Forest Oil Announces Record Operational and Financial Results in 2007 Including Highly Successful Capital Allocation Program

Business Wire, Feb 22, 2008

Estimated Proved Reserves Increased to a Record 2,119 Bcfe in 2007

Reserve Replacement Ratio Was 703% from All Capital Activities with Finding, Development, and Acquisition Costs of $2.27 Per Mcfe

Organic Reserve Replacement Ratio Was 236%, with Finding and Development Costs of $2.21 Per Mcfe ($1.99 Per Mcfe Excluding Revisions)

Net Sales Volumes Increased 50% to 149 Bcfe (Excluding Alaska)

All-in Cash Costs Decreased on a Per-Unit Basis by 17% in the Fourth Quarter 2007 to $2.32 Per Mcfe from $2.78 Per Mcfe in the Fourth Quarter of 2006

DENVER -- Forest Oil Corporation (NYSE: FST) (Forest or the Company) today announced financial and operational results for the fourth quarter and full year 2007. The Company reported the following full year 2007 highlights:

* Record estimated proved reserves of 2,119 Bcfe replacing over 700% of production with finding, development, and acquisition costs of $2.27 per Mcfe

* Record adjusted earnings of $223.1 million, up 102% over 2006, on revenues of almost $1.1 billion

* Record adjusted EBITDA of $871.4 million, up 69% over $516.5 million in 2006

* Record adjusted discretionary cash flow of $742.0 million, up 71% over $434.6 million in 2006

* Strategic repositioning of the asset portfolio with the purchase of The Houston Exploration Company (Houston Exploration) and the sale of the Alaska assets

* Successful capital re-allocation on properties recently acquired from Houston Exploration

H. Craig Clark, President and CEO, stated, "The Company had an excellent year with attractive results. The successful integration of Houston Exploration and sale of the Alaska assets significantly narrowed our operational focus and improved both the quality of our asset base and the inventory of undrilled locations to drive organic growth. Despite the significant transition required to effect these extensive changes and improvements in our business, we were able to maintain excellent organic and all-in reserve replacement costs while keeping our proved undeveloped reserve percentage flat. We also were able to drive total cash costs down significantly to $2.32 in the fourth quarter. We have delivered efficient investment, improved margin extraction, and conservative capital spending, all as promised.

"When we bought Houston Exploration, we dedicated ourselves to rationalize capital on the acquired assets and prudently invest irrespective of the short-term impact on the acquired production. Our investment results were exceptional and proved that the Houston Exploration asset base is capable of generating good rates of returns and F&D costs. Our capital rationalization strategy employed on the Houston Exploration assets in 2007, combined with the existing capital deployment strategy on the legacy Forest assets, yielded organic F&D costs of $2.21 per Mcfe. Houston Exploration posted standalone onshore organic F&D of $3.78 per Mcfe in 2006.

"The successful capital rationalization strategy required us to take a step back from the drilling program on the acquired assets in South Texas and the Uinta Basin in the fourth quarter of 2007. This allowed us to perform a comprehensive review of the properties and has enabled us to commit to a 5 rig drilling program in South Texas and resume operations in the Uinta Basin, starting in the first quarter of 2008. Due to the reduction in capital spending and natural declines of the South Texas fields, production for Forest will be down sequentially in the first quarter of 2008. After this initial decline, we believe that we will be able to grow production organically at an annual rate of approximately 10% in the last three quarters of 2008."

ESTIMATED PROVED RESERVES

Forest reported year end estimated proved reserves of approximately 2,119 Bcfe, up 66% compared to 1,274 Bcfe, pro forma for the sale of the Alaska assets, at December 31, 2006. The estimated proved reserves, which are 70% proved developed, consist of approximately 73% natural gas. The pre-tax present value of estimated proved reserves at year end, based on constant prices and costs and discounted at 10%, totaled $6.0 billion, up 82% compared to $3.3 billion at December 31, 2006. The valuation was based on year end natural gas prices of $6.80 per MMbtu and oil prices of $95.98 per barrel NYMEX, compared to natural gas prices of $5.64 per MMbtu and oil prices of $61.05 per barrel NYMEX at December 31, 2006. Forest's estimated proved reserves were audited by an independent third-party engineering firm.

The following table reflects the 2007 activity related to Forest's estimated proved reserve amounts, and includes calculations of finding and development costs and reserve replacement ratios utilizing net sales volumes and capital expenditure amounts:

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CAPITAL ACTIVITIES

For the year ended December 31, 2007, Forest invested $1.598 billion on acquisitions, and $777 million in exploration and development activities (not including $5 million of capital spent on the divested Alaska assets). Other costs included as capital expenditures were a non-cash gross up of $559 million relating to the tax step-up in the booked fair value of the assets acquired in the Houston Exploration acquisition, $38 million associated with asset retirement obligations, and $21 million of capitalized interest and equity compensation. The following table summarizes capital expenditures incurred for the year ended December 31, 2007 for exploration and development, and acquisition activities (in millions):