Filed by Forest Oil Corporation
Pursuant to Rule 425 under the Securities Act of 1933

 

Subject Company:  Forest Oil Corporation
File No. 1-13515

 

These materials are not a substitute for the registration statement that will be filed with the Securities and Exchange Commission in connection with the transaction, or the proxy statement/prospectus-information statement to be mailed to stockholders. Investors are urged to read the proxy statement/prospectus-information statement which will contain important information, including detailed risk factors, when it becomes available. The proxy statement/prospectus-information statement and other documents that will be filed by Forest and Mariner with the Securities and Exchange Commission will be available free of charge at the SEC’s website, www.sec.gov, or by directing a request when such a filing is made to Forest Oil Corporation, 707 17th  Street, Suite 3600, Denver, CO 80202, Attention: Investor Relations; or by directing a request when such a filing is made to Mariner Energy, Inc., 2101 CityWest Blvd., Bldg. 4, Ste. 900, Houston, TX 77042-2831, Attention: Investor Relations.

 

Mariner, Forest and their respective directors, and executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the participants in the solicitation will be set forth in the proxy statement/prospectus-information statement when it becomes available.

 

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[GRAPHIC]

 

THE “NEW” FST

 

Same Leadership. Same Strategies. Same Discipline. Improved Focus.

 

[LOGO]

 

GROWTH

 

PROGRESS

 

MOMENTUM

 

 

September 2005

 



 

THE “NEW” FST – Operations Spin-Off Drives Value

 

                  Innovative transaction provides new optionality and returns value directly to Forest’s shareholders

 

                  Opportunistic tax-free spin / merge of offshore Gulf operations creates two highly focused and valuable enterprises

 

                  Investment in Mariner Energy creates high quality, well positioned GOM independent with excellent track record and growth outlook

 

                  Remaining Forest creates highly-focused onshore resource company to execute a more focused “acquire and exploit” strategy

 

                  Forest’s portfolio of long-life, concentrated assets in high quality basins provides a foundation for sustainable organic growth

 

STREAMLINED ASSET BASE, IMPROVED FOCUS AND

BETTER POSITIONED FOR GROWTH

 

2



 

KEY TRANSACTION TERMS

 

Asset Contribution

 

344 Bcfe of Forest offshore proved reserves (12/31/04)

 

 

 

 

 

 

 

 

 

 

$200 Million of debt

Liability Contribution

 

$50 Million of derivatives at 6/30/2005

 

 

$157 Million of ARO

 

 

 

 

 

 

Tax-free Reverse Morris Trust transaction

Structure

 

Spin-off of offshore Gulf of Mexico operations

 

 

Stock-for-stock merger of “SpinCo” and Mariner

 

 

 

 

Mariner Equity

 

58.2% Forest shareholders

Ownership

 

41.8% Mariner shareholders

 

 

 

 

 

 

Scott D. Josey, Chairman & CEO

Mariner Management

 

7 member board

& Governance

 

2 members to be mutually agreed by Forest and Mariner

 

 

 

 

 

 

 

 

Expected Close

 

Q4 2005 / Q1 2006 (economic effective date of July 1, 2005)*

 


*  Subject to Mariner shareholder vote and SEC registration requirements and Forest bondholder consent

 

3



 

Combination

 

[LOGO]

 

Mariner Contribution

[LOGO]

 

Forest Contribution

[LOGO]

Management

 

Development expertise/personnel

Deepwater, shelf, West Texas assets

 

Underexploited shelf assets

Exploration track record

 

Identified exploitation opportunities

Prospect inventory

 

Cash flow

 

 

 

42% Equity

 

 

58% Equity

ownership

[LOGO]

 

ownership

 

 

 

 

Dynamic GOM player with scale and expertise to effectively compete in the shelf, deep shelf, and deepwater

 

 

Strong cash flow

 

 

Modest debt level

 

Shareholders benefit from the diversity and upside potential intrinsic in these complementary asset bases

 

Blend of exploration and exploitation opportunities

 



 

Exploration Track Record

 

[GRAPHIC]

 

Significant Discoveries….over 80% Internally Generated

 



 

Deepwater Operations Expertise

 

[GRAPHIC]

 



 

Strong Competitive Positioning and Value

 

2004 Proved Reserves

 

2005 Production

 

 

 

[CHART]

 

[CHART]

 

 

 

2005 EV/Proved Reserves

 

2005 EV/Production

 

 

 

[CHART]

 

[CHART]

 


*Reserves are pro-forma for acquisition of Bass Lite

 

Note: Enterprise values as of September 9, 2005

 



 

FOREST OIL’S REMAINING ASSETS

 

[GRAPHIC]

 

Alaska

 

 

 

12/31/04 Reserves (Bcfe)

 

117

 

YTD 2005 Production (MMcfe/d)

 

41

 

12/31/04 Net Acreage (M)

 

1,182

 

Reserve Life

 

7.8

 

Canada

 

 

 

12/31/04 Reserves (Bcfe)

 

152

 

YTD 2005 Production (MMcfe/d)

 

70

 

12/31/04 Net Acreage (M)

 

930

 

Reserve Life

 

5.9

 

Western

 

 

 

12/31/04 Reserves (Bcfe)*

 

643

 

YTD 2005 Production (MMcfe/d)

 

110

 

12/31/04 Net Acreage (M)*

 

254

 

Reserve Life*

 

16.1

 

Southern

 

 

 

12/31/04 Reserves (Bcfe)*

 

198

 

YTD 2005 Production (MMcfe/d)

 

46

 

12/31/04 Net Acreage (M)*

 

147

 

Reserve Life

 

11.8

 

Consolidated

 

 

 

12/31/04 Reserves (Bcfe)*

 

1,110

 

YTD 2005 Production (MMcfe/d)

 

267

 

12/31/04 Net Acreage (M)*

 

7,698

 

Reserve Life

 

11.4

 

 


* Pro Forma for the Buffalo Wallow Acquisition and offshore spin-off

 

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REALIGNING ASSET BASE – “The Perfect Pie”

 

Old Forest Oil

 

New Forest Oil

 

 

 

[CHART]

 

[CHART]

 

 

 

2004 Reserves: 1,454 Bcfe*

 

2004 Reserves: 1,110 Bcfe*

61% Gas

 

55% Gas

75% PD

 

74% PD

 

 

 

[CHART]

 

[CHART]

 

 

 

YTD 2005 Production: 495 MMcfe/d

 

YTD 2005 Production: 267 MMcfe/d

2005 R/P:  8.0

 

2005 R/P:  11.4

 


*  Pro-Forma for the Buffalo Wallow acquisition and offshore spin-off

 

9



 

MAINTAINS CREDIT QUALITY. . .

 

                  Pro forma Forest reduces liabilities by $791 MM as follows:

 

                  $200 MM of debt

                  $157 MM of Asset Retirement Obligation

                  $134 MM Mark-to-Market hedges valued at 9/27/05

                  $300 MM of potential income tax liability

 

                  R/P is significantly lengthened, operational and replacement risk is greatly reduced, and leverage per barrel is positive

 

                  R/P is increased 43% from 8.0 to 11.4 years

                  Proved Developed R/P is increased 40% from 6.0 to 8.4 years

                  (Debt + Future Development Costs) / BOE is reduced

                  Debt / BOE is neutral

                  Elimination of primary hurricane risk

 

                  Pro forma Forest has significant organic growth potential

 

                  Business model will continue to mandate free cash flow

 

                  Net debt target of $600 MM at June 30, 2006

 

10



 

…AND ENHANCES INVESTOR APPEAL

 

                  Uniquely positioned mid-cap with critical mass in multiple high quality basins

 

                  Extensive drilling inventory in Texas Panhandle / Mid-Continent area

                  Large scale Permian footprint and Haley Atoka exposure

                  High quality Alberta Plains and Canadian Foothills inventory

                  Significant Rockies acreage position

                  High impact Onshore Louisiana and Texas exploration

                  Significant acreage in developing Alaska gas

 

                  Well-balanced resource play with visible organic growth profile

 

                  Extensive exploitation inventory; over 2,350 projects

                  Attractive exploration upside; 7.1 million net undeveloped acres

 

                  Successful acquisition and exploitation track record fueling steady replenishment of drilling opportunities

 

                  In excess of $1 billion in strategic acquisitions over last 2 years adding 681 Bcfe at an all-in cost of $1.51 / Mcfe

 

                  Demonstrated ability to be disciplined with capital spending

 

                  Excellent tax loss carryforward position (US $466 MM and Canada $240 MM)

 

11



 

SUSTAINABLE GROWTH PROFILE

 

July 31, 2003:  Implementation of initial “4-Point” Game Plan (focused on balancing the portfolio)

 

[CHART]

 

12



 

EXTENSIVE PROSPECT INVENTORY

 

 

 

Project

 

Net Reserve

 

Key Growth Platforms

 

Inventory

 

Potential (Bcfe)

 

Buffalo Wallow (Texas Panhandle)

 

362

 

396

 

– From 40 to 20-acre spacing

 

 

 

 

 

 

 

 

 

 

 

Permian Basin

 

679

 

565

 

– 27,000 gross acres in Haley Atoka

 

 

 

 

 

 

 

 

 

 

 

Wild River

 

120

 

54

 

– From 640 to 160 acre spacing

 

 

 

 

 

Southern

 

419

 

513

 

– Frio, Yegua, Wilcox, Vicksburg trend

 

 

 

 

 

 

 

 

 

 

 

Rockies (Tight gas & Williston oil)

 

371

 

243

 

 

 

 

 

 

 

Onshore Cook Inlet Gas

 

32

 

1,875

 

 

 

 

 

 

 

Total

 

1,983

 

3,646

 

 

13



 

WESTERN BUSINESS UNIT - Buffalo Wallow

 

[GRAPHIC]

 

                  120 Bcfe of estimated proved reserves and production of 29 MMcfe/d

 

                  370 drillsites identified (40 identified as PUD)

 

                  Field approved for 20 acre downspacing

 

                  Production increased 45% since acquisition (100% success rate)

 

                  Production expected to increase to 40 to 45 MMcfe/d in 2006

 

                  33,000+ gross acres in trend

 

                  Deep pay found in the Atoka

 

14



 

WESTERN BUSINESS UNIT – Delaware Basin Deep Gas Play

 

[GRAPHIC]

 

            Haley Atoka Morrow Play

 

      Rejuvenated in 2003

 

      Area currently producing in excess of 100 MMcfe/d

 

      FST has 27,000 gross acres

 

            Vermejo Field – Two deep tests currently drilling and one completing

 

15



 

CANADIAN BUSINESS UNITWild River

 

[GRAPHIC]

 

                  Very active area for shallow and deep gas exploration on 21,000 acres

 

                  Gross production increased from 17 to 36 MMcfe/d

 

                  Well costs reduced

 

                  Seven wells awaiting pipeline connection

 

                  Two drilling rigs in the field

 

                  160 acre down-spacing and commingling recently approved

 

                  Over 100 down-spacing locations identified

 

16



 

SOUTHERN BUSINESS UNIT - Sabine

 

[GRAPHIC]

 

                  Approximately 157,000 acres leased or optioned in this prolific Yegua and Wilcox trend (45% WI)

 

                  260 square miles of 3-D and 2,000 linear miles of 2-D data available to map

 

                  Four wells in the field completed at an average of 4.4 MMcfe/d

 

                  Two wells in progress

 

17



 

ALASKA BUSINESS UNIT - Onshore Alaska Gas

 

[GRAPHIC]

 

                  Undeveloped onshore net acreage in excess of 1,100,000 acres

 

                  West Foreland #2 (100% WI) tested 15 MMcfe/d

 

                  Three Mile Creek Unit #1 (30% WI) tested 5 MMcfe/d from shallow zone

 

                  Net undeveloped acreage of 96,000 surrounding the two discoveries

 

                  New supply contract commences in Q4 2005

 

                  4 additional tests planned in 2005

 

18



 

ACQUISITION LOOKBACK SUMMARY – 6/30/2005

 

Unocal, New Permian, Wiser, S. Bonus, Minihan, McAllen & Oxy

 

 

 

 

Investment

 

Reserves

 

 

 

 

 

($MM)

 

(Bcfe)

 

$/ Mcfe

 

Original Acquisition

 

775

 

517

 

1.50

 

Cash Flow / Production

 

(346

)

(91

)

3.80

 

Subtotal

 

429

 

426

 

1.01

 

Capital Projects

 

188

 

133

 

1.41

 

Total Investment

 

617

 

559

 

1.10

 

 

                  45% of original investment paid out with 82% of reserves remaining

 

                  36% of total investment paid out with 108% of reserves remaining

 

19



 

ADDITIONAL REMAINING VALUE

 

                  Unbooked discoveries

 

                  S. Africa (tested 220 MMcfe/d)

                  Mackenzie Delta (approximately 200 Bcfe of unbooked reserves)

 

                  Carried interest on frontier acreage

 

                  Gabon (100% carry on seismic and well to be spud in Q1 2006)

                  S. Africa deepwater

 

                  Cook Inlet Pipeline Company

 

                  Lantern Drilling Company

 

                  8 company-owned drilling rigs operating in the Permian Basin

 

                  Tax attributes

 

                  $706 Million NOL (including Canadian tax pools of $240 MM)

 

                  Extensive undeveloped acreage and seismic database worldwide

 

20



 

VALUE PROPOSITION – Peer Group Comparison

 

2004 Proved Reserves

 

2005 Production

 

 

 

[CHART]

 

[CHART]

 

 

 

2005 EV/Proved Reserves

 

2005 EV/Production

 

 

 

[CHART]

 

[CHART]

 


Note:  Enterprise values as of September 9, 2005.

* Pro forma for Buffalo Wallow acquisition

 

21



 

THE “NEW” FST – Summary of Opportunity

 

                  Unlocks intrinsic shareholder value in a tax efficient manner and clarifies the value proposition

 

                  Maintains Forest’s credit quality and capitalizes Mariner appropriately

 

                  Intensifies focus on two discreet asset bases, each with critical mass and competitive advantage

 

                  Integrates offshore portfolio into high growth vehicle with deepwater exploration potential

 

                  Unleashes Forest’s management to aggressively execute the onshore resource-focused growth strategy

 

Value Proposition

 

                  Public valuations and M&A transactions support values of $3.00 per proved reserve and $13,750 per flowing Mcfe/d for remaining Forest

 

                  Public valuations and M&A transactions support values of $3.75 per proved reserve and $10,500 per flowing Mcfe/d for Mariner/Spinco

 

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CAUTIONARY STATEMENTS

 

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions.  We use the terms “probable” and “possible” reserves, reserve “potential” or “upside” or other descriptions of volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines strictly prohibit Forest from including in filings with the SEC.  These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by us.  Investors are urged to consider closely the disclosure in Forest’s Form 10-K for fiscal year ended December 31, 2004, available from Forest at 707 17th Street, Suite 3600, Denver, CO 80202, Attention: Investor Relations.  You can also obtain this form from the SEC by calling 1-800-SEC-0330.

 

This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  All statements, other than statements of historical facts, that address activities that Forest and Mariner assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements.  The forward-looking statements provided in this presentation are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.  Forest and Mariner cautions that their future natural gas and liquids production, revenues and expenses and other forward-looking statements are subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.  These risks include, but are not limited to, price volatility, inflation or lack of availability of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks as described in Forest’s 2004 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.  Also, the financial results of Forest’s foreign operations are subject to currency exchange rate risks.  Any of these factors could cause Forest’s or Mariner’s actual results and plans to differ materially from those in the forward-looking statements.

 

This material is not a substitute for the registration statement on Form S-4 that Mariner will file with the Securities and Exchange Commission in connection with the transaction, or the proxy statement/prospectus-information statement to be mailed to stockholders. Investors are urged to read the proxy statement/prospectus-information statement which will contain important information, including detailed risk factors, when it becomes available. The proxy statement/prospectus-information statement and other documents that will be filed by Forest and Mariner with the Securities and Exchange Commission will be available free of charge at the SEC’s website or by directing a request when such a filing is made to Forest Oil Corporation, 707 17th Street, Suite 3600, Denver, CO 80202, Attention: Investor Relations; or by directing a request when such a filing is made to Mariner Energy, Inc., 2101 CityWest Blvd., Bldg. 4, Ste. 900, Houston, TX 77042-2831, Attention: Investor Relations.

 

Mariner, Forest and their respective directors, and executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the participants in the solicitation will be set forth in the proxy statement/prospectus-information statement when it becomes available.

 

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