Forest Oil Reports Third Quarter Results

Forest Oil Corporation (NYSE: FST) announced financial and operational results for the third quarter of 2006. The Company reported the following highlights:

--Forest's net sales volumes were 313 MMcfe/d, an increase of 17% compared to 2005 Remainco

--Discretionary cash flow was $112 million, an increase of 1% compared to 2005 Remainco

--Adjusted EBITDA was $133 million, an increase of 9% compared to 2005 Remainco

H. Craig Clark, President and CEO, stated, "Forest has continued to increase year-over-year production in its major properties, and keep costs flat in a rising price environment. We have seen great success in our cornerstone "Big Three" properties, with combined production up to a record 93 MMcfe/d for the third quarter, increasing 11% sequentially, along with plays outside of the "Big Three" such as Katy and Ansell. As we continue to exploit these plays we also maintain our focus on cost control. Further, updated reserve estimates indicate solid results in our investments made in 2006. We are experiencing similar all-in FD&A costs to 2005 which we believe is better than industry trends."


The following discussion compares Forest's third quarter results in 2006 to 2005 pro forma adjusted for the spin-off ("Spin-off") of its Gulf of Mexico operations and subsequent merger of those operations with a subsidiary of Mariner Energy, Inc. on March 2, 2006 and includes non-GAAP measures. We refer to the portion of Forest not included in the Spin-off as "Remainco" and the Spin-off properties as "Spinco." When we refer to "Total Company" or "Forest" we mean Remainco or, for the time prior to the Spin-off, Remainco and Spinco added together.

For the quarter ended September 30, 2006, Forest had net earnings of $76.9 million or $1.24 per basic share. This amount is an increase of 463% compared to Remainco's pro forma net earnings of $13.7 million or $.22 per basic share in the corresponding period in 2005. The net earnings in the third quarter of 2006 were affected by net unrealized gains on derivative instruments and foreign currency exchange effects of $77.1 million ($47.2 million net of tax). Without the effect of the net unrealized gains, Forest's net earnings would have been $29.7 million or $.48 per basic share. This amount compares to Remainco's pro forma net earnings of $35.3 million or $.57 per basic share in the corresponding 2005 period computed on a comparable basis excluding unrealized losses on derivative instruments of $34.9 million ($21.6 million net of tax). Adjusted earnings in the third quarter of 2006 decreased against the same period in the prior year primarily as a result of lower natural gas prices and higher production, depreciation and depletion and interest expense.

For the three months ended September 30, 2006, Forest's oil and gas sales volumes increased to 313 MMcfe/d or 17% over Remainco's 267 MMcfe/d in the corresponding period in 2005.


Western Business Unit

Buffalo Wallow Area, Texas Panhandle (66-100% WI) - During the third quarter a total of 15 wells were drilled at a 100% success rate with current net production increasing to a record 39 MMcfe/d. Our second best well to date was drilled which had initial sales of 7.3 MMcfe/d. During the quarter an additional 8,300 gross acres were leased bringing our total gross acreage in this area to 45,400 acres. Additional locations have already been identified on a portion of these new lands.

Greater Vermejo/Haley Area, West Texas (42-100% WI) - One re-entry was added in the third quarter at a rate of 2.5 MMcfe/d and one additional re-entry is planned by year-end. Forest added 1,200 gross acres in the third quarter bringing our total to approximately 45,200 gross acres. A 153 square mile 3-D seismic survey has been initiated and will be completed in mid-2007. In addition, Forest is in the process of purchasing an additional 480 square miles of 3-D seismic.

Central Midland Basin, West Texas (50-100% WI) - A total of 11 wells were completed at a 100% success rate in the third quarter. Initial rates ranged from 28 to 189 Bbls/d on the shallow oil program.

Southern Business Unit

Katy Field, Waller, Harris and Ft. Bend Counties, Texas (54% WI) - Forest took over complete operatorship on August 1, 2006 increasing gross production from 13 MMcfe/d in the first half of 2006 to 17 MMcfe/d currently. Since taking over operations, Forest has conducted pressure surveys on 71 shut-in wells and cased hole logging operations on 17 wells to identify additional reactivation, workover and recompletion candidates. Test compressors were also employed to evaluate compression needs for late 2006 and early 2007. Artificial lift optimization has been done on 17 wells. A six well shallow Frio drilling program is planned for the fourth quarter along with two deeper Wilcox tests. Our working interest was increased from 52% to 54% as a result of a property trade in the third quarter.

East Texas Cotton Valley Area, Rusk, Panola and Harrison Counties, Texas (52 - 100% WI) - A total of 10 wells were drilled in the third quarter at a 100% success rate with net production increasing in this area to a record 18 MMcfe/d. Initial rates ranged from .8 to 2.3 MMcfe/d. As a result of new processing and gathering contracts, new facilities and pipelines are expected to be completed by year-end which will allow for lower line pressure and higher natural gas liquids recoveries.

South Louisiana (22 - 100% WI) - A development well in the West White Lake Field came on line at 5.1 MMcfe/d while a recompletion program at Sweet Lake yielded 2.7 MMcfe/d during the third quarter. Gas exploration drilling has resumed on our Sabine prospect as well as additional 3-D seismic acquisitions.

Barnett Shale, Hill, Erath and Hamilton Counties, Texas (50 - 100% WI) - The first horizontal drilling well was commenced in the third quarter. Barnett Shale pay was logged in the vertical pilot hole before being plugged back for horizontal operations. An additional well is planned by year-end.

Canada Business Unit

Wild River Area, Alberta, Canada (25 - 100% WI) - Activity resumed in the third quarter following spring road bans. A total of 9 wells were drilled at a 100% success rate with net production increasing in the area to a record 36 MMcfe/d. During the quarter, the Wild River 5-30 well tested 8 MMcfe/d and the Wild River 12-35 tested 6 MMcfe/d. These are the best wells drilled to date in the area and benefited from recent completion optimization.

Sundance/Ansell Area, Alberta, Canada (50% WI) - Two additional exploration wells were successfully completed. The Ansell 8-27 tested 7.2 MMcfe/d and the Ansell 2-3 tested 1.6 MMcfe/d. The Ansell 8-27 is the best well to date in this program with offset locations identified. Two additional wells are planned by year-end. Our gross acreage position in this area is 23,000 acres.

Hinton Area, Alberta Foothills, Canada (50% WI) - Two exploratory wells have been drilled with the first coming on-stream at 2.0 MMcfe/d while the second is waiting on completion. Additional drilling will commence in early 2007. Along with our partners, our gross acreage position has increased to 9,000 acres.

Waterton Area, Alberta Foothills, Canada (12% WI) - Two deep exploration wells are currently being drilled on the newly formed Waterton West Carbondale Unit.

Copton/Palliser/Narraway Areas, Alberta Foothills, Canada (50% WI) - The West Narraway pipeline work will be started in the fourth quarter following freeze-up to tie in the Narraway 13-2 (4.8 MMcfe/d) and the Narraway 12-34 (1.0 MMcfe/d). Winter drilling will commence in the fourth quarter.