##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 Form 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file number 1-32747
 
 MARINER ENERGY, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    86-0460233(I.R.S. Employer
Identification Number)
 One BriarLake Plaza, Suite 2000
2000 West Sam Houston Parkway South
Houston, Texas 77042  (Address of principal executive offices and zip code)
 (713) 954-5500  (Registrants telephone number, including area code)
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PART IItem 1. Consolidated Financial Statements (unaudited)
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART IIItem 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    38Item 6. Exhibits
    
    
    38Consent of Ryder Scott Company, L.P.Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 1350Certification of CFO Pursuant to Section 1350
  2




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##### Table of Contents



PART I
 
 Item 1. Consolidated Financial Statements
 MARINER ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2008
    
    
    2007Current Assets:Cash and cash equivalents
    
    $
    41,269
    
    
    $
    18,589Receivables, net of allowances of $2,637 and $2,449
as of June 30, 2008 and December 31, 2007,
respectively
    
    
    289,214
    
    
    
    157,774Insurance receivables
    
    
    10,800
    
    
    
    26,683Derivative financial instruments
    
    
    
    
    
    
    11,863Intangible assets
    
    
    5,422
    
    
    
    17,209Prepaid expenses and other
    
    
    14,906
    
    
    
    10,630Deferred tax asset
    
    
    119,669
    
    
    
    6,232Total current assets
    
    
    481,280
    
    
    
    248,980Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    3,775,421
    
    
    
    3,118,273Unproved properties, not subject to amortization
    
    
    126,853
    
    
    
    40,455Total oil and gas properties
    
    
    3,902,274
    
    
    
    3,158,728Other property and equipment
    
    
    66,258
    
    
    
    15,545Accumulated depreciation, depletion and amortization
    
    
    (1,004,492
    )
    
    
    (754,079
    )Total property and equipment, net
    
    
    2,964,040
    
    
    
    2,420,194Restricted Cash
    
    
    
    
    
    
    5,000Goodwill
    
    
    295,598
    
    
    
    295,598Insurance Receivables
    
    
    28,145
    
    
    
    56,924Derivative Financial Instruments
    
    
    
    
    
    
    691Other Assets, net of amortization
    
    
    62,166
    
    
    
    56,248TOTAL ASSETS
    
    $
    3,831,229
    
    
    $
    3,083,635Current Liabilities:Accounts payable
    
    $
    18,090
    
    
    $
    1,064Accrued liabilities
    
    
    135,661
    
    
    
    96,936Accrued capital costs
    
    
    210,510
    
    
    
    159,010Abandonment liability
    
    
    52,421
    
    
    
    30,985Accrued interest
    
    
    9,848
    
    
    
    7,726Derivative financial instruments
    
    
    333,416
    
    
    
    19,468Total current liabilities
    
    
    759,946
    
    
    
    315,189Long-Term Liabilities:Abandonment liability
    
    
    208,430
    
    
    
    191,021Deferred income tax
    
    
    420,885
    
    
    
    343,948Derivative financial instruments
    
    
    102,459
    
    
    
    25,343Long-term debt, bank credit facility
    
    
    350,000
    
    
    
    179,000Long-term debt, senior unsecured notes
    
    
    600,000
    
    
    
    600,000Other long-term liabilities
    
    
    54,656
    
    
    
    38,115Total long-term liabilities
    
    
    1,736,430
    
    
    
    1,377,427Commitments and Contingencies (see Note 8)Minority Interest
    
    
    189
    
    
    
    1Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000
shares authorized, no shares issued and outstanding
at June 30, 2008 and December 31, 2007
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 88,820,553 shares issued and
outstanding at June 30, 2008; 180,000,000 shares
authorized, 87,229,312 shares issued and
outstanding at December 31, 2007
    
    
    9
    
    
    
    9Additional paid-in capital
    
    
    1,057,787
    
    
    
    1,054,089Accumulated other comprehensive loss
    
    
    (278,144
    )
    
    
    (22,576
    )Accumulated retained earnings
    
    
    555,012
    
    
    
    359,496Total stockholders equity
    
    
    1,334,664
    
    
    
    1,391,018TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,831,229
    
    
    $
    3,083,635
 The accompanying notes are an integral part of these consolidated financial statements
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MARINER ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Natural gas
    
    $
    250,278
    
    
    $
    134,082
    
    
    $
    429,901
    
    
    $
    274,614Oil
    
    
    144,556
    
    
    
    66,678
    
    
    
    258,170
    
    
    
    127,129Natural gas liquids
    
    
    33,057
    
    
    
    11,413
    
    
    
    54,038
    
    
    
    20,562Other revenues
    
    
    1,561
    
    
    
    908
    
    
    
    3,240
    
    
    
    2,381Total revenues
    
    
    429,452
    
    
    
    213,081
    
    
    
    745,349
    
    
    
    424,686Costs and Expenses:Lease operating expense
    
    
    55,315
    
    
    
    38,601
    
    
    
    100,147
    
    
    
    72,072Severance and ad valorem taxes
    
    
    5,263
    
    
    
    2,888
    
    
    
    9,873
    
    
    
    5,878Transportation expense
    
    
    4,197
    
    
    
    1,403
    
    
    
    7,216
    
    
    
    3,305General and administrative expense
    
    
    14,360
    
    
    
    12,878
    
    
    
    26,286
    
    
    
    24,054Depreciation, depletion and amortization
    
    
    141,454
    
    
    
    93,799
    
    
    
    260,772
    
    
    
    192,655Other miscellaneous expense
    
    
    677
    
    
    
    294
    
    
    
    1,214
    
    
    
    462Total costs and expenses
    
    
    221,266
    
    
    
    149,863
    
    
    
    405,508
    
    
    
    298,426OPERATING INCOME
    
    
    208,186
    
    
    
    63,218
    
    
    
    339,841
    
    
    
    126,260Other Income (Expense):Interest income
    
    
    281
    
    
    
    231
    
    
    
    607
    
    
    
    522Interest expense, net of amounts capitalized
    
    
    (17,563
    )
    
    
    (13,873
    )
    
    
    (36,134
    )
    
    
    (26,220
    )Other income (expense)
    
    
    
    
    
    
    (373
    )
    
    
    
    
    
    
    5,058Income Before Taxes and Minority Interest
    
    
    190,904
    
    
    
    49,203
    
    
    
    304,314
    
    
    
    105,620Provision for Income Taxes
    
    
    (67,416
    )
    
    
    (16,245
    )
    
    
    (108,610
    )
    
    
    (34,455
    )Minority Interest Expense
    
    
    (98
    )
    
    
    
    
    
    
    (188
    )
    
    
    NET INCOME
    
    $
    123,390
    
    
    $
    32,958
    
    
    $
    195,516
    
    
    $
    71,165Earnings per share:Net income per sharebasic
    
    $
    1.40
    
    
    $
    0.38
    
    
    $
    2.23
    
    
    $
    0.83Net income per sharediluted
    
    $
    1.39
    
    
    $
    0.38
    
    
    $
    2.21
    
    
    $
    0.83Weighted average shares outstandingbasic
    
    
    87,983,902
    
    
    
    85,627,433
    
    
    
    87,638,816
    
    
    
    85,585,072Weighted average shares outstandingdiluted
    
    
    88,828,904
    
    
    
    85,905,296
    
    
    
    88,430,344
    
    
    
    85,767,175
 The accompanying notes are an integral part of these consolidated financial statements
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MARINER ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
 Six MonthsEnded June 30,2008
    
    
    2007Operating Activities:Net income
    
    $
    195,516
    
    
    $
    71,165Adjustments to reconcile net income to net cash provided by operating activities:Allowance for doubtful receivables
    
    
    188
    
    
    
    (840
    )Deferred income tax
    
    
    105,075
    
    
    
    34,205Depreciation, depletion and amortization
    
    
    260,772
    
    
    
    192,655Amortization of deferred financing costs
    
    
    1,466
    
    
    
    1,272Ineffectiveness of derivative instruments
    
    
    6,474
    
    
    
    2,047Share-based compensation
    
    
    7,172
    
    
    
    3,414Minority interest
    
    
    188
    
    
    
    Changes in operating assets and liabilities:Receivables
    
    
    (131,078
    )
    
    
    (15,087
    )Insurance receivables
    
    
    57,083
    
    
    
    (20,125
    )Prepaid expenses and other
    
    
    (62
    )
    
    
    (2,172
    )Accounts payable and accrued liabilities
    
    
    48,686
    
    
    
    17,363Net cash provided by operating activities
    
    
    551,480
    
    
    
    283,897Investing Activities:Acquisitions and additions to oil and gas properties
    
    
    (652,910
    )
    
    
    (256,494
    )Additions to other property and equipment
    
    
    (48,605
    )
    
    
    (906
    )Property conveyances
    
    
    
    
    
    
    1,103Restricted cash designated for investment
    
    
    5,000
    
    
    
    31,830Net cash used in investing activities
    
    
    (696,515
    )
    
    
    (224,467
    )Financing Activities:Credit facility borrowings
    
    
    630,000
    
    
    
    142,000Credit facility repayments
    
    
    (459,000
    )
    
    
    (496,000
    )Proceeds from note offering
    
    
    
    
    
    
    300,000Deferred offering costs
    
    
    
    
    
    
    (6,491
    )Repurchase of stock
    
    
    (4,014
    )
    
    
    Proceeds from exercise of stock options
    
    
    729
    
    
    
    629Net cash provided by (used in) financing activities
    
    
    167,715
    
    
    
    (59,862
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    22,680
    
    
    
    (432
    )Cash and Cash Equivalents at Beginning of Period
    
    
    18,589
    
    
    
    9,579Cash and Cash Equivalents at End of Period
    
    $
    41,269
    
    
    $
    9,147Supplemental Disclosure of Cash Flow Information:Cash paid during the year for:Interest, net of amount capitalized
    
    $
    31,101
    
    
    $
    20,808Income taxes, net of refunds
    
    $
    1,100
    
    
    $
    250
 The accompanying notes are an integral part of these consolidated financial statements
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MARINER ENERGY, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Summary of Significant Accounting Policies
 Operations
 Interim Financial Statements
 Use of Estimates
 Principles of Consolidation
 Reclassifications
 Income Taxes
  6




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Recent Accounting Pronouncements
      7




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2. Acquisitions and Dispositions
 Gulf of Mexico Shelf Acquisition.
 Pro Forma Financial Information
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007(In thousands, except per share amounts)Pro Forma:Revenue
    
    $
    429,168
    
    
    $
    276,539
    
    
    $
    760,042
    
    
    $
    542,860Net income available to common stockholders
    
    $
    123,443
    
    
    $
    47,151
    
    
    $
    199,071
    
    
    $
    95,132Basic earnings per share
    
    $
    1.40
    
    
    $
    0.55
    
    
    $
    2.27
    
    
    $
    1.11Diluted earnings per share
    
    $
    1.39
    
    
    $
    0.55
    
    
    $
    2.25
    
    
    $
    1.11
 West Texas Acquisitions.
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Interest in Cottonwood
 3. Long-Term Debt
 Bank Credit Facility
 
    
    increase the facilitys maximum credit availability to $1.0 billion, including up to
$50.0 million in letters of credit,
    
    fix the borrowing base at $750.0 million as of January 31, 2008,
    
    extend the facilitys term to January 31, 2012,
    
    terminate a dedicated $40.0 million letter of credit facility due to Mariners
satisfaction of its obligations under a drill-to-earn program, and
    
    add as a permitted use of loan proceeds the funding of Mariners purchase of MGOM.
     Senior Notes 1 2 1 2 1 2
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Capitalized Interest
 4. Oil and Gas Properties
    5. Accrual for Future Abandonment Liabilities
    (In thousands)Abandonment liability as of December 31, 2007 (1)
    
    $
    222,006Liabilities Incurred
    
    
    6,364Liabilities Settled
    
    
    (25,179
    )Accretion Expense
    
    
    10,359Revisions to previous estimates
    
    
    2,881Liabilities from assets acquired
    
    
    44,420Abandonment liability as of June 30, 2008 (2)
    
    $
    260,851
 
 (1)
    
    Includes $31.0 million classified as a current liability at December 31, 2007. 10




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(2)
    
    Includes $52.4 million classified as a current liability at June 30, 2008. 6. Stockholders Equity
   WeightedAverageExercise
    
    
    AggregateShares
    
    
    Price
    
    
    IntrinsicValue (1)(In thousands)Outstanding at beginning of year
    
    
    720,488
    
    
    $
    13.82
    
    
    $
    16,679Granted
    
    
    
    
    
    
    
    
    
    
    Exercised (2)
    
    
    (55,160
    )
    
    
    13.21
    
    
    
    (1,311
    )Forfeited
    
    
    (18,000
    )
    
    
    14.00
    
    
    
    (413
    )Outstanding at June 30, 2008
    
    
    647,328
    
    
    
    13.87
    
    
    $
    14,955
 
 (1)
    
    Based upon the difference between the closing price of the common stock on the last trading
date of the quarter ($36.97) and the option exercise price of in-the-money options.(2)
    
    Options were exercised for cash proceeds of approximately $729,000.  Restricted Shares underStock Incentive PlanJune 30,2008
    
    
    2007Total unvested shares at beginning of period: January 1
    
    
    1,484,552
    
    
    
    875,380Shares granted (1)
    
    
    1,683,316
    
    
    
    799,694Shares vested
    
    
    (432,606
    )
    
    
    (207,053
    )Shares forfeited
    
    
    (17,214
    )
    
    
    (24,266
    )Total unvested shares at end of period: June 30
    
    
    2,718,048
    
    
    
    1,443,755Available for future grant as options or restricted stock
    
    
    2,554,720
    
    
    
    4,146,100
 
 (1)
    
    Current year activity includes 1,083,493 shares granted in June 2008 under the Stock
Incentive Plans 2008 Long-Term Performance-Based Restricted Stock Program. Vesting of these
shares is contingent and begins upon satisfaction of specified thresholds for the market price
of Mariners common stock, assuming, in most instances, continued employment by Mariner. 7. Derivative Financial Instruments and Hedging Activities
  11




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Cash (Loss) Gain on Settlements
    
    $
    (64,607
    )
    
    $
    6,868
    
    
    $
    (74,914
    )
    
    $
    30,490(Loss) Gain on Hedge Ineffectiveness (1)
    
    
    (2,550
    )
    
    
    101
    
    
    
    (6,474
    )
    
    
    (2,047
    )Total
    
    $
    (67,157
    )
    
    $
    6,969
    
    
    $
    (81,388
    )
    
    $
    28,443
 
 (1)
    
    Unrealized (loss) gain recognized in natural gas revenue related to the ineffective portion
of open contracts that are not eligible for deferral under SFAS 133 due primarily to the basis
differentials between the contract price and the indexed price at the point of sale.  June 30,Weighted Average
    
    
    2008 Fair ValueFixed Price Swaps
    
    Quantity
    
    
    Fixed Price
    
    
    Liability(In thousands)Natural Gas (MMbtus)July 1December 31, 2008
    
    
    17,542,192
    
    
    $
    8.41
    
    
    $
    (88,138
    )January 1December 31, 2009
    
    
    31,642,084
    
    
    $
    8.48
    
    
    
    (121,670
    )Crude Oil (Bbls)July 1December 31, 2008
    
    
    1,023,040
    
    
    $
    78.80
    
    
    
    (62,517
    )January 1December 31, 2009
    
    
    2,172,210
    
    
    $
    76.15
    
    
    
    (131,664
    )Total
    
    
    
    
    
    
    
    
    
    $
    (403,989
    )
 June 30,Weighted Average
    
    
    Weighted Average
    
    
    2008 Fair ValueCostless Collars
    
    Quantity
    
    
    Floor
    
    
    Cap
    
    
    Liability(In thousands)Natural Gas (MMbtus)July 1December 31, 2008
    
    
    5,704,000
    
    
    $
    7.83
    
    
    $
    14.60
    
    
    $
    (4,045
    )Crude Oil (Bbls)July 1December 31, 2008
    
    
    521,640
    
    
    $
    61.65
    
    
    $
    86.80
    
    
    
    (27,841
    )Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (31,886
    )
  8. Commitments and Contingencies
 Minimum Future Lease Payments
 (In thousands)2009
    
    $
    2,2172010
    
    
    2,4892011
    
    
    2,4992012
    
    
    2,4142013 and thereafter
    
    
    11,961
 Other Commitments
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MMS Proceedings
   Insurance Matters
 Hurricanes Katrina and Rita (2005)
     13




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Hurricane Ivan (2004)
  Litigation MMS Proceedings
 Letters of Credit
   9. Earnings per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share data)Numerator:Net Income
    
    $
    123,390
    
    
    $
    32,958
    
    
    $
    195,516
    
    
    $
    71,165Denominator:Weighted average shares outstanding
    
    
    87,984
    
    
    
    85,627
    
    
    
    87,639
    
    
    
    85,585Add dilutive securities
    
    
    845
    
    
    
    278
    
    
    
    791
    
    
    
    182Total weighted average shares
outstanding and dilutive
securities
    
    $
    88,829
    
    
    $
    85,905
    
    
    $
    88,430
    
    
    $
    85,767Earnings per sharebasic
    
    $
    1.40
    
    
    $
    0.38
    
    
    $
    2.23
    
    
    $
    0.83Earnings per sharediluted
    
    $
    1.39
    
    
    $
    0.38
    
    
    $
    2.21
    
    
    $
    0.83
 14




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10. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Net Income
    
    $
    123,390
    
    
    $
    32,958
    
    
    $
    195,516
    
    
    $
    71,165Other comprehensive (loss) income:Derivative contracts settled
and reclassified, net of income
taxes of ($23,910), $2,445,
($28,977) and $9,979
    
    
    (43,247
    )
    
    
    4,523
    
    
    
    (52,411
    )
    
    
    18,464Change in unrealized
mark-to-market losses arising
during period, net of income
taxes of ($67,487), ($2,235),
($124,800) and ($29,358)
    
    
    (122,068
    )
    
    
    (4,134
    )
    
    
    (203,157
    )
    
    
    (52,329
    )Change in accumulated other
comprehensive (loss) gain
    
    
    (165,315
    )
    
    
    389
    
    
    
    (255,568
    )
    
    
    (33,865
    )Comprehensive (loss) income
    
    $
    (41,925
    )
    
    $
    33,347
    
    
    $
    (60,052
    )
    
    $
    37,300
 11. Fair Value Measurement
    15




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As of June 30, 2008Fair Value Measurements Using:SignificantQuoted Prices
    
    
    other
    
    
    Significantin Active
    
    
    Observable
    
    
    UnobservableCarrying
    
    
    Total Fair
    
    
    Markets
    
    
    Inputs
    
    
    InputsAmount
    
    
    Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative Financial Instruments
    
    
    
    
    
    
    
    
    
    (In thousands)Crude oil and natural gas fixed
price swaps and costless
collars  Short Term
    
    $
    (333,416
    )
    
    $
    (333,416
    )
    
    $
    
    
    
    $
    (301,530
    )
    
    $
    (31,886
    )Crude oil and natural gas fixed
price swaps and costless
collars  Long Term
    
    
    (102,459
    )
    
    
    (102,459
    )
    
    
    
    
    
    
    (102,459
    )
    
    
    Total
    
    $
    (435,875
    )
    
    $
    (435,875
    )
    
    $
    
    
    
    $
    (403,989
    )
    
    $
    (31,886
    )
  Level 2 Fair Value Measurements
  Level 3 Fair Value Measurements
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30, 2008
    
    
    June 30, 2008(In thousands)Fair value of costless collars, beginning of period
    
    $
    (13,536
    )
    
    $
    (4,058
    )Total gains/(losses):Included in natural gas and oil revenues (realized/unrealized)
    
    
    (11,697
    )
    
    
    (15,703
    )Included in other comprehensive loss (realized/unrealized)
    
    
    (18,350
    )
    
    
    (27,828
    )Purchases, issuances, and settlements, net
    
    
    11,697
    
    
    
    15,703Transfers in and/or out of Level 3
    
    
    
    
    
    
    Fair value of costless collars, end of period
    
    $
    (31,886
    )
    
    $
    (31,886
    )The amount of net losses for the period included in earnings
attributable to the change in net unrealized losses relating to
costless collars still held at the reporting date
    
    $
    
    
    
    $
    
 12. Segment Information
   16




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##### Table of Contents



13. Supplemental Guarantor Information
 1 2
   17




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONSOLIDATING BALANCE SHEET
June 30, 2008
(In thousands except share data)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Current Assets:Cash and cash equivalents
    
    $
    38,127
    
    
    $
    3,142
    
    
    $
    
    
    
    $
    41,269Receivables, net of allowances
    
    
    134,849
    
    
    
    154,365
    
    
    
    
    
    
    
    289,214Insurance receivables
    
    
    3,950
    
    
    
    6,850
    
    
    
    
    
    
    
    10,800Intangible assets
    
    
    5,422
    
    
    
    
    
    
    
    
    
    
    
    5,422Prepaid expenses and other
    
    
    12,527
    
    
    
    2,379
    
    
    
    
    
    
    
    14,906Deferred tax asset
    
    
    119,669
    
    
    
    
    
    
    
    
    
    
    
    119,669Total current assets
    
    
    314,544
    
    
    
    166,736
    
    
    
    
    
    
    
    481,280Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    1,773,717
    
    
    
    2,001,704
    
    
    
    
    
    
    
    3,775,421Unproved properties, not subject to amortization
    
    
    113,010
    
    
    
    13,843
    
    
    
    
    
    
    
    126,853Total oil and gas properties
    
    
    1,886,727
    
    
    
    2,015,547
    
    
    
    
    
    
    
    3,902,274Other property and equipment
    
    
    33,050
    
    
    
    33,208
    
    
    
    
    
    
    
    66,258Accumulated depreciation, depletion and amortization
    
    
    (537,309
    )
    
    
    (467,183
    )
    
    
    
    
    
    
    (1,004,492
    )Total property and equipment, net
    
    
    1,382,468
    
    
    
    1,581,572
    
    
    
    
    
    
    
    2,964,040Investment in Subsidiaries
    
    
    1,171,614
    
    
    
    
    
    
    
    (1,171,614
    )
    
    
    Intercompany Receivables / (Payables)
    
    
    292,088
    
    
    
    (292,088
    )
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    295,598
    
    
    
    
    
    
    
    295,598Insurance Receivables
    
    
    
    
    
    
    28,145
    
    
    
    
    
    
    
    28,145Other Assets, net of amortization
    
    
    61,154
    
    
    
    1,012
    
    
    
    
    
    
    
    62,166TOTAL ASSETS
    
    $
    3,221,868
    
    
    $
    1,780,975
    
    
    $
    (1,171,614
    )
    
    $
    3,831,229Current Liabilities:Accounts payable
    
    $
    18,090
    
    
    $
    
    
    
    $
    
    
    
    $
    18,090Accrued liabilities
    
    
    99,710
    
    
    
    35,951
    
    
    
    
    
    
    
    135,661Accrued capital costs
    
    
    151,841
    
    
    
    58,669
    
    
    
    
    
    
    
    210,510Abandonment liability
    
    
    4,222
    
    
    
    48,199
    
    
    
    
    
    
    
    52,421Accrued interest
    
    
    9,848
    
    
    
    
    
    
    
    
    
    
    
    9,848Derivative financial instruments
    
    
    333,416
    
    
    
    
    
    
    
    
    
    
    
    333,416Total current liabilities
    
    
    617,127
    
    
    
    142,819
    
    
    
    
    
    
    
    759,946Long-Term Liabilities:Abandonment liability
    
    
    53,710
    
    
    
    154,720
    
    
    
    
    
    
    
    208,430Deferred income tax
    
    
    113,874
    
    
    
    307,011
    
    
    
    
    
    
    
    420,885Derivative financial instruments
    
    
    102,459
    
    
    
    
    
    
    
    
    
    
    
    102,459Long-term debt, bank credit facility
    
    
    350,000
    
    
    
    
    
    
    
    
    
    
    
    350,000Long-term debt, senior unsecured notes
    
    
    600,000
    
    
    
    
    
    
    
    
    
    
    
    600,000Other long-term liabilities
    
    
    50,034
    
    
    
    4,622
    
    
    
    
    
    
    
    54,656Total long-term liabilities
    
    
    1,270,077
    
    
    
    466,353
    
    
    
    
    
    
    
    1,736,430Commitments and Contingencies (see Note 8)Minority Interest
    
    
    
    
    
    
    189
    
    
    
    
    
    
    
    189Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000
shares authorized, no shares issued and outstanding
at
June 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 88,820,553 shares issued and
outstanding at June 30, 2008
    
    
    9
    
    
    
    5
    
    
    
    (5
    )
    
    
    9Additional paid-in capital
    
    
    1,057,787
    
    
    
    886,142
    
    
    
    (886,142
    )
    
    
    1,057,787Partner capital
    
    
    
    
    
    
    29,192
    
    
    
    (29,192
    )
    
    
    Accumulated other comprehensive loss
    
    
    (278,144
    )
    
    
    
    
    
    
    
    
    
    
    (278,144
    )Accumulated retained earnings
    
    
    555,012
    
    
    
    256,275
    
    
    
    (256,275
    )
    
    
    555,012Total stockholders equity
    
    
    1,334,664
    
    
    
    1,171,614
    
    
    
    (1,171,614
    )
    
    
    1,334,664TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,221,868
    
    
    $
    1,780,975
    
    
    $
    (1,171,614
    )
    
    $
    3,831,229
 18




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONSOLIDATING BALANCE SHEET
December 31, 2007
(In thousands except share data)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Current Assets:Cash and cash equivalents
    
    $
    18,589
    
    
    $
    
    
    
    $
    
    
    
    $
    18,589Receivables, net of allowances
    
    
    64,727
    
    
    
    93,047
    
    
    
    
    
    
    
    157,774Insurance receivables
    
    
    3,950
    
    
    
    22,733
    
    
    
    
    
    
    
    26,683Derivative financial instruments
    
    
    11,863
    
    
    
    
    
    
    
    
    
    
    
    11,863Intangible assets
    
    
    16,209
    
    
    
    1,000
    
    
    
    
    
    
    
    17,209Prepaid expenses and other
    
    
    9,092
    
    
    
    1,538
    
    
    
    
    
    
    
    10,630Deferred tax asset
    
    
    6,232
    
    
    
    
    
    
    
    
    
    
    
    6,232Total current assets
    
    
    130,662
    
    
    
    118,318
    
    
    
    
    
    
    
    248,980Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    1,469,989
    
    
    
    1,648,284
    
    
    
    
    
    
    
    3,118,273Unproved properties, not subject to amortization
    
    
    40,025
    
    
    
    430
    
    
    
    
    
    
    
    40,455Total oil and gas properties
    
    
    1,510,014
    
    
    
    1,648,714
    
    
    
    
    
    
    
    3,158,728Other property and equipment
    
    
    15,495
    
    
    
    50
    
    
    
    
    
    
    
    15,545Accumulated depreciation, depletion and amortization
    
    
    (403,159
    )
    
    
    (350,920
    )
    
    
    
    
    
    
    (754,079
    )Total property and equipment, net
    
    
    1,122,350
    
    
    
    1,297,844
    
    
    
    
    
    
    
    2,420,194Investment in Subsidiaries
    
    
    1,014,548
    
    
    
    
    
    
    
    (1,014,548
    )
    
    
    Intercompany Receivables / (Payables)
    
    
    222,215
    
    
    
    (222,215
    )
    
    
    
    
    
    
    Restricted Cash
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Goodwill
    
    
    
    
    
    
    295,598
    
    
    
    
    
    
    
    295,598Insurance Receivables
    
    
    2,663
    
    
    
    54,261
    
    
    
    
    
    
    
    56,924Derivative Financial Instruments
    
    
    691
    
    
    
    
    
    
    
    
    
    
    
    691Other Assets, net of amortization
    
    
    55,607
    
    
    
    641
    
    
    
    
    
    
    
    56,248TOTAL ASSETS
    
    $
    2,548,736
    
    
    $
    1,549,447
    
    
    $
    (1,014,548
    )
    
    $
    3,083,635Current Liabilities:Accounts payable
    
    $
    1,064
    
    
    $
    
    
    
    $
    
    
    
    $
    1,064Accrued liabilities
    
    
    70,467
    
    
    
    26,469
    
    
    
    
    
    
    
    96,936Accrued capital costs
    
    
    85,839
    
    
    
    73,171
    
    
    
    
    
    
    
    159,010Abandonment liability
    
    
    4,383
    
    
    
    26,602
    
    
    
    
    
    
    
    30,985Accrued interest
    
    
    7,726
    
    
    
    
    
    
    
    
    
    
    
    7,726Derivative financial instruments
    
    
    19,468
    
    
    
    
    
    
    
    
    
    
    
    19,468Total current liabilities
    
    
    188,947
    
    
    
    126,242
    
    
    
    
    
    
    
    315,189Long-Term Liabilities:Abandonment liability
    
    
    49,827
    
    
    
    141,194
    
    
    
    
    
    
    
    191,021Deferred income tax
    
    
    80,095
    
    
    
    263,853
    
    
    
    
    
    
    
    343,948Derivative financial instruments
    
    
    25,343
    
    
    
    
    
    
    
    
    
    
    
    25,343Long-term debt, bank credit facility
    
    
    179,000
    
    
    
    
    
    
    
    
    
    
    
    179,000Long-term debt, senior unsecured notes
    
    
    600,000
    
    
    
    
    
    
    
    
    
    
    
    600,000Other long-term liabilities
    
    
    34,506
    
    
    
    3,609
    
    
    
    
    
    
    
    38,115Total long-term liabilities
    
    
    968,771
    
    
    
    408,656
    
    
    
    
    
    
    
    1,377,427Commitments and Contingencies (see Note 8)Minority Interest
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000
shares authorized, no shares issued and outstanding
at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 87,229,312 shares issued and
outstanding at December 31, 2007
    
    
    9
    
    
    
    5
    
    
    
    (5
    )
    
    
    9Additional paid-in capital
    
    
    1,054,089
    
    
    
    886,142
    
    
    
    (886,142
    )
    
    
    1,054,089Partner capital
    
    
    
    
    
    
    6,000
    
    
    
    (6,000
    )
    
    
    Accumulated other comprehensive loss
    
    
    (22,576
    )
    
    
    
    
    
    
    
    
    
    
    (22,576
    )Accumulated retained earnings
    
    
    359,496
    
    
    
    122,401
    
    
    
    (122,401
    )
    
    
    359,496Total stockholders equity
    
    
    1,391,018
    
    
    
    1,014,548
    
    
    
    (1,014,548
    )
    
    
    1,391,018TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,548,736
    
    
    $
    1,549,447
    
    
    $
    (1,014,548
    )
    
    $
    3,083,635
 19




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended June 30, 2008
(In thousands)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    110,905
    
    
    $
    139,373
    
    
    $
    
    
    
    $
    250,278Oil
    
    
    76,215
    
    
    
    68,341
    
    
    
    
    
    
    
    144,556Natural gas liquids
    
    
    25,541
    
    
    
    7,516
    
    
    
    
    
    
    
    33,057Other revenues
    
    
    41
    
    
    
    1,520
    
    
    
    
    
    
    
    1,561Total revenues
    
    
    212,702
    
    
    
    216,750
    
    
    
    
    
    
    
    429,452Costs and Expenses:Operating expenses
    
    
    31,769
    
    
    
    33,006
    
    
    
    
    
    
    
    64,775General and administrative expense
    
    
    14,189
    
    
    
    171
    
    
    
    
    
    
    
    14,360Depreciation, depletion and amortization
    
    
    76,425
    
    
    
    65,029
    
    
    
    
    
    
    
    141,454Other miscellaneous expense
    
    
    640
    
    
    
    37
    
    
    
    
    
    
    
    677Total costs and expenses
    
    
    123,023
    
    
    
    98,243
    
    
    
    
    
    
    
    221,266OPERATING INCOME
    
    
    89,679
    
    
    
    118,507
    
    
    
    
    
    
    
    208,186Earnings of Affiliates
    
    
    88,686
    
    
    
    
    
    
    
    (88,686
    )
    
    
    Other Income (Expense):Interest income
    
    
    2,491
    
    
    
    15
    
    
    
    (2,225
    )
    
    
    281Interest expense, net of amounts capitalized
    
    
    (17,433
    )
    
    
    (2,355
    )
    
    
    2,225
    
    
    
    (17,563
    )Income Before Taxes and Minority Interest
    
    
    163,423
    
    
    
    116,167
    
    
    
    (88,686
    )
    
    
    190,904Provision for Income Taxes
    
    
    (40,033
    )
    
    
    (27,383
    )
    
    
    
    
    
    
    (67,416
    )Minority Interest Expense
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    (98
    )NET INCOME
    
    $
    123,390
    
    
    $
    88,686
    
    
    $
    (88,686
    )
    
    $
    123,390
 20




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended June 30, 2007
(In thousands)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    60,368
    
    
    $
    73,714
    
    
    $
    
    
    
    $
    134,082Oil
    
    
    32,129
    
    
    
    34,549
    
    
    
    
    
    
    
    66,678Natural gas liquids
    
    
    7,284
    
    
    
    4,129
    
    
    
    
    
    
    
    11,413Other revenues
    
    
    908
    
    
    
    
    
    
    
    
    
    
    
    908Total revenues
    
    
    100,689
    
    
    
    112,392
    
    
    
    
    
    
    
    213,081Costs and Expenses:Operating expenses
    
    
    10,201
    
    
    
    32,691
    
    
    
    
    
    
    
    42,892General and administrative expense
    
    
    12,072
    
    
    
    806
    
    
    
    
    
    
    
    12,878Depreciation, depletion and amortization
    
    
    45,392
    
    
    
    48,407
    
    
    
    
    
    
    
    93,799Other miscellaneous expense
    
    
    70
    
    
    
    224
    
    
    
    
    
    
    
    294Total costs and expenses
    
    
    67,735
    
    
    
    82,128
    
    
    
    
    
    
    
    149,863OPERATING INCOME
    
    
    32,954
    
    
    
    30,264
    
    
    
    
    
    
    
    63,218Earnings of Affiliates
    
    
    17,183
    
    
    
    
    
    
    
    (17,183
    )
    
    
    Other Income (Expense):Interest income
    
    
    3,872
    
    
    
    1
    
    
    
    (3,642
    )
    
    
    231Interest expense, net of amounts capitalized
    
    
    (13,818
    )
    
    
    (3,697
    )
    
    
    3,642
    
    
    
    (13,873
    )Other income
    
    
    
    
    
    
    (373
    )
    
    
    
    
    
    
    (373
    )Income Before Taxes and Minority Interest
    
    
    40,191
    
    
    
    26,195
    
    
    
    (17,183
    )
    
    
    49,203Provision for Income Taxes
    
    
    (7,233
    )
    
    
    (9,012
    )
    
    
    
    
    
    
    (16,245
    )NET INCOME
    
    $
    32,958
    
    
    $
    17,183
    
    
    $
    (17,183
    )
    
    $
    32,958
 21




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended June 30, 2008
(In thousands)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    196,438
    
    
    $
    233,463
    
    
    $
    
    
    
    $
    429,901Oil
    
    
    138,146
    
    
    
    120,024
    
    
    
    
    
    
    
    258,170Natural gas liquids
    
    
    37,284
    
    
    
    16,754
    
    
    
    
    
    
    
    54,038Other revenues
    
    
    375
    
    
    
    2,865
    
    
    
    
    
    
    
    3,240Total revenues
    
    
    372,243
    
    
    
    373,106
    
    
    
    
    
    
    
    745,349Costs and Expenses:Operating expenses
    
    
    52,875
    
    
    
    64,361
    
    
    
    
    
    
    
    117,236General and administrative expense
    
    
    25,416
    
    
    
    870
    
    
    
    
    
    
    
    26,286Depreciation, depletion and amortization
    
    
    136,580
    
    
    
    124,192
    
    
    
    
    
    
    
    260,772Other miscellaneous expense
    
    
    1,161
    
    
    
    53
    
    
    
    
    
    
    
    1,214Total costs and expenses
    
    
    216,032
    
    
    
    189,476
    
    
    
    
    
    
    
    405,508OPERATING INCOME
    
    
    156,211
    
    
    
    183,630
    
    
    
    
    
    
    
    339,841Earnings of Affiliates
    
    
    133,874
    
    
    
    
    
    
    
    (133,874
    )
    
    
    Other Income (Expense):Interest income
    
    
    5,534
    
    
    
    22
    
    
    
    (4,949
    )
    
    
    607Interest expense, net of amounts capitalized
    
    
    (35,807
    )
    
    
    (5,276
    )
    
    
    4,949
    
    
    
    (36,134
    )Income Before Taxes and Minority Interest
    
    
    259,812
    
    
    
    178,376
    
    
    
    (133,874
    )
    
    
    304,314Provision for Income Taxes
    
    
    (64,296
    )
    
    
    (44,314
    )
    
    
    
    
    
    
    (108,610
    )Minority Interest Expense
    
    
    
    
    
    
    (188
    )
    
    
    
    
    
    
    (188
    )NET INCOME
    
    $
    195,516
    
    
    $
    133,874
    
    
    $
    (133,874
    )
    
    $
    195,516
 22




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended June 30, 2007
(In thousands)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    135,916
    
    
    $
    138,698
    
    
    $
    
    
    
    $
    274,614Oil
    
    
    64,232
    
    
    
    62,897
    
    
    
    
    
    
    
    127,129Natural gas liquids
    
    
    12,083
    
    
    
    8,479
    
    
    
    
    
    
    
    20,562Other revenues
    
    
    2,241
    
    
    
    140
    
    
    
    
    
    
    
    2,381Total revenues
    
    
    214,472
    
    
    
    210,214
    
    
    
    
    
    
    
    424,686Costs and Expenses:Operating expenses
    
    
    27,003
    
    
    
    54,252
    
    
    
    
    
    
    
    81,255General and administrative expense
    
    
    21,405
    
    
    
    2,649
    
    
    
    
    
    
    
    24,054Depreciation, depletion and amortization
    
    
    85,490
    
    
    
    107,165
    
    
    
    
    
    
    
    192,655Other miscellaneous expense
    
    
    1,038
    
    
    
    (576
    )
    
    
    
    
    
    
    462Total costs and expenses
    
    
    134,936
    
    
    
    163,490
    
    
    
    
    
    
    
    298,426OPERATING INCOME
    
    
    79,536
    
    
    
    46,724
    
    
    
    
    
    
    
    126,260Earnings of Affiliates
    
    
    29,557
    
    
    
    
    
    
    
    (29,557
    )
    
    
    Other Income (Expense):Interest income
    
    
    7,769
    
    
    
    1
    
    
    
    (7,248
    )
    
    
    522Interest expense, net of amounts capitalized
    
    
    (26,032
    )
    
    
    (7,436
    )
    
    
    7,248
    
    
    
    (26,220
    )Other income
    
    
    
    
    
    
    5,058
    
    
    
    
    
    
    
    5,058Income Before Taxes and Minority Interest
    
    
    90,830
    
    
    
    44,347
    
    
    
    (29,557
    )
    
    
    105,620Provision for Income Taxes
    
    
    (19,665
    )
    
    
    (14,790
    )
    
    
    
    
    
    
    (34,455
    )NET INCOME
    
    $
    71,165
    
    
    $
    29,557
    
    
    $
    (29,557
    )
    
    $
    71,165
 23




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##### Table of Contents



MARINER ENERGY, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2008
(In thousands)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Net cash provided by (used in) operating activities
    
    $
    322,194
    
    
    $
    363,160
    
    
    $
    (133,874
    )
    
    $
    551,480Cash flow from investing activities:Acquisitions and additions to oil and gas properties
    
    
    (297,858
    )
    
    
    (355,052
    )
    
    
    
    
    
    
    (652,910
    )Additions to other property and equipment
    
    
    (15,447
    )
    
    
    (33,158
    )
    
    
    
    
    
    
    (48,605
    )Restricted cash designated for investment
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Net cash used in investing activities
    
    
    (313,305
    )
    
    
    (383,210
    )
    
    
    
    
    
    
    (696,515
    )Cash flow from financing activities:Credit facility borrowings
    
    
    630,000
    
    
    
    
    
    
    
    
    
    
    
    630,000Credit facility repayments
    
    
    (459,000
    )
    
    
    
    
    
    
    
    
    
    
    (459,000
    )Other financing activities
    
    
    (26,477
    )
    
    
    23,192
    
    
    
    
    
    
    
    (3,285
    )Net activity in investment from subsidiaries
    
    
    (133,874
    )
    
    
    
    
    
    
    133,874
    
    
    
    Net cash provided by financing activities
    
    
    10,649
    
    
    
    23,192
    
    
    
    133,874
    
    
    
    167,715Increase in Cash and Cash Equivalents
    
    
    19,538
    
    
    
    3,142
    
    
    
    
    
    
    
    22,680Cash and Cash Equivalents at Beginning of Period
    
    
    18,589
    
    
    
    
    
    
    
    
    
    
    
    18,589Cash and Cash Equivalents at End of Period
    
    $
    38,127
    
    
    $
    3,142
    
    
    $
    
    
    
    $
    41,269
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2007
(In thousands)
(Unaudited)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Net cash provided by (used in) operating activities
    
    $
    196,520
    
    
    $
    116,934
    
    
    $
    (29,557
    )
    
    $
    283,897Cash flow from investing activities:Acquisitions and additions to oil and gas properties
    
    
    (192,552
    )
    
    
    (63,942
    )
    
    
    
    
    
    
    (256,494
    )Additions to other property and equipment
    
    
    (913
    )
    
    
    7
    
    
    
    
    
    
    
    (906
    )Restricted cash designated for investment
    
    
    31,830
    
    
    
    
    
    
    
    
    
    
    
    31,830Other investing activities
    
    
    18
    
    
    
    1,085
    
    
    
    
    
    
    
    1,103Net cash used in investing activities
    
    
    (161,617
    )
    
    
    (62,850
    )
    
    
    
    
    
    
    (224,467
    )Cash flow from financing activities:Credit facility borrowings
    
    
    142,000
    
    
    
    
    
    
    
    
    
    
    
    142,000Credit facility repayments
    
    
    (496,000
    )
    
    
    
    
    
    
    
    
    
    
    (496,000
    )Proceeds from note offering
    
    
    300,000
    
    
    
    
    
    
    
    
    
    
    
    300,000Other financing activities
    
    
    (5,862
    )
    
    
    
    
    
    
    
    
    
    
    (5,862
    )Net activity in investment from subsidiaries
    
    
    24,527
    
    
    
    (54,084
    )
    
    
    29,557
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (35,335
    )
    
    
    (54,084
    )
    
    
    29,557
    
    
    
    (59,862
    )Decrease in Cash and Cash Equivalents
    
    
    (432
    )
    
    
    
    
    
    
    
    
    
    
    (432
    )Cash and Cash Equivalents at Beginning of Period
    
    
    9,579
    
    
    
    
    
    
    
    
    
    
    
    9,579Cash and Cash Equivalents at End of Period
    
    $
    9,147
    
    
    $
    
    
    
    $
    
    
    
    $
    9,147
 24




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
    
    
    Ryder Scott Company, L.P. estimated proved oil and gas reserves of 49.7 Bcfe, 93% of
which are developed;
    
    interests in 36 (16 net) producing wells producing approximately 53 MMcfe per day net
to MGOMs interest, 76% of which Mariner now operates;
    
    gas gathering systems comprised of 31 miles of 10-inch, 12-inch and 16-inch pipelines;
and
    
    approximately 106,000 net acres of developed leasehold and 256,000 net acres of
undeveloped leasehold.
   25




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##### Table of Contents



Second Quarter 2008 Highlights
  
    
    Estimated average daily production for second quarter 2008 increased to 390 million
cubic feet of natural gas equivalent per day. Actualized prior period adjustments brought
our reported average daily production to 400 million cubic feet of natural gas equivalent
per day.
    
    Total revenues for second quarter 2008 increased 102% to $429.5 million, up from the
$213.1 million reported for second quarter 2007.
    
    Net cash provided by operations for the first six months of 2008 increased 94% to $551.5
million, up from $283.9 million for 2007.
    
    During second quarter 2008, we announced a deepwater discovery at Garden Banks 462 #1,
known as Geauxpher, in which Mariner holds a 60% working interest. In July 2008, Garden
Banks 462 #2, a delineation well, was successful. Development is underway with initial
combined gross production rates estimated from 125 to 150 million cubic feet of natural gas
equivalent per day expected by year-end 2008.
    
    During second quarter 2008, we settled certain excess coverage insurance claims related
to property damage caused by Hurricanes Katrina and Rita for net proceeds of approximately
$48.5 million, which were in addition to an interim payment by our primary insurer of $8.6 million in
April 2008. In July 2008, we settled insurance claims related to property damage caused by
Hurricane Ivan for agreed net proceeds of approximately $3.9 million.
 Operational Update
 Offshore
 Well Name
    
    Operator
    
    Working Interest
    
    Water Depth (Ft)
    
    LocationEugene Island 342 C17
    
    Mariner
    
    
    50
    %
    
    
    287
    
    
    Conventional ShelfWest Cameron 110 #19
    
    Mariner
    
    
    100
    %
    
    
    41
    
    
    Conventional ShelfVermilion 380 A15ST4
    
    Mariner
    
    
    100
    %
    
    
    340
    
    
    Conventional ShelfSouth Marsh 76 F-2
    
    Mariner
    
    
    100
    %
    
    
    138
    
    
    Conventional ShelfViosca Knoll 821 #1
    
    Mariner
    
    
    30
    %
    
    
    1,028
    
    
    Deepwater (1)Garden Banks 462 #1
    
    Mariner
    
    
    60
    %
    
    
    2,700
    
    
    Deepwater
 
 (1)
    
    As defined in Mariners Form 10-K for the fiscal year ended December 31, 2007, deepwater
means depths greater than 1,300 feet.  Operationally, Mariner characterizes this well as
located in the deepwater because its development and infrastructure requirements, such as a
subsea tieback, are more typical of Mariners deepwater wells.  Mariner reports financial
results for wells consistent with the definitional scheme set forth in its Form 10-K.   26




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##### Table of Contents



Onshore 
 Results of Operations
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
  Three Months EndedJune 30,
    
    
    IncreaseSummary Operating Information:
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    % Change(In thousands, except net production, average sales prices, average unitcosts per Mcfe and % change)Net Production:Natural gas (MMcf)
    
    
    24,359
    
    
    
    16,391
    
    
    
    7,968
    
    
    
    49
    %Oil (MBbls)
    
    
    1,502
    
    
    
    1,081
    
    
    
    421
    
    
    
    39
    %Natural gas liquids (MBbls)
    
    
    511
    
    
    
    282
    
    
    
    229
    
    
    
    81
    %Total natural gas equivalent (MMcfe)
    
    
    36,434
    
    
    
    24,567
    
    
    
    11,867
    
    
    
    48
    %Average daily production (MMcfe/d)
    
    
    400
    
    
    
    270
    
    
    
    130
    
    
    
    48
    %Hedging Activities:Natural gas revenue (loss) gain
    
    $
    (28,839
    )
    
    $
    8,186
    
    
    $
    (37,025
    )
    
    
    (452
    )%Oil revenue loss
    
    
    (38,318
    )
    
    
    (1,217
    )
    
    
    (37,101
    )
    
    
    3,049
    %Total hedging revenue (loss) gain
    
    $
    (67,157
    )
    
    $
    6,969
    
    
    $
    (74,126
    )
    
    
    (1,064
    )%Average Sales Prices:Natural gas (per Mcf) realized(1)
    
    $
    10.27
    
    
    $
    8.18
    
    
    $
    2.09
    
    
    
    26
    %Natural gas (per Mcf) unhedged
    
    
    11.46
    
    
    
    7.68
    
    
    
    3.78
    
    
    
    49
    %Oil (per Bbl) realized(1)
    
    
    96.24
    
    
    
    61.69
    
    
    
    34.55
    
    
    
    56
    %Oil (per Bbl) unhedged
    
    
    121.75
    
    
    
    62.82
    
    
    
    58.93
    
    
    
    94
    %Natural gas liquids (per Bbl) realized(1)
    
    
    64.69
    
    
    
    40.51
    
    
    
    24.18
    
    
    
    60
    %Natural gas liquids (per Bbl) unhedged
    
    
    64.69
    
    
    
    40.51
    
    
    
    24.18
    
    
    
    60
    %Total natural gas equivalent ($/Mcfe)
realized(1)
    
    
    11.74
    
    
    
    8.64
    
    
    
    3.10
    
    
    
    36
    %Total natural gas equivalent ($/Mcfe)
unhedged
    
    
    13.59
    
    
    
    8.35
    
    
    
    5.24
    
    
    
    63
    %Summary of Financial Information:Natural gas revenue
    
    $
    250,278
    
    
    $
    134,082
    
    
    $
    116,196
    
    
    
    87
    %Oil revenue
    
    
    144,556
    
    
    
    66,678
    
    
    
    77,878
    
    
    
    117
    %Natural gas liquids revenue
    
    
    33,057
    
    
    
    11,413
    
    
    
    21,644
    
    
    
    190
    %Other revenues
    
    
    1,561
    
    
    
    908
    
    
    
    653
    
    
    
    72
    %Lease operating expense
    
    
    55,315
    
    
    
    38,601
    
    
    
    16,714
    
    
    
    43
    %Severance and ad valorem taxes
    
    
    5,263
    
    
    
    2,888
    
    
    
    2,375
    
    
    
    82
    %Transportation expense
    
    
    4,197
    
    
    
    1,403
    
    
    
    2,794
    
    
    
    199
    %General and administrative expense
    
    
    14,360
    
    
    
    12,878
    
    
    
    1,482
    
    
    
    12
    %Depreciation, depletion and amortization
    
    
    141,454
    
    
    
    93,799
    
    
    
    47,655
    
    
    
    51
    %Other miscellaneous expense
    
    
    677
    
    
    
    294
    
    
    
    383
    
    
    
    130
    %Net interest expense
    
    
    17,282
    
    
    
    13,642
    
    
    
    3,640
    
    
    
    27
    %Other income (expense)
    
    
    
    
    
    
    (373
    )
    
    
    (373
    )
    
    
    (100
    )%Income before taxes and minority interest
    
    
    190,904
    
    
    
    49,203
    
    
    
    141,701
    
    
    
    288
    %Provision for income taxes
    
    
    67,416
    
    
    
    16,245
    
    
    
    51,171
    
    
    
    315
    %Net Income
    
    
    123,390
    
    
    
    32,958
    
    
    
    90,432
    
    
    
    274
    %
 27




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##### Table of Contents



Three Months EndedJune 30,
    
    
    IncreaseSummary Operating Information:
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    % Change(In thousands, except net production, average sales prices, average unitcosts per Mcfe and % change)Average Unit Costs per Mcfe:Lease operating expense
    
    $
    1.52
    
    
    $
    1.57
    
    
    $
    (0.05
    )
    
    
    (3
    )%Severance and ad valorem taxes
    
    
    0.14
    
    
    
    0.12
    
    
    
    0.02
    
    
    
    17
    %Transportation expense
    
    
    0.12
    
    
    
    0.06
    
    
    
    0.06
    
    
    
    100
    %General and administrative expense
    
    
    0.39
    
    
    
    0.52
    
    
    
    (0.13
    )
    
    
    (25
    )%Depreciation, depletion and amortization
    
    
    3.88
    
    
    
    3.82
    
    
    
    0.06
    
    
    
    2
    %
 
 (1)
    
    Average sales prices include the effects of hedging Net Income
 Net Production
 Natural gas, oil and NGL revenues
   HedgingRealized
    
    Unhedged
    
    (Loss) Gain
    
    % ChangeSecond quarter 2008:Natural gas (per Mcf)
    
    $
    10.27
    
    
    $
    11.46
    
    
    $
    (1.19
    )
    
    
    (10.4
    )%Oil (per Bbl)
    
    
    96.24
    
    
    
    121.75
    
    
    
    (25.51
    )
    
    
    (21.0
    )%Second quarter 2007:Natural gas (per Mcf)
    
    $
    8.18
    
    
    $
    7.68
    
    
    $
    0.50
    
    
    
    6.5
    %Oil (per Bbl)
    
    
    61.69
    
    
    
    62.82
    
    
    
    (1.13
    )
    
    
    (1.8
    )%
 Other revenues
 Lease operating expense LOE
 28




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##### Table of Contents



Severance and ad valorem tax
 Transportation expense
 General and administrative (G&A) expense
 Depreciation, depletion, and amortization expense
 Other miscellaneous expense
 Net interest expense
 Other income (expense)
 Income before taxes and minority interest
 Provision for income taxes
 Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
  Six Months EndedJune 30,
    
    
    IncreaseSummary Operating Information:
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    % Change(In thousands, except net production, average sales prices, average unit costs per Mcfe and % change)Net Production:Natural gas (MMcf)
    
    
    45,315
    
    
    
    33,869
    
    
    
    11,446
    
    
    
    34
    %Oil (MBbls)
    
    
    2,851
    
    
    
    2,127
    
    
    
    724
    
    
    
    34
    %Natural gas liquids (MBbls)
    
    
    888
    
    
    
    559
    
    
    
    329
    
    
    
    59
    %Total natural gas equivalent (MMcfe)
    
    
    67,749
    
    
    
    49,985
    
    
    
    17,764
    
    
    
    35
    %Average daily production (MMcfe/d)
    
    
    372
    
    
    
    276
    
    
    
    96
    
    
    
    35
    %
 29




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##### Table of Contents



Six Months EndedJune 30,
    
    
    IncreaseSummary Operating Information:
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    % Change(In thousands, except net production, average sales prices, average unit costs per Mcfe and % change)Hedging Activities:Natural gas revenue (loss) gain
    
    $
    (26,902
    )
    
    $
    27,973
    
    
    $
    (54,875
    )
    
    
    (196
    )%Oil revenue (loss) gain
    
    
    (54,486
    )
    
    
    470
    
    
    
    (54,956
    )
    
    
    (11,693
    )%Total hedging revenue (loss) gain
    
    $
    (81,388
    )
    
    $
    28,443
    
    
    $
    (109,831
    )
    
    
    (386
    )%Average Sales Prices:Natural gas (per Mcf) realized(1)
    
    $
    9.49
    
    
    $
    8.11
    
    
    $
    1.38
    
    
    
    17
    %Natural gas (per Mcf) unhedged
    
    
    10.08
    
    
    
    7.28
    
    
    
    2.80
    
    
    
    38
    %Oil (per Bbl) realized(1)
    
    
    90.55
    
    
    
    59.76
    
    
    
    30.79
    
    
    
    52
    %Oil (per Bbl) unhedged
    
    
    109.67
    
    
    
    59.54
    
    
    
    50.13
    
    
    
    84
    %Natural gas liquids (per Bbl) realized(1)
    
    
    60.85
    
    
    
    36.81
    
    
    
    24.04
    
    
    
    65
    %Natural gas liquids (per Bbl) unhedged
    
    
    60.85
    
    
    
    36.81
    
    
    
    24.04
    
    
    
    65
    %Total natural gas equivalent ($/Mcfe)
realized(1)
    
    
    10.95
    
    
    
    8.45
    
    
    
    2.50
    
    
    
    30
    %Total natural gas equivalent ($/Mcfe)
unhedged
    
    
    12.16
    
    
    
    7.88
    
    
    
    4.28
    
    
    
    54
    %Summary of Financial Information:Natural gas revenue
    
    $
    429,901
    
    
    $
    274,614
    
    
    $
    155,287
    
    
    
    57
    %Oil revenue
    
    
    258,170
    
    
    
    127,129
    
    
    
    131,041
    
    
    
    103
    %Natural gas liquids revenue
    
    
    54,038
    
    
    
    20,562
    
    
    
    33,476
    
    
    
    163
    %Other revenues
    
    
    3,240
    
    
    
    2,381
    
    
    
    859
    
    
    
    36
    %Lease operating expense
    
    
    100,147
    
    
    
    72,072
    
    
    
    28,075
    
    
    
    39
    %Severance and ad valorem taxes
    
    
    9,873
    
    
    
    5,878
    
    
    
    3,995
    
    
    
    68
    %Transportation expense
    
    
    7,216
    
    
    
    3,305
    
    
    
    3,911
    
    
    
    118
    %General and administrative expense
    
    
    26,286
    
    
    
    24,054
    
    
    
    2,232
    
    
    
    9
    %Depreciation, depletion and amortization
    
    
    260,772
    
    
    
    192,655
    
    
    
    68,117
    
    
    
    35
    %Other miscellaneous expense
    
    
    1,214
    
    
    
    462
    
    
    
    752
    
    
    
    163
    %Net interest expense
    
    
    35,527
    
    
    
    25,698
    
    
    
    9,829
    
    
    
    38
    %Other income (expense)
    
    
    
    
    
    
    5,058
    
    
    
    (5,058
    )
    
    
    (100
    )%Income before taxes and minority interest
    
    
    304,314
    
    
    
    105,620
    
    
    
    198,694
    
    
    
    188
    %Provision for income taxes
    
    
    108,610
    
    
    
    34,455
    
    
    
    74,155
    
    
    
    215
    %Net Income
    
    
    195,516
    
    
    
    71,165
    
    
    
    124,351
    
    
    
    175
    %Average Unit Costs per Mcfe:Lease operating expense
    
    $
    1.48
    
    
    $
    1.44
    
    
    $
    0.04
    
    
    
    3
    %Severance and ad valorem taxes
    
    
    0.15
    
    
    
    0.12
    
    
    
    0.03
    
    
    
    25
    %Transportation expense
    
    
    0.11
    
    
    
    0.07
    
    
    
    0.04
    
    
    
    57
    %General and administrative expense
    
    
    0.39
    
    
    
    0.48
    
    
    
    (0.09
    )
    
    
    (19
    )%Depreciation, depletion and amortization
    
    
    3.85
    
    
    
    3.85
    
    
    
    0.00
    
    
    
    N/A
 
 (1)
    
    Average sales prices include the effects of hedging Net Income
 Net Production
 Natural gas, oil and NGL revenues
 30




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##### Table of Contents



HedgingRealized
    
    Unhedged
    
    (Loss) Gain
    
    % ChangeSix months ended June 30, 2008:Natural gas (per Mcf)
    
    $
    9.49
    
    
    $
    10.08
    
    
    $
    (0.59
    )
    
    
    (5.9
    )%Oil (per Bbl)
    
    
    90.55
    
    
    
    109.67
    
    
    
    (19.12
    )
    
    
    (17.4
    )%Six months ended June 30, 2007:Natural gas (per Mcf)
    
    $
    8.11
    
    
    $
    7.28
    
    
    $
    0.83
    
    
    
    11.4
    %Oil (per Bbl)
    
    
    59.76
    
    
    
    59.54
    
    
    
    0.22
    
    
    
    0.4
    %
 Other revenues
 Lease operating expense
 Severance and ad valorem tax
 Transportation expense
 General and administrative expense
 Depreciation, depletion, and amortization expense
 Other miscellaneous expense
 31




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##### Table of Contents



Net interest expense
 Other income (expense)
 Income before taxes and minority interest
 Provision for income taxes
 Liquidity and Capital Resources
     Capital Expenditures 
 In thousands
    
    
    PercentageCapital Expenditures:Acquisitions
    
    $
    253,680
    
    
    
    33
    %Offshore oil and natural gas development
    
    
    186,341
    
    
    
    24
    %Oil and natural gas exploration
    
    
    140,725
    
    
    
    18
    %Leasehold Acquisitions
    
    
    90,110
    
    
    
    12
    %Onshore oil and natural gas development
    
    
    49,905
    
    
    
    7
    %Other items (primarily capitalized overhead)
    
    
    45,011
    
    
    
    6
    %Total capital expenditures
    
    $
    765,772
    
    
    
    100
    %
 32




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##### Table of Contents



Bank Credit Facility
  Future Uses of Capital.
 
    
    funding future capital expenditures;
    
    funding hurricane repairs and hurricane-related abandonment operations;
    
    financing any future acquisitions that we may identify;
    
    paying routine operating and administrative expenses; and
    
    paying other commitments comprised largely of cash settlement of hedging obligations
and debt service.
 2008 Capital Expenditures.
 Future Capital Resources.
 
    
    cash flow from operations in future periods,
    
    proceeds under our bank credit facility,
    
    proceeds from insurance policies relating to hurricane repairs, and
    
    proceeds from future capital markets transactions as needed.
  33




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##### Table of Contents



Off-Balance Sheet Arrangements
 Letters of Credit
  Fair Value Measurement
      34




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Commodity Prices and Related Hedging Activities
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Cash (Loss) Gain on Settlements
    
    $
    (64,607
    )
    
    $
    6,868
    
    
    $
    (74,914
    )
    
    $
    30,490(Loss) Gain on Hedge Ineffectiveness (1)
    
    
    (2,550
    )
    
    
    101
    
    
    
    (6,474
    )
    
    
    (2,047
    )Total
    
    $
    (67,157
    )
    
    $
    6,969
    
    
    $
    (81,388
    )
    
    $
    28,443
 
 (1)
    
    Unrealized (loss) gain recognized in natural gas revenue related to the ineffective portion
of open contracts that are not eligible for deferral under SFAS 133 due primarily to the basis
differentials between the contract price and the indexed price at the point of sale.
  June 30,Weighted Average
    
    
    2008 Fair ValueFixed Price Swaps
    
    Quantity
    
    
    Fixed Price
    
    
    Liability(In thousands)Natural Gas (MMbtus)July 1December 31, 2008
    
    
    17,542,192
    
    
    $
    8.41
    
    
    $
    (88,138
    )January 1December 31, 2009
    
    
    31,642,084
    
    
    $
    8.48
    
    
    
    (121,670
    )Crude Oil (Bbls)July 1December 31, 2008
    
    
    1,023,040
    
    
    $
    78.80
    
    
    
    (62,517
    )January 1December 31, 2009
    
    
    2,172,210
    
    
    $
    76.15
    
    
    
    (131,664
    )Total
    
    
    
    
    
    
    
    
    
    $
    (403,989
    )
 June 30,Weighted Average
    
    
    Weighted Average
    
    
    2008 Fair ValueCostless Collars
    
    Quantity
    
    
    Floor
    
    
    Cap
    
    
    Liability(In thousands)Natural Gas (MMbtus)July 1December 31, 2008
    
    
    5,704,000
    
    
    $
    7.83
    
    
    $
    14.60
    
    
    $
    (4,045
    )Crude Oil (Bbls)July 1December 31, 2008
    
    
    521,640
    
    
    $
    61.65
    
    
    $
    86.80
    
    
    
    (27,841
    )Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (31,886
    )
  35




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##### Table of Contents



Interest Rate Market Risk 
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors.
   
    
    the volatility of oil and natural gas prices;
    
    discovery, estimation, development and replacement of oil and natural gas reserves;
    
    cash flow, liquidity and financial position;
 36




---



##### Table of Contents




    
    business strategy;
    
    amount, nature and timing of capital expenditures, including future development costs;
    
    availability and terms of capital;
    
    timing and amount of future production of oil and natural gas;
    
    availability of drilling and production equipment;
    
    operating costs and other expenses;
    
    prospect development and property acquisitions;
    
    risks arising out of our hedging transactions;
    
    marketing of oil and natural gas;
    
    competition in the oil and natural gas industry;
    
    the impact of weather and the occurrence of natural events and natural disasters such
as loop currents, hurricanes, fires, floods and other natural events, catastrophic events
and natural disasters;
    
    governmental regulation of the oil and natural gas industry;
    
    environmental liabilities;
    
    developments in oil-producing and natural gas-producing countries;
    
    uninsured or underinsured losses in our oil and natural gas operations;
    
    risks related to our level of indebtedness; and
    
    risks related to significant acquisitions or other strategic transactions, such as
failure to realize expected benefits or objectives for future operations.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchases of Equity Securities
 Maximum Number (orTotal Number of
    
    Approximate DollarShares
    
    Value) ofTotal
    
    
    
    
    
    (or Units)
    
    Shares (or Units)Number of
    
    Average
    
    Purchased as
    
    that May Yet BeShares (or
    
    Price Paid
    
    Part of Publicly
    
    Purchased Under theUnits)
    
    per Share
    
    Announced Plans or
    
    Plans orPeriod
    
    Purchased
    
    (or Unit)
    
    Programs
    
    ProgramsApril 1, 2008 to April 30, 2008 (1)
    
    
    33,639
    
    
    $
    29.60
    
    
    
    
    
    
    
    May 1, 2008 to May 31, 2008 (1)
    
    
    78,648
    
    
    $
    31.78
    
    
    
    
    
    
    
    June 1, 2008 to June 30, 2008 (1)
    
    
    4,401
    
    
    $
    34.86
    
    
    
    
    
    
    
    Total
    
    
    116,688
    
    
    $
    31.27
    
    
    
    
    
    
    
    
 
 (1)
    
    These shares were withheld upon the vesting of employee restricted stock grants in connection
with payment of required withholding taxes. 37




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  1.
    
    Election of directors:
 For
    
    WithholdJonathan Ginns (term expires in 2011)
    
    
    76,183,083
    
    
    
    358,011Scott D. Josey (term expires in 2011)
    
    
    75,960,988
    
    
    
    580,106
 2.
    
    Ratification of the selection of Deloitte & Touche LLP as independent auditors
for the fiscal year ending December 31, 2008:
 For
    
    Against
    
    Abstain75,351,519
    
    1,181,519
    
    8,056
  
 Item 6. Exhibits
 Number
    
    Description2.1*
    
    Agreement and Plan of Merger dated as of September 9, 2005 among Forest Oil Corporation, SML
Wellhead Corporation, Mariner Energy, Inc. and MEI Sub, Inc. (incorporated by reference to
Exhibit 2.1 to Mariners Registration Statement on Form S-4 (File No. 333-137441) filed on
September 19, 2006).2.2*
    
    Letter Agreement dated as of February 3, 2006 among Forest Oil Corporation, Forest Energy
Resources, Inc., Mariner Energy, Inc. and MEI Sub, Inc. amending the transaction agreements
(incorporated by reference to Exhibit 2.2 to Mariners Registration Statement on Form S-4
(File No. 333-137441) filed on September 19, 2006).2.3*
    
    Letter Agreement, dated as of February 28, 2006, among Forest Oil Corporation, Forest Energy
Resources, Inc., Mariner Energy, Inc. and MEI Sub, Inc. amended the transaction agreements
(incorporated by reference to Exhibit 2.1 to Mariners Form 8-K filed on March 3, 2006).2.4*
    
    Letter Agreement, dated April 12, 2006, among Forest Oil Corporation, Mariner Energy Resources,
Inc. and Mariner Energy, Inc. amended the transaction agreements (incorporated by reference to
Exhibit 2.1 to Mariners Form 8-K filed on April 13, 2006).2.5*
    
    Membership Interest Purchase Agreement by and between Hydro Gulf of Mexico, Inc. and Mariner
Energy, Inc., executed December 23, 2007 (incorporated by reference to Exhibit 2.1 to Mariners
Form 8-K filed on February 5, 2008).3.1*
    
    Second Amended and Restated Certificate of Incorporation of Mariner Energy, Inc., as amended
(incorporated by reference to Exhibit 3.1 to Mariners Registration Statement on Form S-8
(File No. 333-132800) filed on March 29, 2006).3.2*
    
    Fourth Amended and Restated Bylaws of Mariner Energy, Inc. (incorporated by reference to
Exhibit 3.2 to Mariners Registration Statement on Form S-4 (File No. 333-129096) filed on
October 18, 2005).4.1*
    
    Indenture, dated as of April 30, 2007, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on May 1, 2007).4.2*
    
    Indenture, dated as of April 24, 2006, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on April 25, 2006).4.3*
    
    Exchange and Registration Rights Agreement, dated as of April 24, 2006, among Mariner Energy,
Inc.,
 38




---



##### Table of Contents



Number
    
    Descriptionthe guarantors party thereto and the initial purchasers party thereto (incorporated by
reference to Exhibit 4.2 to Mariners Form 8-K filed on April 25, 2006).4.4*
    
    Amended and Restated Credit Agreement, dated as of March 2, 2006, among Mariner Energy, Inc. and
Mariner Energy Resources, Inc., as Borrowers, the Lenders party thereto from time to time, as
Lenders, and Union Bank of California, N.A., as Administrative Agent and as Issuing Lender
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on March 3, 2006).4.5*
    
    Amendment No. 1 and Consent, dated as of April 7, 2006, among Mariner Energy, Inc. and Mariner
Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California,
N.A., as Administrative Agent for such Lenders and as Issuing Lender for such Lenders
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on April 13, 2006).4.6*
    
    Amendment No. 2, dated as of October 13, 2006, among Mariner Energy, Inc. and Mariner Energy
Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California, N.A., as
Administrative Agent for such Lenders and as Issuing Lender for such Lenders (incorporated by
reference to Exhibit 4.1 to Mariners Form 8-K filed on October 18, 2006).4.7*
    
    Amendment No. 3 and Consent, dated as of April 23, 2007, among Mariner Energy, Inc. and Mariner
Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California,
N.A., as Administrative Agent for such Lenders and as Issuing Lender for such Lenders
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on April 24, 2007).4.8*
    
    Amendment No. 4, dated as of August 24, 2007, among Mariner Energy, Inc. and Mariner Energy
Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California, N.A., as
Administrative Agent for such Lenders and as Issuing Lender for such Lenders (incorporated by
reference to Exhibit 4.1 to Mariners Form 8-K filed on August 27, 2007).4.9*
    
    Amendment No. 5 and Agreement, dated as of January 31, 2008, among Mariner Energy, Inc. and
Mariner Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of
California, N.A., as Administrative Agent for such Lenders and as Issuing Lender for such Lenders
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on February 5, 2008).4.10*
    
    Master Assignment, Agreement and Amendment No. 6, dated as of June 2, 2008, among Mariner Energy,
Inc. and Mariner Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank
of California, N.A., as Administrative Agent for such Lenders and as Issuing Lender for such
Lenders (incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on June 3, 2008).10.1*
    
    Underwriting Agreement, dated April 25, 2007, among J.P. Morgan Securities Inc., as Representative
of the several Underwriters listed in Schedule 1 thereto, Mariner Energy, Inc., Mariner Energy
Resources, Inc., Mariner LP LLC, and Mariner Energy Texas LP (incorporated by reference to
Exhibit 1.1 to Mariners Form 8-K filed on April 26, 2007).10.2*
    
    Purchase Agreement, dated as of April 19, 2006, among Mariner Energy, Inc., Mariner LP LLC,
Mariner Energy Resources, Inc., Mariner Energy Texas LP and the initial purchasers party thereto
(incorporated by reference to Exhibit 10.1 to Mariners Form 8-K filed on April 25, 2006).10.3*+
    
    Form of Restricted Stock Agreement (2008 Long-Term Performance-Based Restricted Stock Program)
under Mariner Energy, Inc. Second Amended and Restated Stock Incentive Plan (incorporated by
reference to Exhibit 10.2 to Mariners Form 8-K filed on June 19, 2008).23.1
    
    Consent of Ryder Scott Company, L.P.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference as indicated.+
    
    Management contract, plan or arrangement.  39




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##### Table of Contents



SIGNATURES
    By:
    /s/ Scott D. JoseyScott D. Josey,Chairman of the Board, Chief Executive Officer
and PresidentBy:
    /s/ John H. KarnesJohn H. Karnes,Senior Vice President, Chief Financial Officer
and Treasurer 40




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description2.1*
    
    Agreement and Plan of Merger dated as of September 9, 2005 among Forest Oil Corporation, SML
Wellhead Corporation, Mariner Energy, Inc. and MEI Sub, Inc. (incorporated by reference to
Exhibit 2.1 to Mariners Registration Statement on Form S-4 (File No. 333-137441) filed on
September 19, 2006).2.2*
    
    Letter Agreement dated as of February 3, 2006 among Forest Oil Corporation, Forest Energy
Resources, Inc., Mariner Energy, Inc. and MEI Sub, Inc. amending the transaction agreements
(incorporated by reference to Exhibit 2.2 to Mariners Registration Statement on Form S-4
(File No. 333-137441) filed on September 19, 2006).2.3*
    
    Letter Agreement, dated as of February 28, 2006, among Forest Oil Corporation, Forest Energy
Resources, Inc., Mariner Energy, Inc. and MEI Sub, Inc. amended the transaction agreements
(incorporated by reference to Exhibit 2.1 to Mariners Form 8-K filed on March 3, 2006).2.4*
    
    Letter Agreement, dated April 12, 2006, among Forest Oil Corporation, Mariner Energy Resources,
Inc. and Mariner Energy, Inc. amended the transaction agreements (incorporated by reference to
Exhibit 2.1 to Mariners Form 8-K filed on April 13, 2006).2.5*
    
    Membership Interest Purchase Agreement by and between Hydro Gulf of Mexico, Inc. and Mariner
Energy, Inc., executed December 23, 2007 (incorporated by reference to Exhibit 2.1 to Mariners
Form 8-K filed on February 5, 2008).3.1*
    
    Second Amended and Restated Certificate of Incorporation of Mariner Energy, Inc., as amended
(incorporated by reference to Exhibit 3.1 to Mariners Registration Statement on Form S-8
(File No. 333-132800) filed on March 29, 2006).3.2*
    
    Fourth Amended and Restated Bylaws of Mariner Energy, Inc. (incorporated by reference to
Exhibit 3.2 to Mariners Registration Statement on Form S-4 (File No. 333-129096) filed on
October 18, 2005).4.1*
    
    Indenture, dated as of April 30, 2007, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on May 1, 2007).4.2*
    
    Indenture, dated as of April 24, 2006, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on April 25, 2006).4.3*
    
    Exchange and Registration Rights Agreement, dated as of April 24, 2006, among Mariner Energy,
Inc., the guarantors party thereto and the initial purchasers party thereto (incorporated by
reference to Exhibit 4.2 to Mariners Form 8-K filed on April 25, 2006).4.4*
    
    Amended and Restated Credit Agreement, dated as of March 2, 2006, among Mariner Energy, Inc. and
Mariner Energy Resources, Inc., as Borrowers, the Lenders party thereto from time to time, as
Lenders, and Union Bank of California, N.A., as Administrative Agent and as Issuing Lender
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on March 3, 2006).4.5*
    
    Amendment No. 1 and Consent, dated as of April 7, 2006, among Mariner Energy, Inc. and Mariner
Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California,
N.A., as Administrative Agent for such Lenders and as Issuing Lender for such Lenders
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on April 13, 2006).4.6*
    
    Amendment No. 2, dated as of October 13, 2006, among Mariner Energy, Inc. and Mariner Energy
Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California, N.A., as
Administrative Agent for such Lenders and as Issuing Lender for such Lenders (incorporated by
reference to Exhibit 4.1 to Mariners Form 8-K filed on October 18, 2006).4.7*
    
    Amendment No. 3 and Consent, dated as of April 23, 2007, among Mariner Energy, Inc. and Mariner
Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California,
N.A., as Administrative Agent for such Lenders and as Issuing Lender for such Lenders
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on April 24, 2007).4.8*
    
    Amendment No. 4, dated as of August 24, 2007, among Mariner Energy, Inc. and Mariner Energy
Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of California, N.A., as
Administrative Agent for such Lenders and as Issuing Lender for such Lenders (incorporated by
reference to Exhibit 4.1 to Mariners Form 8-K filed on August 27, 2007).
 41




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##### Table of Contents



Number
    
    Description4.9*
    
    Amendment No. 5 and Agreement, dated as of January 31, 2008, among Mariner Energy, Inc. and
Mariner Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank of
California, N.A., as Administrative Agent for such Lenders and as Issuing Lender for such Lenders
(incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on February 5, 2008).4.10*
    
    Master Assignment, Agreement and Amendment No. 6, dated as of June 2, 2008, among Mariner Energy,
Inc. and Mariner Energy Resources, Inc., as Borrowers, the Lenders party thereto, and Union Bank
of California, N.A., as Administrative Agent for such Lenders and as Issuing Lender for such
Lenders (incorporated by reference to Exhibit 4.1 to Mariners Form 8-K filed on June 3, 2008).10.1*
    
    Underwriting Agreement, dated April 25, 2007, among J.P. Morgan Securities Inc., as Representative
of the several Underwriters listed in Schedule 1 thereto, Mariner Energy, Inc., Mariner Energy
Resources, Inc., Mariner LP LLC, and Mariner Energy Texas LP (incorporated by reference to
Exhibit 1.1 to Mariners Form 8-K filed on April 26, 2007).10.2*
    
    Purchase Agreement, dated as of April 19, 2006, among Mariner Energy, Inc., Mariner LP LLC,
Mariner Energy Resources, Inc., Mariner Energy Texas LP and the initial purchasers party thereto
(incorporated by reference to Exhibit 10.1 to Mariners Form 8-K filed on April 25, 2006).10.3*+
    
    Form of Restricted Stock Agreement (2008 Long-Term Performance-Based Restricted Stock Program)
under Mariner Energy, Inc. Second Amended and Restated Stock Incentive Plan (incorporated by
reference to Exhibit 10.2 to Mariners Form 8-K filed on June 19, 2008).23.1
    
    Consent of Ryder Scott Company, L.P.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference as indicated.+
    
    Management contract, plan or arrangement.  42