ipaa 2004 oil & gas investment symposium april 21, 2004 forest oil corporation

IPAA 2004 Oil & Gas Investment Symposium

April 21, 2004

Forest Oil Corporation

FOREST OIL PROFILE

Market Capitalization (as of 4/16/04) $1.4 Billion

Enterprise Value $2.3 Billion

Headquartered Denver, Colorado

Business Units Gulf Coast, Western U.S.,Alaska, Canada and International

NORTH AMERICAN OPERATIONAL PROFILE

Significant PositionGulf Coast

Significant PositionGulf Coast

ExplorationExploration

Steady ProductionSteady Production

12/31/03 Reserves (Bcfe)2003 Prod. (MMcfe/d)Natural Gas Production (%)

Alaska132

580

Canada162

5167


Western389

6168


Gulf Coast

613239

79


Consolidated

1,296409

65


2004 Exploitation2003 Acquisitions

2004 Exploration

THE “4-POINT” GAME PLAN

1. Continued reduction in costs

– Achieving higher margins is equivalent to drilling“no cost” wells

2. Acquisitions will be an integral part of our investment program

– Acquisitions will compete for capital with drilling

3. Lower exposure to frontier exploration

– Shift investment emphasis toward low-risk exploitation and development

4. Maintain strong balance sheet

– Prudent capital structure and financial flexibility are critical to act quickly and optimize investment returns

1. CONTINUED REDUCTION IN COSTS

Maintain savings in lease operating expenses achieved in 2003

Reduce general and administrative expenses by greater than 5%

Reduce interest expense through fixed/floating % and debt reduction

Capex budget adherence with improved drilling efficiencies

Create a Culture of Cost Discipline

Per Per2002 Unit 2003 Unit

Direct / Workover 131 .91 125 .84Severance / Ad Valorem 13 .09 20 .13Transportation 14 .10 9 .06

Total 158 1.10 154 1.03

Aggressive cost reduction on acquired fields– Oxy-Permian monthly LOE reduced by over 40%

Concentrated effort on high-cost non-operated fields

1. CONTINUED REDUCTION IN COSTS - LOE

$ millions

1. CONTINUED REDUCTION IN COSTS – G&A

Reduce general and administrative expenses by a

minimum of 5%

Costs have steadily decreased since August 2003

Employee costs have increased 10% due to

significant acquisitions and reduction of contractors

Target legal, insurance and occupancy costs

2002 2003 2004e2002 2003 2004e

Lease Operating Expense General and Administrative Expense

Interest/Current Tax Expense Total Cash Costs

$1.03 / Mcfe$1.03 / Mcfe$0.21 / Mcfe$0.21 / Mcfe

2002 2003 2004e2002 2003 2004e

$0.29 / Mcfe$0.29 / Mcfe

$0.35 / Mcfe$0.35 / Mcfe



$1.10 / Mcfe$1.10 / Mcfe $0.27 / Mcfe$0.27 / Mcfe


1. CONTINUED REDUCTION IN COSTS – Total Cash Costs

2% Annual Reduction

7.3

9.1

7.36.4

7.5

5.9

3.92.9

4.6 4.3

AK-2 AV-1 AW-1 AY-1 Avg AA-1 AA-2 AX-1 AX-2 Avg

2003 Program2000 – 2001 Program

(Gross $MM)Offshore South Africa

7.1

11.8

8.5

6.4

ST 72 #16 ST 72 #20 AVG ST 72 #21

2003 Program2000 – 2001 Program

South Timbalier

$C4.6$C5.4$C5.6$C6.0

$C7.6

2000 AVG 2001 AVG 2002 AVG 2003 AVG 2004 AVG

Alberta Foothills

1. CONTINUED REDUCTION IN COSTS – Drilling

2000 – 2002 Program 2003 – 2004 Program

2. ACQUISITION PROGRAM

Very active last 6 months of 2003 – 216% annual reserve replacement at $1.22 per Mcfe

Acquisition opportunities to compete for capital with drilling activities– Employ 2004 free cash flow– Capital markets will be accessed to fund large

acquisitions

Continued disposition of non-strategic assets– High cost properties– Non-performing assets, plants, and pipeline

2. ACQUISITION PROGRAM – 2003 Activity

South Bonus $ 5.8 2 5 $1.07 50,000 32,000 6.4 n/aMcAllen 12.5 5 12 1.06 15,000 13,000 2.6 $ .81Oxy-Permian 33.0 9 34 .97 26,000 - - .97Unocal 218.8 66 141 1.55 252,000 93,000 15.9 1.41New Permian 112.9 25 109 1.04 32,000 5,000 - 1.00Others 8.4 3 21 .40 - - - .27

Total $391.4 110 322 $1.22 375,000 143,000 24.9 $1.14

Total F&D cost of $1.22 on 322 Bcfe of reserves w/o allocation, $1.14 w/ allocation

Production per Mcfe/d acquired at $3,558 with R/P of 8 years Plants, pipelines and other assets included

Purchase Trans. ReservePrice Production ReservesAmount Per Net Undevel. Other Amount(mm) (MMcfe/d) (Bcfe) Mcfe/Res. Acreage Acreage Assets Per Mcfe

2. ACQUISITION PROGRAM - Oxy-Permian

Investment PV10 Reserves

($MM) ($MM) (Bcfe) $/Mcfe ROCE %

Original Acquisition 33.0 33.0 34.0 0.97 10.4

Production/cash flow (5.2) (5.2) (1.4) 3.72

Pump Out Sub-Total 27.8 27.8 32.6 0.85

Reserve adds/Revisions 0.0 9.4 0.3 -

Remaining Investment 27.8 37.2 32.9 0.84 14.0

PV increase due to increased production and decreased LOE

Potential offset drilling at Sand Dunes field

16% of original investment paid out with 97% of reserves remaining

PV 10 on same price deck is now 113% of original purchase price

2. ACQUISITION PROGRAM – Unocal

Terminated operating contracts in December 2003 Current net production ahead of plan Identified plants and pipelines for divestiture

UNOCAL ACQ. - West White Lake

0

2

4

6

8

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12

14

11/1

/2003

11/8

/2003

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003

11/2

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12/6

/2003

12/1

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/2004

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MM

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D (

Gro

ss)

0

500

1000

1500

2000

BO

PD

(G

ross)

MMCFD

MMCFED

BOPD

Waterflood

Drilling

Oxy-Permian FieldsExisting FST Fields

SAGANew Permian Fields

37 wells planned 4 waterflood installations 3D mapping to evaluate

potential development– Wolfcamp– Devonian– Delaware– Spraberry

Focus on costs and production optimization

2. ACQUISITION PROGRAM – 2004 Permian Basin Activity

2004 Drilling Inventory 6 Frio wells (100% WI) 2 Yegua wells (100% WI) 7 Wilcox wells (53-75% WI) 1 Vicksburg well (100% WI)

McAllen AcquisitionExisting FST Fields

South Bonus AcquisitionNew Permian Acquisition

Texas

Katy

South BonusBonus

Houston

Guerra

McAllen Ranch

2. ACQUISITION PROGRAM – 2004 South Texas Activity

2. ACQUISITION PROGRAM – South Texas

Took over operations immediately and acquired 3-D seismic (175 sq. miles) Drilled 11 shallow Frio wells (91% success rate) Increased gross production from 4 MMcfe/d to 19 MMcfe/d Completed first Yegua well – Beard #1 (7 MMcfe/d) and the McMillian #2 well (3 MMcfe/d) Currently drilling first Deep Wilcox well

BONUS/WEST WHARTON PRODUCTION

0

2

4

6

8

10

12

14

16

18

1/1

/03

3/1

/03

5/1

/03

7/1

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9/1

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11/1

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1/1

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3/1

/04

MC

FD

(G

ros

s)

0

200

400

600

800

1000

1200

1400

1600

1800

BO

PD

(G

ros

s)

BA 542A-1ST, A-4ST

BA 491#4

DiabloMI 666 #1

LonewolfGAA-98 #1

HI A-467A-16

HI A-469A-4ST Twin

CrossbowHI 53 #4

ChaChaHI 116

SM 6A-22

GrasshopperWC 226

HI A-416B-1ST

SidewinderSM 76 B-15ST

VegaWC 111/112

VR 14I-3 Loc

VR 102A-2, A-3

JavlinSM 105 A-5

RoadrunnerSM 115

Crystal C-1STC6, C7 SMI 149/150

PhoenixEI 273/284

BlackbirdEI 281

EI 43 #1ST

ST 211A-1ST

SpitfireST 72 #22 & #8ST

PanhandleST 288

StarfishCA 26

MackeralMP 98/99

McAllenRanch

Bonus

KatySweetLake

Twin Island

2. ACQUISITION PROGRAM – 2004 Gulf of Mexico Activity

21 Wells planned: – 17 Shelf

– 3 Deep Shelf

– 1 Sub-Salt

Attack Unocal acquisition properties Installation of two new production facilities New discoveries at VR 102, WC 112, and Eugene Island 273

3. LOWER EXPOSURE TO FRONTIER EXPLORATION

Allocate 5 - 10% of invested capital to frontier exploration compared with historical 20%

Fewer frontier areas Reinvest capital in “traditional areas” Evaluate significant acreage position for leverage,

trades or monetization (saved $45 mm in 2003)

The purpose of Exploration is…. Production!

2003 by Category

58%Acquisitions


2004 by Category

2003 by Business Unit

2004 by Business Unit

14%Exploration

28%Development

28%Exploration

72%Development

9%Alaska

57%Gulf Coast

6%Canada

27%Western

1%Int’l

11%Alaska

53%Gulf Coast

11%Canada

18%Western

7%Int’l

Frontier 14%

Frontier 9%

$300 MM

$729 MM

3. LOWER EXPOSURE TO FRONTIER EXPLORATIONProduction Growth Profile – Bcfe

Gulf Coast Western Alaska Canada Total

81 87

23 22

20 21

20 144

104

28

16

18

19

166

149

2002 2003 2004e 2002 2003 2004e 2004e2003 2004e20032002 2002 2003 2004e2002

• South Timbalier #72– 19,025’ total depth– 90 days from spud to

initial sales– Tested 2,000 Bbls/d and

1.4 MMcf/d at 5,500 psi

Deep Shelf Performance


• West Cameron #112– 15,325’ total depth– On-line in 3Q 2004– Tested 15.4 MMcf/d and

322 Bbls/d at 10,475 psi


Increased production from zero to 28 MMcfe/d in approximately 1 year Completed 3 wells (100% success rate) Identified 2 additional locations to drill in 2004

Vermilion 102 - Shelf (100% Working Interest)

VR 102

0

5

10

15

20

25

30

01-J

an-0

3

20-J

an-0

3

08-F

eb-0

3

27-F

eb-0

3

3/1

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003

4/6

/2003

4/2

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/2003

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9/5

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12/9

/2003

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/2004

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/2004

MM

CF

D (

Gro

ss

)

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500

750

1000

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1500

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PD

(G

ros

s)

MMCFD

MMCFED

BOPD


Achieved record production in 2004 Produces in excess of 20% of Canada’s net total production Acquired additional 3-D seismic in 1Q 2004 Currently completing two wells Drilling costs reduced significantly in field

Narraway Field, Canada

4. MAINTAIN STRONG BALANCE SHEET

Maintain liquidity to allow flexibility for acquisitions– Plan to generate in 2004 $200 million of excess cash

from operations and divestitures

Debt : Book capitalization target of 30-40% Manage debt portfolio to reduce refinancing risks

and minimize cost of capital Access public capital markets to fund larger

opportunities as appropriate Actively manage commodity price and interest rate

risks

INTERIM 6 MONTH “REPORT CARD”

Ahead of schedule: – Cost reductions– Acquisition initiatives– Production growth

On schedule: – Capital expenditure reallocation – Strengthening of balance sheet– Leadership/culture changes

Behind schedule on reserve growth

SUMMARY – Disciplined People, Disciplined Action

Costs are being reduced across the board Acquisition program has been successfully

“kicked-off” Capital is being allocated to traditional areas ROCE and free cash flow is being rewarded Balance sheet is strengthening Attractive valuation reflects early stage of

turnaround

CAUTIONARY STATEMENTS

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use the terms “probable” and “possible” reserves, reserve “potential” or “upside” or other descriptions of volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines strictly prohibit Forest from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by us. Investors are urged to consider closely the disclosure in Forest’s Form 10-K for fiscal year ended December 31, 2003, available from Forest at 1600 Broadway, Suite 2200, Denver, CO 80202, Attention: Investor Relations. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

This presentation may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurances that expected results will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in commodity prices for oil and gas, operating risks, regulatory changes and other risk factors as described in the Company’s 2003 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

ipaa 2004 oil & gas investment symposium april 21, 2004 forest oil corporation

Documents

continued reduction

program slide

annual reduction slide

costs total cash costs

costs loe

exploration slide

occupancy costs

costs ga