Mariner's Q1 Profit Edges Upward

Mariner Energy, Inc. on Thursday announced financial results for the first quarter 2007 and provided an operational update.

Production, revenue and net income for the first quarter 2007 increased significantly from results reported a year ago primarily as a result of the acquisition of the Forest Oil Corporation Gulf of Mexico assets on March 2, 2006, organic growth and restoration of production shut in due to the 2005 hurricanes.

-- Net production totaled 25.4 billion cubic feet equivalents of natural gas (Bcfe) for the first quarter 2007, an increase of 142% from the first quarter 2006.
-- Revenue totaled $211 million for the first quarter 2007, an increase of 164% from the first quarter 2006.
-- Net income totaled $38.2 million for the first quarter 2007, an increase of 243% from the first quarter 2006.
-- Basic and diluted earnings per share (EPS) for the first quarter 2007 were each $0.45, compared to $0.22 basic EPS and $0.21 diluted EPS in the first quarter 2006.

Following is more detailed information regarding Mariner's first quarter 2007 financial and operational results.

NET INCOME AND EARNINGS PER SHARE

First quarter 2007 net income was $38.2 million compared to $11.1 million for the first quarter 2006, an increase of 243%. The increase is due primarily to an increase in production and revenue resulting from the Forest transaction, restoration of production shut in due to the 2005 hurricane and organic growth. Net income for the first quarter 2007 includes non-cash losses of $2.1 million related to hedge ineffectiveness under FAS 133, Accounting for Derivative Instruments.

Basic and fully-diluted EPS for first quarter 2007 was $0.45 for each measure, compared to $0.22 basic and $0.21 diluted EPS in the first quarter 2006.

NET PRODUCTION AND PRICING

For the first quarter 2007, Mariner reported net production of 25.4 Bcfe, compared to 10.5 Bcfe for the first quarter 2006, an increase of 142%. Total natural gas net production was 17.5 billion cubic feet (Bcf) at an average realized price including the effects of hedging of $8.04 per thousand cubic feet (Mcf), compared to 6.4 Bcf for the first quarter 2006 at an average realized price including the effects of hedging of $6.88/Mcf. Total oil net production was 1.05 million barrels (MMBbls) at an average realized price including the effects of hedging of $57.76 per barrel (Bbl), compared to 0.56 MMBbls in the first quarter 2006 at an average realized price including the effects of hedging of $53.55/Bbl. Commencing with the first quarter 2007, Mariner began classifying revenue associated with liquids and plant products separately from oil revenue. Natural gas liquid (NGL) net production was 0.28 MMBbls at an average realized price of $33.04/Bbl, compared to 0.12 MMBbls in the first quarter 2006 at an average realized price of $43.44/Bbl.

REVENUES

First quarter 2007 total revenues were $211 million, compared to $80 million for first quarter 2006, an increase of 164%. Hedge gains in the first quarter 2007 were $23.6 million compared to hedge losses of $10.0 million in the first quarter 2006. In the first quarter 2007, natural gas comprised 67% of total revenues as compared to 55% in the first quarter 2006.

OPERATING AND GENERAL & ADMINISTRATIVE EXPENSES

Lease Operating Expense and Production Taxes

Lease operating expense ("LOE") in the first quarter 2007 totaled $34.8 million, or $1.37 per thousand cubic feet equivalent of natural gas (Mcfe) as compared to $11.5 million, or $1.09/Mcfe, in the first quarter 2006. LOE for the first quarter 2007 included $3.5 million ($0.14/Mcfe) of expenses billed during the quarter by outside operators relating to periods in 2006.

Severance and ad valorem taxes in the first quarter 2007 totaled $3.0 million, or $0.12/Mcfe as compared to $1.7 million, or $0.16/Mcfe, in the first quarter 2006.

Due to higher than anticipated severance and production taxes, Mariner's LOE, exclusive of the $3.5 million 2006 LOE charges received in the first quarter, are now expected to average between $1.20/Mcfe and $1.30/Mcfe for 2007.

General & Administrative Expense

General and administrative ("G&A") expense for the first quarter 2007 totaled $10.1 million, or $0.40/Mcfe. This compares to $10.5 million, or $1.00/Mcfe, in the first quarter 2006. G&A expense includes stock compensation expense of $1.6 million and $6.4 million in the first quarter 2007 and 2006, respectively. Due to higher insurance and benefits costs, as well as anticipated increases in professional and consulting services planned for Sarbanes-Oxley compliance, system enhancement and insurance claims initiatives for the remainder of the year, the cash costs included in G&A expense are now expected to average between $0.25/Mcfe and $0.30/Mcfe for 2007. In addition, we expect non-cash stock compensation expense which will also be included in G&A to average between $0.04/Mcfe and $0.06/Mcfe.

OTHER INCOME

Other income of $5.4 million in the first quarter 2007 reflects a partial settlement of remaining post-closing accounting adjustments related to the Forest transaction.

OPERATIONAL UPDATE

Offshore -- Mariner drilled eight offshore wells in the first quarter 2007, seven of which were successful. Information regarding the successful wells is shown below:



                                 Working   Water Depth
    Well Name       Operator    Interest     (Ft)       Location

    SM 150 #1       Mariner       100 %       235    Conv. Shelf
    WC 110 #12ST    Mariner       100 %        45    Conv. Shelf
    WC 110#18ST     Mariner       100 %        45    Conv. Shelf
    AT 426 #1BP1    Mariner      42.2 %      6640    Deepwater
    AT 426 #2       Mariner      42.2 %      6640    Deepwater
    EI 337 A5ST1     Devon          2 %       265    Conv. Shelf
    HI A467 A16     Mariner       100 %       185    Conv. Shelf

As of March 31, 2007, five offshore wells were drilling.

Onshore -- In the first quarter of 2007, Mariner drilled 33 development wells in West Texas, all of which were successful. As of March 31, 2007, Mariner had four rigs operating on its West Texas properties.

CAPITAL EXPENDITURES

Mariner's capital expenditures for the three-month periods ended March 31, 2007 and 2006, are summarized below:



                                                           Three Months Ended
                                                                March 31,
                                                              2007      2006
                                                         (Dollars in Millions)
    Oil and Natural Gas Exploration                          $57.0     $46.4
    Oil and Natural Gas Development                          123.7      51.1
    Acquisitions/Dispositions/Other                            2.5       3.7
                                                            ----------------
          Total Capital Expenditures                        $183.2    $101.2

Mariner Energy, Inc. is an independent oil and gas exploration, development and production company headquartered in Houston, Texas, with principal operations in the Gulf of Mexico and West Texas.

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