ ------- ------- ------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ANSCHUTZ RANCH EAST CORPORATION
ANSCHUTZ RANCH FIELD
NOTES TO STATEMENT OF OIL AND GAS REVENUE
AND DIRECT LEASE OPERATING EXPENSES
FOR EACH OF THE YEARS IN THE THREE-YEAR
PERIOD ENDED DECEMBER 31, 1997
(1) PURCHASE OF OIL AND GAS PROPERTIES AND BASIS OF PRESENTATION
The accompanying financial statement presents the revenues and direct
operating expenses of a certain oil and gas property and related equipment
of Anschutz Ranch East Corporation (the Anschutz Property) for each of the
years in the three-year period ended December 31, 1997. The property
consists of a working interest in a oil and gas property located in Summit
County, Utah and Uinta County, Wyoming. This property is subject to an
agreement whereby it would be purchased by Forest Oil Corporation effective
January 1, 1998.
The accompanying statement of oil and gas revenue and direct lease
operating expenses of the Anschutz Property was prepared to comply with
certain rules and regulations of the Securities and Exchange Commission and
does not include general and administrative expenses, interest expense, a
provision for depreciation, depletion and amortization, or any provision
for income taxes since historical expenses of this nature incurred by
Anschutz Ranch East Corporation are not necessarily indicative of the costs
to be incurred by Forest Oil Corporation.
Revenue in the accompanying statement of oil and gas revenue and direct
lease operating expense is recognized on the sales method. During 1997 and
1996, a portion of the Anschutz Property's revenue was sold under a gas
purchase contract. This contract was terminated in 1997.
Direct lease operating expenses are recognized on the accrual basis and
consist of all costs incurred in producing, marketing and distributing
products produced by the property as well as production taxes and monthly
administrative overhead costs.
<PAGE>
(2) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
The following unaudited information has been prepared in accordance with
Statement of Financial Accounting Standards No. 69, DISCLOSURE ABOUT OIL
AND GAS PRODUCING ACTIVITIES (SFAS No. 69).
(A) ESTIMATED PROVED OIL AND GAS RESERVES
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas, and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions;
i.e., prices and costs as of the date the estimate is made. Proved
developed oil and gas reserves are reserves that can be expected to be
recovered through existing wells with existing equipment and operating
methods. Proved undeveloped oil and gas reserves are reserves that are
expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion.
An estimate of proved developed future net recoverable oil and gas reserves
of the Anschutz Property and changes therein follows. Such estimates are
inherently imprecise and may be subject to substantial revisions. Proved
undeveloped reserves attributable to the Anschutz Property are not
significant.
<TABLE>
<CAPTION>
Oil and
Condensate Natural Gas
(000's of Bbls) (Mmcf)
--------------- -----------
<S> <C> <C>
Balance at December 31, 1994 9,166 54,903
Production (868) (6,238)
Effect of changes in prices and other 57 366
------ ------
Balance at December 31, 1995 8,355 49,031
Production (875) (7,064)
Effect of changes in prices and other 383 1,945
------ ------
Balance at December 31, 1996 7,863 43,912
Production (823) (7,161)
Effect of changes in prices and other (148) (466)
------ ------
Balance at December 31, 1997 6,892 36,285
------ ------
------ ------
</TABLE>
<PAGE>
(2) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
(CONTINUED)
(B) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The standardized measure of discounted future net cash flows has been
calculated in accordance with the provisions of SFAS No. 69.
Future oil and gas sales and production and development costs have been
estimated using prices and costs in effect at the end of the years
indicated. Future income tax expense has not been considered as the
properties are not a tax paying entity. Future general and administrative
and interest expenses have also not been considered.
Changes in the demand for oil and natural gas, inflation, and other factors
make such estimates inherently imprecise and subject to substantial
revision. This table should not be construed to be an estimate of the
current market value of the proved reserves. The standardized measure of
discounted future net cash flows as of December 31, 1997, 1996, and 1995 is
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- -------
(in thousands)
<S> <C> <C> <C>
Future oil and gas sales $137,339 243,887 135,650
Future production and development costs (43,326) (56,999) (47,564)
--------- -------- -------
Future net revenue 94,013 186,888 88,086
10% annual discount for estimated timing
of cash flows (30,642) (65,114) (29,317)
--------- -------- -------
Standardized measure of discounted future
net cash flows $ 63,371 121,774 58,769
--------- -------- -------
--------- -------- -------
</TABLE>
(C) CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES
An analysis of the changes in the total standardized measure of discounted
future net cash flows during each of the last three years is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- -------
(in thousands)
<S> <C> <C> <C>
Beginning of year $121,774 58,769 70,108
Changes resulting from:
Sales of oil and gas, net of production
costs (20,033) (17,460) (8,392)
Changes in prices and other (50,547) 74,588 (9,958)
Accretion of discount 12,177 5,877 7,011
--------- -------- -------
End of year $ 63,371 121,774 58,769
--------- -------- -------
--------- -------- -------
</TABLE>
<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 from a private company for
total consideration of approximately $230,776,000 (the Louisiana Acquisition).
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 from the Company's bank credit facility and from the issuance of
$75,000,000 principal amount of 8 3/4% Senior Subordinated Debentures.
On April 6, 1998 Forest entered into a definitive purchase and sale agreement
with The Anschutz Corporation to acquire certain oil and gas property interests
from Anschutz in exchange for 5,950,000 shares of Forest Common Stock (the
Anschutz Transaction). The properties include an interest in the Anschutz Ranch
Field which is located in Utah and Wyoming, prospects and producing acreage in
Canada, and interests in projects in various other countries (the Anschutz
Properties). On June 25 and 29, 1998, in two separate closings, Forest acquired
all of the Anschutz Properties with the exception of an interest in a project in
Thailand. The closing of this interest, which is not material to the Company or
to the transaction, is expected to be completed in July 1998.
The following unaudited condensed pro forma combined balance sheet assumes that
the Anschutz Transaction occurred on March 31, 1998 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 three months ended March 31, 1998 and for the year ended December 31, 1997
assumes that the Louisiana Acquisition and the Anschutz Transaction 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 this date. These statements should be
read in conjunction with the historical financial statements and related notes
of Forest, the Statement of Oil and Gas Revenue and Direct Operating and
Production Expenses of the properties acquired in the Louisiana Acquisition
included in the Form 8-K/A dated February 3, 1998, and the Statement of Oil and
Gas Revenue and Direct Operating Expenses of the Anschutz Ranch Field included
herein.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED BALANCE SHEET (NOTE A)
MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
Anschutz Pro forma
Forest Transaction Combined
Historical (Note C) Forest
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 5,770 50,951 (1) 25,721
(31,000)(2)
Accounts receivable 50,243 3,290 (1) 53,533
Other current assets 5,539 - 5,539
--------- ------ -------
Total current assets 61,552 23,241 84,793
Net property and equipment, at cost 760,723 62,638 (1) 823,861
500 (3)
Goodwill and other intangible assets, net 25,947 - 25,947
Other assets 13,606 - 13,606
--------- ------ -------
$ 861,828 86,379 948,207
--------- ------ -------
--------- ------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - 5,300 (1) 5,300
Accounts payable 43,435 3,159 (1) 47,094
500 (3)
Accrued interest 3,158 1,476 (1) 4,634
Other current liabilities 2,927 341 (1) 3,268
--------- ------ -------
Total current liabilities 49,520 10,776 60,296
Long-term debt 472,922 38,700 (1) 480,622
(31,000)(2)
Other liabilities 16,973 338 (1) 17,311
Deferred income taxes 34,176 - 34,176
Minority interest 12,927 - 12,927
Shareholders' equity:
Common stock 3,732 595 (1) 4,327
Capital surplus 503,058 66,970 (1) 570,028
Accumulated deficit (224,463) - (224,463)
Other comprehensive loss (7,017) - (7,017)
--------- ------ -------
Total shareholders' equity 275,310 67,565 342,875
--------- ------ -------
$ 861,828 86,379 948,207
--------- ------ -------
--------- ------ -------
</TABLE>
See accompanying notes to condensed pro forma combined financial statements.
<PAGE>
FOREST OIL CORPORATION
CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS (NOTE A)
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Louisiana Combined Anschutz
Acquisition Forest and Anschutz Transaction Pro Forma
Forest Adjustments Louisiana Transaction Adjustments Combined
Historical (Note B) Acquisition Historical (Note C) Forest
---------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Marketing and processing $ 35,003 - 35,003 - - 35,003
Oil and gas sales:
Gas 27,607 2,435 (1) 30,042 3,104 - 33,146
Oil, condensate and natural gas liquids 12,886 1,199 (1) 14,085 1,832 - 15,917
-------- ----- ------ ----- ----- ------
Total oil and gas sales 40,493 3,634 44,127 4,936 - 49,063
-------- ----- ------ ----- ----- ------
Total revenue 75,496 3,634 79,130 4,936 - 84,066
Operating expenses:
Marketing and processing 33,168 - 33,168 - - 33,168
Oil and gas production 8,842 378 9,220 863 - 10,083
General and administrative 4,255 - 4,255 - - 4,255
Depreciation and depletion 23,333 1,770 (2) 25,103 - 2,348 (1) 27,451
-------- ----- ------ ----- ----- ------
Total operating expenses 69,598 2,148 71,746 863 2,348 74,957
-------- ----- ------ ----- ----- ------
Earnings (loss) from operations 5,898 1,486 7,384 4,073 (2,348) 9,109
Other income and expense:
Other expense, net 2 - 2 - - 2
Interest expense 8,506 1,432 (3) 9,938 - 963 (2) 10,901
Minority interest in loss of subsidiary (80) - (80) - - (80)
Translation gain on subordinated debt (1,024) - (1,024) - - (1,024)
-------- ----- ------ ----- ----- ------
Total other income and expense 7,404 1,432 8,836 - 963 9,799
-------- ----- ------ ----- ----- ------
Earnings (loss) before income taxes (1,506) 54 (1,452) 4,073 (3,311) (690)
Income tax benefit (503) - (503) - - (503)
-------- ----- ------ ----- ----- ------
Income (loss) from continuing operations $ (1,003) 54 (949) 4,073 (3,311) (187)
-------- ----- ------ ----- ----- ------
-------- ----- ------ ----- ----- ------
Weighted average number of common shares
outstanding 36,975 - 36,975 - 5,950 (3) 42,925
-------- ----- ------ ----- ----- ------
-------- ----- ------ ----- ----- ------
Loss from continuing operations
attributable to common stock $ (1,003) - (949) - - (187)
-------- ----- ------ ----- ----- ------
-------- ----- ------ ----- ----- ------
Basic loss per share from continuing
operations $ (.03) - (.03) - - -
-------- ----- ------ ----- ----- ------
-------- ----- ------ ----- ----- ------
Diluted loss per share from continuing
operations $ (.03) - (.03) - - -
-------- ----- ------ ----- ----- ------
-------- ----- ------ ----- ----- ------
</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)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Louisiana Combined Anschutz
Louisiana Acquisition Forest and Anschutz Transaction Pro Forma
Forest Acquisition Adjustments Louisiana Transaction Adjustments Combined
Historical Historical (Note B) Acquisition Historical (Note C) Forest
---------- ----------- ----------- ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Marketing and processing $ 184,399 - - 184,399 - - 184,399
Oil and gas sales:
Gas 100,993 19,146 - 120,139 13,541 - 133,680
Oil, condensate and natural
gas liquids 54,249 11,294 - 65,543 10,527 - 76,070
--------- ------ ------ -------- ------- ------- -------
Total oil and gas sales 155,242 30,440 - 185,682 24,068 - 209,750
--------- ------ ------ -------- ------- ------- -------
Total revenue 339,641 30,440 - 370,081 24,068 - 394,149
Operating expenses:
Marketing and processing 175,847 - - 175,847 - - 175,847
Oil and gas production 36,284 5,262 - 41,546 4,035 - 45,581
General and administrative 16,864 - 750 (1) 17,614 - - 17,614
Depreciation and depletion 79,991 - 12,917 (2) 92,908 - 10,515 (1) 103,423
--------- ------ ------ -------- ------- ------- -------
Total operating expenses 308,986 5,262 13,667 327,915 4,035 10,515 342,465
--------- ------ ------ -------- ------- ------- -------
Earnings (loss) from operations 30,655 25,178 (13,667) 42,166 20,033 (10,515) 51,684
Other income and expense:
Other income, net (1,289) - - (1,289) - - (1,289)
Interest expense 21,403 - 16,896 (3) 38,299 - 3,740 (2) 42,039
Minority interest in earnings
of subsidiary 108 - - 108 - - 108
Translation loss on
subordinated debt 4,051 - - 4,051 - - 4,051
--------- ------ ------ -------- ------- ------- -------
Total other income and
expense 24,273 - 16,896 41,169 - 3,740 44,909
Earnings (loss) before income
taxes and extraordinary item 6,382 25,178 (30,563) 997 20,033 (14,255) 6,775
Income tax expense 3,293 - - 3,293 - - 3,293
--------- ------ ------ -------- ------- ------- -------
Income (loss) from continuing
operations $ 3,089 25,178 (30,563) (2,296) 20,033 (14,255) 3,482
--------- ------ ------ -------- ------- ------- -------
--------- ------ ------ -------- ------- ------- -------
Weighted average number of
common shares outstanding 33,669 - 1,000 (4) 34,669 - 5,950 (3) 40,619
--------- ------ ------ -------- ------- ------- -------
--------- ------ ------ -------- ------- ------- -------
Income (loss) from continuing
operations attributable to
common stock 2,900 - - (2,485) - - 3,293
--------- ------ ------ -------- ------- ------- -------
--------- ------ ------ -------- ------- ------- -------
Basic income (loss) per share
from continuing operations $ .09 - - (.07) - - .08
--------- ------ ------ -------- ------- ------- -------
--------- ------ ------ -------- ------- ------- -------
Diluted income (loss) per share
from continuing operations $ .08 - - (.07) - - .07
--------- ------ ------ -------- ------- ------- -------
--------- ------ ------ -------- ------- ------- -------
</TABLE>
See accompanying notes to condensed pro forma combined financial statements.
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited condensed pro forma combined balance sheet assumes
that the Anschutz Transaction occurred on March 31, 1998 and reflects the
historical consolidated balance sheet of Forest at that date giving pro forma
effect to the 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 accompanying unaudited condensed pro forma combined statements of operations
for the three months ended March 31, 1998 and for the year ended December 31,
1997 assume that the Louisiana Acquisition and the Anschutz Transaction 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 this date. These statements should be
read in conjunction with the historical financial statements and related notes
of Forest, the Statement of Revenue and Direct Operating Expenses of the
properties acquired in the Louisiana Acquisition included in Form 8-K/A dated
February 3, 1998 and the Statement of Revenue and Direct Operating Expenses of
the Anschutz Properties included herein.
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. The effects of this transaction are included in the
historical balance sheet at March 31, 1998.
The historical information of Forest Oil Corporation in the accompanying
condensed pro forma combined statement of operations for the three months ended
March 31, 1998 includes the historical revenue and direct operating expenses of
the Louisiana properties subsequent to their acquisition on February 3, 1998.
In addition, the following pro forma adjustments have been made to the
accompanying historical revenue and direct operating expenses of Forest Oil
Corporation for the three months ended March 31, 1998:
1. To record oil and gas revenue of the Louisiana properties for the period
from January 1, 1998 to February 2, 1998.
2. To adjust depletion expense to reflect the pro forma combined depletion
rate giving effect to the acquisition of the properties.
3. To increase interest expense for interest associated with the debt incurred
in connection with the Louisiana Acquisition.
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. 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:
<PAGE>
B. ACQUISITION OF LOUISIANA PROPERTIES (continued)
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 the shares
issued in connection with the Louisiana Acquisition.
C. ACQUISITION OF ANSCHUTZ PROPERTIES
On January 9, 1998 Forest entered into an agreement in principle with The
Anschutz Corporation to purchase certain oil and gas property interests in
exchange for shares of Forest Common Stock. On April 6, 1998 a definitive
purchase and sale agreement was executed. The properties include an interest in
The Anschutz Ranch Field which is located in Utah and Wyoming, prospects and
producing acreage in Canada, and interests in projects in various other
countries (the Anschutz Properties). Forest's consideration consists of
5,950,000 shares of Common Stock. On June 25 and 29, 1998, in two separate
closings, Forest acquired all of the Anschutz Properties with the exception of
an interest in a project in Thailand. The closing of this interest, which is
not material to the Company or to the transaction, is expected to be completed
in July 1998.
The accompanying historical balance sheet of Forest at March 31, 1998 has been
adjusted as follows to record the purchase price of the Anschutz assets acquired
and liabilities assumed:
1. To record the assets acquired and liabilities assumed relating to the
Anschutz Properties at March 31, 1998 and the issuance of Forest Common
Stock in consideration therefor. The assets acquired and liabilities
assumed (which consist primarily of the assets and liabilities of the
Anschutz Ranch East Corporation which owns the Anschutz Ranch East Field)
are as follows (in thousands):
<TABLE>
<S> <C>
Cash $ 50,951
Accounts receivable 3,290
Oil and gas properties 62,638
Current portion of long-term debt (5,300)
Accounts payable (3,159)
Accrued interest (1,476)
Other current liabilities (341)
Long-term debt (38,700)
Other liabilities (338)
--------
Fair value of Forest Common Stock $ 67,565
--------
--------
</TABLE>
The Common Stock issued was valued at $67,565,000 determined by reference
to the quoted market price of Forest common shares during the period two
days preceding and two days following the announcement of the agreement in
principle, less a discount to reflect the size of the block of shares to be
issued and the estimated brokerage fees on the ultimate disposition of the
shares.
In connection with the transaction, the Company will assume $44,000,000 of
Senior Notes. The Senior Notes bear interest at 8.5% per annum, payable
semiannually until the notes are repaid in 2003. A principal repayment of
$1,000,000 is due on May 31, 1998 with the balance payable in 10 semiannual
payments beginning November 30, 1998. The Senior Notes are secured by a
first priority lien on the Anschutz Ranch Field.
2. To reflect the use of available cash received in the transaction to repay a
portion of Forest's bank credit facility.
3. To record estimated costs associated with the Anschutz Transaction.
<PAGE>
C. ACQUISITION OF ANSCHUTZ PROPERTIES (continued)
The accompanying condensed pro forma combined statement of operations for the
three months ended March 31, 1998 and for the year ended December 31, 1997 have
been adjusted to include the historical revenue and direct operating expenses of
the Anschutz Ranch Field prior to the acquisition. There was no significant
production from any of the other acquired properties. In addition, the
following adjustments have been made to the accompanying condensed pro forma
combined statement of operations for the three months ended March 31, 1998 and
for the year ended December 31, 1997:
1. To adjust depletion expense to reflect the pro forma combined depletion
rate giving effect to the acquisition of the Anschutz Properties.
2. To record interest expense associated with the debt to be assumed by Forest
in connection with the acquisition of the Anschutz Properties.
3. To adjust the weighted average shares outstanding to reflect shares issued
in connection with the Anschutz Acquisition.
In addition to effects of the pro forma adjustments described above, the Company
presently expects additional effects and events to occur as described below.
The following statements are forward-looking and are based upon the Company's
current belief as to the outcome and timing of such future events. There are
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 could differ materially from those
expressed in the forward-looking statements.
1. The Company intends to repay in full the notes assumed in the Anschutz
Acquisition as soon after closing as is reasonably practicable. Such
repayment, which will be made using funds available under the Company's
bank credit facility, is expected to result in reduced interest expense to
the Company in the amount of approximately $450,000 annually.
2. General and administrative expense will increase as a result of adding the
Anschutz Properties to the Company's existing property base. The Company
estimates that additional engineering, marketing, accounting, legal and
other administrative services will cost approximately $200,000 to $300,000
annually.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
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
Statement (No. 333-56553) on Form S-3 of Forest Oil Corporation of Common Stock
issuable to Bank of America National Trust and Savings Association and resales
thereof, of our report dated March 12, 1998 relating to the statement of oil and
gas revenue and direct lease operating expenses of an oil and gas property (the
Anschutz Ranch Field) of Anschutz Ranch East Corporation acquired by Forest Oil
Corporation for each of the years in the three-year period ended December 31,
1997, which report appears in the Form 8-K of Forest Oil Corporation dated
July 8, 1998.
KPMG PEAT MARWICK LLP
Denver, Colorado
July 8, 1998
<PAGE>
AMENDMENT NO. 2 TO
RIGHTS AGREEMENT
This AMENDMENT NO. 2 TO RIGHTS AGREEMENT (this "AMENDMENT") is entered
into by Forest Oil Corporation, a New York corporation (the "COMPANY"), and
ChaseMellon Shareholder Services L.L.C., a New York limited liability
company, as rights agent (the "RIGHTS AGENT"), this 25th day of June 1998.
The Company and the Rights Agent entered into a Rights Agreement dated
as of October 14, 1993 and amended as of July 27, 1995 (the "RIGHTS
AGREEMENT").
The Board of Directors of the Company (the "BOARD"), in approving that
certain Purchase and Sale Agreement dated as of April 6, 1998 (the "PURCHASE
AND SALE AGREEMENT"), between the Company and The Anschutz Corporation (the
"PURCHASER"), also approved certain amendments to the Rights Agreement; and
NOW, THEREFORE, the parties agree as follows (terms used but not
otherwise defined herein shall have the same meanings as in the Purchase and
Sale Agreement):
1. Notwithstanding any other provision of the Rights Agreement, (a) the
execution or the delivery of one or more of the Transaction Documents or the
conclusion of one or more of the Transactions (including, without limitation
(i) the acquisition by the Purchaser or any of its Affiliates of the Forest
Shares and (ii) the "beneficial ownership" (as defined in the Rights
Agreement) by any of the Purchaser and its Affiliates of the foregoing) will
not cause or permit the Rights to become exercisable, the Rights to be
separated from the stock certificates to which they are attached or any
provision of the Rights Agreement to apply to the Purchaser or any other
person by reason of or in connection with the Transaction Documents or the
Transactions, including, without limitation, the designation of the Purchaser
or any other person as an Acquiring Person (as defined in the Rights
Agreement) the occurrence of a Distribution Date (as defined in the Rights
Agreement) and the occurrence of a Shares Acquisition Date (as defined in the
Rights Agreement), and (b) for purposes of this Rights Agreement, none of the
Purchaser and its Affiliates shall at any time be deemed to be the Beneficial
Owner (as defined in the Rights Agreement) of the shares of Common Stock and
other securities referred to in the preceding clause (a), provided, however,
that this amendment shall not effect any amendment of the Rights
Agreement with respect to the acquisition or beneficial ownership of Voting
Securities (as defined in the Rights Agreement) that are not referred to in
the preceding clause (a) that may be acquired or owned beneficially by any of
the Purchaser and its Affiliates from time to time (other that Voting
Securities acquired pursuant to or in connection with, or beneficially owned
as a result of, the payment of a dividend on or split-up, merger,
reclassification, recapitalization, reorganization, combination, subdivision,
conversion, exchange of shares or the like with respect to such Voting
Securities).
2. Except as otherwise amended herein, all provisions of the Rights
Agreement shall remain in full force and effect and shall be binding upon the
parties hereto.
3. This Amendment may be executed in any number of counterparts, each
of such shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers, each of whom is duly authorized,
as of the date first written above.
<PAGE>
FOREST OIL CORPORATION
By: /s/Daniel L. McNamara
------------------------------------
Name: Daniel L. McNamara
---------------------------------
Title: Secretary
--------------------------------
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
By: /s/James E. Hagan
------------------------------------
Name: James E. Hagan
----------------------------------
Title: Vice President
--------------------------------
-2-
<PAGE>
AMENDMENT NO. 2 TO
REGISTRATION RIGHTS AGREEMENT
This AMENDMENT NO. 2 TO REGISTRATION RIGHTS AGREEMENT this
("AMENDMENT") is entered into by FOREST OIL CORPORATION, a New York
corporation (the "COMPANY"), and THE ANSCHUTZ CORPORATION, a Kansas
corporation (the "SHAREHOLDER"), this 25th day of June, 1998.
The Company and the Shareholder entered into a Registration Rights
Agreement dated as of May 19, 1995, and amended as of November 5, 1996 (the
"REGISTRATION RIGHTS AGREEMENT"). Terms not otherwise defined herein have
the meanings stated in the Registration Rights Agreement or, if not defined
therein, in the Purchase Agreement (as defined therein).
The Board of Directors of Forest, in approving the Purchase and Sale
Agreement dated as of April 6, 1998, between Forest and Anschutz, also
approved certain amendments to the Registration Rights Agreement.
NOW, THEREFORE, the parties agree as follows:
1. The definition of "Registrable Shares" in the last sentence of
Recital D is hereby amended to read in its entirety as follows:
The Shareholder Shares and, when acquired by the Shareholder, the Tranche
B Warrant Shares, and the Forest Shares (acquired by the Shareholder
pursuant to a Purchase and Sale Agreement dated as of April 6, 1998
between the Shareholder and the Company) are collectively referred to as
the "REGISTRABLE SHARES."
2. Except as otherwise provided herein, all provisions of the
Registration Rights Agreement shall remain in full force and effect and shall
be binding upon the parties hereto.
3. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first written above.
FOREST OIL CORPORATION
By: /s/Daniel L. McNamara
---------------------------------------------
Name: Daniel L. McNamara
-------------------------------------------
Title: Secretary
------------------------------------------
THE ANSCHUTZ CORPORATION
By: /s/Craig D. Slater
---------------------------------------------
Name: Craig D. Slater
-------------------------------------------
Title: Vice President
------------------------------------------
<PAGE>
SECOND AMENDMENT TO
SHAREHOLDERS AGREEMENT
This SECOND AMENDMENT TO SHAREHOLDERS AGREEMENT (this "AMENDMENT") is
entered into by and between Forest Oil Corporation, a New York corporation
("FOREST"), and The Anschutz Corporation, a Kansas corporation ("ANSCHUTZ"),
this 25th day of June 1998.
Forest and Anschutz have entered into that certain Shareholders
Agreement dated as of July 27, 1995, as amended by a First Amendment to
Shareholders Agreement dated as of January 24, 1996 (the "SHAREHOLDERS
AGREEMENT").
The Board of Directors of Forest (the "BOARD"), in approving the
Purchase and Sale Agreement (the "PURCHASE AND SALE AGREEMENT"), dated as of
April 6, 1998, between Forest and Anschutz, also approved certain amendments
to the Shareholders Agreement.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual agreements herein contained, and the mutual benefits to be derived
therefrom the parties agree as follows (terms used but not otherwise defined
shall have the same meaning as in the Shareholders Agreement):
1. Article I of the Shareholders Agreement is hereby amended by
adding the following definitions:
"Forest Shares" has the meaning given such term in the Purchase and
Sale Agreement.
"Shares" means the Purchaser Shares and the Forest Shares.
"Transaction Documents" means the Transaction Documents (as defined
in the Purchase Agreement) and the Transaction Documents (as defined
in the Purchase and Sale Agreement).
2. The definition of "Section 16(b) Liability" in Article I, the
definition of "Section 16(b) Matter" in Article I, Section 3.2, Section
3.2(f), Section 3.2(h), Section 3.2(i), Section 3.3(a)(1), Section 5.1, and
Section 5.5 are hereby amended by replacing "Purchaser Shares" with "Shares."
3. Section 2.2(b) is hereby amended in its entirety to read as
follows:
(b) In all notices, registrations, applications, statements,
pleadings, memoranda, briefs and other documents submitted to or filed
with any Governmental Body (including, without limitation, in any Action
referred to in Section 2.2(c)), none of the Company, Purchaser and their
respective Affiliates shall assert any position or claim with respect to
the acquisition (or deemed acquisition) or disposition (or deemed
disposition) by Purchaser of "beneficial ownership" of, or a "pecuniary
interest" or "indirect pecuniary interest" in (i) any of the Purchaser
Shares that is inconsistent with the position or claim that Purchaser
acquired (or shall have been deemed to acquire) "beneficial ownership" of,
or a "pecuniary interest" or "indirect pecuniary interest" in, all of the
Purchaser Shares on or before April 6, 1998 or (ii) any of the Forest
Shares that is inconsistent with the position or claim that Purchaser
acquired (or shall have been deemed to acquire)
<PAGE>
"beneficial ownership" of, or a "pecuniary interest" or "indirect pecuniary
interest" in, all of the Forest Shares on April 6, 1998, except that
Purchaser may assert any such inconsistent position or claim if Purchaser,
based on advice of counsel, determines that there is a reasonable basis to
conclude that as a result of the failure to assert such inconsistent
position or claim, Purchaser, any person who controls Purchaser within the
meaning of any applicable Regulation or any of their respective
shareholders, directors, officers, employees, agents and Affiliates could
be in violation of any applicable Regulation or could become subject to any
sanction, fine, award or other penalty, whether civil or criminal.
4. Section 3.2(f) is further amended by replacing the reference to
"Section 2.1" with "Section 3.1."
Except as expressly amended hereby, the Shareholders Agreement is hereby
ratified and confirmed, and as hereby amended, shall remain in full force and
effect in accordance with its terms, conditions and provisions.
EXECUTED in multiple counterparts, each having the force and effect of
an original, effective as of the date first written above.
FOREST OIL CORPORATION
By: /s/Daniel L. McNamara
-----------------------------------
Name: Daniel L. McNamara
--------------------------------
Title: Secretary
--------------------------------
THE ANSCHUTZ CORPORATION
By: /s/Craig D. Slater
-----------------------------------
Name: Craig D. Slater
---------------------------------
Title: Vice President
--------------------------------
-2-
<PAGE>
[LETTERHEAD]
FOR IMMEDIATE RELEASE
FOREST OIL ANNOUNCES SHAREHOLDER APPROVAL
OF ANSCHUTZ TRANSACTION
DENVER, COLORADO - JUNE 25, 1998 - Forest Oil Corporation (NYSE:FST)
announced that at today's annual meeting of shareholders its shareholders
approved the proposed transaction between the company and The Anschutz
Corporation to acquire certain oil and gas properties from Anschutz in
exchange for 5.95 million shares of Forest Oil Corporation common stock.
Approximately 97% of eligible shareholders voted in favor of the proposed
transaction.
The company also announced the election of two directors at the annual meeting
of shareholders. Directors elected to serve terms expiring at the company's
annual meeting in 2002 are Cortlandt S. Dietler and Craig D. Slater.
Forest Oil Corporation is engaged in the acquisition, exploration, development,
production and marketing of natural gas and crude oil in North America.
Forest's principal reserves and producing properties are located in the United
States in the Gulf of Mexico, Louisiana, Texas, Oklahoma and Wyoming and in
Canada in Alberta and the Northwest Territories. Forest's common stock trades
on the New York Stock Exchange under the symbol FST.
June 25, 1998
