Jefferies Global Energy Conference · Jefferies Global Energy Conference ... and 2009,Forest...

FOREST OIL CORPORATION

GROWING THE OIL IN FOREST

Jefferies Global Energy ConferenceJefferies Global Energy Conference

November 28, 2012


Cautionary StatementsCautionary Statements

1

Forward Looking Statements – This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, that address activities that Forest assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements provided in this presentation are based on management's current belief, based on currently available information, as to the outcome and timing of future events. Forest cautions that its future natural gas and liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing of capital expenditures, and other forward-looking statements are subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.

These risks relating to Forest include, but are not limited to, oil and natural gas price volatility, Forest’s level of indebtedness, its ability to replace production, its ability to compete with larger producers, environmental risks, drilling and other operating risks, regulatory changes, credit risk of financial counterparties, risks of using third-party transportation and processing facilities and other risks as described in reports that Forest files with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Any of these factors could cause Forest's actual results and plans to differ materially from those in the forward-looking statements.

Reserves – The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC's definitions of such terms. Forest discloses only proved reserves in its filings with the SEC. Forest's proved reserves as of December 31, 2011 contained in this presentation were estimated by Forest's internal staff of engineers and comply with rules and definitions promulgated by the SEC. Forest engaged independent reserve engineers to audit a substantial portion of its proved reserves. The reserve audit procedures followed by the independent reserve engineers on behalf of Forest are described in Forest's Annual Report on Form 10-K. For the years ended December 31, 2011, 2010, and 2009, Forest engaged DeGolyer and MacNaughton, an independent petroleum engineering firm, to perform reserve audit services with respect to its proved reserves.

In this presentation, Forest also uses internal estimates of resource ”potential" or "upside" or other descriptions of volumes of resources potentially recoverable through additional exploratory drilling or recovery techniques, which volumes the SEC's guidelines strictly prohibit Forest from including in filings with the SEC. These estimates, as well as estimates of probable and possible reserves, are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by Forest. Resource potential refers to Forest's internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. Resource potential does not constitute reserves within the meaning of the Society of Petroleum Engineer's Petroleum Resource Management System. Area wide unrisked resource potential has not been risked by Forest's management. Actual quantities that may be ultimately recovered from Forest's interests will differ substantially. Factors affecting ultimate recovery include the scope of Forest’s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors; and actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates of resource potential may change significantly as development of our resource plays provides additional data. Investors are urged to consider closely the disclosures in Forest's Annual Report on Form 10-K, Forest’s Quarterly Reports on Form 10-Q and Forest’s Current Reports on Form 8-K, copies of which are available for free from Forest by writing Forest at 707 17th Street, Suite 3600, Denver, CO 80202, Attention: Investor Relations, or by calling Investor Relations at 303-812-1400, or visiting Forest's website at www.forestoil.com.

FOREST OIL CORPORATION 2

Forest Oil SnapshotForest Oil Snapshot

12/31/11 Est. Proved Reserves of 1.9 tcfe

55% Proved Developed

R/P Ratio – 16 Years

3Q Daily Net Production of 339 MMcfe/d

225 MMcf/d of gas

8.9 Mbbl/d of oil

10.1 Mbbl/d of natural gas liquids

3Q12 Oil Volumes Organically Increased 29% over 3Q11

Liquids Account for 34% of Equivalent Volumes

Core Gas & Liquids Area

Core Oil & Liquids Areas

Panhandle

Eagle Ford Shale

East Texas/ North Louisiana

Corporate Summary


Second Half 2012 StrategySecond Half 2012 Strategy

3

Executing on Strategic Objectives

• Exploit our growing inventory of higher-return oil growth opportunities in the Panhandle Area

• Focus on go-it-alone plan in the Eagle Ford

• Adjust capital spending rate to align with projected cash flow

• De-lever balance sheet with sale of non-core assets to enhance financial strength and flexibility

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Third Quarter 2012 Highlights Third Quarter 2012 Highlights

4

• Panhandle Area continues to yield impactful results targeting shallower oil horizons- Extended boundary of Hogshooter play with successful well at Camp South

that came online at an average 24-hr max rate of 1,600 boe/d (71% oil)- Seeing consistent results with Hogshooter program posting an average 24-hr

max rate of 2,600 boe/d (68% oil)

• Eagle Ford program at development stage - Second generation wells have had an average 24-hr max production rate of

667 boe/d and 30-day average of 489 boe/d- Focusing on cost savings to maximize returns- Rig-walking system introduced that allows for multi-well pad drilling

• Executing divestiture program with ~$277 million in sales closed

• Opportunistically completed $500 million senior notes offering to increase financial flexibility

Executing on Strategic Objectives


Focused Drilling PlanFocused Drilling Plan

5

Rig Count by Area • Estimated 2012 total capital budget of $675 – $695 million (E&D capital budget of $605 – $620 million)

• Majority of 2012 E&D capital allocated to oil focused projects in Panhandle Area and Eagle Ford Areas

• Drilling of lower return liquids projects in the Panhandle Area and East Texas being deferred until a more robust commodity price environment

• Capital spending rate is aligned with projected cash flow

• Budget designed to maximize capital efficiency

Drilling Rigs Targeting Oil, Liquids & GasDrilling Rigs Targeting Oil

All Rigs are Focused on Oil and Liquids-Rich Targets

2H 2012 Drilling & Completion Allocation

41%

24%

35%

Panhandle Area East Texas Eagle Ford


Oil Transformation ContinuesOil Transformation Continues

6

Track Record of Growing Oil Production

* Pro forma for Lone Pine Resources spin-off and 2009 Permian Basin divestiture

5,331 6,412 6,812

9,065

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2009 2010 2011 2012E **

** FY 2012 production based on actuals for 1H 2012 and the mid-point of 2H 2012 guidance

( barrels per day )


Revenue & Production Revenue & Production

7

* Pro forma for Lone Pine Resources spin-off and 2009 Permian Basin divestiture

2008 – 3Q12 Revenue & Production Mix*

15%

17%

19%

21%

23%

25%

27%

29%

31%

33%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2008 2009 2010 2011 3Q12

% Revenues % of Production

( % Revenues ) ( % Oil & Liquids Production )

Oil and Liquids Make up 34% of Equivalent Volumes and are Growing


Focused Portfolio Located in the Right AreasFocused Portfolio Located in the Right Areas

8

AreaNet Acres(September 30,

2012)

PUD Locations(December 31,

2011)

PUD Reserves ***

(Net Bcfe) (December 31, 2011)

Other Identified Locations*

(December 31, 2011)

Unrisked Potential*

(Net Bcfe) (December 31, 2011)

Liquids Target

Lantern Drilling

Utilization

Land Access & Infrastructure

In Place

Panhandle Area 108,000 297 350 1,096 1,266 ��

East Texas / North Louisiana

123,000 289 305 2,755 4,198 ��

Eagle Ford Shale ** 40,000 42 57 500 675 ��

Total 271,000 628 712 4,351 6,139 ��

* Does not include estimated proved reserves or locations associated with estimated proved reserves

** Only includes the 40,000 net acres Forest plans to develop in the central fairway

*** Please see (i) the disclosure under “Risk Factors” included in Item 8.01 of our Form 8-K filed September 12, 2012 for a discussion of risks associated with our estimated proved reserves and (ii) “Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Ceiling Test Write-Down of Oil and Natural Gas Properties” in our Form 10-Q for the third quarter of 2012 for information regarding our decision to reclassify our reserves in Italy from proved to probable

Core Assets Hold Meaningful Growth Opportunities


Panhandle Area Presents Unique OpportunityPanhandle Area Presents Unique Opportunity

9

Panhandle Area Geologic Zones

Hunton

Sil

WoodfordDev

St. Louis Lime

ChesterMiss

Springer

Morrow

AtokaNovi Lime

DouglasTonkawa

Missourian WashCleveland

Lansing - Kansas CityMarmatonDes Moines

Granite Wash A-F

Penn

FST developed zones

6,40

0’

Knowledge Based Exploitation

* As of December 31, 2011. Does not include estimated proved reserves or locations associated with estimated proved reserves.

AreaGross Acres (September 30,

2012)

Net Acres(September 30,

2012)

Other Identified Locations*

Unrisked Potential*( Net Bcfe )

Frye Ranch / Camp South 50,000 23,000 631 521

Canadian SE / Buffalo Wallow 66,000 42,000 193 256

Mendota Ranch / Kelln 62,000 43,000 272 490

Total Panhandle 178,000 108,000 1,096 1,266

• Large database (700+ wells) creates unique and extensive knowledge base of stacked-pay sands that provide for multiple wells from the same location creating an acreage multiplier

• Upper oil zones complement deeper liquids-rich opportunities• Sixteen intervals successfully developed (seven targeting oil

horizons) with five additional intervals identified as prospective for horizontal development

• Results continue to demonstrate the large resource potential that exists within the numerous horizons of the Panhandle

Oil Gas


Panhandle Area Geologic IntervalsPanhandle Area Geologic Intervals

10

Acreage Multiplier (Interval Factor)

Geologic IntervalOther Identified

Locations*

Douglas 25

Tonkawa 63

Missourian Wash (3 Zones) 45

Cleveland 90

Des Moines / Marmaton 44

Britt 114

Granite Wash Series (5 Zones) 442

Atoka (2 Zones) 145

Morrow 125

St. Louis 3

Woodford TBD

Total Other Identified Locations 1,096

* As of December 31, 2011. Does not include locations associated with estimated proved reserves.

Sixteen Intervals Have Been Successfully Developed Horizontally

Higher-margin oil zones provide

increasing development opportunities

Complementary liquids-rich and natural gas

horizons


Panhandle Area Oil ZonesPanhandle Area Oil Zones

11

• Missourian Wash (Hogshooter) program averaging a 24-hour max production rate of 2,600 boe/d within the Frye Ranch Area

• Hogshooter program has produced over 1 MMboe since inception

• Productive boundary of the Hogshooter play extended into the Camp South Area

• Initial well came online at a 24-hour max production rate of 1,600 boe/d (71% oil)

• Recently completed first well targeting the Douglas horizon in the Canadian SE Area

• 715 boe/d ( 62% oil) 24-hour max production rate

• Two rig Panhandle program focusing on the Hogshooter and other oil intervals

Undisclosed

MENDOTARANCH

Cleveland / Tonkawa

Douglas

KELLN

BUFFALOWALLOW

Missourian Wash/ “Hogshooter”

CAMPSOUTH

FRYERANCH

CANADIAN SE

Growing Oil Opportunities


Panhandle Area NGL Takeaway Improving Panhandle Area NGL Takeaway Improving

12

Source: DCP Midstream

• DCP Midstream currently constructing Southern Hills Pipeline

• Southern Hills provides increased optionality with access to better outlets

• Allows Forest to move its Panhandle NGL’s away from bottleneck at Conway and take advantage of higher priced Mont Belvieu hub

• Southern Hills will have NGL takeaway capacity of more than 150,000 b/d

• Expected to be in service by July 2013

Panhandle Area

FST Acreage

Improving Dynamics


Eagle Ford Shale: Oil Window PositionEagle Ford Shale: Oil Window Position

13

• Go-it-alone plan allows Forest to hold approximately 40,000 net acres

• Continue to see consistent IP and EUR results within second-generation well group

• 24-hr max IP rate of 667 boe/d

• 30-day average rate of 489 boe/d

• Focus on optimizing operations and lowering costs

• Remaining acreage position is being evaluated for monetization opportunities

* Assumes 40,000 net acres, 80-acre spacing, and EUR of 300 mboe. Does not include proved reserves or locations associated with estimated proved reserves.

Developing Central Fairway

Gross Acres

Net Acres

Other Identified Drilling Locations*

( Gross )

Unrisked

Potential*( Net MMBbls )

100,000 91,000 500 113


Eagle Ford Shale: Completion OptimizationEagle Ford Shale: Completion Optimization

14

Completion Evolution – Yielding Consistent Results

Landing Section

Version I Version II

Initial Completion Transitional Completion Current Completion


Eagle Ford Shale Well Performance Eagle Ford Shale Well Performance

15

Development Program Seeing Consistent Results

550

667

272

489

0

100

200

300

400

500

600

700

1st Generation 2nd Generation 1st Generation 2nd Generation

24-hr Max IP Rate* 30-day Average Rate*( Boe/d )

* Includes non-restricted rate program wells only


• Rig walking system introduced for multi-well pad drilling

• Pad drilling results in improved efficiencies and other synergies

• Four-well pad can be drilled in 65 days as compared to four single-well sites requiring 84 days; lowering costs and enhancing economics

• Completed well costs reduced by 8-15% to $5.5 – $6.0 million over a single-well approach

Eagle Ford Shale: Maximizing EfficienciesEagle Ford Shale: Maximizing Efficiencies

Enhancing Well Economics


Eagle Ford Premium PricingEagle Ford Premium Pricing

17

$70

$80

$90

$100

$110

$120

$130

$140

Platts LLS NYMEX WTI

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

Standard Eagle Ford Well FST Eagle Ford Well

Gross Revenue Gross LLS Premium

2012 Platts LLS vs. NYMEX WTI* Gross 1st Month Revenue Comparison*

• Our Eagle Ford barrel is valuable

• LLS has averaged a 122% premium to NYMEX for last two months and a 118% premium for first ten months of 2012

• Premium LLS/Brent based oil contract for 2 years

* Based on a 30-day rate of 500 Bbls/d of oil with NYMEX of $90.00 per barrel and LLS average of 118% of NYMEX through October 2012


Economic Sensitivity of Eagle Ford Economic Sensitivity of Eagle Ford

18

300 Mboe EUR Type Well Economics*

* Base case: EUR of 300 Mboe and 500 Boe/d initial 30-day average rate


East Texas Liquids PlayEast Texas Liquids Play

19

Stacked-Pay Advantage

• Total acreage position of 147,000 gross acres (110,000 net) in East Texas prospective for oil and liquids-rich Cotton Valley objectives

• Legacy acreage position held by production with low cost of entry

• Recently completed horizontal oil and liquids-rich Cotton Valley well with an average 24-hour IP rate of 13 mmcfe/d (39% liquids or 845 boe/d from oil and natural gas liquids)

• Significant offset activity targeting oil and liquids-rich Cotton Valley objectives

• One-rig dedicated program

East Texas Horizontal Liquids Play

Gross Acres 147,000

Net Acres 110,000

Gross Drilling Cost ($MM) $7.0

Unrisked Gross EUR (Bcfe) 4.0 – 5.0

Current FST activity


0

200

400

600

800

1,000

1,200

2012 2013 2014 2015 2016 2017 2018 2019 2020

Fixed Debt Floating Debt

$1,000 @

7.25%

$300 @

L + 5.89%1

20

Attractive Debt Maturity ProfileAttractive Debt Maturity Profile

Debt Profile 9/30/2012

Maturity (years) 6.1

• Current long-term debt totals $1.8 billion pro forma for announced divestitures• Senior Notes offering extended the weighted average maturity of Forest debt and significantly

reduces refinancing risk related to the 2014 Senior Notes • Non-core asset divestitures expected to further increase financial flexibility and liquidity

($MM)

1 Forest has entered into a fixed-to-floating interest rate swap for $500 million

$300

$500 @

7.5%


Hedging Program SummaryHedging Program Summary

21

Oct. – Dec. 2012 2013 2014 2015

Natural gas swaps (Bbtu/d) 155 (1) 160 40 -

Weighted average price (per MMBtu) $4.63 $3.98 $4.50 -

Natural gas liquids swaps (MBbls/d) 2.0 - - -

Weighted average price (per Bbl) $45.22 - - -

Oil swaps (MBbls/d) 4.5 4.0 - -

Weighted average price (per Bbl) $97.26 $95.53 - -

Natural gas swaptions (Bbtu/d) - 40.0 40.0 -

Weighted average price (per MMBtu) - $4.02 $4.50 -

Oil swaptions (MBbls/d) - 2.0 5.0 3.0

Weighted average price (per Bbl) - $95.00 $105.80 $100.00

Opportunistically Adding to Hedge Position

(1) 50 Bbtu/d of 2012 gas swaps (with a weighted average hedged price per MMBtu of $5.30) are layered with a written put of $3.53 and a call spread of $4.00-to-$4.50. Together with the put and call spread, Forest willreceive the swap price of $5.30 on the 50 Bbtu/d except as follows: Forest will receive (i) NYMEX Henry Hub (HH) plus $1.77 when NYMEX HH is below $3.53; (ii) $5.30 plus the value of the call spread when NYMEX HH isbetween $4.00 and $4.50; and (iii) $5.80 when NYMEX HH is $4.50 or above.

In connection with entering into certain 2012 gas swaps with premium hedged prices, Forest granted oil puts to the counterparties, giving the counterparties the option to put 5 MBbls/d to Forest at $75.00 per Bbl on a monthlybasis during the period July 2012 through December 2012.


Investment HighlightsInvestment Highlights

22

• Dominant operating position in Forest’s three core areas

• Focused capital plan allows Forest to concentrate on higher return oil and liquids-rich growth opportunities

• High quality inventory of assets underpin future oil growth

• Deleveraging plan identified and being executed to enhance financial flexibility and liquidity

• Hedging program provides greater visibility for cash flows and capital spending


Forest Oil Corporation

707 Seventeenth Street, Suite 3600Denver, CO 80202

303.812.1400Website: www.forestoil.com

Investor Relations Contact: Larry Busnardo, Director – Investor RelationsPhone: 303.812.1441 | Email: [email protected]

TWITTER.COM/FORESTOIL FACEBOOK.COM/FORESTOIL LINKEDIN.COM/FORESTOIL

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