Forest Oil to Acquire the Houston Exploration Company for $1.5 Billion

Business Wire, Jan 8, 2007

* Consideration will be 23.6 million Forest shares and $740 million cash

* Forest will add an estimated 655 Bcfe of proved reserves and estimated production of 205 MMcfe/d

* Adds significant South Texas, East Texas, and Arkoma Basin assets

* Forest intends to divest Alaska entity to reduce pro forma debt

* Forest worked with Houston Ex's largest shareholder, JANA Partners LLC, with the result that JANA agreed to vote for the transaction and to support Forest Oil management

* Conference call on Monday, January 8, 2007 at 9:00 AM Eastern Time

DENVER -- Forest Oil Corporation (NYSE:FST) (Forest or the Company) today announced it has entered into a definitive agreement to acquire 100% of the outstanding stock of The Houston Exploration Company (NYSE:THX) (Houston Ex) in a stock and cash transaction totaling approximately $1.5 billion plus the assumption of net debt estimated to be $100 million at December 31, 2006.

Forest Oil worked with JANA Partners LLC (JANA), the holder of 14.7% of the outstanding shares of Houston Ex, with the result that JANA has agreed today to vote in favor of the transaction. JANA has also agreed not to propose any extraordinary transactions with Forest or to seek to influence the management or control of Forest for a year following the close of the transaction.

The transaction positions Forest as one of the top independent onshore North American exploration and production companies. The acquisition will also create a highly concentrated and complementary set of oil and natural gas assets focused in all regions of Texas. On a pro forma basis at December 31, 2005, the Company would have estimated proved reserves of approximately 2.0 trillion cubic feet of natural gas equivalents (Tcfe) of which approximately 69% would be classified as proved developed and approximately 70% would be natural gas.

H. Craig Clark, Forest's President and Chief Executive Officer, stated, "We are undertaking this significant acquisition to further strengthen our onshore North American asset base and to add drilling inventory for our proven acquire and exploit strategy. This strategy has provided us with superior risk weighted returns over the last several years. This acquisition will add in excess of 3,200 drillsites to our existing inventory. Furthermore, these assets are located in tight gas sand basins in which we have extensive experience and have recently benefited from new technological applications like horizontal drilling and fracture stimulation. We believe that our stated organic growth goals can be achieved in the foreseeable future within our existing free-cash flow model. In order to reduce our leverage and to further narrow our geographic focus, we will seek to sell our Alaskan entity in 2007."

William G. Hargett, Chairman, President and Chief Executive Officer of Houston Ex, said, "Over the past year, we have made significant progress in improving Houston Exploration's operations and creating a more focused asset portfolio. Our agreement with Forest builds on this solid foundation and represents a successful conclusion to the strategic review that our Board and management team began last year to enhance shareholder value and develop an even stronger future for our company. The transaction with Forest not only provides immediate value to Houston Exploration's shareholders, but also affords them the opportunity to participate in the upside potential created by our combination. I am confident that together with Forest, we will have the financial and operational strength needed to continue capturing the opportunities in our industry."

Barry Rosenstein, JANA's Managing Partner, stated, "Given the current environment, we believe this is a good deal and we have confidence that Forest Oil is the right company to maximize the value of these assets. Forest Oil has a strong track record of keeping F&D costs and operating expenses low, and its disciplined management team has maintained some of the most favorable cost controls in the industry during the inflationary period of the last several years. In addition, we believe there are significant synergies, particularly given Forest Oil's demonstrated expertise in analogous acquisitions and the direct overlapping acreage positions in the combined portfolio."

TRANSACTION DETAILS

Under the terms of the agreement, Houston Ex shareholders will receive total consideration equal to 0.84 shares of Forest common stock and $26.25 in cash for each share of Houston Ex common stock outstanding, or an estimated 23.6 million shares of Forest common stock and cash of $740 million. This represents $52.47 per share of consideration to be received by the Houston Ex shareholders based on the closing price of Forest shares on January 5, 2007. The exact amount of the total cash and stock consideration to be received by each Houston Ex shareholder will be determined by elections and an equalization formula. It is anticipated that the transaction will be tax free to Houston Ex and the stock portion of consideration will be received tax free by its shareholders. The cash component of the acquisition is expected to be financed with a new $1.4 billion revolving credit facility which has been underwritten by JPMorgan Chase Bank, N.A.