Mariner Reports 3Q07 Results

Mariner Energy, Inc. (NYSE:ME) reported third-quarter 2007 net income of $22.5 million, compared to $36.4 million (including a non-cash hedging gain of $4.5 million) for the third quarter 2006. Net income in the third quarter 2007 includes non-recurring expenses relating to Mariner's 2006 Gulf of Mexico acquisition from Forest Oil Corporation of $2.7 million and a non-cash loss related to hedge ineffectiveness under FAS 133 of $0.4 million. Basic and fully-diluted earnings per share (EPS) for the third quarter 2007 were $0.26, compared to $0.43 ($0.03 of which represented a non-cash hedging gain) for each measure in the third quarter 2006. Cash flows from operations for the nine-month period ended September 30, 2007 was $437.4 million, compared to $325.0 million for the same period in 2006, an increase of 35%.

For the third quarter 2007, Mariner reported net production of 23.2 billion cubic feet equivalents of natural gas (Bcfe), compared to 22.7 Bcfe for the third quarter 2006. Total natural gas net production was 15.5 billion cubic feet (Bcf), compared to 16.1 Bcf for the third quarter 2006. Total oil net production was 0.99 million barrels (MMBbls), compared to 0.91 MMBbls in the third quarter 2006. Natural gas liquids (NGL) net production was 0.29 MMBbls compared, to 0.18 MMBbls in the third quarter 2006.

Delays during the quarter in executing recompletions and initiating first production from new projects in the Gulf of Mexico resulted in the deferral of significant production affecting the second half of 2007. As a result, Mariner has revised its 2007 full-year production guidance to approximately 100 Bcfe.

Scott D. Josey, Mariner's Chief Executive Officer, elaborated on the results: "While frustrating, the production delays experienced in the third quarter do not overshadow Mariner's impressive 24% year-over-year production growth. We have numerous new projects with significant production potential -- including our Bass Lite and Northwest Nansen deepwater projects -- set to commence production over the next ninety days. Production from these new projects, combined with deferred production from the second half of 2007, should position Mariner for continued strong production growth in 2008."

Third quarter 2007 total revenues were $196.5 million, compared to $190.5 million for third quarter 2006. Settlements under Mariner's hedge positions resulted in a gain of $11.5 million in the third quarter 2007, compared to a gain of $3.5 million in the third quarter 2006. For the third quarter 2007, Mariner's average realized natural gas price, including the effects of hedging, was $7.18 per thousand cubic feet (Mcf), compared to $7.48/Mcf for the same period last year. Mariner's average realized oil price, including the effects of hedging, was $70.68 per barrel (Bbl) for the third quarter 2007, compared to $65.25/Bbl last year. The third-quarter 2007 average realized NGL price was $49.02/Bbl, compared to $53.12/Bbl in the year ago quarter. In the third quarter 2007, natural gas comprised 57% of total revenues, compared to 63% in the third quarter 2006.


Offshore -- Mariner drilled five offshore wells in the third quarter 2007, two of which were successful. Information regarding the successful wells is shown below:

                                      Working  Water Depth
    Well Name             Operator   Interest     (Ft)           Location
    Sabine Pass 8#1        Mariner        57%           40  Conventional Shelf
    Viosca Knoll 917#1ST1    Noble        15%        4,370           Deepwater
As of September 30, 2007, two offshore wells were drilling.

Onshore -- In the third quarter of 2007, Mariner drilled 33 development wells in West Texas, all of which were successful. As of September 30, 2007, Mariner had five rigs operating on its West Texas properties.

Mariner expanded its acreage position in West Texas through three separate transactions involving an aggregate of 8,400 net acres. The acreage contains an estimated 200 drilling locations with Spraberry, Wolfberry, Dean and Fusselman reserve potential estimated at 19 million barrels of oil equivalent (MMBoe) net to Mariner's interest. Including the acreage acquired in these transactions, Mariner's current net acreage position in West Texas stands at approximately 44,400 net acres, up from 31,800 reported as of year-end 2006.

Subsequent to the third quarter, Mariner completed its 150-well drilling commitment under its 2005 Tamarack acquisition. Mariner satisfied the commitment achieving a 100% success rate and earning an approximate 38% working interest in approximately 33,000 gross acres in the Spraberry trend in Reagan County, West Texas.


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