Forest Oil Enjoys Record Second Quarter

Forest Oil Corporation (NYSE:FST) announced financial and operational results for the second quarter and first six months of 2004 and provided updates for Forest's operations and its 2004 guidance.

SECOND QUARTER 2004 RESULTS

For the second quarter of 2004, Forest's sales volumes increased to 446 MMcfe/d, an increase of 11% compared to the second quarter of 2003 and 4% compared to the first quarter of 2004, led by strong results from the Gulf Coast drilling program. In addition, the Company's EBITDA increased 38% to a record $147 million in the second quarter of 2004 compared to the second quarter of 2003 due to increased production, higher netbacks and reduced G&A expense. Netbacks (oil and gas sales revenue less production expense) of approximately $153 million ($3.78 per Mcfe) for the second quarter of 2004 were approximately $34 million ($.51 per Mcfe) greater than those reported in the second quarter of 2003 as a result of increases in both production and product prices. General and administrative expense in the second quarter of 2004 was $8.2 million, a 16% decrease compared to the second quarter of 2003. Forest's second quarter 2004 capital expenditures for exploration and development were $92 million which was $55 million less than EBITDA for the quarter.

For the quarter ended June 30, 2004, Forest reported net earnings from continuing operations of approximately $28 million or $.51 per basic share, compared to net earnings from continuing operations of approximately $24 million or $.49 per share in the corresponding 2003 period. Higher earnings for the second quarter of 2004 compared to 2003 were due primarily to increased production and netbacks offset partially by higher depletion expense. During the second quarter of 2004, cash flow from operations, exclusive of working capital items, was $131 million.

Craig Clark, Forest's President and CEO, stated: "The second quarter was a solid quarter for us and was important as it began to validate our business model which focuses on a balanced drilling program and exploitation efforts. We are seeing good quality drilling opportunities being generated from our core properties and acquisition activities. Our execution associated with our operations and acquisitions is gaining momentum. The Wiser acquisition, from which we will begin to see results in the third quarter, should allow us to continue to build on that momentum. The Company generated about $100 million of cash flow in excess of capital expenditures in the first six months of 2004 which we used to fund about 30% of the cost of the Wiser assets. The mandated underspending of cash flow by the business units enabled us to execute this acquisition quickly and without a significant increase to our leverage."

Certain Comparative Financial and Operating Data

The following table sets forth certain of Forest's financial and operating data for the three and six months ended June 30, 2004 and 2003:

                                       Three Months      Six Months
                                          Ended            Ended
                                        June 30,          June 30,
                                    ----------------- ----------------
                                       2004    2003     2004    2003
                                     -------  ------- -------  -------
Daily natural gas sales volumes
 (MMCF):
   United States                       241.5   217.8    237.6   220.9
   Canada                               35.8    32.4     35.2    32.3
                                     -------  -------  ------  -------
   Total                               277.3   250.2    272.8   253.2

Daily liquids sales volumes (MBBLS):
   United States                        25.5    22.0     25.0    21.0
   Canada                                2.6     2.8      2.5     2.9
                                     -------  -------  ------  -------
   Total                                28.1    24.8     27.5    23.9

Equivalent daily sales volumes
 (MMCFE):
   United States                       394.5   349.7    387.6   347.1
   Canada                               51.4    49.5     50.2    49.8
   Total                               445.9   399.2    437.8   396.9
                                     -------  -------  ------  -------
Total equivalent sales volumes
 (BCFE)                                 40.6    36.3     79.7    71.8

Oil and gas sales revenue
 (millions)                         $  207.9   153.6    401.7   321.8

Average gas sales price ($/MCF)     $   5.20    4.39     5.14    4.66

Average liquids sales price ($/BBL) $  30.00   23.76    29.28   24.90

Cash costs (per MCFE):
     Oil and gas production         $   1.34     .98     1.43     .98

     General and administrative
      expense                       $    .20     .27      .18     .25

     Interest expense               $    .32     .34      .33     .35

     Current income tax expense     $     --     .01      .01     .01
Oil and gas production expense increased in the quarter and six months ended June 30, 2004 compared to the corresponding periods of 2003. The components of oil and gas production expense were as follows:
            Three Months Ended June 30,     Six Months Ended June 30,
          -----------------------------    ---------------------------
                   Per             Per             Per           Per
           2004    Mcfe    2003    Mcfe    2004    Mcfe   2003   Mcfe
          ------  ------  ------  -------  -----  ------  ----  ------
                     (In Thousands, except per unit amounts)
Direct
operating
 expense  $39,511   0.97   27,634   0.77   82,159   1.03  54,914  0.76
Workovers   4,807   0.11     ----   ----   11,107   0.14     957  0.01
Product
trans-
portation   3,458   0.09    2,648   0.07    7,103   0.09   5,132  0.07
Production
and ad
valorem
 tax        6,915   0.17    5,230   0.14   13,651   0.17   9,709  0.14
           ------  -----    -----   ----   ------   ----   -----  ----
Total
oil and
gas
production
 expense $ 54,691   1.34   35,512   0.98  114,020   1.43  70,712  0.98
           ======  =====   ======   ====  =======   ====  ======  ====


Lease operating expense in the second quarter of 2004 decreased, both on an absolute and a per-unit basis, compared to the first quarter of 2004. The decrease was due to a 24% decrease in workover expense and a 15% decrease in direct costs primarily in the Gulf Coast Region. These decreases reflect improved field operations of certain assets purchased in the fourth quarter of 2003.

General and administrative expense decreased 16% to $8 million and 21% to $15 million for the quarter and six months ended June 30, 2004, respectively, compared to $10 million and $18 million for the corresponding periods in 2003. The decreases resulted primarily from cost reduction measures in corporate areas.

Depreciation and depletion expense increased to $83 million and $163 million for the quarter and six months ended June 30, 2004 from $51 million and $100 million for the corresponding periods in 2003. On a per-unit basis, the depletion rates were $2.04 and $2.03 per Mcfe for the quarter and six months ended June 30, 2004 compared to $1.39 and $1.36 per Mcfe in the corresponding prior year periods. The increases in depletion expense and in the per-unit depletion rates in 2004 compared to 2003 were due primarily to downward revisions in estimated proved reserves in the fourth quarter of 2003.

The consolidated balance sheet at June 30, 2004 includes The Wiser Oil Company acquisition. Pursuant to purchase accounting rules, Forest recorded a deferred tax liability of approximately $54 million and an asset for goodwill of approximately $64 million. Forest's net debt (principal amount of long-term debt less cash on hand) at June 30, 2004 increased to approximately $1.0 billion from $830 million at March 31, 2004. The increase is due primarily to cash paid and debt assumed in the acquisition of Wiser, offset by cash flow in excess of capital expenditures for the quarter, and proceeds from an equity offering in June. The acquisition of The Wiser Oil Company was completed via a tender offer in late June 2004.

Hedging

Forest currently has hedges in place for the remainder of 2004 and 2005 covering the aggregate average daily volumes and weighted average prices shown below.

                                                     Remainder
                                                        of
                                                       2004      2005
                                                    ---------   ------
Natural gas swaps:
-----------------------------
Contract volumes (BBtu/d)                               147.4   100.0
Weighted average price (per MMBtu)                    $  5.18    5.04

Natural gas collars:
-----------------------------
Contract volumes (BBtu/d)                                23.3     6.2
Weighted average ceiling price (per MMBtu)            $  6.31    7.11
Weighted average floor price (per MMBtu)              $  5.06    5.30

Natural gas three-way collars:
-----------------------------
Contract volumes (BBtu/d)                                18.4       -
Weighted average ceiling price (per MMBtu)            $  5.91       -
Weighted average floor price (per MMBtu)              $  4.75       -
Three-way weighted average floor price (per MMBtu)    $  3.50       -

Oil swaps:
-----------------------------
Contract volumes (MBbls/d)                               13.4     6.5
Weighted average price (per Bbl)                      $ 28.82   30.93

Oil calls:
-----------------------------
Contract volumes (MBbls/d)                                1.0       -
Weighted average price (per Bbl)                      $ 32.13       -

Oil collars:
-----------------------------
Contract volumes (MBbls/d)                                  -      .2
Weighted average ceiling price (per Bbl)              $     -   35.30
Weighted average floor price (per Bbl)                $     -   32.00

Oil three-way collars:
-----------------------------
Contract volumes (MBbls/d)                                  -     1.5
Weighted average ceiling price (per Bbl)              $     -   32.00
Weighted average floor price (per Bbl)                $     -   28.00
Three-way weighted average floor price (per Bbl)      $     -   24.00


OPERATIONAL PROJECT UPDATE West Cameron Block 112 (55% Working Interest) - As previously announced, the #1 deep shelf discovery well came on line as scheduled in late June 2004 and is currently flowing at a rate of 33 MMcfe/d. Additional seismic evaluation is being performed on this block.

West Cameron Block 110 (37% Working Interest) - The #9 recompletion performed in June 2004 tested 9 MMcfe/d. The #15 well was drilled directionally and logged 230 feet of gas pay in 6 sands. The #15 well is expected to be on line in August of 2004.

South Marsh Island Block 149 (50% Working Interest) - During the second quarter of 2004, three wells were drilled and completed. Total field gross production increased from 22 MMcfe/d to 50 MMcfe/d in July as a result of this drilling.

High Island Block A-551 # C-6 (100% Working Interest) - The C-6 well was directionally drilled to a depth of 10,356 ft and found 65 ft of pay in 3 sands. The well was completed in May 2004 and placed on line in June at a rate of 14.2 MMcfe/d.

Sabine Acreage (45% Working Interest) - The first Yegua exploratory test on the Sabine acreage acquired in June 2004, the Olympia 25-1 in Calcasieu Parish, Louisiana, reached total depth in July and was tested at a rate of 5.5 MMcfe/d. Additional drilling is planned on this 157,000 acre block.

South Bonus Area, South Texas (69% - 100% Working Interest) - During the second quarter of 2004, 3 shallow Frio wells were completed out of 4 wells drilled. Two deep Wilcox wells, the Wilbeck #1 and Jones #1, were discoveries and are currently being completed. Also during the second quarter of 2004, gross field production reached a record peak of 20 MMcfe/d. Additional Wilcox wells are planned in 2004.

Jonah Field, SW Wyoming (50-100% Working Interest) - Two additional wells were drilled and completed at a combined gross rate of 6.5 MMcfe/d.

Alberta Foothills - Waterton Area (20-30% Working Interest) - The Waterton 14-21 discovery came on line in late second quarter of 2004 at a gross rate of 15 MMcfe/d after additional zones were added to this new completion.

Alberta Foothills - Wild River Area (24-50% Working Interest) -The Wild River 10-2 well was completed at 2.5 MMcfe/d, the 11-3 well is currently being completed and the 6-36 well is currently drilling. Additional drilling is planned in 2004.

2004 GUIDANCE

Prices for Forest's products are determined primarily by prevailing market conditions. Market conditions for these products are influenced by regional and worldwide economic and political conditions, consumer product demand, weather and other substantially variable factors. These factors are beyond Forest's control and are difficult to predict. In addition, Forest's oil and gas prices may vary considerably due to differences between regional markets, transportation availability and demand for different grades of products. Consequently, Forest's financial results and resources are highly influenced by this price volatility.

Estimates for Forest's future production are based on assumptions of capital expenditure levels and the assumption that market demand and prices for oil and gas will continue at levels that allow for economic production of these products.

The production, transportation and marketing of liquids and gas are complex processes which are subject to disruption due to transportation and processing availability, mechanical failure, human error, meteorological events including, but not limited to, hurricanes and earthquakes, and numerous other factors. Our estimates are based on certain other assumptions, such as well performance, which may vary significantly from those assumed. Therefore, we can give no assurance that our future production will be as estimated.

Given these general limitations and those discussed below, the following is a summary of Forest's forecast for 2004:

Daily Production. We expect that our daily production will be in the range of 470 to 500 MMcfe/d for the full year of 2004.

Liquids Production. We expect that our 2004 production of oil and natural gas liquids will be between 28,500 and 29,500 Bbls/d.

Gas Production. We expect that our 2004 natural gas production will be between 295 and 325 MMcf/d.

Production Expense. Our oil and gas production expense (which includes ad valorem taxes, production taxes and product transportation) varies in response to several factors. Among the most significant of these factors are additions to or deletions from our property base, changes in production taxes, general changes in the prices of services and materials that are used in the operation of our properties and the amount of repair and workover activity required. We expect that our 2004 production expense will be between $225 million and $245 million.

General and Administrative Expense (G&A). We expect that due to lower than anticipated general and administrative costs in the first six months our 2004 G&A expense will be between $30 million and $34 million.

Depreciation, Depletion and Amortization (DD&A). We expect that our DD&A rate will be between $ 2.00 and $2.10 per Mcfe during 2004.

Capital Expenditures. We expect that due to the acquisition of The Wiser Oil Company capital expenditures for exploration and development will be between $310 million and $330 million in 2004. Some of the factors impacting the level of capital expenditures in 2004 include crude oil and natural gas prices, the volatility in these prices and the cost and availability of oil field services.

NON-GAAP FINANCIAL MEASURES

In addition to reporting earnings from continuing operations as defined under U.S. Generally Accepted Accounting Principles (GAAP), Forest also presents EBITDA, which consists of earnings from continuing operations plus interest expense, income tax expense, depreciation, depletion and amortization expense, impairment and accretion of asset retirement obligation. Management uses this measure to assess the Company's ability to generate cash to fund exploration and development activities and to service debt. Management interprets trends in this measure in a similar manner as trends in cash flow and liquidity. EBITDA should not be considered as an alternative to earnings from continuing operations as defined by GAAP. The following is a reconciliation of earnings from continuing operations to EBITDA:

                                  Three Months        Six Months
                                      Ended              Ended
                                    June 30,           June 30,
                                ----------------- -------------------
                                 2004     2003      2004      2003
                                -------- -------- ---------- --------
Earnings from continuing
 operations                   $  28,130   23,537     47,767   57,793
Interest expense                 13,084   12,490     26,031   25,450
Income tax expense               16,220   15,689     28,721   37,487
Depreciation, depletion and
 amortization expense and
 impairment                      85,164   51,346    164,792   99,637
Accretion of asset retirement
 obligation                       4,153    3,147      8,428    6,267
                                -------- -------- ---------- --------
  EBITDA                      $ 146,751  106,209    275,739  226,634
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