Forest Creates Alaskan Subsidiary

Forest Oil Corporation on Thursday said that it has transferred the majority of its Alaska Business Unit as of October 31, 2006, to a new subsidiary, Forest Alaska Operating LLC (Alaska). Alaska will hold oil and gas interests of Forest in the Cook Inlet region of Alaska and will enter into a services agreement with Forest for the operation of those assets.

Alaska initially has approximately 32 MMBoe of estimated proved reserves, and production of approximately 6,000 Boe/d, as of September 30, 2006. The estimated proved reserves are based on a recently received updated reserve report prepared by Forest's independent reserve engineers, DeGolyer & MacNaughton ("D&M"). D&M's report, which was prepared as of June 30, 2006, states that Forest's estimated proved reserves in Alaska increased by approximately 12 MMBoe since Forest's 2005 year-end reserve report due primarily to a field study and development plan for the McArthur River Field. Alaska also owns 186,000 net acres of developed and undeveloped land and interests in production and drilling infrastructure, primarily offshore Cook Inlet. The activities of Alaska are intended to focus on the exploitation of its assets and participation in the proposed development program in the McArthur River Field over the next several years.

Alaska intends to attempt to place $375 million of term loan financing to fund a $350 million distribution to Forest and provide initial working capital for its operations. Forest will indirectly own 100% of the interests in Alaska, and the term loans will be secured by Alaska's assets and will be non-recourse to Forest. Forest intends to use the proceeds from the distribution to reduce its outstanding borrowings under its U.S. credit facility. Credit Suisse and JP Morgan will act as co-lead arrangers and joint bookrunners in the placement of the term loans. H. Craig Clark, President and CEO, stated, "This transaction allows us to segregate the financial requirements of a long-lived oil asset in the middle years of its productive life from the financial requirements of our other North American assets, which are in various stages of exploitation and necessarily more capital intensive. We are excited about the prospects for both the Alaska assets and the remaining core assets within Forest and think it makes sense to segregate and finance them separately."