SOURCE: Mariner Energy, Inc.

Mariner Energy, Inc.

March 01, 2010 05:45 ET

Mariner Energy Reports 2009 Fourth-Quarter and Full-Year Results and Announces Additional Drilling Success in the Gulf of Mexico Deepwater and Shelf

HOUSTON, TX--(Marketwire - March 1, 2010) - Mariner Energy, Inc. (NYSE: ME) today reported fiscal fourth-quarter and full-year 2009 financial and operating results. For the three months ended December 31, 2009, the company reported net income of $83.3 million or $0.83 per basic and $0.82 per diluted share, compared with a loss of $648.9 million or $7.41 per basic and diluted share for the same period in the prior year. For the full year ended December 31, 2009, the company reported a net loss of $319.4 million ($3.34 per basic and diluted share). This compares to a net loss of $388.7 million ($4.44 per basic and diluted share) for 2008. Excluding a non-recurring, non-cash gain and certain non-cash charges, the company's adjusted net income for fourth quarter 2009 was $21.0 million or $0.22 per basic and diluted share, and for full-year 2009 adjusted net income was $92.2 million or $0.96 per basic and diluted share. Operating cash flow was $531.1 million for 2009. See the notes below for reconciliation of non-GAAP measures adjusted net income and operating cash flow.

Highlights for 2009 and first quarter 2010 to date include:

--  First quarter 2010 discoveries at Mandy, a deepwater oil field on
    Mississippi Canyon Block 199, and on South Pass 75, a gas field on the
    shelf, as well as the previously announced success at the Lucius
    sidetrack well on Keathley Canyon Block 875.
--  A 2009 drilling success rate of 63% (10 for 16) offshore, including
    the Heidelberg and Lucius oil fields in the deepwater Gulf of Mexico
    and the discovery and appraisal onshore of a new oil field at Deadwood
    in the Permian Basin.
--  Expanding into a new core area in the Gulf Coast with the acquisition
    of producing properties located principally in South Texas.
--  Building a new leasehold position in unconventional resource plays,
    including approximately 43,000 net acres in Wyoming, North Dakota
    and Arkansas principally targeting low-entry-cost oil opportunities.
--  A 12% increase in 2009 year-end estimated proved reserves to 1.087
    trillion cubic feet of natural gas equivalent (Tcfe), a reserve
    replacement rate from all sources of 190% at a cost of $3.24 per
    thousand cubic feet equivalent (Mcfe) (see related notes below), and
    a year-over-year production increase of 7% to 126.5 billion cubic feet
    of natural gas equivalent (Bcfe).

"Mariner Energy continues to create and build value, our primary focus. Consistent with our business plan, we expanded onshore into new areas, conventional and unconventional, that should provide predictable and repeatable results going forward, while tapping the significant upside potential in our offshore exploration portfolio, principally in the deepwater. We've had another successful year with the drillbit in all areas and realized continued success in the prolific deepwater subsalt play. For the sixth year in a row, we increased our estimated proved oil and gas reserves, which now approach 1.1 Tcfe, a milestone for our company. The increase occurred without a material increase in the percentage of our proved undeveloped reserves. Our proved reserves do not yet reflect any contribution from a number of our deepwater discoveries, including the significant Heidelberg and Lucius discoveries as well as Bushwood, Wide Berth and Dalmatian and include only relatively small amounts from Balboa, Smoothie and the Deadwood field in the Permian Basin. These unbooked projects should significantly enhance reserves and production in future years. More than half of our proved reserves now are onshore. Additionally, almost half of our proved reserves are oil and liquids; and we have evolved into an oil company, especially when the unbooked discoveries, comprised largely of oil and liquids, are considered. Our excellent operational success in 2009 and early 2010 again validates our balanced business model," said Scott D. Josey, Mariner's Chairman, Chief Executive Officer and President.

NON-CASH GAIN AND CHARGES

The company's results for fourth-quarter and full-year 2009 reflect a non-recurring, non-cash gain of $107.3 million attributable to the December 31, 2009 acquisition of the subsidiaries and operations of Edge Petroleum Corporation. Based on lower average commodity prices for 2009, Mariner recorded full cost ceiling test impairments of its proved oil and gas properties in the amount of $754.3 million for full-year 2009 and $49.6 million for fourth quarter 2009. The company also recorded a non-recurring, non-cash charge of $12.0 million at year-end 2009 related to a contingent OIL withdrawal premium. Stock compensation expense of $25.4 million was recorded for the full-year 2009, which includes $7.1 million for the fourth-quarter. These items are detailed below in the reconciliation of adjusted net income, a non-GAAP measure.

FOURTH QUARTER 2009 RESULTS

For fourth quarter 2009, Mariner reported net income of $83.3 million, or $0.83 per basic and $0.82 per diluted share, which reflects the non-cash gain and charges noted above. This compares with a net loss of $648.9 million or $7.41 per basic and diluted share for the same three-month period in the prior year. Adjusted net income, which excludes the non-cash gain and charges, was $21.0 million for fourth quarter 2009, or $0.22 per share (see reconciliation of this non-GAAP measure below).

Net production for fourth quarter 2009 was 30.8 Bcfe, compared with 23.5 Bcfe for fourth quarter 2008. Total natural gas production net to Mariner for fourth quarter 2009 was 20.8 billion cubic feet (Bcf), compared with 16.1 Bcf for the same period in the prior year. Total oil net production for fourth quarter 2009 was 1.2 million barrels (MMBbls), compared with 1.0 MMBbls for the same period in 2008. Natural gas liquids net production for fourth quarter 2009 was 0.4 MMBbls, compared with 0.3 MMBbls for fourth quarter 2008. Mariner has begun posting its estimated monthly production volumes on its website (www.mariner-energy.com) on the last business day of the month following the applicable reporting period. The first such report, disclosing January 2010 estimated production, was posted on February 26, 2010.

For fourth quarter 2009, Mariner's average realized natural gas price was $6.08 per thousand cubic feet (Mcf) compared with $7.44 per Mcf for the same period in 2008. Mariner's average realized oil price was $77.96 per barrel (Bbl) for fourth quarter 2009, compared with $65.29 per Bbl for fourth quarter 2008. These average realized prices reflect settlements during the period under Mariner's hedging program. The average realized NGL price was $41.49 per Bbl for fourth quarter 2009, compared with $26.63 per Bbl for the same period in 2008.

FULL-YEAR 2009 RESULTS

For the year ended December 31, 2009, Mariner reported a net loss of $319.4 million, which equates to a loss of $3.34 per basic and diluted share. For 2008, Mariner reported a net loss of $388.7 million, or $4.44 per basic and diluted share. Adjusted net income, which excludes the non-cash gain and charges noted above, was $92.2 million for 2009 or $0.96 per basic and diluted share (see reconciliation of this non-GAAP measure below).

For the full-year 2009, Mariner reported net production of 126.5 Bcfe, up from 118.4 Bcfe reported in 2008. Daily production averaged more than 347.0 million cubic feet of natural gas equivalent (MMcfe), a record for Mariner. Total natural gas net production during 2009 was 90.8 Bcf at an average realized price of $6.08 per Mcf, compared with 79.8 Bcf for 2008 at an average realized price of $9.31 per Mcf. Total oil net production for 2009 was 4.5 MMBbls at an average realized price of $70.59 per Bbl, compared to 4.9 MMBbls during 2008 at an average realized price of $86.02 per Bbl. These average realized prices reflect settlements during the period under Mariner's hedging program. Total NGL net production during 2009 was 1.5 MMBbls at an average realized price of $33.10, compared to 1.6 MMBbls at an average realized price of $55.02 per Bbl for the prior year.

Operating cash flow was $531.1 million for the full 2009 fiscal year, compared with $885.9 million in 2008 (see reconciliation of this non-GAAP measure below).

CAPITAL EXPENDITURES

Mariner's capital expenditures for the fourth-quarter and full-year 2009 are summarized in the table below.

                                                         Fourth     Full-
                                                        Quarter     Year
                                                          2009      2009
                                                        --------- ---------
                                                          (In thousands)
Exploration                                             $  39,006 $ 204,805

Development
  Gulf of Mexico - Deepwater                            $   2,170 $  67,538
  Gulf of Mexico - Shelf                                   31,153   179,973
  Permian Basin                                            22,621    59,323

Acquisitions                                            $ 239,517 $ 236,661

Corporate expenditures and other                        $     696 $  38,462

                                                        --------- ---------
    Total Capital Expenditures                          $ 335,163 $ 786,762
                                                        ========= =========


OPERATIONAL UPDATE

Offshore

Mariner was successful in 10 of its 16 offshore wells drilled in 2009. Mariner drilled five offshore wells in fourth quarter 2009, four of which were successful:


                            Working    Water Depth
Well Name          Operator Interest       (Ft)      Location
                   -------- ---------  ------------  ----------------------
Green Canyon 490#1
 (Wide Berth)      Mariner      56.25%        3,700  Conventional Deepwater
South Marsh
 Island 10 #4      Mariner        100%           70  Conventional Shelf
Keathley Canyon
 875#1 (Lucius)    Anadarko     16.67%        7,100  Deepwater Subsalt
Viosca Knoll
 917#1ST2
 (Swordfish)       Noble           15%        4,370  Conventional Deepwater


The unsuccessful well during the fourth quarter was South Marsh Island 150 D1ST1.

Subsequent to the end of fourth quarter 2009, Mariner drilled five wells, all of which were successful:


                            Working    Water Depth
Well Name          Operator Interest      (Ft)      Location
                   -------- --------   -----------  ----------------------
Keathley Canyon
 875#1ST1 (Lucius) Anadarko    16.67%        7,100  Deepwater Subsalt
Mississippi
 Canyon 199#1
 (Mandy)           LLOG           35%        2,500  Conventional Deepwater
Mississippi Canyon
 199#2 (Mandy)     LLOG           35%        2,500  Conventional Deepwater
South Pass 75
 A6ST1             Apache       28.8%          356  Conventional Shelf
South Pass 75 A11
 ST2               Apache       28.8%          356  Conventional Shelf


Mariner currently has three rigs working in the Gulf of Mexico.

Onshore

In fourth quarter 2009, Mariner drilled 25 wells in the Permian Basin, of which 21 were successful. The non-commercial wells were shallow gas targets drilled at the company's Homestake prospect in Edwards County, Texas. Mariner currently has six rigs working on its Permian Basin properties. The company participated in 51 onshore wells in 2009.

CONFERENCE CALL TO DISCUSS RESULTS

A conference call has been scheduled for 10:30 a.m. Eastern Time (9:30 a.m. Central Time) on Monday, March 1, 2010, to discuss fiscal 2009 financial and operating results.

To participate in the call, please dial one of the numbers listed below at least 10 minutes prior to the scheduled start time:

    Callers from the United States and Canada:      +1 (866) 202-0886
    Callers from International locations:           +1 (617) 213-8841

The conference passcode for both numbers is 8460 0122.

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. Speakers may refer to data in the company's latest investor presentation, which is accessible on the company's website under "Investor Information," then clicking "Webcasts and Presentations."

A telephonic replay of the call will be available through March 11, 2010 by dialing (888) 286-8010 or (617) 801-6888, pass code 7201 1598. An archive of the webcast will be available shortly after the call on Mariner's website through March 31, 2010.

About Mariner Energy, Inc.

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

                           MARINER ENERGY, INC.
                          SELECTED OPERATING DATA
                                (Unaudited)

Net Production, Realized Prices and Operating
 Costs
                                             Three Months   Twelve Months
                                                Ended           Ended
                                             December 31,    December 31,
                                             2009    2008    2009    2008
                                            ------  ------- ------- -------

Net production:
  Natural gas (Bcf)                           20.8     16.1    90.8    79.8
  Oil (MMBbls)                                 1.2      1.0     4.5     4.9
  Natural gas liquids (MMBbls)                 0.4      0.3     1.5     1.6
    Total production (Bcfe)                   30.8     23.5   126.5   118.4

Realized prices (net of hedging):
  Natural gas ($/Mcf)                       $ 6.08  $  7.44 $  6.08 $  9.31
  Oil ($/Bbl)                                77.96    65.29   70.59   86.02
  Natural gas liquids ($/Bbl)                41.49    26.63   33.10   55.02

Operating costs per Mcfe:
  Lease operating expense                   $ 2.72  $  2.73 $  1.97 $  1.96
  Severance and ad valorem taxes              0.09     0.15    0.11    0.15
  Transportation expense                      0.16     0.16    0.15    0.13
  General and administrative expense          0.73     1.03    0.63    0.51
  Depreciation, depletion and amortization    3.18     3.91    3.16    3.95
  Other expense                              (0.12)    0.09    0.07    0.03

Estimated Proved Reserves

                                         As of the Year    As of the Year
                                              Ended             Ended
                                        December 31, 2009 December 31, 2008
                                        ----------------- -----------------
Estimated proved natural gas, oil and
 natural gas liquids reserves:
  Natural gas (Bcf)                                 571.4             558.0
  Oil (MMBbls)                                       52.5              43.8
  Natural gas liquids (MMBbls)                       33.5              25.5
                                        ----------------- -----------------
    Total estimated proved reserves
     (Bcfe)                                       1,087.1             973.9
                                        ----------------- -----------------
    Total proved developed reserves
     (Bcfe)                                         716.4             677.7
                                        ----------------- -----------------


                          MARINER ENERGY, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)



                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Revenues:
  Natural gas sales         $  126,512  $  119,665  $  552,259  $  742,370
  Oil sales                     94,855      63,721     315,642     419,878
  Natural gas liquids sales     18,523       7,136      48,921      85,715
  Other revenues                   399      46,746      26,119      52,544
                            ----------  ----------  ----------  ----------
    Total revenues             240,289     237,268     942,941   1,300,507
Cost and Expenses:
  Lease operating expense       83,633      64,304     249,449     231,645
  Severance and ad valorem
   taxes                         2,742       3,505      14,410      18,191
  Transportation expense         4,867       3,708      18,494      14,996
  General and
   administrative expense       22,505      24,333      79,960      60,613
  Depreciation, depletion
   and amortization             98,095      92,095     399,400     467,265
  Full cost ceiling test
   impairment                   49,594     575,607     754,325     575,607
  Goodwill impairment                -     295,598           -     295,598
  Other property impairment          -      15,252           -      15,252
  Other miscellaneous
   expense                      (3,654)      2,087       8,306       3,052
                            ----------  ----------  ----------  ----------
    Total costs and
     expenses                  257,782   1,076,489   1,524,344   1,682,219
                            ----------  ----------  ----------  ----------
OPERATING LOSS                 (17,493)   (839,221)   (581,403)   (381,712)

Other Income/(Expenses):
  Interest income                   56         386         499       1,362
  Interest expense, net of
   capitalized amounts         (19,058)     (2,757)    (70,134)    (56,398)
  Gain on acquisition          107,259           -     107,259           -
                            ----------  ----------  ----------  ----------
Income (loss) before taxes      70,764    (841,592)   (543,779)   (436,748)
Benefit for income taxes        12,510     192,672     224,370      48,223
                            ----------  ----------  ----------  ----------
Net income (loss)               83,274    (648,920)   (319,409)   (388,525)
   Less: net income
    attributable to
    non-controlling
    interest                         -           -           -        (188)
                            ----------  ----------  ----------  ----------
 Net Income (Loss)
  Attributable to Mariner   $   83,274  $ (648,920) $ (319,409) $ (388,713)
                            ==========  ==========  ==========  ==========

Earnings per share:
Net income (loss) per
 Share - basic              $     0.83  $    (7.41) $    (3.34) $    (4.44)
Net income (loss) per
 Share - diluted            $     0.82  $    (7.41) $    (3.34) $    (4.44)

Weighted average shares
 Outstanding - basic           100,826      87,623      95,607      87,491
Weighted average shares
 Outstanding - diluted         101,406      87,623      95,607      87,491



                            MARINER ENERGY, INC.
                        CONSOLIDATED BALANCE SHEETS
                    (In thousands, except share data)


                                                  December 31, December 31,
                                                     2009          2008
                                                  -----------  -----------
Current Assets
  Cash and cash equivalents                       $     8,919  $     3,251
  Receivables, net of allowances                      148,725      219,920
  Insurance receivables                                 8,452       13,123
  Derivative financial instruments                      2,239      121,929
  Intangible assets                                    22,615        2,353
  Prepaid expenses and other                           11,667       14,377
  Deferred income tax                                   9,704            -
                                                  -----------  -----------
    Total current assets                              212,321      374,953

Property and equipment:
  Proved oil and gas properties, full cost
   method                                           5,117,273    4,448,146
  Unproved properties, not subject to
   amortization                                       292,237      201,121
                                                  -----------  -----------
    Total oil and gas properties                    5,409,510    4,649,267
  Other property and equipment                         55,695       53,115
  Accumulated depreciation, depletion and
   amortization:
  Proved oil and gas properties                    (2,884,411)  (1,767,028)
  Other properties                                     (8,235)      (5,477)
                                                  -----------  -----------
    Total accumulated depreciation,
     depletion and amortization                    (2,892,646)  (1,772,505)
                                                  -----------  -----------
    Total property and equipment, net               2,572,559    2,929,877

Insurance receivables                                       -       22,132
Derivative financial instruments                          902            -
Deferred income tax                                    12,491            -
Other Assets, net of amortization                      68,932       65,831
                                                  -----------  -----------
TOTAL ASSETS                                      $ 2,867,205  $ 3,392,793
                                                  ===========  ===========

Current Liabilities
  Accounts payable                                $     3,579  $     3,837
  Accrued liabilities                                 137,206      107,815
  Accrued capital costs                               140,941      195,833
  Deferred income tax                                       -       23,148
  Abandonment liability                                54,915       82,364
  Accrued interest                                      8,262       12,567
  Derivative financial instruments                     27,708            -
                                                  -----------  -----------
    Total current liabilities                         372,611      425,564

Long-Term Liabilities
  Abandonment liability                               362,972      325,880
  Deferred income tax                                       -      319,766
  Derivative financial instruments                     15,017            -
  Long-term debt                                    1,194,850    1,170,000
  Other long-term liabilities                          38,800       31,263
                                                  -----------  -----------
    Total long-term liabilities                   $ 1,611,639  $ 1,846,909

Stockholders' Equity
  Common stock, $.0001 par value; 180,000,000
   shares authorized; 101,806,825 shares issued
   and outstanding at December 31, 2009;
   180,000,000 shares authorized, 88,846,073
   shares issued and outstanding at December 31,
   2008                                                    10            9
  Additional paid-in capital                        1,257,526    1,071,347
  Accumulated other comprehensive (loss)
   income                                             (25,955)      78,181
  Accumulated deficit                                (348,626)     (29,217)
                                                  -----------  -----------
    Total stockholders' equity                        882,955    1,120,320
                                                  -----------  -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 2,867,205  $ 3,392,793
                                                  ===========  ===========




                           MARINER ENERGY, INC.
                    SELECTED CASH FLOW INFORMATION (1)
                              (in thousands)
                                (unaudited)

                                              12 Months Ended December 31,

                                              ----------------------------
                                                  2009           2008
                                              -------------  -------------

Operating cash flow (2)                       $     531,149  $     885,887
Changes in operating assets and liabilities          46,518        (23,870)
                                              -------------  -------------
  Net cash provided by operating activities   $     577,667  $     862,017
                                              =============  =============

Net cash used in investing activities         $    (747,108) $  (1,264,784)
                                              =============  =============

Net cash provided by financing activities     $     175,109  $     387,429
                                              =============  =============

Increase (Decrease) in cash and cash
 equivalents                                  $       5,668  $     (15,338)
                                              =============  =============

(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

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. Estimated reserves are related to hydrocarbon prices. Hydrocarbon prices used in estimating reserves may vary significantly from actual future prices. Therefore, volumes of reserves actually recovered may differ significantly from such estimates. 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 Mariner's latest Annual Report on Form 10-K and other documents filed by Mariner with the Securities and Exchange Commission (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 Mariner's latest Annual Report on Form 10-K and other documents filed by Mariner with the SEC.

"Proved" oil and gas reserves are those that can be estimated with reasonable certainty to be economically and legally producible under existing economic conditions, operating methods and government regulations. "Probable," "possible" and "non-proved" reserves, reserve "potential" or "upside" or other descriptions of volumes of reserves potentially recoverable involve estimates that by their nature are more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of actually being realized by Mariner. The SEC generally does not permit a company's filings with the SEC to include estimates of oil or gas resources other than reserves, and any estimated values of such resources, due to concern that resources other than reserves are too speculative and may be misleading.

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

Note on reserve replacement rate: Mariner's reserve replacement rate reported above was calculated by dividing total estimated proved reserve changes for the period from all sources, including acquisitions and divestitures, by production for the same period. The method Mariner uses to calculate its reserve replacement rate may differ from methods used by other companies to compute similar measures. As a result, its reserve replacement rate may not be comparable to similar measures provided by other companies.

2009 net additions, revisions, conversions, purchases,
 sales:                                                         239.8 Bcfe
2009 production:                                                126.5 Bcfe

2009 proved reserves adds/2009 production:                      189.6%

Note on reserve replacement cost: Reserve replacement cost is calculated by dividing hydrocarbon development, exploration and acquisition capital expenditures (including capitalized internal costs and excluding hurricane expenditures net of insurance recoveries and non-cash changes to asset retirement obligations) for the period by net estimated proved reserve additions for the period from all sources, including acquisitions and divestitures. Mariner's calculation of reserve replacement cost includes costs and reserve additions related to the purchase of proved reserves. The method Mariner uses to calculate its reserve replacement cost may differ significantly from methods used by other companies to compute similar measures. As a result, its reserve replacement cost may not be comparable to similar measures provided by other companies. Mariner believes that providing a measure of reserve replacement cost is useful in evaluating the cost, on a per-Mcfe basis, to add proved reserves. However, this measure is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with generally accepted accounting principles. Due to various factors, including timing differences in the addition of proved reserves and the related costs to develop those reserves, reserve replacement costs do not necessarily reflect precisely the costs associated with particular reserves. As a result of various factors that could materially affect the timing and amounts of future increases in reserves and the timing and amounts of future costs, the company cannot assure you that its future reserve replacement costs will not differ materially from those presented.

                                         2007         2008         2009
                                     -----------  -----------  -----------
                                                 (in millions)

Capital costs related to property
 acq, expl, and devel                      788.6      1,344.1        784.2
Hurricane expenditures, net of
 insurance recoveries                      (12.3)       (60.1)        (6.6)
Proceeds from divestitures                   4.1            -            -
                                     -----------  -----------  -----------
Capital expenditures before
 divestitures ($MM) (1)                    780.4      1,284.0        777.6

Reserve additions (Bcfe)                   222.6        256.7        239.8
Reserve Replacement Cost/Mcfe        $      3.51  $      5.00  $      3.24

Rolling 3-year capital expenditures                                2,842.0
Rolling 3-year reserve additions                                     719.1
Rolling 3-year Reserve Replacement
 Cost/Mcfe                                                     $      3.95

(1) Unaudited


Reconciliation of Non-GAAP Measure: Adjusted Net Income

Mariner Energy's reported net income and earnings per share for the fiscal fourth quarter and full-year 2009 includes a non-recurring, non-cash gain and non-cash charges. 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 fiscal fourth quarter and full-year 2009 are listed below.

--  A non-recurring gain attributable to the December 31, 2009 acquisition
    of the subsidiaries and operations of Edge Petroleum Corporation
    positively impacting net income.  The $107.3 million non-taxable gain
    equates to $1.12 for the year and $1.06 for fourth-quarter contribution
    to basic and diluted earnings per share (EPS).
--  Ceiling test impairments in the fourth-quarter and full-year 2009
    negatively impacted net income.  For the full-year 2009, the ceiling
    test impairment was $754.3 million ($494.5 million after tax), for a
    $5.17 after-tax loss per basic and diluted share.  For fourth-quarter
    2009, the ceiling test impairment was $49.6 million ($32.5 million
    after tax), for a $0.32 loss per basic and diluted share.
--  A non-cash charge for a contingent withdrawal premium related to
    Mariner's participation in the OIL insurance mutual negatively impacted
    net income.  The additional premium was $12.0 million charge ($7.9
    million after-tax) or a loss per basic and diluted share of $0.08 for
    the fourth-quarter and full-year 2009.
--  Non-cash stock compensation expense in the fourth-quarter and full-year
    2009 negatively impacted net income.  For the full-year 2009, the
    expense was $25.4 million ($16.5 million after tax), which equates to
    $0.17 loss per basic and diluted share.  For fourth quarter 2009, this
    charge was $7.1 million ($4.6 million after tax) for a loss per basic
    and diluted share of $0.05.

Excluding the items above, Mariner would have reported earnings for the fourth quarter 2009 of $21.0 million or $0.22 per basic and diluted share. Fiscal 2009's full year net income and basic and diluted EPS would have been $92.2 million and $0.96, respectively. Adjusted net income 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.

                           MARINER ENERGY, INC.
                  RECONCILIATION OF ADJUSTED NET INCOME
                  (in  millions, except per share data)
                              (Unaudited)



                              Three Months Ended      Twelve Months Ended
                              December 31, 2009       December 31, 2009

                             After-Tax               After-Tax
                             Impact (1)     EPS (2)  Impact (1)     EPS (3)

Net income (loss)           $     83.3  $     0.83  $   (319.4) $    (3.34)
  Gain on acquisition           (107.3)      (1.06)     (107.3)      (1.12)
  Ceiling test impairment         32.5        0.32       494.5        5.17
  Contingent OIL premium
   charges                         7.9        0.08         7.9        0.08
  Stock compensation
   expense                         4.6        0.05        16.5        0.17
Adjusted net income
 (non-GAAP)                 $     21.0  $     0.22  $     92.2  $     0.96

(1) Calculated using Mariner's effective tax rate
(2) Denotes basic earnings per share.  In fourth-quarter 2009 Mariner
    reported $0.82 diluted earnings per share.
(3) Denotes basic and diluted earnings per share.


Reconciliation of Non-GAAP Measure: Operating Cash Flow

Operating cash flow (OCF) is not a financial or operating measure under generally accepted accounting principles in the United States of America (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.

                                                      12 Months Ended
                                                        December 31,
                                                    2009            2008
                                                  --------        --------
                                                       (in thousands)
                                                         (Unaudited)

Net cash provided by operating activities         $    577,667 $   862,017
Less: Changes in operating assets and liabilities       46,518     (23,870)
                                                  ------------ -----------
Operating cash flow (non-GAAP)                    $    531,149 $   885,887
                                                  ============ ===========