Mariner Energy Reports 2009 First Quarter Results

HOUSTON, May 11 /PRNewswire-FirstCall/ -- Mariner Energy, Inc. today reported first quarter 2009 operating and financial results. The company reported a net loss of $424.1 million for first quarter 2009, or $4.77 per share, which includes a non-cash, full cost ceiling test impairment charge of $704.7 million. Adjusted net income for first quarter 2009, which excludes a non-recurring gain and the non-cash charge for the ceiling test impairment, was $19.8 million, or $0.22 per share (see reconciliation of this non-GAAP measure below).

Highlights for the first quarter 2009 include: -- Operating cash flow was $143.0 million for first quarter 2009, compared with $239.0 million for the same period in the prior year (see reconciliation of this non-GAAP measure below). -- Production increased 25% from fourth quarter 2008 to 29.5 billion cubic feet of gas equivalent (Bcfe) from 23.5 Bcfe. -- Mariner announced offshore exploration discoveries on two projects, including deepwater success at Green Canyon Block 859 (Heidelberg) and on the shelf at South Marsh Island 150. -- The company was the apparent high bidder on 12 blocks in Central Gulf of Mexico Lease Sale 208, with two of the deepwater blocks and one shelf block already awarded. -- Mariner added more than 4,200 net acres to its position in the Permian Basin.

"We are off to a good start for the year with growth initiatives underway in all of our core areas. Our production increased 25 percent over the preceding quarter as we have restored most of our production that was affected by Hurricane Ike. We expect our production to continue to ramp up during the year as new fields, including Geauxpher, Daniel Boone, Viosca Knoll 821, and South Marsh Island 150, are brought onstream. Our deep shelf discovery at Smoothie commenced production on May 2, approximately four months from discovery. We also announced deepwater discoveries at Heidelberg and Bushwood, which are being appraised. We had another successful offshore lease sale, of which three leases have now been awarded. In the Permian Basin, we expanded our acreage position in our Deadwood prospect and continue to observe encouraging results from our delineation of this project," said Scott D. Josey, Mariner's Chairman, Chief Executive Officer and President.

NON-RECURRING GAIN AND NON-CASH CHARGE

The company's results for first quarter 2009 reflect a non-recurring, after-tax gain of $10.7 million related to an arbitration award. Based on low natural gas prices at March 31, 2009, Mariner also recorded a full cost ceiling test impairment of its proved gas properties in the amount of $704.7 million. These items are detailed below in the reconciliation of adjusted net income, a non-GAAP measure.

FIRST QUARTER 2009 RESULTS

For the three-month period ended March 31, 2009, Mariner reported a net loss of $424.1 million, or $4.77 per basic and fully-diluted share, which reflects the non-recurring gain and non-cash charge cited above. This compares with net income of $72.2 million and basic and fully-diluted earnings per share of $0.83 and $0.82, respectively, for the same three-month period in the prior year. Adjusted net income, which excludes the non-recurring gain and non-cash charge, was $19.8 million for first quarter 2009, or $0.22 per basic and fully-diluted share (see reconciliation of this non-GAAP measure below). The lower year-over-year results are due primarily to lower commodity prices and to decreased production volumes as a result of Hurricane Ike.

Net production for first quarter 2009 was 29.5 Bcfe, compared with 31.3 Bcfe for first quarter 2008. Total natural gas net production for first quarter 2009 was 22.1 billion cubic feet (Bcf), compared with 21.0 Bcf for the same period in the prior year. Total net oil production for first quarter 2009 was 1.0 million barrels (MMBbls), compared with 1.4 MMBbls for the same period in 2008. Natural gas liquids (NGL) net production for first quarter 2009 was 0.3 MMBbls, compared with 0.4 MMBbls for first quarter 2008.

For first quarter 2009, Mariner's average realized natural gas price was $6.95 per thousand cubic feet (Mcf) compared with $8.57 per Mcf for the same period in 2008. Mariner's average realized oil price was $62.81 per barrel (Bbl) for first quarter 2009, compared with $84.16 per Bbl for first quarter 2008. The average realized NGL price was $23.70 per Bbl for first quarter 2009, compared with $55.65 per Bbl for the same period in 2008. Average realized prices reflect settlements during the period under Mariner's hedging program.

OPERATIONAL UPDATE Offshore

Mariner drilled three offshore wells in the first quarter 2009, all of which were successful:

Water Working Depth Well Name Operator Interest (Ft) Location --------- -------- --------- ---- -------- Green Canyon 859 #1 Anadarko 12.5% 5000 Deepwater (Heidelberg) South Marsh Island 150 D2 Mariner 100.0% 230 Conventional Shelf South Marsh Island 150 D3 Mariner 100.0% 230 Conventional Shelf

Subsequent to the end of first quarter 2009, one additional third-party-operated well was drilled and unsuccessful.

Onshore

In the first quarter of 2009, Mariner drilled 12 wells in the Permian Basin, all of which were successful. As of March 31, 2009, two rigs were drilling on Mariner's Permian Basin properties.

CONFERENCE CALL TO DISCUSS RESULTS

A conference call has been scheduled for 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Tuesday, May 12, 2009, to discuss first quarter 2009 financial and operating results. To participate in the call, please dial [phone] at least 10 minutes prior to the scheduled start time. International callers can dial [phone]. The conference pass code for both numbers is 3655 7510. The call also will be webcast live over the internet and can be accessed through the Investor Information section of Mariner's website at http://www.mariner-energy.com/.

A telephonic replay of the call will be available through May 22, 2009 by dialing [phone] or [phone], pass code 2587 3951. An archive of the webcast will be available shortly after the call on Mariner's website through June 30, 2009.

About Mariner Energy, Inc.

Mariner Energy, Inc. is an independent oil and gas exploration, development and production company headquartered in Houston, Texas, with principal operations in the Permian Basin and the Gulf of Mexico. For more information about Mariner, please visit its website at http://www.mariner-energy.com/.

MARINER ENERGY, INC. SELECTED OPERATIONAL RESULTS (1) (Unaudited) Net Production, Realized Pricing and Operating Costs Three Months Ended March 31, 2009 2008 ---- ---- Net production: Natural gas (Bcf) 22.1 21.0 Oil (MMBbls) 1.0 1.4 Natural gas liquids (MMBbls) 0.3 0.4 Total production (Bcfe) 29.5 31.3 Realized prices (net of hedging): Natural gas ($/Mcf) $6.95 $8.57 Oil ($/Bbl) 62.81 84.16 Natural gas liquids ($/Bbl) 23.70 55.65 Operating costs per Mcfe: Lease operating expense $1.81 $1.46 Severance and ad valorem taxes 0.12 0.15 Transportation expense 0.16 0.10 General and administrative expense 0.59 0.35 Depreciation, depletion and amortization 3.21 3.81 -------------------------

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

MARINER ENERGY, INC. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS OF OPERATIONS (1) (In thousands, except per share data) (Unaudited) Three Months Ended March 31, 2009 2008 ---- ---- Revenues: Natural gas sales $153,338 $179,623 Oil sales 60,925 113,614 Natural gas liquids sales 6,469 20,981 Other revenues 22,604 1,679 Total revenues 243,336 315,897 Cost and Expenses: Lease operating expense 53,399 45,647 Severance and ad valorem taxes 3,532 4,610 Transportation expense 4,584 3,019 General and administrative expense 17,411 11,111 Depreciation, depletion and amortization 94,805 119,318 Full cost ceiling test impairment 704,731 - Other miscellaneous expense 8,009 537 Total costs and expenses 886,471 184,242 OPERATING (LOSS) INCOME (643,135) 131,655 Interest: Income 85 326 Expense, net of capitalized amounts (14,402) (18,571) ------- ------- (Loss) Income before taxes and noncontrolling interest (657,452) 113,410 Benefit (Provision) for income taxes 233,334 (41,194) Noncontrolling interest - (90) --- --- Net (loss) income $(424,118) $72,126 Less: net loss attributable to noncontrolling interest - (90) NET (LOSS) INCOME ATTRIBUTABLE TO MARINER ENERGY, INC $(424,118) $72,216 Earnings per share: Net (loss) income per share-basic $(4.77) $0.83 Net (loss) income per share-diluted $(4.77) $0.82 Weighted average shares outstanding-basic 88,865 87,294 Weighted average shares outstanding-diluted 88,865 88,013 -------------------------

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

MARINER ENERGY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) March 31, December 31, 2009 2008 ---- ---- Current Assets Cash and cash equivalents $7,339 $3,251 Receivables, net of allowances 210,454 219,920 Insurance receivables 16,148 13,123 Derivative financial instruments 149,224 121,929 Intangible assets 1,805 2,353 Prepaid expenses and other 27,452 14,377 ------ ------ Total current assets 412,422 374,953 Property and Equipment Proved oil and gas properties, full-cost method 4,634,723 4,448,146 Unproved properties, not subject to amortization 192,738 201,121 ------- ------- Total oil and gas properties 4,827,461 4,649,267 Other property and equipment 53,612 53,115 Accumulated depreciation, depletion and amortization: Proved oil and gas properties (2,557,169) (1,767,028) Other property and equipment (6,163) (5,477) Total accumulated depreciation, depletion and amortization (2,563,332) (1,772,505) Total property and equipment, net 2,317,741 2,929,877 Insurance receivables 23,781 22,132 Other Assets, net of amortization 65,897 65,831 ------ ------ TOTAL ASSETS $2,819,841 $3,392,793 ========== ========== Current Liabilities Accounts payable $2,490 $3,837 Accrued liabilities 91,689 107,815 Accrued capital costs 152,290 195,833 Deferred income tax 12,594 23,148 Abandonment liability 109,718 82,364 Accrued interest 21,284 12,567 ------ ------ Total current liabilities 390,065 425,564 Long-Term Liabilities Abandonment liability 327,548 325,880 Deferred income tax 108,876 319,766 Long-term debt 1,240,000 1,170,000 Other long-term liabilities 29,400 31,263 ------ ------ Total long-term liabilities 1,705,824 1,846,909 Stockholders' Equity Common stock, $.0001 par value; 180,000,000 shares authorized; 90,006,593 shares issued and outstanding at March 31, 2009; 180,000,000 shares authorized, 88,846,073 shares issued and outstanding at December 31, 2008 9 9 Additional paid-in capital 1,077,677 1,071,347 Accumulated other comprehensive income/(loss) 99,601 78,181 Accumulated deficit (453,335) (29,217) -------- ------- Total stockholders' equity 723,952 1,120,320 ------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,819,841 $3,392,793 ========== ========== MARINER ENERGY, INC. SELECTED CASH FLOW INFORMATION (1) (In Thousands) (Unaudited) Three Months Ended March 31, --------- 2009 2008 ---- ---- Operating cash flow (2) $143,000 $239,220 Changes in operating assets and liabilities (17,043) (25,049) ------- ------- Net cash provided by operating activities $125,957 $214,171 ======== ======== Net cash used in investing activities $(191,404) $(480,213) ========= ========= Net cash provided by financing activities $69,535 $251,325 ======= ======== (Decrease) Increase in cash and cash equivalents $4,088 $(14,717) ====== ======== -------------------------

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

(2) See below for reconciliation of this non-GAAP measure.

IMPORTANT INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS AND CERTAIN STATISTICS

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, that address activities that Mariner assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. Our forward-looking statements generally are accompanied by words such as "may", "will", "estimate", "project", "predict", "believe", "expect", "anticipate", "potential", "plan", "goal", or other words that convey the uncertainty of future events or outcomes. Forward-looking statements provided in this press release are based on Mariner's current belief based on currently available information as to the outcome and timing of future events and assumptions that Mariner believes are reasonable. Mariner does not undertake to update its guidance, estimates or other forward-looking statements as conditions change or as additional information becomes available. Mariner cautions that its forward-looking statements are subject to all of the risks and uncertainties normally incident to the exploration for and development, production and sale of oil and natural gas. These risks include, but are not limited to, price volatility or inflation, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as amended, and other documents filed by Mariner with the SEC. Any of these factors could cause Mariner's actual results and plans of Mariner to differ materially from those in the forward-looking statements. Investors are urged to read the Annual Report on Form 10-K for the year ended December 31, 2008, as amended, and other documents filed by Mariner with the SEC.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities of Mariner.

Reconciliation of Non-GAAP Measure: Adjusted Net Income

Mariner Energy's reported net income and earnings per share for the first quarter 2009 include a non-recurring gain and a non-cash charge. Mariner's management believes that it is common among investment analysts to consider earnings excluding the effects of these items when evaluating the company's operating results. These items and their effects on reported earnings for the first quarter 2009 are listed below.

-- A non-recurring gain of $16.6 million attributable to an arbitration award related to a consummated acquisition. This resulted in a $10.7 million after-tax gain, which equates to a $0.12 contribution to basic and fully-diluted earnings per share (EPS). -- Ceiling test impairments recorded at March 31, 2009 negatively impacted net income for the quarter by $704.7 million, or $454.6 million after-tax for a $5.11 loss per basic and fully-diluted share.

Excluding the items above, Mariner would have reported earnings for the first quarter 2009 of $19.8 million or $0.22 per basic and fully-diluted share. Adjusted net income is not a financial measure under generally accepted accounting principles in the Unites States of America (GAAP) and should not be considered in isolation or as a substitute for net income or another measure of financial performance presented in accordance with GAAP. This is further outlined in the table below (which excludes 2008 because there were no material impairments, nonrecurring events or other items in respect of which to adjust net income for the quarter ended March 31, 2008).

MARINER ENERGY, INC. RECONCILIATION OF ADJUSTED NET INCOME (In millions, except per share data) (Unaudited) Three Months Ended March 31, 2009 After-Tax EPS (2) Impact (1) Net loss $(424.1) $(4.77) Arbitration award (10.7) (0.12) Ceiling test impairment 454.6 5.11 ----- ---- Adjusted net income (non-GAAP) $19.8 $0.22 ------------------------- (1) Calculated using the statutory rate (2) Denotes basic and fully-diluted earnings per share Reconciliation of Non-GAAP Measure: Operating Cash Flow

Operating cash flow (OCF) is not a financial or operating measure under GAAP. The table below reconciles OCF to related GAAP information. Mariner believes that OCF is a widely accepted financial indicator that provides additional information about its ability to meet its future requirements for debt service, capital expenditures and working capital, but OCF should not be considered in isolation or as a substitute for net income, operating income, net cash provided by operating activities or any other measure of financial performance presented in accordance with GAAP or as a measure of a company's profitability or liquidity.

Three Months Ended March 31, 2009 2008 ---- ---- (In thousands) (Unaudited) Net cash provided by operating activities $125,957 $214,171 Less: Changes in operating assets and liabilities (17,043) (25,049) ------- ------- Operating cash flow (non-GAAP) $143,000 $239,220 ======== ========

Mariner Energy, Inc.

CONTACT: Patrick Cassidy of Mariner Energy, Inc., [phone],
[e-mail]

Web Site: http://www.mariner-energy.com/