Forest Oil Sets Records in Q1

Forest Oil Corporation announced financial and operational results for the first quarter 2008. For the quarter ended March 31, 2008, the Company reported the following highlights:

-- Record adjusted net earnings of $92.7 million, up 141% over $38.4 million in 2007, on revenues of $376.5 million

-- Record adjusted EBITDA of $294.1 million, up 88% over $156.5 million in 2007

-- Record discretionary cash flow of $265.2 million, up 116% over $123.0 million in 2007

-- Announced strategic shift in the Company's capital allocation policy from one of spending within cash flow to one of spending in excess of cash flow

H. Craig Clark, President and CEO, stated, "This year is off to a good start with higher volumes and lower per-unit cash costs from a year earlier, contributing to record adjusted net earnings, adjusted EBITDA and discretionary cash flow. As we had previously announced, the first quarter of 2008 was the launching pad for higher organic production growth as spending activity was restored and even increased in some areas. This is expected to increase our organic production growth rate to about 15% starting in the second quarter of 2008. Additional capital is being allocated to our Focus Areas where we have a successful track record and extensive inventory of unbooked potential drilling locations and to our new Frontier Program, specifically the shale programs and the Greater Vermejo/Haley Area. Our recent Ark-La-Tex acquisition further adds to this inventory."

FIRST QUARTER 2008 RESULTS

For the three months ended March 31, 2008, Forest reported a net loss of $4.7 million or $(.05) per basic share. This earnings amount decreased 169% compared to Forest's net earnings of $6.9 million or $.11 per basic share in the corresponding period in 2007. The net loss for the three months ended March 31, 2008 was affected by the following item:

-- The non-cash effect of net unrealized losses relating to recording derivative instruments and investments at fair value and to foreign currency exchange loss, totaling $152.1 million ($97.4 million net of tax)

Without the effect of this item, Forest's adjusted net earnings were a record $92.7 million or $1.06 per basic share. This is an increase of 141% over Forest's adjusted net earnings of $38.4 million or $.62 per basic share in the corresponding 2007 period.

Forest's adjusted EBITDA increased 88% for the three months ended March 31, 2008 to a record $294.1 million compared to adjusted EBITDA of $156.5 million in the corresponding 2007 period. Forest's discretionary cash flow increased 116% for the three months ended March 31, 2008 to a record $265.2 million compared to discretionary cash flow of $123.0 million in the corresponding 2007 period.

The significant increases in adjusted net earnings, adjusted EBITDA and discretionary cash flow were due to higher sales volumes resulting from acquisition and drilling activities, higher per-unit price realizations and lower per-unit cash costs.

Sales Volumes

For the three months ended March 31, 2008, Forest's average oil and gas net sales volumes were 478 MMcfe/d, representing a 58% increase over Forest's 302 MMcfe/d in the corresponding 2007 period. The volumes were higher in 2008 due to Forest's acquisition and drilling activities.

Product Price Differentials to NYMEX

Forest's price differential to NYMEX for natural gas decreased 3% for the three months ended March 31, 2008 to $.78 per Mcf compared to $.80 per Mcf in the corresponding 2007 period amid higher NYMEX prices. Realized prices were $7.25 per Mcf and $5.96 per Mcf for the three months ended March 31, 2008 and 2007, respectively.

Forest's price differentials to NYMEX for oil and condensate and for natural gas liquids were $4.23 per Bbl and $48.58 per Bbl, respectively, for the three months ended March 31, 2008 compared to $4.51 per Bbl and $29.10 per Bbl, respectively, in the corresponding 2007 period. Realized prices for oil and condensate and for natural gas liquids were $93.73 per Bbl and $49.38 per Bbl (approximately 50% of NYMEX for natural gas liquids), respectively, for the three months ended March 31, 2008 compared to $53.72 per Bbl and $29.13 per Bbl (approximately 50% of NYMEX for natural gas liquids), respectively, in the corresponding 2007 period.

Total Cash Costs

Total cash costs per-unit decreased 22% for the three months ended March 31, 2008 to $2.43 per Mcfe compared to $3.11 per Mcfe in the corresponding 2007 period. The reduction is a result of Forest's improved asset mix and synergies resulting from acquisitions and divestitures completed in 2007.

Forest's oil and gas production expense per-unit decreased 19% for the three months ended March 31, 2008 to $1.44 per Mcfe from $1.77 per Mcfe in the corresponding 2007 period. The improved results were due to the addition of the gas oriented Houston Exploration assets and the divestiture of the high operating cost Alaska assets. The improvements were partially offset by higher production taxes as a result of higher commodity prices.

Forest's per-unit general and administrative expense, excluding stock-based compensation expense, decreased 15% for the three months ended March 31, 2008 to $.35 per Mcfe compared to $.41 per Mcfe in the corresponding 2007 period. The decrease reflects synergies realized through the acquisition of Houston Exploration partially offset by severance costs related to the divestiture of Forest's Alaska assets.

Forest's interest expense increased 14% for the three months ended March 31, 2008 to $27.9 million compared to $24.4 million in the corresponding 2007 period. The increase resulted from higher average debt levels offset somewhat by lower average interest rates. Debt levels increased to fund the Houston Exploration acquisition.

Depreciation and Depletion Expense

Forest's per-unit depreciation and depletion expense increased 20% for the three months ended March 31, 2008 to $2.66 per Mcfe compared to $2.22 per Mcfe in the corresponding 2007 period. The increase of $.44 per Mcfe was primarily due to the Houston Exploration acquisition.

Exploration and Development Activities

Forest invested $242.7 million in exploration and development activities (excluding capitalized interest and equity compensation) for the three months ended March 31, 2008.

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