HOUSTON, May 9 /PRNewswire-FirstCall/ -- Mariner Energy, Inc.
(NYSE:ME) today announced financial results for first quarter 2006
and provided an operational update. As previously reported, on
March 2, 2006 Mariner completed its acquisition of Forest Oil
Corporation's Gulf of Mexico operations (the Forest Transaction),
and on March 3 commenced trading on the NYSE under the symbol "ME."
Beginning with March 2006, Mariner consolidated the results of the
Forest Gulf of Mexico operations. Accordingly, the reported first
quarter 2006 financial results include only one month of operations
from the Forest assets. Production and revenues in the first
quarter 2006 increased from the first quarter 2005, primarily due
to the addition of the Forest assets in the current quarter as
described above. Production for the first quarter 2006 totaled 10.5
Bcfe, a 27% increase from first quarter 2005, and revenues totaled
$80.3 million, a 44% increase from 2005. Net income totaled $11.1
million, a 37% decrease from 2005, primarily due to increased
depreciation, depletion, and amortization and net interest expense
resulting from the Forest Transaction, and increased stock
compensation expense, offset by higher operating revenues. Basic
and diluted earnings per share (EPS) for the first quarter 2006
were $0.22 and $0.21, respectively, compared to $0.58 for each
measure in the first quarter of 2005. Net cash flows from
operations for the first quarter 2006 increased by 36% to $66.5
million from $49.0 million from the first quarter 2005. The
increase was driven primarily by higher operating revenues. Mariner
has scheduled a conference call to review first quarter 2006
results on May 10, 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) 825-1692. International callers
can dial (617) 213-8059. The conference passcode for both numbers
is 96732138. Following is more detailed information on Mariner's
first quarter 2006 operational and financial results. For pro forma
financial information taking into account the Forest Transaction,
please refer to the pro forma financial information included as an
exhibit to Mariner's Current Report on Form 8-K/A filed on March
31, 2006. OPERATIONAL UPDATE Offshore -- Mariner drilled seven
offshore wells in the first quarter of 2006 with five successes.
Four wells budgeted for drilling in 2005 were postponed into the
first quarter of 2006 because of impacts from the 2005 active
hurricane season. Information regarding the five successful wells
is shown below: Expected Working Water Date of Initial Operator
Interest Depth (Ft) Production Location 1st Qtr 2006 NW Nansen (EB
602 #11) Kerr McGee 33% 3,507 feet TBD Deep Water Reliant (SS 26
#14) Mariner 50% 12 feet 2nd Qtr 2006 Conventional Shelf West
Cameron 130 #3 Dominion 15% 38 feet 3rd Qtr 2006 Deep Shelf King
Kong (GC473 #2ST1) ENI 50% 3,842 feet April 2006 Deep Water Brazos
491 #5 Mariner 100% 77 feet 2nd Qtr 2006 Conventional Shelf Mariner
commenced production at its Rigel (MC 296) and King Kong (GC 473)
deep water fields in March and April 2006, respectively, at gross
initial productive rates of approximately 85 MMcf and 32 MMcf of
natural gas per day, respectively. Mariner owns a 22.5% working
interest in the Rigel field and a 50% working interest in the King
Kong discovery well. Since March 31, 2006, the NW Nansen (EB 602
#12), High Island 131 #2 (King of the Hill), and Reliant (SS 26
#14) wells reached total depth and are successes. The NW Nansen (EB
602 #12) well is located at a water depth of approximately 3,500
feet and was drilled to a total depth of 9,994 feet. The well is
the third discovery in the NW Nansen development project.
Kerr-McGee is the operator, and Mariner owns a 33% working interest
in the first three wells. Kerr-McGee also operates the fourth
planned well in the project, NW Nansen (EB 558 #2), in which
Mariner and Kerr-McGee each own a 50% working interest. The
exploratory test well at High Island 131 #2 (King of the Hill) is
located at a water depth of approximately 50 feet and was drilled
to a total depth of 16,300 feet. Gryphon Exploration Company is the
operator and Mariner owns a 25% working interest in the well, which
is expected to commence production in the second quarter of 2006.
Mariner's Reliant (SS 26 #14) well is located at a water depth of
12 feet and was included as a discovery in the first quarter of
2006 after drilling to a depth of 16,713 feet. The well has been
successfully deepened to a total depth of 17,175 feet to access
additional non-proved reserves. Mariner operates the field and owns
a 50% working interest in the discovery well which should also
commence production in the second quarter of 2006. With these
recent successes, Mariner has been successful in seven of the nine
wells drilled to date through April 30 2006. As of April 30, 2006,
five offshore drilling wells are in progress, including NW Nansen
(EB 558 #2). 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). To
date, Mariner has been awarded four of the blocks, one of which is
in the deepwater. Onshore -- In the first quarter of 2006, Mariner
drilled 46 development wells in West Texas, all of which were
successful. It currently has five rigs operating on its West Texas
properties. PRODUCTION Production for the first quarter 2006
continued to be negatively effected by the lingering impact of the
2005 hurricane season. As of March 31, 2006 approximately 42 MMcfe
per day of production associated with the Forest assets was shut-in
awaiting repairs to pipelines, facilities and terminals, and
approximately 20 MMcfe per day of production from Mariner
development projects awaited completion of hurricane repairs.
Mariner expects approximately two- thirds of the shut-in or
deferred production to recommence by mid-year with the remainder
flowing before year-end. For the first quarter 2006, production
increased 27% to 10.5 Bcfe compared to 8.3 Bcfe for the first
quarter 2005. Natural gas and oil production totaled 6.9 Bcf and
0.6 million Bbls, respectively, in the first quarter 2006 compared
to 5.3 Bcf and 0.5 million Bbls, respectively, for the first
quarter of 2005. Approximately 2.1 Bcfe of the first quarter 2006
production was generated by Mariner's West Texas operations and
approximately 8.4 Bcfe by its offshore operations, compared to
approximately 1.3 Bcfe in West Texas and approximately 7.0 bcfe
offshore in the first quarter 2005. REVENUES AND PRICING For the
first quarter 2006, Mariner generated total natural gas revenues of
$48.1 million compared to $34.9 million for first quarter 2005.
Total oil revenues for first quarter 2006 were $31.5 million,
compared to $19.1 million in the first quarter 2005. Total oil and
gas revenues increased approximately 48% to $79.6 million in the
first quarter 2006 compared to $54.0 million in the first quarter
2005. Prices for the first quarter of 2006 averaged $7.96/Mcf for
natural gas and $57.38/Bbl for oil, compared to $6.52/Mcf and
$46.57/Bbl, respectively, for the first quarter 2005. The impact of
hedges reduced average pricing in the first quarter 2006 by
$1.00/Mcf for natural gas and $5.08/Bbl for oil to $6.96/Mcf and
$52.30/Bbl, respectively. This compares to an increase in natural
gas pricing of $0.02/Mcf and a decrease in oil pricing of
$7.96/Bbl, to $6.54/Mcf and $38.61/Bbl, respectively, in the first
quarter 2005. Hedge losses in the first quarter 2006 were $10.0
million compared to $3.9 million in the first quarter 2005. HEDGING
ACTIVITY Subsequent to March 31, 2006, Mariner has hedged natural
gas and crude oil production as follows: Natural Gas MMBtu Indexed
Price/MMBtu June 1, 2006-March 31, 2007 7,372,000 $9.30 (Swap)
April 1-December 31, 2007 8,796,000 $7.70 - $14.60 (Costless
Collar) January 1-December 31, 2008 12,347,000 $7.83 - $14.60
(Costless Collar) Crude Oil Bbls Indexed Price/Bbl June 1-December
31, 2006 992,600 $75.26 (Swap) January 1-December 31, 2007
1,331,200 $63.38 - $89.4 (Costless Collar) January 1-December 31,
2008 1,080,020 $61.63 - $86.80 (Costless Collar) OPERATING AND
GENERAL & ADMINISTRATIVE EXPENSES Lease Operating Expenses:
Lease operating expenses (including severance, ad valorem taxes and
workover expenses) for the first quarter 2006 were $13.2 million
compared to $6.2 million in the first quarter 2005. The increase
primarily was caused by consolidation of the Forest assets and
increased costs attributable to the addition of new productive
wells at Mariner's West Texas fields. On a per unit basis, lease
operating costs rose to $1.25/Mcfe in the first quarter 2006 from
$0.74/Mcfe in the first quarter 2005. Continued shut- in production
from the impact of the 2005 hurricanes contributed to the increased
per unit operating costs. General & Administrative Expenses:
General and administrative ("G&A") expenses totaled $10.5
million in the first quarter 2006 compared to $5.2 million in the
first quarter 2005. Reported G&A expenses are net of $1.8
million and $1.0 million of overhead reimbursements billed or
received from other working interest owners in the first quarter
2006 and the first quarter 2005, respectively. The first quarter
2006 includes $6.4 million of stock compensation expense which
primarily resulted from the amortization of the cost of restricted
stock granted at the closing of Mariner's private equity placement
in March 2005 in consideration of past performance, compared to
$1.3 million of similar expenses in the first quarter 2005.
Salaries and wages in the first quarter 2006 increased by $2.6
million compared to the first quarter of 2005 as a result of
increased staffing, partially related to the Forest Transaction.
The first quarter 2005 also included $2.3 million in payments to
Mariner's former stockholders to terminate a services agreement.
NET INCOME AND EARNINGS PER SHARE First quarter 2006 net income was
$11.1 million compared to $17.8 million for the first quarter 2005.
The decrease in net income from the first quarter 2005 is primarily
due to increased depreciation, depletion, and amortization and net
interest expense resulting from the Forest Transaction, and
increased stock compensation expense, offset by higher operating
revenues. Basic and fully diluted earnings per share for first
quarter 2006 was $0.22 and $0.21, respectively, compared to $0.58
for each measure in the first quarter 2005. CASH FLOWS FROM
OPERATIONS AND EBITDA Net cash flows from operations for the first
quarter 2006 were $66.5 million compared to $49.0 million for the
first quarter 2005. Capital expenditures in the first quarter 2006
totaled $101.2 million compared to $42.1 million in the first
quarter 2005. EBITDA for the first quarter 2006 was $55.8 million
compared to $43.5 million for the first quarter 2005. EBITDA for
the first quarter 2006 and 2005 includes charges of $6.4 million
and $1.3 million for non-cash stock compensation expense,
respectively. Please refer to the EBITDA reconciliation and
definition included below. PRODUCTION, AVERAGE PRICES (Net of
Hedging), and PER UNIT COSTS Quarter Ended March 31, 2006 2005
Production: Natural Gas (Bcf) 6.9 5.3 Oil and Liquids (Mbbls) 0.6
0.5 Natural Gas Equivalent (Bcfe) 10.5 8.3 Realized Prices (net of
hedging): Gas ($/Mcf) $6.96 $6.54 Oil ($/Bbl) 52.30 38.61 Operating
Costs per Mmcfe Lease Operating Expense $1.25 $0.74 Transportation
Expense 0.07 0.12 General and Administrative Expense 1.00 0.62
General and Administrative Expense - Net of stock comp. exp. 0.39
0.46 Depreciation, Depletion, and Amortization 3.12 1.82 CAPITAL
EXPENDITURES Mariner's capital expenditures for the first quarters
of 2006 and 2005 are summarized below: Quarter Ended March 31, 2006
2005 (In Millions) Oil and Natural Gas Exploration 46.4 1.2 Oil and
Natural Gas Development 51.1 38.9 Other 3.7 2.0 Total Capital
Expenditures 101.2 42.1 COMPARATIVE CONSOLIDATED FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
MARINER ENERGY, INC. STATEMENTS OF OPERATIONS (Dollars in
Thousands) (Unaudited) Three Months ended March 31, 2006 2005
Revenues: Oil Sales $31,471 $19,084 Gas Sales 48,101 34,866 Other
Revenues 688 1,857 Total Revenues 80,260 55,807 Costs and Expenses:
Lease Operating Expense 13,182 6,159 Transportation Expense 730 990
General and Administrative Expense 10,509 5,165 Depreciation,
Depletion and Amortization 32,824 15,129 Total Costs and Expenses
57,245 27,443 Operating Income 23,015 28,364 Net Interest Expense
(5,892) (1,318) Income Before Taxes 17,123 27,046 Provision for
Income Taxes (5,993) (9,271) Net Income $11,130 $17,775 Earnings
per Share: -- EPS (basic) $0.22 $0.58 -- EPS (fully diluted) $0.21
$0.58 Weighted Average Shares Outstanding: -- Basic 49,615.5
30,588.1 -- Fully Diluted 51,844.6 30,599.2 (Dollars in Millions)
Reconciliation of Non-GAAP Measure: EBITDA (1) $55.8 $43.5 Changes
in Working Capital 8.6 4.8 Non-cash Hedge Gain - (1.4)
Amortization/Other (4.4) 0.3 Stock Compensation Expense 6.4 1.3 Net
Interest Expense (5.9) (1.3) Provision for Income Taxes 6.0 1.8 Net
Cash Provided By Operating Activities $66.5 $49.0 (1) EBITDA means
earnings before interest, income taxes, depreciation, depletion,
amortization and impairments. For the three months March 31, 2006
and March 31, 2005, EBITDA includes $6.4 million and $1.3 million,
respectively, in non-cash stock compensation expense related to
restricted stock and stock options granted in 2005. Mariner
believes that EBITDA is a widely accepted financial indicator that
provides additional information about Mariner's ability to meet its
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) March 31, December 31, 2006 2005 Current Assets:
(unaudited) Cash and Cash Equivalents $5,414 $4,556 Receivables
135,480 88,651 Deferred Tax Asset 10,215 26,017 Prepaid Expenses
and Other 77,967 22,208 Total Current Assets 229,076 141,432
Property and Equipment (Net) 1,802,342 515,943 Goodwill 261,472 -
Other Assets, Net of Amortization 28,699 8,161 TOTAL ASSETS
$2,321,589 $665,536 Current Liabilities: Accounts Payable $114,235
$37,530 Accrued Liabilities 232,328 123,689 Accrued Interest 1,514
614 Derivative Liability 42,119 42,173 Total Current Liabilities
390,196 204,006 Long-Term Liabilities: Abandonment Liability
176,796 38,176 Deferred Income Tax 224,515 25,886 Derivative
Liability 13,523 21,632 Long-Term Debt 366,202 156,000 Other
Long-Term Liabilities 16,600 6,500 Total Long-Term Liabilities
797,636 248,194 Stockholders' Equity Common Stock and Additional
Paid-In-Capital 1,053,305 160,709 Accumulated Other Comprehensive
(Loss) (24,778) (41,473) Accumulated Retained Earnings 105,230
94,100 Total Stockholders' Equity 1,133,757 213,336 TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $2,321,589 $665,536 FORWARD
LOOKING STATEMENTS 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, Web site:
http://www.mariner-energy.com/
Copyright