Mariner Energy Posts Another Record Year
Mariner Energy reported full-year 2008 results, which included the following:
- Year-over-year net production increased 18% to 118.4 billion cubic feet equivalent (Bcfe).
- 217% reserve replacement rate from all sources.
- Year-end estimated proved reserves up 17% to 973.9 Bcfe.
- Net loss for the year of $388.7 million ($4.44 per share). Adjusted net income, which excludes a non-recurring, non-cash gain and non-cash charges, was $284.1 million or $3.25 per share.
- Operating cash flow was $885.9 million for the full 2008 fiscal year, an increase of 42% from 2007.
Commenting on Mariner's 2008 results, Scott D. Josey, Mariner's Chairman, Chief Executive Officer and President, said, "Despite plummeting commodity prices, hurricanes, and the turmoil in the financial markets, Mariner posted another record year. Our capital program was very successful in 2008, with quality acquisitions, an 80% success rate offshore, and 100% success onshore. While non-cash impairments necessitated by low year-end commodity and stock prices negatively affected our earnings, our fundamentals are good.
"Economic circumstances continue to present challenges in the year ahead, but we are off to a good start in 2009. Our capital program should not only allow us to live within our cash flows, but also to increase production and pay down debt while exposing our shareholders to upside potential. We intend to carefully monitor changing industry and general economic conditions and can quickly adjust our capital program as circumstances warrant."
NON-CASH GAIN AND CHARGES
The company's results for 2008 reflect a non-recurring, non-cash gain of $46.5 million for the release as of year-end of suspended revenue associated with a disputed MMS royalty liability. Based on low commodity prices at year-end, Mariner recorded a full cost ceiling test impairment of its proved oil and gas properties in the amount of $575.6 million. The company also recorded other impairments, including goodwill, of $310.9 million for the year. Additionally, Mariner recognized a non-cash charge of $36.0 million for a contingent insurance premium. These items are detailed below in the reconciliation of adjusted net income, a non-GAAP measure.
FOURTH QUARTER 2008 RESULTS
For the three-month period ended December 31, 2008, Mariner reported a net loss of $648.9 million, or $7.41 per basic and fully-diluted share, which reflects the non-cash gain and charges cited above. This compares with net income of $50.2 million and basic and fully-diluted earnings per share of $0.59 and $0.58, respectively, for the same three-month period in the prior year. Adjusted net income, which excludes the non-cash gain and charges, was $14.5 million for fourth quarter 2008, or $0.17 per basic and fully-diluted share (see reconciliation of this non-GAAP measure below). The lower year-over-year results are due primarily to decreased production volumes as a result of Hurricanes Ike and Gustav and lower commodity prices.
Net production for fourth quarter 2008 was 23.5 Bcfe, compared with 27.1 Bcfe for fourth quarter 2007. Total natural gas net production for fourth quarter 2008 was 16.1 billion cubic feet (Bcf), compared with 18.4 Bcf for the same period in the prior year. Total net oil production for fourth quarter 2008 was 1.0 million barrels (MMBbls), compared with 1.1 MMBbls for the same period in 2007. Natural gas liquids (NGL) net production for fourth quarter 2008 was 0.3 MMBbls, compared with 0.3 MMBbls for fourth quarter 2007.
For fourth quarter 2008, Mariner's average realized natural gas price was $7.44 per thousand cubic feet (Mcf) compared with $8.07 per Mcf for the same period in 2007. Mariner's average realized oil price was $65.29 per barrel (Bbl) for fourth quarter 2008, compared with $79.64 per Bbl for fourth quarter 2007. The average realized NGL price was $26.63 per Bbl for fourth quarter 2008, compared with $55.32 per Bbl for the same period in 2007. Average realized prices reflect settlements during the period under Mariner's hedging program.
FULL-YEAR 2008 RESULTS
For the 12-month period ended December 31, 2008, Mariner reported a net loss of $388.7 million, which equates to a loss of $4.44 per basic and fully-diluted share. For the same period in the prior year, Mariner reported net income of $143.9 million, or $1.68 per basic share/$1.67 per fully-diluted share. Adjusted net income, which excludes the non-cash gain and charges noted above, was $284.1 million or $3.25 per share.
For the full-year 2008, Mariner reported net production of 118.4 Bcfe, up from 100.3 Bcfe reported in 2007. Total natural gas net production during 2008 was 79.8 Bcf at an averaged realized price of $9.31 per Mcf, compared with 67.8 Bcf for 2007 at an average realized price of $7.88 per Mcf. Total net oil production for 2008 was 4.9 MMBbls at an average realized price of $86.02 per Bbl, compared to 4.2 MMBbls during 2007 at an average realized price of $67.50 per Bbl. Total NGL net production during 2008 was 1.6 MMBbls at an average realized price of $55.02, compared to 1.2 MMBbls at an average realized price of $45.16 per Bbl for the prior year. Average realized prices reflect settlements during the period under Mariner's hedging program.
Mariner was successful in 20 of its 25 offshore wells drilled in 2008. Mariner drilled eight offshore wells in the fourth quarter 2008, seven of
which were successful.
In the fourth quarter of 2008, Mariner drilled 23 wells in the Permian Basin, all of which were successful. As of December 31, 2008, four rigs were drilling on Mariner's Permian Basin properties. The company participated in 122 onshore wells in 2008, all of which were successful.
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