##### 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 September 30, 2009
 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
    
    86-0460233(State or other jurisdiction of 
incorporation or organization)
    
    (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
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PART IItem 1. Unaudited Condensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets at September 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Changes in Stockholders Equity for the Nine Months Ended September 30, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and
2008
    
    
    6Notes to the Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 4. Controls and Procedures
    
    
    49PART IIItem 1A. Risk Factors
    
    
    50Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    51Item 6. Exhibits
    
    
    52Items 1, 3, 4 and 5 are not applicable and have been omitted.EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I
 
 Item 1. Unaudited Condensed Consolidated Financial Statements
 MARINER ENERGY, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    6,017
    
    
    $
    3,209Receivables, net of allowances of $6,949 and $3,868 as of
September 30, 2009 and December 31, 2008, respectively
    
    
    136,424
    
    
    
    219,920Insurance receivables
    
    
    12,414
    
    
    
    13,123Derivative financial instruments
    
    
    4,434
    
    
    
    121,929Intangible assets
    
    
    1,446
    
    
    
    2,334Prepaid expenses and other
    
    
    23,264
    
    
    
    14,438Total current assets
    
    
    183,999
    
    
    
    374,953Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    4,897,001
    
    
    
    4,448,146Unproved properties, not subject to amortization
    
    
    214,891
    
    
    
    201,121Total oil and gas properties
    
    
    5,111,892
    
    
    
    4,649,267Other property and equipment
    
    
    55,229
    
    
    
    53,115Accumulated depreciation, depletion and amortization:Proved oil and gas properties
    
    
    (2,745,601
    )
    
    
    (1,767,028
    )Other property and equipment
    
    
    (7,549
    )
    
    
    (5,477
    )Total accumulated depreciation, depletion and amortization
    
    
    (2,753,150
    )
    
    
    (1,772,505
    )Total property and equipment, net
    
    
    2,413,971
    
    
    
    2,929,877Insurance Receivables
    
    
    
    
    
    
    22,132Derivative Financial Instruments
    
    
    920
    
    
    
    Other Assets, net of amortization
    
    
    74,689
    
    
    
    65,831TOTAL ASSETS
    
    $
    2,673,579
    
    
    $
    3,392,793LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    3,586
    
    
    $
    3,837Accrued liabilities
    
    
    119,965
    
    
    
    107,815Accrued capital costs
    
    
    128,781
    
    
    
    195,833Deferred income tax
    
    
    15,772
    
    
    
    23,148Abandonment liability
    
    
    47,977
    
    
    
    82,364Accrued interest
    
    
    30,353
    
    
    
    12,567Derivative financial instruments
    
    
    9,907
    
    
    
    Total current liabilities
    
    
    356,341
    
    
    
    425,564Long-Term Liabilities:Abandonment liability
    
    
    408,504
    
    
    
    325,880Deferred income tax
    
    
    78,468
    
    
    
    319,766Derivative financial instruments
    
    
    18,267
    
    
    
    Long-term debt
    
    
    954,503
    
    
    
    1,170,000Other long-term liabilities
    
    
    29,037
    
    
    
    31,263Total long-term liabilities
    
    
    1,488,779
    
    
    
    1,846,909Commitments and Contingencies (see Note 9)Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
authorized, no shares issued and outstanding at
September 30, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 101,855,521 shares issued and outstanding at
September 30, 2009; 180,000,000 shares authorized,
88,846,073 shares issued and outstanding at December 31,
2008
    
    
    10
    
    
    
    9Additional paid-in capital
    
    
    1,250,151
    
    
    
    1,071,347Accumulated other comprehensive income
    
    
    10,198
    
    
    
    78,181Accumulated deficit
    
    
    (431,900
    )
    
    
    (29,217
    )Total stockholders equity
    
    
    828,459
    
    
    
    1,120,320TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,673,579
    
    
    $
    3,392,793
 The accompanying notes are an integral part of these condensed consolidated financial statements
 3




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MARINER ENERGY, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Natural gas
    
    $
    130,046
    
    
    $
    192,804
    
    
    $
    425,747
    
    
    $
    622,705Oil
    
    
    80,908
    
    
    
    97,987
    
    
    
    220,787
    
    
    
    356,157Natural gas liquids
    
    
    15,736
    
    
    
    24,541
    
    
    
    30,398
    
    
    
    78,579Other revenues
    
    
    656
    
    
    
    2,558
    
    
    
    25,720
    
    
    
    5,798Total revenues
    
    
    227,346
    
    
    
    317,890
    
    
    
    702,652
    
    
    
    1,063,239Costs and Expenses:Lease operating expense
    
    
    65,325
    
    
    
    65,267
    
    
    
    165,816
    
    
    
    167,341Severance and ad valorem taxes
    
    
    4,406
    
    
    
    4,813
    
    
    
    11,668
    
    
    
    14,686Transportation expense
    
    
    4,468
    
    
    
    4,065
    
    
    
    13,627
    
    
    
    11,288General and administrative expense
    
    
    18,922
    
    
    
    11,554
    
    
    
    57,455
    
    
    
    36,280Depreciation, depletion and amortization
    
    
    106,218
    
    
    
    114,398
    
    
    
    301,305
    
    
    
    375,170Full-cost ceiling test impairment
    
    
    
    
    
    
    
    
    
    
    704,731
    
    
    
    Other miscellaneous expense
    
    
    1,193
    
    
    
    125
    
    
    
    11,960
    
    
    
    965Total costs and expenses
    
    
    200,532
    
    
    
    200,222
    
    
    
    1,266,562
    
    
    
    605,730OPERATING INCOME (LOSS)
    
    
    26,814
    
    
    
    117,668
    
    
    
    (563,910
    )
    
    
    457,509Other Income (Expense):Interest income
    
    
    56
    
    
    
    369
    
    
    
    443
    
    
    
    976Interest expense, net of amounts capitalized
    
    
    (19,702
    )
    
    
    (17,507
    )
    
    
    (51,076
    )
    
    
    (53,641
    )Income (Loss) Before Taxes
    
    
    7,168
    
    
    
    100,530
    
    
    
    (614,543
    )
    
    
    404,844(Provision) Benefit for Income Taxes
    
    
    (2,946
    )
    
    
    (35,839
    )
    
    
    211,860
    
    
    
    (144,449
    )Net Income (Loss)
    
    
    4,222
    
    
    
    64,691
    
    
    
    (402,683
    )
    
    
    260,395Less: Net income attributable to
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (188
    )NET INCOME (LOSS) ATTRIBUTABLE TO MARINER
ENERGY, INC.
    
    $
    4,222
    
    
    $
    64,691
    
    
    $
    (402,683
    )
    
    $
    260,207Net Income(Loss) per share attributable to
Mariner Energy, Inc.:Basic
    
    $
    0.04
    
    
    $
    0.74
    
    
    $
    (4.29
    )
    
    $
    2.98Diluted
    
    $
    0.04
    
    
    $
    0.73
    
    
    $
    (4.29
    )
    
    $
    2.95Weighted average shares outstanding:Basic
    
    
    100,752,532
    
    
    
    87,595,792
    
    
    
    93,848,859
    
    
    
    87,447,280Diluted
    
    
    101,084,502
    
    
    
    88,183,715
    
    
    
    93,848,859
    
    
    
    88,239,859
 The accompanying notes are an integral part of these condensed consolidated financial statements
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MARINER ENERGY, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    AccumulatedOtherAdditional
    
    
    Comprehensive
    
    
    
    
    
    
    TotalCommon
    
    
    Stock
    
    
    Paid-In-
    
    
    Income/
    
    
    Accumulated
    
    
    StockholdersStock
    
    
    Amount
    
    
    Capital
    
    
    (Loss)
    
    
    Deficit
    
    
    EquityBalance at December 31, 2008
    
    
    88,846
    
    
    $
    9
    
    
    $
    1,071,347
    
    
    $
    78,181
    
    
    $
    (29,217
    )
    
    $
    1,120,320Common shares issued  equity offering
    
    
    11,500
    
    
    
    1
    
    
    
    159,673
    
    
    
    
    
    
    
    
    
    
    
    159,674Common shares issued  restricted stock
    
    
    1,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock bought and cancelled on
same day
    
    
    (175
    )
    
    
    
    
    
    
    (1,991
    )
    
    
    
    
    
    
    
    
    
    
    (1,991
    )Forfeiture of restricted stock
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    21,114
    
    
    
    
    
    
    
    
    
    
    
    21,114Stock options exercised
    
    
    1
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Comprehensive income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,683
    )
    
    
    (402,683
    )Change in fair value of derivative
hedging instruments  net of income
taxes of $(62,411)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (189,763
    )
    
    
    
    
    
    
    (189,763
    )Hedge settlements reclassified to
income  net of income taxes of
$68,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,780
    
    
    
    
    
    
    
    121,780Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,983
    )
    
    
    (402,683
    )
    
    
    (470,666
    )Balance at September 30, 2009
    
    
    101,856
    
    
    $
    10
    
    
    $
    1,250,151
    
    
    $
    10,198
    
    
    $
    (431,900
    )
    
    $
    828,459
 Accumulated
    
    
    
    
    
    
    TotalOther
    
    
    
    
    
    
    MarinerAdditional
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Energy, Inc.
    
    
    
    
    
    
    TotalCommon
    
    
    Stock
    
    
    Paid-In-
    
    
    Income/
    
    
    Retained
    
    
    Stockholders
    
    
    Noncontrolling
    
    
    StockholdersStock
    
    
    Amount
    
    
    Capital
    
    
    (Loss)
    
    
    Earnings
    
    
    Equity
    
    
    Interests
    
    
    EquityBalance at December 31, 2007
    
    
    87,229
    
    
    $
    9
    
    
    $
    1,054,089
    
    
    $
    (22,576
    )
    
    $
    359,496
    
    
    $
    1,391,018
    
    
    $
    1
    
    
    $
    1,391,019Common shares issued 
restricted stock
    
    
    1,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock bought and
cancelled on same day
    
    
    (137
    )
    
    
    
    
    
    
    (4,239
    )
    
    
    
    
    
    
    
    
    
    
    (4,239
    )
    
    
    
    
    
    
    (4,239
    )Forfeiture of restricted stock
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    11,766
    
    
    
    
    
    
    
    
    
    
    
    11,766
    
    
    
    
    
    
    
    11,766Stock options exercised
    
    
    56
    
    
    
    
    
    
    
    741
    
    
    
    
    
    
    
    
    
    
    
    741
    
    
    
    
    
    
    
    741Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260,207
    
    
    
    260,207
    
    
    
    188
    
    
    
    260,395Change in fair value of
derivative hedging instruments 
net of income taxes of $25,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,224
    
    
    
    
    
    
    
    69,224
    
    
    
    
    
    
    
    69,224Hedge settlements reclassified
to income  net of income taxes
of $(43,980)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79,549
    )
    
    
    
    
    
    
    (79,549
    )
    
    
    
    
    
    
    (79,549
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,325
    )
    
    
    260,207
    
    
    
    249,882
    
    
    
    188
    
    
    
    250,070Balance at September 30, 2008
    
    
    88,854
    
    
    $
    9
    
    
    $
    1,062,357
    
    
    $
    (32,901
    )
    
    $
    619,703
    
    
    $
    1,649,168
    
    
    $
    189
    
    
    $
    1,649,357
 The accompanying notes are an integral part of these condensed consolidated financial statements
 5




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##### Table of Contents



MARINER ENERGY, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine MonthsEnded September 30,2009
    
    
    2008Operating Activities:Net (loss) income attributable to Mariner Energy, Inc.
    
    $
    (402,683
    )
    
    $
    260,207Adjustments to reconcile net income to net cash provided by operating activities:Deferred income (benefit) tax
    
    
    (211,860
    )
    
    
    140,854Depreciation, depletion and amortization
    
    
    301,305
    
    
    
    375,170Ineffectiveness of derivative instruments
    
    
    812
    
    
    
    1,647Full-cost ceiling test impairment
    
    
    704,731
    
    
    
    Share-based compensation
    
    
    18,360
    
    
    
    11,953Derivative financial instruments
    
    
    (14,128
    )
    
    
    Other
    
    
    7,046
    
    
    
    2,538Changes in operating assets and liabilities:Receivables
    
    
    83,357
    
    
    
    (12,356
    )Insurance receivables
    
    
    22,841
    
    
    
    64,378Cash from liquidation of hedges
    
    
    52,562
    
    
    
    Prepaid expenses and other
    
    
    (25,334
    )
    
    
    1,640Accounts payable and accrued liabilities
    
    
    1,100
    
    
    
    15,777Net cash provided by operating activities
    
    
    538,109
    
    
    
    861,808Investing Activities:Acquisitions and additions to oil and gas properties
    
    
    (468,980
    )
    
    
    (952,105
    )Additions to other property and equipment
    
    
    (2,141
    )
    
    
    (49,647
    )Restricted cash designated for investment
    
    
    
    
    
    
    5,000Net cash used in investing activities
    
    
    (471,121
    )
    
    
    (996,752
    )Financing Activities:Credit facility borrowings
    
    
    350,221
    
    
    
    938,000Credit facility repayments
    
    
    (855,221
    )
    
    
    (807,000
    )Repurchase of stock
    
    
    (1,991
    )
    
    
    (4,239
    )Debt redetermination costs
    
    
    (2,306
    )
    
    
    Debt offering costs
    
    
    (5,906
    )
    
    
    Proceeds from equity offering
    
    
    159,736
    
    
    
    Proceeds from debt issuance
    
    
    291,279
    
    
    
    Proceeds from exercise of stock options
    
    
    8
    
    
    
    741Net cash (used in) provided by financing activities
    
    
    (64,180
    )
    
    
    127,502Increase (Decrease) in Cash and Cash Equivalents
    
    
    2,808
    
    
    
    (7,442
    )Cash and Cash Equivalents at Beginning of Period
    
    
    3,209
    
    
    
    18,589Cash and Cash Equivalents at End of Period
    
    $
    6,017
    
    
    $
    11,147Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest (net of amount capitalized)
    
    $
    29,238
    
    
    $
    35,059Income taxes, net of refunds
    
    $
    (2,001
    )
    
    $
    2,906
 The accompanying notes are an integral part of these condensed consolidated financial statements
 6




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##### Table of Contents



MARINER ENERGY, INC.
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Summary of Significant Accounting Policies
 Operations
 Interim Financial Statements
 Use of Estimates
 Principles of Consolidation
 Reclassifications
 Income Taxes
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Recent Accounting Pronouncements
   Modernization of Oil and Gas Reporting
 
    
    Oil and gas reserves must be reported using average prices over the prior 12 month
period, rather than year-end prices;
    
    Companies will be allowed to report, on an optional basis, probable and possible
reserves;
    
    Non-traditional reserves, such as oil and gas extracted from coal and shales, will
be included in the definition of oil and gas producing activities;
    
    Companies will be permitted to use new technologies to determine proved reserves, as
long as those technologies have been demonstrated empirically to lead to reliable
conclusions with respect to reserve volumes;
    
    Companies will be required to disclose, in narrative form, additional details on
their proved undeveloped reserves (PUDs), including the total quantity of PUDs at year
end, any material changes to PUDs that occurred during the year, investments and
progress made to convert PUDs to developed oil and gas reserves and an explanation of
the reasons why material concentrations of PUDs in individual fields or countries have
remained undeveloped for five years or more after disclosure as PUDs; and
 8




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
    
    Companies will be required to report the qualifications and measures taken to assure
the independence and objectivity of any business entity or employee primarily
responsible for preparing or auditing the reserves estimates.
     2. Acquisitions and Dispositions
 Gulf of Mexico Shelf Acquisition.
 Pro Forma Financial Information
 9




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##### Table of Contents



For the Three Months
    
    For the Nine MonthsEnded September 30, 2008(In thousands, except per share amounts)Pro Forma:Revenue
    
    $
    317,890
    
    
    $
    1,077,932Net income attributable to Mariner Energy, Inc.
    
    $
    64,670
    
    
    $
    263,806Basic earnings per share
    
    $
    0.74
    
    
    $
    3.02Diluted earnings per share
    
    $
    0.73
    
    
    $
    2.99
 Permian Basin Acquisitions.
 Bass Lite
 3. Long-Term Debt
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Bank credit facility
    
    $
    65,000
    
    
    $
    570,0007 1/2% Senior Notes, due April 15, 2013, net of discount
    
    
    297,983
    
    
    
    300,0008% Senior Notes, due May 15, 2017
    
    
    300,000
    
    
    
    300,00011 3/4% Senior Notes, due June 30, 2016, net of discount
    
    
    291,520
    
    
    
    Total long-term debt
    
    $
    954,503
    
    
    $
    1,170,000
 Bank Credit Facility
 3 4
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
    
    maintain a ratio of consolidated current assets plus the unused borrowing base to
consolidated current liabilities of not less than 1.0 to 1.0; and
 
    
    maintain a ratio of total debt to EBITDA (as defined in the credit agreement) of not
more than 2.5 to 1.0.
   Senior Notes 3 4 3 4 1 2 1 2 3 4 3 4 1 2
 11 3 / 4 % Notes 3 4
 3 4
 3 4 1 2
 3 4
 11




---



##### Table of Contents



3 4 3 4
 
 3 4 3 4
 3 4 3 4
 3 4 1 2
 
    
    make investments;
    
    incur additional indebtedness or issue preferred stock;
    
    create certain liens;
    
    sell assets;
    
    enter into agreements that restrict dividends or other payments from its
subsidiaries to itself;
    
    consolidate, merge or transfer all or substantially all of its assets;
    
    engage in transactions with affiliates;
    
    pay dividends or make other distributions on capital stock or subordinated
indebtedness; and
    
    create unrestricted subsidiaries.
 Capitalized Interest
 4. Stockholders Equity
 Common Stock Offering
 12




---



##### Table of Contents



5. Oil and Gas Properties
     6. Accrual for Future Abandonment Liabilities
  13




---



##### Table of Contents



(In thousands)Abandonment liability as of January 1, 2009
    
    $
    408,244Liabilities incurred
    
    
    13,453Liabilities settled
    
    
    (26,999
    )Accretion expense
    
    
    25,390Revisions to previous estimates
    
    
    36,393Abandonment liability as of September 30, 2009
    
    $
    456,481
 7. Share-Based Compensation
 Applicable Plans
   
    
    without the approval of the Companys stockholders, no change can be made that would
 (i)
    
    increase the total number of shares that may be issued under
the Stock Incentive Plan, except as provided in the Stock Incentive Plan with
respect to stock dividends or splits, or with respect to mergers,
recapitalizations, reorganizations, spin-offs or other unusual transactions or
events,(ii)
    
    permit the exercise price of any outstanding option that is
underwater to be reduced or for an underwater option to be cancelled and
replaced with a new award,(iii)
    
    include participants other than employees, non-employee
directors and consultants, or(iv)
    
    materially increase benefits accrued to participants under the
Stock Incentive Plan; and
 
    
    no change can materially adversely affect the rights of a participant under an award
without the participants written consent.
  14




---



##### Table of Contents



Plan Activity
  WeightedAverage
    
    
    Aggregate IntrinsicExercise
    
    
    Value (1)Shares
    
    
    Price
    
    
    (In thousands)Outstanding at January 1, 2009
    
    
    645,348
    
    
    $
    13.88
    
    
    $
    196Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (726
    )
    
    
    11.59
    
    
    
    (2
    )Forfeited
    
    
    
    
    
    
    
    
    
    
    Outstanding and exercisable at September 30, 2009
    
    
    644,622
    
    
    $
    13.88
    
    
    $
    194
 
 (1)
    
    Based upon the difference between the closing price per share of the common stock on the last
trading date of the quarter of $14.18 and the option exercise price of in-the-money options.  Restricted Shares underStock Incentive PlanSeptember 30,2009
    
    2008Total unvested shares at beginning of period: January 1
    
    
    2,697,926
    
    
    
    1,484,552Shares granted (1)
    
    
    1,708,795
    
    
    
    1,729,329Shares vested
    
    
    (591,049
    )
    
    
    (460,897
    )Shares forfeited (1)
    
    
    (25,131
    )
    
    
    (23,383
    )Total unvested shares at end of period: September 30
    
    
    3,790,541
    
    
    
    2,729,601Available for future grant as options or restricted stock
    
    
    7,021,666
    
    
    
    2,522,823
 
 (1)
    
    Current year activity includes 4,741 shares granted and forfeited under the Stock Incentive
Plans 2008 Long-Term Performance-Based Restricted Stock Program discussed below during the
nine months ended September 30, 2009.  WeightedAggregate
    
    
    AverageEquity
    
    
    Weighted
    
    
    Intrinsic
    
    
    RemainingInstruments
    
    
    Average
    
    
    Value
    
    
    Contractual(thousands)
    
    
    Fair Value
    
    
    ($ thousands)
    
    
    Life (Years)Unvested at January 1, 2009
    
    
    2,697,926
    
    
    $
    28.22
    
    
    $
    76,123Granted
    
    
    1,708,795
    
    
    
    11.20
    
    
    
    19,144Vested
    
    
    (591,049
    )
    
    
    22.30
    
    
    
    (13,180
    )Forfeited
    
    
    (25,131
    )
    
    
    14.16
    
    
    
    (356
    )Unvested at September 30, 2009
    
    
    3,790,541
    
    
    
    21.56
    
    
    $
    81,731
    
    
    
    6.32
 Long-Term Performance-Based Restricted Stock Program
 15




---



##### Table of Contents



Quarter EndedSeptember 30,2009Weighted average fair value of grants
    
    $
    33.73Expected volatility
    
    
    42.29
    %Risk-free interest rate
    
    
    4.57
    %Dividend yield
    
    
    0.00
    %Expected life
    
    10 years
  8. Derivative Financial Instruments and Hedging Activities
     16




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Cash Gain (Loss) on Settlements (1)
    
    $
    52,644
    
    
    $
    (46,968
    )
    
    $
    173,648
    
    
    $
    (121,882
    )Reclassification of liquidated swaps (2)
    
    
    3,859
    
    
    
    
    
    
    
    17,059
    
    
    
    Gain (Loss) on Hedge Ineffectiveness (3)
    
    
    (809
    )
    
    
    4,827
    
    
    
    (812
    )
    
    
    (1,647
    )Total
    
    $
    55,694
    
    
    $
    (42,141
    )
    
    $
    189,895
    
    
    $
    (123,529
    )
 
 (1)
    
    Designated as cash flow hedges pursuant to accounting for derivatives and hedging under GAAP.(2)
    
    Natural gas and crude oil fixed price swaps liquidated in first and third quarters of 2009
that do not qualify for hedge accounting. These amounts include net losses of $1.8 million and
$1.5 million for the three-month and nine-month periods ended September 30, 2009,
respectively.(3)
    
    Unrealized loss recognized in natural gas revenue related to the ineffective portion of open
contracts that are not eligible for deferral under GAAP due primarily to the basis
differentials between the contract price and the indexed price at the point of sale.  Weighted Average
    
    
    Fair ValueFixed Price Swaps
    
    Quantity
    
    
    Fixed Price
    
    
    Asset (Liability) (1)(In thousands)Natural Gas (MMbtus)October 1December 31, 2009
    
    
    783,380
    
    
    $
    4.22
    
    
    $
    410January 1December 31, 2010
    
    
    12,775,000
    
    
    $
    5.84
    
    
    
    (4,405
    )January 1December 31, 2011
    
    
    13,650,000
    
    
    $
    6.45
    
    
    
    (5,080
    )January 1December 31, 2012
    
    
    6,588,000
    
    
    $
    6.62
    
    
    
    (2,262
    )January 1December 31, 2013
    
    
    5,840,000
    
    
    $
    6.76
    
    
    
    (1,384
    )Crude Oil (Bbls)October 1December 31, 2009
    
    
    228,160
    
    
    $
    76.33
    
    
    
    1,183January 1December 31, 2010
    
    
    1,934,500
    
    
    $
    67.48
    
    
    
    (12,589
    )January 1December 31, 2011
    
    
    978,100
    
    
    $
    73.24
    
    
    
    (3,369
    )January 1December 31, 2012
    
    
    494,100
    
    
    $
    80.77
    
    
    
    668January 1December 31, 2013
    
    
    408,800
    
    
    $
    82.81
    
    
    
    595Total
    
    
    
    
    
    
    
    
    
    $
    (26,233
    )
 
 (1)
    
    Table excludes $3.4 million included in Derivative financial instruments on the balance sheet
relating to the liquidation of 783,380 MMBtu to be paid in monthly installments through
December 31, 2009.    17




---



##### Table of Contents



Additional Disclosures about Derivative Instruments and Hedging Activities
  Fair Value of Derivative ContractsAsset DerivativesSeptember 30, 2009
    
    
    December 31, 2008Balance sheet
    
    
    
    
    
    
    Balance sheetLocation
    
    
    Fair value
    
    
    Location
    
    
    Fair valueDerivatives designated as cash flow hedging contractsFixed Price Swaps
    
    Current Assets: Derivative financial instruments
    

    
    $
    611
    
    
    Current Assets: Derivative financial instruments
    

    
    $
    121,929Long-Term Assets: Derivative Financial Instruments
    

    
    

    920Derivatives not designated as cash flow hedging contractsFixed Price Swaps
    
    Current Assets: Derivative financial instruments
    

    
    
    3,823
    
    
    Current Assets: Derivative financial instruments
    

    
    
    Stockholders Equity: Accumulated other comprehensive income
    
    

    
    38,844Total
    

    
    $
    44,198
    
    
    Total
    

    
    $
    121,929
 Fair Value of Derivative ContractsLiability DerivativesSeptember 30, 2009
    
    
    December 31, 2008Balance sheet
    
    
    
    
    
    
    Balance sheetLocation
    
    
    Fair value
    
    
    Location
    
    
    Fair valueDerivatives designated as cash flow hedging contractsFixed Price Swaps
    
    Current Liabilities: Derivative financial instruments
    
    
    $
    9,907
    
    
    Current Liabilities: Derivative financial  instruments
    

    
    $
    Long-Term Liabilities: Derivative financial instruments
    

    
    
    18,267
    
    
    Long-Term Liabilities: Derivative financial instruments
    

    
    
    Total
    

    
    $
    28,174
    
    

    Total
    

    
    $
    
  Location of gain/(loss)
    
    
    Amount of gain/(loss)
    
    
    
    
    
    
    Amount ofAmount of gain/(loss)
    
    
    reclassified from
    
    
    reclassified from
    
    
    Location of gain/(loss)
    
    
    gain/(loss)Derivatives
    
    recognized in OCI on
    
    
    Accumulated OCI into
    
    
    Accumulated OCI
    
    
    recognized in income
    
    
    recognized in incomedesignated as cash
    
    derivative (effective
    
    
    income (effective
    
    
    into income (effective
    
    
    on derivative
    
    
    on derivativeflow hedging
    
    portion)
    
    
    portion)
    
    
    portion)
    
    
    (ineffective portion)
    
    
    (ineffective portion)contracts under
    
    Third Quarter
    
    
    
    
    
    Third Quarter
    
    
    
    
    
    Third QuarterGAAP
    
    2009
    
    
    2008
    
    
    
    
    
    2009
    
    
    2008
    
    
    
    
    
    2009
    
    
    2008Fixed Price Swaps
    
    $
    26,643
    
    
    $
    (46,498
    )
    
    Revenues-Natural Gas
    

    
    $
    50,521
    
    
    $
    (17,102
    )
    

    Revenues-Natural Gas
    

    
    $
    (809
    )
    
    $
    4,827Fixed Price Collars
    
    
    
    
    
    
    (3,720
    )
    
    Revenues-Crude Oil
    

    
    
    2,123
    
    
    
    (29,866
    )
    
    Revenues-Crude Oil
    

    
    
    
    
    
    
    Total
    
    $
    26,643
    
    
    $
    (50,218
    )
    
    Total
    

    
    $
    52,644
    
    
    $
    (46,968
    )
    
    Total
    

    
    $
    (809
    )
    
    $
    4,827
 Amount of gain/(loss) recognized inincome on derivativeDerivatives not designated as cash
    
    Location of gain/(loss) recognized in income
    
    
    Third Quarter
    
    
    Third Quarterflow hedging contracts
    
    on derivative
    
    
    2009
    
    
    2008Fixed Price Swaps
    
    Revenues-Natural Gas
    
    

    $
    (1,837
    )
    
    $
    Revenues-Crude Oil
    

    
    
    5,696
    
    
    
    Total
    

    
    $
    3,859
    
    
    $
    
 18




---



##### Table of Contents



9. Commitments and Contingencies
 Minimum Future Lease Payments
 (In thousands)2010
    
    $
    2,6202011
    
    
    2,5872012
    
    
    2,5022013
    
    
    2,1732014 and thereafter
    
    
    9,958
 Other Commitments
 Insurance Matters
 Current Insurance Against Hurricanes
     19




---



##### Table of Contents



Hurricane Ike (2008)
  Hurricanes Katrina and Rita (2005)
    Litigation
 Letters of Credit
 20




---



##### Table of Contents



10. Earnings per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per share data)Numerator:Net Income (Loss) attributable to Mariner Energy, Inc.
    
    $
    4,222
    
    
    $
    64,691
    
    
    $
    (402,683
    )
    
    $
    260,207Denominator:Weighted average shares outstanding
    
    
    100,753
    
    
    
    87,596
    
    
    
    93,849
    
    
    
    87,447Add dilutive securitiesOptions
    
    
    11
    
    
    
    246
    
    
    
    
    
    
    
    265Restricted stock
    
    
    321
    
    
    
    342
    
    
    
    
    
    
    
    528Total weighted average shares outstanding and dilutive securities
    
    
    101,085
    
    
    
    88,184
    
    
    
    93,849
    
    
    
    88,240Net Income (Loss) per share attributable to Mariner Energy, Inc.:Basic:
    
    $
    0.04
    
    
    $
    0.74
    
    
    $
    (4.29
    )
    
    $
    2.98Diluted:
    
    $
    0.04
    
    
    $
    0.73
    
    
    $
    (4.29
    )
    
    $
    2.95
  11. Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net Income (Loss)
    
    $
    4,222
    
    
    $
    64,691
    
    
    $
    (402,683
    )
    
    $
    260,395Other comprehensive (loss) income:Change in fair value of derivative hedging instruments, net
of income taxes of $(36,084), $150,590, $(62,411), and
$25,790
    
    
    (64,513
    )
    
    
    272,381
    
    
    
    (189,763
    )
    
    
    69,224Derivative contracts settled and reclassified, net of income
taxes of $19,977, $(15,003), $68,115 and $(43,980)
    
    
    35,717
    
    
    
    (27,138
    )
    
    
    121,780
    
    
    
    (79,549
    )Change in accumulated other comprehensive (loss) income
    
    
    (28,796
    )
    
    
    245,243
    
    
    
    (67,983
    )
    
    
    (10,325
    )Comprehensive (loss) income
    
    
    (24,574
    )
    
    
    309,934
    
    
    
    (470,666
    )
    
    
    250,070Comprehensive income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188Comprehensive (loss) income attributable to Mariner Energy, Inc.
    
    $
    (24,574
    )
    
    $
    309,934
    
    
    $
    (470,666
    )
    
    $
    249,882
 12. Fair Value Measurement
  21




---



##### Table of Contents



Fair Value Measurements Using:SignificantQuoted Prices
    
    
    other
    
    
    Significantin Active
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Markets
    
    
    Inputs
    
    
    InputsDerivative Financial Instruments
    
    Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(In thousands)Natural gas and crude oil fixed price swaps  Short Term
    
    $
    (5,473
    )
    
    $
    
    
    
    $
    (5,473
    )
    
    $
    Natural gas and crude oil fixed price swaps  Long Term
    
    
    (17,347
    )
    
    
    
    
    
    
    (17,347
    )
    
    
    Total
    
    $
    (22,820
    )
    
    $
    
    
    
    $
    (22,820
    )
    
    $
    
  Level 2 Fair Value Measurements
  Level 3 Fair Value Measurements
   22




---



##### Table of Contents



September 30, 2009
    
    
    December 31, 2008Carrying
    
    
    
    
    
    
    CarryingLong-term Debt
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(In thousands)Bank credit facility
    
    $
    65,000
    
    
    $
    65,000
    
    
    $
    570,000
    
    
    $
    570,0007 1/2% Notes, net of discount
    
    
    297,983
    
    
    
    222,054
    
    
    
    300,000
    
    
    
    144,9568% Notes
    
    
    300,000
    
    
    
    145,721
    
    
    
    300,000
    
    
    
    59,97811 3/4% Notes, net of discount
    
    
    291,520
    
    
    
    147,051
    
    
    
    
    
    
    
    Total long-term debt
    
    $
    954,503
    
    
    $
    579,826
    
    
    $
    1,170,000
    
    
    $
    774,934
  13. Segment Information
   14. Supplemental Guarantor Information
 3 4 1 2
   23




---



##### Table of Contents



MARINER ENERGY, INC.
CONSOLIDATING BALANCE SHEET (Unaudited)
September 30, 2009
(In thousands except share data)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Current Assets:Cash and cash equivalents
    
    $
    6,016
    
    
    $
    1
    
    
    $
    
    
    
    $
    6,017Receivables, net of allowances
    
    
    91,928
    
    
    
    44,496
    
    
    
    
    
    
    
    136,424Insurance receivables
    
    
    56
    
    
    
    12,358
    
    
    
    
    
    
    
    12,414Derivative financial instruments
    
    
    4,434
    
    
    
    
    
    
    
    
    
    
    
    4,434Intangible assets
    
    
    1,446
    
    
    
    
    
    
    
    
    
    
    
    1,446Prepaid expenses and other
    
    
    21,635
    
    
    
    1,629
    
    
    
    
    
    
    
    23,264Total current assets
    
    
    125,515
    
    
    
    58,484
    
    
    
    
    
    
    
    183,999Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    2,445,514
    
    
    
    2,451,487
    
    
    
    
    
    
    
    4,897,001Unproved properties, not subject to amortization
    
    
    206,092
    
    
    
    8,799
    
    
    
    
    
    
    
    214,891Total oil and gas properties
    
    
    2,651,606
    
    
    
    2,460,286
    
    
    
    
    
    
    
    5,111,892Other property and equipment
    
    
    19,871
    
    
    
    35,358
    
    
    
    
    
    
    
    55,229Accumulated depreciation, depletion and amortization:
    
    
    
    
    
    
    
    
    
    
    Proved oil and gas properties
    
    
    (1,421,006
    )
    
    
    (1,324,595
    )
    
    
    
    
    
    
    (2,745,601
    )Other property and equipment
    
    
    (5,718
    )
    
    
    (1,831
    )
    
    
    
    
    
    
    (7,549
    )Total accumulated depreciation, depletion and
amortization
    
    
    (1,426,724
    )
    
    
    (1,326,426
    )
    
    
    
    
    
    
    (2,753,150
    )Total property and equipment, net
    
    
    1,244,753
    
    
    
    1,169,218
    
    
    
    
    
    
    
    2,413,971Investment in Subsidiaries
    
    
    440,538
    
    
    
    
    
    
    
    (440,538
    )
    
    
    Intercompany Receivables
    
    
    214,629
    
    
    
    
    
    
    
    (214,629
    )
    
    
    Intercompany Note Receivable
    
    
    7,175
    
    
    
    
    
    
    
    (7,175
    )
    
    
    Insurance Receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred income tax
    
    
    63,110
    
    
    
    
    
    
    
    (63,110
    )
    
    
    Derivative Financial Instruments
    
    
    920
    
    
    
    
    
    
    
    
    
    
    
    920Other Assets, net of amortization
    
    
    74,337
    
    
    
    352
    
    
    
    
    
    
    
    74,689TOTAL ASSETS
    
    $
    2,170,977
    
    
    $
    1,228,054
    
    
    $
    (725,452
    )
    
    $
    2,673,579Current Liabilities:Accounts payable
    
    $
    3,586
    
    
    $
    
    
    
    $
    
    
    
    $
    3,586Accrued liabilities
    
    
    100,965
    
    
    
    19,000
    
    
    
    
    
    
    
    119,965Accrued capital costs
    
    
    95,888
    
    
    
    32,893
    
    
    
    
    
    
    
    128,781Deferred income tax
    
    
    15,772
    
    
    
    
    
    
    
    
    
    
    
    15,772Abandonment liability
    
    
    12,850
    
    
    
    35,127
    
    
    
    
    
    
    
    47,977Accrued interest
    
    
    30,353
    
    
    
    
    
    
    
    
    
    
    
    30,353Derivative financial instruments
    
    
    9,907
    
    
    
    
    
    
    
    
    
    
    
    9,907Total current liabilities
    
    
    269,321
    
    
    
    87,020
    
    
    
    
    
    
    
    356,341Long-Term Liabilities:Abandonment liability
    
    
    71,984
    
    
    
    336,520
    
    
    
    
    
    
    
    408,504Deferred income tax
    
    
    
    
    
    
    141,578
    
    
    
    (63,110
    )
    
    
    78,468Intercompany payable
    
    
    
    
    
    
    214,629
    
    
    
    (214,629
    )
    
    
    Derivative financial instruments
    
    
    18,267
    
    
    
    
    
    
    
    
    
    
    
    18,267Long-term debt,
    
    
    954,503
    
    
    
    
    
    
    
    
    
    
    
    954,503Other long-term liabilities
    
    
    28,443
    
    
    
    594
    
    
    
    
    
    
    
    29,037Intercompany note payable
    
    
    
    
    
    
    7,175
    
    
    
    (7,175
    )
    
    
    Total long-term liabilities
    
    
    1,073,197
    
    
    
    700,496
    
    
    
    (284,914
    )
    
    
    1,488,779Commitments and Contingencies (see Note 9)Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
authorized, no shares issued and outstanding at
September 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 101,855,521 shares issued and
outstanding at September 30, 2009
    
    
    10
    
    
    
    5
    
    
    
    (5
    )
    
    
    10Additional paid-in capital
    
    
    1,250,151
    
    
    
    886,142
    
    
    
    (886,142
    )
    
    
    1,250,151Partner capital
    
    
    
    
    
    
    31,438
    
    
    
    (31,438
    )
    
    
    Accumulated other comprehensive income
    
    
    10,198
    
    
    
    
    
    
    
    
    
    
    
    10,198Accumulated deficit
    
    
    (431,900
    )
    
    
    (477,047
    )
    
    
    477,047
    
    
    
    (431,900
    )Total stockholders equity
    
    
    828,459
    
    
    
    440,538
    
    
    
    (440,538
    )
    
    
    828,459TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,170,977
    
    
    $
    1,228,054
    
    
    $
    (725,452
    )
    
    $
    2,673,579
 24




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##### Table of Contents



MARINER ENERGY, INC.
 CONSOLIDATING BALANCE SHEET (Unaudited)
December 31, 2008
(In thousands except share data)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Current Assets:Cash and cash equivalents
    
    $
    2,809
    
    
    $
    400
    
    
    $
    
    
    
    $
    3,209Receivables, net of allowances
    
    
    157,362
    
    
    
    62,558
    
    
    
    
    
    
    
    219,920Insurance receivables
    
    
    5,886
    
    
    
    7,237
    
    
    
    
    
    
    
    13,123Derivative financial instruments
    
    
    121,929
    
    
    
    
    
    
    
    
    
    
    
    121,929Intangible assets
    
    
    2,334
    
    
    
    
    
    
    
    
    
    
    
    2,334Prepaid expenses and other
    
    
    12,965
    
    
    
    1,473
    
    
    
    
    
    
    
    14,438Total current assets
    
    
    303,285
    
    
    
    71,668
    
    
    
    
    
    
    
    374,953Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    2,181,238
    
    
    
    2,266,908
    
    
    
    
    
    
    
    4,448,146Unproved properties, not subject to amortization
    
    
    185,012
    
    
    
    16,109
    
    
    
    
    
    
    
    201,121Total oil and gas properties
    
    
    2,366,250
    
    
    
    2,283,017
    
    
    
    
    
    
    
    4,649,267Other property and equipment
    
    
    33,351
    
    
    
    19,764
    
    
    
    
    
    
    
    53,115Accumulated depreciation, depletion and amortization:Proved oil and gas properties
    
    
    (911,462
    )
    
    
    (855,566
    )
    
    
    
    
    
    
    (1,767,028
    )Other property and equipment
    
    
    (4,425
    )
    
    
    (1,052
    )
    
    
    
    
    
    
    (5,477
    )Total accumulated depreciation, depletion and
amortization
    
    
    (915,887
    )
    
    
    (856,618
    )
    
    
    
    
    
    
    (1,772,505
    )Total property and equipment, net
    
    
    1,483,714
    
    
    
    1,446,163
    
    
    
    
    
    
    
    2,929,877Investment in Subsidiaries
    
    
    704,971
    
    
    
    
    
    
    
    (704,971
    )
    
    
    Intercompany Receivables
    
    
    123,142
    
    
    
    113,064
    
    
    
    (236,206
    )
    
    
    Intercompany Note Receivable
    
    
    176,200
    
    
    
    
    
    
    
    (176,200
    )
    
    
    Insurance Receivables
    
    
    3,924
    
    
    
    18,208
    
    
    
    
    
    
    
    22,132Other Assets, net of amortization
    
    
    64,726
    
    
    
    1,105
    
    
    
    
    
    
    
    65,831TOTAL ASSETS
    
    $
    2,859,962
    
    
    $
    1,650,208
    
    
    $
    (1,117,377
    )
    
    $
    3,392,793Current Liabilities:Accounts payable
    
    $
    3,837
    
    
    $
    
    
    
    $
    
    
    
    $
    3,837Accrued liabilities
    
    
    72,743
    
    
    
    35,072
    
    
    
    
    
    
    
    107,815Accrued capital costs
    
    
    144,710
    
    
    
    51,123
    
    
    
    
    
    
    
    195,833Deferred income tax
    
    
    23,148
    
    
    
    
    
    
    
    
    
    
    
    23,148Abandonment liability
    
    
    1,554
    
    
    
    80,810
    
    
    
    
    
    
    
    82,364Accrued interest
    
    
    12,567
    
    
    
    
    
    
    
    
    
    
    
    12,567Total current liabilities
    
    
    258,559
    
    
    
    167,005
    
    
    
    
    
    
    
    425,564Long-Term Liabilities:Abandonment liability
    
    
    56,920
    
    
    
    268,960
    
    
    
    
    
    
    
    325,880Deferred income tax
    
    
    110,431
    
    
    
    209,335
    
    
    
    
    
    
    
    319,766Intercompany payables
    
    
    113,064
    
    
    
    123,142
    
    
    
    (236,206
    )
    
    
    Long-term debt
    
    
    1,170,000
    
    
    
    
    
    
    
    
    
    
    
    1,170,000Other long-term liabilities
    
    
    30,668
    
    
    
    595
    
    
    
    
    
    
    
    31,263Intercompany note payable
    
    
    
    
    
    
    176,200
    
    
    
    (176,200
    )
    
    
    Total long-term liabilities
    
    
    1,481,083
    
    
    
    778,232
    
    
    
    (412,406
    )
    
    
    1,846,909Commitments and Contingencies (see Note 9)Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
authorized, no shares issued and outstanding at
December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 88,846,073 shares issued and outstanding at
December 31, 2008
    
    
    9
    
    
    
    5
    
    
    
    (5
    )
    
    
    9Additional paid-in-capital
    
    
    1,071,347
    
    
    
    886,143
    
    
    
    (886,143
    )
    
    
    1,071,347Partner capital
    
    
    
    
    
    
    30,646
    
    
    
    (30,646
    )
    
    
    Accumulated other comprehensive income
    
    
    78,181
    
    
    
    
    
    
    
    
    
    
    
    78,181Accumulated deficit
    
    
    (29,217
    )
    
    
    (211,823
    )
    
    
    211,823
    
    
    
    (29,217
    )Total stockholders equity
    
    
    1,120,320
    
    
    
    704,971
    
    
    
    (704,971
    )
    
    
    1,120,320TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,859,962
    
    
    $
    1,650,208
    
    
    $
    (1,117,377
    )
    
    $
    3,392,793
 25




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##### Table of Contents



MARINER ENERGY, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended September 30, 2009
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    98,896
    
    
    $
    31,150
    
    
    $
    
    
    
    $
    130,046Oil
    
    
    53,265
    
    
    
    27,643
    
    
    
    
    
    
    
    80,908Natural gas liquids
    
    
    13,226
    
    
    
    2,510
    
    
    
    
    
    
    
    15,736Other revenues
    
    
    597
    
    
    
    59
    
    
    
    
    
    
    
    656Total revenues
    
    
    165,984
    
    
    
    61,362
    
    
    
    
    
    
    
    227,346Costs and Expenses:Operating expenses
    
    
    39,616
    
    
    
    34,583
    
    
    
    
    
    
    
    74,199General and administrative expense
    
    
    17,774
    
    
    
    1,148
    
    
    
    
    
    
    
    18,922Depreciation, depletion and amortization
    
    
    64,656
    
    
    
    41,562
    
    
    
    
    
    
    
    106,218Other miscellaneous expense
    
    
    445
    
    
    
    748
    
    
    
    
    
    
    
    1,193Total costs and expenses
    
    
    122,491
    
    
    
    78,041
    
    
    
    
    
    
    
    200,532OPERATING INCOME (LOSS)
    
    
    43,493
    
    
    
    (16,679
    )
    
    
    
    
    
    
    26,814(Loss) Earnings of Affiliates
    
    
    (11,357
    )
    
    
    
    
    
    
    11,357
    
    
    
    Other Income (Expense):Interest income
    
    
    133
    
    
    
    
    
    
    
    (77
    )
    
    
    56Interest expense, net of amounts capitalized
    
    
    (19,632
    )
    
    
    (147
    )
    
    
    77
    
    
    
    (19,702
    )Income (Loss) Before Taxes
    
    
    12,637
    
    
    
    (16,826
    )
    
    
    11,357
    
    
    
    7,168(Provision) Benefit for Income Taxes
    
    
    (8,415
    )
    
    
    5,469
    
    
    
    
    
    
    
    (2,946
    )NET INCOME (LOSS)
    
    $
    4,222
    
    
    $
    (11,357
    )
    
    $
    11,357
    
    
    $
    4,222
 26




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##### Table of Contents



MARINER ENERGY, INC.
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended September 30, 2008
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    92,898
    
    
    $
    99,906
    
    
    $
    
    
    
    $
    192,804Oil
    
    
    48,814
    
    
    
    49,173
    
    
    
    
    
    
    
    97,987Natural gas liquids
    
    
    13,055
    
    
    
    11,486
    
    
    
    
    
    
    
    24,541Other revenues
    
    
    1,198
    
    
    
    1,360
    
    
    
    
    
    
    
    2,558Total revenues
    
    
    155,965
    
    
    
    161,925
    
    
    
    
    
    
    
    317,890Costs and Expenses:Operating expenses
    
    
    36,790
    
    
    
    37,355
    
    
    
    
    
    
    
    74,145General and administrative expense
    
    
    11,324
    
    
    
    230
    
    
    
    
    
    
    
    11,554Depreciation, depletion and amortization
    
    
    60,365
    
    
    
    54,033
    
    
    
    
    
    
    
    114,398Other miscellaneous expense
    
    
    101
    
    
    
    24
    
    
    
    
    
    
    
    125Total costs and expenses
    
    
    108,580
    
    
    
    91,642
    
    
    
    
    
    
    
    200,222OPERATING INCOME
    
    
    47,385
    
    
    
    70,283
    
    
    
    
    
    
    
    117,668Earnings of Affiliates
    
    
    52,556
    
    
    
    
    
    
    
    (52,556
    )
    
    
    Other Income (Expense):Interest income
    
    
    2,522
    
    
    
    62
    
    
    
    (2,215
    )
    
    
    369Interest expense, net of amounts capitalized
    
    
    (17,637
    )
    
    
    (2,085
    )
    
    
    2,215
    
    
    
    (17,507
    )Income Before Taxes
    
    
    84,826
    
    
    
    68,260
    
    
    
    (52,556
    )
    
    
    100,530Provision for Income Taxes
    
    
    (20,135
    )
    
    
    (15,704
    )
    
    
    
    
    
    
    (35,839
    )NET INCOME
    
    
    64,691
    
    
    
    52,556
    
    
    
    (52,556
    )
    
    
    64,691Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME ATTRIBUTABLE TO MARINER ENERGY, INC.
    
    $
    64,691
    
    
    $
    52,556
    
    
    $
    (52,556
    )
    
    $
    64,691
 27




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##### Table of Contents



MARINER ENERGY, INC.
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
Nine Months Ended September 30, 2009
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    307,051
    
    
    $
    118,696
    
    
    $
    
    
    
    $
    425,747Oil
    
    
    159,210
    
    
    
    61,577
    
    
    
    
    
    
    
    220,787Natural gas liquids
    
    
    23,416
    
    
    
    6,982
    
    
    
    
    
    
    
    30,398Other revenues
    
    
    7,913
    
    
    
    17,807
    
    
    
    
    
    
    
    25,720Total revenues
    
    
    497,590
    
    
    
    205,062
    
    
    
    
    
    
    
    702,652Costs and Expenses:Operating expenses
    
    
    103,091
    
    
    
    88,020
    
    
    
    
    
    
    
    191,111General and administrative expense
    
    
    56,247
    
    
    
    1,208
    
    
    
    
    
    
    
    57,455Depreciation, depletion and amortization
    
    
    171,449
    
    
    
    129,856
    
    
    
    
    
    
    
    301,305Full-cost ceiling test impairment
    
    
    342,595
    
    
    
    362,136
    
    
    
    
    
    
    
    704,731Other miscellaneous expense
    
    
    9,482
    
    
    
    2,478
    
    
    
    
    
    
    
    11,960Total costs and expenses
    
    
    682,864
    
    
    
    583,698
    
    
    
    
    
    
    
    1,266,562OPERATING LOSS
    
    
    (185,274
    )
    
    
    (378,636
    )
    
    
    
    
    
    
    (563,910
    )Loss of Affiliates
    
    
    (265,224
    )
    
    
    
    
    
    
    265,224
    
    
    
    Other Income (Expense):Interest income
    
    
    3,849
    
    
    
    
    
    
    
    (3,406
    )
    
    
    443Interest expense, net of amounts capitalized
    
    
    (50,880
    )
    
    
    (3,602
    )
    
    
    3,406
    
    
    
    (51,076
    )Loss Before Taxes
    
    
    (497,529
    )
    
    
    (382,238
    )
    
    
    265,224
    
    
    
    (614,543
    )Benefit for Income Taxes
    
    
    94,846
    
    
    
    117,014
    
    
    
    
    
    
    
    211,860NET LOSS
    
    $
    (402,683
    )
    
    $
    (265,224
    )
    
    $
    265,224
    
    
    $
    (402,683
    )
 28




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##### Table of Contents



MARINER ENERGY, INC.
 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
Nine Months Ended September 30, 2008
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    289,336
    
    
    $
    333,369
    
    
    $
    
    
    
    $
    622,705Oil
    
    
    186,960
    
    
    
    169,197
    
    
    
    
    
    
    
    356,157Natural gas liquids
    
    
    50,339
    
    
    
    28,240
    
    
    
    
    
    
    
    78,579Other revenues
    
    
    1,573
    
    
    
    4,225
    
    
    
    
    
    
    
    5,798Total revenues
    
    
    528,208
    
    
    
    535,031
    
    
    
    
    
    
    
    1,063,239Costs and Expenses:Operating expenses
    
    
    90,549
    
    
    
    102,766
    
    
    
    
    
    
    
    193,315General and administrative expense
    
    
    36,230
    
    
    
    50
    
    
    
    
    
    
    
    36,280Depreciation, depletion and amortization
    
    
    196,945
    
    
    
    178,225
    
    
    
    
    
    
    
    375,170Other miscellaneous expense
    
    
    888
    
    
    
    77
    
    
    
    
    
    
    
    965Total costs and expenses
    
    
    324,612
    
    
    
    281,118
    
    
    
    
    
    
    
    605,730OPERATING INCOME
    
    
    203,596
    
    
    
    253,913
    
    
    
    
    
    
    
    457,509Earnings of Affiliates
    
    
    186,430
    
    
    
    
    
    
    
    (186,430
    )
    
    
    Other Income (Expense):Interest income
    
    
    8,056
    
    
    
    84
    
    
    
    (7,164
    )
    
    
    976Interest expense, net of amounts capitalized
    
    
    (53,444
    )
    
    
    (7,361
    )
    
    
    7,164
    
    
    
    (53,641
    )Income Before Taxes
    
    
    344,638
    
    
    
    246,636
    
    
    
    (186,430
    )
    
    
    404,844Provision for Income Taxes
    
    
    (84,431
    )
    
    
    (60,018
    )
    
    
    
    
    
    
    (144,449
    )NET INCOME
    
    
    260,207
    
    
    
    186,618
    
    
    
    (186,430
    )
    
    
    260,395Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    188
    
    
    
    
    
    
    
    188NET INCOME ATTRIBUTABLE TO MARINER ENERGY, INC.
    
    $
    260,207
    
    
    $
    186,430
    
    
    $
    (186,430
    )
    
    $
    260,207
 29




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##### Table of Contents



MARINER ENERGY, INC.
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2009
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Net cash provided by operating activities
    
    $
    390,197
    
    
    $
    147,912
    
    
    $
    
    
    
    $
    538,109Cash flow from investing activities:Acquisitions and additions to oil and gas properties
    
    
    (299,947
    )
    
    
    (169,033
    )
    
    
    
    
    
    
    (468,980
    )Additions to other property and equipment
    
    
    13,453
    
    
    
    (15,594
    )
    
    
    
    
    
    
    (2,141
    )Repayments of notes from affiliates
    
    
    169,025
    
    
    
    
    
    
    
    (169,025
    )
    
    
    Net cash used in investing activities
    
    
    (117,469
    )
    
    
    (184,627
    )
    
    
    (169,025
    )
    
    
    (471,121
    )Cash flow from financing activities:Credit facility borrowings
    
    
    350,221
    
    
    
    
    
    
    
    
    
    
    
    350,221Credit facility repayments
    
    
    (855,221
    )
    
    
    
    
    
    
    
    
    
    
    (855,221
    )Repayments of notes to affiliates
    
    
    
    
    
    
    (169,025
    )
    
    
    169,025
    
    
    
    Other financing activities
    
    
    235,478
    
    
    
    205,342
    
    
    
    
    
    
    
    440,820Net cash (used in) provided by financing activities
    
    
    (269,522
    )
    
    
    36,317
    
    
    
    169,025
    
    
    
    (64,180
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    3,206
    
    
    
    (398
    )
    
    
    
    
    
    
    2,808Cash and Cash Equivalents at Beginning of Period
    
    
    2,810
    
    
    
    399
    
    
    
    
    
    
    
    3,209Cash and Cash Equivalents at End of Period
    
    $
    6,016
    
    
    $
    1
    
    
    $
    
    
    
    $
    6,017
 30




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##### Table of Contents



MARINER ENERGY, INC.
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2008
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Net cash (used in) provided by operating activities
    
    $
    611,124
    
    
    $
    437,114
    
    
    $
    (186,430
    )
    
    $
    861,808Cash flow from investing activities:Acquisitions and additions to oil and gas properties
    
    
    (520,363
    )
    
    
    (431,742
    )
    
    
    
    
    
    
    (952,105
    )Additions to other property and equipment
    
    
    (15,029
    )
    
    
    (34,618
    )
    
    
    
    
    
    
    (49,647
    )Restricted cash designated for investment
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Net cash used in investing activities
    
    
    (535,392
    )
    
    
    (461,360
    )
    
    
    
    
    
    
    (996,752
    )Cash flow from financing activities:Credit facility borrowings
    
    
    938,000
    
    
    
    
    
    
    
    
    
    
    
    938,000Credit facility repayments
    
    
    (807,000
    )
    
    
    
    
    
    
    
    
    
    
    (807,000
    )Other financing activities
    
    
    (28,144
    )
    
    
    24,646
    
    
    
    
    
    
    
    (3,498
    )Net activity in investment from subsidiaries
    
    
    (186,430
    )
    
    
    
    
    
    
    186,430
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (83,574
    )
    
    
    24,646
    
    
    
    186,430
    
    
    
    127,502(Decrease) Increase in Cash and Cash Equivalents
    
    
    (7,842
    )
    
    
    400
    
    
    
    
    
    
    
    (7,442
    )Cash and Cash Equivalents at Beginning of Period
    
    
    18,589
    
    
    
    
    
    
    
    
    
    
    
    18,589Cash and Cash Equivalents at End of Period
    
    $
    10,747
    
    
    $
    400
    
    
    $
    
    
    
    $
    11,147
 15. Subsequent Events
  31




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  Overview
    Unconventional Resources and Canadian Opportunities
 Securities Offering. 3 4
 32




---



##### Table of Contents



Acquisitions.
   Third Quarter 2009 Highlights
  
    
    Average daily production during third quarter 2009 increased to 362 MMcfe per day,
compared to 294 MMcfe per day during third quarter 2008.
    
    Net cash provided by operations for the nine-month period ended September 30, 2009
decreased 38% to $538.1 million, from $861.8 million for the same period in 2008.
    
    Total revenues during third quarter 2009 were $227.3 million, a decrease of 28% from
$317.9 million during third quarter 2008.
 Operational Update
 Offshore
 ApproximateWell Name
    
    Operator
    
    Working Interest
    
    Water Depth (Ft)
    
    LocationVermilion 380 A3 ST #1
    
    Mariner
    
    
    100
    %
    
    
    340
    
    
    Conventional ShelfSouth Timbalier 316 A6 ST #1
    
    W&T Offshore
    
    
    33
    %
    
    
    453
    
    
    Conventional Shelf
  Onshore
 Results of Operations
 Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
  33




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##### Table of Contents



Three Months EndedSeptember 30,
    
    
    Increase
    
    
    %Summary Operating Information:
    
    2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change(In thousands, except net production, average sales pricesand % change)Net Production:Natural gas (MMcf)
    
    
    24,121
    
    
    
    18,357
    
    
    
    5,764
    
    
    
    31
    %Oil (MBbls)
    
    
    1,106
    
    
    
    1,054
    
    
    
    52
    
    
    
    5
    %Natural gas liquids (MBbls)
    
    
    427
    
    
    
    402
    
    
    
    25
    
    
    
    6
    %Total natural gas equivalent (MMcfe)
    
    
    33,316
    
    
    
    27,091
    
    
    
    6,225
    
    
    
    23
    %Average daily production (MMcfe/d)
    
    
    362
    
    
    
    294
    
    
    
    68
    
    
    
    23
    %Hedging Activities:Natural gas revenue gain
    
    $
    47,875
    
    
    $
    (12,275
    )
    
    $
    60,150
    
    
    
    490
    %Oil revenue gain (loss)
    
    
    7,819
    
    
    
    (29,866
    )
    
    
    37,685
    
    
    
    126
    %Total hedging revenue gain (loss)
    
    $
    55,694
    
    
    $
    (42,141
    )
    
    $
    97,835
    
    
    
    232
    %Average Sales Prices:Natural gas (per Mcf) realized(1)
    
    $
    5.39
    
    
    $
    10.50
    
    
    $
    (5.11
    )
    
    
    (49
    )%Natural gas (per Mcf) unhedged
    
    
    3.41
    
    
    
    11.17
    
    
    
    (7.76
    )
    
    
    (69
    )%Oil (per Bbl) realized(1)
    
    
    73.15
    
    
    
    92.97
    
    
    
    (19.82
    )
    
    
    (21
    )%Oil (per Bbl) unhedged
    
    
    66.08
    
    
    
    121.30
    
    
    
    (55.22
    )
    
    
    (46
    )%Natural gas liquids (per Bbl) realized(1)
    
    
    36.85
    
    
    
    61.05
    
    
    
    (24.20
    )
    
    
    (40
    )%Natural gas liquids (per Bbl) unhedged
    
    
    36.85
    
    
    
    61.05
    
    
    
    (24.20
    )
    
    
    (40
    )%Total natural gas equivalent ($/Mcfe) realized(1)
    
    
    6.80
    
    
    
    11.64
    
    
    
    (4.84
    )
    
    
    (42
    )%Total natural gas equivalent ($/Mcfe) unhedged
    
    
    5.13
    
    
    
    13.20
    
    
    
    (8.07
    )
    
    
    (61
    )%Summary of Financial Information:Natural gas revenue
    
    $
    130,046
    
    
    $
    192,804
    
    
    $
    (62,758
    )
    
    
    (33
    )%Oil revenue
    
    
    80,908
    
    
    
    97,987
    
    
    
    (17,079
    )
    
    
    (17
    )%Natural gas liquids revenue
    
    
    15,736
    
    
    
    24,541
    
    
    
    (8,805
    )
    
    
    (36
    )%Other revenues
    
    
    656
    
    
    
    2,558
    
    
    
    (1,902
    )
    
    
    (74
    )%Lease operating expense
    
    
    65,325
    
    
    
    65,267
    
    
    
    58
    
    
    
    <1
    %Severance and ad valorem taxes
    
    
    4,406
    
    
    
    4,813
    
    
    
    (407
    )
    
    
    (8
    )%Transportation expense
    
    
    4,468
    
    
    
    4,065
    
    
    
    403
    
    
    
    10
    %General and administrative expense
    
    
    18,922
    
    
    
    11,554
    
    
    
    7,368
    
    
    
    64
    %Depreciation, depletion and amortization
    
    
    106,218
    
    
    
    114,398
    
    
    
    (8,180
    )
    
    
    (7
    )%Other miscellaneous expense
    
    
    1,193
    
    
    
    125
    
    
    
    1,068
    
    
    
    854
    %Net interest expense
    
    
    19,646
    
    
    
    17,138
    
    
    
    2,508
    
    
    
    15
    %Income before taxes
    
    
    7,168
    
    
    
    100,530
    
    
    
    (93,362
    )
    
    
    (93
    )%Provision for income taxes
    
    
    2,946
    
    
    
    35,839
    
    
    
    (32,893
    )
    
    
    (92
    )%Net (Loss) Income attributable to Mariner
Energy, Inc.
    
    $
    4,222
    
    
    $
    64,691
    
    
    $
    (60,469
    )
    
    
    (93
    )%Average Unit Costs per Mcfe:Lease operating expense
    
    $
    1.96
    
    
    $
    2.41
    
    
    $
    (0.45
    )
    
    
    (19
    )%Severance and ad valorem taxes
    
    
    0.13
    
    
    
    0.18
    
    
    
    (0.05
    )
    
    
    (28
    )%Transportation expense
    
    
    0.13
    
    
    
    0.15
    
    
    
    (0.02
    )
    
    
    (13
    )%General and administrative expense
    
    
    0.57
    
    
    
    0.43
    
    
    
    0.14
    
    
    
    33
    %Depreciation, depletion and amortization
    
    
    3.19
    
    
    
    4.22
    
    
    
    (1.03
    )
    
    
    (24
    )%
 
 (1)
    
    Average sales prices include the effects of hedging Net (Loss) Income attributable to Mariner Energy, Inc.
 Net Production
  34




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##### Table of Contents




    
    Decreased production of 1.2 Bcfe, or 8%, from our Gulf of Mexico shelf properties as
a result of normal depletion declines, gas balancing adjustments and production
interruptions due to repairs on certain fields totaling 5.7 Bcfe, partially offset by
increased production of 4.5 Bcfe at certain of our properties including High Island 116
(1.0 Bcfe).
    
    Increased production of 6.3 Bcfe, or 71%, from our Gulf of Mexico deepwater
properties primarily due to the favorable impact of a full quarter of production at
full capacity from, and our recently acquired incremental 11.6% working interest in
Bass Lite (2.2 Bcfe) located in Atwater 426 and from our May 2009 start up of
production from Geauxpher (5.7 Bcfe) located in Garden Banks 462. The increase was
partially offset by normal depletion declines at Northwest Nansen (1.7 Bcfe) located in
East Breaks 602.
    
    Increased production of 1.1 Bcfe, or 30%, from our onshore properties primarily as a
result of our recently acquired additional working interests in certain of our existing
properties in the Spraberry field in the Permian Basin.
 Natural gas, oil and NGL revenues
   HedgingRealized
    
    Unhedged
    
    Gain (Loss)
    
    % ChangeThree Months Ended September 30, 2009:Natural gas (per Mcf)
    
    $
    5.39
    
    
    $
    3.41
    
    
    $
    1.98
    
    
    
    58
    %Oil (per Bbl)
    
    
    73.15
    
    
    
    66.08
    
    
    
    7.07
    
    
    
    11
    %Three Months Ended September 30, 2008:Natural gas (per Mcf)
    
    $
    10.50
    
    
    $
    11.17
    
    
    $
    (0.67
    )
    
    
    (6
    )%Oil (per Bbl)
    
    
    92.97
    
    
    
    121.30
    
    
    
    (28.33
    )
    
    
    (23
    )%
 Other revenues
 Lease operating expense LOE
 35




---



##### Table of Contents



Severance and ad valorem tax
 Transportation expense
 General and administrative expense (G&A)
 Depreciation, depletion, and amortization expense (DD&A)
 Other miscellaneous expense
 Net interest expense 3 4
 Provision for income taxes
 Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
  36




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##### Table of Contents



Nine Months EndedSeptember 30,
    
    
    Increase
    
    
    %Summary Operating Information:
    
    2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change(In thousands, except net production, average sales prices and %change)Net Production:Natural gas (MMcf)
    
    
    69,979
    
    
    
    63,672
    
    
    
    6,307
    
    
    
    10
    %Oil (MBbls)
    
    
    3,255
    
    
    
    3,905
    
    
    
    (650
    )
    
    
    (17
    )%Natural gas liquids (MBbls)
    
    
    1,032
    
    
    
    1,290
    
    
    
    (258
    )
    
    
    (20
    )%Total natural gas equivalent (MMcfe)
    
    
    95,696
    
    
    
    94,840
    
    
    
    856
    
    
    
    1
    %Average daily production (MMcfe/d)
    
    
    351
    
    
    
    346
    
    
    
    5
    
    
    
    1
    %Hedging Activities:Natural gas revenue gain (loss)
    
    $
    149,685
    
    
    $
    (39,177
    )
    
    $
    188,862
    
    
    
    482
    %Oil revenue gain (loss)
    
    
    40,210
    
    
    
    (84,352
    )
    
    
    124,562
    
    
    
    148
    %Total hedging revenue gain (loss)
    
    $
    189,895
    
    
    $
    (123,529
    )
    
    $
    313,424
    
    
    
    254
    %Average Sales Prices:Natural gas (per Mcf) realized(1)
    
    $
    6.08
    
    
    $
    9.78
    
    
    $
    (3.70
    )
    
    
    (38
    )%Natural gas (per Mcf) unhedged
    
    
    3.94
    
    
    
    10.40
    
    
    
    (6.46
    )
    
    
    (62
    )%Oil (per Bbl) realized(1)
    
    
    67.83
    
    
    
    91.21
    
    
    
    (23.38
    )
    
    
    (26
    )%Oil (per Bbl) unhedged
    
    
    55.48
    
    
    
    112.81
    
    
    
    (57.33
    )
    
    
    (51
    )%Natural gas liquids (per Bbl) realized(1)
    
    
    29.46
    
    
    
    60.91
    
    
    
    (31.45
    )
    
    
    (52
    )%Natural gas liquids (per Bbl) unhedged
    
    
    29.46
    
    
    
    60.91
    
    
    
    (31.45
    )
    
    
    (52
    )%Total natural gas equivalent ($/Mcfe) realized(1)
    
    
    7.07
    
    
    
    11.15
    
    
    
    (4.08
    )
    
    
    (37
    )%Total natural gas equivalent ($/Mcfe) unhedged
    
    
    5.09
    
    
    
    12.45
    
    
    
    (7.36
    )
    
    
    (59
    )%Summary of Financial Information:Natural gas revenue
    
    $
    425,747
    
    
    $
    622,705
    
    
    $
    (196,958
    )
    
    
    (32
    )%Oil revenue
    
    
    220,787
    
    
    
    356,157
    
    
    
    (135,370
    )
    
    
    (38
    )%Natural gas liquids revenue
    
    
    30,398
    
    
    
    78,579
    
    
    
    (48,181
    )
    
    
    (61
    )%Other revenues
    
    
    25,720
    
    
    
    5,798
    
    
    
    19,922
    
    
    
    344
    %Lease operating expense
    
    
    165,816
    
    
    
    167,341
    
    
    
    (1,525
    )
    
    
    (1
    )%Severance and ad valorem taxes
    
    
    11,668
    
    
    
    14,686
    
    
    
    (3,018
    )
    
    
    (21
    )%Transportation expense
    
    
    13,627
    
    
    
    11,288
    
    
    
    2,339
    
    
    
    21
    %General and administrative expense
    
    
    57,455
    
    
    
    36,280
    
    
    
    21,175
    
    
    
    58
    %Depreciation, depletion and amortization
    
    
    301,305
    
    
    
    375,170
    
    
    
    (73,865
    )
    
    
    (20
    )%Full-cost ceiling test impairment
    
    
    704,731
    
    
    
    
    
    
    
    704,731
    
    
    
    N/AOther miscellaneous expense
    
    
    11,960
    
    
    
    965
    
    
    
    10,995
    
    
    
    1139
    %Net interest expense
    
    
    50,633
    
    
    
    52,665
    
    
    
    (2,032
    )
    
    
    (4
    )%(Loss) Income before taxes
    
    
    (614,543
    )
    
    
    404,844
    
    
    
    (1,019,387
    )
    
    
    (252
    )%(Benefit) Provision for income taxes
    
    
    (211,860
    )
    
    
    144,449
    
    
    
    (356,309
    )
    
    
    (247
    )%Net (Loss) Income
    
    
    (402,683
    )
    
    
    260,395
    
    
    
    (663,078
    )
    
    
    (255
    )%Less: Net income attributable to noncontrolling
interest
    
    
    
    
    
    
    (188
    )
    
    
    188
    
    
    
    (100
    )%Net (Loss) Income attributable to Mariner
Energy, Inc.
    
    $
    (402,683
    )
    
    $
    260,207
    
    
    $
    (662,890
    )
    
    
    (255
    )%Average Unit Costs per Mcfe:Lease operating expense
    
    $
    1.73
    
    
    $
    1.76
    
    
    $
    (0.03
    )
    
    
    (2
    )%Severance and ad valorem taxes
    
    
    0.12
    
    
    
    0.15
    
    
    
    (0.03
    )
    
    
    (20
    )%Transportation expense
    
    
    0.14
    
    
    
    0.12
    
    
    
    0.02
    
    
    
    17
    %General and administrative expense
    
    
    0.60
    
    
    
    0.38
    
    
    
    0.22
    
    
    
    58
    %Depreciation, depletion and amortization
    
    
    3.15
    
    
    
    3.96
    
    
    
    (0.81
    )
    
    
    (20
    )%
 
 (1)
    
    Average sales prices include the effects of hedging Net (Loss) Income attributable to Mariner Energy, Inc.
 37




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##### Table of Contents



Net Production
   
    
    Decreased production of 9.7 Bcfe, or 18%, from our Gulf of Mexico shelf properties
as a result of normal depletion declines and production interruptions due to repairs on
certain fields totaling 18.6 Bcfe, partially offset by increased production of 8.9 Bcfe
at certain of our properties including High Island 116 (2.8 Bcfe) and South Marsh
Island 76 (2.0 Bcfe) and gas balancing adjustments.
    
    Increased production of 8.1 Bcfe, or 26%, from our Gulf of Mexico deepwater
properties primarily due to Bass Lite located in Atwater Valley 426 (8.9 Bcfe) and
Geauxpher located in Garden Banks 462 (8.3 Bcfe), partially offset by decreases from
Pluto located in Mississippi Canyon 674 (3.6 Bcfe) and Northwest Nansen located in East
Breaks 602 (3.6 Bcfe).
    
    Increased production of 2.5 Bcfe, or 23%, from our onshore properties primarily as a
result of our drilling and development of existing acreage in the Permian Basin.
 Natural gas, oil and NGL revenues
   HedgingRealized
    
    Unhedged
    
    (Loss) Gain
    
    % ChangeNine Months Ended September 30, 2009:Natural gas (per Mcf)
    
    $
    6.08
    
    
    $
    3.94
    
    
    $
    2.14
    
    
    
    54
    %Oil (per Bbl)
    
    
    67.83
    
    
    
    55.48
    
    
    
    12.35
    
    
    
    22
    %Nine Months Ended September 30, 2008:Natural gas (per Mcf)
    
    $
    9.78
    
    
    $
    10.40
    
    
    $
    (0.62
    )
    
    
    (6
    )%Oil (per Bbl)
    
    
    91.21
    
    
    
    112.81
    
    
    
    (21.60
    )
    
    
    (19
    )%
 Other revenues
 38




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##### Table of Contents



Lease operating expense LOE
 Severance and ad valorem tax
 Transportation expense
 General and administrative expense
 Depreciation, depletion, and amortization expense
 Full-cost ceiling test impairment
 Other miscellaneous expense
 Net interest expense 3 4
 Provision for income taxes
 39




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##### Table of Contents



Liquidity and Capital Resources
     Capital Expenditures 
 In thousands
    
    
    PercentageCapital Expenditures:Offshore natural gas and oil development
    
    $
    232,074
    
    
    
    51
    %Natural gas and oil exploration
    
    
    139,465
    
    
    
    31
    %Onshore natural gas and oil development
    
    
    36,701
    
    
    
    8
    %Other items (primarily capitalized overhead)
    
    
    27,138
    
    
    
    6
    %Acquisitions (property and leasehold)
    
    
    15,925
    
    
    
    4
    %Total capital expenditures
    
    $
    451,303
    
    
    
    100
    %
  Bank Credit Facility
 3 4
  40




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##### Table of Contents




    
    maintain a ratio of consolidated current assets plus the unused borrowing base to
consolidated current liabilities of not less than 1.0 to 1.0; and
    
    maintain a ratio of total debt to EBITDA (as defined in the credit agreement) of not more
than 2.5 to 1.0.
  Senior Notes 3 4 3 4 1 2 1 2 3 4 3 4 1 2
 11 3 / 4 % Notes 3 4
 3 4
 41




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##### Table of Contents



3 4 1 2
 3 4
 3 4 3 4
    3 4 3 4
 3 4 3 4
 3 4 1 2
 
    
    make investments;
    
    incur additional indebtedness or issue preferred stock;
    
    create certain liens;
    
    sell assets;
    
    enter into agreements that restrict dividends or other payments from our
subsidiaries to us;
    
    consolidate, merge or transfer all or substantially all of our assets;
    
    engage in transactions with affiliates;
    
    pay dividends or make other distributions on capital stock or subordinated
indebtedness; and
    
    create unrestricted subsidiaries.
 42




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##### Table of Contents



Common Stock Offering
 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.
 2009 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.
 
 43




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##### Table of Contents



Off-Balance Sheet Arrangements
 Letters of Credit
 Fair Value Measurement
     44




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##### Table of Contents



Legal Proceedings
 MMS Proceedings
 Kerr-McGee Oil & Gas Corp. v. Allred Kerr-McGee Kerr-McGee Oil & Gas Corp. v. Allred
 Kerr-McGee
 Recent Accounting Pronouncements
  45




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##### Table of Contents




    
    Oil and gas reserves must be reported using average prices over the prior 12 month
period, rather than year-end prices;
    
    Companies will be allowed to report, on an optional basis, probable and possible
reserves;
    
    Non-traditional reserves, such as oil and gas extracted from coal and shales, will
be included in the definition of oil and gas producing activities;
    
    Companies will be permitted to use new technologies to determine proved reserves, as
long as those technologies have been demonstrated empirically to lead to reliable
conclusions with respect to reserve volumes;
    
    Companies will be required to disclose, in narrative form, additional details on
their proved undeveloped reserves (PUDs), including the total quantity of PUDs at year
end, any material changes to PUDs that occurred during the year, investments and
progress made to convert PUDs to developed oil and gas reserves and an explanation of
the reasons why material concentrations of PUDs in individual fields or countries have
remained undeveloped for five years or more after disclosure as PUDs; and
    
    Companies will be required to report the qualifications and measures taken to assure
the independence and objectivity of any business entity or employee primarily
responsible for preparing or auditing the reserves estimates.
   46




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Commodity Prices and Related Hedging Activities
     47




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Cash Gain (Loss) on Settlements (1)
    
    $
    52,644
    
    
    $
    (46,968
    )
    
    $
    173,648
    
    
    $
    (121,882
    )Reclassification of liquidated swaps (2)
    
    
    3,859
    
    
    
    
    
    
    
    17,059
    
    
    
    Gain (Loss) on Hedge Ineffectiveness (3)
    
    
    (809
    )
    
    
    4,827
    
    
    
    (812
    )
    
    
    (1,647
    )Total
    
    $
    55,694
    
    
    $
    (42,141
    )
    
    $
    189,895
    
    
    $
    (123,529
    )
 
 (1)
    
    Designated as cash flow hedges pursuant to accounting for derivatives and hedging under GAAP.(2)
    
    Natural gas and crude oil fixed price swaps liquidated in first and third quarters of 2009
that do not qualify for hedge accounting. These amounts include net losses of $1.8 million and
$1.5 million for the three-month and nine-months periods ended September 30, 2009,
respectively(3)
    
    Unrealized loss recognized in natural gas revenue related to the ineffective portion of open
contracts that are not eligible for deferral under GAAP due primarily to the basis
differentials between the contract price and the indexed price at the point of sale.  Weighted Average
    
    
    Fair ValueFixed Price Swaps
    
    Quantity
    
    
    Fixed Price
    
    
    Asset (Liability) (1)(In thousands)Natural Gas (MMbtus)October 1December 31, 2009
    
    
    783,380
    
    
    $
    4.22
    
    
    $
    410January 1December 31, 2010
    
    
    12,775,000
    
    
    $
    5.84
    
    
    
    (4,405
    )January 1December 31, 2011
    
    
    13,650,000
    
    
    $
    6.45
    
    
    
    (5,080
    )January 1December 31, 2012
    
    
    6,588,000
    
    
    $
    6.62
    
    
    
    (2,262
    )January 1December 31, 2013
    
    
    5,840,000
    
    
    $
    6.76
    
    
    
    (1,384
    )Crude Oil (Bbls)October 1December 31, 2009
    
    
    228,160
    
    
    $
    76.33
    
    
    
    1,183January 1December 31, 2010
    
    
    1,934,500
    
    
    $
    67.48
    
    
    
    (12,589
    )January 1December 31, 2011
    
    
    978,100
    
    
    $
    73.24
    
    
    
    (3,369
    )January 1December 31, 2012
    
    
    494,100
    
    
    $
    80.77
    
    
    
    668January 1December 31, 2013
    
    
    408,800
    
    
    $
    82.81
    
    
    
    595Total
    
    
    
    
    
    
    
    
    
    $
    (26,233
    )
 
 (1)
    
    Table excludes $3.4 million included in Derivative financial instruments on the balance sheet
relating to the liquidation of 783,380 MMBtu to be paid in monthly installments through
December 31, 2009.    Interest Rate Market Risk 
 48




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  49




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##### Table of Contents



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;
    
    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;
 50




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##### Table of Contents




    
    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
    
    ProgramsJuly 1, 2009 to July 31, 2009 (1)
    
    
    9,626
    
    
    $
    11.75
    
    
    
    
    
    
    
    August 1, 2009 to August 31, 2009 (1)
    
    
    2,250
    
    
    $
    12.34
    
    
    
    
    
    
    
    September 1, 2009 to September 30, 2009 (1)
    
    
    16,375
    
    
    $
    13.70
    
    
    
    
    
    
    
    Total
    
    
    28,251
    
    
    $
    12.93
    
    
    
    
    
    
    
    
 
 (1)
    
    These shares were withheld upon the vesting of employee restricted stock grants in connection
with payment of required withholding taxes. 51




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##### Table of Contents



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*
    
    
    Certificate of Designations of Series A Junior Participating
Preferred Stock of Mariner Energy, Inc. (incorporated by
reference to Exhibit 3.1 to Mariners Form 8-K filed on October
14, 2008).3.3*
    
    
    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 June 10, 2009, 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 June 16, 2009).4.2*
    
    
    First Supplemental Indenture, dated as of June 10, 2009, among
Mariner Energy, Inc., the guarantors party thereto and Wells
Fargo Bank, N.A., as trustee (incorporated by reference to
Exhibit 4.2 to Mariners Form 8-K filed on June 16, 2009).4.3*
    
    
    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).4.4*
    
    
    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).4.5*
    
    
    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).
 52




---



##### Table of Contents



Number
    
    Description4.6*
    
    
    Rights Agreement, dated as of October 12, 2008, between Mariner
Energy, Inc. and Continental Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to Exhibit 4.1 to
Mariners Form 8-K filed on October 14, 2008).4.7*
    
    
    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).4.8*
    
    
    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).4.9*
    
    
    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).4.10*
    
    
    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).4.11*
    
    
    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).4.12*
    
    
    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).4.13*
    
    
    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).4.14*
    
    
    Amendment No. 7, dated as of December 12, 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 December 15, 2008).4.15*
    
    
    Amendment No. 8 and Consent, dated as of March 24, 2009, 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 March 27, 2009).4.16*
    
    
    Amendment No. 9, dated as of June 2, 2009, 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 2, 2009).
 53




---



##### Table of Contents



Number
    
    Description4.17*
    
    
    Amendment No. 10, dated as of August 25, 2009, 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, 2009).10.1*
    
    
    Underwriting Agreement, dated June 4, 2009, among Credit Suisse
Securities (USA) LLC, J.P. Morgan Securities Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Representatives
of the several Underwriters named in Schedule A thereto, and
Mariner Energy, Inc. (incorporated by reference to Exhibit 1.1
to Mariners Form 8-K filed on June 9, 2009).10.2*
    
    
    Underwriting Agreement, dated June 4, 2009, among Credit Suisse
Securities (USA) LLC, Banc of America Securities LLC, J.P.
Morgan Securities Inc., Wachovia Capital Markets, LLC and
Citigroup Global Markets Inc., as Representatives of the several
Underwriters named in Schedule A thereto, and Mariner Energy,
Inc., Mariner Energy Resources, Inc., Mariner Gulf of Mexico
LLC, MC Beltway 8 LLC and Mariner LP LLC (incorporated by
reference to Exhibit 1.2 to Mariners Form 8-K filed on June 9,
2009).10.3*
    
    
    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).10.4*
    
    
    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).10.5*
    
    
    Mariner Energy, Inc. Third Amended and Restated Stock Incentive
Plan, effective as of May 11, 2009 (incorporated by reference to
Exhibit 10.1 to Mariners Form 8-K filed on May 12, 2009).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.  54




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##### Table of Contents



SIGNATURES
  Mariner Energy, Inc.By:
    /s/ Scott D. JoseyScott D. Josey,Chairman of the Board, Chief Executive Officer
and PresidentBy:
    /s/ Jesus G. MelendrezJesus G. Melendrez,Senior Vice President, Chief Commercial Officer,
Acting Chief Financial Officer and Treasurer 
 55




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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*
    
    
    Certificate of Designations of Series A Junior Participating
Preferred Stock of Mariner Energy, Inc. (incorporated by
reference to Exhibit 3.1 to Mariners Form 8-K filed on October
14, 2008).3.3*
    
    
    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 June 10, 2009, 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 June 16, 2009).4.2*
    
    
    First Supplemental Indenture, dated as of June 10, 2009, among
Mariner Energy, Inc., the guarantors party thereto and Wells
Fargo Bank, N.A., as trustee (incorporated by reference to
Exhibit 4.2 to Mariners Form 8-K filed on June 16, 2009).4.3*
    
    
    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).4.4*
    
    
    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).4.5*
    
    
    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).
 56




---



##### Table of Contents



Number
    
    Description4.6*
    
    
    Rights Agreement, dated as of October 12, 2008, between Mariner
Energy, Inc. and Continental Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to Exhibit 4.1 to
Mariners Form 8-K filed on October 14, 2008).4.7*
    
    
    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).4.8*
    
    
    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).4.9*
    
    
    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).4.10*
    
    
    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).4.11*
    
    
    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).4.12*
    
    
    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).4.13*
    
    
    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).4.14*
    
    
    Amendment No. 7, dated as of December 12, 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 December 15, 2008).4.15*
    
    
    Amendment No. 8 and Consent, dated as of March 24, 2009, 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 March 27, 2009).4.16*
    
    
    Amendment No. 9, dated as of June 2, 2009, 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 2, 2009).
 57




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##### Table of Contents



Number
    
    Description4.17*
    
    
    Amendment No. 10, dated as of August 25, 2009, 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, 2009).10.1*
    
    
    Underwriting Agreement, dated June 4, 2009, among Credit Suisse
Securities (USA) LLC, J.P. Morgan Securities Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Representatives
of the several Underwriters named in Schedule A thereto, and
Mariner Energy, Inc. (incorporated by reference to Exhibit 1.1
to Mariners Form 8-K filed on June 9, 2009).10.2*
    
    
    Underwriting Agreement, dated June 4, 2009, among Credit Suisse
Securities (USA) LLC, Banc of America Securities LLC, J.P.
Morgan Securities Inc., Wachovia Capital Markets, LLC and
Citigroup Global Markets Inc., as Representatives of the several
Underwriters named in Schedule A thereto, and Mariner Energy,
Inc., Mariner Energy Resources, Inc., Mariner Gulf of Mexico
LLC, MC Beltway 8 LLC and Mariner LP LLC (incorporated by
reference to Exhibit 1.2 to Mariners Form 8-K filed on June 9,
2009).10.3*
    
    
    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).10.4*
    
    
    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).10.5*
    
    
    Mariner Energy, Inc. Third Amended and Restated Stock Incentive
Plan, effective as of May 11, 2009 (incorporated by reference to
Exhibit 10.1 to Mariners Form 8-K filed on May 12, 2009).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.  58