HOUSTON, April 3 /PRNewswire-FirstCall/ -- Mariner Energy, Inc.
(NYSE:ME) today announces financial results for fourth quarter and
full year 2005, first quarter 2006 operational updates and provides
2006 guidance. The year 2005 was likely the most dramatic year in
the Company's history, highlighted by several major events. Mariner
began the year by executing a Rule 144A private placement in which
31 million shares of Mariner stock sold at $14 per share. In
September 2005 we agreed to a merger transaction to acquire the
Gulf of Mexico operations of Forest Oil Corporation ("Forest"). In
August and September 2005 Hurricanes Katrina and Rita struck the
Gulf of Mexico. On March 2, 2006 we completed the acquisition of
the Forest assets and on March 3 commenced trading on the NYSE
under the symbol "ME". In the midst of these activities, Mariner
added 129 billion cubic feet equivalents of natural gas (Bcfe) and
ended the year with 338 Bcfe of estimated proved reserves, a 42%
increase over the December 31, 2004 estimated proved reserves.
Production, revenues, and net income were all severely affected by
the hurricane activity as described below. Production totaled 29.1
Bcfe, a 23% decrease from year earlier levels, revenues totaled
$199.7 million, a 7% decrease from 2004, and net income totaled
$40.5 million, a 41% decrease from 2004. Basic earnings per share
(EPS) for the year was $1.24 and diluted EPS was $1.20, compared to
$2.30 for each measure in 2004. Mariner has scheduled a conference
call to review fourth quarter and full year 2005 results on April
4, 2006, at 10:00 a.m. EDT (9:00 a.m. CDT). To participate in the
Mariner conference call, callers in the United States and Canada
can dial (866) 356-4123. International callers can dial (617)
597-5393. The conference passcode for both numbers is 72385429.
Following is more detailed information surrounding Mariner's 2005
operational and financial results. For more information relating to
Mariner's full year 2005 results and other information, please
refer to its Annual Report on Form 10-K filed on March 31, 2006.
For pro forma financial information taking into account its
acquisition of the Forest assets, please refer to the pro forma
financial information included as an exhibit on Mariner's Current
Report on Form 8-K filed on March 31, 2006. OPERATIONAL UPDATE
Offshore -- Due to a very active hurricane season, Mariner was only
able to complete a portion of its 2005 budgeted drilling program,
which resulted in three successes out of ten wells drilled. Four
wells budgeted for drilling in 2005 were postponed into the first
quarter of 2006. Our first quarter 2006 drilling activity resulted
in five successes out of seven wells drilled. Information regarding
the successful wells is shown below: Expected Working Water Date of
Initial Operator Interest Depth (Ft) Production 2005 Capricorn (HI
A-341) Mariner 60% 242 feet 2nd Qtr 2006 Cottonwood (GB 244)
Petrobras 20% 2,118 feet 2007 NW Nansen (EB 602 #10) Kerr McGee 33%
3,507 feet 2007 1st Qtr 2006 NW Nansen (EB 602 #11) Kerr McGee 33%
3,507 feet 2007 Reliant (SS 26) Mariner 50% 12 feet TBD WC 130
Dominion 15% 38 feet 3rd Qtr 2006 King Kong (GC473) ENI 50% 3,842
feet 2nd Qtr 2006 Brazos 491 Mariner 100% 77 feet 2nd Qtr 2006 Of
the above discoveries, only proved reserves associated with our
Capricorn and Reliant projects have been included in December 31,
2005 pro forma proved reserves. As of March 31, 2006 five offshore
wells are in progress, including Reliant (SS 26). In addition,
Mariner was the apparent high bidder on ten blocks in the Minerals
Management Service (MMS) OCS Oil and Gas Lease Sale 198 held on
March 15 with a net cost exposure of approximately $18 million. Two
of the blocks are located in deepwater areas of the Gulf (depths
greater than 400 meters). Onshore -- In 2005, Mariner drilled 92
development wells in the West Texas Permian Basin, all of which
were successful. In the first quarter 2006 we drilled an additional
46 wells, all of which were successful (including five exploration
wells). 2005 TROPICAL STORM AND HURRICANE ACTIVITY As previously
indicated, the Company's operations were adversely affected during
2005 by one of the most active and severe hurricane seasons in
recorded history. As of December 31, 2005, we had approximately 5
million cubic feet equivalents of natural gas per day (MMcfe/d) of
net production shut-in (approximately 56 Mmcfe/d pro forma for the
Forest transaction) as a result of Hurricanes Katrina and Rita. As
of the end of the first quarter 2006, Mariner estimates
approximately 42 Mmcfe/d remains shut in, all of which relate to
the Forest properties. Additionally, the Company experienced delays
in the startup of four of its deepwater projects primarily as a
result of Hurricane Katrina. Two of the projects have commenced
production and two are anticipated to commence production in the
second quarter of 2006. For the period of September through
December 31, 2005 the hurricanes had the combined effect of
deferring approximately 6-8 Bcfe of production (15 - 20 Bcfe pro
forma for the Forest transaction). Mariner estimates that
approximately 8 Bcfe of its pro forma 2006 production will be
deferred before repairs to offshore and onshore infrastructure are
fully completed. The Company believes the estimated costs to repair
damage caused by Hurricanes Katrina and Rita to the Company's
platforms and facilities will total approximately $50 million
(including the Forest assets), with all but approximately $15
million of that amount expected to be recovered through insurance
proceeds. PRODUCTION For the full year 2005, total natural gas
production was 18.4 Bcf at an average realized price (net of
hedging) of $6.66/Mcf compared to 23.8 Bcf for the full year 2004
at an average realized price (net of hedging) of $5.80/Mcf. Total
oil production was 1.8 million barrels (Bbls) at an average
realized price (net of hedging) of $41.23/Bbl compared to 2.3
million Bbls for the full year 2004 at an average realized price
(net of hedging) of $33.17/Bbl. Total combined production for full
year 2005 was 29.1 Bcfe compared to 37.6 Bcfe for the full year
2004. The 23% decrease in total production from 2004 to 2005 is
primarily attributable to the impact of Hurricanes Katrina and
Rita. For the fourth quarter 2005, total natural gas production was
3.9 Bcf at an average realized price (net of hedging) of $7.12/Mcf
compared to 5.8 Bcf for the fourth quarter 2004 at an average
realized price (net of hedging) of $5.66/Mcf. Total oil production
was 0.5 million Bbls at an average realized price (net of hedging)
of $44.50/Bbl compared to 0.6 million Bbls for the fourth quarter
2004 at an average realized price (net of hedging) of $34.39/Bbl.
Total combined production for fourth quarter 2005 was 6.6 Bcfe,
compared to 9.1 Bcfe for the fourth quarter 2004, a decrease of
28%. REVENUE For the full year 2005 the Company generated total
natural gas revenues of $122.3 million compared to $138.0 million
for full year 2004. Total oil revenues for full year 2005 were
$73.8 million, compared to full year 2004 total oil revenues of
$76.2 million. Total oil and gas revenues decreased 8% to $196.1
million in 2005 compared to total oil and gas revenues of $214.2
million in 2004. This decrease was primarily due to decreased
production during the hurricane season and was partially offset by
an 18% increase in average realized prices (including the effects
of hedging) to $6.74/Mcfe in 2005 from $5.70/Mcfe in 2004. Fourth
quarter 2005 total natural gas revenues were $27.4 million compared
to $33.0 million for fourth quarter 2004. Total oil revenues for
fourth quarter 2005 were $20.2 million compared to $18.9 million
for the fourth quarter 2004. Total combined oil and gas revenues
for fourth quarter 2005 were $47.6 million compared to $51.9
million for fourth quarter 2004, a decrease of 8%. Hedge losses for
full year 2005 were $49.3 million compared $19.8 million for full
year 2004. Fourth quarter 2005 hedge losses were $25.9 million
compared to $11.9 million in fourth quarter 2004. OPERATING AND
GENERAL & ADMINISTRATIVE EXPENSES Lease Operating Expenses:
Lease operating expenses for the full year 2005 increased 17% to
$29.9 million in 2005 from $25.5 million in 2004. The increased
costs were primarily attributable to the addition of new productive
wells at the Company's Aldwell Unit. The operating costs of these
new wells were partially offset by reduced costs at the Company's
deepwater fields. On a per unit basis lease operating costs rose to
$1.03/Mcfe in 2005 from $0.68/Mcfe in 2004, an increase of 51%.
Fourth quarter 2005 lease operating expenses increased 54% to $9.7
million from $6.3 million in fourth quarter 2004, largely due to
increased workover activity and the impact of the 2005 hurricane
season. General & Administrative Expenses: General and
administrative ("G&A") expenses, which are net of $6.9 million
and $4.4 million of overhead reimbursements billed or received from
other working interest owners in 2005 and 2004, respectively,
increased 322% to $37.1 million during 2005 compared to $8.8
million in 2004. The increase includes $25.7 million of stock
compensation expense which primarily resulted from the amortization
of the cost of restricted stock granted at the closing of our
private equity placement in March 2005 in consideration of past
performance. We also paid $2.3 million to our former stockholders
to terminate a services agreement in 2005, compared to $1.0 million
under the same agreement in 2004. In addition, G&A expenses
increased by $1.6 million due to a reduction in the amount of
G&A expenses capitalized in 2005 compared to 2004. NET INCOME
AND EARNINGS PER SHARE Full year 2005 net income decreased $27.9
million to $40.5 million from $68.4 million for the full year 2004.
Basic earnings per share for full year 2005 was $1.24 compared to
$2.30 in 2004. Fully diluted earnings per share was $1.20 for full
year 2005 compared to $2.30 for full year 2004. The Company
generated $4.9 million of net income for the fourth quarter of 2005
compared to $17.9 million in fourth quarter 2004. Quarterly
earnings per share for fourth quarter 2005 was $0.15 (basic) and
$0.14 (fully diluted) compared to $0.60 (basic and fully diluted)
for fourth quarter 2004. Pro forma for the Forest transaction
combined weighted average shares outstanding are 83.3 million basic
and 84.5 million on a fully diluted basis. CASH FLOW FROM
OPERATIONS AND EBITDA Net cash flow from operations for 2005
increased $9.9 million to $165.4 million compared to $155.5 million
for 2004. Fourth quarter 2005 net cash flow from operations
decreased $0.5 million to $30.1 million compared to $30.6 million
for the fourth quarter 2004. EBITDA for 2005 decreased $46.5
million to $130.4 million for 2005 from $176.9 million for 2004.
Fourth quarter 2005 EBITDA decreased $18.3 million to $27.7 million
compared to $46.0 million for the fourth quarter 2004. Fourth
quarter and full year 2005 EBITDA include charges of $8.1 million
and $25.7 million for non-cash stock compensation expense,
respectively. Please refer to the EBITDA reconciliation and
definition included later. 2006 GUIDANCE On March 2, 2006, Mariner
completed the merger of the Forest Oil Corp. Gulf of Mexico
operations (the Forest assets). From that date forward, Mariner
will consolidate the results of the Forest assets for reporting
purposes. Results for the months of January and February 2006 will
not be incorporated, but will be accounted for as an adjustment to
the cash settlement price as reflected in the merger agreement.
Guidance provided by Mariner for its 2006 results will include
operating results for the Forest assets for the period beginning
March 2006. PRODUCTION Note: 2006 Guidance includes only the
periods March through December 2006 for the Forest Assets Daily
production for the combined Mariner and Forest assets was
approximately 205 (Mmcfe/d) as of December 31, 2005. In the first
quarter of 2006 we commenced production at our Rigel (Mississippi
Canyon 296) deep water project at an initial sustainable rate of
approximately 17 Mmcfe/d net to Mariner's interest. At March 31,
2006 Mariner's production was approximately 215 - 220 Mmcfe/d.
Mariner anticipates production will commence in the second quarter
of 2006 from its Ochre (Mississippi Canyon 66), North Black Widow
(Ewing Bank 921), Pluto (Mississippi Canyon 718), and King Kong
(Green Canyon 473) projects. The Company believes the aggregate
initial productive rate for these projects will approximate 40
Mmcfe/d net to its interest. Approximately half of the 42 Mmcfe/d
of production from the Forest assets that has been shut-in awaiting
repairs to onshore and offshore pipelines and facilities damaged in
the 2005 hurricanes should recommence in the second quarter 2006,
and the remainder in the second half of 2006. Full-year 2006
reportable production may vary significantly depending on the
timing of initial production at our offshore development projects
and 2006 hurricane activity affecting the Gulf of Mexico.
Hurricanes, loop currents and other adverse weather conditions,
unavailability or increased costs of rigs, equipment, supplies, or
personnel, the timing of third party operations and other factors
that Mariner cannot control could delay planned operations
necessary to achieve its estimated production. Without attempting
to estimate potential shut-in production from the 2006 hurricane
season, we anticipate 2006 reportable production to approximate 75
- 85 Bcfe. CAPITAL EXPENDITURES Mariner's board of directors has
approved a capital expenditure budget of approximately $464
million, excluding estimated capital for 2005 hurricane repairs.
Approximately 41% of the budget has been allocated to the Company's
exploration program, 57% for development operations, and the
remainder allocated for capitalized overhead and interest costs.
Approximately 85% of the budget is allocated for offshore
activities. The Company's 2006 drilling budget includes drilling 30
- 40 wells in the Gulf of Mexico of which half are expected to be
conventional shelf wells, with the remainder split evenly between
deepwater and deepshelf. Mariner also expects to drill more than
100 onshore wells. PRODUCTION AND AVERAGE REALIZED PRICES (Net of
Hedging) Three Months Pro-Forma Ended Year Ended Year Ended
December 31 Dec 31, December 31 2005 2004 2005 2005 2004
Production: Natural Gas (Bcf) 3.9 5.8 67.5 18.4 23.8 Oil (Mbbls)
0.5 0.6 4.6 1.8 2.3 Natural Gas Equivalent (Bcfe) 6.6 9.1 94.9 29.1
37.6 Realized Prices (net of hedging): Gas ($/Mcf) $7.12 $5.66
$6.40 $6.66 $5.80 Oil ($/Bbl) 44.50 34.39 34.18 41.23 33.17 CAPITAL
EXPENDITURES The Company's capital expenditures for 2005 and 2004
are summarized below: Year Ended December 31 2005 2004 (In
millions) Capital Expenditures: Leasehold Acquisitions $11.5 $4.8
Oil and Natural Gas Exploration 50.0 43.0 Oil and Natural Gas
Development 121.7 88.6 Acquisitions 53.4 4.9 Other 16.1 7.6 Total
Capital Expenditures $252.7 $148.9 ESTIMATED PROVED RESERVES The
Company's estimated proved reserves for pro forma 2005, 2005, and
2004 are summarized below: Pro-Forma Year Ended Year Ended December
31 Dec 31, 2005 2005 2004 Proved Oil and Natural Gas Reserves
(Estimated): Natural gas reserves (Bcf) 438.8 207.7 151.9 Oil
(MMbbls) 34.1 21.6 14.3 Total proved oil and natural gas reserves
(Bcfe) 643.7 337.6 237.5 Total proved developed reserves (Bcfe)
362.3 167.4 109.4 COMPARATIVE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE FOURTH QUARTER AND FULL YEAR 2005 AND 2004
MARINER ENERGY, INC. STATEMENTS OF OPERATIONS (Dollars in
Thousands) Three Months Ended Year Ended December 31 December 31
2005 2004 2005 2004 Revenues: Oil Sales $20,252 $18,922 $73,831
$76,207 Gas Sales 27,378 32,975 122,291 137,980 Other Revenues 835
--- 3,588 --- Total Revenues 48,465 51,897 199,710 214,187 Costs
and Expenses: Lease Operating Expense 9,712 6,290 29,882 25,484
Transportation Expense 639 (1,785) 2,336 3,029 General and
Administrative Expense 10,327 1,467 37,053 8,772 Depreciation,
Depletion and Amortization 15,969 16,817 59,426 64,911 Impairment
of Production Equipment Held for Use 1,347 --- 1,845 957 Total
Costs and Expenses 37,994 22,789 130,542 103,153 Operating Income
10,471 29,108 69,168 111,034 Net Interest Expense 2,673 1,607 7,393
5,734 Income Before Taxes 7,798 27,501 61,775 105,300 Provision for
Income Taxes 2,880 9,562 21,294 36,855 Net Income $4,918 $17,939
$40,481 $68,445 Earnings per Share: -- EPS (basic) $0.15 $0.60
$1.24 $2.30 -- EPS (fully diluted) $0.14 $0.60 $1.20 $2.30 Weighted
Average Shares Outstanding: -- Basic 33,348.1 29,748.1 32,667.6
29,748.1 -- Fully Diluted 35,189.3 29,748.1 33,766.6 29,748.1
EBITDA RECONCILIATION: Three Months Ended Year Ended December 31
December 31 2005 2004 2005 2004 (Dollars in Millions)
Reconciliation of Non-GAAP Measure: EBITDA (A) $27.7 $46.0 $130.4
$176.9 Changes in Working Capital (5.1) (11.3) 20.0 (7.0) Non-cash
Hedge Gain (0.9) (2.8) (4.5) (7.9) Amortization/Other 0.3 0.3 1.2
0.8 Stock Compensation Expense 8.1 --- 25.7 --- Net Interest
Expense (2.7) (1.6) (7.4) (5.7) Income Tax Expense 2.6 --- ---
(1.6) Net Cash Provided By Operating Activities $30.0 $30.6 $165.4
$155.5 (A) EBITDA means earnings before interest, income taxes,
depreciation, depletion, amortization and impairments. For the
three months and year ended December 31, 2005, EBITDA includes $8.1
million and $25.7 million, respectively, 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 operating activities or any
other measure financial performance presented in accordance with
generally accepted accounting principles or as a measure of a
company's profitability or liquidity. MARINER ENERGY, INC. BALANCE
SHEET (Dollars in Thousands) December 31 2005 2004 Current Assets:
Cash and Cash Equivalents $4,556 $2,541 Receivables 88,651 52,734
Deferred Tax Asset 26,017 --- Prepaid Expenses and Other 22,208
10,471 Total Current Assets 141,432 65,746 Property and Equipment
(Net) 515,943 303,773 Deferred Tax Asset --- 3,029 Other Assets,
Net of Amortization 8,161 3,471 TOTAL ASSETS $665,536 $376,019
Current Liabilities: Accounts Payable $37,530 $2,526 Accrued
Liabilities 123,689 81,831 Accrued Interest 614 79 Derivative
Liability 42,173 16,976 Total Current Liabilities 204,006 101,412
Long-Term Liabilities: Abandonment Liability 38,176 19,268 Deferred
Income Tax 25,886 --- Derivative Liability 21,632 5,432 Long-Term
Debt 156,000 115,000 Other Long-Term Liabilities 6,500 1,000 Total
Long-Term Liabilities 248,194 140,700 Stockholders' Equity Common
Stock and Additional Paid-In-Capital 167,322 91,918 Unearned
Compensation (6,613) --- Accumulated Other Comprehensive (Loss)
(41,473) (11,630) Accumulated Retained Earnings 94,100 53,619 Total
Stockholders' Equity 213,336 133,907 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $665,536 $376,019 MARINER ENERGY, INC.
STATEMENTS OF CASH FLOWS (Dollars in Thousands) Three Months Ended
Year Ended December 31 December 31 2005 2004 2005 2004 Operating
Activities: Net Income $4,918 $17,939 $40,481 $68,445 Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities: Deferred Income Tax 5,432 9,561 21,294 35,234
Depreciation, Depletion and Amortization 16,319 17,103 60,640
65,697 Stock Compensation Expense 8,112 --- 25,726 --- Impairment
of Production Equipment Held for Use 1,347 --- 1,845 957 Changes in
Operating Assets and Liabilities (6,058) (13,994) 15,458 (14,795)
Net Cash Provided By Operating Activities 30,070 30,609 165,444
155,538 Investing Activities: Additions to Oil and Gas Properties
(104,741) (47,726) (237,729) (148,689) Proceeds from Property
Conveyances --- --- 18 --- Additions to Other Property and
Equipment (974) (3) (10,088) (250) Restricted Cash --- 8,420 ---
621 Net Cash Used In Investing Activities (105,715) (39,309)
(247,799) (148,318) Financing Activities: Credit Facility
Borrowings (Repayments), net 77,000 10,000 47,000 101,579 Proceeds
from Private Equity Offering (203) --- 44,331 --- Capital
Contributions/Dividends from Affiliates --- (1) 2,879 (166,432)
Repayment of Term Note --- --- (6,000) --- Deferred Offering Costs
(1,160) --- (3,840) --- Net Cash (Used In) Provided By Financing
Activities 75,637 9,999 84,370 (64,853) Incr. (Decr.) in Cash &
Cash Equivalents (8) 1,299 2,015 (57,633) Cash & Cash
Equivalents at Beg. of Period 4,564 1,242 2,541 60,174 Cash &
Cash Equivalents at End of Period $4,556 $2,541 $4,556 $2,541
FORWARD LOOKING STATEMENTS The preceding guidance estimates contain
assumptions that we believe are reasonable. These estimates are
based on information that is available as of the date of this news
release. We are not undertaking any obligation to update these
estimates as conditions change or as additional information becomes
available. There can be no assurance that any of the guidance
estimates can or will be achieved. This news 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 are
generally 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. The forward-looking
statements provided in this press release are based on the current
belief of Mariner based on currently available information, as to
the outcome and timing of future events. Mariner cautions that its
future natural gas and liquids production, revenues and expenses
and other forward-looking statements are subject to all of the
risks and uncertainties normally incident to the exploration for
and development and production and sale of oil and gas. These risks
include, but are not limited to, price volatility, inflation or
lack of availability of goods and services, environmental risks,
drilling and other operating risks, regulatory changes, the
uncertainty inherent in estimating future oil and gas production or
reserves, and other risks as described in the Annual Report on Form
10-K for the fiscal year ended December 31, 2005, and other
documents filed by Mariner with the Securities and Exchange
Commission. Any of these factors could cause the 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, 2005 and other
documents filed by Mariner with the Securities and Exchange
Commission that contain important information including detailed
risk factors. This news release does not constitute an offer to
sell or a solicitation of an offer to buy any shares of Mariner
common stock. About Mariner Energy, Inc. Mariner Energy, Inc. is an
independent oil and gas exploration, development and production
company with principal operations in the Gulf of Mexico and the
Permian Basin in West Texas. For more information about Mariner,
please visit its website at http://www.mariner-energy.com/.
DATASOURCE: Mariner Energy, Inc. CONTACT: Rick G. Lester, Vice
President and Chief Financial Officer of Mariner Energy, Inc.,
+1-713-954-5551, or Web site: http://www.mariner-energy.com/
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