Forest Oil Corporation has entered into a definitive agreement with Cordillera Texas, L.P. to acquire producing assets including approximately 118,000 gross acres (85,000 net acres) in Forest's core Greater Buffalo Wallow and East Texas/North Louisiana Focus Areas. Forest attributes estimated proved reserves of 350 Bcfe (36% proved developed) with additional net unrisked potential of 1,200 Bcfe and approximately 1,500 additional vertical and horizontal drilling locations (1,194 unbooked locations) to the properties. The properties produced an average of approximately 34 MMcfe/d in the first half of 2008 and are focused primarily in the Granite Wash, Atoka and Morrow intervals in the Greater Buffalo Wallow Area and in the Cotton Valley and Travis Peak intervals in East Texas. The acquired acreage in East Texas also has James Lime, Haynesville/Bossier Shale and Pettet rights.

Under the terms of the agreement, Forest will pay, subject to customary closing adjustments, approximately $708 million in cash and deliver 3.5 million shares of Forest's common stock (subject to a collar mechanism) to the seller for these assets. Measured at the closing price of Forest common stock on August 15, 2008, the transaction is valued at $892 million. The Company will initially fund the acquisition using its existing credit facility which has approximately $1.21 billion in liquidity as of July 31, 2008. Forest intends to ultimately fund the acquisition by divesting of identified non-core, non-strategic assets. The Company expects that the transaction, which is subject to customary closing conditions, will close at the end of the third quarter of 2008. Forest intends to update 2008 guidance upon the closing of this transaction.

Craig Clark, Forest's President and Chief Executive Officer, stated, "This significant transaction plays directly into Forest's strengths by increasing the scale of our business in core areas and ultimately funding it with non-core divestitures. We have a well developed core operational expertise for the assets in the Greater Buffalo Wallow and East Texas which has led to these assets being the primary contributors to our organic growth in the last two years. With this acquisition and through our intense focus on these assets we expect each of the Greater Buffalo Wallow and East Texas/North Louisiana areas to exit the year with 13 rigs running.

"We plan to increase activity further in 2009 in these areas and ramp our rig count 20% higher to more than 30 rigs running by the fourth quarter of 2009, including the addition of horizontal drilling activity in the Greater Buffalo Wallow Area. This activity is expected to result in a greater than 30% organic production increase on the acquired assets in 2009. As you have come to expect from Forest, we will not stand still with acquired assets but will employ our operational expertise in these assets and drive value to our organization and our shareholders.

"Assuming the completion of our proposed divestitures, we will have acquired approximately $600 million of new assets in each of Greater Buffalo Wallow and East Texas/North Louisiana this year and fund it primarily by selling $800 million - 1.1 billion of non-core properties. We expect as our asset quality continues to improve and our operations get more focused, we can become even more efficient than we now are and deliver even better margins from our operations with a higher organic growth rate."

Tags: Cordillera Texas, Forest Oil Corporation