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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2010Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                to


Commission File Number 1-13515

FOREST OIL CORPORATION(Exact name of registrant as specified in its charter)

New York(State or other jurisdiction of
incorporation or organization)

25-0484900(I.R.S. Employer
Identification No.)


707 17th Street, Suite 3600 Denver, Colorado 80202(Address of principal executive offices) (Zip Code)

Registrant's
telephone number, including area code:(303) 812-1400

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. ý Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). ý Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). o Yes    ý No

As of April 30, 2010 there were 112,447,491 shares of the registrant's common stock, par value $.10 per share, outstanding.



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Table of Contents



FOREST OIL CORPORATION
INDEX TO FORM 10-Q
March 31, 2010



Part IFINANCIAL INFORMATION


1Item 1Financial Statements


1Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009


1Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and
2009


2Condensed Consolidated Statement of Shareholders' Equity for the Three Months Ended March 31, 2010


3Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and
2009


4Notes to Condensed Consolidated Financial Statements


5Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations


27Item 3Quantitative and Qualitative Disclosures About Market Risk


38Item 4Controls and Procedures


41Part IIOTHER INFORMATION


42Item 2Unregistered Sales of Equity Securities and Use of Proceeds


42Item 6Exhibits


43Signatures


44


i

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Table of Contents

PART IFINANCIAL INFORMATION



Item 1.    FINANCIAL STATEMENTS



FOREST OIL CORPORATION        CONDENSED CONSOLIDATED BALANCE SHEETS        (Unaudited)        (In Thousands, Except Share Data)

March 31,
2010

December 31,
2009ASSETSCurrent assets:Cash and cash equivalents

$
213,778


467,221Accounts receivable


132,790


126,354Derivative instruments


117,790


35,643Deferred income taxes





7,108Inventory


52,390


52,211Other current assets


44,782


41,455Total current assets


561,530


729,992Property and equipment, at cost:Oil and gas properties, full cost method of accounting:Proved, net of accumulated depletion of $7,596,330 and $7,511,661


1,491,776


1,316,712Unproved


886,219


828,645Net oil and gas properties


2,377,995


2,145,357Other property and equipment, net of accumulated depreciation and amortization of $58,960 and $54,810


111,538


113,850Net property and equipment


2,489,533


2,259,207Deferred income taxes


372,058


393,061Goodwill


256,478


255,908Derivative instruments





556Other assets


44,497


45,966$
3,724,096


3,684,690LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities

$
322,796


284,302Accrued interest


34,776


25,755Derivative instruments


35,112


41,358Deferred income taxes


26,753


Current portion of long-term debt





156,678Asset retirement obligations


3,006


4,853Other current liabilities


18,841


22,074Total current liabilities


441,284


535,020Long-term debt


1,866,727


1,865,836Asset retirement obligations


82,247


88,450Derivative instruments


5,454


826Deferred income taxes


52,626


46,884Other liabilities


68,055


68,520Total liabilities


2,516,393


2,605,536Shareholders' equity:Preferred stock, none issued and outstanding





Common stock, 112,468,080 and 112,337,315 shares issued and outstanding


11,247


11,234Capital surplus


2,662,526


2,652,689Accumulated deficit


(1,543,264
)

(1,652,426
)Accumulated other comprehensive income


77,194


67,657Total shareholders' equity


1,207,703


1,079,154$
3,724,096


3,684,690


See accompanying Notes to Condensed Consolidated Financial Statements.

1

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FOREST OIL CORPORATION        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (Unaudited)        (In Thousands, Except Per Share Amounts)

Three Months Ended
March 31,2010

2009Revenues:Oil and gas sales

$
221,729


194,659Interest and other


136


209Total revenues


221,865


194,868Costs, expenses, and other:Lease operating expenses


29,102


41,231Production and property taxes


11,428


11,695Transportation and processing costs


4,859


5,244General and administrative


18,753


16,085Depreciation, depletion, and amortization


52,312


104,552Accretion of asset retirement obligations


1,839


2,038Ceiling test write-down of oil and gas properties





1,575,843Interest expense


38,043


36,545Realized and unrealized gains on derivative instruments, net


(93,211
)

(139,328
)Other, net


(9,833
)

9,083Total costs, expenses, and other


53,292


1,662,988Earnings (loss) before income taxes


168,573


(1,468,120
)Income tax:Current


717


1,268Deferred


58,694


(291,615
)Total income tax


59,411


(290,347
)Net earnings (loss)

$
109,162


(1,177,773
)Basic earnings (loss) per common share

$
.97


(12.32
)Diluted earnings (loss) per common share

$
.97


(12.32
)


See
accompanying Notes to Condensed Consolidated Financial Statements.

2

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FOREST OIL CORPORATION        CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY        (Unaudited)        (In Thousands)

Common Stock





Accumulated
Other
Comprehensive
IncomeCapital
Surplus

Accumulated
Deficit

Total
Shareholders'
EquityShares

AmountBalances at December 31, 2009


112,337

$
11,234


2,652,689


(1,652,426
)

67,657


1,079,154Exercise of stock options


114


11


2,159








2,170Employee stock purchase plan


20


2


389








391Amortization of stock-based compensation








7,181








7,181Other, net


(3
)




108








108Comprehensive earnings:Net earnings











109,162





109,162Unfunded postretirement benefits, net of tax














395


395Foreign currency translation














9,142


9,142Total comprehensive earnings

















118,699Balances at March 31, 2010


112,468

$
11,247


2,662,526


(1,543,264
)

77,194


1,207,703


See accompanying Notes to Condensed Consolidated Financial Statements.

3

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FOREST OIL CORPORATION        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (Unaudited)        (In Thousands)

Three Months Ended
March 31,2010

2009Operating activities:Net earnings (loss)

$
109,162


(1,177,773
)Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:Depreciation, depletion, and amortization


52,312


104,552Ceiling test write-down of oil and gas properties





1,575,843Deferred income tax


58,694


(291,615
)Unrealized gains on derivative instruments, net


(83,242
)

(67,539
)Unrealized foreign currency exchange (gains) losses, net


(6,650
)

3,539Unrealized losses on other investments, net





2,327Stock-based compensation expense


4,654


3,947Accretion of asset retirement obligations


1,839


2,038Other, net


(3,482
)

1,187Changes in operating assets and liabilities:Accounts receivable


(5,055
)

43,280Other current assets


(2,874
)

10,136Accounts payable and accrued liabilities


(66,493
)

(89,982
)Accrued interest and other current liabilities


6,813


28,426Net cash provided by operating activities


65,678


148,366Investing activities:Capital expenditures for property and equipment:Exploration and development costs


(191,754
)

(301,329
)Other fixed assets


(1,584
)

(21,840
)Proceeds from sales of assets


10,766


6,292Net cash used by investing activities


(182,572
)

(316,877
)Financing activities:Proceeds from bank borrowings


7,875


430,856Repayments of bank borrowings


(7,875
)

(799,484
)Redemption of 73/4% senior notes


(151,938
)

Issuance of 81/2% senior notes, net of issuance costs





559,767Proceeds from the exercise of options and from employee stock purchase plan


2,561


458Change in bank overdrafts


13,003


(21,752
)Other, net


(137
)

(2,663
)Net cash (used) provided by financing activities


(136,511
)

167,182Effect of exchange rate changes on cash


(38
)

(20
)Net decrease in cash and cash equivalents


(253,443
)

(1,349
)Cash and cash equivalents at beginning of period


467,221


2,205Cash and cash equivalents at end of period

$
213,778


856Cash paid during the period for:Interest

$
29,218


6,100Income taxes


64,048


1,930


See
accompanying Notes to Condensed Consolidated Financial Statements.

4

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Table of Contents



FOREST OIL CORPORATION        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        (Unaudited)

(1) BASIS OF PRESENTATION

The Condensed Consolidated Financial Statements included herein are unaudited and include the accounts of Forest Oil Corporation and its consolidated subsidiaries (collectively, "Forest"
or the "Company"). In the opinion of management, all adjustments, consisting of normal recurring accruals, have been made which are necessary for a fair presentation of the financial position of
Forest at March 31, 2010, the results of its operations for the three months ended March 31, 2010 and 2009, and its cash flows for the three months ended March 31, 2010 and 2009.
Interim results are not necessarily indicative of expected annual results because of the impact of fluctuations in prices received for liquids (oil, condensate, and natural gas liquids) and natural
gas and other factors.

In
the course of preparing the Condensed Consolidated Financial Statements, management makes various assumptions, judgments, and estimates to determine the reported amounts of assets,
liabilities, revenues, and expenses, and in the disclosures of commitments and contingencies. Changes in these assumptions, judgments, and estimates will occur as a result of the passage of time and
the occurrence of future events and, accordingly, actual results could differ from amounts previously established.

The
more significant areas requiring the use of assumptions, judgments, and estimates relate to volumes of oil and gas reserves used in calculating depletion, the amount of future net
revenues used in computing the ceiling test limitations, and the amount of future capital costs and abandonment obligations used in such calculations, determining impairments of investments in
unproved properties, valuing deferred tax assets and goodwill, and estimating fair values of financial instruments, including derivative instruments.

Certain
amounts in the prior year financial statements have been reclassified to conform to the 2010 financial statement presentation due primarily to changing to an unclassified
statement of operations.

For
a more complete understanding of Forest's operations, financial position, and accounting policies, reference is made to the consolidated financial statements of Forest, and related
notes thereto, filed with Forest's Annual Report on Form 10-K for the year ended December 31, 2009, previously filed with the Securities and Exchange Commission ("SEC").

(2) EARNINGS (LOSS) PER SHARE AND COMPREHENSIVE EARNINGS (LOSS)

Earnings (Loss) per Share

Basic earnings (loss) per share is computed using the two-class method by dividing net earnings (loss) attributable to
common stock by the weighted average number of common shares outstanding during each period. Under the treasury stock method, diluted earnings (loss) per share is computed by dividing net earnings
(loss) adjusted for the effects of certain contracts that provide the issuer or holder with a choice between settlement methods by the weighted average number of common shares outstanding adjusted for
the dilutive effect, if any, of potential common shares (i.e. stock options, unvested restricted stock grants, and unvested phantom
stock units that may be settled in shares). No potential common shares shall be included in the computation of any diluted per share amount when a net loss exists.

The
two-class method of computing earnings per share is required for those entities that have participating securities or multiple classes of common stock. The
two-class method is an earnings

5

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(2) EARNINGS (LOSS) PER SHARE AND COMPREHENSIVE EARNINGS (LOSS) (Continued)

allocation
formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in
undistributed earnings. Holders of restricted stock issued under Forest's stock incentive plans have the right to receive non-forfeitable cash dividends, participating on an equal basis
with common stock. Holders of phantom stock units issued to directors under Forest's stock incentive plans also have the right to receive non-forfeitable cash dividends, participating on
an equal basis with common stock, while phantom stock units issued to employees do not participate in dividends. Stock options issued under Forest's stock incentive plans do not participate in
dividends. Therefore, restricted stock issued to employees and directors and phantom stock units issued to directors are participating securities and earnings are allocated to both common stock and
these participating securities under the two-class method. However, these participating securities do not have a contractual obligation to share in Forest's losses. Therefore, in periods
of net loss, none of the loss is allocated to these participating securities.

Unvested
restricted stock grants were not included in the calculation of diluted earnings per share for the three months ended March 31, 2010 as their inclusion would have an
antidilutive effect. Stock options, unvested restricted stock grants, and unvested phantom stock units that may be settled in shares were not included in the calculation of diluted loss per share for
the three months ended March 31, 2009 as their inclusion would have an antidilutive effect.

The
following sets forth the calculation of basic and diluted earnings (loss) per share for the periods presented.

Three Months Ended
March 31,2010

2009(In Thousands, Except
Per Share Amounts)Net earnings (loss)

$
109,162


(1,177,773
)Net earnings attributable to participating securities


(1,962
)

Net earnings (loss) attributable to common stock for basic earnings per share


107,200


(1,177,773
)Adjustment for liability-classified stock-based compensation awards


26


Net earnings (loss) for diluted earnings per share

$
107,226


(1,177,773
)Weighted average common shares outstanding during the period


110,416


95,571Dilutive effects of potential common shares


586


Weighted average common shares outstanding during the period, including the effects of dilutive potential common shares


111,002


95,571Basic earnings (loss) per common share

$
.97


(12.32
)Diluted earnings (loss) per common share

$
.97


(12.32
)


6

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(2) EARNINGS (LOSS) PER SHARE AND COMPREHENSIVE EARNINGS (LOSS) (Continued)

Comprehensive Earnings (Loss)

Comprehensive earnings (loss) is a term used to refer to net earnings (loss) plus other comprehensive income (loss). Other
comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under generally accepted accounting principles are reported as separate components of shareholders' equity
instead of net earnings (loss). Items included in Forest's other comprehensive income (loss) for the three months ended March 31, 2010 and 2009 are foreign currency gains and losses related to
the translation of the assets and liabilities of Forest's Canadian operations and changes in unfunded postretirement benefits.

The
components of comprehensive earnings (loss) are as follows:

Three Months Ended
March 31,2010

2009(In Thousands)Net earnings (loss)

$
109,162


(1,177,773
)Other comprehensive income (loss):Foreign currency translation gains (losses)


9,142


(12,826
)Unfunded postretirement benefits, net of tax


395


36Total comprehensive earnings (loss)

$
118,699


(1,190,563
)


7

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(3) STOCK-BASED COMPENSATION

The table below sets forth total stock-based compensation recorded during the three months ended March 31, 2010 and 2009, and the remaining unamortized amounts and the weighted
average amortization period remaining as of March 31, 2010.

Stock
Options

Restricted
Stock

Phantom
Stock Units

Total(1)(In Thousands)Three months ended March 31, 2010:Total stock-based compensation costs

$
222


6,821


1,268


8,311Less: stock-based compensation costs capitalized


(93
)

(2,691
)

(589
)

(3,373
)Stock-based compensation costs expensed

$
129


4,130


679


4,938Unamortized stock-based compensation costs as of March 31, 2010

$
1,080


25,405


6,494
(2)

32,979Weighted average amortization period remaining


1.0 years


1.4 years


2.1 years


1.6 yearsThree months ended March 31, 2009:Total stock-based compensation costs

$
277


5,984


(76
)

6,185Less: stock-based compensation costs capitalized


(125
)

(2,346
)

45


(2,426
)Stock-based compensation costs expensed

$
152


3,638


(31
)

3,759


(1)The
Company also maintains an employee stock purchase plan (which is not included in the table) under which $.1 million and
$.2 million of compensation cost was recognized for the three months ended March 31, 2010 and 2009, respectively.(2)Based
on the closing price of the Company's common stock on March 31, 2010.


Stock Options

The following table summarizes stock option activity in the Company's stock-based compensation plans for the three months ended
March 31, 2010.

Number of
Options

Weighted
Average Exercise
Price

Aggregate
Intrinsic Value
(In Thousands)(1)

Number of
Options
ExercisableOutstanding at January 1, 2010


1,818,419

$
21.26

$
7,387


1,722,216Granted


Exercised


(114,190
)

19.00


812Cancelled


(9,640
)

27.69Outstanding at March 31, 2010


1,694,589

$
21.38

$
11,094


1,598,386


(1)The
intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of
the option.


8

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(3) STOCK-BASED COMPENSATION (Continued)




Restricted Stock and Phantom Stock Units

The following table summarizes the restricted stock and phantom stock unit activity in the Company's stock-based compensation plans for
the three months ended March 31, 2010.

Restricted Stock

Phantom Stock Units(1)Number of
Shares

Weighted
Average
Grant Date
Fair Value

Vest Date Fair
Value
(In Thousands)

Number of
Units

Weighted
Average
Grant Date
Fair Value

Vest Date Fair
Value
(In Thousands)(2)Unvested at January 1, 2010


2,028,683

$
39.44





475,063

$
27.91Awarded


400


28.23





6,050


23.91Vested


(5,300
)

38.35

$
144


(11,150
)

45.14

$
262Forfeited


(8,350
)

28.47





(5,878
)

36.39Unvested at March 31, 2010


2,015,433

$
39.49





464,085

$
27.34


(1)Of
the unvested units of phantom stock at March 31, 2010, 215,250 units can be settled in cash, shares of common stock, or a
combination of both, while the remaining 248,835 units can only be settled in cash. The phantom stock units have been accounted for as a liability within the Condensed Consolidated Financial
Statements.(2)Of
the 11,150 phantom stock units that vested during the three months ended March 31, 2010, 11,000 units were settled in shares of
common stock and 150 units were settled in cash.


9

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FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)




(4) DEBT

The components of debt are as follows:

March 31, 2010

December 31, 2009Principal

Unamortized
Premium
(Discount)

Other(1)

Total

Principal

Unamortized
Premium
(Discount)

Other(1)

Total(In Thousands)8% Senior Notes due 2011

$
285,000


2,260


1,431


288,691


285,000


2,583


1,638


289,2217% Senior Subordinated Notes due 2013


112


(2
)




110


112


(2
)




11081/2% Senior Notes due 2014


600,000


(22,594
)




577,406


600,000


(24,029
)




575,97173/4% Senior Notes due 2014(2)














150,000


(1,035
)

7,713


156,67871/4% Senior Notes due 2019


1,000,000


520





1,000,520


1,000,000


534





1,000,534Total long-term debt


1,885,112


(19,816
)

1,431


1,866,727


2,035,112


(21,949
)

9,351


2,022,514Less: current portion of long-term debt(2)














(150,000
)

1,035


(7,713
)

(156,678
)Long-term portion of long-term debt

$
1,885,112


(19,816
)

1,431


1,866,727


1,885,112


(20,914
)

1,638


1,865,836


(1)Represents
the unamortized portion of gains realized upon termination of interest rate swaps in 2002 and 2003 that were accounted for as fair
value hedges. The gains are being amortized as a reduction of interest expense over the terms of the notes.(2)In
December 2009, the Company irrevocably called the 73/4% senior notes due 2014 and redeemed these notes in January 2010 at
101.292% of par.


Bank Credit Facilities

As of March 31, 2010, the Company had syndicated bank revolving credit agreements with total lender commitments of
$1.8 billion. The credit agreements consist of a $1.65 billion U.S. credit facility through a syndicate of banks led by JPMorgan Chase Bank, N.A. (the "U.S. Credit Facility") and a
$150 million Canadian credit facility through a syndicate of banks led by JPMorgan Chase Bank, N.A., Toronto Branch (the "Canadian Credit Facility," and together with the U.S. Credit Facility,
the "Credit Facilities"). The Credit Facilities will mature in June 2012. At March 31, 2010, there were no outstanding borrowings under the Credit Facilities.

10

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FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(4) DEBT (Continued)

Forest's availability under the Credit Facilities is governed by a borrowing base (the "Global Borrowing
Base"). As of March 31, 2010, the borrowing base under the Credit Facilities was $1.3 billion, which Forest has allocated $1.155 billion to the U.S. Credit Facility and
$145 million to the Canadian Credit Facility. The determination of the Global Borrowing Base is made by the lenders in their sole discretion, on a semi-annual basis, taking into
consideration the estimated value of Forest's oil and gas properties based on pricing models determined by the lenders at such time, in accordance with the lenders' customary practices for oil and gas
loans. The available borrowing amount under the Credit Facilities could increase or decrease based on such redetermination. In April 2010, the lenders reaffirmed the borrowing base at
$1.3 billion and the next redetermination is expected to occur in the third or fourth quarter of 2010. In addition to the semi-annual redeterminations, Forest and the lenders each
have discretion at any time, but not more often than once during a calendar year, to have the Global Borrowing Base redetermined. The Global Borrowing Base is also subject to automatic adjustments if
certain events occur.

73/4% Senior Notes Due 2014

In December 2009, Forest notified the trustee and note holders of the 73/4% senior notes that it was calling the
73/4% senior notes. This notice was irrevocable after it was given. The 73/4% senior notes were redeemed in January 2010 at 101.292% of par and a net gain of
$4.6 million was recognized upon redemption. The net gain was driven by the write-off of unamortized deferred gains on the termination of interest rate swaps.

(5) OIL AND GAS PROPERTIES

Full Cost Method of Accounting

The Company uses the full cost method of accounting for oil and gas properties. Separate cost centers are maintained for each country
in which the Company has operations. During the periods presented, the Company's primary oil and gas operations were conducted in the United States and Canada. All costs incurred in the acquisition,
exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes, and overhead related to exploration and development activities) and
the fair value of estimated future costs of site restoration, dismantlement, and abandonment activities are capitalized. During the three months ended March 31, 2010 and 2009, Forest
capitalized $12.1 million and $10.4 million of general and administrative costs (including stock-based compensation), respectively. Interest costs related to significant unproved
properties that are under development are also capitalized to oil and gas properties. During the three months ended March 31, 2010 and 2009, the Company capitalized $2.8 million and
$3.4 million, respectively, of interest costs attributed to unproved properties.

Investments
in unproved properties, including capitalized interest costs, are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed
periodically to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the
properties, the holding period of the properties, geographic and geologic data obtained relating to the properties, and estimated discounted future net cash flows from the properties. Estimated
discounted future net cash flows are based on discounted future net revenues associated with probable and possible reserves, risk

11

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(5) OIL AND GAS PROPERTIES (Continued)

adjusted
as appropriate. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for
purposes of assessing impairment. The amount of impairment assessed is added to the costs to be amortized, or is reported as a period expense, as appropriate.

The
Company performs a ceiling test each quarter on a country-by-country basis. The full cost ceiling test is a limitation on capitalized costs prescribed by SEC
Regulation S-X Rule 4-10. The ceiling test is not a fair value based measurement. Rather, it is a standardized mathematical calculation. The ceiling test provides
that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated
production of proved oil and gas reserves using current prices (as discussed below), excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on
the balance sheet, at a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties
included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. Should the net capitalized costs for a
cost center exceed the sum of the components noted above, a ceiling test write-down would be recognized to the extent of the excess
capitalized costs. The March 31, 2010 ceiling test, which did not result in a write-down, was based on average prices during the twelve-month period prior to March 31, 2010
pursuant to the SEC's "Modernization of Oil and Gas Reporting" rule, which was effective beginning with December 31, 2009 reporting. The March 31, 2009 ceiling test, which was based on
the March 31, 2009 spot prices, resulted in non-cash write-downs of oil and gas property costs of $1.4 billion in the United States cost center and $199.0 million in
the Canada cost center.

Gain
or loss is not recognized on the sale of oil and gas properties unless the sale significantly alters the relationship between capitalized costs and estimated proved oil and gas
reserves attributable to a cost center.

Depletion
of proved oil and gas properties is computed on the units-of-production method, whereby capitalized costs, as adjusted for future development costs and
asset retirement obligations, are amortized over the total estimated proved reserves. The Company uses its quarter-end reserves estimates to calculate depletion for the current quarter.

(6) ASSET RETIREMENT OBLIGATIONS

Forest records the fair value of a liability for an asset retirement obligation in the period in which it is incurred with a corresponding increase in the carrying amount of the related
long-lived asset. Subsequent to initial measurement, the asset retirement obligation is required to be accreted each period to its present value. Capitalized costs are depleted as a
component of the full cost pool using the units-of-production method. Forest's asset retirement obligations consist of costs related to the plugging of wells, the removal of
facilities and equipment, and site restoration on oil and gas properties.

12

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(6) ASSET RETIREMENT OBLIGATIONS (Continued)

The
following table summarizes the activity for Forest's asset retirement obligations for the three months ended March 31, 2010 and 2009.

Three Months Ended
March 31,2010

2009(In Thousands)Asset retirement obligations at beginning of period

$
93,303


96,991Accretion expense


1,839


2,038Liabilities incurred


945


1,313Liabilities settled


(151
)

(880
)Disposition of properties


(513
)

(607
)Revisions of estimated liabilities


(10,555
)

1,172Impact of foreign currency exchange rate


385


(383
)Asset retirement obligations at end of period


85,253


99,644Less: current asset retirement obligations


(3,006
)

(3,477
)Long-term asset retirement obligations

$
82,247


96,167


(7) FAIR VALUE MEASUREMENTS

The authoritative accounting guidance regarding fair value measurements for assets and liabilities measured at fair value establishes a three-tier fair value hierarchy, which
prioritizes the inputs used to measure fair value. These tiers consist of: Level 1, defined as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data
exists, therefore requiring an entity to develop its own assumptions. The Company uses the income approach to value financial instruments under the Level 2 hierarchy.

13

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) FAIR VALUE MEASUREMENTS (Continued)

The
Company's assets and liabilities measured at fair value on a recurring basis at March 31, 2010 are set forth by level within the fair value hierarchy in the table below.

Description

Using
Significant Other
Observable Inputs
(Level 2)(In Thousands)Assets:Derivative instruments(1)Commodity

$
110,289Interest rate


7,501Total assets

$
117,790Liabilities:Derivative instruments(1)Commodity

$
36,056Interest rate


4,510Total liabilities

$
40,566


(1)The
Company's derivative assets and liabilities include commodity and interest rate derivatives (see Note 8 for more information on
these instruments). The Company utilizes present value techniques and option-pricing models for valuing its derivatives. Inputs to these valuation techniques include published forward prices,
volatilities, and credit risk considerations, including the incorporation of published interest rates and credit spreads. All of the significant inputs are observable, either directly or indirectly;
therefore, the Company's derivative instruments are included within the Level 2 fair value hierarchy.


14

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) FAIR VALUE MEASUREMENTS (Continued)




The following table presents a reconciliation of the beginning and ending balances of the Company's assets measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2009.

Three Months Ended
March 31, 2009Equity
Securities

Debt
Securities(1)(In Thousands)Balance at beginning of period





1,670Total (losses) (realized/unrealized):Included in earnings


(657
)

(1,670
)Included in other comprehensive income





Purchases, issuances, sales, and settlements:Purchases





Issuances





Sales





Settlements





Transfers in and/or out of Level 3(2)(3)


657


Balance at end of period





The amount of total (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at
end of period


(657
)

(1,670
)


(1)The
Company's debt securities are comprised of a zero coupon senior subordinated note due from Pacific Energy Resources, Ltd.
("PERL") in 2014 at a principal amount at stated maturity of $60.8 million (the "PERL Note") that was received as a portion of the total consideration for the sale of the
Company's Alaska assets in 2007. In March 2009, PERL filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company used its own assumptions as to what
market participants would assume regarding future cash flows and risk-adjusted discount rates in valuing the PERL Note, which is currently valued at zero and has been since
March 31, 2009.(2)The
Company's investment in PERL common stock, which the Company also received as a portion of the total consideration for the sale of the
Company's Alaska assets in 2007, was transferred from Level 1 to Level 3 in the first quarter of 2009 when PERL's common stock was suspended from trading for failure to
meet the continued stock exchange listing requirements. The Company used its own assumptions as to what market participants would assume regarding future cash flows and risk-adjusted
discount rates in valuing the PERL common stock, which is currently valued at zero and has been since March 31, 2009.(3)The
Company's policy is to recognize transfers in and/or out of fair value hierarchy levels as of the beginning of the reporting period in
which the event or change in circumstances caused the transfer.


Losses (realized and unrealized) included in earnings related to the Company's assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the three months

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(7) FAIR VALUE MEASUREMENTS (Continued)

ended
March 31, 2009 are reported in the Condensed Consolidated Statements of Operations under "Other, net" as follows:

Three Months Ended
March 31, 2009Equity
Securities

Debt
Securities(In Thousands)Total losses included in earnings for the period


657


1,670Change in unrealized losses relating to assets still held at end of period


657


1,670


The
fair values and carrying amounts of the Company's financial instruments are summarized below for the periods presented.

March 31, 2010

December 31, 2009Carrying
Amount

Fair
Value(1)

Carrying
Amount

Fair
Value(1)(In Thousands)Assets:Cash and cash equivalents

$
213,778


213,778


467,221


467,221Derivative instruments


117,790


117,790


36,199


36,199Liabilities:Derivative instruments


40,566


40,566


42,184


42,1848% senior notes due 2011


288,691


302,100


289,221


296,4007% senior subordinated notes due 2013


110


112


110


11281/2% senior notes due 2014


577,406


636,000


575,971


630,00073/4% senior notes due 2014








156,678


151,93871/4% senior notes due 2019


1,000,520


1,005,000


1,000,534


992,500


(1)The
Company used various assumptions and methods in estimating the fair values of its financial instruments. The carrying amount of cash and
cash equivalents approximated fair value due to the short original maturities (three months or less) and high liquidity of the cash equivalents. The fair values of the senior notes and senior
subordinated notes were estimated based on quoted market prices. The methods used to determine the fair values of the derivative instruments are discussed above. See also Note 8 to the
Condensed Consolidated Financial Statements for more information on the derivative instruments.


(8) DERIVATIVE INSTRUMENTS

Commodity Derivatives

Forest periodically enters into derivative instruments such as swap, basis swap, and collar agreements as an attempt to moderate the
effects of wide fluctuations in commodity prices on the Company's cash flow and to manage the exposure to commodity price risk. Forest's commodity derivative instruments generally serve as effective
economic hedges of commodity price exposure; however, the Company has elected not to designate its derivatives as hedging instruments. As such, the Company recognizes all changes in fair value of its
derivative instruments as unrealized gains or losses on derivative instruments in the Condensed Consolidated Statement of Operations.

16

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(8) DERIVATIVE INSTRUMENTS (Continued)

The table below sets forth Forest's outstanding commodity swaps and costless collars as of March 31,
2010.

Natural Gas (NYMEX HH)

Oil (NYMEX WTI)Bbtu
Per Day

Weighted Average
Hedged Price
per MMBtu

Barrels
Per Day

Weighted Average
Hedged Price
per BblSwaps:April 2010 - December 2010


200

$
6.28


3,000

$
76.06Collars:April 2010 - December 2010








2,000


60.00/98.50
(1)Calendar 2011








2,000


75.00/92.80
(1)


(1)Represents
weighted average hedged floor and ceiling price per Bbl.


Subsequent to March 31, 2010, through April 30, 2010, Forest entered into an additional gas swap covering 10 Bbtu per day for the
period May 2010 through December 2010 at a hedged price of $4.505 per MMBtu and entered into an additional oil collar covering 1,000 barrels per day for Calendar 2011 at a hedged floor and ceiling
price per barrel of $75.00 and $105.00, respectively.

Forest
also uses basis swaps in connection with natural gas swaps in order to fix the price differential between the NYMEX Henry Hub price and the index price at which the natural gas
production is sold. The table below sets forth Forest's outstanding basis swaps as of March 31, 2010.

Basis SwapsRemaining Swap Term

Index

Bbtu
Per Day

Weighted Average
Hedged Price
Differential
per MMBtuApril 2010 - December 2010

Centerpoint


30

$
(.95
)April 2010 - December 2010

Houston Ship Channel


50


(.29
)April 2010 - December 2010

Mid Continent


60


(1.04
)April 2010 - December 2010

NGPL TXOK


40


(.44
)


Interest Rate Derivatives

Forest periodically enters into interest rate derivative agreements in an attempt to manage the mix of fixed and floating interest
rates within its debt portfolio. The Company has elected not to designate its derivatives as hedging instruments. As such, the Company recognizes all changes in fair value of its derivative
instruments as unrealized gains or losses on derivative instruments in the Condensed

17

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(8) DERIVATIVE INSTRUMENTS (Continued)

Consolidated
Statement of Operations. The table below sets forth Forest's outstanding fixed-to-floating interest rate swaps as of March 31, 2010.

Interest Rate SwapsRemaining Swap Term

Notional
Amount
(In Thousands)

Weighted Average
Floating Rate

Weighted
Average
Fixed RateApril 2010 - February 2014

$
500,000

1 month LIBOR + 5.89%


8.50
%


In
addition to interest rate swaps, Forest periodically enters into interest rate swaptions that enable the counterparties to exercise options to enter into interest rate swaps with
Forest in exchange for premiums paid to Forest. The premiums received on these swaptions are amortized as realized gains on derivatives over the terms of the related swaptions. Forest enters into
these interest rate swaptions because its targeted floating interest rates are not attainable at the time in the interest rate swap market, yet premiums are available from counterparties for the
option to swap Forest's 8.5% fixed rate for the floating rates it had targeted. The table below sets forth Forest's outstanding interest rate swaption as of March 31, 2010.

Interest Rate SwaptionOption Term

Swap Term

Premium
Received
(In Thousands)

Notional
Amount
(In Thousands)

Floating Rate

Fixed
RateJan 2010 - April 2010

May 2010 - Feb 2014

$
350

$
100,000

3 month LIBOR + 5.50%


8.50
%


In April 2010, the interest rate swaption in the table above was unexercised and the Company entered into an additional interest rate swaption as
set forth in the table below.

Interest Rate SwaptionOption Term

Swap Term

Premium
Received
(In Thousands)

Notional
Amount
(In Thousands)

Floating Rate

Fixed
RateApril 2010 - August 2010

Aug 2010 - Feb 2014

$
634

$
100,000

3 month LIBOR + 5.75%


8.50
%


Fair Value and Gains and Losses

The table below summarizes the location and fair value amounts of Forest's derivative instruments reported in the Condensed
Consolidated Balance Sheets as of the dates indicated. These derivative instruments are not designated as hedging instruments for accounting purposes. For financial reporting purposes, Forest does not
offset asset and liability fair value amounts recognized for derivative

18

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(8) DERIVATIVE INSTRUMENTS (Continued)

instruments
with the same counterparty under its master netting arrangements. See Note 7 to the Condensed Consolidated Financial Statements for more information on Forest's derivative
instruments.

March 31, 2010

December 31, 2009(In Thousands)Assets:Commodity derivatives:Current assets: derivative instruments

$
110,289


35,454Interest rate derivatives:Current assets: derivative instruments


7,501


189Derivative instruments





556Total assets


117,790


36,199Liabilities:Commodity derivatives:Current liabilities: derivative instruments


35,023


40,843Derivative instruments


1,033


Interest rate derivatives:Current liabilities: derivative instruments


89


515Derivative instruments


4,421


826Total liabilities


40,566


42,184Net derivative fair value

$
77,224


(5,985
)


The
table below summarizes the amount of derivative instrument gains reported in the Condensed Consolidated Statements of Operations as realized and unrealized gains on derivative
instruments, net, for the periods indicated. These derivative instruments are not designated as hedging instruments for accounting purposes.

Three Months Ended
March 31,2010

2009(In Thousands)Commodity derivatives:Realized (gains)

$
(6,448
)

(71,265
)Unrealized (gains)


(79,622
)

(65,784
)Interest rate derivatives:Realized (gains)


(3,521
)

(524
)Unrealized (gains)


(3,620
)

(1,755
)Realized and unrealized (gains) on derivative instruments, net

$
(93,211
)

(139,328
)


Due
to the volatility of oil and natural gas prices, the estimated fair values of Forest's commodity derivative instruments are subject to large fluctuations from period to period.
Forest has experienced the effects of these commodity price fluctuations in both the current period and prior periods and expects that volatility in commodity prices will continue.

19

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(8) DERIVATIVE INSTRUMENTS (Continued)

Credit Risk

Forest executes with each of its derivative counterparties an International Swap and Derivatives Association, Inc. ("ISDA")
Master Agreement, which is a standard industry form contract containing general terms and conditions applicable to many types of derivative transactions. Additionally, Forest executes, with each of
its derivative counterparties, a Schedule, which modifies the terms and conditions of the ISDA Master Agreement according to the parties' requirements and the specific types of derivatives to be
traded. All but one of the counterparties is a lender, or an affiliate of a lender, under the Credit Facilities, which provide that any security granted by Forest under the Credit Facilities shall
also extend to and be available to those lenders that are counterparties to derivative transactions with Forest. None of these counterparties require collateral beyond that already pledged under the
Credit Facilities. The remaining counterparty, a purchaser of Forest's natural gas production, generally is a net debtor to Forest and as a result of these purchases does not require collateral under
the ISDA Master Agreement and Schedule it has executed with Forest.

The
ISDA Master Agreements and Schedules contain cross-default provisions whereby a default under the Credit Facilities will also cause a default under the derivative agreements. Such
events of default include non-payment, breach of warranty, non-performance of financial covenants, default on other indebtedness, certain pension plan events, certain adverse
judgments, change of control, a failure of the liens securing the Credit Facilities, and an event of default under the Canadian Facility. In addition, bankruptcy and insolvency events with respect to
Forest or certain of its subsidiaries will result in an automatic acceleration of the indebtedness under the Credit Facilities. None of these events of default are specifically credit-related, but
some could arise if there were a general deterioration of Forest's credit. The ISDA Master Agreements and Schedules contain a further credit-related termination event that would occur if Forest were
to merge with another entity and the creditworthiness of the resulting entity was materially weaker than that of Forest.

The
vast majority of Forest's derivative counterparties are all financial institutions that are engaged in similar activities and have similar economic characteristics that, in general,
could cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Forest does not require the posting of collateral for its benefit under
its derivative agreements. However, Forest's ISDA Master Agreements contain netting provisions whereby if on any date amounts would otherwise be payable by each party to the other, then on such date
the party that owes the larger amount will pay the excess of that amount over the smaller amount owed by the other party, thus satisfying each party's obligations. These provisions apply to all
derivative transactions with the particular counterparty. If all counterparties failed, Forest would be exposed to a risk of loss equal to this net amount owed to us, the fair value of which was
$88.4 million at March 31, 2010. If Forest suffered an event of default, each counterparty could demand immediate payment, subject to notification periods, of the net obligations due to
it under the derivative agreements. At March 31, 2010, Forest owed a net derivative liability to four counterparties, the fair value of which was $11.2 million.

20

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(9) INCOME TAXES

A reconciliation of income tax computed by applying the United States statutory federal income tax rate is as follows:

Three Months Ended
March 31,2010

2009(In Thousands)Federal income tax at 35% of earnings (loss) before income taxes

$
59,001


(513,842
)Change in valuation allowance for deferred tax assets(1)





215,836State income taxes, net of federal income tax benefits


1,671


(14,244
)Effect of differing tax rates in Canada


(1,329
)

12,338Effect of federal, state, and foreign tax on permanent items


932


3,119Adjustments for statutory rate reductions and other


(864
)

6,446Total income tax

$
59,411


(290,347
)


(1)In assessing the need for a valuation allowance on the Company's deferred tax assets, all available
evidence, both negative and positive, was considered in determining whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Based on this assessment,
Forest recorded a valuation allowance of $215.3 million against its U.S. deferred tax assets as of March 31, 2009.


(10) COSTS, EXPENSES, AND OTHER

The table below sets forth the components of "Other, net" in the Condensed Consolidated Statements of Operations for the periods indicated.

Three Months Ended
March 31,2010

2009(In Thousands)Unrealized foreign currency exchange (gains) losses, net

$
(6,650
)

3,539Unrealized losses on other investments, net





2,327(Gain) on debt extinguishment, net


(4,578
)

Other, net


1,395


3,217$
(9,833
)

9,083


(11) GEOGRAPHICAL SEGMENTS

At March 31, 2010, Forest conducted operations in one industry segment, oil and gas exploration and production, and had three reportable geographical business segments: United
States, Canada, and International. Forest's remaining activities were not significant and therefore were not reported as a separate segment, but have been included as a reconciling item in the
information below. The segments were determined based upon the geographical location of operations in each business segment. The

21

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(11) GEOGRAPHICAL SEGMENTS (Continued)

segment
data presented below was prepared on the same basis as the Condensed Consolidated Financial Statements.

Oil and Gas Exploration and ProductionThree Months Ended March 31, 2010United States

Canada

International

Total Company(In Thousands)Oil and gas sales

$
184,322


37,407





221,729Costs and expenses:Lease operating expenses


23,468


5,634





29,102Production and property taxes


10,806


622





11,428Transportation and processing costs


2,655


2,204





4,859Depletion


36,511


13,116





49,627Accretion of asset retirement obligations


1,549


265


25


1,839Segment earnings (loss)

$
109,333


15,566


(25
)

124,874Capital expenditures(1)

$
166,496


107,641


1,114


275,251Goodwill(2)

$
239,420


17,058





256,478Long-lived assets(2)(3)

$
1,845,983


555,412


88,138


2,489,533Total assets(2)

$
2,991,423


643,660


89,013


3,724,096


(1)Includes estimated discounted asset retirement obligations of $(9.6) million.(2)As
of March 31, 2010.(3)Consists
of net property and equipment.


A reconciliation of segment earnings to consolidated earnings before income taxes is as follows:

Three Months Ended
March 31, 2010(In Thousands)Segment earnings

$
124,874Interest and other income


136General and administrative expense


(18,753
)Depreciation and amortization expense


(2,685
)Interest expense


(38,043
)Realized and unrealized gains on derivative instruments, net


93,211Other, net


9,833Earnings before income taxes

$
168,573


22

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(11) GEOGRAPHICAL SEGMENTS (Continued)



Oil and Gas Exploration and ProductionThree Months Ended March 31, 2009United States

Canada

International

Total Company(In Thousands)Oil and gas sales

$
166,352


28,307





194,659Costs and expenses:Lease operating expenses


34,702


6,529





41,231Production and property taxes


10,944


751





11,695Transportation and processing costs


3,039


2,205





5,244Depletion


86,491


15,678





102,169Ceiling test write-down of oil and gas properties


1,376,822


199,021





1,575,843Accretion of asset retirement obligations


1,772


243


23


2,038Segment loss

$
(1,347,418
)

(196,120
)

(23
)

(1,543,561
)Capital expenditures(1)

$
225,860


25,976


965


252,801Goodwill(2)

$
239,420


13,738





253,158Long-lived assets(2)(3)

$
2,532,182


458,647


78,618


3,069,447Total assets(2)

$
3,455,316


476,440


79,578


4,011,334


(1)Includes estimated discounted asset retirement obligations of $2.5 million.(2)As
of March 31, 2009.(3)Consists
of net property and equipment.


A reconciliation of segment loss to consolidated loss before income taxes is as follows:

Three Months Ended
March 31, 2009(In Thousands)Segment loss

$
(1,543,561
)Interest and other income


209General and administrative expense


(16,085
)Depreciation and amortization expense


(2,383
)Interest expense


(36,545
)Realized and unrealized gains on derivative instruments, net


139,328Other, net


(9,083
)Loss before income taxes

$
(1,468,120
)


23

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(12) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's 8% senior notes due 2011, 81/2% senior notes due 2014, and 71/4% senior notes due 2019
have been fully and unconditionally guaranteed by Forest Oil Permian Corporation, a wholly-owned subsidiary of the Company (the "Subsidiary Guarantor"). The Company's remaining subsidiaries (the
"Non-Guarantor Subsidiaries") have not provided guarantees. Based on this distinction, the following presents condensed consolidating financial information as of March 31, 2010 and
December 31, 2009 and for the three months ended March 31, 2010 and 2009 on an issuer (parent company), guarantor subsidiary, non-guarantor subsidiaries, eliminating entries,
and consolidated basis. Elimination entries presented are necessary to combine the entities.

CONDENSED CONSOLIDATING BALANCE SHEETS  (Unaudited)  (In Thousands)

March 31, 2010

December 31, 2009Parent
Company

Guarantor
Subsidiary

Combined
Non-Guarantor
Subsidiaries

Eliminations

Consolidated

Parent
Company

Guarantor
Subsidiary

Combined
Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
213,069


2


707





213,778


456,978


379


9,864





467,221Accounts receivable


64,158


26,444


43,390


(1,202
)

132,790


79,857


24,406


22,671


(580
)

126,354Deferred income taxes

















6,589


519








7,108Other current assets


185,897


951


28,114





214,962


115,663


797


12,849





129,309Total current assets


463,124


27,397


72,211


(1,202
)

561,530


659,087


26,101


45,384


(580
)

729,992Property and equipment, at cost


7,228,860


1,107,838


1,808,125





10,144,823


7,093,082


1,074,610


1,657,986





9,825,678Less accumulated depreciation, depletion, and amortization


5,534,411


1,001,814


1,119,065





7,655,290


5,502,530


994,005


1,069,936





7,566,471Net property and equipment


1,694,449


106,024


689,060





2,489,533


1,590,552


80,605


588,050





2,259,207Investment in subsidiaries


342,988








(342,988
)




308,424








(308,424
)

Note receivable from subsidiary


162,529








(162,529
)




135,529








(135,529
)

Goodwill


216,460


22,960


17,058





256,478


216,460


22,960


16,488





255,908Due from (to) parent and subsidiaries


229,299


(63,401
)

(165,898
)







215,679


(60,884
)

(154,795
)




Deferred income taxes


374,516








(2,458
)

372,058


395,519








(2,458
)

393,061Other assets


42,062


6


2,429





44,497


44,087


6


2,429





46,522$
3,525,427


92,986


614,860


(509,177
)

3,724,096


3,565,337


68,788


497,556


(446,991
)

3,684,690LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities

$
215,978


4,964


103,056


(1,202
)

322,796


238,935


6,825


39,122


(580
)

284,302Current portion of long-term-debt

















156,678











156,678Other current liabilities


111,883


51


6,554





118,488


86,633


64


7,343





94,040Total current liabilities


327,861


5,015


109,610


(1,202
)

441,284


482,246


6,889


46,465


(580
)

535,020Long-term debt


1,866,727











1,866,727


1,865,836











1,865,836Note payable to parent








162,529


(162,529
)










135,529


(135,529
)

Other liabilities


122,215


161


33,380





155,756


121,869


769


35,158





157,796Deferred income taxes


921


20,228


33,935


(2,458
)

52,626


16,232


4,446


28,664


(2,458
)

46,884Total liabilities


2,317,724


25,404


339,454


(166,189
)

2,516,393


2,486,183


12,104


245,816


(138,567
)

2,605,536Shareholders' equity


1,207,703


67,582


275,406


(342,988
)

1,207,703


1,079,154


56,684


251,740


(308,424
)

1,079,154$
3,525,427


92,986


614,860


(509,177
)

3,724,096


3,565,337


68,788


497,556


(446,991
)

3,684,690


24

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(12) CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS  (Unaudited)  (In Thousands)

Three Months Ended March 31,2010

2009Parent
Company

Guarantor
Subsidiary

Combined
Non-Guarantor
Subsidiaries

Eliminations

Consolidated

Parent
Company

Guarantor
Subsidiary

Combined
Non-Guarantor
Subsidiaries

Eliminations

ConsolidatedRevenuesOil and gas sales

$
142,456


41,142


38,131





221,729


133,143


32,521


28,995





194,659Interest and other


1,684


9


6


(1,563
)

136


3,057


75


53


(2,976
)

209Equity earnings (losses) in subsidiaries


41,067








(41,067
)




(310,643
)







310,643


Total revenues


185,207


41,151


38,137


(42,630
)

221,865


(174,443
)

32,596


29,048


307,667


194,868Costs, expenses, and other:Lease operating expenses


20,631


2,689


5,782





29,102


28,925


5,556


6,750





41,231Other direct operating costs


11,224


2,614


2,449





16,287


13,153


1,474


2,312





16,939General and administrative


15,648


548


2,557





18,753


13,312


715


2,058





16,085Depreciation, depletion, and amortization


30,883


7,809


13,620





52,312


71,516


18,011


15,025





104,552Ceiling test write-down of oil and gas properties

















1,155,777


218,567


201,499





1,575,843Interest expense


37,303


857


1,446


(1,563
)

38,043


31,667


2,303


5,551


(2,976
)

36,545Realized and unrealized gains on derivative instruments, net


(77,047
)

(15,954
)

(210
)




(93,211
)

(113,095
)

(25,723
)

(510
)




(139,328
)Other, net


(2,704
)

(52
)

(5,238
)




(7,994
)

5,610


96


5,415





11,121Total costs, expenses, and other


35,938


(1,489
)

20,406


(1,563
)

53,292


1,206,865


220,999


238,100


(2,976
)

1,662,988Earnings (loss) before income taxes


149,269


42,640


17,731


(41,067
)

168,573


(1,381,308
)

(188,403
)

(209,052
)

310,643


(1,468,120
)Income tax


40,107


15,786


3,518





59,411


(203,535
)

(35,928
)

(50,884
)




(290,347
)Net earnings (loss)

$
109,162


26,854


14,213


(41,067
)

109,162


(1,177,773
)

(152,475
)

(158,168
)

310,643


(1,177,773
)


25

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Table of Contents

FOREST OIL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(12) CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS  (Unaudited)  (In Thousands)

Three Months Ended March 31,2010

2009Parent
Company

Guarantor
Subsidiary

Combined
Non-Guarantor
Subsidiaries

Consolidated

Parent
Company

Guarantor
Subsidiary

Combined
Non-Guarantor
Subsidiaries

ConsolidatedOperating activities:Net earnings (loss)

$
68,095


26,854


14,213


109,162


(867,130
)

(152,475
)

(158,168
)

(1,177,773
)Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities:Depreciation, depletion, and amortization


30,883


7,809


13,620


52,312


71,516


18,011


15,025


104,552Unrealized gains on derivative instruments, net


(68,289
)

(14,759
)

(194
)

(83,242
)

(54,947
)

(12,347
)

(245
)

(67,539
)Deferred income tax


39,390


15,786


3,518


58,694


(204,803
)

(35,928
)

(50,884
)

(291,615
)Ceiling test write-down of oil and gas properties














1,155,777


218,567


201,499


1,575,843Other, net


2,867


41


(6,547
)

(3,639
)

9,017


81


3,940


13,038Changes in operating assets and liabilities:Accounts receivable


15,699


(2,038
)

(18,716
)

(5,055
)

46,994


3,438


(7,152
)

43,280Other current assets


12,064


(154
)

(14,784
)

(2,874
)

10,465


(348
)

19


10,136Accounts payable and accrued liabilities


(66,341
)

(2,879
)

2,727


(66,493
)

(71,829
)

(5,014
)

(13,139
)

(89,982
)Accrued interest and other current liabilities


8,041


(21
)

(1,207
)

6,813


30,496


(249
)

(1,821
)

28,426Net cash provided (used) by operating activities


42,409


30,639


(7,370
)

65,678


125,556


33,736


(10,926
)

148,366Investing activities:Capital expenditures for property and equipment


(107,640
)

(32,101
)

(53,597
)

(193,338
)

(228,685
)

(56,534
)

(37,950
)

(323,169
)Proceeds from sales of assets


157


40


10,569


10,766


96





6,196


6,292Net cash used by investing activities


(107,483
)

(32,061
)

(43,028
)

(182,572
)

(228,589
)

(56,534
)

(31,754
)

(316,877
)Financing activities:Issuance of 81/2% senior notes, net of issuance costs














559,767








559,767Redemption of 73/4% senior notes


(151,938
)







(151,938
)










Proceeds from bank borrowings








7,875


7,875


373,000





57,856


430,856Repayments of bank borrowings








(7,875
)

(7,875
)

(763,000
)




(36,484
)

(799,484
)Net activity in investments from subsidiaries


(40,289
)

1,839


38,450





(42,729
)

25,262


17,467


Other, net


13,392


(794
)

2,829


15,427


(24,766
)

(2,517
)

3,326


(23,957
)Net cash (used) provided by financing activities


(178,835
)

1,045


41,279


(136,511
)

102,272


22,745


42,165


167,182Effect of exchange rate changes on cash








(38
)

(38
)







(20
)

(20
)Net decrease in cash and cash equivalents


(243,909
)

(377
)

(9,157
)

(253,443
)

(761
)

(53
)

(535
)

(1,349
)Cash and cash equivalents at beginning of period


456,978


379


9,864


467,221


1,226


74


905


2,205Cash and cash equivalents at end of period

$
213,069


2


707


213,778


465


21


370


856


26

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Table of Contents



Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Forest Oil Corporation ("Forest") is an independent oil and gas company engaged in the acquisition, exploration, development, and
production of natural gas and liquids primarily in North America. Forest was incorporated in New York in 1924, as the successor to a company formed in 1916, and has been a publicly held company since
1969. Unless the context otherwise indicates, references in this quarterly report on Form 10-Q to "Forest," "we," "ours," "us," or like terms refer to Forest Oil Corporation and its
subsidiaries.

We
currently conduct our operations in three geographical segments: the United States, Canada, and International. Our core operational areas, where the majority of our exploration and
development activities are planned in 2010, are the Texas Panhandle area, the East Texas / North Louisiana area, and the Canadian Deep Basin area in Alberta and British Columbia. Our total estimated
proved reserves as of December 31, 2009 were approximately 2,121 Bcfe. At December 31, 2009, approximately 83% of our estimated proved oil and natural gas reserves were in the United
States, approximately 15% were in Canada, and approximately 2% were in Italy. Approximately 80% of our estimated proved reserves were natural gas as of December 31, 2009. See Note 11 to
the Condensed Consolidated Financial Statements for additional information about our geographical segments.

The
following discussion and analysis should be read in conjunction with Forest's Condensed Consolidated Financial Statements and Notes thereto, the information under the heading
"Forward-Looking Statements" below, and the information included or incorporated by reference in Forest's 2009 Annual Report on Form 10-K under the headings "Risk Factors," and
"Management's Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies, Estimates, Judgments, and Assumptions."

First Quarter 2010 Summary

Forest's first quarter 2010 highlights and other significant items were as follows:



RESULTS OF OPERATIONS

Forest reported net earnings of $109 million in the first quarter of 2010, or $.97 per diluted share, compared to a net loss of
$1.2 billion, or $12.32 per diluted share, in the first quarter 2009. The increase in net earnings in the first quarter 2010 compared to the first quarter 2009 was primarily due to a
$1.6 billion non-cash ceiling test write-down recorded in the first quarter 2009 which was caused by the significant decline in spot natural gas prices at
March 31, 2009. Higher realized oil and gas prices in the first quarter 2010 as compared to the first quarter 2009 also contributed to the increase in net

27

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Table of Contents

earnings;
however, the increase in realized prices was somewhat offset by a decrease in realized gains on derivative instruments and a decrease in production between the two periods due to
non-core oil and gas property divestitures in 2009. Forest's earnings before interest expense; income taxes; depletion, depreciation, and amortization expense; and certain other items
("Adjusted EBITDA"), were $171 million and $193 million for the three months ended March 31, 2010 and 2009, respectively. The fluctuation in Adjusted EBITDA between the two
periods was primarily driven by changes in oil and gas revenues and realized gains and losses on oil and gas derivative instruments, each as discussed below. Adjusted EBITDA is not considered a
performance measure under U.S. Generally Accepted Accounting Principles ("GAAP") and reference should be made to"Reconciliation of Non-GAAP
Measures"at the end of this Item 2 for further explanation of this performance measure, as well as a reconciliation to the most directly comparable GAAP measure.
Discussion of the components of the changes in our quarterly results follows.

Oil and Gas Production and Revenues

Oil and gas production volumes, revenues, and average sales prices by product and location for the three months ended March 31,
2010 and 2009 are set forth in the table below.

Three Months Ended March 31,2010

2009Gas

Oil

NGLs

Total

Gas

Oil

NGLs

Total(MMcf)

(MBbls)

(MBbls)

(MMcfe)

(MMcf)

(MBbls)

(MBbls)

(MMcfe)Production volumes:United States


24,107


502


677


31,181


32,120


937


810


42,602Canada


4,979


180


47


6,341


5,468


168


64


6,860Totals


29,086


682


724


37,522


37,588


1,105


874


49,462Revenues (in thousands):United States

$
119,095


38,113


27,114


184,322


115,605


35,100


15,647


166,352Canada


22,734


12,475


2,198


37,407


20,841


5,660


1,806


28,307Totals

$
141,829


50,588


29,312


221,729


136,446


40,760


17,453


194,659Average sales price per unit:United States

$
4.94


75.92


40.05


5.91


3.60


37.46


19.32


3.90Canada


4.57


69.31


46.77


5.90


3.81


33.69


28.22


4.13Totals

$
4.88


74.18


40.49


5.91


3.63


36.89


19.97


3.94


Net
oil and gas production in the first quarter 2010 was 37.5 Bcfe, or an average of 417 MMcfe per day, a 24% decrease from 49.5 Bcfe, or an average of 550 MMcfe per day, in the first
quarter 2009. The decrease in oil and gas production for the comparable three month periods was primarily due to non-core oil and gas property divestitures that occurred in late 2009. Oil
and gas revenues were $222 million in the first quarter 2010, a 14% increase as compared to $195 million in the first quarter 2009. The increase in oil and gas revenues between the
comparable three month periods was primarily due to a 50% increase in average realized sales prices partially offset by the decrease in production discussed above.

28

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Table of Contents

Oil and Gas Production Expense

The table below sets forth the detail of oil and gas production expense for the three months ended March 31, 2010 and 2009.

Three Months Ended
March 31,2010

2009(In Thousands,
Except
Per Mcfe Data)Production expense:Lease operating expenses

$
29,102


41,231Production and property taxes


11,428


11,695Transportation and processing costs


4,859


5,244Production expense

$
45,389


58,170Production expense per Mcfe:Lease operating expenses

$
.78


.83Production and property taxes


.30


.24Transportation and processing costs


.13


.11Production expense per Mcfe

$
1.21


1.18


Lease
operating expenses in the first quarter 2010 were $29 million, or $.78 per Mcfe, compared to $41 million, or $.83 per Mcfe, in the first quarter 2009. The
$12 million decrease in lease operating expense was due to the non-core oil and gas property divestitures that occurred during 2009 as well as cost control initiatives.

Production
and property taxes, which primarily consist of severance taxes paid on the value of the oil and gas produced, generally fluctuate proportionately to our oil and gas revenues.
As a percentage of oil and natural gas revenue, production and property taxes were 5.2% and 6.0% for the three months ended March 31, 2010 and 2009, respectively. Normal fluctuations occur in
the percentage between periods based upon the timing of approval of incentive tax credits in Texas, changes in tax rates, and changes in the assessed values of property and equipment for purposes of
ad valorem taxes.

Transportation
and processing costs of $5 million in the first quarter 2010 were consistent with the first quarter of 2009 despite the reduction in transportation and processing
costs associated with the 2009 non-core property divestitures due to slightly higher processing costs in other areas.

General and Administrative Expense

The following table summarizes the components of general and administrative expense incurred during the periods indicated.

Three Months Ended
March 31,2010

2009(In Thousands)Stock-based compensation costs

$
8,450


6,373Other general and administrative costs


22,413


20,157General and administrative costs capitalized


(12,110
)

(10,445
)General and administrative expense

$
18,753


16,085


29

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Table of Contents

General
and administrative expense in the first quarter 2010 was $19 million compared to $16 million in the first quarter 2009. The $3 million increase in general
and administrative expense in the comparable three month periods was primarily due to increased employee compensation, including higher incentive stock-based compensation costs recognized in
connection with the increase in Forest's common stock price during the first quarter of 2010. The percentage of general and administrative costs capitalized under the full cost method of accounting
was consistent between the comparable periods at 39%.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization expense in the first quarter 2010 was $52 million, or $1.39 per Mcfe, compared to
$105 million, or $2.11 per Mcfe, in the first quarter 2009. The per-unit decrease for the comparable three month periods was primarily due to the oil and gas property divestitures
that occurred during 2009 and due to a $1.6 billion non-cash ceiling test write-down recorded in the first quarter 2009.

Ceiling Test Write-Down of Oil and Gas Properties

In the first quarter 2009, Forest recorded a $1.6 billion ceiling test write-down related to its United States and
Canadian cost centers pursuant to the ceiling test limitation prescribed by the Securities and Exchange Commission ("SEC") for companies using the full cost method of accounting. The
write-down was primarily a result of a significant decline in natural gas prices in the first quarter of 2009. The March 31, 2009 spot price for natural gas was $3.63 per MMBtu
compared to $5.71 at December 31, 2008. Our March 31, 2010 ceiling test calculation, which was calculated using $3.99 per MMBtu and $70.09 per barrel, which are the average natural gas
and oil prices, respectively, from the twelve months prior to March 31, 2010, did not result in a ceiling test write-down.

Interest Expense

The following table summarizes interest expense incurred during the periods indicated.

Three Months Ended
March 31,2010

2009(In Thousands)Interest costs

$
40,825


39,948Interest costs capitalized


(2,782
)

(3,403
)Interest expense

$
38,043


36,545


Interest
expense in the first quarter 2010 totaled $38 million compared to $37 million in the first quarter 2009. Although our outstanding debt decreased to
$1.9 billion as of March 31, 2010 from $2.9 billion as of March 31, 2009, interest expense did not decrease proportionately given the fact that the majority of the over
$1 billion debt reduction was attributable to a reduction of borrowings under our bank credit facilities (which had a variable interest rate that averaged less than 2% in the first quarter of
2009).

In
order to effectively reduce the concentration of fixed-rate debt anticipated after the completion of our 2009 oil and gas property divestiture program and the related
reduction in outstanding debt, Forest entered into fixed-to-floating interest rate swaps under which it has swapped, as of March 31, 2010, $500 million notional
amount of 8.5% fixed-rate debt for an equal amount of variable rate debt with a weighted-average rate equal to the 1-month LIBOR plus approximately 5.9%. Forest recognized
approximately $3 million of realized gains under these interest rate swap arrangements during the first quarter of 2010. These gains are recorded as realized gains on derivatives rather than as
a reduction to interest expense since Forest has not elected to use hedge accounting. See Note 8 to the Condensed Consolidated Financial Statements for more information on our interest rate
derivatives.

30

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Table of Contents

Realized and Unrealized Gains and Losses on Derivative Instruments

The table below sets forth realized and unrealized gains and losses on derivatives recognized under "Costs, expenses, and other" in our
Condensed Consolidated Statements of Operations for the periods indicated. See Note 7 and Note 8 to the Condensed Consolidated Financial Statements for more information on our derivative
instruments.

Three Months Ended
March 31,2010

2009(In Thousands)Realized losses (gains) on derivatives, net:Oil

$
738


(10,449
)Gas


(7,186
)

(60,816
)Interest


(3,521
)

(524
)Subtotal realized (gains) on derivatives, net


(9,969
)

(71,789
)Unrealized losses (gains) on derivatives, net:Oil


1,553


5,567Gas


(81,175
)

(71,351
)Interest


(3,620
)

(1,755
)Subtotal unrealized (gains) on derivatives, net


(83,242
)

(67,539
)Realized and unrealized (gains) on derivatives, net

$
(93,211
)

(139,328
)


Other, Net

The table below sets forth the components of "Other, net" in our Condensed Consolidated Statements of Operations for the periods
indicated.

Three Months Ended
March 31,2010

2009(In Thousands)Unrealized foreign currency exchange (gains) losses, net

$
(6,650
)

3,539Unrealized losses on other investments, net





2,327(Gain) on debt extinguishment, net


(4,578
)

Other, net


1,395


3,217$
(9,833
)

9,083


Foreign Currency Exchange

Unrealized foreign currency exchange gains and losses relate to outstanding intercompany indebtedness and advances, which are
denominated in U.S. dollars, between Forest Oil Corporation and our wholly-owned Canadian subsidiary.

Unrealized Loss on Other Investments

Unrealized losses on other investments relate to fair value adjustments to the shares of Pacific Energy Resources, Ltd.
("PERL") common stock and the zero coupon senior subordinated note from PERL due 2014, which were received as a portion of the total consideration for the sale of our Alaska assets in
August 2007. See Note 7 to the Condensed Consolidated Financial Statements for more information on these investments.

31

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Table of Contents

Gain on Debt Extinguishment

The net gain on debt extinguishment relates to the redemption in January 2010 of all $150 million of our 73/4%
senior notes due 2014 at 101.292% of par. The net gain was driven by the write-off of unamortized deferred gains on the termination of interest rate swaps. See Note 4 to the
Condensed Consolidated Financial Statements.

Current and Deferred Income Tax

Three Months Ended
March 31,2010

2009(In Thousands, Except
Percentages)Current income tax

$
717


1,268Deferred income tax


58,694


(291,615
)Total income tax

$
59,411


(290,347
)Effective tax rate


35
%

20
%


Our
combined U.S. and Canadian effective tax rate generally approximates 35% to 36% but will fluctuate based on the percentage of pre-tax income generated in the U.S. versus
Canada. Our effective income tax rate was approximately 35% for the three months ended March 31, 2010 and 20% for the three months ended March 31, 2009. The significant variance between
the effective tax rate in 2009 of 20% and our normal effective rate was primarily due to the valuation allowance placed on a portion of our deferred tax assets in the United States as of
March 31, 2009. See Note 9 to the Condensed Consolidated Financial Statements for a reconciliation of our income taxes at the statutory U.S. federal rate to income taxes at our effective
rate for each period presented.

LIQUIDITY AND CAPITAL RESOURCES

Our exploration, development, and acquisition activities require us to make significant operating and capital expenditures.
Historically, we have used cash flow from operations and our bank credit facilities as our primary sources of liquidity. To fund large and other exceptional transactions, such as acquisitions and debt
refinancing transactions, we have looked to the private and public capital markets as another source of financing and, as market conditions have permitted, we have engaged in asset monetization
transactions.

Changes
in the market prices for oil and natural gas directly impact our level of cash flow generated from operations. For the quarter ended March 31, 2010, natural gas accounted
for approximately 78% of our total oil and gas production and, as a result, our operations and cash flow are more sensitive to fluctuations in the market price for natural gas than to fluctuations in
the market price for oil. We employ a commodity hedging strategy as an attempt to moderate the effects of wide fluctuations in commodity prices on our cash flow. As of April 30, 2010, we had
hedged, via commodity swaps and collar instruments, approximately 86 Bcfe of our total 2010 production and 7 Bcfe of our total 2011 oil production. This level of hedging will provide a measure of
certainty of the cash flow that we will receive for a portion of our production in 2010 and 2011. For further information concerning our derivative contracts, see
Item 3"Quantitative and Qualitative Disclosures about Market RiskCommodity Price Risk" below.

The
other primary source of liquidity is our combined U.S. and Canadian credit facilities, which had an aggregate borrowing base of $1.3 billion as of March 31, 2010. These
facilities are used to fund daily operations and to fund acquisitions and refinance debt, as needed and if available. The credit facilities are secured by a portion of our assets and mature in June
2012. See"Bank Credit Facilities"

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below
for further details. We had no amounts drawn on our credit facilities as of March 31, 2010 and April 30, 2010.

The
public and private capital markets have historically served as our primary source of financing to fund large acquisitions and other exceptional transactions. In the past, we have
issued debt and equity in both the public and private capital markets. For example, in February 2009, we issued $600 million principal amount of 81/2% senior notes due 2014 in a
private offering for net proceeds of $560 million and in May 2009, we issued approximately 14 million shares of common stock for net proceeds of $256 million. Our ability to
access the debt and equity capital markets on economical terms is affected by general economic conditions, the domestic and global financial markets, the credit ratings assigned to our debt by
independent credit rating agencies, our operational and financial performance, the value and performance of our equity and debt securities, prevailing commodity prices, and other macroeconomic factors
outside of our control.

We
also have engaged in asset dispositions as a means of generating additional cash to fund expenditures and enhance our financial flexibility. For example, during 2009, we sold certain
non-strategic assets for approximately $1.1 billion, a portion of which proceeds were used to pay off the outstanding balances under our credit facilities in 2009 and redeem our
73/4% senior notes due 2014 in January 2010.

We
believe that our current cash and cash equivalents, cash flows provided by operating activities, and $1.3 billion of funds available under our credit facilities will be
sufficient to fund our normal recurring
operating needs, anticipated capital expenditures, and our contractual obligations. However, if our revenue and cash flow decrease in the future as a result of a deterioration in domestic and global
economic conditions or a significant decline in commodity prices, we may elect to reduce our planned capital expenditures. We believe that this financial flexibility to adjust our spending levels will
provide us with sufficient liquidity to meet our financial obligations should economic conditions deteriorate.

Bank Credit Facilities

Our bank credit facilities consist of a $1.65 billion U.S. credit facility (the "U.S. Facility") with a syndicate of banks led
by JPMorgan Chase Bank, N.A., and a $150 million Canadian credit facility (the "Canadian Facility," and together with the U.S. Facility, the "Credit Facilities") with a syndicate of banks led
by JPMorgan Chase Bank, N.A., Toronto Branch. The Credit Facilities will mature in June 2012.

Our
availability under the Credit Facilities is governed by a borrowing base (the "Global Borrowing Base"), which was $1.3 billion as of March 31, 2010. We currently have
allocated $1.155 billion to the borrowing base under the U.S. Facility and $145 million to the borrowing base under the Canadian Facility. The determination of the Global Borrowing Base
is made by the lenders in their sole discretion, on a semi-annual basis, taking into consideration the estimated value of our oil and gas properties based on pricing models determined by
the lenders at such time, in accordance with the lenders' customary practices for oil and gas loans. The available borrowing amount under the Credit Facilities could increase or decrease based on such
redetermination. In April 2010, the lenders reaffirmed the borrowing base at $1.3 billion and the next redetermination is expected to occur in the third or fourth quarter of 2010. In addition
to the semi-annual redeterminations, Forest and the lenders each have discretion at any time, but not more often than once during a calendar year, to have the Global Borrowing Base
redetermined. The Global Borrowing Base is also subject to automatic adjustments if certain events occur.

From
time to time, we engage in other transactions with a number of the lenders under the Credit Facilities. Such lenders or their affiliates may serve as underwriters or initial
purchasers of our debt and equity securities, act as agent or directly purchase our production, or serve as counterparties to our commodity and interest rate derivative agreements. As of
April 30, 2010, our primary derivative

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counterparties
are lenders and their affiliates, with six such lenders accounting for approximately 76 Bcfe, or 88% of our 2010 hedged production and approximately 7 Bcfe, or 100% of our 2011 hedged
production. Our obligations under our existing derivative agreements with our lenders are secured by the security documents executed by the parties under our Credit Facilities. See
Part 3"Quantitative and Qualitative Disclosures about Market RiskCommodity Price Risk," below for additional details concerning our derivative arrangements.

As
of March 31, 2010 and April 30, 2010, there were no outstanding borrowings under our Credit Facilities. The Company had used the Credit Facilities for approximately
$2.4 million in letters of credit at March 31, 2010.

Historical Cash Flow

Net cash provided by operating activities, net cash used by investing activities, and net cash (used) provided by financing activities
for the three months ended March 31, 2010 and 2009 were as follows:

Three Months Ended
March 31,2010

2009(In Thousands)Net cash provided by operating activities

$
65,678


148,366Net cash (used) by investing activities


(182,572
)

(316,877
)Net cash (used) provided by financing activities


(136,511
)

167,182


Net
cash provided by operating activities is primarily affected by production volumes, commodity prices, the effects of settlements of our derivative contracts, and changes in working
capital. The decrease in net cash provided by operating activities in the three months ended March 31, 2010 compared to the same period of 2009 was primarily due to an increased investment in
net operating assets (i.e., working capital) in 2010 as compared to 2009. Discretionary cash flow, which is a non-GAAP liquidity measure that management uses to evaluate cash flow
from operations before changes in working capital, was $133 million and $157 million for the three months ended March 31, 2010 and 2009, respectively. The decrease in
discretionary cash flow between the two periods was primarily driven by a net reduction in oil and gas revenues and realized gains and losses on oil and gas derivative instruments. Reference should be
made to "Reconciliation of Non-GAAP Measures" at the end of this Item 2 for further explanation of this non-GAAP
liquidity measure.

Net
cash used by investing activities is primarily comprised of expenditures for the exploration and development of oil and gas properties net of proceeds from the dispositions of oil
and gas properties. The decrease in net cash used by investing activities in the three months ended March 31, 2010 compared to the same period of 2009 was primarily due to less cash paid for
capital expenditures in the

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first
quarter 2010. See "Capital Expenditures" below. The major components of cash used by investing activities for the three months ended
March 31, 2010 and 2009 were as follows:

Three Months Ended
March 31,2010

2009(In Thousands)Exploration and development costs(1)

$
(191,754
)

(301,329
)Proceeds from sale of assets


10,766


6,292Acquisition of other fixed assets


(1,584
)

(21,840
)Net cash (used) by investing activities

$
(182,572
)

(316,877
)


(1)Cash paid for exploration and development costs as reflected in the Condensed Consolidated Statements
of Cash Flows differs from the reported capital expenditures in the "Capital Expenditures" table below due to the timing of when the capital expenditures
are incurred and when the actual cash payment is made.


Net cash used by financing activities in the three months ended March 31, 2010 included the redemption of the 73/4% senior
notes for $152 million. Net cash provided by financing activities in the three months ended March 31, 2009 included the issuance of the 81/2% senior notes for net proceeds
of $560 million, offset by net repayments of bank borrowings of $369 million.

Capital Expenditures

Expenditures for property exploration and development were as follows:

Three Months Ended
March 31,2010

2009(In Thousands)Exploration and development costs:Direct costs

$
260,359


238,953Overhead capitalized


12,110


10,445Interest capitalized


2,782


3,403Total capital expenditures(1)

$
275,251


252,801


(1)Total capital expenditures include cash expenditures, accrued expenditures, and non-cash
capital expenditures including stock-based compensation capitalized under the full cost method of accounting. Total capital expenditures also include estimated discounted asset retirement obligations
of $(9.6) million and $2.5 million for the three months ended March 31, 2010 and 2009, respectively.


FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than statements
of historical or present facts, that address activities, events, outcomes, and other matters that Forest plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates,
or anticipates (and other similar expressions) will, should, or may occur in the future. Generally, the words "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes,"
"seeks," "estimates," "may," "will," "could," "should," "future," "potential," "continue," variations of such words, and similar expressions identify forward-looking statements. These forward-looking
statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

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These forward-looking statements appear in a number of places in this report and include statements with respect to, among other
things:



We
believe the expectations and forecasts reflected in our forward-looking statements are reasonable, but we can give no assurance that they will prove to be correct. We caution you that
these forward-looking statements can be affected by inaccurate assumptions and are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond
our control, incident to the exploration for and development, production, and sale of oil and gas. When considering forward-looking statements, you should keep in mind the risk factors and other
cautionary statements described under the heading "Risk Factors" included or incorporated in Part I of our 2009 Annual Report on Form 10-K.

Should
one or more of the risks or uncertainties described above or elsewhere in this Form 10-Q occur, or should underlying assumptions prove incorrect, our actual
results and plans could differ materially from those expressed in any forward-looking statements.

We
caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, and we undertake no obligation to update this information
to reflect events or circumstances after the filing of this report with the SEC, except as required by law. All forward-looking statements, expressed or implied, included in this
Form 10-Q and attributable to Forest are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with
any subsequent written or oral forward-looking statements that we may make or persons acting on our behalf may issue.

RECONCILIATION OF NON-GAAP MEASURES

Adjusted EBITDA

In addition to reporting net earnings as defined under GAAP, Forest also presents adjusted earnings before interest, taxes,
depreciation, depletion, and amortization ("Adjusted EBITDA"), which is a non-GAAP performance measure. Adjusted EBITDA consists of net earnings (loss) before interest expense, income
taxes, depreciation, depletion, and amortization, as well as other items such as ceiling test write-downs of oil and gas properties, unrealized gains on derivative instruments, unrealized foreign

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currency
exchange (gains) losses, unrealized losses on other investments, accretion of asset retirement obligations, and other items presented in the table below. Adjusted EBITDA does not represent
and should not be considered an alternative to GAAP measurements, such as net earnings (its most comparable GAAP financial measure), and Forest's calculations thereof may not be comparable to
similarly titled measures reported by other companies. By eliminating interest, income taxes, depreciation, depletion, amortization, and other items, Forest believes the result is a useful measure
across time in evaluating its fundamental core operating performance. Management also uses Adjusted EBITDA to manage its business, including in preparing its annual operating budget and financial
projections. Forest believes that Adjusted EBITDA is also useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their
evaluation of
companies in similar industries. As indicated, Adjusted EBITDA does not include interest expense on borrowed money or depletion and depreciation expense on capital assets or the payment of income
taxes, which are necessary elements of Forest's operations. Because Adjusted EBITDA does not account for these and other expenses, its utility as a measure of Forest's operating performance has
material limitations. Because of these limitations, Forest's management does not view Adjusted EBITDA in isolation and also uses other measurements, such as net earnings and revenues to measure
operating performance. The following table provides a reconciliation of net earnings (loss), the most directly comparable GAAP measure, to Adjusted EBITDA for the periods presented.

Three Months Ended
March 31,2010

2009(In Thousands)Net earnings (loss)

$
109,162


(1,177,773
)Income tax expense (benefit)


59,411


(290,347
)Unrealized (gains) on derivative instruments, net


(83,242
)

(67,539
)Unrealized foreign currency exchange (gains) losses, net


(6,650
)

3,539Unrealized losses on other investments, net





2,327Interest expense


38,043


36,545(Gain) on debt extinguishment, net


(4,578
)

Accretion of asset retirement obligations


1,839


2,038Ceiling test write-down of oil and gas properties





1,575,843Depreciation, depletion, and amortization


52,312


104,552Stock-based compensation


4,654


3,947Adjusted EBITDA

$
170,951


193,132


Discretionary Cash Flow

In addition to reporting cash provided by operating activities as defined under GAAP, Forest also presents discretionary cash flow,
which is a non-GAAP liquidity measure. Discretionary cash flow consists of cash provided by operating activities before changes in working capital items. Management uses discretionary cash
flow as a measure of liquidity and believes it provides useful information to investors because it assesses cash flow from operations for each period before changes in working capital, which
fluctuates due to the timing of collections of receivables and the settlements of liabilities. This measure does not represent the residual cash flow available for discretionary expenditures, since
Forest has mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure. The following table provides a reconciliation of cash
provided by operating

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activities,
the most directly comparable GAAP measure, to discretionary cash flow for the periods presented.

Three Months Ended
March 31,2010

2009(In Thousands)Net cash provided by operating activities

$
65,678


148,366Changes in working capital:Accounts receivable


5,055


(43,280
)Other current assets


2,874


(10,136
)Accounts payable and accrued liabilities


66,493


89,982Accrued interest and other current liabilities


(6,813
)

(28,426
)Discretionary cash flow

$
133,287


156,506




Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including the effects of adverse changes in commodity prices, interest rates, and foreign currency
exchange rates as discussed below.

Commodity Price Risk

We produce and sell natural gas, crude oil, and natural gas liquids for our own account in the United States and Canada. As a result,
our financial results are affected when prices for these commodities fluctuate. Such effects can be significant. In order to reduce the impact of fluctuations in commodity prices, or to protect the
economics of property acquisitions, we make use of an oil and gas hedging strategy. Under our hedging strategy, we enter into commodity swaps, collars, and basis swaps with counterparties who, in
general, are participants in our credit facilities. These arrangements, which are based on prices available in the financial markets at the time the contracts are entered into, are settled in cash and
do not require physical deliveries of hydrocarbons.

Swaps

In a typical commodity swap agreement, we receive the difference between a fixed price per unit of production and a price based on an
agreed upon published, third-party index if the index price is lower than the fixed price. If the index price is higher, we pay the difference. By entering into swap agreements, we effectively fix the
price that we will receive in the future for the hedged production. Our current swaps are settled in cash on a monthly basis. As of March 31, 2010, we had entered into the following swaps:

SwapsNatural Gas (NYMEX HH)

Oil (NYMEX WTI)Remaining Swap Term

Bbtu
per Day

Weighted Average
Hedged Price
per MMBtu

Fair Value
(In Thousands)

Barrels
per Day

Weighted Average
Hedged Price
per Bbl

Fair Value
(In Thousands)April 2010 - December 2010


200

$
6.28

$
110,289


3,000

$
76.06

$
(7,299
)


Subsequent to March 31, 2010, through April 30, 2010, we entered into an additional gas swap covering 10 Bbtu per day for the period
May 2010 through December 2010 at a hedged price of $4.505 per MMBtu.

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Collars

Forest also enters into costless collar agreements with third parties. A collar agreement is similar to a swap agreement, except that
we receive the difference between the floor price and the index price only if the index price is below the floor price and we pay the difference between the ceiling price and the index price only if
the index price is above the ceiling price. As of March 31, 2010, we had entered into the following collars:

Oil Collars (NYMEX WTI)Remaining Collar Term

Barrels
Per Day

Weighted Average
Hedged Floor and
Ceiling Price
per Bbl

Fair Value
(In Thousands)April 2010 - December 2010


2,000

$
60.00/98.50

$
(696
)Calendar 2011


2,000


75.00/92.80


(1,284
)


Subsequent
to March 31, 2010, through April 30, 2010, we entered into an additional oil collar covering 1,000 barrels per day for Calendar 2011 at a hedged floor and
ceiling price per barrel of $75.00 and $105.00, respectively.

Basis Swaps

Forest also uses basis swaps in connection with natural gas swaps in order to fix the price differential between the NYMEX Henry Hub
price and the index price at which the natural gas production is sold. As of March 31, 2010, we had entered into the following basis swaps:

Basis SwapsRemaining Swap Term

Index

Bbtu
Per Day

Weighted
Average
Hedged Price
Differential
per MMBtu

Fair Value
(In Thousands)April 2010 - December 2010

Centerpoint


30

$
(.95
)
$
(5,983
)April 2010 - December 2010

Houston Ship Channel


50


(.29
)

(3,512
)April 2010 - December 2010

Mid Continent


60


(1.04
)

(13,946
)April 2010 - December 2010

NGPL TXOK


40


(.44
)

(3,336
)


The
estimated fair value of all our commodity derivative instruments based on various inputs, including published forward prices, at March 31, 2010 was a net asset of
approximately $74.2 million.

Interest Rate Risk

Forest periodically enters into interest rate derivative agreements in an attempt to manage the mix of fixed and floating interest
rates within its debt portfolio. As of March 31, 2010, we had entered into the following interest rate swaps:

Interest Rate SwapsRemaining Swap Term

Notional
Amount
(In Thousands)

Weighted Average
Floating Rate

Weighted
Average
Fixed
Rate

Fair Value
(In Thousands)April 2010 - February 2014

$
500,000

1 month LIBOR + 5.89%


8.50
%
$
3,080


In
addition to the interest rate swaps, we periodically enter into interest rate swaptions that enable the counterparties to exercise options to enter into interest rate swaps with us in
exchange for premiums paid to us. The premiums received on these swaptions are amortized as realized gains on derivatives over the terms of the related swaptions. We enter into these interest rate
swaptions because

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our
targeted floating interest rates are not attainable at the time in the interest rate swap market, yet premiums are available from counterparties for the option to swap our 8.5% fixed rate for the
floating rates we had targeted. The table below sets forth our outstanding interest rate swaption as of March 31, 2010.

Interest Rate SwaptionOption Term

Swap Term

Premium
Received
(In Thousands)

Notional
Amount
(In Thousands)

Floating Rate

Fixed
Rate

Fair Value
(In Thousands)Jan 2010 - Apr 2010

May 2010 - Feb 2014

$
350

$
100,000

3 month LIBOR + 5.50%


8.50
%
$
(89
)


In April 2010, the interest rate swaption in the table above was unexercised and we entered into an additional interest rate swaption as set forth
in the table below.

Interest Rate SwaptionOption Term

Swap Term

Premium
Received
(In Thousands)

Notional
Amount
(In Thousands)

Floating Rate

Fixed
RateApril 2010 - August 2010

Aug 2010 - Feb 2014

$
634

$
100,000

3 month LIBOR + 5.75%


8.50
%


The estimated fair value of all our interest rate derivative instruments was approximately $3.0 million as of March 31, 2010.

Derivative Fair Value Reconciliation

The table below sets forth the changes that occurred in the fair values of our open derivative contracts during the three months ended
March 31, 2010, beginning with the fair value of our derivative contracts on December 31, 2009. It has been our experience that commodity prices are subject to large fluctuations, and we
expect this volatility to continue. Due to the volatility of oil and natural gas prices, the estimated fair values of our commodity derivative instruments are subject to large fluctuations from period
to period. Actual gains and losses recognized related to our commodity derivative instruments will likely differ from those estimated at March 31, 2010 and will depend exclusively on the price
of the commodities on the specified settlement dates provided by the derivative contracts.

Fair Value of Derivative ContractsCommodity

Interest Rate

Total(In Thousands)As of December 31, 2009

$
(5,389
)

(596
)

(5,985
)Premiums received





(350
)

(350
)Net increase in fair value


86,070


7,458


93,528Net contract (gains) recognized


(6,448
)

(3,521
)

(9,969
)As of March 31, 2010

$
74,233


2,991


77,224


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Interest Rates on Borrowings

The following table presents principal amounts and related interest rates by year of maturity for Forest's debt obligations at
March 31, 2010.

2011

2013

2014

2019

Total(Dollar Amounts in Thousands)Long-term debt:Fixed rate

$
285,000


112


600,000


1,000,000


1,885,112Coupon interest rate


8.00
%

7.00
%

8.50
%

7.25
%

7.76
%Effective interest rate(1)


7.25
%

7.50
%

9.47
%

7.24
%

7.95
%


(1)The
effective interest rates on the senior notes differ from the coupon interest rates due to the amortization of related discounts or
premiums on the notes. The effective interest rate on the 8% senior notes due 2011 is further reduced from the coupon rate as a result of amortization of deferred gains related to interest rate swaps
terminated in 2002 and 2003.


Foreign Currency Exchange Risk

We conduct business in several foreign currencies and thus are subject to foreign currency exchange rate risk on cash flows related to
sales, expenses, financing, and investing transactions. We have not entered into any foreign currency forward contracts or other similar financial instruments to manage this risk. Expenditures
incurred relative to the foreign concessions held by Forest outside of North America have been primarily United States dollar-denominated, as have cash proceeds related to property sales and farmout
arrangements. Substantially all of our Canadian revenues and costs are denominated in Canadian dollars. While the value of the Canadian dollar does fluctuate in relation to the U.S. dollar, we believe
that any currency risk associated with our Canadian operations would not have a material impact on our results of operations.

Item 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to Forest and its consolidated
subsidiaries is made known to the Officers who certify Forest's financial reports and the Board of Directors.

Our
Chief Executive Officer, H. Craig Clark, and our Chief Financial Officer, Michael N. Kennedy, evaluated the effectiveness of our disclosure controls and procedures, as defined in
Rules 13a15(e) and 15d15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the quarterly period ended March 31,
2010 (the "Evaluation Date"). Based on this evaluation, they believe that as of the Evaluation Date our disclosure controls and procedures were effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in the SEC's
rules and forms; and (ii) is accumulated and communicated to Forest's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosures.

Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting that occurred during our quarterly period ended
March 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION



Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

There were no sales of unregistered equity securities during the period covered by this report.

Issuer Purchases of Equity Securities

The table below sets forth information regarding repurchases of our common stock during the first quarter 2010. The shares repurchased
represent shares of our common stock that employees elected to surrender to Forest to satisfy their tax withholding obligations upon the vesting of shares of restricted stock and phantom stock units
that are settled in shares. Forest does not consider this a share buyback program.

Period

Total # of Shares
Purchased

Average Price
Per Share

Total # of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum # (or
Approximate Dollar
Value) of Shares that
May Yet be Purchased
Under the Plans or
ProgramsJanuary 2010


4,656

$
23.52





February 2010


112


26.26





March 2010


1,374


27.54





First Quarter Total


6,142

$
24.47








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Item 6.    EXHIBITS



3.1

Restated Certificate of Incorporation of Forest Oil Corporation dated October 14, 1993, incorporated herein by reference to Exhibit 3(i) to Form 10-Q for Forest Oil Corporation for the quarter ended
September 30, 1993 (File No. 0-4597).3.2

Certificate of Amendment of the Restated Certificate of Incorporation, dated as of July 20, 1995, incorporated herein by reference to Exhibit 3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter
ended June 30, 1995 (File No. 0-4597).3.3

Certificate of Amendment of the Certificate of Incorporation, dated as of July 26, 1995, incorporated herein by reference to Exhibit 3(i)(b) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).3.4

Certificate of Amendment of the Certificate of Incorporation dated as of January 5, 1996, incorporated herein by reference to Exhibit 3(i)(c) to Forest Oil Corporation Registration Statement on Form S-2
(File No. 33-64949).3.5

Certificate of Amendment of the Certificate of Incorporation dated as of December 7, 2000, incorporated herein by reference to Exhibit 3(i)(d) to Form 10-K for Forest Oil Corporation for the year ended
December 31, 2000 (File No. 001-13515).3.6

Bylaws of Forest Oil Corporation Restated as of February 14, 2001, as amended by Amendments No. 1, No. 2, No. 3, and No. 4, incorporated herein by reference to Exhibit 3.1 to Form 10-Q
for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).10.1

Forest Oil Corporation 2010 Annual Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated February 18, 2010 (File No. 001-13515)31.1
*
Certification of Principal Executive Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.31.2
*
Certification of Principal Financial Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.32.1
+
Certification of Principal Executive Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.32.2
+
Certification of Principal Financial Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.


*Filed herewith.+Not
considered to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities
of that section.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

FOREST OIL CORPORATION(Registrant)May 5, 2010

By:

/s/ MICHAEL N. KENNEDY Michael N. Kennedy Executive Vice President and
Chief Financial Officer
(on behalf of the Registrant and as
Principal Financial Officer)By:

/s/ VICTOR A. WIND Victor A. Wind Senior Vice President, Chief Accounting Officer
and Corporate Controller
(Principal Accounting Officer)


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Exhibit Index

3.1

Restated Certificate of Incorporation of Forest Oil Corporation dated October 14, 1993, incorporated herein by reference to Exhibit 3(i) to Form 10-Q for Forest Oil Corporation for the quarter ended
September 30, 1993 (File No. 0-4597).3.2

Certificate of Amendment of the Restated Certificate of Incorporation, dated as of July 20, 1995, incorporated herein by reference to Exhibit 3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter
ended June 30, 1995 (File No. 0-4597).3.3

Certificate of Amendment of the Certificate of Incorporation, dated as of July 26, 1995, incorporated herein by reference to Exhibit 3(i)(b) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).3.4

Certificate of Amendment of the Certificate of Incorporation dated as of January 5, 1996, incorporated herein by reference to Exhibit 3(i)(c) to Forest Oil Corporation Registration Statement on Form S-2
(File No. 33-64949).3.5

Certificate of Amendment of the Certificate of Incorporation dated as of December 7, 2000, incorporated herein by reference to Exhibit 3(i)(d) to Form 10-K for Forest Oil Corporation for the year ended
December 31, 2000 (File No. 001-13515).3.6

Bylaws of Forest Oil Corporation Restated as of February 14, 2001, as amended by Amendments No. 1, No. 2, No. 3, and No. 4, incorporated herein by reference to Exhibit 3.1 to Form 10-Q
for Forest Oil Corporation for the quarter ended June 30, 2008 (File No. 001-13515).10.1

Forest Oil Corporation 2010 Annual Incentive Plan, incorporated herein by reference to Exhibit 10.1 to Form 8-K for Forest Oil Corporation dated February 18, 2010 (File No. 001-13515)31.1
*
Certification of Principal Executive Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.31.2
*
Certification of Principal Financial Officer of Forest Oil Corporation as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.32.1
+
Certification of Principal Executive Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.32.2
+
Certification of Principal Financial Officer of Forest Oil Corporation pursuant to 18 U.S.C. §1350.


*Filed herewith.+Not
considered to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities
of that section.


45

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