LONE PINE RESOURCES INC. INITIAL PUBLIC OFFERING

6 Months Ended

Jun. 30, 2011

LONE PINE RESOURCES INC. INITIAL PUBLIC OFFERING

LONE PINE RESOURCES INC. INITIAL PUBLIC OFFERING

(10) LONE PINE RESOURCES INC. INITIAL PUBLIC OFFERING

In December 2010, Forest announced its intention to separate its Canadian operations through an initial public offering of up to 19.9% of the common stock of its wholly-owned subsidiary, Lone Pine, which would hold Forest’s ownership interests in its Canadian operations, followed by a distribution, or spin-off, of the remaining shares of Lone Pine held by Forest to its shareholders.  In May 2011, as part of a corporate restructuring in anticipation of Lone Pine’s initial public offering, LPR Canada declared a stock dividend to Forest which resulted in Forest incurring a dividend tax payable to Canadian federal tax authorities of $28.9 million, which Forest paid in June 2011. This dividend tax is classified within “Income Tax” on the Condensed Consolidated Statement of Operations. On June 1, 2011, Lone Pine completed an initial public offering of 15 million shares of its common stock at a price of $13.00 per share ($12.22 per share, net of underwriting discounts and commissions).  Upon completion of the offering, Forest retained controlling interest in Lone Pine, owning 82% of the outstanding shares of Lone Pine’s common stock.  The net proceeds from the offering received by Lone Pine, after deducting underwriting discounts and commissions and offering expenses, were $178.5 million.  Lone Pine used the net proceeds to pay $29.2 million to Forest as partial consideration for Forest’s contribution to Lone Pine of Forest’s direct and indirect interest in its Canadian operations.  Additionally, Lone Pine used the remaining net proceeds and borrowings under the Canadian Credit Facility to repay Lone Pine’s outstanding indebtedness owed to Forest, consisting of a note payable, intercompany advances, and accrued interest, of $400.5 million.  The spin-off of the remaining shares of Lone Pine held by Forest is expected to occur on or about September 30, 2011; however, Forest retains the right to decide whether to consummate the spin-off at its sole discretion.

The table below sets forth the effects of changes in Forest’s ownership interest in Lone Pine on Forest’s equity.

	Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
	(In Thousands)
Net earnings attributable to Forest Oil Corporation	$	38,910	$	35,580
Transfers from the noncontrolling interest:
Increase in Forest Oil Corporation’s capital surplus for sale of 15,000,000 Lone Pine Resources Inc. common shares	112,879		112,879
Change from net earnings attributable to Forest Oil Corporation and transfers from noncontrolling interest	$	151,789	$	148,459