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	Sincerely yours,
	Scott D. Josey
	Chairman, Chief Executive Officer and President

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	Sincerely,
	H. Craig Clark
	President and Chief Executive Officer

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	•	to consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of September 9, 2005, as amended, among Forest Oil Corporation, Forest Energy Resources, Inc., Mariner Energy, Inc. and MEI Sub, Inc., subject to the approval of the proposed amendment to Mariner’s certificate of incorporation described below,
	•	to consider and vote upon a proposed amendment to Mariner’s Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of stock from 90 million to 200 million, subject to the completion of the merger,
	•	to consider and vote upon the proposed amendment and restatement of the Mariner Energy, Inc. Stock Incentive Plan,
	•	to elect one director to serve until the annual meeting of stockholders in 2009,
	•	to elect two directors to serve until the annual meeting of stockholders in 2007,
	•	to grant to the proxyholders the authority to vote in their discretion with respect to the approval of any proposal to postpone or adjourn the annual meeting to a later date to solicit additional proxies in favor of the other proposals, if there are not sufficient votes for approval of the other proposals at the annual meeting, and
	•	to transact any other business that may properly come before the annual meeting.

	By Order of the Board of Directors
	of Mariner Energy, Inc.
	Teresa Bushman
	Vice President and General Counsel

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QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF AND MERGER				1
SUMMARY				8
	The Companies			8
	Ownership Structure Before and After the Spin-off and Merger			10
	Material United States Federal Tax Consequences of the Spin-Off and the Merger			11
	Conditions to the Completion of the Merger			11
	Termination of the Merger Agreement			12
	Termination Fee and Expenses			12
	Certificate of Incorporation and By-Laws			13
	Financing Arrangements Relating to the Spin-Off and the Merger			13
	Ancillary Agreements			13
	Regulatory Matters			13
	Comparison of Stockholder Rights			13
SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA				14
	Sources of Information			14
	How We Prepared the Unaudited Pro Forma Combined Condensed Financial Information			14
	Summary Historical Consolidated Financial Data of Mariner			15
	Summary Selected Consolidated Statements of Revenues and Direct Operating Expenses of the Forest Gulf of Mexico Operations			18
	Summary Selected Unaudited Pro Forma Combined Condensed Financial Information			20
	Comparative Per Share Data			21
	Summary Financial and Operational Data for the Year Ended December 31, 2005			22
	Comparative Stock Price and Dividends			23
RISK FACTORS				24
	Risks Related to the Spin-Off and the Merger			24
	Risks Related to the Combined Operations After the Merger			26
	Risks Related to our Common Stock After the Merger			34
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS				36
THE MARINER ANNUAL MEETING				37
	Purpose, Time and Place			37
	Recommendation of the Mariner Board of Directors			37
	Record Date; Stock Entitled to Vote; Quorum			37
	Votes Required			38
	Voting by Proxy			38
	Interests of Certain Persons in the Merger			39
	Stock Ownership of Directors and Executive Officers			40
	Appraisal and Dissenters’ Rights			40
THE SPIN-OFF AND MERGER				41
	Background of the Merger			41
	Reasons for the Merger; Recommendation of the Mariner Board of Directors			49
	Certain Financial Projections			51
	Opinion of Mariner’s Financial Advisor			53

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	The Spin-Off			61
	Stock Exchange Listing			62
	Certificate of Incorporation and By-Laws			62
	Material United States Federal Tax Consequences of the Spin-Off and the Merger			62
	Federal Securities Laws Consequences of the Merger			69
	Accounting Treatment			70
	Regulatory Matters			70
	Appraisal and Dissenters’ Rights			70
STRENGTHS AND STRATEGIES OF MARINER FOLLOWING THE MERGER				71
THE MERGER AGREEMENT				74
	The Merger			74
	Representations and Warranties			75
	Covenants			77
	Additional Covenants			82
	Conditions to the Completion of the Merger			83
	Termination of the Merger Agreement			85
	Amendments and Waiver			87
THE DISTRIBUTION AGREEMENT				88
	Summary of the Transactions			88
	Contribution of the Forest Gulf of Mexico Assets and Assumption of Liabilities			88
	Spin-off			89
	Representations and Warranties			89
	Indemnification			89
	Conditions to the Spin-off			90
ANCILLARY AGREEMENTS				91
	Tax Sharing Agreement			91
	Employee Benefits Agreement			92
	Transition Services Agreement			93
FINANCING ARRANGEMENTS RELATING TO THE SPIN-OFF AND THE MERGER				94
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION				96
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR MARINER				104
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MARINER				107
	Overview			107
	Critical Accounting Policies and Estimates			113
	Results of Operations			115
	Liquidity and Capital Resources			120
	Contractual Commitments			127
	Off-Balance Sheet Arrangements			127
	Recent Accounting Pronouncements			128
	Quantitative and Qualitative Disclosures About Market Risk			129
MARINER				130
	Significant Properties			131
	Estimated Proved Reserves			134
	Production			136

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	Productive Wells			136
	Acreage			137
	Drilling Activity			137
	Property Dispositions			138
	Marketing and Customers			138
	Title to Properties			138
	Competition			138
	Royalty Relief			139
	Regulation			140
	Employees			143
	Legal Proceedings			143
	Insurance Matters			144
	Enron Related Matters			144
SELECTED CONSOLIDATED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF THE FOREST GULF OF MEXICO OPERATIONS				146
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE FOREST GULF OF MEXICO OPERATIONS				147
	Overview			147
	Recent Developments			147
	Nine Months Ended September 30, 2005 Highlights			147
	Results of Operations			149
	Capital Expenditures			151
THE FOREST GULF OF MEXICO OPERATIONS				152
	Significant Properties			152
	Estimated Proved Reserves			154
	Production			156
	Productive Wells			157
	Acreage			157
	Drilling Activity			158
	Title to Properties			158
	Employees			158
	Offices			158
	Legal Proceedings			159
	Insurance Matters			159
FOREST OIL CORPORATION				160
MANAGEMENT OF MARINER				161
	Directors and Executive Officers			161
	Board of Directors			163
	Committees of the Board			164
	Compensation Committee Interlocks and Insider Participation			164
	Director Compensation			164
	Indemnification			165
	Executive Compensation			165
	Employment Agreements and Other Arrangements			166
	Overriding Royalty Arrangements			167

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	Equity Participation Plan			167
PROPOSAL TO AMEND AND RESTATE MARINER STOCK INCENTIVE PLAN				170
ELECTION OF DIRECTORS OF MARINER				174
MARINER SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT				177
CERTAIN TRANSACTIONS WITH AFFILIATES AND MANAGEMENT OF MARINER				178
DESCRIPTION OF MARINER CAPITAL STOCK				179
	Common Stock			179
	Liability and Indemnification of Officers and Directors			179
	Preferred Stock			179
	Anti-Takeover Effects of Provisions of Delaware Law, Our Certificate of Incorporation and Bylaws			180
	Transfer Agent and Registrar			182
COMPARISON OF STOCKHOLDER RIGHTS				183
EXPERTS				186
LEGAL MATTERS				186
GLOSSARY OF OIL AND NATURAL GAS TERMS				187
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE				189
INDEX TO FINANCIAL STATEMENTS				F-1
ANNEX A
	Agreement of Plan and Merger			A-1
ANNEX B
	Lehman Brothers Inc. Fairness Opinion to the Mariner Board of Directors			B-1
ANNEX C
	Distribution Agreement			C-1
ANNEX D
	Tax Sharing Agreement			D-1
ANNEX E
	Proposed Amendment to Second Amended and Restated Certificate of Incorporation of Mariner Energy, Inc.			E-1
ANNEX F
	Report of Ryder Scott Company, L.P., Independent Petroleum Engineers			F-1
ANNEX G
	Mariner Energy, Inc. Amended and Restated Stock Incentive Plan			G-1

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	•	a proxy statement of Mariner for use in the solicitation of proxies for Mariner’s annual meeting of stockholders;
	•	a prospectus of Mariner relating to the issuance of shares of Mariner common stock in connection with the merger; and
	•	an information statement of Forest relating to the spin-off of the Forest Gulf of Mexico operations to the shareholders of Forest.

	•	The terms “we”, “us”, “our” and like terms, and the term “Mariner,” refer to Mariner Energy, Inc.;
	•	“MEI Sub” refers to MEI Sub, Inc.;
	•	“Forest” refers to Forest Oil Corporation;
	•	“Forest Energy Resources” refers to Forest Energy Resources, Inc.; and
	•	“Forest Gulf of Mexico operations” refers to the offshore Gulf of Mexico operations conducted by Forest that have been contributed to Forest Energy Resources and the shares of which will be spun-off to Forest shareholders.

Q:		Please briefly describe the proposed merger and related transactions.
A:		Forest has transferred and contributed the assets and certain liabilities associated with its offshore Gulf of Mexico operations to Forest Energy Resources, a newly formed subsidiary of Forest. Immediately prior to the merger, Forest will distribute all of the outstanding shares of Forest Energy Resources to Forest shareholders on a pro rata basis. Forest Energy Resources will then merge with a newly formed subsidiary of Mariner, and become a new wholly owned subsidiary of Mariner. When the merger is complete, approximately 58% of the Mariner common stock will be held by shareholders of Forest and approximately 42% of Mariner common stock will be held by the pre-merger stockholders of Mariner, each on a pro forma basis.

	•	be an independent public company;
	•	own both the Mariner operations and the Forest Gulf of Mexico operations; and
	•	have total assets of approximately $2.1 billion and total debt of approximately $279.0 million on a pro forma combined basis, assuming the spin-off and the merger occurred on September 30, 2005.

Q:		What are Mariner stockholders being asked to vote upon?
A:		Mariner stockholders are being asked to:

	•	adopt the merger agreement entered into among Forest, Forest Energy Resources, Mariner and MEI Sub, Inc., subject to the approval of the proposed amendment to Mariner’s certificate of incorporation;

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	•	approve the proposed amendment to Mariner’s certificate of incorporation to increase the number of authorized shares of stock from 90 million to 200 million, subject to completion of the merger;
	•	approve the proposed amendment and restatement of Mariner’s stock incentive plan;
	•	to elect one director to serve until the annual meeting of stockholders of Mariner in 2009;
	•	to elect two directors to serve until the annual meeting of stockholders of Mariner in 2007; and
	•	approve the proposed granting of authority to the proxyholders to vote in their discretion on a motion to adjourn or postpone the meeting.

Q:		What changes to Mariner’s stock incentive plan am I being asked to approve?
A:		You are being asked to approve an amendment and restatement of the plan whereby 4.5 million shares of common stock would be added to the plan, the plan would be extended to October 12, 2015 and the number of shares subject to stock options or shares of restricted stock issuable under the plan to any individual would be limited to 2.85 million, subject to the completion of the merger.
Q:		Why am I being asked to grant to the proxy holders the authority to vote in their discretion on a motion to adjourn or postpone the meeting?
A:		We may determine to adjourn or postpone the meeting, for example, to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement.
Q:		What will Forest shareholders receive in the merger?
A:		If the merger is completed, each Forest shareholder will ultimately receive shares of Mariner common stock. As a result of the spin-off, Forest shareholders will initially receive shares of Forest Energy Resources, which will then be converted in the merger into the right to receive shares of Mariner. After the merger, Forest shareholders will be entitled to receive approximately 0.8 shares of Mariner for each Forest share that they own. Forest shareholders will not be required to pay for the shares of Forest Energy Resources distributed in the spin-off transaction or the shares of Mariner issued in the merger. Shareholders will receive cash in lieu of any fractional shares of Mariner common stock. All shares of Forest Energy Resources common stock distributed in the spin-off and Mariner common stock issued in the merger will be issued in book-entry form, meaning that, although Forest shareholders will own the shares, they will not be issued physical share certificates.
Q:		What will Mariner stockholders receive in the merger?
A:		Mariner stockholders will keep the shares of Mariner common stock they currently own, but will not receive any additional shares in the merger.
Q:		Does the Mariner board of directors support the merger and the other proposals?
A:		Yes. The Mariner board of directors has determined that the merger is fair to and in the best interests of Mariner and its stockholders, and that the merger agreement is advisable. The Mariner board of directors has unanimously approved the merger agreement and the other proposals and recommends that the Mariner stockholders vote “for” the adoption of the merger agreement and the other proposals. A more detailed description of the background and reasons for the merger is set forth under “The Spin-Off and Merger” beginning on page 41.
Q:		Do the directors and executive officers of Mariner have interests in the merger that are different from mine?
A:		When considering the recommendations of the Mariner board of directors, you should be aware that the directors and executive officers of Mariner have interests and arrangements that may be different from your interests as stockholders, including:

	•	arrangements regarding the appointment of directors and officers of Mariner following the merger; and
	•	arrangements whereby the executive officers of Mariner will receive a cash payment of $1,000 each in exchange for the waiver of certain rights under their employment agreements, including the automatic

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		vesting or acceleration of restricted stock and options upon the completion of the merger and the right to receive a lump sum cash payment if the officer voluntarily terminates employment without good reason within nine months following the completion of the merger.

Q:		What factors did the Mariner board of directors consider in reaching its decision on the merger?
A:		In reaching its decision on the merger, the Mariner board of directors considered a number of factors, including the following among others:

	•	the increased size of the combined company could reduce volatility and allow it to participate in larger scale drilling projects and acquisition opportunities;
	•	the merger would be expected to increase Mariner’s estimated proved reserves and undeveloped acreage;
	•	the merger could generate increased visibility in the capital markets and trading liquidity for the combined company;
	•	the merger would increase the number of Mariner’s producing fields, thereby reducing Mariner’s dependence on a concentrated number of properties;
	•	the merger would be consummated only if approved by the holders of a majority of the Mariner common stock; and
	•	the merger is structured as a tax-free reorganization for U.S. federal income tax purposes and, accordingly, would not be taxable either to Mariner or its stockholders.

		The Mariner board of directors also identified and considered some risks and potential disadvantages associated with the merger, including, among others, the following:

	•	the risk that there may be difficulties in combining the business of Mariner and the Forest Gulf of Mexico operations;
	•	the risk that the potential benefits sought in the merger might not be fully realized;
	•	the risk that the proved undeveloped, probable and possible reserves of the Forest Gulf of Mexico operations may never be converted to proved developed reserves; and
	•	the fact that, in order to preserve the tax-free treatment of the spin-off, Mariner would be required to abide by restrictions that could reduce its ability to engage in certain business transactions.

		In the judgment of the Mariner board of directors, the potential benefits of the merger outweigh the risks and the potential disadvantages.
Q:		Did Mariner’s financial advisor render its opinion with respect to the fairness from a financial point of view of the exchange ratio in the merger?
A:		Yes. Lehman Brothers Inc., Mariner’s financial advisor, has delivered to Mariner’s board of directors a written opinion that, as of September 9, 2005, based upon and subject to the factors and assumptions set forth in the opinion, the exchange ratio in the merger was fair from a financial point of view to Mariner. This opinion is attached as Annex B to this proxy statement/prospectus-information statement.
Q:		Are there risks that Mariner stockholders should consider in deciding whether to vote on the merger?
A:		Yes. Mariner stockholders should read the “Risk Factors” beginning on page 24 for a description of various risks Mariner stockholders should carefully consider in evaluating the proposed merger.

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Q:		Can Mariner stockholders dissent and require appraisal of their shares of Mariner common stock?
A:		No. Mariner stockholders are not entitled to dissenters’ rights or appraisal rights in connection with the merger.
Q:		Why does Mariner want to increase the number of authorized Mariner shares?
A:		Mariner’s certificate of incorporation currently does not authorize a sufficient number of shares of common stock to complete the merger. Mariner currently is authorized to issue 70 million shares of Mariner common stock and 20 million shares of Mariner preferred stock. As of February 1, 2006, approximately 35.6 million shares of Mariner common stock were issued and outstanding. Under the terms of the merger agreement, Mariner must issue approximately 50.6 million shares (representing approximately 0.8 shares of Mariner common stock for each share of Forest common stock) of common stock in the merger, which would result in approximately 86  million shares of Mariner common stock outstanding. Therefore, the number of authorized shares of Mariner common stock must be increased in order to complete the merger.
Q:		What vote is required to adopt the merger agreement and the other proposals?
A:		For the merger to occur, the holders of a majority of the outstanding Mariner common stock must adopt the merger agreement and approve the amendment to the certificate of incorporation. The amendment to Mariner’s stock incentive plan must be approved by a majority of votes cast by stockholders present in person or by proxy, a quorum being present. Director nominees receiving a plurality of all votes cast at the meeting will be elected to Mariner’s board of directors. Mariner stockholders will have one vote for each share of Mariner common stock they own. On February 1, 2006, the record date for Mariner’s annual meeting, 35,615,400 shares of Mariner common stock were issued and outstanding and entitled to vote at the meeting. The approval of Forest shareholders is not required for the spin-off or the merger.
Q:		Where will Mariner’s common stock be listed?
A:		Mariner’s common stock has been approved for listing on the New York Stock Exchange upon the completion of the merger.
Q:		Who will be the executive officers of Mariner?
A:		The current executive officers of Mariner will remain in their current positions following the merger.
Q:		Who will be the directors of Mariner?
A:		If the merger is completed, Mariner’s board will consist of seven members, five of whom will be the current directors of Mariner, and two of whom will be mutually agreed between Mariner and Forest prior to the completion of the merger. The Chairman of the Mariner board will be Mr. Scott D. Josey, the current Chairman, Chief Executive Officer and President of Mariner.
Q:		Who are the new directors of Mariner, as mutually agreed by Forest and Mariner?
A:		The two Mariner directors to be mutually agreed by Forest and Mariner pursuant to the terms of the merger agreement have not yet been designated.
Q:		When do you expect to complete the spin-off and the merger?
A:		If the merger agreement and the proposed amendment to the certificate of incorporation are adopted and approved by the stockholders of Mariner, then Mariner, Forest, Forest Energy Resources and MEI Sub expect to complete the spin-off and the merger as soon as possible after the satisfaction (or waiver, where permissible) of the other conditions to the spin-off and the merger. We currently anticipate that the merger will be completed during the first calendar quarter of 2006.
Q:		Who is entitled to vote at the meeting of Mariner stockholders?
A:		Holders of Mariner common stock of record at the close of business on February 1, 2006.

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Q:		What should Mariner stockholders do now?
A:		You should mail your signed and dated proxy card(s) in the enclosed envelope or vote via telephone or via the Internet by following the instructions on your proxy card(s) as soon as possible so that your shares of Mariner common stock will be represented and voted at the meeting.
Q:		Do Mariner stockholders need to send in their share certificate(s)?
A:		No. Mariner stockholders should not send in their share certificate(s). Mariner stockholders will not exchange their share certificates in connection with the merger.
Q:		If I am not going to attend the meeting, should I return my proxy card(s)?
A:		Yes. Returning your proxy card(s) ensures that your shares of Mariner common stock will be represented at the meeting, even if you are unable to or do not attend.
Q:		How do I vote my shares of Mariner common stock if they are held in the name of a bank, broker or other fiduciary?
A:		Your bank, broker or other fiduciary will vote your shares of Mariner common stock with respect to the merger only if you provide written instructions to them on how to vote, so it is important that you provide them with instructions. If you do not provide them with instructions, they will not be authorized to vote with respect to the merger or the other proposals. If you wish to vote in person at the meeting and hold your shares of Mariner common stock in the name of a bank, broker or other fiduciary, you must contact your bank, broker or other fiduciary and request a legal proxy. You must bring this legal proxy to the meeting in order to vote in person. Shares of Mariner common stock held by a broker, bank or other fiduciary that are not voted because the customer has not provided instructions to the broker, bank or other fiduciary (referred to as a “broker non-vote”) will have the same effect as a vote “against” the proposals.
Q:		Can I change my vote after I mail my proxy card(s)?
A:		Yes. If you are a record holder of Mariner common stock, you can change your vote by:

		• completing, signing and dating a new proxy card and returning it by mail so that it is received prior to the meeting;
		• voting via telephone or via the Internet by following the instructions provided on your proxy card;
		• sending a written notice to The Continental Stock Transfer & Trust Company that is received prior to the meeting stating that you revoke your proxy; or
		• attending the meeting and voting in person or by legal proxy, if appropriate.
		Internet and telephone voters may use the same procedure to revoke or change their votes as they used to cast their original votes. If your shares of Mariner common stock are held in the name of a bank, broker or other fiduciary and you have directed such person(s) to vote your shares of Mariner common stock, you should instruct such person(s) to change your vote or obtain a legal proxy to do so yourself. Telephone and Internet voting will close at 8:00 p.m. Eastern time on the day before the meeting. Thereafter, voting (including revocation of proxies) can be made by mail or facsimile received prior to the meeting, or in person at the meeting.

Q:		What if I do not vote, or abstain from voting, or do not instruct my broker to vote my shares of Mariner common stock?
A:		If you do not vote, it will have the same effect as a vote against the merger and the proposal to amend Mariner’s certificate of incorporation. Shares that are not voted will not count for purposes of calculating a quorum, which is necessary to have a valid meeting of stockholders. If a quorum of stockholders is not present in person or by proxy at the meeting, no vote will be taken on the merger and the other proposals. Shares that are not voted have the effect of reducing the number of shares required to approve the proposal to amend and restate Mariner’s stock incentive plan and to elect directors, which require the affirmative vote of a majority of a quorum, but do not have the effect of reducing the number of shares required to adopt the merger agreement and to approve the proposed amendment to Mariner’s certificate of

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		incorporation, both of which require the affirmative vote of a majority of Mariner’s outstanding shares. Abstentions and broker non-votes also will have the effect of votes against the merger and the proposal to amend Mariner’s certificate of incorporation. If you sign your proxy card but do not indicate how you want to vote, your shares of Mariner common stock will be voted for the merger and the other proposals.
Q:		What factors did the Forest board of directors consider in reaching its decision on the spin-off and merger?
A:		In reaching its decision on the spin-off and the merger, the Forest board of directors considered a number of factors, including the following among others:

		• the transaction creates two highly focused and valuable enterprises for Forest’s shareholders, Forest and Mariner;
		• the merger of the Forest Gulf of Mexico operations with the Mariner business creates a high quality, well positioned Gulf of Mexico independent with an excellent track record and growth outlook;
		• following the spin-off, Forest will be a highly-focused onshore resource company with an acquire and exploit strategy and a portfolio of long-life, concentrated assets in high quality basins that provide a foundation for sustainable growth;
		• the determination to execute a tax-free transaction designed to increase the value of Forest’s Gulf of Mexico assets; and
		• the determination that a spin-off followed by a merger transaction represents a better alternative for Forest’s shareholders than any other type of transaction considered, providing optionality and returning value directly to Forest’s shareholders.
		The Forest board of directors also considered some risks and potential disadvantages associated with the spin-off and merger, including the following among others:
		• the lack of a liquid trading market and established market value for the Mariner shares;
		• the risk that there may be difficulties in combining the business of Mariner and the Forest Gulf of Mexico operations;
		• the risk that the potential benefits sought in the merger might not be fully realized; and
		• the risk that the proved undeveloped, probable and possible reserves of the Mariner business may never be converted to proved developed reserves.
		In the judgment of the Forest board of directors, the potential benefits of the spin-off and the merger outweigh the risks and the potential disadvantages. In evaluating Mariner’s offer, Forest believed that the combination of stock and assumed liabilities offered by Mariner could be worth an amount in a range of approximately $1.1 billion to $1.4 billion, depending upon the trading value of Mariner’s common stock when the stock begins to trade upon the closing of the merger.

Q:		Do Forest shareholders need to send in any share certificates?
A:		No. If the merger is completed, Forest shareholders will exchange their shares of Forest Energy Resources for share certificates representing Mariner common stock. Forest shareholders who are entitled to receive shares of Forest Energy Resources (i.e., shareholders of record on the record date for the distribution) will be mailed book entry statements evidencing their shares of Forest Energy Resources. The exchange of Forest Energy Resources and Mariner shares will be effected through book-entry, without the exchange of physical share certificates.
Q:		Has Forest set a record date for the distribution of Forest Energy Resources shares in the spin-off?
A:		No. Forest will publicly announce the record date when it has been determined.

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Q:		Can Forest shareholders dissent and require appraisal of their shares of Forest Energy Resources common stock?
A:		No. Forest shareholders are not entitled to dissenters’ rights or appraisal rights in respect of the Forest Energy Resources stock they receive in the merger.
Q:		What should Forest shareholders do now?
A:		Forest shareholders should carefully read this proxy statement/prospectus-information statement, which contains important information about the spin-off, the merger, Mariner, the Forest Gulf of Mexico operations and the combined businesses. Forest shareholders are not required to take any action to approve the spin-off or the merger. As described above, if the merger is completed, shares of Forest Energy Resources will be converted into shares of Mariner common stock.
Q:		Who can answer my questions?
A:		If Mariner stockholders have any questions regarding the meeting or need assistance in voting their shares of Mariner common stock, please contact our transfer agent:

		The Continental Stock Transfer & Trust Company 17 Battery Place, 8th Floor New York, New York 10004 Facsimile: (212) 509-5152 Telephone: (212) 616-7610
		All other questions from Mariner stockholders should be directed to:
		Mariner Energy, Inc. Attention: Investor Relations One BriarLake Plaza, Suite 2000 2000 West Sam Houston Parkway South Houston, Texas 77042 Facsimile: (713) 954-5555 Telephone: (713) 954-5500
		All other questions from Forest shareholders should be directed to:
		Forest Oil Corporation Attention: Investor Relations 707 17th Street, Suite 3600 Denver, Colorado 80202 Facsimile: (303) 812-1510 Telephone: (303) 812-1400

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	The market value of our common stock could decline if large amounts of our common stock are sold following the spin-off and merger.

	The integration of the Forest Gulf of Mexico operations following the merger will be difficult, and will divert our management’s attention away from our normal operations.

	•	the challenge of integrating the Forest Gulf of Mexico operations while carrying on the ongoing operations of our business;
	•	the challenge of managing a significantly larger company, with more than twice the PV10 of Mariner on a stand-alone basis;
	•	faulty assumptions underlying our expectations;
	•	the difficulty associated with coordinating geographically separate organizations;
	•	the challenge of integrating the business cultures of the two companies;
	•	attracting and retaining personnel associated with the Forest Gulf of Mexico operations following the merger; and
	•	the challenge and cost of integrating the information technology systems of the two companies.

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	If we fail to realize the anticipated benefits of the merger, stockholders may receive lower returns than they expect.

	We expect to incur significant charges relating to the integration plan that could materially and adversely affect our period-to-period results of operations following the merger.

	The number of shares Forest shareholders will receive in the merger is not subject to adjustment based on the value of the Mariner or the Forest Gulf of Mexico operations. Accordingly, because this value may fluctuate, the market value of the Mariner common stock that Forest shareholders receive in the merger may not reflect the value of the individual companies at the time of the merger.

	Regulatory agencies may delay or impose conditions on approval of the spin-off and the merger, which may diminish the anticipated benefits of the merger.

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	In order to preserve the tax-free treatment of the spin-off, we will be required to abide by potentially significant restrictions which could limit our ability to undertake certain corporate actions (such as the issuance of our common shares or the undertaking of a change in control) that otherwise could be advantageous.

	Some of our directors and executive officers have interests that are different from, or in addition to, the interests of our stockholders.

	•	arrangements regarding the appointment of directors and officers of Mariner following the merger; and
	•	arrangements whereby our executive officers will receive a cash payment of $1,000 each in exchange for the waiver of certain rights under their employment agreements, including the automatic vesting or acceleration of restricted stock and options upon the completion of the merger and the right to receive a lump sum cash payment if the officer voluntarily terminates employment without good reason within nine months following the completion of the merger.

	Oil and natural gas prices are volatile, and a decline in oil and natural gas prices would reduce our revenues, profitability and cash flow and impede our growth.

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	•	domestic and foreign supply of oil and natural gas;
	•	price and quantity of foreign imports;
	•	actions of the Organization of Petroleum Exporting Countries and other state-controlled oil companies relating to oil price and production controls;
	•	level of consumer product demand;
	•	domestic and foreign governmental regulations;
	•	political conditions in or affecting other oil-producing and natural gas-producing countries, including the current conflicts in the Middle East and conditions in South America and Russia;
	•	weather conditions;
	•	technological advances affecting oil and natural gas consumption;
	•	overall U.S. and global economic conditions; and
	•	price and availability of alternative fuels.

	Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will affect materially the quantities and present value of our reserves and the reserves of the Forest Gulf of Mexico operations, which may lower our bank borrowing base and reduce our access to capital.

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	In estimating future net revenues from proved reserves, we and Forest assume that future prices and costs are fixed and apply a fixed discount factor. If these assumptions or discount factor are materially inaccurate, our revenues, profitability and cash flow could be materially less than our estimates.

	Unless we replace our oil and natural gas reserves, our reserves and production will decline.

	Relatively short production periods or reserve life for Gulf of Mexico properties subjects us to higher reserve replacement needs and may impair our ability to replace production during periods of low oil and natural gas prices.

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	Any production problems related to our Gulf of Mexico properties could reduce our revenue, profitability and cash flow materially.

	Our exploration and development activities may not be commercially successful.

	•	unexpected drilling conditions;
	•	pressure or irregularities in formations;
	•	equipment failures or accidents;
	•	adverse weather conditions, including hurricanes, which are common in the Gulf of Mexico during certain times of the year;
	•	compliance with governmental regulations;
	•	unavailability or high cost of drilling rigs, equipment or labor;
	•	reductions in oil and natural gas prices; and
	•	limitations in the market for oil and natural gas.

	Our exploratory drilling projects are based in part on seismic data, which is costly and cannot ensure the commercial success of the project.

	Oil and gas drilling and production involve many business and operating risks, any one of which could reduce our levels of production, cause substantial losses or prevent us from realizing profits.

	•	fires;
	•	explosions;
	•	blow-outs and surface cratering;

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	•	uncontrollable flows of underground natural gas, oil and formation water;
	•	natural disasters;
	•	pipe or cement failures;
	•	casing collapses;
	•	lost or damaged oilfield drilling and service tools;
	•	abnormally pressured formations; and
	•	environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures and discharges of toxic gases.

	Our offshore operations involve special risks that could increase our cost of operations and adversely affect our ability to produce oil and gas.

	Our hedging transactions may not protect us adequately from fluctuations in oil and natural gas prices and may limit future potential gains from increases in commodity prices or result in losses.

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	We will require additional capital to fund our future activities. If we fail to obtain additional capital, we may not be able to implement fully our business plan, which could lead to a decline in reserves.

	Properties we acquire (including the Forest Gulf of Mexico properties) may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties or obtain protection from sellers against such liabilities.

	Market conditions or transportation impediments may hinder our access to oil and natural gas markets or delay our production.

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	The unavailability or high cost of drilling rigs, equipment, supplies or personnel could affect adversely our ability to execute on a timely basis our exploration and development plans within budget, which could have a material adverse effect on our financial condition and results of operations.

	Competition in the oil and natural gas industry is intense, and many of our competitors have resources that are greater than ours giving them an advantage in evaluating and obtaining properties and prospects.

	Financial difficulties encountered by our farm-out partners or third-party operators could affect the exploration and development of our prospects adversely.

	We cannot control the drilling and development activities on properties we do not operate, and therefore we may not be in a position to control the timing of development efforts, the associated costs or the rate of production of the reserves.

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	Compliance with environmental and other government regulations could be costly and could affect production negatively.

	Our insurance may not protect us against our business and operating risks.

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	An active market for our common stock may not develop and the market price for shares of our common stock may be highly volatile and could be subject to wide fluctuations after this offering.

	•	actual or anticipated downward revisions in our reserve estimates;
	•	our operating results being less than anticipated;
	•	reductions in oil and gas prices;
	•	publication of unfavorable research reports about us or the exploration and production industry;
	•	increases in market interest rates which may increase our cost of capital;
	•	the enactment of more stringent laws or regulations applicable to our business, or unfavorable court rulings or enforcement or legal actions;
	•	increases in royalties or taxes payable in the operation of our business;
	•	a general decline in market valuations of similar companies;
	•	adverse market reaction to any increased indebtedness we incur in the future;
	•	departures of key management personnel;
	•	increases to our asset retirement obligations;
	•	adverse actions taken by our stockholders;
	•	negative speculation in the press or investment community; and
	•	adverse general market and economic conditions.

	We do not anticipate paying any dividends on our common stock in the foreseeable future.

	Mariner stockholders will experience substantial and immediate dilution as a result of the merger, and may experience dilution of their ownership interests due to the future issuance of additional shares of our common stock, which could have an adverse effect on our stock price.

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	Provisions in our organizational documents and under Delaware law could delay or prevent a change in control of our company, which could adversely affect the price of our common stock.

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	•	the volatility of oil and natural gas prices;
	•	discovery, estimation, development and replacement of oil and natural gas reserves;
	•	cash flow, liquidity and financial position;
	•	business strategy;
	•	amount, nature and timing of capital expenditures, including future development costs;
	•	availability and terms of capital;
	•	timing and amount of future production of oil and natural gas;
	•	availability of drilling and production equipment;
	•	operating costs and other expenses;
	•	prospect development and property acquisitions;
	•	marketing of oil and natural gas;
	•	competition in the oil and natural gas industry;
	•	the impact of weather and the occurrence of natural disasters such as fires, floods and other catastrophic events and natural disasters;
	•	governmental regulation of the oil and natural gas industry;
	•	developments in oil-producing and natural gas-producing countries;
	•	the contemplated transactions, including strategic plans, expectations and objectives for future operations, the completion of those transactions, and the realization of expected benefits from the transactions; and
	•	disruption from the merger making it more difficult to manage Mariner’s business.

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	•	to consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of September 9, 2005, as amended, among Forest, Forest Energy Resources, Mariner and MEI Sub, subject to the approval of the proposed amendment to Mariner’s certificate of incorporation,
	•	to consider and vote upon a proposed amendment to Mariner’s Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of stock from 90 million shares to 200 million shares, subject to the completion of the merger,
	•	to consider and vote upon the proposed amendment and restatement of the Mariner stock incentive plan,
	•	to elect one director to serve until the annual meeting of stockholders of Mariner in 2009,
	•	to elect two directors to serve until the annual meeting of stockholders of Mariner in 2007,
	•	to approve the proposed granting of authority to the proxyholders to vote in their discretion on a motion to adjourn or postpone the meeting, and
	•	to transact any other business that may properly come before the meeting.

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	Submitting Proxies

	•	attending the meeting and voting their stock in person at the meeting,
	•	completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage pre-paid envelope, or
	•	voting via telephone or via the Internet by following the instructions provided on the enclosed proxy card.

	Revoking Proxies

	•	completing, signing and dating a new proxy card and returning it by mail so that it is received prior to the meeting;
	•	voting via telephone or via the Internet by following the instructions provided on your proxy card;

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	•	sending a written notice to The Continental Stock Transfer & Trust Company that is received prior to the meeting stating that you revoke your proxy; or
	•	attending the meeting and voting in person or by legal proxy, if appropriate.

	The Continental Stock Transfer & Trust Company
	17 Battery Place
	8th Floor
	New York, New York 10004
	Facsimile: (212) 509-5152

	Other Business; Adjournments

	Proxy Solicitation

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	Governance Structure. Under the terms of the merger agreement, the board of directors of Mariner after completion of the merger will be comprised of seven individuals, five of whom are current directors of Mariner, and two of whom will be mutually agreed to by Mariner and Forest prior to the completion of the merger.
	Payments for Waivers of Rights under Employment Agreements. The executive officers of Mariner will receive cash payments of $1,000 each in exchange for the waiver of certain rights under their employment agreements, including the automatic vesting or acceleration of restricted stock and options upon the completion of the merger and the right to receive a lump sum cash payment, equal to 2.0 (2.5 for Mr. Polasek and 2.99 for Mr. Josey) times the sum of the officer’s base salary and three year average annual bonus, if the officer voluntarily terminates employment without good reason within nine months following the completion of the merger.
	Severance Arrangements. The executive officers have employment agreements that will remain in effect after the completion of the merger. These agreements generally entitle the officers to severance benefits in the event of a resignation for good reason, a termination without cause or, in the case of Scott Josey’s agreement, Mariner’s non-renewal of the agreement. These severance benefits are comprised of (i) a payment equal to 18 months of salary continuation (two years for Mr. Josey and Mr. Polasek) at the highest rate in effect prior to termination, (ii) health care coverage for a period of eighteen months (two years for Mr. Josey and Mr. Polasek), (iii) an amount equal to the sum of all bonuses paid to the officer in the year prior to the year in which termination occurs, (iv) 100% vesting of all restricted shares under our Equity Participation Plan, and (v) 50% vesting of all other rights under any other equity plans, including our Stock Incentive Plan.
	The employment agreements also provide for certain change of control benefits. Upon termination for any reason other than cause at any time within nine months after a change of control that occurs while the executive is employed, or upon the occurrence of a change of control within nine months following resignation of employment for good reason or termination without cause, the agreements provide for the following benefits: (i) a lump sum payment equal to 2.0 (2.5 for Mr. Polasek and 2.99 for Mr. Josey) times the sum of the officer’s base salary and three year average annual bonus, and (ii) 100% vesting of all rights under any equity plans, including our Equity Participation Plan and our Stock Incentive Plan. The officers are entitled to a full tax gross-up payment if the aggregate payments and benefits to be provided constitute a “parachute payment” subject to a Federal excise tax. Pursuant to the waivers described above, the executive officers will waive their rights to the automatic vesting or acceleration of restricted stock and options upon completion of the merger and to receive a lump sum payment if they terminate their employment with Mariner without good reason within nine months following the completion of the merger.

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	•	the increased size of the combined company, which would have approximately three times the pro forma daily net production of Mariner on a stand-alone basis, could reduce volatility related to large-scale deepwater projects, and could allow it to participate in larger scale exploratory and development drilling projects and acquisition opportunities than would be available to Mariner on a stand-alone basis;
	•	the merger would be expected to increase Mariner’s estimated proved reserves, on a pro forma basis as of December 31, 2004, by approximately 243%, making Mariner larger on a reserve basis than many of its peer companies, and would more than double Mariner’s undeveloped acreage;
	•	the integration of the businesses and the realization of expected benefits could be facilitated by the fact that Mariner is already active in the Gulf of Mexico with assets that are complementary to the Forest Gulf of Mexico assets;
	•	the merger could generate increased visibility in the capital markets and trading liquidity for the combined company, which could enhance the market valuation of Mariner common stock;

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	•	the merger would increase the number of Mariner’s producing fields by approximately 400%, thereby diversifying Mariner’s asset base and reducing Mariner’s dependence on a concentrated number of properties;
	•	the assets comprising the Forest Gulf of Mexico operations, which historically have been used as a cash flow generator for Forest, could be candidates for increased exploitation;
	•	oil and natural gas prices are currently at or near historical highs, which could increase the revenues and enhance the profitability of the Forest Gulf of Mexico operations;
	•	the merger would be consummated only if approved by the holders of a majority of the Mariner common stock;
	•	the merger is structured as a tax-free reorganization for U.S. federal income tax purposes and, accordingly, would not be taxable either to Mariner or its stockholders;
	•	the board’s belief that the potential financial benefits stemming from the enhanced growth prospects of the combined company outweigh the anticipated direct and indirect costs of the merger;
	•	the terms of the merger agreement permit Mariner to terminate the merger agreement at any time before the meeting to accept a superior proposal, subject to its obligation to comply with certain procedural requirements and to pay a termination fee and expense reimbursement; and
	•	the opinion, dated September 9, 2005, of Lehman Brothers Inc. to the Mariner board of directors that, as of that date, based upon and subject to the factors and assumptions set forth in the opinion, the exchange ratio in the merger was fair from a financial point of view to Mariner.

	•	the risk that there may be difficulties in combining the business of Mariner and the Forest Gulf of Mexico operations;
	•	the risk that the potential benefits sought in the merger might not be fully realized;
	•	the risk that the proved undeveloped, probable and possible reserves of the Forest Gulf of Mexico operations may never be converted to proved developed reserves;
	•	the risks inherent in owning properties located in the Gulf of Mexico, including the risks of future hurricanes that could damage or destroy the acquired properties;
	•	the risk that current high commodity prices could fall, thereby reducing the profitability of the acquired operations;
	•	the risk that the merger might not be completed;
	•	the fact that, in order to preserve the tax-free treatment of the spin-off, Mariner would be required to abide by restrictions that could reduce its ability to engage in certain business transactions that otherwise might be advantageous;
	•	the fact that under the merger agreement, Mariner could be required to pay Forest a termination fee and expense reimbursement in certain circumstances; and
	•	certain of the other matters described under “Risk Factors” beginning on page 24.

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		2005				2006
Revenue (in millions)		$	230.2			$	421.4
EBITDA (in millions)		$	185.2			$	353.9
Net income (in millions)		$	60.9			$	158.7
Net income per common share		$	1.71			$	4.45
Capital expenditures (in millions)		$	257.4			$	250.5

	•	weighted average common shares outstanding of 35.6 million in both periods;
	•	NYMEX prices for oil and Henry Hub prices for gas, as adjusted for pricing differentials and hedging contracts in place at such date as follows:

		2005				2006
Oil (per Bbl)		$	41.27			$	48.83
Gas (per Mcf)		$	6.86			$	7.87
Total (per Mcfe)		$	6.87			$	7.94

	•	annual production as follows:

		2005				2006
Oil (MBbls)			1.9				2.4
Gas (Bcf)			21.6				38.8
Total (Bcfe)			33.2				53.1

	•	a depreciation, depletion and amortization rate of $1.84 per Mcfe for 2005 and $1.80 per Mcfe for 2006;
	•	an effective income tax rate of 35% in each period; and
	•	various assumptions relating to delays in scheduled commencement of production at Pluto, Swordfish, Ochre and Dice, suspension of production at producing fields and increased capital expenditures due to Hurricane Katrina.

		Six Months Ended
		December 31,
		2005				2006
Revenue (in millions)		$	214.1			$	529.4
EBITDA (in millions)		$	173.5			$	450.5
Net income (in millions)		$	43.9			$	124.3
Net income per common share		$	0.87			$	2.45
Capital expenditures (in millions)		$	123.0			$	202.3

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	•	weighted average common shares outstanding of 50.6 million in each period;
	•	NYMEX prices for oil and Henry Hub prices for gas, as adjusted for pricing differentials and hedging contracts in place at such date as follows:

		Six Months Ended
		December 31,
		2005				2006
Oil (per Bbl)		$	47.42			$	48.41
Gas (per Mcf)		$	6.64			$	7.13
Total (per Mcfe)		$	7.02			$	7.35

	•	production as follows:

		Six Months Ended
		December 31,
		2005				2006
Oil (MBbls)			1.5				2.9
Gas (Bcf)			21.3				54.7
Total (Bcfe)			30.5				72.0

	•	a depreciation, depletion and amortization rate of $3.26 per Mcfe for 2005 and $3.43 per Mcfe for 2006;
	•	an effective income tax rate of 35% in each period;
	•	the allocation from July 1, 2005 to December 31, 2005 of general and administrative expenses as set forth in the distribution agreement;
	•	net hedging losses of $11.7 million for the six months ended December 31, 2005 and $19.5 million in 2006;
	•	various assumptions relating to general and administrative expenses to reflect the allocation set forth in the distribution agreement; and
	•	transaction-related expenses of $12 million for the six months ended December 31, 2005.

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	•	the fact that Mariner’s board of directors unanimously approved the merger, including all directors with no interest in the merger other than their interests as stockholders of Mariner;
	•	the fact that the stockholders of Mariner will be given the opportunity to vote on the merger, and that the merger agreement would not be adopted without the affirmative vote of at least a majority of Mariner’s common stock;
	•	the fact that Mariner does not have a controlling stockholder, and that directors and officers of Mariner own less than 11% of the outstanding stock of Mariner;
	•	the fact that independent financial and legal advisors were retained to assist in the negotiation of the terms of the merger agreement, the distribution agreement and the other ancillary agreements; and
	•	the fact that Mariner received a written opinion from its independent financial advisor as to the fairness, from a financial point of view, of the merger consideration.

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	•	the merger agreement, the distribution agreement, the other transaction agreements and the specific terms of the merger;
	•	publicly available information concerning Mariner that Lehman Brothers believed to be relevant to its analysis, including, without limitation, the Amendment No. 1 to the Registration Statement on Form S-1 filed on July 26, 2005 by Mariner;
	•	publicly available information concerning Forest that Lehman Brothers believed to be relevant to its analysis, including, without limitation, the Annual Report on Form 10-K for the year ended December 31, 2004 and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2005 and June 30, 2005;
	•	financial and operating information with respect to the business, operations and prospects of Mariner as furnished to Lehman Brothers by Mariner, including financial projections and oil and gas reserve estimates as of June 30, 2005 for Mariner as prepared by the management of Mariner;
	•	financial and operating information with respect to the Forest Gulf of Mexico operations as furnished to Lehman Brothers by Forest, including financial projections and oil and gas reserve estimates as of June 30, 2005 for the Forest Gulf of Mexico operations as prepared by the management of Forest;
	•	a comparison of the historical financial results and present financial condition of Mariner and the Forest Gulf of Mexico operations with each other and with those of other companies that Lehman Brothers deemed relevant;
	•	a comparison of the financial terms of the merger with the financial terms of certain other transactions that Lehman Brothers deemed relevant;
	•	commodity prices assumptions used by the management of Mariner, commodity prices assumptions published by Lehman Brothers equity research, and commodity prices as quoted on the NYMEX on August 19, 2005 (collectively the “Commodity Price Assumptions”);
	•	estimates of certain proved reserves generated by third-party reserve engineers as of December 31, 2004 for Mariner and the Forest Gulf of Mexico operations;
	•	the potential pro forma impact of the merger on the current financial condition and future financial performance of Mariner, including the impact on Mariner’s operating metrics, including, the composition of its reserves between oil and gas; the percentage of reserves attributable to onshore, the shelf of the Gulf of Mexico and deepwater Gulf of Mexico; and the ratio of reserves as of June 30, 2005 to 2005 expected production;
	•	the relative contributions of Mariner and the Forest Gulf of Mexico operations to the current and future financial performance of the combined company on a pro forma basis;
	•	the report dated as of September 9, 2005, prepared by the management of Mariner, assessing the damage to the Gulf of Mexico assets of Mariner caused by Hurricane Katrina; and
	•	the report dated as of September 9, 2005, prepared by the management of Forest, assessing the damage to the Gulf of Mexico assets of the Forest Gulf of Mexico operations caused by Hurricane Katrina.

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	Valuation Analyses Used to Derive Implied Exchange Ratios

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				Implied
				Exchange
Valuation Methodology		Summary Description of Valuation Methodology		Ratio Range*
Net Asset Valuation Analysis		Net present valuation of after-tax cash flows generated by producing to exhaustion existing proved reserves, using selected hydrocarbon pricing scenarios and discount rates plus the evaluation of probable and possible reserves and certain other assets and liabilities
		— Case I Commodity Prices			0.84 - 1.11
		— Case II Commodity Prices			0.95 - 1.30
		— Case III Commodity Prices			0.88 - 1.14
Comparable Company Analysis		Market valuation benchmark based on trading multiples of selected comparable companies for selected financial and asset-based measures			0.78 - 1.14
Comparable Transactions Analysis		Market valuation benchmark based on consideration paid in selected comparable transactions			0.80 - 1.32
Exchange Ratio in the Merger					1.00*

*

Shares of Forest Energy Resources will be exchanged for shares of Mariner on a one-for-one basis. The exchange ratio represents the number of Mariner shares to be issued in the merger for each Forest Energy Resources share. As a result of this exchange ratio and the number of shares of Forest Energy Resources to be issued in the spin-off, Forest shareholders will receive approximately 0.8 shares of Mariner common stock for each share of Forest common stock they own and cash in lieu of any fractional shares.

	Net Asset Valuation Analysis

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																											Escalation
			2005E				2006E				2007E				2008E				2009E				2010E				Thereafter
Natural Gas ($MMBtu)
Case I: All reserve classifications			$	5.00			$	5.00			$	5.00			$	5.00			$	5.00			$	5.00				0.0%
Case II:
	Proved developed producing reserves		$	9.24			$	8.89			$	8.29			$	7.85			$	7.47			$	7.14				0.0%
	All other reserve classifications		$	5.00			$	5.00			$	5.00			$	5.00			$	5.00			$	5.00				0.0%
Case III: All reserve classifications			$	9.24			$	8.89			$	8.29			$	7.85			$	7.47			$	7.14				0.0%
Oil ($/BBL)
Case I: All reserve classifications			$	45.00			$	45.00			$	45.00			$	45.00			$	45.00			$	45.00				0.0%
Case II:
	Proved developed producing reserves		$	64.06			$	64.81			$	62.71			$	60.55			$	59.15			$	58.45				0.0%
	All other reserve classifications		$	45.00			$	45.00			$	45.00			$	45.00			$	45.00			$	45.00				0.0%
Case III: All reserve classifications			$	64.06			$	64.81			$	62.71			$	60.55			$	59.15			$	58.45				0.0%

	Comparable Company Analysis

	•	Bois d’Arc Energy, Inc.
	•	Comstock Resources, Inc.
	•	Energy Partners, Ltd.
	•	The Houston Exploration Company
	•	Remington Oil and Gas Corporation
	•	Spinnaker Exploration Company
	•	Stone Energy Corporation
	•	W&T Offshore, Inc.

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	•	Bois d’Arc Energy, Inc.
	•	Energy Partners, Ltd.
	•	The Houston Exploration Company
	•	Remington Oil and Gas Corporation
	•	Spinnaker Exploration Company
	•	Stone Energy Corporation
	•	W&T Offshore, Inc.

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	Comparable Transactions Analysis

	•	Petrohawk Energy Corporation/Mission Resources Corporation
	•	Cimarex Energy Company/Magnum Hunter Resources, Inc.
	•	Noble Energy Inc./Patina Oil & Gas Corporation
	•	EnCana Corporation/Tom Brown, Inc.
	•	Kerr-McGee Corporation/Westport Resources Corporation

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	•	Cimarex Energy Company/Magnum Hunter Resources, Inc.
	•	Noble Energy Inc./Patina Oil & Gas Corporation
	•	EnCana Corporation/Tom Brown, Inc.
	•	Kerr-McGee Corporation/Westport Resources Corporation

	Contribution Analysis

	Pro Forma Merger Consequences Analysis

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	General

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	Scope of the Discussion

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	•	a “U.S. holder” is a beneficial owner of Forest, Forest Energy Resources or Mariner common stock that is (1) an individual citizen or resident of the U.S., (2) a corporation or any other entity taxable as a corporation created or organized in or under the laws of the U.S. or of a state of the U.S. or the District of Columbia, (3) a trust (i) in respect of which a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantive decisions of the trust or (ii) that was in existence on August 20, 1996 and validly elected to continue to be treated as a domestic trust, or (4) an estate that is subject to U.S. tax on its worldwide income from all sources;
	•	a “non-U.S. holder” is any holder of Forest, Forest Energy Resources or Mariner common stock other than a U.S. holder; and
	•	the term “U.S. tax” means U.S. federal income tax under the Internal Revenue Code of 1986, as amended.

	•	tax exempt organizations;
	•	financial institutions, insurance companies and broker-dealers;
	•	holders who hold their Forest, Forest Energy Resources or Mariner common stock, as applicable, as part of a hedge, straddle, wash sale, synthetic security, conversion transaction or other integrated investment comprised of Forest, Forest Energy Resources or Mariner common stock and one or more other investments;
	•	mutual funds;
	•	holders that have a functional currency other than the U.S. dollar;
	•	traders in securities who elect to apply a mark-to-market method of accounting;
	•	holders who acquired their shares in compensatory transactions;
	•	holders who are subject to the alternative minimum tax; or
	•	non-U.S. holders who are or have previously been engaged in the conduct of a trade or business in the U.S. or who have ceased to be U.S. citizens or to be taxed as resident aliens.

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	Material U.S. Tax Consequences of the Spin-Off

	•	a Forest shareholder will not recognize any income, gain or loss as a result of the spin-off;
	•	a Forest shareholder’s aggregate tax basis for his or her Forest common stock on which Forest Energy Resources common stock is distributed and the Forest Energy Resources common stock received by such shareholder in the spin-off will be the same as the tax basis of Forest common stock held by such shareholder immediately prior to the spin-off. A Forest shareholder’s aggregate tax basis will be allocated between his or her Forest common stock and Forest Energy Resources common stock received in the spin-off in proportion to the relative fair market value of the Forest common stock and Forest Energy Resources common stock on the spin-off date;
	•	a Forest shareholder’s holding period for the Forest Energy Resources common stock received in the spin-off will include the holding period of the Forest common stock on which the distribution is made; and
	•	Forest will not recognize any income, gain or loss on the spin-off, other than with respect to any “excess loss account” or “intercompany transaction” required to be taken into account by Forest under the Treasury regulations relating to consolidated returns. It is also possible that Forest may recognize income with respect to certain cash received from Forest Energy Resources under the distribution agreement.

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	Material U.S. Tax Consequences of the Merger

	•	Mariner receive an opinion from Baker Botts L.L.P., dated as of the effective date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code; and
	•	Forest and Forest Energy Resources receive an opinion from Weil, Gotshal & Manges LLP, tax counsel to Forest, dated as of the effective date of the merger, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

	•	a Mariner stockholder will not recognize gain or loss pursuant to the merger, and such holder’s tax basis and holding period in Mariner common stock will not be affected by the merger;

	•	a Forest Energy Resources stockholder who exchanges Forest Energy Resources common stock solely for Mariner common stock in the merger will not recognize gain or loss except, as described below, to the extent of any cash received in lieu of fractional shares of Mariner common stock;
	•	the aggregate tax basis in the Mariner common stock a Forest Energy Resources stockholder receives in the merger (including any fractional shares for which cash is received) will be the same as his or her aggregate tax basis in the Forest Energy Resources common stock surrendered in the merger;
	•	the holding period of the Mariner common stock received in the merger by a holder of Forest Energy Resources common stock (including any fractional shares for which cash is received) will include the holding period of Forest Energy Resources common stock that such stockholder surrendered in the merger; and
	•	a Forest Energy Resources stockholder who receives fractional share proceeds as a result of the sale of shares of Mariner common stock by the transfer agent will be treated as if such fractional share had been received by the shareholder as part of the merger and then sold by such stockholder. Accordingly, such stockholder will recognize capital gain or loss equal to the difference between the cash so received and the portion of the tax basis in Mariner common stock that is allocable to such fractional share. Any such capital gain or loss will be treated as a long-term or short-term capital gain or loss based on the holder’s holding period for the Mariner common stock (as determined above). Non-U.S. holders who receive fractional share proceeds may be subject to withholding tax with respect to the fractional share proceeds under special rules governing the disposition of interests in a United States real property holding corporation.

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	Material U.S. Federal Tax Consequences to U.S. Holders of Holding and Disposing of Mariner Common Stock

	Distributions on Common Stock

	Sales or Dispositions of Common Stock

	Information Reporting and Backup Withholding

	U.S. Federal Estate Tax

	Material U.S. Federal Tax Consequences to Non-U.S. Holders of Holding and Disposing of Mariner Common Stock

	Distributions on Common Stock

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	•	in the case of Mariner common stock held by a foreign partnership, the certification requirement will generally be applied to the partners of the partnership and the partnership will be required to provide certain information;
	•	in the case of Mariner common stock held by a foreign trust, the certification requirement will generally be applied to the trust or the beneficial owners of the trust depending on whether the trust is a “foreign complex trust,” “foreign simple trust” or “foreign grantor trust” as defined in the U.S. Treasury Regulations; and
	•	look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.

	Sales or Dispositions of Common Stock

	•	the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the U.S. and, if an income tax treaty applies, is attributable to a permanent establishment maintained by the non-U.S. holder in the U.S.; in these cases, the gain will be taxed on a net income basis at the rates and in the manner applicable to U.S. persons, and if the non-U.S. holder is a foreign corporation, the branch profits tax described above may also apply;
	•	the non-U.S. holder is an individual who is present in the U.S. for 183 days or more in the taxable year of the disposition and meets other requirements; or
	•	Mariner is or has been a “United States real property holding corporation” for U.S. tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held such Mariner common stock.

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	Information Reporting and Backup Withholding

	•	is a U.S. person for U.S. tax purposes;
	•	derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the U.S.;
	•	is a “controlled foreign corporation” for U.S. tax purposes; or
	•	is a foreign partnership, if at any time during its tax year:

	•	one or more of its partners are U.S. persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or
	•	the foreign partnership is engaged in a U.S. trade or business,

	U.S. Federal Estate Tax

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	•	pursuant to an effective registration statement under the Securities Act;
	•	in conformity with the volume and other limitations of Rule 145 promulgated under the Securities Act; or
	•	in a transaction which, in the opinion of independent counsel reasonably satisfactory to Mariner or as described in a “no-action” or interpretative letter from the Staff of the SEC, is not required to be registered under the Securities Act.

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	•	our high-quality assets with geographic and geological diversity;
	•	our successful track record of finding and developing oil and gas reserves; and
	•	our depth of operating experience.

	•	Our deepwater projects have the potential to provide large reserves, high production volumes and substantial cash flow. Approximately 65 Bcfe of our undeveloped estimated proved reserves as of December 31, 2004, are located in our high-impact deepwater projects — Swordfish, Pluto, Rigel, Baccarat, and Daniel Boone. The Baccarat project commenced production in July 2005 (although production was shut-in due to Hurricane Rita and recommenced in January 2006), and the Swordfish project commenced production in October 2005. Notwithstanding delays caused primarily by 2005 hurricane activity, we believe Pluto and Rigel will commence production in the second quarter of 2006. Proved undeveloped reserves attributable to those projects have been recategorized as proved developed reserves. Daniel Boone is currently scheduled for production in 2008.
	•	The Gulf of Mexico is an area that offers substantial growth opportunities, and we expect to continue to generate shelf, deep shelf and deepwater Gulf of Mexico prospects. The Forest Gulf of Mexico assets will more than double our existing undeveloped acreage position to approximately 465,000 net acres and increase our total net leasehold acreage offshore to nearly 1 million acres, providing numerous exploration, exploitation and development opportunities. We believe the additional acreage also will provide increased exposure to farm-out opportunities from other oil and gas operators. Our team of geoscientists currently has access to seismic data from multiple, recent vintage 3-D seismic databases covering more than 6,600 blocks in the Gulf of Mexico that we intend to continue to use to develop prospects on acreage being evaluated for leasing and to develop and further refine prospects on our expanded acreage position. The combination of our undeveloped acreage position, inventory of development prospects, seismic data and technical knowledge should enhance our ability to select

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		projects with the greatest return potential for future development. We will also gain access to a significant infrastructure in the shelf that we believe will provide substantial cost efficiencies to the combined operations.
	•	Our West Texas assets provide stable cash flow and long-lived reserves, with significant development opportunities. In West Texas, during the three years ended December 31, 2004, we drilled 105 wells, all commercially successful, added approximately 76 Bcfe of estimated proved reserves, and increased our average daily production by more than 400%. Our 52 Bcfe of undeveloped estimated proved reserves in West Texas includes 162 locations. Our recent West Texas acquisition adds to our asset base an approximate 35% working interest in over 200 existing producing wells and, we believe, will provide future infill development opportunities, much like our Aldwell unit. This recent acquisition, in conjunction with our existing West Texas acreage, gives Mariner an inventory of multi-year development drilling opportunities.

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	•	reduce our concentration risk;
	•	provide many exploration, exploitation and development opportunities;
	•	enable us to increase the number of our internally-generated prospects;
	•	expand our sphere of influence and enhance our ability to participate in prospects generated by other operators; and
	•	add a significant cash flow generating resource that will improve our ability to compete effectively in the Gulf of Mexico and provide funding for acquisition projects.

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	Structure of the Merger

	Effective Time of the Merger

	Merger Consideration

	Cancellation of Certain Shares

	Procedure for Surrender of Certificates

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	Treatment of Certain Forest Stock Options

	•	the number of shares of Forest common stock subject to the portion of such option that is unexercisable immediately before the effective time, by
	•	the “option exchange ratio” described below,

	•	the average of the daily closing prices per share of Forest common stock for the last five trading days immediately preceding the effective time of the merger, by
	•	the average of the daily closing prices per share of Mariner common stock for the first five trading days following the effective time of the merger,

	Board of Directors and Officers of Mariner

	•	corporate existence, qualifications to conduct business and corporate standing and power;
	•	corporate authorization, enforceability and actions by the board of directors;
	•	capitalization;
	•	financial statements and undisclosed liabilities;
	•	absence of certain material changes or events since June 30, 2005;

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	•	governmental investigations and litigation;
	•	licenses and compliance with laws;
	•	the registration statements to be filed with the SEC and this proxy statement/ prospectus-information statement;
	•	information supplied to governmental authorities;
	•	compliance with environmental laws;
	•	tax matters;
	•	benefit plans;
	•	labor matters;
	•	intellectual property matters;
	•	material contracts;
	•	financial advisor opinion (given only by Mariner);
	•	payment of broker’s and finder’s fees in connection with the merger agreement and other transaction agreements;
	•	takeover statutes (given only by Mariner);
	•	certain findings of the board of directors to approve the merger;
	•	stockholder votes necessary to complete the merger;
	•	absence of requirement for Forest stockholder approval (given only by Forest);
	•	Forest Energy Resources stockholder approval (given only by Forest Energy Resources);
	•	payments to certain affiliated individuals or entities;
	•	title to, and sufficiency of, assets;
	•	loans made to third parties;
	•	oil and gas reserves; and
	•	derivative transactions.

	•	due organization and good standing;
	•	corporate power, authorization and validity of agreements;
	•	information supplied to governmental authorities;
	•	payment of broker’s and finder’s fees in connection with the merger agreement and other transaction agreements; and
	•	rights plan.

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	No Solicitation

	•	solicit, initiate, encourage, facilitate or induce any inquiry, proposal or offer with respect to an acquisition proposal;
	•	participate in any discussions or negotiations regarding, provide nonpublic information with respect to, or otherwise facilitate any acquisition proposal;
	•	engage in discussions with respect to an acquisition proposal;
	•	approve, endorse or recommend an acquisition proposal, except as provided in the merger agreement; or
	•	enter into any agreement related to any acquisition proposal, except as provided by the merger agreement.

	•	any purchase by any person, entity or group, as defined in Section 13(d) of the Exchange Act, of more than 15% of the total outstanding voting securities of Mariner;
	•	any tender or exchange offer that would result in any person, entity or group, as defined in Section 13(d) of the Exchange Act, owning 15% or more of the total outstanding voting securities of Mariner;
	•	any merger, consolidation, business combination or similar transaction involving Mariner;
	•	any sale, exchange, transfer, acquisition or disposition, or any lease or license outside of the ordinary course of business, of more than 15% of Mariner’s assets; or
	•	any liquidation of dissolution of Mariner.

	•	notify Forest and Forest Energy Resources orally and in writing of the material terms of the acquisition proposal, request or inquiry;
	•	identify to Forest and Forest Energy Resources the person making the acquisition proposal, request or inquiry;
	•	furnish to Forest and Forest Energy Resources copies of all written materials provided in connection with the acquisition proposal or inquiry;
	•	provide to Forest and Forest Energy Resources as promptly as practicable, both orally and in writing, all information reasonably necessary to keep Forest and Forest Energy Resources informed in all material respects of the status and details of the acquisition proposal, request or inquiry, including providing copies of written materials received from and provided to the third party making the acquisition proposal, request or inquiry; and

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	•	provide Forest and Forest Energy Resources 48 hours’ prior notice (or such lesser notice as is provided to Mariner’s directors) of any meeting of Mariner’s board of directors at which it will consider an acquisition proposal, unless shorter notice is provided to the board of directors, in which case Forest and Forest Energy Resources are to be provided the same notice.

	•	Mariner has complied with all of its non-solicitation and notification obligations in the merger agreement;
	•	in the good faith judgment of Mariner’s board of directors (after receiving the advice of its legal counsel and financial advisor), the acquisition proposal is a superior offer or is reasonably likely to result in a superior offer;
	•	concurrently with furnishing any nonpublic information, Mariner notifies Forest and Forest Energy Resources in writing of its intention to furnish nonpublic information and furnishes the same nonpublic information to Forest and Forest Energy Resources;
	•	concurrently with engaging in negotiations with the third party, Mariner notifies Forest and Forest Energy Resources in writing of its intent to enter into negotiations with the third party; and
	•	Mariner executes a customary confidentiality agreement with the third party with terms at least as restrictive as the confidentiality agreement between Forest and Mariner.

	•	Mariner stockholders have not already approved the merger and the merger agreement;
	•	Mariner notifies Forest and Forest Energy Resources in writing:

	•	that it has received a superior offer;
	•	of the terms and conditions of the superior offer;
	•	of the identity of the third party making the superior offer; and
	•	that it intends to change its recommendation that Mariner stockholders approve the merger and the manner in which it intends to do so;

	•	Mariner provides Forest and Forest Energy Resources with copies of all written materials delivered by Mariner to the third party making the superior offer that have not previously been provided to Forest and Forest Energy Resources, and Mariner has otherwise made available to Forest and Forest Energy Resources all materials and information made available to the third party; and
	•	Mariner has not breached any of the provisions of the merger agreement relating to acquisition proposals and superior offers.

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	Board of Directors Covenant to Call Stockholders’ Meeting and to Recommend the Merger

	Operations of Forest (in respect of the Forest Gulf of Mexico operations), Forest Energy Resources and Mariner Pending Closing

	•	in the case of Mariner, declare or pay any dividends on or make other distributions in respect of its capital stock;
	•	split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock;
	•	redeem, repurchase or otherwise acquire (or permit any subsidiary to redeem, repurchase or otherwise acquire) any shares of its capital stock;
	•	issue, deliver or sell any shares of, or securities convertible into, its capital stock of any class, except, in the case of Mariner, the issuance of stock options with three-year vesting or restricted stock for up to 300,000 shares of Mariner common stock;

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	•	amend its governing documents;
	•	other than purchases from vendors or suppliers in the ordinary course of business consistent with past practice, exercises of preferential rights and, in the case of Mariner, certain specified transactions, engage in acquisitions valued at more than $25 million in the aggregate;
	•	other than product sales and other dispositions in connection with normal equipment maintenance or salvage in the ordinary course of business and consistent with past practice and permitted liens, dispose of assets valued at more than $10 million in the aggregate, except, in the case of Mariner, transactions permitted as described under “— No Solicitation” above, and except, in the case of Forest, dispositions of property to Forest and any of its wholly owned subsidiaries;
	•	incur or guarantee indebtedness, other than, in the case of Forest Energy Resources, indebtedness incurred or guaranteed in connection with the spin-off, or, in the case of Mariner, up to $185 million pursuant to a new or amended credit agreement;
	•	fail to continue its capital expenditure program for exploration and development or fail to perform, to the extent reasonably practicable, all capital expenditures at an aggregate cost not exceeding 120% of the aggregate costs set forth in the capital expenditure program;
	•	make material changes to employment arrangements;
	•	fail to comply with any laws, ordinances or regulations or permit to expire or terminate without renewal any license that is necessary to the operation of the business, to the extent the same would result in a material adverse effect;
	•	adopt a plan of complete or partial liquidation or dissolution;
	•	change its fiscal year or make any material change in its methods of accounting except as required by the Financial Accounting Standards Board or changes in generally accepted accounting principles, or in response to comments made by the SEC with respect to any registration statement;
	•	amend any agreement or arrangement with any affiliates (including employees of Mariner and Forest Energy Resources) on terms materially less favorable than could be reasonably expected to have been obtained with an unaffiliated third party on an arm’s-length basis;
	•	except in the ordinary course of business consistent with past practice, modify, amend, terminate or renew any material contract or waive, release or assign any material rights or claims, in each case if the action would have a material adverse effect or impair in any material respect the party’s ability to perform its obligations under the merger agreement and other transaction agreements;
	•	waive any preferential rights;
	•	enter into any contract not in the ordinary course of business involving total consideration of $2 million or more with a term longer than one year, unless it can be terminated by it without penalty upon no more than 30 days’ prior notice;
	•	fail to maintain insurance in amounts and against risks and losses as are customary for companies engaged in their respective businesses, except, in the case of Mariner, self-insurance with respect to operators’ extra expense insurance, physical damage to wellsite real and personal property insurance and business interruption insurance;
	•	make or rescind any material express or deemed election relating to taxes unless the action will not materially and adversely affect that party on a going-forward basis;
	•	settle or compromise any material claim or controversy relating to taxes, except where the settlement or compromise will not result in a material adverse effect on that party;
	•	amend any material tax returns;

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	•	change in any material respect any of its methods of reporting income or deductions for federal income tax purposes, except as may be required by applicable law or except for changes that are reasonably expected not to result in a material adverse effect on that party;
	•	pay, discharge or satisfy any material claims, liabilities or obligations, other than the payment, discharge or satisfaction, in the ordinary course of business or, in the case of Mariner, in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements or incurred in the ordinary course of business;
	•	take or cause or permit to be taken any action that would disqualify the spin-off under the distribution agreement from constituting a tax-free spin-off or that would disqualify either the merger or the contribution of assets from Forest to Forest Energy Resources from constituting a tax-free reorganization;
	•	intentionally take or agree or commit to take any action that would result in any of the conditions set forth in the merger agreement not being satisfied at the effective time of the merger;
	•	enter into any derivative transaction or any fixed price commodity sales agreement with a term of more than 60 days; and
	•	agree or otherwise take any action inconsistent with the foregoing.

	Commercially Reasonable Efforts, Further Assurances

	Employee Benefit Plans

	•	will participate in Mariner benefit plans as of the effective time of the merger on a basis no less favorable than that applicable to similarly situated Mariner employees, and be granted full credit for all purposes under such plans for prior service with Forest and Forest Energy Resources and their affiliates before the effective time of the merger (except to the extent necessary to avoid duplication of benefits);

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	•	will, if the effective time of the merger occurs in 2006, receive vacation benefits for 2006 that are equal to the employee’s accrued and unused vacation under Forest’s vacation policy as of the effective time of the merger plus any additional vacation entitlement the employee would have earned under the terms of Mariner’s vacation policy; and
	•	will receive specified relocation benefits if, from the effective time of the merger to the later of June 30, 2006 or six months after the effective time of the merger, Mariner or a subsidiary of Mariner relocates the principal place of employment of the employee by 50 miles or more from the location of his or her principal place of employment immediately prior to the effective time of the merger.

	Directors’ and Officers’ Indemnification

	Litigation Defense

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	Accounting Matters

	Reorganization Treatment

	Letter of Credit

	•	completion of the spin-off in accordance with the distribution agreement;
	•	obtaining all material consents, approvals and authorizations of any governmental authority legally required for the consummation of the transactions contemplated by the merger agreement and the other transaction agreements;
	•	the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Act;
	•	the SEC having declared effective the registration statements of Mariner relating to the shares of Mariner common stock to be issued in connection with the merger and the shares held by its existing stockholders;
	•	the approval for listing on the New York Stock Exchange or Nasdaq of the shares of Mariner common stock and such other shares required to be reserved for issuance in connection with the merger, subject to official notice of issuance;
	•	adoption of the merger agreement by the Mariner stockholders at the meeting;
	•	the absence of a final and non-appealable injunction or other prohibition issued by a court or other governmental entity that restrains, enjoins or prohibits the spin-off or the merger;
	•	there being no action by a governmental authority pending to restrain, enjoin, prohibit or delay consummation of the transactions contemplated by the merger agreement, or to impose any material restrictions or requirements on the transactions contemplated by the merger agreement or on Forest Energy Resources or Mariner with respect to the transactions;
	•	there being no action taken and no statute, rule, regulation or executive order enacted, entered, promulgated or enforced by any governmental authority with respect to the merger that, individually or in the aggregate, would restrain, prohibit or delay the consummation of the merger or impose material

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		restrictions or requirements on consummation of the merger or on Forest Energy Resources or Mariner with respect to the transactions;
	•	the performance by Forest, Forest Energy Resources and Mariner in all material respects of their respective covenants and agreements contained in the merger agreement and the truthfulness and correctness of the representations and warranties in the merger agreement in all respects, except in each case where the failure to be true and correct, individually or in the aggregate, would not have a material adverse effect or to the extent specifically contemplated or permitted by the merger agreement; and
	•	Forest, Forest Energy Resources and Mariner having received an opinion from their respective counsel to the effect that the merger will be treated for federal income tax purposes as a reorganization.

	•	Forest having received any consents required from its bondholders; and
	•	Forest having received the consents required pursuant to its credit facility.

	•	Mariner having received the consents required pursuant to its credit facility; and
	•	Forest Energy Resources and/or Mariner having entered into a new or amended credit facility with available borrowing capacity sufficient to operate the Forest Gulf of Mexico operations and Mariner’s business after the closing of the merger transaction consistent with past practice.

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	Right to Terminate

	•	by mutual written consent of the parties;
	•	by any party:

	•	if the effective time of the merger has not occurred on or before March 31, 2006, except that a party may not terminate the merger agreement if the cause of the merger not being completed on or before such date resulted from the party’s failure to fulfill its obligations;
	•	if a court or other governmental entity issues a final and non-appealable injunction or otherwise prohibits the merger and the terminating party has used all commercially reasonable efforts to remove such injunction or prohibition; or
	•	if the adoption of the merger agreement and the approval of the transactions contemplated by the merger agreement by the Mariner stockholders is not obtained, except that Mariner may not terminate the merger agreement if the cause of the approval not being obtained resulted from the action or failure to act of Mariner and such action or failure to act constitutes a breach by Mariner of the provisions of the merger agreement relating to non-solicitation in any respect or a material breach by Mariner of any of the other covenants or agreements contained in the merger agreement;

	•	by Mariner:

	•	if either Forest or Forest Energy Resources fails to perform in any material respect any of its respective covenants or agreements contained in the merger agreement required to be performed at or prior to the effective time of the merger, or the respective representations and warranties of Forest or Forest Energy Resources in the merger agreement are or will become untrue in any respect at any time prior to the effective time of the merger and the failure to be true and correct, individually or in the aggregate, would have a material adverse effect on the Forest Gulf of Mexico operations, Forest Energy Resources or Mariner and has not been cured within 30 days after written notice was given to Forest and Forest Energy Resources of such failure or untruth; or
	•	if the board of directors of Mariner changes its recommendation that Mariner stockholders approve the merger in order to accept a superior offer, provided that:

	•	Mariner is not in breach of the provisions of the merger agreement relating to non-solicitation or in material breach of any other covenant or agreement contained in the merger agreement, and has not breached any of its representations and warranties contained in the merger agreement in any material respect;
	•	Forest has not made an offer that is at least favorable as the superior offer within three business days after Forest receives written notice of the superior offer;

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	•	the Mariner board of directors authorizes Mariner to enter into a binding written agreement with respect to the superior offer and notifies Forest and Forest Energy Resources of its intent to do so and provides a copy of the most current version of the agreement; and
	•	Mariner pays the termination fee and expense reimbursement;

	•	by Forest:

	•	if Mariner fails to perform in any material respect any of its covenants or agreements contained in the merger agreement required to be performed at or prior to the effective time of the merger, or the representations and warranties of Mariner in the merger agreement are or will become untrue in any respect at any time prior to the effective time of the merger and the failure to be true and correct, individually or in the aggregate, would have a material adverse effect on Mariner, the Forest Gulf of Mexico operations or Forest Energy Resources and has not been cured within 30 days after written notice was given to Mariner of such failure or untruth; or
	•	if the board of directors of Mariner (i) fails to reaffirm publicly its approval of the merger, as soon as reasonably practicable, and in no event within three business days after Forest’s request, or resolves not to reaffirm the merger, (ii) fails to include in this proxy statement/ prospectus-information statement its recommendation, without modification or qualification, that Mariner stockholders approve the merger, (iii) withholds, withdraws, amends or modifies its recommendation that Mariner stockholders approve the merger, (iv) changes its recommendation that Mariner stockholders approve the merger or (v) within ten business days after commencement, fails to recommend against acceptance of any tender or exchange offer for shares of Mariner common stock or takes no position with respect to any tender or exchange offer.

	Termination Fees and Expenses

	•	the other party’s failure to perform in any material respect any of its covenants or agreements contained in the merger agreement; or
	•	the representations and warranties of such other party in the merger agreement being or becoming untrue; and
	•	the failure to be true and correct, individually or in the aggregate, would have a material adverse effect on Forest Energy Resources, the Mariner business or Mariner and has not been cured within 30 days after written notice was given to such party of such failure or untruth,

	•	(i) either Forest or Mariner terminates the merger agreement as a result of the failure to obtain the requisite stockholder approval from Mariner stockholders, (ii) either Forest or Mariner terminates the merger agreement as a result of the effective time of the merger not occurring on or before March 31, 2006 or (iii) Forest terminates the merger agreement as a result of the failure of Mariner to perform in any material respect any of its covenants and agreements contained in the merger agreement, plus an acquisition proposal had been publicly announced prior to the termination and, within twelve months of the date of termination, Mariner either completes an acquisition proposal with a third party or enters into an agreement or recommends approval of any acquisition proposal that is subsequently completed (whether or not within the twelve-month period);
	•	Forest terminates the merger agreement as a result of the board of directors of Mariner (i) having failed to reaffirm publicly its approval of the merger, as soon as reasonably practicable, and in no event later than three business days, after request by Forest, or having resolved not to reaffirm the merger,

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		(ii) having failed to include in this proxy statement/ prospectus-information statement its recommendation, without modification or qualification, that Mariner stockholders approve the merger, (iii) having withheld, withdrawn, amended or modified its recommendation that Mariner stockholders approve the merger, (iv) having changed its recommendation that Mariner stockholders approve the merger or (v) within ten business days after commencement, having failed to recommend against acceptance of any tender or exchange offer for shares of Mariner common stock or takes no position with respect to any such tender or exchange offer; or
	•	Mariner terminates the merger agreement as a result of the board of directors of Mariner changing its recommendation that Mariner stockholders approve the merger in order to permit Mariner to accept a superior offer.

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	•	all real property interests, overriding royalty interests, reversionary interests, real or immovable property (including use and occupation rights, rights to pooled, communitized or unitized acreage, and platforms, pipelines and improvements), easements, inventory, hydrocarbons, equipment, personal or movable property, spare parts, contracts, books and records, proceeds, refunds, settlements, claims and current assets to the extent comprising a part of the Forest Gulf of Mexico operations;
	•	other assets of Forest and the subsidiaries of Forest to the extent specifically assigned by Forest or any subsidiaries pursuant to the distribution agreement; and
	•	all rights of Forest Energy Resources under the distribution agreement and the other agreements entered into in connection with the merger and the spin-off.

	•	all of the liabilities of the Forest Gulf of Mexico operations to the extent arising after June 30, 2005 and attributable to the conduct of the business after that date;
	•	legal obligations to plug, abandon, remove or retire platforms, pipelines, improvements, equipment, personal or movable property, fixtures and improvements comprising part of the Forest Gulf of Mexico assets, to the extent the obligation was previously disclosed to Mariner, arose after June 30, 2005 or was not known to Forest after due inquiry on the date of the distribution agreement;
	•	environmental liabilities arising from the conduct of the Forest Gulf of Mexico operations (subject to a monetary cap with respect to specified conditions), unless such liability was required to have been disclosed to Mariner prior to the execution of the merger agreement and was not so disclosed; and
	•	liabilities under specified derivatives contracts with an estimated fair value of $50.8 million as of June 30, 2005.

	•	minus revenue derived from the Forest Gulf of Mexico operations from June 30, 2005 through the date of the spin-off (which period is referred to as the “measurement period”);
	•	minus cash consideration from any sale of property, plant and equipment related to the Forest Gulf of Mexico assets during the measurement period;
	•	plus certain net assets and liabilities specified on the date of the distribution agreement;

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	•	plus or minus the net gas balancing assets or liabilities of the Forest Gulf of Mexico operations as of June 30, 2005;
	•	plus or minus the net settlement amounts in respect of settlements of gas imbalances effected during the measurement period;
	•	plus capital and operating expenditures attributable to the Forest Gulf of Mexico operations during the measurement period;
	•	plus an amount equal to hypothetical income taxes attributable to the Forest Gulf of Mexico operations during the measurement period;
	•	plus interest expense attributable to the Forest Gulf of Mexico operations during the measurement period;
	•	plus $1.6 million per month during the measurement period in respect of general and administrative expenses;
	•	plus an amount, not to exceed $7 million, in respect of the fees and expenses of Forest and Forest Energy Resources in connection with the merger and related transactions;
	•	plus or minus an amount equal to the change in working capital accounts (other than cash) of the Forest Gulf of Mexico operations during the measurement period;
	•	plus or minus an amount to adjust for the above items to the extent they are settled through intercompany accounts prior to the closing.

	•	to pay, among other things, any losses or liabilities of Forest or its subsidiaries (including liabilities under the agreements entered into in connection with the merger and the spin-off);

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	•	to transfer to Forest Energy Resources or any of its subsidiaries all of the assets to be transferred to Forest Energy Resources; and
	•	to perform any of its obligations under the distribution agreement.

	•	obtaining all material consents, approvals and authorizations of any governmental authority that are legally required for the spin-off and other transactions contemplated by the other agreements entered into in connection with the spin-off and the merger;
	•	the absence of an injunction or other prohibition issued by a court or other governmental entity that restrains, enjoins or prohibits or otherwise imposes material restrictions on the spin-off or the merger;
	•	the SEC having declared effective the registration statement of Mariner relating to the shares of Mariner common stock to be issued into which shares of Forest Energy Resources common stock will be converted pursuant to the merger, of which this proxy statement/ prospectus-information statement forms a part;
	•	the approval for listing on the New York Stock Exchange or Nasdaq of the Mariner common stock and the other shares required to be reserved for issuance in connection with the merger, subject to official notice of issuance;
	•	the adoption of the merger agreement by the Mariner stockholders at the meeting;
	•	Forest having received an opinion from its tax counsel to the effect that the contribution will constitute a reorganization under Section 368(a) of the Internal Revenue Code and the distribution will qualify under Section 355 of the Internal Revenue Code;
	•	Forest having received the consents required from its bondholders;
	•	the performance by Mariner in all material respects of its covenants and agreements contained in the merger agreement required to be performed at or prior to the date of the spin-off; and
	•	the truthfulness and correctness of the representations and warranties of Mariner in the merger agreement in all respects, except as permitted by the merger agreement or where the failure to be true and correct would not have a material adverse effect.

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	Preparation and Filing of Tax Returns

	Liability for Taxes

	Transaction Taxes

	Continuing Covenants

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	•	a ruling from the Internal Revenue Service to the effect that the action contemplated would not affect the tax-free status of the spin-off,
	•	an opinion from a nationally recognized law firm both reasonably acceptable to Forest and Mariner to the effect that the action contemplated would not affect the tax-free status of the spin-off, or
	•	the agreement of both Forest and Mariner that such contemplated action would not affect the tax-free status of the spin-off.

	Miscellaneous

	•	sets forth the rights of the Forest Gulf of Mexico operations employees under certain of the Forest plans in which they previously participated, including with respect to the portion of their stock options that are exercisable at the effective time of the merger; and

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	•	provides for the assumption by Forest Energy Resources of certain liabilities of Forest relating to employees who are transferred to Forest Energy Resources, including the assumption of liabilities under Forest’s educational assistance plan and accrued vacation liabilities.

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		Applicable Margin
Usage as a %		LIBOR				Reference				Unused
Borrowing Base		Loans				Rate Loans				Fee
Less than 50%			1.25%				0.00%				0.375%
51% to 75%			1.50%				0.00%				0.375%
76% to 90%			1.75%				0.25%				0.250%
Greater than 90%			2.00%				0.50%				0.250%

	•	incur certain indebtedness;
	•	grant certain liens;
	•	merge or consolidate with another entity;
	•	sell unmortgaged property or other assets which generate proceeds in excess of 10% of the borrowing base;
	•	sell assets comprising collateral pledged to the lenders;
	•	make certain loans and investments;
	•	enter new lines of business; and
	•	permit certain trade payables to exceed 90 days.

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	•	consolidated current assets plus the unused borrowing base to consolidated current liabilities of not less than 1.0 to 1.0; and
	•	total debt to EBITDA of not more than 2.5 to 1.0.

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	•	incur indebtedness;
	•	grant certain liens;
	•	merge or consolidate with another entity;
	•	sell assets except in the ordinary course of business;
	•	make certain loans and investments; and
	•	permit trade payables to exceed 90 days.

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												Mariner
				Mariner				Merger				Pro Forma
				Historical				Adjustments(1)				Combined
				(In thousands)
ASSETS
Current Assets:
	Cash and cash equivalents			$	4,564			$	—			$	4,564
	Receivables				50,259				—				50,259
	Deferred tax asset				30,480				—				30,480
	Prepaid expenses and other				18,732				2,874	(2)			21,606
		Total current assets			104,035				2,874				106,909
Property and Equipment, net					393,258				1,463,846	(3)			1,857,104
Goodwill					—				142,000	(3)			142,000
Other Assets, net of amortization					4,916				7,597	(2)			12,513
		TOTAL ASSETS		$	502,209			$	1,616,317			$	2,118,526
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable			$	14,573			$	—			$	14,573
	Accrued liabilities				88,993				32,491	(2)			121,484
	Accrued interest				141				—				141
	Derivative liability				76,902				108,031	(2)			184,933
		Total current liabilities			180,609				140,522				321,131
Long-Term Liabilities:
	Abandonment liability				26,314				116,203	(2)			142,517
	Deferred income tax				6,468				168,852	(4)			175,320
	Derivative liability				28,221				17,203	(2)			45,424
	Bank debt				75,000				200,000	(5)			275,000
	Note payable				4,000				—				4,000
	New debt				—				—				—
	Other long-term liabilities				3,000				—				3,000
		Total long-term liabilities			143,003				502,258				645,261
Stockholders’ Equity:
	Common stock				4				5	(6)			9
	Additional paid-in capital				171,667				973,532	(3)			1,145,199
	Unearned compensation				(14,548	)			—				(14,548	)
	Accumulated other comprehensive (loss)				(67,708	)			—				(67,708	)
	Accumulated retained earnings				89,182				—				89,182
		Total stockholders’ equity			178,597				973,537				1,152,134
		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	502,209			$	1,616,317			$	2,118,526

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								Forest Energy								Mariner
				Mariner				Resources, Inc.				Merger				Pro Forma
				Historical				Historical(7)				Adjustments(1)				Combined
				(In thousands, except per share data)
Revenues:
	Oil & gas sales			$	148,492			$	326,722			$	—			$	475,214
	Other revenues				2,753				—				—				2,753
		Total revenues			151,245				326,722				—				477,967
Costs and Expenses:
	Lease operating expenses				20,170				59,379				—				79,549
	Transportation expenses				1,697				2,484				—				4,181
	General and administrative expenses				26,726				—				—				26,726
	Depreciation, depletion and amortization				43,457				—				201,255	(8)			244,712
	Impairment of production equipment held for use				498				—				—				498
		Total costs and expenses			92,548				61,863				201,255				355,666
OPERATING INCOME					58,697				264,859				(201,255	)			122,301
Interest:
	Income				696								—				696
	Expense, net of amounts capitalized				(5,416	)							(8,010	)(9)			(13,426	)
Income before taxes					53,977								(209,265	)			109,571
Provision for income taxes					(18,414	)							(19,936	)(10)			(38,350	)
NET INCOME					35,563								(229,201	)			71,221
Earnings per share:
Net Income per share — basic					1.10												0.86
Net Income per share — diluted					1.07												0.85
Weighted average shares outstanding — basic					32,438								50,637				83,075
Weighted average shares outstanding — diluted					33,313								50,637				83,950

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								Forest Energy								Mariner
				Mariner				Resources, Inc.				Merger				Pro Forma
				Historical				Historical(7)				Adjustments(1)				Combined
				(In thousands, except per share data)
Revenues:
	Oil & gas sales			$	214,187			$	453,139			$	—			$	667,326
	Other revenues				—				—				—				—
		Total revenues			214,187				453,139				—				667,326
Costs and Expenses:
	Lease operating expenses				25,484				81,627				—				107,111
	Transportation expenses				3,029				2,175				—				5,204
	General and administrative expenses				8,772				—				—				8,772
	Depreciation, depletion and amortization				64,911				—				303,261	(8)			368,172
	Impairment of production equipment held for use				957				—				—				957
		Total costs and expenses			103,153				83,802				303,261				490,216
OPERATING INCOME					111,034				369,337				(303,261	)			177,110
Interest:
	Income				316								—				316
	Expense, net of amounts capitalized				(6,050	)							(7,840	)(9)			(13,890	)
Income before taxes					105,300								(311,101	)			163,536
Provision for income taxes					(36,855	)							(20,383	)(10)			(57,238	)
NET INCOME					68,445								(331,484	)			106,298
Earnings per share:
Net Income per share — basic					2.30												1.32
Net Income per share — diluted					2.30												1.32
Weighted average shares outstanding — basic					29,748								50,637				80,385
Weighted average shares outstanding — diluted					29,748								50,637				80,385

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(1)	Transaction costs consisting of accounting, consulting and legal fees are anticipated to be approximately $12 million. These costs are directly attributable to the transaction and have been excluded from the pro forma financial statements as they represent material nonrecurring charges.
(2)	To record other current and long-term assets that we will receive in the spin-off and liabilities that we will assume as a result of the spin-off reflected at their estimated fair market values, including inventory of $2.1 million, abandonment escrows of $0.7 million, gas imbalances of $7.6 million, asset retirement obligations of $146.6 million and derivative liabilities of $125.2 million.
(3)	To record the preliminary purchase price allocation to the fair value of assets acquired, including oil and gas properties and goodwill. These adjustments also adjust depreciation, depletion and amortization expense to give effect to the acquisition of the Forest Gulf of Mexico operations and their step-up in value using the unit of production method under the full cost method of accounting.
(4)	To record the deferred tax position of the combined company, inclusive of the deferred tax gross-up in connection with the acquisition.
(5)	To record $200.0 million of debt that Forest Energy Resources, Inc. will incur under the terms of the distribution agreement. The actual amount of debt to be incurred will be adjusted to reflect the net cash proceeds generated by the Forest Gulf of Mexico operations since June 30, 2005 pursuant to the terms of the distribution agreement. Mariner plans to refinance the debt, which will mature 90 days after the closing, with a revolving credit facility that matures on the fourth anniversary of the closing. Forest Energy Resources, Inc. will be primarily liable for all indebtedness incurred in connection with the spin-off or any refinancing thereof.
(6)	To record issuance of 50,637,010 shares of common stock at par value of $.0001 per share.
(7)	The Forest Gulf of Mexico operations historically have been operated as part of Forest’s total oil and gas operations. No historical GAAP-basis financial statements exist for the Forest Gulf of Mexico operations on a stand-alone basis; however, statements of revenues and direct operating expenses are presented for the year ended December 31, 2004 (audited) and for the nine months ended September 30, 2005 (unaudited).
(8)	To adjust depreciation, depletion and amortization expense to give effect to the acquisition of the Forest Gulf of Mexico operations and their step-up in value using the unit of production method under the full cost method of accounting.
(9)	To adjust interest expense to give effect to the financing activities in connection with the organization of Forest Energy Resources, Inc. assuming an interest rate of 5.34% for the nine months ended September 30, 2005 and 3.92% for the year ended December 31, 2004 based on the terms of the senior term loan facility to be obtained by Forest Energy Resources. The interest rates used reflect 30-day LIBOR plus 1.50%, or 5.34% as of September 30, 2005 and 3.92% as of December 31, 2004. A change in interest rates of 1/8 percent would result in a change in interest expense of approximately $0.1 million and $0.2 million for the nine months ended September 30, 2005, and the year ended December 31, 2004, respectively.

(10)	To record income tax expense on the combined company results of operations based on a statutory combined federal and state tax rate of 35%.

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														Forest Energy Resources, Inc.
		Mariner Historical												Historical												Mariner Pro Forma Combined
										Natural Gas												Natural Gas												Natural Gas
		Oil				Natural Gas				Equivalent				Liquids				Natural Gas				Equivalent				Liquids				Natural Gas				Equivalent
		(Mbbl)				(MMcf)				(Mmcfe)				(Mbbl)				(MMcf)				(Mmcfe)				(Mbbl)				(MMcf)				(Mmcfe)
December 31, 2003			13,079				127,584				206,060				11,357				295,347				363,489				24,436				422,931				569,549
Revisions of previous estimates			1,249				19,797				27,291				1,693				(2,860	)			7,298				2,942				16,937				34,589
Extensions, discoveries and other additions			2,225				28,334				41,684				630				14,449				18,229				2,855				42,783				59,913
Sales of reserves in place			—				—				—				—				—				—				—				—				—
Production			(2,298	)			(23,782	)			(37,570	)			(3,230	)			(61,684	)			(81,064	)			(5,528	)			(85,466	)			(118,634	)
Purchases of reserves in place			—				—				—				1,200				24,556				31,756				1,200				24,556				31,756
December 31, 2004			14,255				151,933				237,465				11,650	(1)			269,808				339,708				25,905	(1)			421,741				577,173

(1)	Includes 598 Mbbls of natural gas liquids.

Forest Energy Resources, Inc.

Mariner Historical

Historical

Mariner Pro Forma Combined

Natural Gas

Natural Gas

Natural Gas

Oil

Natural Gas

Equivalent

Liquids

Natural Gas

Equivalent

Liquids

Natural Gas

Equivalent

(Mbbl)

(MMcf)

(Mmcfe)

(Mbbl)

(MMcf)

(Mmcfe)

(Mbbl)

(MMcf)

(Mmcfe)

December 31, 2004

6,339

71,361

109,395

9,471

201,759

258,585

15,810

273,120

367,980

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			For the Year Ending December 31, 2004
							Forest Energy				Mariner Pro
			Mariner				Resources, Inc.				Forma
			Historical				Historical				Combined
Future cash inflows			$	1,601,240			$	2,155,217			$	3,756,457
Future production costs				(308,190	)			(272,020	)			(580,210	)
Future development costs				(193,689	)			(357,592	)			(551,281	)
Future income taxes				(285,701	)			(412,477	)			(698,178	)
Future net cash flows				813,660				1,113,128				1,926,788
Discount of future net cash flows at 10% per annum				(319,278	)			(187,291	)			(506,569	)
Standardized measure of discounted future net cash flows			$	494,382				925,837				1,420,219
Balance, beginning of period			$	418,159			$	949,421			$	1,367,580
Increase (decrease) in discounted future net cash flows:
	Sales and transfers of oil and gas produced, net of production costs			(185,673	)			(426,405	)			(612,078	)
	Net changes in prices and production costs			27,767				11,628				39,395
	Extensions and discoveries, net of future development and production costs			102,905				88,999				191,904
	Development costs during period and net change in development costs			44,417				79,642				124,059
	Revision of previous quantity estimates			89,814				28,701				118,515
	Sales of reserves in place			—				—				—
	Net change in income taxes			(27,634	)			(28,550	)			(56,184	)
	Purchases of reserves in place			—				100,681				100,681
	Accretion of discount before income taxes			41,816				121,720				163,536
	Changes in production rates (timing) and other			(17,189	)			—				(17,189	)
Balance, end of period			$	494,382			$	925,837			$	1,420,219

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				Post-2004 Merger													Pre-2004 Merger
												Period from					Period from
								Period from				March 3,					January 1,
				Nine Months				March 3,				2004					2004
				Ended				2004 through				through					through				Year Ended December 31,
				September 30,				September 30,				December 31,					March 2,
				2005				2004				2004					2004				2003				2002				2001				2000
				(In millions, except per share data)
Statement of Operations Data:
	Total revenues(1)			$	151.2			$	122.5			$	174.4				$	39.8			$	142.5			$	158.2			$	155.0			$	121.1
	Lease operating expenses				20.2				15.1				21.4					4.1				24.7				26.1				20.1				17.2
	Transportation expenses				1.7				3.7				1.9					1.1				6.3				10.5				12.0				7.8
	Depreciation, depletion and amortization				43.4				37.4				54.3					10.6				48.3				70.8				63.5				56.8
	Impairment of production equipment held for use				0.5				1.0				1.0					—				—				—				—				—
	Derivative settlement				—				—				—					—				3.2				—				—				—
	Impairment of Enron related receivables				—				—				—					—				—				3.2				29.5				—
	General and administrative expenses				26.7				6.2				7.6					1.1				8.1				7.7				9.3				6.5
	Operating income				58.7				59.1				88.2					22.9				51.9				39.9				20.6				32.8
	Interest income				0.7				0.2				0.2					0.1				0.8				0.4				0.7				0.1
	Interest expense				(5.4	)			(4.4	)			(6.0	)				—				(7.0	)			(10.3	)			(8.9	)			(11.0	)
	Income before income taxes				54.0				54.9				82.4					23.0				45.7				30.0				12.4				21.9
	Provision for income taxes				(18.4	)			(19.2	)			(28.8	)				(8.1	)			(9.4	)			—				—				—
	Income before cumulative effect of change in accounting method net of tax effects				35.6				35.7				53.6					14.9				36.3				30.0				12.4				21.9
	Income before cumulative effect per common share
		Basic			1.10				1.20				1.80					.50				1.22				1.01				.42				.74
		Diluted			1.07				1.20				1.80					.50				1.22				1.01				.42				.74
	Cumulative effect of changes in accounting method				—				—				—					—				1.9				—				—				—
	Net income			$	35.6			$	35.7			$	53.6				$	14.9			$	38.2			$	30.0			$	12.4			$	21.9
	Net income per common share
		Basic			1.10				1.20				1.80					.50				1.29				1.01				.42				.74
		Diluted			1.07				1.20				1.80					.50				1.29				1.01				.42				.74
Capital Expenditure and Disposal Data:
	Exploration, including leasehold/seismic			$	23.6			$	35.7			$	40.4				$	7.5			$	31.6			$	40.4			$	66.3			$	46.7
	Development and other				106.8				50.2				93.2					7.8				51.7				65.7				98.2				61.4
	Proceeds from property conveyances				—				—				—					—				(121.6	)			(52.3	)			(90.5	)			(29.0	)
	Total capital expenditures net of proceeds from property conveyances			$	130.4			$	85.9			$	133.6				$	15.3			$	(38.3	)		$	53.8			$	74.0			$	79.1

(1)	Includes effects of hedging.

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			Post-2004 Merger									Pre-2004 Merger
												December 31,
			September 30,				December 31,
			2005				2004					2003				2002				2001				2000
			(In millions)
Balance Sheet Data:(1)
	Property and equipment, net, full cost method		$	393.3			$	303.8				$	207.9			$	287.6			$	290.6			$	287.8
	Total assets			502.2				376.0					312.1				360.2				363.9				335.4
	Long-term debt, less current maturities			79.0				115.0					—				99.8				99.8				129.7
	Stockholder’s equity			178.6				133.9					218.2				170.1				180.1				141.9
	Working capital (deficit)(2)			(30.2	)			(18.7	)				38.3				(24.4	)			(19.6	)			(15.4	)

(1)	Balance sheet data as of December 31, 2004 reflects purchase accounting adjustments to oil and gas properties, total assets and stockholder’s equity resulting from the acquisition of our former indirect parent on March 2, 2004.
(2)	Working capital (deficit) excludes current derivative assets and liabilities, deferred tax assets and restricted cash.

		Post-2004 Merger													Pre-2004 Merger
										Period from					Period from
						Period from				March 3,					January 1,
		Nine Months				March 3,				2004					2004
		Ended				2004 through				through					through				Year Ended December 31,
		September 30,				September 30,				December 31,					March 2,
		2005				2004				2004					2004				2003				2002				2001				2000
		(In millions)
Other Financial Data:
EBITDA(1)		$	102.7			$	97.5			$	143.5				$	33.4			$	100.3			$	113.9			$	113.6			$	89.6
Net cash provided by operating activities			135.4				96.8				135.9					20.3				103.5				60.3				113.5				63.9
Net cash (used) provided by investing activities			(142.1	)			(85.9	)			(133.6	)				(15.3	)			38.3				(53.8	)			(74.0	)			(79.1	)
Net cash (used) provided by financing activities			8.7				(74.9	)			64.9					—				(100.0	)			—				(30.0	)			17.4
Reconciliation of Non-GAAP Measures:
EBITDA(1)		$	102.7			$	97.5			$	143.5				$	33.4			$	100.3			$	113.9			$	113.6			$	89.6
Changes in working capital			25.1				9.7				6.9					(13.2	)			21.8				(20.4	)			7.5				(15.5	)
Non-cash hedge gain(2)			(3.6	)			(5.1	)			(7.9	)				—				(2.0	)			(23.2	)			—				—
Amortization/other			0.9				0.5				0.8					—				—				(0.1	)			0.6				0.7
Stock compensation expense			17.6				—				—					—				—				—				—				—
Net interest expense			(4.7	)			(4.2	)			(5.8	)				0.1				(6.2	)			(9.9	)			(8.2	)			(10.9	)
Income tax expense			(2.6	)			(1.6	)			(1.6	)				—				(10.4	)			—				—				—
Net cash provided by operating activities		$	135.4			$	96.8			$	135.9				$	20.3			$	103.5			$	60.3			$	113.5			$	63.9

(1)

EBITDA means earnings before interest, income taxes, depreciation, depletion and amortization. For the nine months ended September 30, 2005, EBITDA includes $17.6 million in non-cash stock compensation expense related to restricted stock and stock options granted in 2005. We believe that EBITDA is a widely accepted financial indicator that provides additional information about our ability to meet our future requirements for debt service, capital expenditures and working capital, but EBITDA should not be considered in isolation or as a substitute for net income, operating income, net cash provided by

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	operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles or as a measure of a company’s profitability or liquidity.
(2)	In accordance with SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137 and No. 138, we de-designated our contracts effective December 2, 2001 after the counterparty (an affiliate of Enron Corp.) filed for bankruptcy and recognized all market value changes subsequent to such de-designation in our earnings. The value recorded up to the time of de-designation and included in Accumulated Other Comprehensive Income (“AOCI”), has reversed out of AOCI and into earnings as the original corresponding production, as hedged by the contracts, is produced. We have designated subsequent hedge contracts as cash flow hedges with gains and losses resulting from the transactions recorded at market value in AOCI, as appropriate, until recognized as operating income in our Statement of Operations as the physical production hedged by the contracts is delivered.

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	Recent Developments

	Nine Months Ended September 30, 2005 Highlights

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	2004 Highlights

	Production

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	Oil and Gas Property Costs

	Oil and Gas Reserves

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		Net Proved
		Undeveloped
		Reserves				Year
Property		(Bcfe)(1)				Added				Year Converted to Proved Developed or Sold
Mississippi Canyon 718 (Pluto)(2)			25.1				1998			2000 (100% converted to proved developed)
Ewing Bank 966 (Black Widow)			14.0				1999			2000 (100% converted to proved developed)
Mississippi Canyon 773 (Devils Tower)			28.0				2000			2001 (100% of Mariner’s interest sold)
Mississippi Canyon 305 (Aconcagua)			19.2				2000			2001 (100% of Mariner’s interest sold)
Green Canyon 472/473 (King Kong)			25.5				2000			2002 (100% converted to proved developed)
Green Canyon 516 (Yosemite)			14.9				2001			2002 (100% converted to proved developed)
East Breaks 579 (Falcon)			66.8				2001			2002 (50% of Mariner’s interest sold)
										2003 (all of Mariner’s remaining interest sold)
Viosca Knoll 917 (Swordfish)			13.4				2001			2005 (100% converted to proved developed)
Green Canyon 178 (Baccarat)			4.0				2004			2005 (100% converted to proved developed)
Mississippi Canyon 296/252 (Rigel)			22.4				2003			2005 (75% converted to proved developed/ 25% remains undeveloped)

(1)	Net proved undeveloped reserves attributable to the project in the year it was first added to our proved reserves.
(2)	This field was shut-in in April 2004 pending the drilling of a new well and installation of an extension to the existing infield flowline and umbilical. As a result, as of December 31, 2004, 9.0 Bcfe of our net proved reserves attributable to this project were classified as proved undeveloped reserves. We expect production from Pluto to recommence in the second quarter of 2006.

Net Proved

Undeveloped

Year Expected to

Reserves

Year

Convert to Proved

Property

(Bcfe)(1)

Added

Developed Status

Green Canyon 646 (Daniel Boone)

16.4

2003

2007

Atwater Valley 380/381/382/425/426 (Bass Lite)

30.7

2005

2007

(1)	Net proved undeveloped reserves attributable to the project as of June 30, 2005.

	Oil and Natural Gas Prices and Hedging Activities

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	Operating Costs

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	Oil and Gas Properties

	Proved Reserves

	Compensation Expense

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	Revenue Recognition

	Income Taxes

	Capitalized Interest Costs

	Accrual for Future Abandonment Costs

	Hedging Program

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	Use of Estimates in the Preparation of Financial Statements

	Nine Months Ended September 30, 2005 compared to Nine Months Ended September 30, 2004

						Non-GAAP
						Combined				Post-Merger				Pre-Merger
		Nine Months Ended								Period from				Period from
		September 30,								March 3, 2004				January 1, 2004
										through September 30,				through March 2,
Summary Operating Information:		2005				2004				2004				2004
		(In thousands, except average sales price)
Net production:
Oil (MBbls)			1,336				1,748				1,335				413
Natural gas (MMcf)			14,508				17,959				13,726				4,233
Total (Mmcfe)			22,521				28,444				21,731				6,713
Average daily production (Mmcfe/d)			82				104				102				112
Hedging activities:
Oil revenues (loss)		$	(13,421	)		$	(6,874	)		$	(6,188	)		$	(686	)
Gas revenues (loss)			(9,979	)			(1,010	)			(2,441	)			1,431
Total hedging revenues (loss)		$	(23,400	)		$	(7,884	)		$	(8,629	)		$	745
Average Sales Prices:
Oil (per Bbl) realized(1)		$	40.12			$	32.78			$	33.41			$	30.75
Oil (per Bbl) unhedged			50.17				36.71				38.05				32.41
Natural gas (per Mcf) realized(1)			6.54				5.85				5.68				6.39
Natural gas (per Mcf) unhedged			7.23				5.90				5.86				6.05
Total natural gas equivalent ($/Mcfe) realized(1)			6.59				5.71				5.64				5.92
Total natural gas equivalent ($/Mcfe) unhedged			7.63				5.98				6.04				5.81

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						Non-GAAP
						Combined				Post-Merger				Pre-Merger
		Nine Months Ended								Period from				Period from
		September 30,								March 3, 2004				January 1, 2004
										through September 30,				through March 2,
Summary Operating Information:		2005				2004				2004				2004
		(In thousands, except average sales price)
Oil and gas revenues:
Oil sales		$	53,579			$	57,285			$	44,576			$	12,709
Gas sales			94,913				105,005				77,950				27,055
Total oil and gas revenues		$	148,492			$	162,290			$	122,526			$	39,764
Other revenues			2,753				—				—				—
Lease operating expenses			20,170				19,194				15,073				4,121
Transportation expenses			1,697				4,814				3,744				1,070
Depreciation, depletion and amortization			43,457				48,094				37,464				10,630
General and administrative expenses			26,726				7,305				6,174				1,131
Net interest expense (income)			4,720				4,127				4,213				(86	)
Income before taxes			53,977				77,799				54,901				22,898
Provision for income taxes			18,414				27,293				19,221				8,072

(1)	Average realized prices include the effects of hedges.

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	Year Ended December 31, 2004 compared to Year Ended December 31, 2003

						Non-GAAP
						Combined				Post-Merger				Pre-Merger
										Period from				Period from
		Year Ended December 31,								March 3, 2004				January 1, 2004
										through December 31,				through March 2,
Summary Operating Information:		2003				2004				2004				2004
		(In thousands, except average sales price)
Net production:
Oil (MBbls)			1,600				2,298				1,885				413
Natural gas (MMcf)			23,772				23,782				19,549				4,233
Total (Mmcfe)			33,374				37,569				30,856				6,713
Average daily production (Mmcfe/d)			91				103				101				112
Hedging activities:
Oil revenues (loss)		$	(4,969	)		$	(12,299	)		$	(11,613	)		$	(686	)
Gas revenues (loss)			(24,494	)			(7,498	)			(8,929	)			1,431
Total hedging revenues (loss)		$	(29,463	)		$	(19,797	)		$	(20,542	)		$	745
Average Sales Prices:
Oil (per Bbl) realized(1)		$	23.74			$	33.17			$	33.69			$	30.75
Oil (per Bbl) unhedged			26.85				38.52				39.85				32.41
Natural gas (per Mcf) realized(1)			4.40				5.80				5.67				6.39
Natural gas (per Mcf) unhedged			5.43				6.12				6.13				6.05
Total natural gas equivalent ($/Mcfe) realized(1)			4.27				5.70				5.65				5.92
Total natural gas equivalent ($/Mcfe) unhedged			5.15				6.23				6.32				5.81
Oil and gas revenues:
Oil sales		$	37,992			$	76,207			$	63,498			$	12,709
Gas sales			104,551				137,980				110,925				27,055
Total oil and gas revenues		$	142,543			$	214,187			$	174,423			$	39,764
Lease operating expenses			24,719				25,484				21,363				4,121
Transportation expenses			6,252				3,029				1,959				1,070
Depreciation, depletion and amortization			48,339				64,911				54,281				10,630
General and administrative expenses			8,098				8,772				7,641				1,131
Impairment of production equipment held for use			—				957				957				—
Net interest expense (income)			6,225				5,734				5,820				(86	)
Income before taxes and change in accounting method			45,688				105,300				82,402				22,898
Provision for income taxes			9,387				36,855				28,783				8,072

(1)	Average realized prices include the effects of hedges.

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	Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

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	Cash Flows and Liquidity

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										Pre-Merger
		Combined				Post-Merger
														Year Ended
						Period from				Period from				December 31,
		Year Ended				March 3, 2004 to				January 1, 2004 to
		December 31, 2004				December 31, 2004				March 2, 2004				2003				2002
		(In millions)
Cash flows provided by operating activities		$	156.2			$	135.9			$	20.3			$	103.5			$	60.3

										Pre-Merger
		Combined				Post-Merger
														Year Ended
						Period from				Period from				December 31,
		Year Ended				March 3, 2004 to				January 1, 2004 to
		December 31, 2004				December 31, 2004				March 2, 2004				2003				2002
		(In millions)
Cash flows used in (provided by) investing activities		$	148.9			$	133.6			$	15.3			$	(38.3	)		$	53.8

										Pre-Merger
		Combined				Post-Merger
														Year Ended
						Period from				Period from				December 31,
		Year Ended				March 3, 2004 to				January 1, 2004 to
		December 31, 2004				December 31, 2004				March 2, 2004				2003				2002
		(In millions)
Cash flows used in financing activities		$	(64.9	)		$	(64.9	)			—			$	(100.0	)			—

	Commodity Prices and Related Hedging Activities

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											September 30, 2005
							Fixed				Fair Value
Fixed Price Swaps			Quantity				Price				Gain/(Loss)
											(In millions)
Crude Oil (Bbls)
	October 1 — December 31, 2005			138,000			$	25.22			$	(5.7	)
	January 1 — December 31, 2006			140,160				29.56				(5.2	)
Natural Gas (MMBtus)
	October 1 — December 31, 2005			1,352,400				5.00				(12.3	)
	January 1 — December 31, 2006			1,827,547				5.53				(13.6	)
	Total										$	(36.8	)

															September 30, 2005
															Fair Value
Costless Collars			Quantity				Floor				Cap				Gain/(Loss)
															(In millions)
Crude Oil (Bbls)
	October 1 — December 31, 2005			57,960			$	35.60			$	44.77			$	(1.2	)
	January 1 — December 31, 2006			251,850				32.65				41.52				(6.2	)
	January 1 — December 31, 2007			202,575				31.27				39.83				(4.8	)
Natural Gas (MMBtus)
	October 1 — December 31, 2005			2,189,600				6.01				8.02				(12.3	)
	January 1 — December 31, 2006			7,347,450				5.78				7.85				(29.1	)
	January 1 — December 31, 2007			5,310,750				5.49				7.22				(14.7	)
	Total														$	(68.3	)

											December 31, 2004
							Fixed				Fair Value
Fixed Price Swaps			Quantity				Price				Gain/(Loss)
											(In millions)
Crude Oil (Bbls)
	January 1 — December 31, 2005			606,000			$	26.15			$	(10.0	)
	January 1 — December 31, 2006			140,160				29.56				(1.5	)
Natural Gas (MMBtus)
	January 1 — December 31, 2005			8,670,159				5.41				(7.0	)
	January 1 — December 31, 2006			1,827,547				5.53				(1.9	)
	Total										$	(20.4	)

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															December 31, 2004
															Fair Value
Costless Collars			Quantity				Floor				Cap				Gain/(Loss)
															(In millions)
Crude Oil (Bbls)
	January 1 — December 31, 2005			229,950			$	35.60			$	44.77			$	(0.4	)
	January 1 — December 31, 2006			251,850				32.65				41.52				(0.7	)
	January 1 — December 31, 2007			202,575				31.27				39.83				(0.6	)
Natural Gas (MMBtus)
	January 1 — December 31, 2005			2,847,000				5.73				7.80				0.4
	January 1 — December 31, 2006			3,514,950				5.37				7.35				(0.3	)
	January 1 — December 31, 2007			1,806,750				5.08				6.26				(0.4	)
	Total														$	(2.0	)

		Year Ended December 31,
		2004				2003				2002
		(Dollars in millions)
Natural Gas
Quantity settled (MMBtus)			18,823,063				25,520,000				—
Increase (Decrease) in Natural Gas Sales		$	(10.8	)		$	(27.1	)			—
Crude Oil
Quantity settled (Mbbls)			1,554				730				353
Increase (Decrease) in Crude Oil Sales		$	(16.9	)		$	(5.0	)		$	(0.8	)

	Interest Rate Hedges

	Credit Facility

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	•	maintain a ratio, as of the last day of each fiscal quarter, of (a) current assets (excluding cash posted as collateral to secure hedging obligations) plus unused availability under the credit facility to (b) current liabilities (excluding the current portion of debt and current portion of hedge liabilities) of not less than 1.00 to 1.00;
	•	maintain a ratio, as of the last day of each fiscal quarter, of (a) EBITDA (earnings before interest, taxes, depreciation, amortization and depletion) to (b) the sum of interest expense and maintenance capital expenditures for such period and 20% (on an annualized basis) of outstanding advances, of not less than 1.20 to 1.00; and
	•	maintain a ratio, as of the last day of each fiscal quarter, of (a) total debt to (b) EBITDA of not greater than 1.75 to 1.00 prior to the issuance of bonds as described in the credit agreement and 3.00 to 1.00 thereafter.

	JEDI Term Promissory Note

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	Capital Expenditures and Capital Resources

											Pre-Merger
			Combined				Post-Merger
															Year Ended
							Period from				Period from				December 31,
			Year Ended				March 3, 2004 to				January 1, 2004
			December 31, 2004				December 31, 2004				to March 2, 2004				2003				2002
			(In millions)
Capital expenditures:
	Leasehold acquisition		$	4.8			$	4.4			$	0.4			$	4.8			$	14.9
	Oil and natural gas exploration			43.0				35.9				7.1				26.8				25.5
Oil and natural gas development				88.6				82.0				6.6				44.3				55.3
Proceeds from property conveyances				—				—				—				(121.6	)			(52.3	)
Acquisitions				4.9				4.9				—				—				—
Other items (primarily capitalized overhead and interest)				7.6				6.4				1.2				7.4				10.4
Total capital expenditures, net of proceeds from property conveyances			$	148.9			$	133.6			$	15.3			$	(38.3	)		$	53.8

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						Less
						Than One												More Than
		Total				Year				1-3 Years				3-5 Years				5 Years
		(In millions)
Long-term debt obligations(1)		$	115.0			$	—			$	115.0			$	—			$	—
Interest obligations(2)			0.6				0.5				0.1				—				—
Operating leases			1.1				0.6				0.5				—				—
Abandonment liabilities			24.0				4.7				7.2				7.7				4.4
Derivative liability(3)			22.4				17.0				5.4				—				—
Other long-term liabilities			3.0				2.0				1.0				—				—
Total contractual cash commitments		$	166.1			$	24.8			$	129.2			$	7.7			$	4.4

(1)	As of December 31, 2004, we had incurred debt obligations under our credit facility and the JEDI promissory note that are due as follows: $10 million in 2006; and $105 million in 2007. However, we used a portion of the net proceeds of the private equity placement to repay a portion of amounts outstanding under our credit facility and $6 million under the JEDI promissory note. As of November 30, 2005, we had incurred debt obligations under our credit facility of $75 million and under the JEDI promissory note of $4 million.
(2)	Interest obligations represent approximately 14 months of interest due on the JEDI promissory note at 10%. Future interest obligations under our credit facility are uncertain, due to the variable interest rate on fluctuating balances. Based on a 5.2% weighted average interest rate on amounts outstanding under our credit facility as of December 31, 2004, $5.5 million, $5.5 million and $0.9 million would be due under the credit facility in 2005, 2006 and 2007, respectively.
(3)	As of September 30, 2005, the fair value of the derivative liabilities was $105.1 million, including $76.9 million due in less than one year.

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												Approximate								Date				Estimated
								Mariner				Water				Gross				Production				Proved								Standardized
								Working				Depth				Producing				Commenced/				Reserves				PV10 Value				Measure
				Operator				Interest				(Feet)				Wells(1)				Expected				(Bcfe)				(In $ Millions)(2)				(In $ Millions)
								%
West Texas Permian Basin:
	Aldwell Unit				Mariner				66.5	(3)			Onshore				185				1949				112.7			$	203.8
Gulf of Mexico Deepwater:
	Mississippi Canyon 296/252 (Rigel)				Dominion				22.5				5,200				0			Second Quarter 2006					22.4				82.9
	Viosca Knoll 917/961/962 (Swordfish)				Mariner(4)				15.0				4,700				2			Fourth Quarter 2005					13.4				59.3
	Green Canyon 516 (Yosemite)				ENI				44.0				3,900				1				2002				15.1				66.6
	Mississippi Canyon 718 (Pluto)(5)				Mariner				51.0				2,830				0				1999				9.0				31.7
	Green Canyon 178 (Baccarat)				W&T				40.0				1,400				0			Third Quarter 2005					4.0				14.3
	Green Canyon 472/473 (King Kong)				ENI				50.0				3,850				0				2002				1.2				2.0
Gulf of Mexico Shelf:
	Mississippi Canyon 66 (Ochre)(6)				Mariner				75.0				1,150				0				2004				3.6				11.7
	Other Properties																43								56.1				195.7
		Total:															231								237.5			$	668.0			$	494.4

(1)	Wells producing or capable of producing as of December 31, 2004.
(2)	Please see “Mariner — Estimated Proved Reserves” for a definition of PV10 and a reconciliation of PV10 to the standardized measure of discounted future net cash flows.
(3)	We operate the field and own working interests in individual wells ranging from approximately 33% to 84%.
(4)	Mariner served as operator until December 2005, at which time pursuant to certain contractual arrangements, Noble Energy, Inc., a 60% partner in the project, began serving as operator.
(5)	This field was shut-in in April 2004 pending the drilling of a new well and installation of an extension to the existing infield flowline and umbilical. As a result, as of December 31, 2004, 9.0 Bcfe of our net proved reserves attributable to this project were classified as proved undeveloped reserves. We expect production from Pluto to recommence in the second quarter of 2006.
(6)	Field has been shut in since September 2004 due to destruction of host platform by Hurricane Ivan.

	West Texas Permian Basin

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	Gulf of Mexico Deepwater

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	Other Prospects and Activity

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	Gulf of Mexico Shelf

	Other Activity

			Estimated Proved
			Reserve Quantities
							Natural								PV10 Value(3)
			Oil				Gas				Total																Standardized
Geographic Area			(MMbbls)				(Bcf)				(Bcfe)				Developed				Undeveloped				Total				Measure
																											(Millions)
															(Millions)
West Texas Permian Basin				8.7				62.8				114.8			$	141.1			$	64.4			$	205.5
Gulf of Mexico Deepwater(1)				4.5				59.8				86.7				91.1				219.6				310.7
Gulf of Mexico Shelf(2)				1.1				29.3				36.0				103.2				48.6				151.8
	Total			14.3				151.9				237.5			$	335.4			$	332.6			$	668.0			$	494.4
Proved Developed Reserves				6.3				71.4				109.4

(1)	Deepwater refers to water depths greater than 1,300 feet (the approximate depth of deepwater designation for royalty purposes by the U.S. Minerals Management Service).
(2)	Shelf refers to water depths less than 1,300 feet and includes an insignificant amount of Gulf Coast onshore properties.

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(3)	Please see “Mariner — Estimated Proved Reserves” for a definition of PV10 and a reconciliation of PV10 to the standardized measure of discounted future net cash flows.

		At December 31,
		2004				2003				2002
PV10		$	667,975			$	533,544			$	514,995
Future income taxes, discounted at 10%			173,593				115,385				51,423
Standardized measure of discounted future net cash flows		$	494,382			$	418,159			$	463,572

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							Year Ended December 31,
			Nine Months Ended
			September 30, 2005				2004				2003				2002
Production:
	Natural Gas (Bcf)			14.5				23.8				23.8				29.6
	Oil (MMbbls)			1.3				2.3				1.6				1.7
	Total natural gas equivalent (Bcfe)			22.5				37.6				33.4				39.8
Average realized sales price per unit (excluding effects of hedging):
	Natural gas ($/Mcf)		$	7.23			$	6.12			$	5.43			$	3.35
	Oil ($/bbl)			50.17				38.52				26.85				21.60
	Total natural gas equivalent ($/Mcfe)			7.63				6.23				5.15				3.41
Average realized sales price per unit (including effects of hedging):
	Natural gas ($/Mcf)		$	6.54			$	5.80			$	4.40			$	4.03
	Oil ($/bbl)			40.12				33.17				23.74				22.85
	Total natural gas equivalent ($/Mcfe)			6.59				5.70				4.27				3.97
Expenses ($/Mcfe):
	Lease operating		$	0.90			$	0.68			$	0.74			$	0.65
	Transportation			0.08				0.08				0.19				0.26
	General and administrative, net(1)			1.18				0.23				0.24				0.19
	Depreciation, depletion and amortization (excluding impairments)			1.93				1.73				1.45				1.78

(1)	Net of overhead reimbursements received from other working interest owners and amounts capitalized under the full cost accounting method. General and administrative expenses for the nine months ended September 30, 2005 include compensation expense of $17.6 million for restricted stock and options granted in March 2005.

			Total Productive Wells at
			December 31,								December 31,
			2004								2003
			Gross				Net				Gross				Net
Oil				197				127.9				141				101.3
Gas				34				9.5				37				10.1
	Total			231				137.4				178				111.4

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			Developed Acres(1)								Undeveloped Acres(2)
			Gross				Net				Gross				Net
West Texas				22,413				14,448				—				—
Gulf of Mexico Deepwater(3)				79,200				30,275				224,640				124,588
Gulf of Mexico Shelf(4)				130,302				36,979				130,186				84,242
Other Onshore				3,232				732				856				243
	Total			235,147				82,434				355,682				209,073

(1)	Developed acres are acres spaced or assigned to productive wells.
(2)	Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
(3)	Deepwater refers to water depths greater than 1,300 feet (the approximate depth of deepwater designated for royalty purposes by the U.S. Minerals Management Service).
(4)	Shelf refers to water depths less than 1,300 feet.

			Undeveloped Acreage
			Subject to Expiration in the Year Ended December 31,
			2005								2006								2007
			Gross				Net				Gross				Net				Gross				Net
Gulf of Mexico Deepwater				—				—				46,080				12,988				28,800				9,360
Gulf of Mexico Shelf				9,298				3,100				10,760				6,260				46,000				31,183
	Total			9,298				3,100				56,840				19,248				74,800				40,543

				Year Ended December 31,
				2004								2003								2002
				Gross				Net				Gross				Net				Gross				Net
Exploratory wells:
	Producing				7				3.34				6				2.03				2				1.00
	Dry				7				2.65				6				2.35				5				2.10
		Total			14				5.99				12				4.38				7				3.10
Development wells:
	Producing				56				34.84				45				30.07				11				6.65
	Dry				1				0.68				—				—				—				—
		Total			57				35.52				45				30.07				11				6.65
Total wells:
	Producing				63				38.18				51				32.10				13				7.65
	Dry				8				3.33				6				2.35				5				2.10
		Total			71				41.51				57				34.45				18				9.75

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		Percentage of
		Total Revenues
		for Year Ended
		December 31,
Customer		2004				2003				2002
Sempra			*				34	%			—
Bridgeline Gas Distributing Company			27	%			19	%			42	%
Trammo Petroleum Inc.			9	%			14	%			—
Conoco Phillips			*				*				14	%
Duke Energy			*				6	%			9	%
Genesis Crude Oil LP			*				4	%			4	%
Chevron Texaco			18	%			—				—
BP Energy			12	%			—				—

*	Less than 1%

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Water Depth		Royalty Relief
200-400 meters		no royalty payable on the first 105 Bcfe produced
400-800 meters		no royalty payable on the first 315 Bcfe produced
800 meters or deeper		no royalty payable on the first 525 Bcfe produced

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	Transportation and Sale of Natural Gas

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	Regulation of Production

	Environmental Regulations

	•	require acquisition of a permit before drilling commences;
	•	restrict the types, quantities and concentrations of various materials that can be released into the environment in connection with drilling and production activities; and
	•	limit or prohibit construction or drilling activities in certain ecologically sensitive and other protected areas.

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			Nine Months Ended								Years Ended
			September 30,								December 31,
			2005				2004				2004				2003				2002
			(Dollars in thousands)
Oil and natural gas revenues(1)			$	326,722				324,426				453,139				342,019				228,896
Direct Operating Expenses:
	Lease operating expenses			57,431				63,022				80,079				45,716				52,076
	Transportation			2,484				1,424				2,175				2,652				3,855
	Production taxes			1,948				1,243				1,548				1,521				947
Total direct operating expenses				61,863				65,689				83,802				49,889				56,878
Revenues in excess of direct operating expenses			$	264,859				258,737				369,337				292,130				172,018
Production:
Natural gas (MMcf)				41,442				46,036				61,684				58,785				50,566
Oil and condensate (MBbls)				1,845				2,004				2,624				2,143				1,974
Natural gas liquids (MBbls)				628				186				606				2				6
Total (MMcfe)				56,280				59,176				81,064				71,655				62,446
Average daily production (MMcfe/d)				206				216				221				196				171
Per Mcfe:
Average realized sales price(1)			$	5.81				5.48				5.59				4.77				3.67
Lease operating expenses			$	1.02				1.06				0.99				0.64				0.83
Transportation			$	0.04				0.02				0.03				0.04				0.06
Production taxes			$	0.03				0.02				0.02				0.02				0.02

(1)	Includes effects of hedging.

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	•	Sales volumes decreased 5% to 56.3 Bcfe in the nine months ended September 30, 2005 from 59.2 Bcfe in 2004.
	•	Average realized prices increased 6% to $5.81 per Mcfe in 2005 from $5.48 per Mcfe in 2004.
	•	Higher realized prices partially offset by decreased sales volumes resulted in oil and natural gas revenues increasing 1% to $326.7 million in the nine months ended September 30, 2005 from $324.4 million in the corresponding period in 2004.
	•	Lease operating expense declined 4% from $1.06 per Mcfe for 2004 to $1.02 per Mcfe for 2005.

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	Production

	Oil and Gas Property Costs

	Oil and Gas Reserves

	Oil and Natural Gas Prices and Hedging Activities

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		Natural Gas (NYMEX HH)
						Weighted Average
		Bbtu per				Hedged Price per
		Day				MMBtu
Fourth Quarter 2005			55.0			$	4.88
First Quarter 2006			40.0				6.15
Second Quarter 2006			40.0				6.15
Third Quarter 2006			40.0				6.15
Fourth Quarter 2006			40.0				6.15

	Nine Months Ended September 30, 2005 compared to Nine Months Ended September 30, 2004

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	Year Ended December 31, 2004 compared to Year Ended December 31, 2003

	Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

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			Nine Months Ended								Years Ended
			September 30,								December 31,
			2005				2004				2004				2003				2002
Property acquisitions			$	25				85,546				87,165				168,485				3,263
Exploration				47,418				23,261				28,331				39,683				17,503
Development				57,248				57,145				70,027				74,690				70,833
	Total Capital Expenditures		$	104,691				165,952				185,523				282,858				91,599

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												Approximate
												Water				Gross				Date Production				Estimated				PV10 Value				Standardized
								Working				Depth				Producing				Commenced/				Proved Reserves				(In $				Measure
				Operator				Interest				(Feet)				Wells(a)				Expected				(Bcfe)(b)				Millions)(b)				(In $ Millions)
								%
Gulf of Mexico Shelf:
	East Cameron 14				FOC				50.0				25				2				1969				17.2			$	81.0
	Eugene Island 273				FOC				77.7				175				7				1970				5.4				27.9
	Eugene Island 292				FOC				45.0				195				4				1970				8.5				39.0
	Eugene Island 53				FOC				50.0	(c)			40				5				1964				12.6				68.9
	High Island 116				FOC				98.9	(d)			45				2				1986				10.2				44.9
	High Island 195				Apache				23.5				50				6				1989				3.8				20.9
	Main Pass 166				FOC				100.0				125				0				2006				5.1				18.0
	Ship Shoal 26				FOC				100.0				10				1				1969				5.5				24.6
	South Marsh Isl 149				Unocal				50.0				150				4				1979				5.5				31.7
	South Marsh Isl 18				FOC				100.0				75				1				1993				9.8				32.7
	South Pass 24–NCOC				FOC				100.0				10				37				1957				22.8				73.7
	South Timbalier 72				FOC				100.0	(e)			65				4				1963				6.8				39.1
	Vermilion 14				FOC				100.0				20				21				1959				35.4				129.4
	Vermilion 380				FOC				100.0				320				3				1982				11.5				40.7
	West Cameron 110				BP/Amoco				37.5				40				1				1958				7.7				36.8
	West Cameron 112				FOC				55%				43				1				2004				3.7				22.8
	West Cameron 205				FOC				100.0				50				3				1982				5.9				30.0
	Other Properties																871								146.1				392.3
Gulf of Mexico Deepwater:
	East Breaks 420				Samedan				50.0				2,560				1				2002				16.2				67.8
		Total:															974								339.7			$	1,222.2			$	925.8

(a)	Wells producing or capable of producing as of December 31, 2004.

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(b)	As of December 31, 2004. Please see “The Forest Gulf of Mexico Operations — Estimated Proved Reserves” for a definition of PV10 and a reconciliation of PV10 to the standardized measure of discounted future net cash flows.
(c)	Forest operates the field and owns working interests in individual wells ranging from approximately 50% to 100%.
(d)	Forest operates the field and owns working interests in individual wells ranging from approximately 98.9% to 100%.
(e)	Forest operates the field and owns working interests in individual wells ranging from approximately 37.5% to 100%.

	Gulf of Mexico Shelf Properties

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	Gulf of Mexico Deepwater Property

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			Estimated Proved
			Reserve Quantities
							Natural								PV10 Value(3)
			Oil				Gas				Total																Standardized
Geographic Area			(MMbbls)				(Bcf)				(Bcfe)				Developed				Undeveloped				Total				Measure
																											(Millions)
															(Millions)
Gulf of Mexico Shelf(1)				11.7				253.6				323.5			$	907.8			$	246.6			$	1,154.4
Gulf of Mexico Deepwater(2)				—				16.2				16.2				67.8				—				67.8
	Total			11.7				269.8				339.7			$	975.6			$	246.6			$	1,222.2			$	925.8
Proved Developed Reserves				9.5				201.8				258.6

(1)	Shelf refers to water depths less than 1,300 feet.
(2)	Deepwater refers to water depths greater than 1,300 feet (the approximate depth of deepwater designated for royalty purposes by the U.S. Minerals Management Service).
(3)	Please see below for a definition of PV10 and a reconciliation of PV10 to the standardized measure of discounted future net cash flows.

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		At December 31,
		2004				2003				2002
		(Millions)
PV10		$	1,222.2			$	1,217.2			$	828.1
Future income taxes, discounted at 10%			296.4				267.8				180.1
Standardized measure of discounted future net cash flows		$	925.8			$	949.4			$	648.0

				Nine Months
				Ended				Year Ended December 31,
				September 30,
				2005				2004				2003				2002
				(Unaudited)
Production:
	Natural gas (Bcf)				41.4				61.7				58.8				50.6
	Oil (MMbbls)				1.8				2.6				2.1				2.0
	Natural gas liquids (MMbbls)				.6				.6				—				—
	Total natural gas equivalent (Bcfe)				56.3				81.1				71.7				62.4
Average realized sales price per unit:
	Natural gas ($/Mcf):
		Sales price received		$	7.14			$	6.30			$	5.41			$	3.39
		Effects of hedging			(1.13	)			(0.56	)			(0.63	)			0.17
		Net sales price received			6.01				5.74				4.78				3.56
	Oil ($/bbl):
		Sales price received		$	51.97			$	40.06			$	30.19			$	24.85
		Effects of hedging			(19.95	)			(8.55	)			(1.90	)			—
		Net sales price received			32.02				31.51				28.29				24.85
	Natural gas liquids ($/bbl)
		Sales price received		$	29.54			$	27.28			$	19.00			$	12.33
Average realized sales price per Mcfe (including effects of hedging) ($/Mcfe)				$	5.81			$	5.59			$	4.77			$	3.67

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			Nine Months
			Ended				Year Ended December 31,
			September 30,
			2005				2004				2003				2002
			(Unaudited)
Expenses ($/Mcfe):
	Lease operating		$	1.02			$	0.99			$	0.64			$	0.83
	Transportation			0.04				0.03				0.04				0.06
	Production taxes			0.03				0.02				0.02				0.02

			Total
			Productive
			Wells at
			December 31,
			2004
			Gross				Net
Oil				338				163
Gas				636				366
	Total			974				529

			Developed Acres(1)								Undeveloped Acres(2)
Location			Gross				Net				Gross				Net
Gulf of Mexico Shelf(3)				906,448				402,094				341,976				215,675
Gulf of Mexico Deepwater(4)				11,520				5,760				46,080				40,320
	Total			917,968				407,854				388,056				255,995

(1)	Developed acres are acres spaced or assigned to productive wells.
(2)	Undeveloped acres are acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage contains proved reserves.
(3)	Shelf refers to water depths less than 1,300 feet.
(4)	Deepwater refers to water depths greater than 1,300 feet (the approximate depth of deepwater designated for royalty purposes by the U.S. Minerals Management Service).

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				Year Ended December 31,
				2004								2003								2002
				Gross				Net				Gross				Net				Gross				Net
Exploratory wells:
	Producing				11.0				6.15				4.0				2.92				1.0				0.72
	Dry holes				3.0				2.62				2.0				2.00				2.0				0.68
		Total			14.0				8.77				6.0				4.92				3.0				1.40
Development wells:
	Producing				6.0				4.37				6.0				4.20				13.0				7.30
	Dry holes				—				—				1.0				0.50				1.0				0.17
		Total			6.0				4.37				7.0				4.70				14.0				7.47
Total wells:
	Producing				17.0				10.52				10.0				7.12				14.0				8.02
	Dry holes				3.0				2.62				3.0				2.50				3.0				0.85
		Total			20.0				13.14				13.0				9.62				17.0				8.87

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	Insurance Matters

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Name		Age				Position with Company
Scott D. Josey			48			Chairman of the Board, Chief Executive Officer and President
Dalton F. Polasek			54			Chief Operating Officer
Rick G. Lester			54			Vice President, Chief Financial Officer and Treasurer
Jesus G. Melendrez			47			Vice President — Corporate Development
Mike C. van den Bold			43			Vice President and Chief Exploration Officer
Teresa G. Bushman			56			Vice President, General Counsel and Secretary
Judd A. Hansen			50			Vice President — Shelf and Onshore
Cory L. Loegering			50			Vice President — Deepwater
Bernard Aronson			59			Director
Jonathan Ginns			41			Director
John F. Greene			65			Director
John L. Schwager			57			Director

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							Annual Compensation								Long-Term Compensation
															Awards								Payouts
																			Securities
															Restricted Stock				Underlying				LTIP				All Other
Name and Principal Position			Year				Salary($)				Bonuses(1)($)				Awards($)(2)				Options(#)				Payouts($)				Compensation($)(3)
Scott D. Josey				2005			$	375,000			$				$	—				—			$	—			$	16,210
	Chairman of the Board,			2004				350,000				550,000				9,522,534				200,000				575,000				15,133
	Chief Executive Officer			2003				300,290				850,000				—				—				—				514,895
	and President
Dalton F. Polasek				2005				250,000								—				—				—				16,626
	Chief Operating Officer			2004				215,000				300,000				4,316,886				102,000				248,400				15,236
				2003				176,698				325,000				—				—				—				280,677
Mike C. van den Bold				2005				200,000								—				—				—				15,819
	Vice President and			2004				192,500				215,000				3,174,178				74,000				322,000				14,949
	Chief Exploration Officer			2003				170,150				350,000				—				—				—				45,430
Rick G. Lester				2005				200,000								—				—				—				16,363
	Vice President,			2004				43,352				120,000				428,512				40,000				—				3,502
	Chief Financial Officer			2003				—				—				—				—				—				—
	and Treasurer
Teresa G. Bushman				2005				200,000								—				—				—				17,197
	Vice President, General			2004				190,000				215,000				1,920,380				40,000				59,800				14,834
	Counsel and Secretary			2003				97,750				200,000				—				—				—				23,270

(1)	As of January 31, 2006, bonuses for 2005 have not yet been paid.
(2)	Dollar amounts are calculated by multiplying the number of shares of common stock awarded by $14, the trading price of our common stock on the business day immediately preceding the date the award was granted. Grantees are entitled to vote, and accrue dividends on, the restricted stock prior to vesting; provided, that any dividends that accrue on the restricted stock prior to vesting will only be paid to grantees to the extent the restricted stock vests. Except in specified circumstances, the restricted shares will be automatically forfeited in the event a grantee’s employment terminates prior to the vesting date of the awards. The restricted stock granted will vest, and restrictions will terminate, on the later of (i) the first anniversary of the grant date, which was March 11, 2005, and (ii) the occurrence of a “Public Sale Date”, as defined in our Equity Participation Plan; but in no event later than the second anniversary of the date of grant. Notwithstanding this vesting schedule, the unvested shares of restricted stock will become fully vested upon death or disability of the employee, or if employment is terminated by us for reasons other than for “cause,” or if the employee elects to terminate employment with “good reason,” or

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upon the occurrence of a “change of control,” as those terms are defined in the agreement with us governing the grant. In connection with the merger, each of Mariner’s executive officers has agreed, in exchange for a cash payment of $1,000, that his or her shares of restricted stock will not vest before the later of March 11, 2006 or ninety days after the effective date of the merger. For additional information regarding these special long-term grants, please see “ — Equity Participation Plan.”

		At December 31, 2005, the value of all restricted stock held by each named executive (based on the $17.75 trading price of our common stock on December 31, 2005) was as follows:

Name		No. of Shares				Value
Scott D. Josey			680,181			$	12,073,213
Dalton F. Polasek			308,349				5,473,195
Mike C. van den Bold			226,727				4,024,404
Rick G. Lester			30,608				543,292
Teresa G. Bushman			137,170				2,434,768

(3)

Amounts shown reflect insurance premiums paid by us with respect to term life insurance for the benefit of the named executive officers and retention payments paid during the year. The amounts for 2005 for Messrs. Josey, Polasek, van den Bold, and Lester and Ms. Bushman include $7,000 of employer matching contributions made pursuant to our 401(k) plan and $8,400 made pursuant to the profit sharing portion of our 401(k) plan. In addition, the 2005 amount for Mr. Josey includes $810 of insurance premiums under our group term life insurance. The 2005 amount for Mr. Polasek also includes $1,226 of insurance premiums under our group term life insurance. The 2005 amount for Mr. van den Bold also includes $419 of insurance premiums under our group term life insurance. The 2005 amount for Mr. Lester also includes $963 of insurance premiums under our group term life insurance. The 2005 amount for Ms. Bushman includes $1,797 of insurance premiums under our group term life insurance.

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Officer or Group		No. of Shares				Value at Grant(1)
Scott D. Josey			680,181			$	9,522,534
Dalton F. Polasek			308,349				4,316,886
Mike C. van den Bold			226,727				3,174,178
Rick G. Lester			30,608				428,512
Teresa G. Bushman			137,170				1,920,380
Officers as a group (8 persons)			1,803,613				25,250,582

(1)	Based on a price of $14.00 per share.

	•	the 90th day following the date on which our common stock is listed on the New York Stock Exchange or admitted to trading and quoted on the Nasdaq National Market or Nasdaq SmallCap Market; and
	•	the first date on which both of the following conditions are met: (a) a registration statement covering the resale of the restricted stock has been declared effective by the SEC, and no stop order suspending the effectiveness of such registration statement is in effect and (b) the common stock is listed on the New York Stock Exchange or admitted to trading and quoted on the Nasdaq National Market or Nasdaq SmallCap Market;

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	General

	Shares Subject to the Stock Incentive Plan

	Administration and Eligibility

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	Awards

	•	at the time the ISO is granted, the option price is at least 110% of the fair market value of the common stock subject to the option and
	•	such ISO, by its terms, is not exercisable after the expiration of five years from the date of grant.

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	Other Provisions

	•	provide for either the termination of any such award in exchange for cash in the amount that would have been attained upon the exercise of such award or the replacement of such award with other rights or property selected by the Committee;
	•	provide that such award be assumed by the successor or survivor corporation or its parent or be substituted for by similar options, rights or awards; or
	•	make adjustments in the number and type of shares or other property subject to outstanding awards.

	Stock Incentive Plan Benefits

	U.S. Federal Tax Consequences

	Restricted Stock

	Stock Options

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	•	the excess of the fair market value of such shares on the option exercise date over the exercise price paid for the shares, or
	•	the amount realized on the sale or disposition over the exercise price paid for the shares.

																		Potential Realizable
																		Value of Assumed
																		Annual Rates of Stock
																		Price Appreciation for
						% of Total Options												Option Term (a)
		No. of Securities				Granted to Employees				Exercise				Expiration
Name		Underlying Options				in Fiscal Year				Price				Date				5%($)				10%($)
Scott D. Josey			200,000				24.7	%		$	14.00				3/11/2015			$	1,760,905			$	4,462,479
Dalton F. Polasek			102,000				12.6				14.00				3/11/2015				898,062				2,275,864
Mike C. van den Bold			74,000				9.1				14.00				3/11/2015				651,535				1,651,117
Rick G. Lester			40,000				4.9				14.00				3/11/2015				352,181				892,496
Teresa G. Bushman			40,000				4.9				14.00				3/11/2015				352,181				892,496

	(a)	In accordance with SEC rules, these columns show gain that could accrue for the listed options, assuming that the market price per share of our common stock appreciates from the date of grant over a period of 10 years at an annualized rate of 5% and 10%, respectively. If the stock price does not increase above the exercise price at the time of exercise, the realized value from these options will be zero.

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	Class I Nominee for Election as Director to Serve Until the Annual Meeting in 2009:

	Class II Nominees for Election as Director to Serve Until the Annual Meeting in 2007:

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	Directors Remaining in Office

	Advance Notice Requirements for Stockholder Proposals and Director Nominations

	Communications with Mariner’s Board of Directors

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	•	forward the communication to the director or directors to whom it is addressed (for example, if the communication received deals with questions, concerns or complaints regarding accounting, internal accounting controls and auditing matters, it will be forwarded by management to the Chairman of the Audit Committee for review);
	•	attempt to handle the inquiry directly, for example where it is a request for information about us or our operations or it is a stock-related matter that does not appear to require direct attention by our board of directors or an individual director; or
	•	not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic (in accordance with the explicit instructions of our non-management directors).

	Transactions with Directors, Officers and Affiliates

	Submission of Future Stockholder Proposals

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						Percent
Name of Beneficial Owner		Amount(1)				of Class
5% Stockholder:
FMR Corp.(2)			4,999,200				14.0	%
SAB Capital Advisors, L.L.C.(3)			2,217,700				6.2	%
ACON E&P, LLC(4)			1,895,630				5.3	%
Officers and Directors(5):
Scott D. Josey			680,181				1.9	%
Dalton F. Polasek			308,349				*
Mike C. van den Bold			226,727				*
Rick G. Lester			30,608				*
Teresa G. Bushman			137,170				*
Bernard Aronson(6)			3,405,207				9.6	%
Jonathan Ginns(7)			3,405,207				9.6	%
John F. Greene			—				—
John L. Schwager			—				—
Executive officers and directors as a group (12 persons)			3,699,244				10.4	%

	*	Less than 1%.

(1)	Includes grants of restricted stock to executive officers under our Equity Participation Plan. These shares may be voted, but not disposed of, prior to vesting.
(2)	Of the amount shown, 1,847,200 shares are held by Fidelity Contrafund, 1,828,700 shares are held by Fidelity Puritan Fund: Fidelity Low-Priced Stock Fund, 527,600 shares are held by Variable Insurance Products Fund II: Contra-Fund Portfolio, 516,300 shares are held by Fidelity Puritan Trust: Fidelity Balanced Fund, 200,000 shares are held by Fidelity Securities Fund: Fidelity Small Cap Value Fund, 75,000 shares are held by Fidelity Securities Fund: Fidelity Small Cap Growth Fund, and 4,400 shares are held by Fidelity Management Trust Company on behalf of accounts managed by it. Fidelity may be deemed a beneficial owner of these shares by virtue of its affiliation with these holders of record.
(3)	The address of SAB Capital Advisors, L.L.C. is 712 Fifth Avenue, 42nd Floor, New York, New York 10019. Of the amount shown, 1,060,083 shares are held by SAB Capital Partners, L.P. and 1,157,617 shares are held by SAB Overseas Master Fund, L.P.
(4)	The address of ACON E&P, LLC is c/o ACON Investments LLC, 1133 Connecticut Avenue, N.W., Suite 700, Washington, D.C. 20036. The shares beneficially owned by ACON E&P, LLC are held of record by MEI Acquisitions Holdings, LLC.

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(5)	The address of each officer and director is c/o Mariner Energy, Inc., One BriarLake Plaza, Suite 2000, 2000 West Sam Houston Parkway South, Houston, Texas 77042.
(6)	Mr. Aronson may be deemed to be a beneficial owner of 1,895,630 shares and 1,509,577 shares that are beneficially owned by ACON E&P, LLC and ACON Investments LLC, respectively. MEI Investment Holdings, LLC is the record holder of the shares beneficially owned by ACON Investments LLC. Mr. Aronson is a manager of ACON E&P, LLC and a managing member of ACON Investments LLC, the managing member of MEI Investment Holdings, LLC. Mr. Aronson disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Mr. Aronson’s address is c/o ACON Investments, LLC, 1133 Connecticut Avenue, N.W., Suite 700, Washington, D.C. 20036.
(7)	Mr. Ginns may be deemed to be a beneficial owner of 1,895,630 shares and 1,509,577 shares that are beneficially owned by ACON E&P, LLC and ACON Investments LLC, respectively. MEI Investment Holdings, LLC is the record holder of the shares beneficially owned by ACON Investments LLC. Mr. Ginns is a managing member of Burns Park Investments LLC, a manager of ACON E&P, LLC. Mr. Ginns is a managing member of ACON Investments LLC, the managing member of MEI Investment Holdings, LLC. Mr. Ginns disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Mr. Ginn’s address is c/o ACON Investments, LLC, 1133 Connecticut Avenue, N.W., Suite 700, Washington, D.C. 20036.

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	General

	Classified Board

	Filling Board of Directors Vacancies; Removal

	No Stockholder Action by Written Consent

	Call of Special Meetings

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	Advanced Notice Requirements for Stockholder Proposals and Director Nominations

	No Cumulative Voting

	Authorized but Unissued Shares

	Delaware Business Opportunity Statute

	Amendments to our Certificate of Incorporation and Bylaws

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	Delaware Anti-Takeover Statute

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MARINER		FOREST
Voting
One vote for each share of common stock held of record on all matters submitted to a vote of the stockholders. No cumulative voting is permitted. If a quorum is present, the affirmative vote of a majority of those present constitutes action of the stockholders, except when a greater or lesser vote is required by law, the certificate of incorporation or by-laws. However, the affirmative vote of a plurality of those stockholders present, when a quorum is present, is used to elect directors.		One vote for each share of common stock held of record on all matters submitted to a vote of the shareholders. No cumulative voting is permitted. If a quorum is present the affirmative vote of the holders of a majority of those present constitutes action of the shareholders, except when a greater or lesser vote is required by law, the certificate of incorporation or the by-laws.
Stockholder Action by Written Consent
Any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing by the stockholders.		Any action required or permitted to be taken by the shareholders may be taken without a meeting on unanimous written consent.
Quorum
The holders of a majority of the stock issued and outstanding and entitled to vote, either present in person or represented by proxy, will constitute a quorum at all meetings of stockholders.		The holders of a majority of the stock issued and outstanding and entitled to vote, either present in person or represented by proxy, will constitute a quorum at all meetings of shareholders.
Notice of Stockholder Meetings
Written notice of the place, date and hour of all meetings must be given to each stockholder entitled to vote not less than 10 nor more than 60 days before the meeting. In the case of a special meeting, notice of the purpose or purposes for which the special meeting has been called must also be provided. Notice may be delivered personally or by mail.		Written notice of the place, date and hour of all meetings must be given to each shareholder entitled to vote thereat personally, by electronic transmission or by mail, not less than 10 nor more than 60 days before the meeting. In the case of a special meeting, notice must include the purposes for which the meeting has been called and the identity of the person or the persons calling the meeting.

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MARINER		FOREST
Special Stockholder Meetings
Special meetings of stockholders may be called at any time only by the board of directors acting pursuant to a resolution adopted by the board.		Special meetings of shareholders may be called by the board of directors, the chairman of the board, the chief executive officer, or, in special circumstances prescribed by New York law, by at least ten percent of the shareholders entitled to vote in the election of a director (meeting may only be called for the election of directors).
Amendments to Charter
The approval of at least 80% of the outstanding stock entitled to vote in the election of directors is required to amend or repeal, among other things, articles relating to the classification, election and removal of directors, the amendment of the by-laws, the inability of stockholders to act by written consent, provisions governing how to fill vacancies in directorships, restrictions on business combinations with interested stockholders, the liability of directors, indemnification provisions, provisions related to corporate opportunities, the issuance of rights and the 80% supermajority voting requirement.		The vote of at least two-thirds of all outstanding shares entitled to vote on the following issues is required (i) to adopt, amend or repeal any provision of the by-laws or the certificate of incorporation relating to the number, classification and terms of office of directors, the removal of directors without cause and the power of the board of directors to adopt, amend or repeal the by-laws or the vote of the board of directors required for any such adoption, amendment or repeal and (ii) any amendment or repeal of the two-thirds supermajority voting requirement.
Amendments to By-laws
The by-laws may be adopted, amended or repealed by the board of directors or by the affirmative vote of holders of at least 80% of the voting power of the outstanding shares of common stock.		The board of directors may amend, repeal or adopt by-laws at any regular or special meeting of the board of directors. Please see “Amendments to Charter” above for information related to the shareholders’ rights to amend, repeal or adopt by-laws.
Rights Agreement
Mariner does not have a stockholder rights plan.		Each shareholder has a preferred share purchase right which can be exercised only if a person or group acquires 20% or more of Forest’s common stock or announces a tender offer that would result in ownership by a person or group of 20% or more of the common stock.

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MARINER		FOREST
Board of Directors
Number
Five members currently; must always be at least three directors; number of directors may be changed from time to time by a resolution of the board of directors. Under the terms of the merger agreement, the board of directors of Mariner after the completion of the merger will be composed initially of seven directors, five of whom will be current directors of Mariner and two of whom will be mutually agreed upon by Mariner and Forest prior to the completion of the merger.		Eight currently; must always be at least six directors but no more than 15; number of directors may be changed from time to time by a resolution of the board of directors.
Election and Classification
The board of directors is divided into three classes of directors, with the classes to be as nearly equal in number as possible. One-third of the directors are elected each year to hold office until the third succeeding annual meeting of stockholders and until their respective successors are duly elected and qualified.		The board of directors is divided into three classes of directors as established by action of the shareholders or of the board of directors. At each annual meeting of shareholders, directors to replace those whose terms expire at such annual meeting are elected to hold office until the third succeeding annual meeting.
Removal
A director may only be removed for cause by at least 80% of stockholders entitled to vote at an election of directors.		Directors may be removed for cause by a majority vote of all directors then in office. A director may be removed without cause by the affirmative vote of the holders of two-thirds of all the outstanding shares entitled to vote at a meeting of shareholders called for the purpose of removing such director.
Vacancies
Vacancies and newly created directorships may be filled by the affirmative vote of a majority of the directors then in office.		Vacancies occurring in the board of directors are filled in the following manner: (i) if the vacancy is caused by the removal of the director without cause, it will be filled by an election at a special meeting of shareholders or at any annual meeting, (ii) if the vacancy is caused in any other way, or if new directorships are created, all of the directors then in office, although less than a quorum, may, by majority vote, fill each vacant or newly created directorship; or (iii) if the entire board resigns or become unable to act, any shareholder may call a special meeting and directors may be elected in the same manner prescribed for the election of directors at annual meetings.

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	Mariner Energy, Inc.
	Attention: Investor Relations
	One BriarLake Plaza, Suite 2000 2000 West Sam Houston Parkway South Houston, Texas 77042 Facsimile: (713) 954-5555 Telephone: (713) 954-5500
	or by contacting Forest at:
	Forest Oil Corporation Attention: Investor Relations 707 17th Street, Suite 3600 Denver, Colorado 80202 Facsimile: (303) 812-1510 Telephone: (303) 812-1400

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MARINER ENERGY, INC.
	Report of Independent Registered Public Accounting Firm			F-2
	Balance Sheets at September 30, 2005 (unaudited), December 31, 2004 and 2003			F-3
	Statements of Operations for the nine months ended September 30, 2005 (unaudited); the period from March 3, 2004 through September 30, 2004 (unaudited); the period from March 3, 2004 through December 31, 2004; the period from January 1, 2004 through March 2, 2004; and the years ended December 31, 2003 and 2002			F-4
	Statements of Stockholder’s Equity and Comprehensive Income for the nine months ended September 30, 2005 (unaudited); the period from January 1, 2004 through March 2, 2004; the period from March 3, 2004 through December 31, 2004; and the years ended December 31, 2003 and 2002			F-5
	Statements of Cash Flows for the nine months ended September 30, 2005 (unaudited); the period from March 3, 2004 through September 30, 2004 (unaudited); the period from March 3, 2004 through December 31, 2004; the period from January 1, 2004 through March 2, 2004; and the years ended December 31, 2003 and 2002			F-7
	Notes to the Financial Statements			F-8
FOREST GULF OF MEXICO OPERATIONS
	Report of Independent Registered Public Accounting Firm			F-35
	Statements of Revenues and Direct Operating Expenses for the nine months ended September 30, 2005 and September 30, 2004 (unaudited) and the years ended December 31, 2004, 2003 and 2002			F-36
	Notes to Statements of Revenues and Direct Operating Expenses of Forest Gulf of Mexico Operations			F-37

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	/s/ DELOITTE & TOUCHE LLP

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					Post-Merger									Pre-Merger
					September 30,				December 31,					December 31,
					2005				2004					2003
					(Unaudited)
									(In thousands except
									share data)
Current Assets:
	Cash and cash equivalents				$	4,564			$	2,541				$	60,174
	Restricted cash					—				—					621
	Receivables					50,259				52,734					33,272
	Deferred tax asset					30,480				—					—
	Prepaid expenses and other					18,732				10,471					9,014
			Total current assets			104,035				65,746					103,081
Property and Equipment:
	Oil and gas properties, full cost method:
		Proved				446,868				319,553					599,762
		Unproved, not subject to amortization				31,126				36,245					36,619
			Total			477,994				355,798					636,381
	Other property and equipment					10,074				960					5,651
	Accumulated depreciation, depletion and amortization					(94,810	)			(52,985	)				(434,160	)
			Total property and equipment, net			393,258				303,773					207,872
Deferred Tax Asset						—				3,029					—
Other Assets, Net of Amortization						4,916				3,471					1,151
			TOTAL ASSETS		$	502,209			$	376,019				$	312,104
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
	Accounts payable				$	14,573			$	2,526				$	28,640
	Accrued liabilities					88,993				81,831					35,486
	Accrued interest					141				79					—
	Derivative liability					76,902				16,976					2,464
			Total current liabilities			180,609				101,412					66,590
Long-Term Liabilities:
	Abandonment liability					26,314				19,268					15,027
	Taxes payable to parent company					—				—					5,664
	Deferred income tax					6,468				—					4,769
	Derivative liability					28,221				5,432					1,897
	Bank debt					75,000				105,000					—
	Note payable					4,000				10,000					—
	Other long-term liabilities					3,000				1,000					—
			Total long-term liabilities			143,003				140,700					27,357
Stockholder’s Equity:
	Common stock, $.0001 par value; 70,000,000 shares authorized, issued and outstanding, 35,615,400, 29,748,130 and 29,748,130 shares at September 30, 2005, December 31, 2004 and December 31, 2003, respectively					4				1					1
	Additional paid-in-capital					171,667				91,917					227,318
	Unearned compensation					(14,548	)			—					—
	Accumulated other comprehensive (loss)					(67,708	)			(11,630	)				(4,360	)
	Accumulated retained earnings (deficit)					89,182				53,619					(4,802	)
			Total stockholder’s equity			178,597				133,907					218,157
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY					$	502,209			$	376,019				$	312,104

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				Post-Merger													Pre-Merger
								Period from				Period from					Period from
				Nine Months				March 3, 2004				March 3, 2004					January 1, 2004
				Ended				through				through					through				Year Ended December 31,
				September 30,				September 30,				December 31,					March 2,
				2005				2004				2004					2004				2003				2002
				(Unaudited)				(Unaudited)
				(In thousands except per share data)
Revenues:
	Oil sales			$	53,579			$	44,576			$	63,498				$	12,709			$	37,992			$	38,792
	Gas sales				94,913				77,950				110,925					27,055				104,551				119,436
	Other revenues				2,753				—				—					—				—				—
		Total revenues			151,245				122,526				174,423					39,764				142,543				158,228
Costs and Expenses:
	Lease operating expense				20,170				15,073				21,363					4,121				24,719				26,076
	Transportation expense				1,697				3,744				1,959					1,070				6,252				10,480
	General and administrative expense				26,726				6,174				7,641					1,131				8,098				7,716
	Depreciation, depletion and amortization				43,457				37,464				54,281					10,630				48,339				70,821
	Derivative settlements				—				—				—					—				3,222				—
	Impairment of Enron-related receivables				—				—				—					—				—				3,234
	Impairment of production equipment held for use				498				957				957					—				—				—
		Total costs and expenses			92,548				63,412				86,201					16,952				90,630				118,327
OPERATING INCOME					58,697				59,114				88,222					22,812				51,913				39,901
Interest:
	Income				696				168				225					91				756				390
	Expense, net of amounts capitalized				(5,416	)			(4,381	)			(6,045	)				(5	)			(6,981	)			(10,298	)
Income before taxes					53,977				54,901				82,402					22,898				45,688				29,993
Provision for income taxes					(18,414	)			(19,221	)			(28,783	)				(8,072	)			(9,387	)			—
Income before cumulative effect of change in accounting method, net of tax effects					35,563				35,680				53,619					14,826				36,301				29,993
Cumulative effect of change in accounting method, net of tax effects					—				—				—					—				1,943				—
NET INCOME				$	35,563				35,680			$	53,619				$	14,826			$	38,244			$	29,993
Earnings per share:
Net income per share — basic
	Income before cumulative effect of change in accounting method, net of tax effects			$	1.10			$	1.20			$	1.80				$	.50			$	1.22			$	1.01
	Cumulative effect of change in accounting method, net of tax effects				—				—				—					—				.07				—
	Income per share — basic			$	1.10			$	1.20			$	1.80				$	.50			$	1.29			$	1.01
Net income per share — diluted
	Income before cumulative effect of change in accounting method, net of tax effects			$	1.07			$	1.20			$	1.80				$	.50			$	1.22			$	1.01
	Cumulative effect of change in accounting method, net of tax effects				—				—				—					—				.07				—
	Income per share — diluted			$	1.07			$	1.20			$	1.80				$	.50			$	1.29			$	1.01
Weighted average shares outstanding — basic					32,438,240				29,748,130				29,748,130					29,748,130				29,748,130				29,748,130
Weighted average shares outstanding — diluted					33,312,831				29,748,130				29,748,130					29,748,130				29,748,130				29,748,130

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																			Accumulated				Accumulated
			Common Stock								Additional								Other				Retained				Total
											Paid-In				Unearned				Comprehensive				Earnings				Stockholder’s
			Shares				Amount				Capital				Compensation				Income (Loss)				(Deficit)				Equity
			(In thousands)
Balance at December 31, 2001				29,748			$	1			$	227,318				—			$	25,803			$	(73,039	)		$	180,083
	Net income			—				—				—				—				—				29,993				29,993
	Change in fair value of derivative hedging instruments			—				—				—				—				(17,105	)			—				(17,105	)
	Hedge settlements reclassified to income			—				—				—				—				(22,875	)			—				(22,875	)
	Total comprehensive income (loss)			—				—				—				—				—				—				(9,987	)
Balance at December 31, 2002				29,748			$	1			$	227,318				—			$	(14,177	)		$	(43,046	)		$	170,096
	Net income			—				—				—				—				—				38,244				38,244
	Change in fair value of derivative hedging instruments			—				—				—				—				39,280				—				39,280
	Hedge settlements reclassified to income			—				—				—				—				(29,463	)			—				(29,463	)
																—
	Total comprehensive income			—				—				—				—				—				—				48,061
Balance at December 31, 2003				29,748			$	1			$	227,318				—			$	(4,360	)		$	(4,802	)		$	218,157
Pre-Merger Net Income				—				—				—				—				—				14,826				14,826
	Change in fair value of derivative hedging instruments			—				—				—				—				(7,312	)			—				(7,312	)
	Hedge settlements reclassified to income			—				—				—				—				(745	)			—				(745	)
	Total comprehensive income			—				—				—				—				—				—				6,769
	Pre-Merger Balance at March 2, 2004			29,748			$	1			$	227,318				—			$	(12,417	)		$	10,024			$	224,926
Post-Merger
	Dividend			—				—				—				—				—				(166,432	)			(166,432	)
	Merger adjustments			—				—				(135,401	)			—				12,417				156,408				33,424
Balance at March 3, 2004				29,748			$	1			$	91,917				—			$	—			$	—			$	91,918
	Net income			—				—				—				—				—				53,619				53,619
	Change in fair value of derivative hedging instruments — net of income taxes			—				—				—				—				(32,171	)			—				(32,171	)
	Hedge settlements reclassified to income — net of income taxes			—				—				—				—				20,541				—				20,541
	Total comprehensive income			—				—				—				—				—				—				41,989
Balance at December 31, 2004				29,748			$	1			$	91,917				—			$	(11,630	)		$	53,619			$	133,907

F-5

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Table of Contents

																			Accumulated				Accumulated
			Common Stock								Additional								Other				Retained				Total
											Paid-In				Unearned				Comprehensive				Earnings				Stockholder’s
			Shares				Amount				Capital				Compensation				Income (Loss)				(Deficit)				Equity
			(In thousands)
	Common shares issued — private equity offering (unaudited)			3,600				2				44,532				—				—				—				44,534
	Common shares issued — restricted stock (unaudited)			2,267				1				31,741				(31,742	)			—				—				—
	Amortization of unearned compensation — net of income taxes (unaudited)			—				—				—				17,194				—				—				17,194
	Stock compensation expense — stock options — net of income taxes (unaudited)			—				—				420				—				—				—				420
Contributed capital — Mariner Energy, LLC and Mariner Holdings, Inc. (unaudited)				—				—				3,057				—				—				—				3,057
Comprehensive income:
	Net income (unaudited)			—				—				—				—				—				35,563				35,563
	Other comprehensive income (loss):
	Change in fair value of derivative hedging instruments — net of income taxes (unaudited)			—				—				—				—				(79,479	)			—				(79,479	)
	Hedge settlements reclassified to income — net of income taxes (unaudited)			—				—				—				—				23,401				—				23,401
	Total comprehensive income (loss) (unaudited)			—				—				—				—				—				—				(20,515	)
Balance at September 30, 2005 (unaudited)				35,615			$	4			$	171,667			$	(14,548	)		$	(67,708	)		$	89,182			$	178,597

F-6

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					Post-Merger													Pre-Merger
									Period from				Period from					Period from
					Nine Months				March 3, 2004				March 3, 2004					January 1, 2004				Year Ended
					Ended				through				through					through				December 31,
					September 30,				September 30,				December 31,					March 2,
					2005				2004				2004					2004				2003				2002
					(Unaudited)				(Unaudited)
					(In thousands)
Operating Activities:
	Net income				$	35,563			$	35,680			$	53,619				$	14,826			$	38,244			$	29,993
	Adjustments to reconcile net loss to net cash provided by operating activities:
	Deferred income tax					15,862				17,601				27,162					8,072				—				—
	Depreciation, depletion and amortization					44,321				37,964				55,067					10,630				48,414				70,588
	Stock compensation expense					17,614				—				—					—				—				—
	Hedge activities					—				—				—					—				(2,030	)			(23,200	)
	Impairment of Enron-related receivables					—				—				—					—				—				3,234
	Impairment of production equipment held for use					498				957				957					—				—				—
	Loss on sale of fixed assets					—				—				—					—				—				69
	Cumulative effect of changes in accounting method					—				—				—					—				(2,988	)			—
	Changes in operating assets and liabilities:
		Receivables				2,476				7,707				(10,615	)				(8,847	)			(3,599	)			4,449
		Prepaid expenses and other				418				2,100				(965	)				551				(2,257	)			3,249
		Other assets				(629	)			(636	)			321					(963	)			1,485				344
		Restricted cash				—				(7,800	)			620					1				14,574				(15,195	)
		Accounts payable and accrued liabilities				19,251				3,261				9,697					(3,974	)			1,208				(13,256	)
		Taxes payable to parent company and deferred income tax				—				—				—					—				10,432				—
			Net cash provided by operating activities			135,374				96,834				135,863					20,296				103,483				60,275
Investing Activities:
	Additions to oil and gas properties					(132,988	)			(85,699	)			(133,425	)				(15,264	)			(83,228	)			(105,360	)
	Proceeds from property conveyances					18				—				—					—				121,625				52,329
	Additions to other property and equipment					(9,114	)			(169	)			(172	)				(78	)			(50	)			(738	)
			Net cash (used in) provided by investing activities			(142,084	)			(85,868	)			(133,597	)				(15,342	)			38,347				(53,769	)
Financing Activities:
	Initial borrowings from revolving credit facility, net of fees					—				131,579				131,579					—				—				—
	Repayment of subordinated notes					—				—				—					—				(100,000	)			—
	Repayment of term note					(6,000	)			—				—					—				—				—
	Credit facility borrowings (repayments), net					(30,000	)			(40,000	)			(30,000	)				—				—				—
	Proceeds from private equity offering					44,534				—				—					—				—				—
	Deferred offering costs					(2,680	)			—				—					—				—				—
	Capital contribution from affiliates					2,879				—				—					—				—				—
	Dividend to Mariner Energy LLC					—				(166,431	)			(166,432	)				—				—				—
			Net cash (used in) provided by financing activities			8,733				(74,852	)			(64,853	)				—				(100,000	)			—
Increase (Decrease) in Cash and Cash Equivalents						2,023				(63,886	)			(62,587	)				4,954				41,830				6,506
Cash and Cash Equivalents at Beginning of Period						2,541				65,128				65,128					60,174				18,344				11,838
Cash and Cash Equivalents at End of Period					$	4,564			$	1,242			$	2,541				$	65,128			$	60,174			$	18,344

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1.	Summary of Significant Accounting Policies

F-8

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Table of Contents

Mariner Energy, Inc. bank loan proceeds			$	135.0
Note payable issued by Mariner Energy, Inc. to former parent				10.0
Equity from new owners				100.0
Distributions from Mariner Energy, Inc.				31.2
Assignment by Mariner Energy, Inc. of receivables				1.9
	Total		$	278.1
Repayment of former parent debt obligation			$	197.6
Merger consideration to stockholders and warrant holders				73.5
Acquisition costs and other expenses				7.0
	Total		$	278.1

F-9

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			March 2, 2004
			(In millions)
Oil and natural gas properties — proved			$	203.5
Oil and natural gas properties — unproved				25.2
Other property and equipment and other assets				0.7
Current assets				83.2
Deferred tax asset(1)				9.1
Other assets				4.6
Accounts payable and accrued expenses				(62.2	)
Long-Term Liability				(14.7	)
Fair value of oil and natural gas derivatives				(12.4	)
Debt				(145.0	)
	Total Allocation		$	92.0

(1)	Represents deferred income taxes recorded at the date of the Merger due to differences between the book basis and the tax basis of assets. For book purposes, we had a step-up in basis related to purchase accounting while our existing tax basis carried over.

		Twelve Months
		Ending
		December 31,
		2004
		(In millions)
Revenues and other income		$	214.2
Income before taxes and change in accounting method			103.0
Net income			67.0

F-10

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		Post-Merger													Pre-Merger
						Period from				Period from					Period from
		Nine Months				March 3, 2004				March 3, 2004					January 1, 2004				Years Ended
		Ended				through				through					through				December 31,
		September 30,				September 30,				December 31,					March 2,
		2005				2004				2004					2004				2003				2002
		(Unaudited)				(Unaudited)
Numerator:
Income before cumulative effect of change in accounting method, net of tax effects		$	35,563			$	35,680			$	53,619				$	14,826			$	36,301			$	29,993
Cumulative effect of change in accounting method, net of tax effects			—				—				—					—				1,943				—
Net income		$	35,563			$	35,680			$	53,619				$	14,826			$	38,244			$	29,993
Denominator:
Weighted average shares outstanding			32,438				29,748				29,748					29,748				29,748				29,748
Add dilutive securities: Restricted shares			875				—				—					—				—				—
Total weighted average shares outstanding and dilutive securities			33,313				29,748				29,748					29,748				29,748				29,748
Earnings per share — basic:
Income before cumulative effect of change in accounting method, net of tax effects		$	1.10			$	1.20			$	1.80				$	.50			$	1.22			$	1.01
Cumulative effect of change in accounting method, net of tax effects			—				—				—					—				.07				—
Net income per share — basic		$	1.10			$	1.20			$	1.80				$	.50			$	1.29			$	1.01
Earnings per share — diluted:
Income before cumulative effect of change in accounting method, net of tax effects		$	1.07			$	1.20			$	1.80				$	.50			$	1.22			$	1.01
Cumulative effect of change in accounting method, net of tax effects			—				—				—					—				.07				—
Net income per share — diluted		$	1.07			$	1.20			$	1.80				$	.50			$	1.29			$	1.01

F-11

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F-12

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F-13

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		(In millions)
Abandonment liability as of January 1, 2003 (Pre-Merger)		$	15.7
Liabilities incurred			1.8
Claims settled			(3.9	)
Accretion expense			1.4
Abandonment liability as of December 31, 2003 (Pre-Merger)		$	15.0
Liabilities Incurred			—
Claims Settled			(1.5	)
Accretion Expense			0.2
Abandonment Liability as of March 2, 2004 (Pre-merger)		$	13.7
Abandonment Liability as of March 3, 2004 (Post-merger)		$	13.7
Liabilities Incurred			11.5
Claims Settled			(2.7	)
Accretion Expense			1.5
Abandonment Liability as of December 31, 2004 (Post-merger)(1)		$	24.0
Liabilities Incurred (unaudited)			9.4
Claims Settled (unaudited)			(1.9	)
Accretion Expense (unaudited)			1.6
Abandonment Liability as of September 30, 2005 (Post-merger) (unaudited)(2)		$	33.1

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(1)	Includes $4.7 million classified as a current accrued liability at December 31, 2004.
(2)	Includes $6.8 million classified as a current accrued liability at September 30, 2005.

F-15

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F-16

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2.	Related Party Transactions

F-17

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	Mariner Energy LLC

	Mariner Energy, Inc.

F-18

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		Year Ending
		December 31,
		2004				2003
Natural gas quantity hedged (MMbtu)			—				3,650,000
Increase (decrease) in natural gas sales (thousands)			—			$	2,603
Crude oil quantity hedged (MBbls)			—				—
Increase (decrease) in crude oil sales (thousands)			—				—

			December 31,				December 31,
			2004				2003
			(Amount in millions)
Balance Sheet Data
Related Party Receivable:
	Derivative Asset		$	—			$	—
	Settled Hedge Receivable			—				—
	Oil and Gas Receivable			—				—
Accrued Liabilities:
	Transportation Contract			—				0.1
	Service Agreement			—				0.4
Stockholder’s Equity:
	Common Stock		$	—			$	.001
	Additional Paid in Capital			—				227.3
	Accumulated other Comprehensive Income		$	—			$	227.3

		Year Ended
		December 31,
		2004				2003
Income Statement Data
Oil and Gas Sales		$	—			$	32.6
General and Administrative Expenses			—				0.4
Transportation Expenses			—				1.9
Unrealized gain and other non-cash derivative instrument adjustments			—				—

F-19

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	Post-Merger Related Party Transactions

3.	Property Conveyances

4.	Long-Term Debt

F-20

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F-21

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	JEDI Term Promissory Note

	Cash Interest Expense

5.	Stockholder’s Equity

F-22

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6.	Employee Benefit And Royalty Plans

7.	Commitments And Contingencies

2005		$	561
2006			446
2007			148
2008			—
2009			—

F-23

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											September 30,
											2005
							Fixed				Fair Value
Fixed Price Swaps			Quantity				Price				Gain/(Loss)
											(In millions)
Crude Oil (Bbls)
	October 1 — December 31, 2005			138,000			$	25.22			$	(5.7	)
	January 1 — December 31, 2006			140,160				29.56				(5.2	)
Natural Gas (MMbtus)
	October 1 — December 31, 2005			1,352,400,				5.00				(12.3	)
	January 1 — December 31, 2006			1,827,547				5.53				(13.6	)
	Total										$	(36.8	)

															September 30,
															2005
															Fair Value
Costless Collars			Quantity				Floor				Cap				Gain/(Loss)
															(In millions)
Crude Oil (Bbls)
	October 1 — December 31, 2005			57,960			$	35.60			$	44.77			$	(1.2	)
	January 1 — December 31, 2006			251,850				32.65				41.52				(6.2	)
	January 1 — December 31, 2007			202,575				31.27				39.83				(4.8	)
Natural Gas (MMbtus)
	October 1 — December 31, 2005			2,189,600				6.01				8.02				(12.3	)
	January 1 — December 31, 2006			7,347,450				5.78				7.85				(29.1	)
	January 1 — December 31, 2007			5,310,750				5.49				7.22				(14.7	)
	Total														$	(68.3	)

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											December 31, 2004
							Fixed				Fair Value
Fixed Price Swaps			Quantity				Price				Gain/(Loss)
											(In millions)
Crude Oil (Bbls)
	January 1 — December 31, 2005			606,000			$	26.15			$	(10.0	)
	January 1 — December 31, 2006			140,160				29.56				(1.5	)
Natural Gas (MMbtus)
	January 1 — December 31, 2005			8,670,159				5.41				(7.0	)
	January 1 — December 31, 2006			1,827,547				5.53				(1.9	)
	Total										$	(20.4	)

															December 31, 2004
															Fair Value
Costless Collars			Quantity				Floor				Cap				Gain/(Loss)
															(In millions)
Crude Oil (Bbls)
	January 1 — December 31, 2005			229,950			$	35.60			$	44.77			$	(0.4	)
	January 1 — December 31, 2006			251,850				32.65				41.52				(0.7	)
	January 1 — December 31, 2007			202,575				31.27				39.83				(0.6	)
Natural Gas (MMbtus)
	January 1 — December 31, 2005			2,847,000				5.73				7.80				0.4
	January 1 — December 31, 2006			3,514,950				5.37				7.35				(0.3	)
	January 1 — December 31, 2007			1,806,750				5.08				6.26				(0.4	)
	Total														$	(2.0	)

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			Post-Merger				Pre-Merger
			Period from				Period from
			March 3, 2004				January 1
			through				through				December 31,
			December 31,				March 2,
			2004				2004				2003				2002
Natural Gas
	Quantity hedged (MMbtu)			16,723,063				2,100,000				25,520,000				—
	Increase (Decrease) in Natural Gas Sales (in thousands)		$	(12,223	)		$	1,431			$	(27,097	)			—
Crude Oil
	Quantity hedged (MBbls)			1,375				179				730				353
	Increase (Decrease) in Crude Oil Sales (in thousands)		$	(16,221	)		$	(686	)		$	(4,969	)		$	(762	)

F-26

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F-27

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8.	Income Taxes

			Post-Merger				Pre-Merger
			Period from				Period from
			March 3, 2004				January 1				Year Ending
			through				through				December 31,
			December 31,				March 2,
			2004				2004				2003				2002
			$				$				$				$
Current				—				—				—				—
Deferred				28,783				8,072				10,432				—
	Total			28,783				8,072				10,432				—

		Post-Merger								Pre-Merger
		Period from								Period from
		March 3, 2004								January 1								Year Ending December 31,
		through								through
		December 31,								March 2,
		2004								2004								2003								2002
		$				%				$				%				$				%				$				%
Income before income taxes including change in accounting in 2003			82,402				—				22,898				—				48,676				—				29,993				—
Income tax expense (benefit) computed at statutory rates			28,841				35				8,014				35				17,037				35				10,498				35
Change in valuation allowance			—				—				—				—				(7,090	)			(14	)			(11,507	)			(38	)
Other			(58	)			—				58				—				485				—				1,009				3
Tax Expense			28,783				35				8,072				35				10,432				21				—				—

F-28

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				Year Ending
				December 31,
				2004				2003
Deferred Tax Assets:
	Net operating loss carry forwards			$	15,639			$	—
	Alternative minimum Tax Credit				1,606				—
	Differences between book and tax basis of receivables				—				676
	Other comprehensive income-derivative instruments				6,262				—
	Valuation allowance				(5,909	)			—
		Total net deferred tax assets			17,598				676
Deferred Tax Liabilities:
	Differences between book and tax basis of properties				(14,569	)			(5,445	)
		Total net deferred asset (liability)		$	3,029			$	(4,769	)

9.	Oil and Gas Producing Activities and Capitalized Costs (Unaudited)

			Year Ending December 31,
			2004				2003				2002
Oil and gas sales			$	214,187			$	142,543			$	158,228
Lease operating costs				(25,484	)			(24,719	)			(26,076	)
Transportation				(3,029	)			(6,252	)			(10,480	)
Depreciation, depletion and amortization				(64,911	)			(48,339	)			(70,821	)
	Results of operations		$	120,763			$	63,233			$	50,851

			As of December 31,
			2004				2003				2002
Unevaluated properties, not subject to amortization			$	36,245			$	36,619			$	44,630
Properties subject to amortization				319,553				599,762				620,949
	Capitalized costs			355,798				636,381				665,579
Accumulated depreciation, depletion and amortization				(52,680	)			(429,323	)			(379,543	)
Net capitalized costs			$	303,118			$	207,058			$	286,036

F-29

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			Year Ending December 31,
			2004				2003				2002
Property acquisition costs
	Unproved properties		$	4,844			$	4,746			$	14,813
Exploration costs				43,022				26,823				25,545
Development costs				100,823				51,659				65,002
	Total costs incurred			148,689			$	83,228			$	105,360
Depreciation, depletion and amortization rate per equivalent Mcf before impairment			$	1.73			$	1.45			$	1.78

			Period Incurred
			Year Ended December 31,																Total at
																			December 31,
			2004				2003				2002				Prior				2004
Unproved leasehold acquisition and geological and geophysical costs			$	4,354			$	76			$	10,251			$	7,324			$	22,005
Unevaluated exploration and development costs				8,955				(51	)			(209	)			5,150				13,845
Capitalized interest				267				118				10				—				395
	Total		$	13,576			$	143			$	10,052			$	12,474			$	36,245

10.	Supplemental Oil and Gas Reserve and Standardized Measure Information (Unaudited)

F-30

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F-31

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											Natural Gas
			Oil				Natural Gas				Equivalent
			(Mbbl)				(MMcf)				(MMcfe)
			(In thousands)
December 31, 2001				10,101				176,461				237,069
	Revisions of previous estimates			541				5,523				8,769
	Extensions, discoveries and other additions			2,108				18,791				31,439
	Sale of reserves in place			(35	)			(35,088	)			(35,298	)
	Production			(1,697	)			(29,632	)			(39,814	)
December 31, 2002				11,018				136,055				202,165
	Revisions of previous estimates			900				(3,076	)			2,324
	Extensions, discoveries and other additions			2,795				62,609				79,379
	Sale of reserves in place			(34	)			(44,233	)			(44,437	)
	Production			(1,600	)			(23,771	)			(33,371	)
December 31, 2003				13,079				127,584				206,060
	Revisions of previous estimates			1,249				19,797				27,291
	Extensions, discoveries and other additions			2,225				28,334				41,684
	Sale of reserves in place			—				—				—
	Production			(2,298	)			(23,782	)			(37,570	)
December 31, 2004				14,255				151,933				237,465

										Natural Gas
		Oil				Natural Gas				Equivalent
		(Mbbl)				(MMcf)				(MMcfe)
		(In thousands)
December 31, 2002			3,609				64,586				86,240
December 31, 2003			5,951				60,881				96,587
December 31, 2004			6,339				71,361				109,395

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		Year Ending December 31,
		2004				2003				2002
		(In thousands)
Future cash inflows		$	1,601,240			$	1,182,509			$	992,700
Future production costs			(308,190	)			(196,695	)			(154,661	)
Future development costs			(193,689	)			(138,694	)			(110,474	)
Future income taxes			(285,701	)			(183,199	)			(72,648	)
Future net cash flows			813,660				663,921				654,917
Discount of future net cash flows at 10% per annum			(319,278	)			(245,762	)			(191,345	)
Standardized measure of discounted future net cash flows		$	494,382			$	418,159			$	463,572

		Year Ending December 31,
		2004				2003				2002
Sales and transfers of oil and gas produced, net of production costs		$	(185,673	)		$	(111,572	)		$	(125,610	)
Net changes in prices and production costs			27,767				27,403				331,085
Extensions and discoveries, net of future development and production costs			102,905				180,237				50,085
Development costs during period and net change in development costs			44,417				31,709				28,474
Revision of previous quantity estimates			89,814				6,276				7,480
Sales of reserves in place			—				(138,016	)			(25,887	)
Net change in income taxes			(27,634	)			(63,962	)			(51,423	)
Accretion of discount before income taxes			41,816				51,500				29,488
Changes in production rates (timing) and other			(17,189	)			(28,988	)			(12,148	)
Net change		$	76,223			$	(45,413	)		$	231,544

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11.	Unaudited Quarterly Financial Information

			Post-Merger																	Pre-Merger
															Period from					Period from
			2004 Quarter Ended												March 3, 2004					January 1, 2004				2003 Quarter Ended
															through					through
			December 31				September 30				June 30				March 31, 2004					March 2, 2004				December 31				September 30				June 30				March 31
			(In thousands, except per share data)
Total revenues			$	51,897			$	50,202			$	51,086			$	21,238				$	39,764			$	33,231			$	29,002			$	35,099			$	45,211
Operating income			$	29,108			$	24,403			$	25,045			$	9,666				$	22,812			$	14,474			$	4,428			$	9,681			$	23,330
Income before income taxes			$	27,501			$	22,804			$	23,071			$	9,026				$	22,898			$	14,453			$	2,758			$	7,583			$	20,894
Provision for income taxes				9,562				8,498				7,630				3,093					8,072				10,432				(1,045	)			—				—
Income before cumulative effect of change in accounting method, net of tax effects				17,939				14,306				15,441				5,933					14,826				4,021				3,803				7,583				20,894
Cumulative effect of change in accounting method, net of tax effects				—				—				—				—					—				—				(1,045	)			—				2,988
Net Income			$	17,939			$	14,306			$	15,441			$	5,933				$	14,826			$	4,021			$	2,758			$	7,583			$	23,882
Earnings per share:
Net income per share — basic
	Income before cumulative effect of change in accounting method, net of tax effects		$	0.60			$	0.48			$	0.52			$	0.20				$	0.50			$	0.14			$	0.13			$	0.25			$	0.70
	Cumulative effect of change in accounting method, net of tax effects			—				—				—				—					—				—				(0.04	)			—				0.10
	Income per share — basic		$	0.60			$	0.48			$	0.52			$	0.20				$	0.50			$	0.14			$	0.09			$	0.25			$	0.80
Net income per share — diluted
	Income before cumulative effect of change in accounting method, net of tax effects		$	0.60			$	0.48			$	0.52			$	0.20				$	0.50			$	0.14			$	0.13			$	0.25			$	0.70
	Cumulative effect of change in accounting method, net of tax effects			—				—				—				—					—				—				(0.04	)			—				0.10
	Income per share — diluted		$	0.60			$	0.48			$	0.52			$	0.20				$	0.50			$	0.14			$	0.09			$	0.25			$	0.80
Weighted average shares outstanding — basic				29,748,130				29,748,130				29,748,130				29,748,130					29,748,130				29,748,130				29,748,130				29,748,130				29,748,130
Weighted average shares outstanding — diluted				29,748,130				29,748,130				29,748,130				29,748,130					29,748,130				29,748,130				29,748,130				29,748,130				29,748,130

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	KPMG LLP

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			Nine Months Ended
			September 30,								Years Ended December 31,
			2005				2004				2004				2003				2002
			(Unaudited)
			(In thousands)
Oil and natural gas revenues			$	326,722			$	324,426			$	453,139			$	342,019			$	228,896
Direct Operating Expenses:
	Lease operating expenses			57,431				63,022				80,079				45,716				52,076
	Transportation			2,484				1,424				2,175				2,652				3,855
	Production taxes			1,948				1,243				1,548				1,521				947
Total direct operating expenses				61,863				65,689				83,802				49,889				56,878
Revenues in excess of direct operating expenses			$	264,859			$	258,737			$	369,337			$	292,130			$	172,018

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1.	BASIS OF PRESENTATION

2.	DERIVATIVE INSTRUMENTS

3.	SUPPLEMENTAL INFORMATION REGARDING PROVED OIL AND GAS RESERVES (UNAUDITED)

	Estimated Proved Reserves

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		Liquids				Gas				Total
		(MBbls)				(MMcf)				(MMcfe)
Balance at January 1, 2002			12,767				296,497				373,099
Revisions of previous estimates			(280	)			12,671				10,991
Extensions and discoveries			481				5,557				8,443
Production			(1,980	)			(50,566	)			(62,446	)
Purchases of reserves in place			—				2,009				2,009
Balance at December 31, 2002			10,988				266,168				332,096
Revisions of previous estimates			(2,492	)			(14,565	)			(29,517	)
Extensions and discoveries			357				23,714				25,856
Production			(2,145	)			(58,785	)			(71,655	)
Purchases of reserves in place			4,649				78,815				106,709
Balance at December 31, 2003			11,357				295,347				363,489
Revisions of previous estimates			1,693				(2,860	)			7,298
Extensions and discoveries			630				14,449				18,229
Production			(3,230	)			(61,684	)			(81,064	)
Purchases of reserves in place			1,200				24,556				31,756
Balance at December 31, 2004			11,650				269,808				339,708
Proved developed reserves at:
December 31, 2002			7,644				208,904				254,768
December 31, 2003			7,920				205,334				252,854
December 31, 2004			9,471				201,759				258,585

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	Standardized Measure of Discounted Future Net Cash Flows

		December 31,
		2004				2003				2002
		(In thousands)
Future cash inflows		$	2,155,217				2,105,447				1,539,033
Future production costs			(272,020	)			(272,335	)			(237,876	)
Future development costs			(357,592	)			(372,139	)			(213,020	)
Future income taxes			(412,477	)			(360,707	)			(257,647	)
Future net cash flows			1,113,128				1,100,266				830,490
10% annual discount			(187,291	)			(150,845	)			(182,450	)
Standardized measure of discounted future net cash flows relating to proved reserves		$	925,837				949,421				648,040

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			December 31,
			2004				2003				2002
			(In thousands)
Balance, beginning of period			$	949,421				648,040				434,955
Increase (decrease) in discounted future net cash flows:
	Sales of oil and gas, net of production costs			(426,405	)			(333,029	)			(163,604	)
	Net changes in prices and future production costs			11,628				345,947				373,243
	Net changes in future development costs			9,615				(82,874	)			(43,636	)
	Extensions, discoveries and improved recovery			88,999				98,561				24,292
	Previously estimated development costs incurred during the period			70,027				74,690				70,833
	Revisions of previous quantity estimates			28,701				(104,674	)			31,446
	Purchases of reserves in place			100,681				307,686				3,741
	Accretion of discount			121,720				82,808				48,343
Net change in income taxes				(28,550	)			(87,734	)			(131,573	)
Balance, end of period			$	925,837				949,421				648,040

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ARTICLE I
DEFINITIONS
ARTICLE II
THE MERGER
SECTION 2.1		Distribution and Merger		Annex A-8
SECTION 2.2		Effect on Capital Stock		Annex A-9
SECTION 2.3		Cancellation of Stock		Annex A-9
SECTION 2.4		Stockholders Meeting		Annex A-9
SECTION 2.5		Closing		Annex A-9
SECTION 2.6		Effective Time		Annex A-10
SECTION 2.7		Closing of Transfer Books		Annex A-10
SECTION 2.8		Exchange of Certificates		Annex A-10
SECTION 2.9		Certain Stock Options		Annex A-11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FOREST
SECTION 3.1		Organization; Qualification		Annex A-12
SECTION 3.2		Corporate Authority; No Violation		Annex A-12
SECTION 3.3		Information Supplied		Annex A-13
SECTION 3.4		Brokers or Finders		Annex A-13
SECTION 3.5		Forest Rights Plan		Annex A-13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FOREST AND SPINCO
SECTION 4.1		Organization, Qualification		Annex A-14
SECTION 4.2		Capital Stock and Other Matters		Annex A-14
SECTION 4.3		Corporate Authority; No Violation		Annex A-15
SECTION 4.4		Spinco Financial Statements; Liabilities		Annex A-15
SECTION 4.5		Absence of Certain Changes or Events		Annex A-16
SECTION 4.6		Investigations; Litigation		Annex A-16
SECTION 4.7		Licenses; Compliance with Laws		Annex A-16
SECTION 4.8		Proxy Statement/ Prospectus; Registration Statements		Annex A-16
SECTION 4.9		Information Supplied		Annex A-17
SECTION 4.10		Environmental Matters		Annex A-17
SECTION 4.11		Tax Matters		Annex A-18
SECTION 4.12		Benefit Plans		Annex A-19
SECTION 4.13		Labor Matters		Annex A-20
SECTION 4.14		Intellectual Property Matters		Annex A-20
SECTION 4.15		Material Contracts		Annex A-21
SECTION 4.16		Brokers or Finders		Annex A-21
SECTION 4.17		Certain Board Findings		Annex A-21
SECTION 4.18		Vote Required		Annex A-21

Annex A-i

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SECTION 4.19		Stockholder Approval		Annex A-21
SECTION 4.20		Certain Payments		Annex A-22
SECTION 4.21		Assets		Annex A-22
SECTION 4.22		Loans		Annex A-22
SECTION 4.23		Oil and Gas Reserves		Annex A-22
SECTION 4.24		Derivative Transactions		Annex A-23
SECTION 4.25		No Other Representations and Warranties		Annex A-23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.1		Organization, Qualification		Annex A-24
SECTION 5.2		Capital Stock and Other Matters		Annex A-24
SECTION 5.3		Corporate Authority; No Violation		Annex A-25
SECTION 5.4		Company Financial Statements; Liabilities		Annex A-25
SECTION 5.5		Absence of Certain Changes or Events		Annex A-26
SECTION 5.6		Investigations; Litigation		Annex A-26
SECTION 5.7		Licenses; Compliance with Laws		Annex A-26
SECTION 5.8		Proxy Statement/ Prospectus; Registration Statements		Annex A-26
SECTION 5.9		Information Supplied		Annex A-27
SECTION 5.10		Environmental Matters		Annex A-27
SECTION 5.11		Tax Matters		Annex A-28
SECTION 5.12		Benefit Plans		Annex A-29
SECTION 5.13		Labor Matters		Annex A-30
SECTION 5.14		Intellectual Property Matters		Annex A-30
SECTION 5.15		Material Contracts		Annex A-30
SECTION 5.16		Opinion of Company Financial Advisor		Annex A-31
SECTION 5.17		Brokers or Finders		Annex A-31
SECTION 5.18		Takeover Statutes		Annex A-31
SECTION 5.19		Certain Board Findings		Annex A-31
SECTION 5.20		Vote Required		Annex A-31
SECTION 5.21		Certain Payments		Annex A-31
SECTION 5.22		Assets		Annex A-31
SECTION 5.23		Loans		Annex A-32
SECTION 5.24		Oil and Gas Reserves		Annex A-32
SECTION 5.25		Derivative Transactions		Annex A-32
SECTION 5.26		No Other Representations and Warranties		Annex A-32
ARTICLE VI
COVENANTS AND AGREEMENTS
SECTION 6.1		Conduct of Business by the Company Pending the Merger		Annex A-33
SECTION 6.2		Conduct of Business by Spinco and Forest Pending the Merger		Annex A-36
SECTION 6.3		Proxy Statement/ Prospectus		Annex A-40
SECTION 6.4		Cooperation		Annex A-41
SECTION 6.5		Letter of Spinco’s Accountants		Annex A-41
SECTION 6.6		Letter of the Company’s Accountants		Annex A-41

Annex A-ii

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SECTION 6.7		Forest/ Spinco Employee Stock Options, Incentive and Benefit Plans		Annex A-42
SECTION 6.8		Employee Benefit Plans		Annex A-42
SECTION 6.9		Investigation		Annex A-45
SECTION 6.10		Reasonable Efforts; Further Assurances		Annex A-45
SECTION 6.11		No Solicitation by the Company		Annex A-45
SECTION 6.12		Director and Officer Indemnification; Insurance		Annex A-48
SECTION 6.13		Rule 145 Affiliates		Annex A-49
SECTION 6.14		Public Announcements		Annex A-49
SECTION 6.15		Defense of Litigation		Annex A-49
SECTION 6.16		Notification		Annex A-49
SECTION 6.17		Obligations of Merger Sub		Annex A-50
SECTION 6.18		Accounting Matters		Annex A-50
SECTION 6.19		Reorganization Treatment		Annex A-50
SECTION 6.20		Performance Bond		Annex A-50
SECTION 6.21		Estimated Basis		Annex A-50
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1		Conditions to the Obligations of Spinco, Forest, the Company and Merger Sub to Effect the Merger		Annex A-50
SECTION 7.2		Additional Conditions to the Obligations of Forest and Spinco		Annex A-51
SECTION 7.3		Additional Conditions to the Obligations of the Company and Merger Sub		Annex A-52
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVERS
SECTION 8.1		Termination		Annex A-52
SECTION 8.2		Effect of Termination		Annex A-54
SECTION 8.3		Termination Fee; Expenses		Annex A-54
SECTION 8.4		Amendment		Annex A-55
SECTION 8.5		Waivers		Annex A-55
ARTICLE IX
MISCELLANEOUS
SECTION 9.1		Survival of Representations, Warranties and Agreements; Indemnification		Annex A-55
SECTION 9.2		Expenses		Annex A-56
SECTION 9.3		Notices		Annex A-56
SECTION 9.4		Certain Construction Rules		Annex A-57
SECTION 9.5		Severability		Annex A-57
SECTION 9.6		Assignment; Binding Effect		Annex A-57
SECTION 9.7		No Third Party Beneficiaries		Annex A-57
SECTION 9.8		Limited Liability		Annex A-58
SECTION 9.9		Entire Agreement		Annex A-58
SECTION 9.10		Governing Law		Annex A-58
SECTION 9.11		Counterparts		Annex A-58
SECTION 9.12		Specific Performance		Annex A-58

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SECTION 9.13		Waiver of Jury Trial		Annex A-58
SECTION 9.14		Confidentiality		Annex A-59

Exhibit A — Distribution Agreement
Exhibit B — Initial Officers of the Company
Exhibit C — Certificate of Incorporation of the Company
Exhibit D — Bylaws of the Company
Exhibit E — Relocation and Severance Benefits
Exhibit F — Rule 145 Affiliate Agreement
Exhibit G — Form of Forest Officers’ Certificate
Exhibit H — Form of Company Officers’ Certificate

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Annex A-1

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Annex A-2

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Annex A-3

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Annex A-4

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Annex A-5

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Annex A-6

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Annex A-7

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Annex A-8

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	(a) Each share of Spinco Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 2.2(b)) shall be automatically converted into the right to receive one fully paid and nonassessable share of Company Common Stock; provided, however, that in the event that, subsequent to the date hereof but prior to the Effective Time, the outstanding shares of Spinco Common Stock shall have been changed into a different number of shares as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, combination, exchange, recapitalization or other similar transaction, the Merger Consideration shall be appropriately adjusted to provide the holders of the Spinco Common Stock the same economic effect contemplated by this Agreement prior to such event.
	(b) Each share of Spinco Common Stock held by Spinco as treasury stock and each share of Spinco Common Stock owned by the Company or Merger Sub, in each case immediately prior to the Effective Time, shall be canceled and shall cease to exist and no stock or other consideration shall be delivered in exchange therefor.
	(c) Each share of common stock, par value $.0001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of common stock, par value $.10 per share, of the Surviving Corporation.

Annex A-9

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Annex A-10

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Annex A-11

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Annex A-12

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Annex A-13

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Annex A-14

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Annex A-15

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Annex A-16

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	(i) As of the date hereof Forest or a Subsidiary of Forest has obtained, and as of the Distribution Date and the Effective Time each of Spinco and its Subsidiaries shall have obtained, all Licenses, permits and other authorizations under Environmental Laws (“Environmental Permits”) required for the conduct and operation of the Spinco Business. Each of Spinco, its Subsidiaries and the Spinco Business is in compliance and at all times has been in compliance with the terms and conditions contained in its Environmental Permits, and each of them and the Spinco Business is, and for the past one year has been, in compliance with all applicable Environmental Laws;
	(ii) Neither Spinco nor any of its Subsidiaries is subject to any environmental indemnification obligation regarding businesses currently operated by Forest, Spinco or the Spinco Business or any of their respective Subsidiaries or regarding properties currently owned or leased by Forest, Spinco or the Spinco Business or any of their respective Subsidiaries;
	(iii) To Forest’s and Spinco’s Knowledge there is no condition on, at, under or related to any property (including any release of a Hazardous Material into the air, soil, surface water, sediment or ground water at, under or migrating to or from such property) currently owned, leased or used by Forest, Spinco or any of their respective Subsidiaries or created by Spinco’s or any Spinco Subsidiary’s operations or the Spinco Business that would create liability for Spinco or any of its Subsidiaries under applicable Environmental Laws and, to Forest’s and Spinco’s Knowledge, the foregoing representation is true and correct with regard to property formerly owned, leased or used either by Forest, Spinco or any of their respective Subsidiaries, or in connection with the Spinco Business;
	(iv) There are no past or present actions, activities, circumstances, conditions, events or incidents (including the release, emission, discharge, presence or disposal of any Hazardous Material) that form or are reasonably likely to form the basis of a claim against Forest, Spinco or any of their respective Subsidiaries under Environmental Laws, including any claims based on the alleged exposure of any Person or property to any Hazardous Material;
	(v) Spinco has made available to the Company all material site assessments, compliance audits, and other similar studies prepared since January 1, 2002 in the possession or custody of Forest, Spinco or any of their respective Subsidiaries relating to (A) the environmental conditions on, under or about the properties or assets currently owned, leased, operated or used by Spinco, the Spinco Business, any of its Subsidiaries or any predecessor in interest thereto and (B) any Hazardous Materials used, managed, handled, transported, treated, generated, stored, discharged, emitted, or otherwise released by Spinco, the

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	Spinco Business, any of its Subsidiaries or, to Forest’s and Spinco’s Knowledge, any other Person, on, under, about or from any of the properties currently owned or leased by, or otherwise in connection with the use or operation of any of the properties owned or leased by, or otherwise in connection with the use or operation of any of the properties and assets of, Spinco or any of its Subsidiaries, or their respective businesses and operations;
	(vi) Since January 1, 2002, neither Spinco nor Forest in connection with the Spinco Business nor any Spinco Subsidiary has received any communication that has not been resolved, whether from a Governmental Authority, citizen’s group, employee or otherwise, alleging that it is liable under, or not in compliance with, any Environmental Law; and
	(vii) To Spinco’s and Forest’s Knowledge, there is no requirement anticipated or formally proposed for notice, comment, adoption or implementation under any Environmental Law or any Environmental Permit issued pursuant thereto that is reasonably expected to result in liability or material increases in either capital or operating costs for Spinco or any of its Subsidiaries.

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Annex A-19

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Annex A-20

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Annex A-21

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Annex A-22

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Annex A-23

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Annex A-24

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Annex A-25

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Annex A-26

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	(i) Each of the Company and its Subsidiaries has obtained all Environmental Permits required for the conduct and operation of its business and is in compliance and at all times has been in compliance with the terms and conditions contained in its Environmental Permits, and is, and for the past one year has been, in compliance with all applicable Environmental Laws;
	(ii) Neither the Company nor any of its Subsidiaries is subject to any environmental indemnification obligation regarding businesses currently operated by the Company or any of its Subsidiaries or regarding properties currently owned or leased by the Company or any of its Subsidiaries;
	(iii) To the Company’s Knowledge there is no condition on, at, under or related to any property (including any release of a Hazardous Material into the air, soil, surface water, sediment or ground water at, under or migrating to or from such property) currently owned, leased or used by the Company or any of its Subsidiaries or created by the Company’s or any of the Company Subsidiary’s operations that would create liability for the Company or any of its Subsidiaries under applicable Environmental Laws and, to the Company’s Knowledge, the foregoing representation is true and correct with regard to property formerly owned, leased or used by the Company or any of its Subsidiaries;
	(iv) There are no past or present actions, activities, circumstances, conditions, events or incidents (including the release, emission, discharge, presence or disposal of any Hazardous Material) that form or are reasonably likely to form the basis of a claim against the Company or any of its Subsidiaries under Environmental Laws, including any claims based on the alleged exposure of any Person or property to any Hazardous Material;
	(v) The Company has made available to Spinco and Forest all material site assessments, compliance audits, and other similar studies prepared since January 1, 2002 in the Company’s possession or custody relating to (A) the environmental conditions on, under or about the properties or assets currently owned, leased, operated or used by the Company, any of its Subsidiaries or any predecessor in interest thereto and (B) any Hazardous Materials used, managed, handled, transported, treated, generated, stored, discharged, emitted, or otherwise released by the Company, any of its Subsidiaries or, to the Company’s Knowledge, any other Person, on, under, about or from any of the properties currently owned or leased by, or otherwise in connection with the use or operation of any of the properties owned or leased by, or otherwise in connection with the use or operation of any of the properties and assets of, the Company or any of its Subsidiaries, or their respective businesses and operations;
	(vi) Since January 1, 2002, neither the Company nor any of its Subsidiaries has received any communication that has not been resolved, whether from a Governmental Authority, citizen’s group, employee or otherwise, alleging that it is liable under, or not in compliance with, any Environmental Law; and
	(vii) To the Company’s Knowledge, there is no requirement anticipated or formally proposed for notice, comment, adoption or implementation under any Environmental Law or Environmental Permit

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	issued pursuant thereto that is reasonably expected to result in liability or material increases in either capital or operating costs for the Company or any of its Subsidiaries.

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	(a) Ordinary Course. Each of the Company and its Subsidiaries shall conduct its operations in accordance with its ordinary course of business consistent with past practice and use all commercially reasonable efforts to preserve intact its present business organization, maintain its material rights and franchises, keep available the services of its current officers and key employees and preserve its relationships with material customers, suppliers and others having business dealings with it in such a manner that its goodwill and ongoing businesses are not impaired in any material respect. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into any new material line of business. Prior to the Effective Time and except as specifically contemplated by this Agreement or as mutually approved in writing by Spinco and the Company, the Company shall cause Merger Sub not to conduct any business operations, enter into any Contract (other than this Agreement), acquire any assets or incur any liabilities.
	(b) Dividends; Changes in Stock. The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall the Company or any of its Subsidiaries propose to, (i) declare or pay any dividends on or make other distributions in respect of any shares of its capital stock or partnership interests (whether in cash, securities or property), except for the declaration and payment of cash dividends or distributions paid on or with respect to a class of capital stock all of which shares of capital stock or partnership interests (with the exception of directors’ qualifying shares and other similarly nominal holdings required by law to be held by Persons other than the Company or its wholly owned Subsidiaries), as the case may be, of the applicable corporation or partnership are owned directly or indirectly by the Company; (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; or (iii) redeem, repurchase or otherwise acquire, or permit any Subsidiary to redeem, repurchase or otherwise acquire, any shares of its capital stock (including any securities convertible or exchangeable into such capital stock).
	(c) Issuance of Securities. The Company shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose to issue, deliver or sell, any shares of its capital stock of any class, any Company Voting Debt or any securities convertible into, or any rights, warrants or options to acquire, any such shares, Company Voting Debt or convertible securities, other than (i) the issuance of shares of Company Common Stock upon the exercise of stock options that are outstanding on the date hereof pursuant to the Company Stock Plans; (ii) the issuance of stock options with three year vesting and restricted stock to existing employees and directors and newly-hired employees and directors of the Company or its Subsidiaries, not to exceed 300,000 shares of Company Common Stock reserved for issuance under the Company Stock Plans on the date hereof; and (iii) issuances by a wholly owned Subsidiary of its capital stock to the Company.
	(d) Governing Documents. The Company shall not amend or propose to amend its Second Amended and Restated Certificate of Incorporation or Fourth Amended and Restated Bylaws, nor shall

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	it permit any of its Subsidiaries to amend or propose to amend its charter or bylaws in any manner that would hinder the consummation of the transactions contemplated by this Agreement.
	(e) Acquisitions. Other than (i) purchases from vendors or suppliers in the ordinary course of business consistent with past practice, (ii) exercises of preferential rights, (iii) any single or series of acquisitions whether or not related, where the fair market value of the total consideration payable in all such acquisitions does not exceed $25.0 million in the aggregate or (iv) with respect to the transaction described in Section 4.2 of the Spinco Disclosure Schedule, the Company shall not, nor shall it permit any of its Subsidiaries to, in a single transaction or a series of transactions, acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof; provided, however, that in any event, the Company shall not, nor shall it permit any of its Subsidiaries to, make any such acquisition, agreement or purchase if it would hinder in any material respect the consummation of the transactions contemplated by this Agreement or the other Transaction Agreements.
	(f) Dispositions. Subject to Section 6.11, and other than product sales and other dispositions in connection with normal equipment maintenance or salvage in the ordinary course of business consistent with past practice and Permitted Liens, the Company shall not, nor shall it permit any of its Subsidiaries to, in a single transaction or a series of related or unrelated transactions, sell (including sale-leaseback), lease, pledge, encumber or otherwise dispose of, or agree to sell (or engage in a sale-leaseback), lease (whether such lease is an operating or capital lease), pledge, encumber or otherwise directly or indirectly dispose of, any of its assets that in the aggregate have a fair market value in excess of $10 million; provided, that the Company shall not consummate or agree to consummate any such transaction with respect to any securities of any of its Subsidiaries.
	(g) Indebtedness; Leases. The Company shall not, nor shall it permit any of its Subsidiaries to, incur any indebtedness for borrowed money or guarantee or otherwise become contingently liable for any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any of its Subsidiaries or guarantee any debt securities of others or enter into any material lease (whether such lease is an operating or capital lease, but excluding compressor leases) or otherwise incur any material obligation or liability (absolute or contingent) other than indebtedness to the Company or a wholly owned Subsidiary of the Company, or under the Credit Agreement dated as of March 2, 2004, among the Company and the lenders party thereto, as amended from time to time, or any replacement thereof; provided, however, that the aggregate outstanding indebtedness under such credit agreement shall not exceed $170 million (exclusive of indebtedness incurred to fund (A) costs related to the transactions contemplated by this Agreement and (B) payments made to Company executives pursuant to non-compete, employment and severance agreements and similar agreements and arrangements).
	(h) Capital Expenditures. Except as required by law, the Company shall continue its 2005 budgeted capital expenditure program for exploration and development as described in the capital expenditure budget dated as of September 8, 2005 provided to Forest prior to the date hereof, and shall perform, to the extent reasonably practicable, all scheduled capital expenditures set forth in such capital expenditure program at an aggregate cost not exceeding 120% of the aggregate costs set forth therein (it being understood that particular projects set forth on such budget may be substituted with other projects, so long as the aggregate maximum set forth above is not exceeded). In the event that the Effective Time does not occur in 2005, the parties shall reasonably consult regarding the Company’s capital expenditure budget for 2006.
	(i) Employee Arrangements. The Company and its Subsidiaries shall not:

	(i) grant any material increases in the compensation of any of its directors, officers or employees, except in the ordinary course of business consistent with past practice;

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	(ii) pay or agree to pay to any director, officer or employee, whether past or present, any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing benefit, severance, termination, pension or employment plans, Contracts or arrangements as in effect on the date hereof;
	(iii) except in the ordinary course of business consistent with past practice, enter into any new, or materially amend any existing, employment or severance or termination Contract with any director or officer; or
	(iv) except (x) in the ordinary course of business consistent with past practice or (y) as may be required to comply with applicable law, become obligated under any new pension plan, welfare plan, multiemployer plan, employee benefit plan, severance plan, benefit arrangement or similar plan or arrangement that was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder.

	(j) Compliance with Laws; Licenses. Except as would not individually or in the aggregate have a Material Adverse Effect on the Company, the Company shall not, nor shall it permit any of its Subsidiaries to: (i) fail to comply with any laws, ordinances or regulations applicable to it or to the conduct of its business or (ii) permit to expire or terminate without renewal any License that is necessary to the operation of the business of such party, any facilities associated therewith or any other business.
	(k) No Liquidation or Dissolution. The Company shall not authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of the Company or any of its Subsidiaries.
	(l) Accounting Methods. The Company shall not make any material change in its methods of accounting in effect at December 31, 2004, except (i) as required by the Financial Accounting Standards Board or changes in GAAP as agreed to by the Company’s independent auditors, (ii) in response to comments made by the SEC with respect to any Registration Statement or (iii) as otherwise agreed to in this Agreement. The Company and Merger Sub shall not change their respective fiscal years.
	(m) Affiliate Transactions. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into or amend any agreement or arrangement with any of their respective Affiliates (including any Company Employees), other than with wholly owned Subsidiaries of the Company, on terms materially less favorable to the Company or such Subsidiary, as the case may be, than could be reasonably expected to have been obtained with an unaffiliated third party on an arm’s-length basis.
	(n) Contracts. The Company shall not, nor shall it permit any of its Subsidiaries to, except in the ordinary course of business consistent with past practice, modify, amend, terminate or renew any material Contract to which it or any of its Subsidiaries is a party or waive, release or assign any material rights or claims, in each case if such action would have a Material Adverse Effect on the Company or impair in any material respect the Company’s ability to perform its obligations under this Agreement and the other Transaction Agreements. The Company shall not, and shall not permit any of its Subsidiaries to, waive any preferential rights. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into any Contract not in the ordinary course of business involving total consideration of $2 million or more with a term longer than one year which is not terminable by the Company or any such Subsidiary of the Company without penalty upon no more than 30 days’ prior notice.
	(o) Insurance. The Company shall, and shall cause its Subsidiaries to, maintain with financially responsible insurance companies insurance in such amounts and against such risks and losses as are customary for companies engaged in their respective businesses; provided, however, that the Company may self-insure with respect to operators’ extra expense insurance, physical damage to well site real and personal property insurance and business interruption insurance.
	(p) Tax Matters. The Company shall not (i) make or rescind any material express or deemed election relating to Taxes unless such action will not materially and adversely affect the Company or any

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	of its Affiliates, or the Surviving Corporation on a going-forward basis after the Effective Date, including elections for any and all joint ventures, partnerships, limited liability companies, working interests or other investments where the Company has the capacity to make such binding election, (ii) settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, except where such settlement or compromise will not result in a Material Adverse Effect on the Company, (iii) amend any material Tax Returns, except where such amendment would not adversely affect the Company or any of its Affiliates, or the Surviving Corporation on a going-forward basis after the Effective Date or (iv) change in any material respect any of its methods of reporting income or deductions for federal income tax purposes from those expected to be employed in the preparation of its federal income tax return for the taxable year ended December 31, 2004, except as may be required by applicable law or except for such changes that are reasonably expected not to result in a Material Adverse Effect on the Company; provided, however, that the Company may make or rescind any such election, settle or compromise any such claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy, change any such method of reporting or amend any such Tax Return without Forest’s prior written consent if the amount of Tax liabilities relating to such action does not exceed $500,000.
	(q) Discharge of Liabilities. Unless otherwise provided in this Agreement or required by applicable law, the Company shall not, nor shall it permit any of its Subsidiaries to, pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business (which includes the payment of final and unappealable judgments) or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company as of and for the twelve months ended December 31, 2004, or incurred in the ordinary course of business.
	(r) Tax Treatment. Neither the Company nor Merger Sub shall take or cause or permit to be taken any action (i) that would disqualify the Distribution from constituting a tax-free distribution under Section 355 of the Code or the Contribution from constituting a tax-free reorganization under Section 368(a) of the Code or (ii) that would disqualify the Merger from constituting a tax-free reorganization under Section 368(a) of the Code.
	(s) Advice of Changes. Subject to the provisions of the Confidentiality Agreement, the Company shall promptly advise Forest and Spinco orally and in writing of any change or event having, or that, insofar as can reasonably be foreseen, could have, either individually or together with other changes or events, a Material Adverse Effect on the Company.
	(t) No Action. Subject to the terms and conditions of this Agreement, the Company shall not, nor will it permit any of its Subsidiaries to, intentionally take or agree or commit to take any action that would result in any of the conditions set forth in Article VII not being satisfied at the Effective Time.
	(u) Hedging Activities. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into (i) any Derivative Transaction or (ii) any fixed price commodity sales agreement with a term of more than 60 days.
	(v) Lender Consent. The Company shall use reasonable commercial efforts to obtain the lender consent referenced in Section 5.3 of the Company Disclosure Schedule and to enter into the new credit facility referenced in Section 7.3(b).
	(w) Agreements. The Company shall not, nor shall it permit any of its Subsidiaries to, agree in writing or otherwise to take any action inconsistent with the foregoing.

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	(a) Ordinary Course. Forest (in regard to the Spinco Business only) and each of Spinco and its Subsidiaries shall conduct its operations in accordance with its ordinary course of business consistent with past practice and use all commercially reasonable efforts to preserve intact its present business organization, maintain its material rights and franchises, keep available the services of its current officers and key employees and preserve its relationships with material customers, suppliers and others having business dealings with it in such a manner that its goodwill and ongoing businesses are not impaired in any material respect. Spinco shall not, nor shall it permit any of its Subsidiaries to, enter into any new material line of business.
	(b) Dividends; Changes in Stock. Except as expressly permitted in the Tax Sharing Agreement, Spinco shall not, nor shall it permit any of its Subsidiaries to, nor shall it or any of its Subsidiaries propose to, (i) declare or pay any dividends on or make other distributions in respect of any shares of its capital stock or partnership interests (whether in cash, securities or property), except for the declaration and payment of cash dividends or distributions paid on or with respect to a class of capital stock or partnership interests all of which shares of capital stock or partnership interests (with the exception of directors’ qualifying shares and other similarly nominal holdings required by law to be held by Persons other than Spinco or its wholly owned Subsidiaries), as the case may be, of the applicable corporation or partnership are owned directly or indirectly by Spinco; (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock, except as contemplated by the Distribution Agreement or (iii) redeem, repurchase or otherwise acquire, or permit any Subsidiary to redeem, repurchase or otherwise acquire, any shares of its capital stock (including any securities convertible or exchangeable into such capital stock). Forest shall not, nor shall it permit any of its Subsidiaries to, nor shall it or any of its Subsidiaries propose to, declare or pay any dividends on or make other distributions in respect of any shares of its capital stock or partnership interests (whether in cash, securities or property), to the extent such dividend or distribution would impact Spinco or the Spinco Business, or would prevent Forest from consummating the Contribution or the Distribution. None of Forest, Spinco or any of their respective Subsidiaries shall form or propose to form a new Subsidiary of Spinco.
	(c) Issuance of Securities. Spinco shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose to issue, deliver or sell, any shares of Spinco’s capital stock or capital stock of any Spinco Subsidiary of any class, any Spinco Voting Debt or any securities convertible into, or any rights, warrants or options to acquire, any such shares, Spinco Voting Debt or convertible securities, other than (i) pursuant to this Agreement and pursuant to the other Transaction Agreements; and (ii) issuances by a wholly owned Subsidiary of Spinco of its capital stock to Spinco. Without limiting the foregoing, Forest shall not issue, deliver or sell, or authorize or propose to issue, deliver or sell, any additional options or other equity-based awards that could be converted into any option to acquire Spinco Common Stock, pursuant to the Employee Benefits Agreement or otherwise.
	(d) Governing Documents. Spinco shall not amend or propose to amend Spinco’s Certificate of Incorporation or Bylaws, nor shall it permit any of its Subsidiaries to amend or propose to amend its charter or bylaws except as explicitly provided herein or in the Distribution Agreement, in each case with a Company Consent.
	(e) Acquisitions. Other than (i) purchases from vendors or suppliers in the ordinary course of business consistent with past practice, (ii) exercises of preferential rights, or (iii) any single or series of acquisitions, whether or not related, where the fair market value of the total consideration payable in all such acquisitions does not exceed $25 million in the aggregate, Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall they permit any of their respective Subsidiaries to, in a single transaction or a series of transactions, acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or

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	division thereof; provided, however, that in any event, Forest shall not, and Spinco shall not, nor shall they permit any of their respective Subsidiaries to, make any such acquisition, agreement or purchase if it would hinder in any material respect the consummation of the transactions contemplated by this Agreement or the other Transaction Agreements.
	(f) Dispositions. Other than product sales and other dispositions in connection with normal equipment maintenance or salvage in the ordinary course of business consistent with past practice and Permitted Liens, Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall they permit any of their respective Subsidiaries to, in a single transaction or a series of related or unrelated transactions, sell (including sale-leaseback), lease, pledge, encumber or otherwise dispose of, or agree to sell (or engage in a sale-leaseback), lease (whether such lease is an operating or capital lease), pledge, encumber or otherwise directly or indirectly dispose of, any of its assets that in the aggregate have a fair market value in excess of $10 million, except as otherwise provided in this Agreement and the other Transaction Agreements; provided, that Forest shall not consummate or agree to consummate any such transaction with respect to any securities of Spinco or any of its Subsidiaries.
	(g) Indebtedness; Leases. Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall they permit any of their respective Subsidiaries to, incur any indebtedness for borrowed money or guarantee or otherwise become contingently liable for any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of Spinco or any of its Subsidiaries or guarantee any debt securities of others or enter into any material lease (whether such lease is an operating or capital lease, but excluding compressor leases) or otherwise incur any material obligation or liability (absolute or contingent) other than indebtedness of Spinco to be incurred by Spinco and obligations or liabilities to be assumed by Spinco in connection with the consummation of the transactions contemplated by the Distribution Agreement.
	(h) Capital Expenditures. Except as required by law, Forest and Spinco shall continue the capital expenditure program for exploration and development with respect to the Spinco Assets as described in the capital expenditure budget dated as of September 8, 2005 provided to the Company prior to the date hereof, and shall perform, to the extent reasonably practicable, such capital expenditures at an aggregate cost not exceeding 120% of the aggregate costs set forth therein (it being understood that particular projects set forth in such budget may be substituted with other projects, so long as the aggregate maximum set forth above is not exceeded). In the event that the Effective Time does not occur in 2005, the parties shall reasonably consult regarding the Spinco Business’ capital expenditure budget for 2006.
	(i) Employee Arrangements. Forest (in regard to the Spinco Employees only) shall not, and Spinco shall not, nor shall Forest (in regard to the Spinco Employees only) or Spinco permit any of their respective Subsidiaries to:

	(i) grant any material increases in the compensation of any of its directors, officers or employees, except in the ordinary course of business consistent with past practice;
	(ii) pay or agree to pay to any director, officer or employee, whether past or present, any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing benefit, severance, termination, pension or employment plans, Contracts or arrangements as in effect on the date hereof;
	(iii) hire any new director, officer or, except in the ordinary course of business consistent with past practice, employee, or enter into any new, or materially amend any existing, employment or severance or termination Contract with any director, officer or employee; or
	(iv) except as may be required to comply with applicable law, become obligated under any new pension plan, welfare plan, multiemployer plan, employee benefit plan, severance plan, benefit arrangement or similar plan or arrangement that was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof solely with respect to Spinco Employees if such amendment would have the effect of enhancing any benefits thereunder.

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	(j) Compliance with Laws; Licenses. Except as would not individually or in the aggregate have a Material Adverse Effect on Spinco or the Spinco Assets, Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall they permit any of their respective Subsidiaries to, (i) fail to comply with any laws, ordinances or regulations applicable to it or to the conduct of its business or (ii) permit to expire or terminate without renewal any License that is necessary to the operation of the business of Spinco or its Subsidiaries, any facilities associated therewith, the Spinco Business, or any other business.
	(k) No Liquidation or Dissolution. Neither Forest nor Spinco shall authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of Spinco or any of its Subsidiaries.
	(l) Accounting Methods. Neither Forest (in regard to the Spinco Business only) nor Spinco shall make any material change in Forest’s methods of accounting in effect at December 31, 2004, except (i) as required by the Financial Accounting Standards Board or changes in GAAP as agreed to by Forest’s or Spinco’s independent auditors, (ii) in response to comments made by the SEC with respect to any Registration Statement or (iii) as otherwise agreed to in this Agreement. Spinco shall not change its fiscal year.
	(m) Affiliate Transactions. Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall Forest (in regard to the Spinco Business only) or Spinco permit any of their respective Subsidiaries to, enter into or amend any agreement or arrangement with any of their respective Affiliates (including any Spinco Employees), other than with wholly owned Subsidiaries of Spinco, on terms materially less favorable to Spinco or such Subsidiary, as the case may be, than could be reasonably expected to have been obtained with an unaffiliated third party on an arm’s-length basis.
	(n) Contracts. Neither Forest nor Spinco shall, nor shall they permit any of their respective Subsidiaries to, except in the ordinary course of business consistent with past practice, modify, amend, terminate or renew any material Contract to which Spinco or any of its Subsidiaries is a party or which otherwise is or will be, a Spinco Asset, or waive, release or assign any material rights or claims which is or will be a Spinco Asset, in each case if such action would have a Material Adverse Effect on Spinco or the Spinco Business, or impair in any material respect Forest’s or Spinco’s ability to perform their respective obligations under this Agreement and the other Transaction Agreements. Forest, Spinco or their respective Subsidiaries shall reasonably consult with the Company before entering into any new Contract material to Spinco or the Spinco Business. Neither Forest nor Spinco shall, nor shall they permit any of their respective Subsidiaries to, waive any preferential rights that constitute Spinco Assets. Neither Forest nor Spinco shall, nor shall they permit any of their respective Subsidiaries to, enter into any Contract to which Spinco or any of its Subsidiaries will be a party or which otherwise will be a Spinco Asset, which Contract is not in the ordinary course of business, involves total consideration of $2 million or more, has a term longer than one year and which is not terminable by Spinco or any such Subsidiary of Spinco without penalty upon no more than 30 days’ prior notice.
	(o) Insurance. Forest and Spinco shall, and shall cause their respective Subsidiaries to, maintain with financially responsible insurance companies insurance for the Spinco Business and the Spinco Assets in such amounts and against such risks and losses as are customary for companies engaged in their respective businesses.
	(p) Tax Matters. Forest and Spinco shall not (i) make or rescind any material express or deemed election relating to Taxes of Spinco or the Spinco Business unless such action will not materially and adversely affect Spinco or the Surviving Corporation on a going-forward basis after the Effective Date, including elections for any and all joint ventures, partnerships, limited liability companies, working interests or other investments where Forest or Spinco has the capacity to make such binding election, (ii) settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes of Spinco or the Spinco Business, except where such settlement or compromise will not result in a Material Adverse Effect on Spinco or the Spinco Business, (iii) amend any material Tax Returns of Spinco or relating to the Spinco Business or (iv) change in any material

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	respect any method of reporting income or deductions of Spinco or the Spinco Business for federal income tax purposes from those expected to be employed in the preparation of its federal income tax return for the taxable year ended December 31, 2004, except as may be required by applicable law or except for such changes that are reasonably expected not to result in a Material Adverse Effect on Spinco or the Spinco Business, provided, however, that Spinco may make or rescind any such election, settle or compromise any such claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy, change any such method of reporting or amend any such Tax Return without the Company’s prior written consent if the amount of Tax liabilities relating to such action does not exceed $500,000.
	(q) Discharge of Liabilities. Unless otherwise provided in this Agreement or required by applicable law, Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall Forest (in regard to the Spinco Business only) or Spinco permit any of their respective Subsidiaries to, pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business (which includes the payment of final and unappealable judgments).
	(r) Tax Treatment. Neither Forest nor Spinco shall take or cause or permit to be taken any action (i) that would disqualify the Distribution from constituting a tax-free distribution under Section 355 of the Code or the Contribution from constituting a tax-free reorganization under Section 368(a) of the Code or (ii) that would disqualify the Merger from constituting a tax-free reorganization under Section 368(a) of the Code.
	(s) Advice of Changes. Subject to the provisions of the Confidentiality Agreement, Forest and Spinco shall promptly advise the Company orally and in writing of any change or event having, or that, insofar as can reasonably be foreseen, could have, either individually or together with other changes or events, a Material Adverse Effect on the Spinco Business or Spinco.
	(t) No Action. Neither Forest nor Spinco shall, nor will they permit any of their respective Subsidiaries to, intentionally take or agree or commit to take any action that would result in any of the conditions set forth in Article VII not being satisfied at the Effective Time.
	(u) Hedging Activities. Forest (in regard to the Spinco Business only) shall not, and Spinco shall not, nor shall they permit any of their respective Subsidiaries to, enter into (i) any Derivative Transaction or (ii) any fixed price commodity sales agreement with a term of more than 60 days.
	(v) Agreements. Neither Forest nor Spinco shall, nor shall they permit any of their respective Subsidiaries to, agree in writing or otherwise to take any action inconsistent with the foregoing.

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	(a) The Company shall take all such action as may reasonably be required under state securities or “blue sky” laws in connection with the issuance of shares of Company Common Stock pursuant to the Merger;
	(b) Forest, Spinco and the Company shall cooperate with one another to the extent reasonably necessary or commercially appropriate in promptly making any filings with, and seeking any consents or approvals from, Governmental Authorities necessary for the consummation of the transactions contemplated by this Agreement;
	(c) As promptly as practicable, the Company shall make application to the NYSE or Nasdaq for the listing or quotation of the shares of Company Common Stock to be issued pursuant to the transactions contemplated by this Agreement and the Distribution Agreement and use all commercially reasonable efforts to cause such shares to be Approved for Listing;
	(d) Forest, Spinco and the Company shall, as promptly as practicable, make any required filings and any other required or requested submissions under the HSR Act, promptly respond to any requests for additional information from either the Federal Trade Commission or the Department of Justice; and cooperate in the preparation of, and coordinate, such filings, submissions and responses (including the exchange of drafts between each party’s outside counsel) so as to reduce the length of any review periods; and
	(e) Forest, Spinco and the Company shall promptly provide outside counsel for the other parties for their confidential review copies of all filings proposed to be made by such party with any Governmental Authority in connection with this Agreement and the other Transaction Agreements and the transactions contemplated hereby and thereby.

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	(ii) The Company shall provide Forest and Spinco with forty eight (48) hours prior notice (or such lesser prior notice as is provided to the members of its Board of Directors) of any meeting of its Board of Directors at which its Board of Directors is reasonably expected to consider any Acquisition Proposal.

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Annex A-47

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Annex A-48

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	(a) Prior to the Effective Time, the Distribution shall have been consummated in accordance with the Distribution Agreement and the conditions to the consummation of the Distribution set forth in Section 9.1 of the Distribution Agreement shall have been satisfied or shall have been waived with a Company Consent;
	(b) All material consents, approvals and authorizations of any Governmental Authority legally required for the consummation of the transactions contemplated by this Agreement and the other Transaction Agreements shall have been obtained and be in effect at the Effective Time;

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	(c) Any applicable waiting period (including any extended waiting period arising as a result of a request for additional information by either HSR Agency) under the HSR Act shall have expired or been terminated;
	(d) The Registration Statements shall have become effective in accordance with the Securities Act and the Exchange Act and shall not be the subject of any stop order or proceedings seeking a stop order; all necessary permits and authorizations under state securities or “blue sky” laws, the Securities Act and the Exchange Act relating to the issuance and trading of shares of Company Common Stock to be issued in connection with the Merger shall have been obtained and shall be in effect; and such shares of Company Common Stock and such other shares required to be reserved for issuance in connection with the Merger shall have been Approved for Listing;
	(e) The Requisite Approval shall have been obtained;
	(f) No court of competent jurisdiction or other Governmental Authority shall have issued an Order that is still in effect restraining, enjoining or prohibiting the Distribution or the Merger;
	(g) No Action by any Governmental Authority with respect to the Merger shall be pending that seeks to restrain, enjoin, prohibit or delay consummation of the transactions contemplated by this Agreement or to impose any material restrictions or requirements thereon or on Spinco or the Company with respect thereto;
	(h) The Company Common Stock shall have been approved for listing on the NYSE or Nasdaq, subject only to official notice of issuance; and
	(i) No action shall have been taken, and no statute, rule, regulation or executive order shall have been enacted, entered, promulgated or enforced, by any Governmental Authority with respect to the Merger that, individually or in the aggregate, would (i) restrain, prohibit or delay the consummation of the Merger or (ii) impose material restrictions or requirements thereon or on Spinco or the Company with respect thereto.

	(a) The Company shall have performed in all material respects its covenants and agreements contained in this Agreement required to be performed at or prior to the Effective Time and the representations and warranties of the Company contained in this Agreement (which for purposes of this Section 7.2(a) shall be read as though none of them contained any materiality or material adverse effect qualifications) shall be true and correct in all respects as of the date of this Agreement and as of the Effective Time as if made at and as of the Effective Time (except to the extent such representations and warranties address matters as of a particular date), except in each case (i) where the failure to be true and correct, individually or in the aggregate, would not have a Material Adverse Effect on Spinco or the Company or (ii) to the extent specifically contemplated or permitted by this Agreement;
	(b) The Company shall have delivered to Forest a certificate, dated as of the Effective Time, of a senior officer of the Company certifying the satisfaction by the Company of the conditions set forth in subsection (a) of this Section 7.2;
	(c) Forest and Spinco shall have received an opinion of Weil, Gotshal & Manges LLP to the effect that the Merger will constitute a reorganization under Section 368(a) of the Code. In rendering such opinion, Weil, Gotshal & Manges LLP may require and rely upon representations contained in certificates of officers of Forest (with respect to Spinco) and the Company (on its behalf and on behalf of Merger Sub) substantially in the forms attached hereto in Exhibits G and H;
	(d) Forest shall have received the bondholder consents referenced in Section 3.2 of the Forest Disclosure Schedule; and

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	(e) Forest shall have received the consents of its lenders under its credit facility referenced in Section 3.2 of the Forest Disclosure Schedule.

	(a) Spinco and Forest shall have performed in all material respects their respective covenants and agreements contained in this Agreement required to be performed at or prior to the Effective Time and the representations and warranties of Spinco and Forest contained in this Agreement (which for purposes of this Section 7.3(a) shall be read as though none of them contained any materiality or material adverse effect qualifications) shall be true and correct in all respects as of the date of this Agreement and as of the Effective Time as if made at and as of the Effective Time (except to the extent such representations and warranties address matters as of a particular date), except in each case (i) where the failure to be true and correct, individually or in the aggregate, would not have a Material Adverse Effect on the Spinco Business, Spinco or the Company or (ii) to the extent specifically contemplated or permitted by this Agreement;
	(b) The Company shall have received the consent of the lenders under its credit facility referenced in Section 5.3 of the Company Disclosure Schedule, and Spinco and/or the Company shall have entered into a new or amended credit facility with available borrowing capacity sufficient to operate the Spinco Business and the Company’s business after the Closing consistent with past practice;
	(c) Spinco shall have delivered to the Company a certificate, dated as of the Effective Time, of a senior officer of Forest certifying the satisfaction of the conditions set forth in subsection (a) of this Section 7.3;
	(d) The Company shall have received an opinion from Baker Botts L.L.P. to the effect that the Merger will constitute a reorganization under Section 368(a) of the Code. In rendering such opinion, Baker Botts L.L.P. may require and rely upon representations contained in certificates of officers of Forest (with respect to Spinco) and the Company (on its behalf and on behalf of Merger Sub) substantially in the forms attached hereto in Exhibits H and I; and
	(e) The Company shall be reasonably satisfied that the Contribution and Distribution have taken place in accordance with the terms set forth in the Distribution Agreement.

	(a) by the mutual written consent of each party hereto, which consent shall be effected by action of the Board of Directors of each such party;
	(b) by any party hereto if the Effective Time shall not have occurred on or before March 31, 2006 provided that the right to terminate this Agreement pursuant to this clause (b) shall not be available to any party whose failure to perform any of its obligations under this Agreement required to be performed by it at or prior to such date has been a cause of, or contributed to, the failure of the Merger to have become effective on or before such date;

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	(c) by any party hereto if (i) any court of competent jurisdiction or any other Governmental Authority shall have issued an Order restraining, enjoining or otherwise prohibiting the Merger and such Order shall have become final and nonappealable, provided that, if the party seeking to terminate this Agreement pursuant to this Section 8.1(c)(i) is a party to the applicable proceeding, such party shall have used all commercially reasonable efforts to remove such Order; or (ii) the Requisite Approval is not obtained; provided, that the right to terminate this Agreement pursuant to this Section 8.1(c)(ii) shall not be available to the Company where the failure to obtain the Requisite Approval shall have been caused by the action or failure to act by the Company and such action or failure to act constitutes a breach by the Company of Section 6.11 in any respect or a material breach by the Company of any of the other covenants or agreements contained in this Agreement;
	(d) by the Company if (i) either Forest or Spinco shall have failed to perform in any material respect any of its respective covenants and agreements contained in this Agreement required to be performed at or prior to the Effective Time, or (ii) the respective representations and warranties of Forest or Spinco contained in this Agreement are or shall become untrue (without giving effect to any materiality qualification or standard contained in any such representations and warranties) in any respect at any time prior to the Effective Time (except to the extent such representations and warranties address matters as of a particular date), except where the failure to be true and correct, individually or in the aggregate, would not have a Material Adverse Effect on the Spinco Business, Spinco or the Company; provided that the right of the Company to terminate this Agreement pursuant to this subsection (d) shall not be available unless such failure or untruth is incapable of cure or Forest and Spinco shall have been unable to cure such failure or such untruth for 30 calendar days after the Company shall have given Forest and Spinco notice of such failure or such untruth;
	(e) by Forest if (i) the Company shall have failed to perform in any material respect any of its covenants and agreements contained in this Agreement required to be performed at or prior to the Effective Time, or (ii) the representations and warranties of the Company contained in this Agreement are or shall become untrue (without giving effect to any materiality qualification or standard contained in any such representations and warranties) in any respect at any time prior to the Effective Time (except to the extent such representations and warranties address matters as of a particular date), except where the failure to be true and correct, individually or in the aggregate, would not have a Material Adverse Effect on the Company, the Spinco Business or Spinco; provided that the right of Forest to terminate this Agreement pursuant to this subsection (e) shall not be available unless such failure or untruth is incapable of cure or the Company shall have been unable to cure such failure or such untruth for 30 calendar days after Forest shall have given the Company notice of such failure or such untruth;
	(f) by Forest in the event that (i) the Board of Directors of the Company shall have failed to reaffirm publicly its approval, as soon as reasonably practicable, and in no event later than three business days, after Forest’s request for such reaffirmation, of the Merger and the transactions contemplated by this Agreement, or shall have resolved not to reaffirm the Merger, (ii) the Board of Directors of the Company shall have failed to include in the Proxy Statement/Prospectus its recommendation, without modification or qualification, that the Company stockholders approve and adopt this Agreement and approve the Merger, (iii) the Board of Directors of the Company shall have withheld, withdrawn, amended or modified, or proposed publicly to withdraw, amend or modify, in a manner adverse to Forest and Spinco, the recommendation of such Board of Directors to the Company stockholders that they approve and adopt this Agreement and approve the Merger, (iv) the Board of Directors of the Company shall have a Change of Recommendation or (v) the Board of Directors of the Company, within ten business days after commencement of any tender or exchange offer for any shares of Company Common Stock, shall have failed to recommend against acceptance of such tender or exchange offer by its stockholders or takes no position with respect to the acceptance of such tender or exchange offer by its stockholders; or
	(g) by the Company if the Board of Directors of the Company has made a Change of Recommendation in order to approve and permit the Company to accept a Superior Offer; provided, however, that (i) the Company is not then in breach of Section 6.11 or material breach of any other covenant or other

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agreement contained in this Agreement and has not breached any of its representations and warranties contained in this Agreement in any material respect, (ii) Forest does not make, within three (3) business days after receipt of the Company’s written notice pursuant to Section 6.11(d), an offer that the Board of Directors of the Company shall have concluded in good faith (following consultation with its financial advisor and outside legal counsel) is at least as favorable, from a financial point of view, to the Company stockholders as such Superior Offer, (iii) the Board of Directors of the Company authorizes the Company, subject to complying with the terms of Section 6.11 and this clause (g), to enter into a binding written agreement concerning a transaction that constitutes a Superior Offer and the Company notifies Forest and Spinco in writing that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice, and (iv) the Company shall have tendered to Forest payment in full of the amount specified in Section 8.3 concurrently with delivery of notice of termination pursuant to this Section 8.1(g).

	(i) If (x) this Agreement is terminated by Forest or the Company pursuant to Section 8.1(c)(ii) (as it relates to failure to obtain the Requisite Approval), (y) Forest or the Company terminates this Agreement pursuant to Section 8.1(b), or (z) Forest terminates this Agreement pursuant to Section 8.1(e)(i); and

	(ii) If Forest shall terminate this Agreement pursuant to Section 8.1(f); or
	(iii) If the Company shall terminate this Agreement pursuant to Section 8.1(g);

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Annex A-55

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	SML Wellhead Corporation or Forest Oil Corporation
	707 17th Street, Suite 3600
	Denver, Colorado 80202
	Attn: General Counsel
	Facsimile: (303) 812-1510

	Vinson & Elkins LLP
	666 Fifth Avenue
	New York, New York 10103
	Attn: Alan P. Baden
	Facsimile: (212) 849-5337

	SML Wellhead Corporation
	c/o Mariner Energy, Inc.
	2101 CityWest Boulevard
	Building 4, Suite 900
	Houston, Texas 77042
	Attn: General Counsel
	Facsimile: (713) 954-3820

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	Baker Botts L.L.P.
	One Shell Plaza
	Houston, Texas 77002
	Attn: Kelly B. Rose
	Facsimile: (713) 229-7996

	Mariner Energy, Inc.
	2101 CityWest Boulevard
	Building 4, Suite 900
	Houston, Texas 77042
	Attn: General Counsel
	Facsimile: (713) 954-3820

	Baker Botts L.L.P.
	One Shell Plaza
	Houston, Texas 77002
	Attn: Kelly B. Rose
	Facsimile: (713) 229-7996

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Annex A-58

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Annex A-59

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	FOREST OIL CORPORATION

	By:	/s/ H. Craig Clark

	Name: H. Craig Clark
	Title:   President and CEO
	SML WELLHEAD CORPORATION

	By:	/s/ Cyrus Marter

	Name: Cyrus Marter
	Title:   Vice President and Secretary
	MARINER ENERGY, INC.

	By:	/s/ Scott D. Josey

	Name: Scott D. Josey
	Title:   Chief Executive Officer and President
	MEI SUB, INC.

	By:	/s/ Scott D. Josey

	Name: Scott D. Josey
	Title:   Chief Executive Officer and President

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Annex B-1

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Annex B-2

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	Very truly yours,
	LEHMAN BROTHERS

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ARTICLE I DEFINITIONS
Section 1.1		General			Annex C-1
Section 1.2		References to Time			Annex C-9
ARTICLE II PRELIMINARY TRANSACTIONS
Section 2.1		Business Separation			Annex C-9
Section 2.2		Conveyancing and Assumption Agreements			Annex C-10
Section 2.3		Certificate of Incorporation; By-laws			Annex C-10
Section 2.4		Issuance of Stock			Annex C-10
Section 2.5		Other Agreements			Annex C-10
Section 2.6		Transfers Not Effected Prior to the Distribution; Transfers Deemed Effective as of the Distribution Date			Annex C-10
ARTICLE III THE DISTRIBUTION
Section 3.1		Record Date and Distribution Date			Annex C-11
Section 3.2		The Agent			Annex C-11
Section 3.3		Delivery of Share Certificates to the Agent			Annex C-11
Section 3.4		The Distribution			Annex C-11
ARTICLE IV CASH AMOUNT
Section 4.1		Estimated Cash Amount			Annex C-12
Section 4.2		Actual Cash Amount			Annex C-12
Section 4.3		Incremental Tax Amount			Annex C-12
Section 4.4		Dispute Resolution Procedure			Annex C-12
Section 4.5		Payment of Cash Amount			Annex C-13
ARTICLE V SURVIVAL AND INDEMNIFICATION
Section 5.1		Survival of Agreements			Annex C-13
Section 5.2		Indemnification			Annex C-13
Section 5.3		Procedures for Indemnification for Third-Party Claims			Annex C-13
Section 5.4		Reductions for Insurance Proceeds and Other Recoveries			Annex C-14
Section 5.5		Remedies Cumulative			Annex C-15
Section 5.6		Tax Treatment of Indemnity and Other Payments			Annex C-15
Section 5.7		Survival of Indemnities			Annex C-15
ARTICLE VI CERTAIN ADDITIONAL COVENANTS
Section 6.1		Notices to Third Parties			Annex C-15
Section 6.2		Licenses and Permits			Annex C-15
Section 6.3		Intercompany Agreements			Annex C-15
Section 6.4		Further Assurances			Annex C-16
Section 6.5		Guarantee Obligations and Liens			Annex C-16

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Section 6.6		Insurance			Annex C-17
Section 6.7		Cooperation			Annex C-18
ARTICLE VII ACCESS TO INFORMATION
Section 7.1		Provision of Corporate Records			Annex C-18
Section 7.2		Access to Information			Annex C-18
Section 7.3		Production of Witnesses			Annex C-19
Section 7.4		Retention of Records			Annex C-19
Section 7.5		Confidentiality			Annex C-20
Section 7.6		Cooperation with Respect to Government Reports and Filings			Annex C-20
Section 7.7		Tax Sharing Agreement			Annex C-20
ARTICLE VIII NO REPRESENTATIONS OR WARRANTIES
Section 8.1		No Representations or Warranties			Annex C-20
ARTICLE IX MISCELLANEOUS
Section 9.1		Conditions to the Distribution			Annex C-21
Section 9.2		Complete Agreement			Annex C-22
Section 9.3		Expenses			Annex C-22
Section 9.4		Governing Law			Annex C-22
Section 9.5		Notices			Annex C-22
Section 9.6		Amendment and Modification			Annex C-23
Section 9.7		Successors and Assigns; No Third-Party Beneficiaries			Annex C-23
Section 9.8		Counterparts			Annex C-23
Section 9.9		Interpretation			Annex C-23
Section 9.10		Severability			Annex C-23
Section 9.11		References; Construction			Annex C-24
Section 9.12		Termination			Annex C-24
Section 9.13		Consent to Jurisdiction and Service of Process			Annex C-24
Section 9.14		Waivers			Annex C-24
Section 9.15		Specific Performance			Annex C-24
Section 9.16		Waiver of Jury Trial			Annex C-24

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	(i) Two hundred million dollars ($200 million); provided, however, that if the condition described in Section 4.2 of the Spinco Disclosure Schedule has not been satisfied, such amount shall equal two hundred seventy-five million dollars ($275 million); less
	(ii) All revenue recognized by Forest in accordance with GAAP applied on a consistent basis (or as otherwise agreed by Forest, Spinco and the Company), derived from the Spinco Assets during the Measurement Period (including, without limitation, oil and gas revenue, settled gains and losses from Assumed Derivative Liabilities, gas processing revenue and gas marketing revenue, but excluding gains on sales of property, plant and equipment related to the Spinco Assets); less
	(iii) Cash consideration of any sale during the Measurement Period of property, plant and equipment related to the Spinco Assets recognized by Forest in accordance with GAAP; plus
	(iv) The net assets and liabilities described in Section 1.1(B) of the Disclosure Schedule; plus or minus, as determined below,
	(v) An amount equal to net gas balancing assets or liabilities, as the case may be, based on a gas price of $6.50 per mmbtu, of the Spinco Business as of the Measurement Date (it being understood and agreed that if the net amount is positive, such amount shall be added to the Cash Amount, and if negative, shall be deducted from the Cash Amount); plus or minus, as determined below,
	(vi) An amount equal to the net settlement amount in respect of settlements of gas imbalances effected during the Measurement Period (it being understood and agreed that if the net amount is

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	positive, such amount shall be deducted from the Cash Amount, and if negative, shall be added to the Cash Amount); plus
	(vii) All capital and operating expenditures of Forest attributable to the Spinco Assets during the Measurement Period calculated by Forest in accordance with GAAP, other than expenditures (A) in connection with repairs or remediation to any Properties damaged in Hurricane Ivan or Hurricane Lilly, (B) in connection with any environmental Liabilities that do not constitute Assumed Environmental Liabilities or (C) amounts described in paragraph (x) below; plus
	(viii) An amount equal to hypothetical income taxes, which amount shall be calculated by applying a rate of 35% to an amount calculated as follows:

	(a) Item (ii) of the Cash Amount; less
	(b) Item (vii) of the Cash Amount; less
	(c) Item (x) of the Cash Amount; less
	(d) Item (xi) of the Cash Amount; plus
	(e) Capital expenditures in item (vii) of the Cash Amount to the extent they represent tangible assets; less
	(f) An amount representing estimated cost depletion computed at a rate of $1.20 per mcfe produced during the Measurement Period, subject to the adjustment as provided in Section 4.3; plus

	(ix) An amount equal to interest expense, which amount shall be calculated, for each calendar month during the Measurement Period (or partial month, if applicable with respect to the last month of the Measurement Period), at a rate of 6.5% per annum on the aggregate amount of indebtedness of the Spinco Business based on the average for such month, which indebtedness shall be assumed to have equaled two hundred million dollars ($200 million) on the Measurement Date and to have been reduced on the last day of each calendar month after the Measurement Date by net cash provided by operating activities, and increased by net cash used in investing activities, in each case in accordance with GAAP; plus
	(x) $1.6 million per month (prorated for any partial month) for general and administrative expenses, plus any Retention Benefits paid to Spinco Employees during the Measurement Period pursuant to Section 6.8(g) of the Merger Agreement; plus
	(xi) A cash amount for costs and expenses incurred by Forest or Spinco in connection with the Transaction Agreements and the transactions contemplated thereby (including, without limitation, fees and expenses of legal and financial advisors), such costs and expenses not to exceed seven million dollars ($7 million); plus or minus, as determined below,
	(xii) An amount equal to the change in working capital accounts, other than cash (accounts receivable plus inventories plus other current assets less accounts payable and other current liabilities, but excluding gas imbalances), excluding the effects of FAS 143 and FAS 133, related to the Spinco Assets during the Measurement Period (it being understood and agreed that working capital related to the Spinco Assets at the Measurement Date shall be assumed to be zero and that if the net amount is positive, such amount shall be added to the Cash Amount, and if negative, shall be deducted from the Cash Amount).

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	(a) (i) all real property interests of Forest and the Forest Subsidiaries in the Offshore Gulf of Mexico, including without limitation the leasehold estates in and to the oil, gas and mineral leases described on Schedule 1.1(D)(a)(i) (and any extensions, renewals,

	ratifications or amendments to such interests whether or not such extensions, renewals, ratifications or amendments are described on Schedule 1.1(D)(a)(i) (collectively, the “Properties,” or singularly, a “Property”)), (ii) the overriding royalty interests and reversionary interests described on Schedule 1.1(D)(a)(ii) and (iii) the other assets described on Schedule 1.1(D)(a)(iii);

	(b) all real or immovable property and rights incident to or used in conjunction with the Properties, including (i) all rights with respect to the use and occupation of the surface of and the subsurface depths under the Properties; (ii) all rights with respect to any pooled, communitized or unitized acreage by virtue of any Property being a part thereof, including all production from such pool or unit allocated to any such Property; (iii) all platforms, pipelines and improvements located or situated on, related to, or used in connection with the Properties; and (iv) all surplus, materials stocks and inventory listed on Schedule 1.1(D)(b)(iv);
	(c) all Easements to the extent related to or used in connection with the Properties;

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	(d) all oil, gas, condensate and other hydrocarbons produced from or attributable to the Properties from and after the Measurement Date or in storage on the Measurement Date (the “Hydrocarbons”) and all equipment, personal or movable property, fixtures, inventory and improvements located on or to the extent reasonably necessary in connection with the operation of the Properties and the Easements or with the production, treatment, sale, or disposal of the Hydrocarbons, byproducts or waste produced therefrom or attributable thereto, including all wells (whether producing, shut in or abandoned, and whether for production, injection or disposal), wellhead equipment, pumps, pumping units, flowlines, gathering systems, interests in processing plants, platforms, pipelines, vessels, computer software and hardware, piping, tanks, buildings, boat docks, treatment facilities, injection facilities, disposal facilities, compression facilities, spare parts, tools, production units, heaters, separators, dehydrators, tank batteries, abandoned property, offices and office equipment and supplies at Forest’s Metairie and Lafayette offices, and other materials, supplies, equipment, facilities, appurtenances and machinery;
	(e) all contracts and instruments, including but not limited to those listed on Schedule 1.1(D)(e)(i), to the extent the same relate to the Properties after the Measurement Date (collectively, the “Contracts”);
	(f) any and all books and records (including without limitation those referred to in Section 7.1), files, muniments of title, reports, intellectual property (including without limitation patents, trade secrets and copyrights), state and MMS compliance information, logs core samples, geological, geophysical (to the extent not subject to third party consents or restriction on transfer) and engineering data and information (including blueprints, maps, diagrams, annotated logs, cross sections and all data room material) and interpretive data, analysis and similar information, whether or not of a proprietary nature (including without limitation seismic processing methods) to the extent related to the Properties;
	(g) the rights of Spinco and its Subsidiaries under this Agreement and the other Transaction Agreements;
	(h) all noncash consideration of any sale after the Measurement Date of property, plant and equipment related to the assets described in paragraphs (a) through (g) above;
	(i) any and all proceeds, benefits, refunds, settlements, income or revenue accruing and attributable to the Spinco Assets prior to the Measurement Date to the extent they are in connection with any Assumed Abandonment Liability, any Assumed Environmental Liability or any Assumed Derivative Liability;
	(j) any and all proceeds from the settlements of contract disputes with purchasers of Hydrocarbons or byproducts from the Properties, insofar as said disputes are attributable to periods after the Measurement Date;
	(k) any and all rights, titles, claims and interests of Forest and its Subsidiaries to or under any policy or agreement of insurance or indemnity, any bond, or to any insurance proceeds or awards, to the extent attributable to pre-Measurement Date events and to the extent they are in connection with any Assumed Abandonment Liability or any Assumed Environmental Liability;
	(l) any and all claims and causes of action of Forest and its Subsidiaries arising from acts, omissions or events, or damages to or destruction of property, occurring prior to the Measurement Date to the extent they are in connection with any Assumed Abandonment Liability or any Assumed Environmental Liability; and
	(m) all accounts receivable, inventories and other current assets (other than cash) attributable to the assets described in paragraphs (a) through (l) above from and after the Measurement Date.

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	(i) Forest or a Forest Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Forest and the Forest Subsidiaries under the Policies; and
	(ii) Spinco or a Spinco Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Spinco and the Spinco Subsidiaries under the Policies.

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Annex C-18

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Annex C-19

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Annex C-20

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	(a) All material consents, approvals and authorizations of any Governmental Authority legally required for the making of the Distribution and the consummation of the other transactions contemplated by the Transaction Agreements shall have been obtained and be in effect in all material respects at the Distribution Date;
	(b) Any waiting period applicable to the Distribution or the Merger (including any extended waiting period arising as a result of a request for additional information by either the Federal Trade Commission or the Antitrust Division of the Department of Justice) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, shall have expired or been terminated and no court of competent jurisdiction or other Governmental Authority shall have issued any decree, judgment, injunction, writ, rule or other order that is in effect restraining, enjoining, prohibiting or otherwise imposing any material restrictions or limitations on the Distribution or the Merger;
	(c) The Registration Statements shall have become effective in accordance with the Exchange Act and the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order; all necessary permits and authorizations under state securities or “blue sky” laws, the Securities Act and the Exchange Act relating to the issuance and trading of shares of Spinco Common Stock to be issued in connection with the Distribution and the Merger, respectively, shall have been obtained and shall be in effect; and such shares of Spinco Common Stock and such other shares required to be reserved for issuance in connection with the Merger shall have been approved for listing on the New York Stock Exchange, Inc., subject to official notice of issuance;
	(d) The Requisite Approval shall have been obtained;
	(e) No action, proceeding or investigation by any Governmental Authority with respect to the Distribution or the Merger shall be pending that seeks to restrain, enjoin, prohibit or delay the making of the Distribution, the consummation of the Merger or the consummation of the other transactions contemplated by the Merger Agreement or to impose any material restrictions or requirements thereon or on any of the parties with respect thereto;
	(f) No action shall have been taken, and no statute, rule, regulation or executive order shall have been enacted, entered, promulgated or enforced by any Governmental Authority with respect to the Distribution or the Merger that, individually or in the aggregate, would (i) restrain, prohibit or delay the making of the Distribution or the consummation of the Merger or (ii) impose any material restrictions or requirements thereon or on any of the parties with respect thereto;
	(g) Forest shall have received an opinion of Weil, Gotshal & Manges LLP to the effect that the Contribution will constitute a reorganization under Section 368(a) of the Code and the Distribution will qualify under Section 355 of the Code. In rendering such opinion, Weil, Gotshal & Manges LLP may require and rely upon representations contained in certificates of officers of Forest, Spinco and the Company substantially in the forms attached as Exhibits C, D and E hereto;
	(h) The Company shall have performed in all material respects its covenants and agreements contained in the Merger Agreement required to be performed at or prior to the Distribution Date;
	(i) The representations and warranties of the Company contained in the Merger Agreement shall have been true and correct in all respects when made and as of the Distribution Date as if made at such time (except to the extent such representations and warranties address matters as of a particular date), except in each case (i) where the failure to be true and correct, individually or in the aggregate, would

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	not have a Material Adverse Effect on the Company or (ii) to the extent specifically contemplated by the Merger Agreement;
	(j) Forest shall have received the bondholder consent referenced in Section 3.2 of the Forest Disclosure Schedule to the Merger Agreement; and
	(k) Spinco and the Company shall have irrevocably confirmed to Forest and each other that each condition of the Merger Agreement to Spinco’s and the Company’s respective obligations to effect the Merger has been fulfilled or will be fulfilled at the Effective Time or is or has been waived by Spinco or the Company, as the case may be.

	Forest Oil Corporation
	1600 Broadway, Suite 2200
	Denver, Colorado 80202
	Attention: General Counsel
	Facsimile: (303) 812-1510

	Vinson & Elkins L.L.P.
	666 Fifth Avenue, 26th Floor
	New York, NY 10103-0040
	Attention: Alan P. Baden
	Facsimile: (917) 849-5337

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	SML Wellhead Corporation
	c/o Forest Oil Corporation
	1600 Broadway, Suite 2200
	Denver, Colorado 80202
	Attention: General Counsel
	Facsimile: (303) 812-1510

	SML Wellhead Corporation
	c/o Mariner Energy, Inc.
	2101 CityWest Blvd.
	Building 4, Suite 900
	Houston, TX 77042
	Attention: General Counsel
	Facsimile: (713) 954-5555

	Baker Botts L.L.P.
	910 Louisiana Street
	Houston, Texas 77002
	Attn: Kelly B. Rose
	Facsimile: (713) 229-7996

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	FOREST OIL CORPORATION

	By:	/s/ H. Craig Clark

	Name: H. Craig Clark
	Title:   President and Chief Executive Officer
	SML WELLHEAD CORPORATION

	By:	/s/ Cyrus Marter

	Name: Cyrus Marter
	Title:   Vice President and Secretary

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	Affiliated Group shall mean an affiliated group of corporations, within the meaning of Section 1504(a) of the Code, including the common parent corporation, and any member of such group.
	Code shall mean the Internal Revenue Code of 1986, as amended.
	Counsel means Weil, Gotshal & Manges LLP and Baker Botts L.L.P.
	Distribution Date shall mean the date and time as of which the Distribution shall be effected.
	Final Determination shall have the meaning given to the term “determination” by Section 1313 of the Code with respect to United States federal Tax matters; and with respect to foreign, state and local Tax matters Final Determination shall mean any final settlement with a relevant Tax Authority that does not provide a right to appeal or any final decision by a court with respect to which no timely appeal is pending and as to which the time for filing such appeal has expired. For the avoidance of doubt, a Final Determination with respect to United States federal Tax matters shall include any formal or informal settlement entered into with the IRS with respect to which the taxpayer has no right to appeal.
	Forest Consolidated Group shall mean the Affiliated Group of which Forest is the common parent corporation.

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	Forest Group shall mean, individually and collectively, as the case may be, each member of the Forest Consolidated Group, other than Spinco.
	Indemnifying Party shall mean any Person from which an Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement.
	Indemnified Party shall mean any Person which is seeking indemnification from an Indemnifying Party pursuant to the provisions of this Agreement.
	IRS shall mean the United States Internal Revenue Service.
	Merger Opinions shall mean the opinions of Counsel with respect to certain Tax aspects of the Merger.
	Person shall mean and includes any individual, corporation, company, association, partnership, joint venture, limited liability company, joint stock company, trust, unincorporated organization, or other entity.
	Post-Distribution Taxable Period shall mean a taxable period or portion thereof that begins after the Distribution Date.
	Pre-Distribution Taxable Period shall mean a taxable period or portion thereof that ends on or before the Distribution Date.
	Spinco Group shall mean, individually and collectively, as the case may be, Spinco and its present and future direct and indirect Subsidiaries.
	Spin-Off Opinion shall mean the opinion of Weil, Gotshal & Manges LLP with respect to certain Tax aspects of the Contribution and the Distribution.
	Straddle Period shall mean a taxable period that includes, but does not end on, the Distribution Date.
	Tax or Taxes shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, gains, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, custom duties, fees, assessments and charges of any kind whatsoever, together with any interest and any penalties, fines, additions to tax or additional amounts imposed by any Tax Authority and shall include any transferee liability in respect of Taxes.
	Tax Authority shall mean the IRS and any other domestic or foreign governmental authority responsible for the administration and collection of Taxes.
	Tax Benefit shall mean a reduction in the Tax Liability (or increase in refund or credit or any item of deduction or expense) of a taxpayer (or of the Affiliated Group of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax Liability of the taxpayer (or of the Affiliated Group of which it is a member) for such period, after taking into account the effect of the Tax Item on the Tax Liability of such taxpayer in the current period and all prior periods, is less than it would have been had such Tax Liability been determined without regard to such Tax Item.
	Tax Detriment shall mean an increase in the Tax Liability (or reduction in refund or credit or item of deduction or expense) of a taxpayer (or of the Affiliated Group of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a Tax Detriment shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax Liability of the taxpayer (or of the Affiliated Group of which it is a member) for such period, after taking into account the effect of the Tax Item on the Tax Liability of such taxpayer in the current period and all prior periods, is more than it would have been had such Tax Liability been determined without regard to such Tax Item.

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	Tax Item shall mean any item of income, gain, loss, deduction, expense or credit, or other attribute that may have the effect of increasing or decreasing any Tax.
	Tax Liabilities shall mean all liabilities for Taxes.
	Tax Returns shall mean all reports, returns, declaration forms and statements (including amendments thereto) filed or required to be filed with respect to Taxes, and any attachments thereto.
	Transaction Taxes shall mean (i) any Tax or Tax Detriment (without regard to the second sentence in the definition thereof and applying a 38% rate) resulting from any income or gain recognized by Forest, Spinco or their Affiliates as a result of the Contribution or the Distribution failing to qualify for tax-free treatment under Sections 355 and 368 and related provisions of the Code or corresponding provisions of other applicable Tax laws and (ii) any Tax resulting from any income or gain recognized by Forest or its Affiliates under Treasury Regulation Sections 1.1502-13 or 1.1502-19 (or any corresponding provisions of other applicable Tax laws) as a result of the Contribution or the Distribution.
	Treasury Regulations shall mean the regulations under the Code promulgated by the United States Department of the Treasury.

	(b) The words “hereof, “herein”, and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
	(c) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

(b) Spinco and Mariner, jointly and severally, shall indemnify and hold harmless each of Forest and its Affiliates for all Tax Liabilities (and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, incurred in connection therewith) attributable to (i) any Taxes of Spinco or the Spinco Group for any Post-Distribution Taxable Period other than Taxes described in Section 2.1(a); (ii) any Taxes of Forest or its Affiliates resulting from the breach of any obligation or covenant of Spinco or Mariner under this Agreement; (iii) Transaction Taxes, but only to the extent such Transaction Taxes arise from (w) a breach by Spinco, Mariner or any of their respective Affiliates of the representations or

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	covenants under Article III, (x) a Disqualifying Action of Spinco, Mariner or any of their respective Affiliates, (y) the inaccuracy of any factual statements or representations made by Mariner or Spinco in its representations letters to Counsel and (z) an action taken by Spinco, Mariner or any of their respective Affiliates which is not required or permitted by the Merger Agreement and which causes the Contribution, the Distribution or the Merger to be taxable; (iv) Mariner’s or Spinco’s portion of any Transfer Taxes determined pursuant to Section 2.4; and (v) any Taxes of Mariner and its Subsidiaries other than Taxes described in Section 2.1(a).
	(c) If the Indemnifying Party is required to indemnify the Indemnified Party pursuant to this Article II, the Indemnified Party shall submit its calculations of the amount required to be paid pursuant to this Article II, showing such calculations in sufficient detail so as to permit the Indemnifying Party to understand the calculations. Subject to the following two sentences, the Indemnifying Party shall pay to the Indemnified Party, no later than ten (10) business days after the Indemnifying Party receives the Indemnified Party’s calculations, the amount that the Indemnifying Party is required to pay the Indemnified Party under this Article II. If the Indemnifying Party disagrees with such calculations, it must notify the Indemnified Party of its disagreement in writing within thirty (30) business days of receiving such calculations.
	(d) Any claim under this Article II with respect to a Tax Liability must be made no later than thirty (30) days after the expiration of the applicable statute of limitations for assessment of such Tax Liability.
	(e) For all Tax purposes, the Forest Group and the Spinco Group agree to treat (i) any payment required by this Agreement as either a contribution by Forest to Spinco or a distribution by Spinco to Forest, as the case may be, occurring immediately prior to the Distribution and (ii) any payment of interest or non-federal Taxes by or to a Tax Authority as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise mandated by applicable law or by a Final Determination.
	(f) The amount of any indemnification payment with respect to any Tax Liability shall be reduced by any current Tax Benefits actually realized by the Indemnified Party in respect of such Tax Liability by the end of the taxable year in which the indemnity payment is made. The calculation of such Tax Benefit shall be included in the calculation required to be submitted pursuant to Section 2.1(c). If, notwithstanding the treatment required by Section 2.1(e), any indemnification payment hereunder is determined to be taxable to the Indemnified Party by any Tax Authority, the indemnity payment payable by the Indemnifying Party shall be increased as necessary to ensure that, after all required Taxes on the indemnity payment are paid (including Taxes applicable to any increases in the indemnity payment under this Section 2.1(f)), the Indemnified Party receives the amount it would have received if the indemnity payment was not taxable.

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	(b) Spinco shall prepare or cause to be prepared and file or cause to be filed all Tax Returns of Spinco for any Straddle Period (each a “Straddle Period Return”) on a basis consistent with the past practice of Forest with respect to the Spinco Business, except that Spinco may complete such Straddle Period Return in a manner that is not consistent with past practice if such Straddle Period Return preparation is allowed by law and such Straddle Period Return preparation does not adversely affect the Tax Liability of Forest or any of its Affiliates. If the Straddle Period Return reflects Taxes attributable to the Pre-Distribution Taxable Period, Spinco shall provide a copy of each such Straddle Period Return together with a computation of the pre-Distribution Taxes reflected in such Straddle Period Return (such computation, the “Statement”) to Forest for its review and comment not later than 30 days prior to the deadline for filing each such Straddle Period Return. Forest shall provide comments, if any, to Spinco at least 15 days prior to the deadline for filing such Straddle Period Return (the “15-Day Review Period”). Forest’s failure to notify Spinco of any disagreement prior to the end of the 15-Day Review Period shall indicate its concurrence with such Straddle Period Return and Statement. If Forest disagrees with the allocation in such Straddle Period Return and Statement, Forest shall notify Spinco in writing of such disagreement prior to the close of the 15-Day Review Period, and Forest and Spinco shall consult and attempt to resolve in good faith the disagreement.
	(c) Unless otherwise required by a Tax Authority, the parties hereby agree to prepare and file all Tax Returns, and to take all other actions, in a manner consistent with this Agreement. All Tax Returns shall be filed on a timely basis (taking into account applicable extensions) by the party responsible for filing such returns under this Agreement.
	(d) The party responsible for filing a Tax Return under this Section 2.3 is also responsible for paying to the relevant Tax Authority the amount of Tax Liability reflected on such Tax Return, subject to any indemnification rights it may have against the other party.

(a) Notwithstanding any other provisions hereof, if after the Distribution Date, an Indemnified Party or any of its Affiliates receives any notice, letter, correspondence, claim or decree from any Tax Authority (a “Tax Notice”) and, upon receipt of such Tax Notice, believes it has suffered or potentially could suffer any Tax Liability for which it is indemnified, the Indemnified Party shall promptly deliver such Tax Notice to the Indemnifying Party; provided, however, that the failure of the Indemnified Party to provide the Tax Notice to the Indemnifying Party shall not affect the indemnification rights of the Indemnified Party pursuant to this Article II, except to the extent that the Indemnifying Party is more than insignificantly prejudiced by the Indemnified Party’s failure to deliver such Tax Notice. The Indemnifying Party shall have the right to handle, defend, conduct and control, at its own expense, any Tax audit or other proceeding that relates to such Tax Notice (except to the extent that such Tax Notice,

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	Tax audit or other proceeding relates to a Straddle Period, in which case there shall be joint control of the Tax audit); provided that, in all events, Forest shall have the right to participate, at its own expense, in any Tax audit or proceeding relating to Transaction Taxes. The Indemnifying Party shall also have the right to compromise or settle any such Tax audit or other proceeding that it has the authority to control pursuant to the preceding sentence subject, in the case of a compromise or settlement that would have a Material Adverse Effect on the Indemnified Party, to the Indemnified Party’s consent, which consent shall not be unreasonably withheld. If the Indemnifying Party fails within a reasonable time after notice to defend any such Tax Notice or the resulting audit or proceeding as provided herein, the Indemnifying Party shall be bound by the results obtained by the Indemnified Party in connection therewith. The Indemnifying Party shall pay to the Indemnified Party the amount of any Tax Liability within 15 days after a Final Determination of such Tax Liability.
	(b) If any adjustments shall be made to any Tax Returns related to Spinco or the Forest Group for any Pre-Distribution Taxable Period as a result of or in settlement of any audit, other administrative proceeding or judicial proceeding or as the result of the filing of an amended return to reflect the consequences of any determination made in connection with any such audit or proceeding or as required by an intervening change of law, Forest shall be liable for any additional Tax Liability and Forest shall be entitled to retain any Tax refund obtained.

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Annex D-7

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	(i) Mariner or Spinco shall not take any action within its control, nor shall Mariner or Spinco permit any of its Affiliates to take any action within their control (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions) that, or fail to take any action within its or their control the failure of which, would cause the Distribution to fail so to qualify (any such action or failure to act, a “Disqualifying Action”); provided, however, that the term “Disqualifying Action” as applied to Spinco or any of its Affiliates shall not include (x) any action, or failure to act, that is contemplated by the terms of the Distribution Agreement or the Merger Agreement or (y) any failure to take action to mitigate the effects of a breach by Spinco, occurring prior to the time of the Distribution, of a representation, warranty or covenant contained in the Distribution Agreement, regardless of whether such breach or its effects continue after the time of the Distribution.
	(ii) Forest shall not take, or fail to take any action that would result in, a Disqualifying Action; provided, however, that the term “Disqualifying Action” as applied to Forest shall not include any action, or failure to act, that is contemplated by the terms of the Distribution Agreement or the Merger Agreement.
	(iii) Prior to the first day following the second anniversary of the Distribution and except as otherwise provided in this Agreement, neither Spinco, Mariner, nor Forest shall take any action within its control, and neither Spinco, Mariner, nor Forest shall permit any of its Affiliates to take any action within their control (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions) that, or fail to take any action within its or their control the failure of which (in both cases, including an action or failure to act that would be reasonably likely to be inconsistent with any representation made in the Tax Materials), would result in a more than immaterial possibility that the Distribution would be treated as part of a plan pursuant to which one or more persons acquire directly or indirectly Spinco stock or Forest stock representing a “50-percent or greater interest” within the meaning of Section 355(e)(4) of the Code (any such action or failure to act, a “Potential Disqualifying Action”), unless, prior to the taking of the Potential Disqualifying Action, (i) Mariner delivers to Forest, or Forest delivers to Mariner (as the case may be), either a ruling from the IRS (a “Ruling”) or an opinion from a nationally recognized law firm both reasonably acceptable to Forest (or to Mariner) (a “Subsequent Opinion”), in either case, to the effect that the Potential Disqualifying Action would not cause the Tax-Free Status of the Distribution to cease to apply to the Distribution, or (ii) Mariner and Forest mutually agree that such Potentially Disqualifying Action would not cause the Tax-Free Status of the Distribution to cease to apply to the Distribution.

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	(i) Forest and its Affiliates shall cooperate with Mariner, and Mariner and its Affiliates shall cooperate with Forest (as the case may be), and shall take (or refrain from taking) all such actions as Mariner (or Forest) may reasonably request in connection with obtaining any ruling or opinion referred to in Section 3.2. Such cooperation shall include providing any information, representations and/or covenants reasonably requested by Mariner (or Forest) (or counsel for Mariner or Forest) to enable Mariner (or Forest) to obtain and maintain either a Subsequent Opinion or a Ruling. From and after any date on which Forest, Spinco, Mariner or any of their respective Affiliates makes any representation or covenant to counsel for purposes of obtaining a Subsequent Opinion or to the IRS for the purpose of obtaining a Ruling and (with respect solely to any representation given) until the first day after the second anniversary (or such later date as may be agreed upon at the time such representation is made) of the date of such Subsequent Opinion or Ruling, the party making such representation or covenant shall take no action that would have caused such representation to be untrue or covenant to be breached unless both parties determine, in their reasonable discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Distribution, that such action would not cause the Tax-Free Status of the Distribution to cease to apply to the Distribution. Such representations and warranties, once made in writing, shall be considered Tax Materials subject to the provisions of Section 3.1.
	(ii) Neither Spinco, Mariner nor any of their respective Affiliates shall file any request for a Ruling with respect to the Tax-Free Status of the Distribution without the prior written consent of Forest, which consent shall not be unreasonably withheld or delayed, if a favorable Ruling would be reasonably likely to have an adverse effect on Forest or any of its Affiliates.

	(i) Subject to clause (iii) of this Section 3.3(c), until the first day after the second anniversary of the Distribution, Mariner shall give Forest, or Forest shall give Mariner (as the case may be), at least ten (10) days prior written notice of its or any of its Affiliates’ intention to effect any transaction with respect to such Person’s capital structure, whether through issuance, redemption or otherwise; provided, that Forest shall only be required to give Mariner notice of such a contemplated transaction if such transaction would result in more than an immaterial possibility of a Potential Disqualifying Action. Each such notice shall set forth the necessary terms and conditions of the proposed transaction, including, as applicable, the nature of any related action proposed to be taken, the approximate number of shares proposed to be issued, redeemed or transferred (directly or indirectly, in accordance with the provisions of Section 355(e) of the Code), the timetable for such action or transaction, and the number of shares otherwise then owned by the other party to the action or transaction (directly or indirectly, in accordance with the provisions of Section 355(e) of the Code), all with sufficient particularity to enable Forest (or Mariner) to review and comment on the effect of such transaction with respect to Section 355(e) of the Code. All information provided by any of the parties to the other parties pursuant to this Section 3.3 shall be kept confidential by the receiving parties to the same extent as that provided in Section 7.5 of the Distribution Agreement.
	(ii) If Mariner or any of its Affiliates, or Forest or any of its Affiliates (as the case may be), receives a Subsequent Opinion or Ruling, Mariner (or Forest) shall notify Forest (or Mariner) (if Forest

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	or Mariner is not otherwise provided with a copy of

	the Subsequent Opinion or Ruling) promptly, but in any event within two (2) business days, after the receipt of the Subsequent Opinion or Ruling.

(iii) Notice shall not be required under (i) of this Section 3.3(c) with respect to the grant and/or exercise of any stock option, stock, stock-based compensation or other employment related arrangements arising in the ordinary course of business that have customary terms and conditions consistent with past practice (“Compensatory Transaction”) if the Compensatory Transaction satisfies the requirements of Treasury Regulation Section 1.355-7(d)(8), or, if in the case of options, if (A) the exercise price is equal to or greater than the fair market value of the stock subject to the option on the date of grant or issuance and (B) such option does not have a readily ascertainable fair market value within the meaning of Treasury Regulation Section 1.83-7.

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	Forest Oil Corporation
	1600 Broadway, Suite 2200
	Denver, Colorado 80202
	Attention: General Counsel
	Facsimile: (303) 812-1510

	Vinson & Elkins L.L.P.
	666 Fifth Avenue, 26th Floor
	New York, NY 10103-0040
	Attention: Alan P. Baden
	Facsimile: (917) 849-5337

	SML Wellhead Corporation
	c/o Mariner Energy, Inc.
	2101 CityWest Blvd.
	Building 4, Suite 900
	Houston, TX 77042
	Attention: General Counsel
	Facsimile: (713) 954-5555

	Baker Botts L.L.P.
	910 Louisiana Street
	Houston, Texas 77002
	Attn: Kelly B. Rose
	Facsimile: (713) 229-7996

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	Mariner Energy, Inc.
	2101 CityWest Blvd.
	Building 4, Suite 900
	Houston, TX 77042
	Attention: General Counsel
	Facsimile: (713) 954-5555

	Baker Botts L.L.P.
	910 Louisiana Street
	Houston, Texas 77002
	Attn: Kelly B. Rose
	Facsimile: (713) 229-7996

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	FOREST OIL CORPORATION

	By:	/s/ H. Craig Clark

	Name: H. Craig Clark
	Title:   President and Chief Executive Officer
	SML WELLHEAD CORPORATION

	By:	/s/ Cyrus Marter

	Name: Cyrus Marter
	Title:   Vice President and Secretary
	MARINER ENERGY, INC.

	By:	/s/ Scott D. Josey

	Name: Scott D. Josey
	Title:   Chief Executive Officer and President

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	First: The amendment to the Corporation’s Second Amended and Restated Certificate of Incorporation set forth below was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware and has been authorized by the stockholders in accordance with Section 242 of the General Corporation Law of the State of Delaware.
	Second: The first sentence of Article Four of the Corporation’s Certificate of Incorporation is amended to read in its entirety as follows:

	“The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 200 million shares, of which 180 million shares shall be shares of Common Stock, par value $.0001 per share (“Common Stock”), and 20 million shares shall be shares of Preferred Stock, par value $.0001 per share (“Preferred Stock”).”

	MARINER ENERGY, INC.
	By:
	Name:
	Title:

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				Proved
				Developed
																Total
				Producing				Non-Producing				Undeveloped				Proved
Net Remaining Reserves
		Oil/ Condensate—Barrels			6,171,886				167,142				7,916,458				14,255,486
		Gas—MMCF			57,788				13,573				80,572				151,933
Cash Flow Data (M$)
	Future Gross Revenue			$	621,366.9			$	91,410.3			$	836,425.2			$	1,549,202.4
	Deductions				143,343.3				27,769.0				278,728.5				449,840.8
	Future Net Cash Flow			$	478,023.6			$	63,641.3			$	557,696.7			$	1,099,361.6
	(Before Taxes)
	Present Value @ 10%			$	281,479.0			$	53,887.8			$	332,608.3			$	667,975.1
	(PV10)

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				Present Value
				As of December 31, 2004
				(M$)
Discount Rate				Total
Percent				Proved
	5			$	815,643.4
	15			$	575,781.8
	20			$	511,036.7
	25			$	462,061.6

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	Very truly yours,
	RYDER SCOTT COMPANY, L.P.
	Timothy J. Torres, P.E.
	Vice President

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	(i) Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes:

	(A) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and
	(B) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.

	(ii) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the “proved” classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based.

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	(iii) Estimates of proved reserves do not include the following:

	(A) oil that may become available from known reservoirs but is classified separately as “indicated additional reserves”;
	(B) crude oil, natural gas, and natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics, or economic factors;
	(C) crude oil, natural gas, and natural gas liquids, that may occur in undrilled prospects; and
	(D) crude oil, natural gas, and natural gas liquids, that may be recovered from oil shales, coal, gilsonite and other such sources.

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Annex F-8

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Annex G-1

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Annex G-2

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	(i) Exercise Price. Subject to adjustment pursuant to Section 4(c) of the Plan, the purchase price per Share purchasable under an Option shall be determined by the Committee at the time the Option is granted, but shall not be less than the Fair Market Value per Share on the effective date of such grant.
	(ii) Time and Method of Exercise. The Committee shall determine and provide in the Award Agreement the time or times at which an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms (which may include, without limitation, cash, check acceptable to the Company, Shares already-owned by the Participant for more than six months (unless such holding requirement is waived by the Committee), if the Shares are publicly traded, a “cashless-broker” exercise through procedures approved by the Company, or any combination thereof) in which payment of the exercise price with respect thereto may be made or deemed to have been made.
	(iii) Incentive Stock Options. An Incentive Stock Option may be granted only to an individual who is an employee of the Company or any parent or subsidiary corporation (as defined in section 424 of the Code) at the time the Option is granted and must be granted within 10 years from the date the Plan was approved by the Board or the shareholders, whichever is earlier. To the extent that the aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000, or such Option fails to constitute an Incentive Stock Option for any reason, such purported Incentive Stock Options shall be treated as Non-Qualified Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of a Participant’s purported Incentive Stock Options do not constitute Incentive Stock Options and shall notify the Participant of such determination as soon as reasonably practicable after such determination. No Incentive Stock Option shall be granted to an individual if, at the time the Option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is granted the option price is at least 110% of the Fair Market Value of the Common Stock subject to the Option and (ii) such Option by its terms is not exercisable after the

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expiration of five years from the date of grant. An Incentive Stock Option shall not be transferable otherwise than by will or the laws of descent and distribution, and shall be exercisable during the Participant’s lifetime only by such Participant or the Participant’s guardian or legal representative. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision, and any regulations promulgated thereunder.

	(i) Dividends. Dividends paid on Restricted Stock may be paid directly to the Participant, may be subject to risk of forfeiture and/or transfer restrictions during any period established by the Committee or sequestered and held in a bookkeeping cash account (with or without interest) or reinvested on an immediate or deferred basis in additional shares of Common Stock, which credit or shares may be subject to the same restrictions as the underlying Award or such other restrictions, all as determined by the Committee in its discretion, as provided in the Award Agreement.
	(ii) Registration. Any Restricted Stock may be evidenced in such manner as the Committee shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.
	(iii) Forfeiture and Restrictions Lapse. Except as otherwise determined by the Committee or the terms of the Award Agreement that granted the Restricted Stock, upon termination of a Participant’s employment for any reason during the applicable Restricted Period, all Restricted Stock shall be forfeited by the Participant without payment and re-acquired by the Company. The Committee may, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to such Participant’s Restricted Stock, provided, however, if the Award is intended to qualify as performance based compensation under Section 162(m) of the Code, such waiver may be only upon an event permitted under Section 162(m) of the Code or the regulations thereunder. Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be issued to the holder of Restricted Stock promptly after the applicable restrictions have lapsed or otherwise been satisfied.
	(iv) Transfer Restrictions. During the Restricted Period, Restricted Stock will be subject to such limitations on transfer as necessary to comply with Section 83 of the Code.

	(i) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, any other Award granted under the Plan or any award granted under any other plan of the Company or any Parent Entity or Subsidiary. Awards granted in addition to or in tandem with other Awards or awards granted under any other plan of the Company or any Parent Entity or Subsidiary may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
	(ii) Limits on Transfer of Awards.

	(A) Except as provided in paragraph (C) below, each Award, and each right under any Award, shall be exercisable only by the Participant during the Participant’s lifetime, or if permissible under applicable law, by the Participant’s guardian or legal representative as determined by the Committee.

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	(B) Except as provided in paragraph (C) below, no Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution, and any such purported prohibited assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Parent Entity or Subsidiary.
	(C) To the extent specifically approved in writing by the Committee, an Award (other than an Incentive Stock Option) may be transferred to immediate family members or related family trusts, limited partnerships or similar entities or other Persons on such terms and conditions as the Committee may establish or approve in its sole discretion.

	(iii) Terms of Awards. The term of each Award shall be for such period as may be determined by the Committee, provided the term of an Incentive Stock Option shall be limited as provided in Section 6(a)(iii).
	(iv) Share Restrictions. All Shares or other securities of the Company or any Subsidiary delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and if certificates are issued for the Shares, the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
	(v) Consideration for Grants. Awards may be granted for no cash consideration or for such consideration as the Committee determines including, without limitation, such minimal cash consideration as may be required by applicable law.
	(vi) Delivery of Shares or other Securities and Payment by Participant of Consideration. No Shares or other securities shall be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including, without limitation, any exercise price or tax withholding) is received by the Company. Such payment may be made by such method or methods and in such form or forms as the Committee shall determine, including, without limitation, cash, Shares, other securities, other Awards or other property, withholding of Shares, cashless exercise with simultaneous sale, or any combination thereof, provided that the combined value, as determined by the Committee, of all cash and cash equivalents and the Fair Market Value of any such Shares or other property so tendered to the Company, as of the date of such tender, is at least equal to the full amount required to be paid pursuant to the Plan or the applicable Award Agreement to the Company.
	(vii) Unusual Transactions or Events. In the event of any distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, reorganization, merger, spin-off, split-off, split-up, consolidation, combination, repurchase, or exchange of Shares or other securities of the Company, or other relevant corporate transaction or event or any unusual or nonrecurring transactions or events affecting the Company or any affiliate of the Company, and whenever the Committee determines that action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events, the Committee, in its sole discretion and on such terms and conditions as it deems appropriate, may take any one or more of the following actions:

(A) To provide for either (i) the termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of such transaction or event the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (ii) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;

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	(B) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
	(C) To make adjustments in the number and type of shares of common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Awards and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future, and in the maximum number of shares with respect to which Options or Restricted Stock may be granted to an Employee during the term of the Plan; and
	(D) To provide that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement.

	(i) Amendments to the Plan. The Board or the Committee may amend, alter, suspend, discontinue, or terminate the Plan without the consent of any stockholder, Participant, other holder or beneficiary of an Award, or other Person; provided, however, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company (i) no such amendment, alteration, suspension, discontinuation, or termination shall be made that would increase the total number of Shares that may be issued under Awards granted under the Plan, except as provided in Section 4(c) of the Plan, or (ii) permit the exercise price of any outstanding Option that is “underwater” to be reduced or for an “underwater” Option to be cancelled and replaced with a new Award; provided further, however, no such amendment, alteration, suspension, discontinuation, or termination shall materially adversely affect the rights of a Participant under an Award without the consent of such Participant.
	(ii) Amendments to Awards. Subject to clause (i) above, the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided no change in any Award shall materially adversely affect the rights of a Participant under the Award without the consent of such Participant. Notwithstanding the foregoing, with respect to any Award intended to qualify as performance-based compensation under Section 162(m) of the Code, no adjustment other than an acceleration of vesting or payment upon the Participant’s death, disability or change of control of the Company, shall be authorized to the extent such adjustment would cause the Award to fail to so qualify.
	(iii) Compliance. Notwithstanding the foregoing, the Committee may make any amendment to the Plan or an Award Agreement that it believes necessary or helpful to comply with any applicable law, including without limitation, Section 409A of the Code.

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Annex G-7