##### 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 March 31, 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
    
    (I.R.S. Employerincorporation or organization)
    
    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 March 31, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Changes in Stockholders Equity for the Three Months Ended
March 31, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008
    
    
    6Notes to the Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    38PART IIItem 1A. Risk Factors
    
    
    40Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    42Items 1, 3
and 4 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
  March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    7,339
    
    
    $
    3,251Receivables, net of allowances of $7,182 and $3,868 as of
March 31, 2009 and December 31, 2008, respectively
    
    
    210,454
    
    
    
    219,920Insurance receivables
    
    
    16,148
    
    
    
    13,123Derivative financial instruments
    
    
    149,224
    
    
    
    121,929Intangible assets
    
    
    1,805
    
    
    
    2,353Prepaid expenses and other
    
    
    27,452
    
    
    
    14,377Total current assets
    
    
    412,422
    
    
    
    374,953Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    4,634,723
    
    
    
    4,448,146Unproved properties, not subject to amortization
    
    
    192,738
    
    
    
    201,121Total oil and gas properties
    
    
    4,827,461
    
    
    
    4,649,267Other property and equipment
    
    
    53,612
    
    
    
    53,115Accumulated depreciation, depletion and amortization:Proved oil and gas properties
    
    
    (2,557,169
    )
    
    
    (1,767,028
    )Other property and equipment
    
    
    (6,163
    )
    
    
    (5,477
    )Total accumulated depreciation, depletion and amortization
    
    
    (2,563,332
    )
    
    
    (1,772,505
    )Total property and equipment, net
    
    
    2,317,741
    
    
    
    2,929,877Insurance Receivables
    
    
    23,781
    
    
    
    22,132Other Assets, net of amortization
    
    
    65,897
    
    
    
    65,831TOTAL ASSETS
    
    $
    2,819,841
    
    
    $
    3,392,793LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    2,490
    
    
    $
    3,837Accrued liabilities
    
    
    91,689
    
    
    
    107,815Accrued capital costs
    
    
    152,290
    
    
    
    195,833Deferred income tax
    
    
    12,594
    
    
    
    23,148Abandonment liability
    
    
    109,718
    
    
    
    82,364Accrued interest
    
    
    21,284
    
    
    
    12,567Total current liabilities
    
    
    390,065
    
    
    
    425,564Long-Term Liabilities:Abandonment liability
    
    
    327,548
    
    
    
    325,880Deferred income tax
    
    
    108,876
    
    
    
    319,766Long-term debt
    
    
    1,240,000
    
    
    
    1,170,000Other long-term liabilities
    
    
    29,400
    
    
    
    31,263Total long-term liabilities
    
    
    1,705,824
    
    
    
    1,846,909Commitments and Contingencies (see Note 8)Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
authorized, no shares issued and outstanding at March
31, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 90,006,593 shares issued and outstanding at
March 31, 2009; 180,000,000 shares authorized,
88,846,073 shares issued and outstanding at December 31,
2008
    
    
    9
    
    
    
    9Additional paid-in capital
    
    
    1,077,677
    
    
    
    1,071,347Accumulated other comprehensive income
    
    
    99,601
    
    
    
    78,181Accumulated deficit
    
    
    (453,335
    )
    
    
    (29,217
    )Total stockholders equity
    
    
    723,952
    
    
    
    1,120,320TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,819,841
    
    
    $
    3,392,793
 The accompanying notes are an integral part of these condensed consolidated financial statements
 3




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##### Table of Contents



MARINER ENERGY, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months EndedMarch 31,2009
    
    
    2008Revenues:Natural gas
    
    $
    153,338
    
    
    $
    179,623Oil
    
    
    60,925
    
    
    
    113,614Natural gas liquids
    
    
    6,469
    
    
    
    20,981Other revenues
    
    
    22,604
    
    
    
    1,679Total revenues
    
    
    243,336
    
    
    
    315,897Costs and Expenses:Lease operating expense
    
    
    53,399
    
    
    
    45,647Severance and ad valorem taxes
    
    
    3,532
    
    
    
    4,610Transportation expense
    
    
    4,584
    
    
    
    3,019General and administrative expense
    
    
    17,411
    
    
    
    11,111Depreciation, depletion and amortization
    
    
    94,805
    
    
    
    119,318Full cost ceiling test impairment
    
    
    704,731
    
    
    
    Other miscellaneous expense
    
    
    8,009
    
    
    
    537Total costs and expenses
    
    
    886,471
    
    
    
    184,242OPERATING (LOSS) INCOME
    
    
    (643,135
    )
    
    
    131,655Other Income (Expense):Interest income
    
    
    85
    
    
    
    326Interest expense, net of amounts capitalized
    
    
    (14,402
    )
    
    
    (18,571
    )(Loss) Income Before Taxes
    
    
    (657,452
    )
    
    
    113,410Benefit (Provision) for Income Taxes
    
    
    233,334
    
    
    
    (41,194
    )Net (Loss) Income
    
    
    (424,118
    )
    
    
    72,216Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    90NET (LOSS) INCOME ATTRIBUTABLE TO MARINER ENERGY, INC.
    
    $
    (424,118
    )
    
    $
    72,126Net (Loss) Income per share attributable to Mariner Energy, Inc.:Basic
    
    $
    (4.77
    )
    
    $
    0.83Diluted
    
    $
    (4.77
    )
    
    $
    0.82Weighted average shares outstanding:Basic
    
    
    88,864,648
    
    
    
    87,293,730Diluted
    
    
    88,864,648
    
    
    
    88,012,901
 The accompanying notes are an integral part of these condensed consolidated financial statements
 4




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##### Table of Contents



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 
restricted stock
    
    
    1,213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock bought and
cancelled on same day
    
    
    (52
    )
    
    
    
    
    
    
    (448
    )
    
    
    
    
    
    
    
    
    
    
    (448
    )Forfeiture of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    6,778
    
    
    
    
    
    
    
    
    
    
    
    6,778Stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive
income (loss):Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (424,118
    )
    
    
    (424,118
    )Change in fair value of
derivative hedging instruments 
net of income taxes of $(10,398)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,496
    )
    
    
    
    
    
    
    (19,496
    )Hedge settlements reclassified
to income  net of income taxes
of $22,885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,916
    
    
    
    
    
    
    
    40,916Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,420
    
    
    
    (424,118
    )
    
    
    (402,698
    )Balance at March 31, 2009
    
    
    90,007
    
    
    $
    9
    
    
    $
    1,077,677
    
    
    $
    99,601
    
    
    $
    (453,335
    )
    
    $
    723,952
 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
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock bought and
cancelled on same day
    
    
    (13
    )
    
    
    
    
    
    
    (366
    )
    
    
    
    
    
    
    
    
    
    
    (366
    )
    
    
    
    
    
    
    (366
    )Forfeiture of restricted stock
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    2,625
    
    
    
    
    
    
    
    
    
    
    
    2,625
    
    
    
    
    
    
    
    2,625Stock options exercised
    
    
    52
    
    
    
    
    
    
    
    691
    
    
    
    
    
    
    
    
    
    
    
    691
    
    
    
    
    
    
    
    691Comprehensive
income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,126
    
    
    
    72,126
    
    
    
    90
    
    
    
    72,216Change in fair value of
derivative hedging instruments 
net of income taxes of $45,111
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,089
    )
    
    
    
    
    
    
    (81,089
    )
    
    
    
    
    
    
    (81,089
    )Hedge settlements reclassified
to income  net of income taxes
of $5,067
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,164
    )
    
    
    
    
    
    
    (9,164
    )
    
    
    
    
    
    
    (9,164
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90,253
    )
    
    
    72,126
    
    
    
    (18,127
    )
    
    
    90
    
    
    
    (18,037
    )Balance at March 31, 2008
    
    
    87,810
    
    
    $
    9
    
    
    $
    1,057,039
    
    
    $
    (112,829
    )
    
    $
    431,622
    
    
    $
    1,375,841
    
    
    $
    91
    
    
    $
    1,375,935
 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
  Three MonthsEnded March 31,2009
    
    
    2008Operating Activities:Net (loss) income
    
    $
    (424,118
    )
    
    $
    72,216Adjustments to reconcile net income to net cash provided by operating activities:Deferred income tax
    
    
    (233,334
    )
    
    
    40,400Depreciation, depletion and amortization
    
    
    94,805
    
    
    
    119,318Ineffectiveness of derivative instruments
    
    
    179
    
    
    
    3,924Full cost ceiling test impairment
    
    
    704,731
    
    
    
    Share-based compensation
    
    
    6,778
    
    
    
    2,625Derivative financial instruments
    
    
    (3,591
    )
    
    
    Allowance for doubtful accounts and other
    
    
    (2,450
    )
    
    
    737Changes in operating assets and liabilities:Receivables
    
    
    12,784
    
    
    
    (50,020
    )Insurance receivables
    
    
    (4,674
    )
    
    
    Cash from liquidation of hedges
    
    
    10,024
    
    
    
    Prepaid expenses and other
    
    
    (13,457
    )
    
    
    (16,007
    )Accounts payable and accrued liabilities
    
    
    (21,720
    )
    
    
    40,978Net cash provided by operating activities
    
    
    125,957
    
    
    
    214,171Investing Activities:Acquisitions and additions to oil and gas properties
    
    
    (190,880
    )
    
    
    (437,565
    )Additions to other property and equipment
    
    
    (524
    )
    
    
    (47,648
    )Restricted cash designated for investment
    
    
    
    
    
    
    5,000Net cash used in investing activities
    
    
    (191,404
    )
    
    
    (480,213
    )Financing Activities:Credit facility borrowings
    
    
    140,000
    
    
    
    412,000Credit facility repayments
    
    
    (70,000
    )
    
    
    (161,000
    )Repurchase of stock
    
    
    (448
    )
    
    
    (366
    )Debt redetermination costs
    
    
    (17
    )
    
    
    Proceeds from exercise of stock options
    
    
    
    
    
    
    691Net cash provided by financing activities
    
    
    69,535
    
    
    
    251,325Increase (Decrease) in Cash and Cash Equivalents
    
    
    4,088
    
    
    
    (14,717
    )Cash and Cash Equivalents at Beginning of Period
    
    
    3,251
    
    
    
    18,589Cash and Cash Equivalents at End of Period
    
    $
    7,339
    
    
    $
    3,872Supplemental Disclosure of Cash Flow Information:Cash paid during the year for:Interest (net of amount capitalized)
    
    $
    6,836
    
    
    $
    3,757
 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
  7




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Recent Accounting Pronouncements Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly, Interim
Disclosures about Fair Value of Financial Instruments, Recognition
and Presentation of Other-Than-Temporary Impairments,
 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;
    
    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.
   Fair Value Measurements
 8




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##### Table of Contents



Effective Date of FASB Statement No. 157
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 2. Acquisitions and Dispositions
 Gulf of Mexico Shelf Acquisition.
 Pro Forma Financial Information
 For the Three MonthsEnded March 31, 2008(In thousands, except pershare amounts)Pro Forma:Revenue
    
    $
    330,874Net income available to common stockholders
    
    $
    75,628Basic earnings per share
    
    $
    0.87Diluted earnings per share
    
    $
    0.86
 Permian Basin Acquisitions.
 Bass Lite
 9




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##### Table of Contents



3. Long-Term Debt
  March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Bank credit facility
    
    $
    640,000
    
    
    $
    570,0007 1/2% Senior Notes, due April 15, 2013
    
    
    300,000
    
    
    
    300,0008% Senior Notes, due May 15, 2017
    
    
    300,000
    
    
    
    300,000Total long-term debt
    
    $
    1,240,000
    
    
    $
    1,170,000
 Bank Credit Facility
    
    
    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 1 2 1 2 1 2
 10




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##### Table of Contents



Capitalized Interest
 4. Oil and Gas Properties
    5. Accrual for Future Abandonment Liabilities
    11




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##### Table of Contents



(In thousands)Abandonment liability as of January 1, 2009 (1)
    
    $
    408,244Liabilities incurred
    
    
    10,502Liabilities settled
    
    
    (10,516
    )Accretion expense
    
    
    8,708Revisions to previous estimates
    
    
    20,328Abandonment Liability as of March 31, 2009 (2)
    
    $
    437,266
 
 (1)
    
    Includes $82.4 million classified as a current liability at December 31, 2008.(2)
    
    Includes $109.7 million classified as a current liability at March 31, 2009. 6. Share-Based Compensation
    WeightedAverage
    
    
    Aggregate IntrinsicExercise
    
    
    Value (1)Shares
    
    
    Price
    
    
    (In thousands)Outstanding at January 1, 2009
    
    
    645,348
    
    
    $
    13.88
    
    
    $
    (3,956
    )Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    Outstanding
and exercisable at March 31, 2009
    
    
    645,348
    
    
    $
    13.88
    
    
    $
    (3,956
    )
 
 (1)
    
    Based upon the difference between the closing price per share
of the common stock on the New York Stock Exchange on the last trading
date of the quarter of $7.75 and the option exercise price of in-the-money options.  Restricted Shares underStock Incentive PlanMarch 31,2009
    
    2008Total unvested shares at beginning of period: January 1
    
    
    2,697,926
    
    
    
    1,484,552Shares granted (1)
    
    
    1,212,654
    
    
    
    548,864Shares vested
    
    
    (170,724
    )
    
    
    (40,844
    )Shares forfeited
    
    
    
    
    
    
    (6,708
    )Total unvested shares at end of period: March 31
    
    
    3,739,856
    
    
    
    1,985,864Available for future grant as options or restricted stock
    
    
    1,369,868
    
    
    
    3,561,978
 
 (1)
    
    Current year activity includes 4,741 shares granted under the Stock Incentive Plans 2008
Long-Term Performance-Based Restricted Stock Program discussed below during the three months
ended March 31, 2009. 12




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##### Table of Contents



WeightedAggregate
    
    
    AverageEquity
    
    
    Weighted
    
    
    Intrinsic
    
    
    RemainingInstruments
    
    
    Average
    
    
    Value
    
    
    Contractual(thousands)
    
    
    Fair Value
    
    
    ($ thousands)
    
    
    Life (Years)Unvested at January 1, 2009
    
    
    2,697,926
    
    
    $
    28.22
    
    
    $
    76,127Granted
    
    
    1,212,654
    
    
    
    10.94
    
    
    
    13,266Vested
    
    
    (170,724
    )
    
    
    25.69
    
    
    
    (4,386
    )Forfeited
    
    
    
    
    
    
    
    
    
    
    Unvested at March 31, 2009
    
    
    3,739,856
    
    
    
    22.73
    
    
    $
    85,007
    
    
    
    6.59
 Long-Term Performance-Based Restricted Stock Program
  Quarter EndedMarch 31,2009Weighted average fair value of grants
    
    $
    33.73Expected volatility
    
    
    42.29
    %Risk-free interest rate
    
    
    4.57
    %Dividend yield
    
    
    0.00
    %Expected life
    
    10 years
  7. Derivative Financial Instruments and Hedging Activities
   13




---



##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(In thousands)Cash Gain (Loss) on Settlements (1)
    
    $
    57,457
    
    
    $
    (10,307
    )Gains on
liquidated swaps (2)
    
    
    6,523
    
    
    
    Loss on Hedge Ineffectiveness (3)
    
    
    (179
    )
    
    
    (3,924
    )Total
    
    $
    63,801
    
    
    $
    (14,231
    )
 
 (1)
    
    Designated as cash flow hedges pursuant to SFAS 133.(2)
    
    Crude oil fixed price swaps liquidated on January 29, 2009 that do not qualify for hedge
accounting. Includes $2.6 million, net of premium, related to
the $10.0 million cash liquidation, and $3.9 million, net
of discount, related to the $13.5 million installment
liquidation.(3)
    
    Unrealized loss recognized in natural gas revenue related to the ineffective portion of open
contracts that are not eligible for deferral under SFAS 133 due primarily to the basis
differentials between the contract price and the indexed price at the point of sale.  Weighted Average
    
    
    Fair ValueFixed Price Swaps
    
    Quantity
    
    
    Fixed Price
    
    
    Asset(In thousands)Natural Gas (MMbtus)April 1December 31, 2009
    
    
    36,923,804
    
    
    $
    7.57
    
    
    $
    121,718Crude Oil (Bbls)April 1December 31, 2009
    
    
    769,485
    
    
    $
    76.56
    
    
    
    16,494Total
    
    
    
    
    
    
    
    
    
    $
    138,212
    14




---



##### Table of Contents



Weighted AverageFixed Price Swaps
    
    Quantity
    
    Fixed PriceNatural Gas (MMbtus)January 1December 31, 2010
    
    
    12,775,000
    
    
    $
    5.84January 1June 30, 2011
    
    
    4,525,000
    
    
    $
    6.65Crude Oil (Bbls)January 1December 31, 2010
    
    
    1,277,500
    
    
    $
    62.28January 1June 30, 2011
    
    
    452,500
    
    
    $
    65.65
 Additional Disclosures about Derivative Instruments and Hedging Activities
  Fair Value of Derivative ContractsAsset DerivativesMarch 31, 2009
    
    
    December 31, 2008Balance sheet
    
    
    
    
    
    Balance sheetLocation
    
    Fair value
    
    
    Location
    
    Fair valueDerivatives designated as cash flow hedging contracts under SFAS 133Fixed Price Swaps
    
    Current Assets: Derivative
Financial
Instruments
    
    $
    138.2
    
    
    Current Assets: Derivative
Financial Instruments
    
    $
    121.9Derivatives not designated as cash flow hedging contracts under SFAS 133Fixed Price Swaps
    
    Current Assets: Derivative
Financial
Instruments
    
    
    11.0
    
    
    Current Assets: Derivative
Financial Instruments
    
    
    Total derivatives
    
    
    
    $
    149.2
    
    
    
    
    $
    121.9
  Amount of
    
    
    Location of
    
    Amount of gain/(loss)gain/(loss)
    
    
    gain/(loss)
    
    reclassified from
    
    
    
    
    Amount of (loss)Derivatives
    
    recognized in OCI
    
    
    reclassified from
    
    Accumulated OCI into
    
    
    
    
    recognized in incomedesignated as cash
    
    on derivative
    
    
    Accumulated OCI
    
    income (effective
    
    
    Location of (loss)
    
    on derivativeflow hedging
    
    (effective portion)
    
    
    into income
    
    portion)
    
    
    recognized in income
    
    (ineffective portion)contracts under
    
    First Quarter
    
    
    (effective
    
    First Quarter
    
    
    on derivative
    
    First QuarterSFAS 133
    
    2009
    
    
    2008
    
    
    portion)
    
    2009
    
    
    2008
    
    
    (ineffective portion)
    
    2009
    
    
    2008Fixed Price Swaps
    
    $
    138.2
    
    
    $
    (163.1
    )
    
    Revenues-Natural Gas
    
    $
    43,145
    
    
    $
    5,860
    
    
    Revenues-Natural Gas
    
    $
    (179
    )
    
    $
    (3,924
    )Fixed
Price Collars
    
    
    
    
    
    
    (13.5
    )
    
    Revenues-Crude Oil
    
    
    14,312
    
    
    
    (16,167
    )Total
    
    $
    138.2
    
    
    $
    (176.6
    )
    
    Total
    
    $
    57,457
    
    
    $
    (10,307
    )
 Amount of gain/(loss) recognizedLocation of gain/(loss)
    
    in income on derivativeDerivatives not designated as cash flow hedging contracts
    
    recognized in income on
    
    First Quarter
    
    First Quarterunder SFAS 133
    
    derivative
    
    2009
    
    2008Fixed Price Swaps
    
    Revenues-Crude Oil
    
    $
    6,523
    
    
    
    
 15




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##### Table of Contents



8. Commitments and Contingencies
 Minimum Future Lease Payments
 (In thousands)2010
    
    $
    2,5322011
    
    
    2,4992012
    
    
    2,4142013
    
    
    2,0842014 and thereafter
    
    
    9,877
 Other Commitments
 Insurance Matters
 Current Insurance Against Hurricanes
    Hurricane Ike (2008)
  16




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##### Table of Contents



Hurricanes Katrina and Rita (2005)
    Litigation
 Letters of Credit
 9. Earnings per Share
  17




---



##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008(In thousands, except per share data)Numerator:Net (Loss) Income
    
    $
    (424,118
    )
    
    $
    72,216Denominator:Weighted average shares outstanding
    
    
    88,865
    
    
    
    87,294Add dilutive securitiesOptions
    
    
    
    
    
    
    260Restricted stock
    
    
    
    
    
    
    459Total weighted average shares outstanding and dilutive securities
    
    
    88,865
    
    
    
    88,013Net (Loss) Income per share:Basic:
    
    $
    (4.77
    )
    
    $
    0.83Diluted:
    
    $
    (4.77
    )
    
    $
    0.82
  10. Comprehensive Income
  Three Months EndedMarch 31,2009
    
    
    2008(in thousands)Net (Loss) Income
    
    $
    (424,118
    )
    
    $
    72,216Other comprehensive (loss) income:Change in fair value of derivative hedging instruments, net of income taxes
of $(10,398) and $(45,111)
    
    
    (19,496
    )
    
    
    (81,089
    )Derivative contracts settled and reclassified, net of income taxes of $22,885
and $(5,067)
    
    
    40,916
    
    
    
    (9,164
    )Change in accumulated other comprehensive (loss) income
    
    
    21,420
    
    
    
    (90,253
    )Comprehensive loss
    
    
    (402,698
    )
    
    
    (18,037
    )Comprehensive income attributable to noncontrolling interest
    
    
    
    
    
    
    90Comprehensive loss attributable to Mariner Energy, Inc.
    
    $
    (402,698
    )
    
    $
    (18,127
    )
 11. Fair Value Measurement
   18




---



##### 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
    
    $
    149,224
    
    
    $
    
    
    
    $
    149,224
    
    
    $
    Natural gas and crude oil fixed
price swaps  Long Term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    149,224
    
    
    $
    
    
    
    $
    149,224
    
    
    $
    
  Level 2 Fair Value Measurements
  Level 3 Fair Value Measurements
  12. Segment Information
   19




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##### Table of Contents



13. Supplemental Guarantor Information
 1 2
   20




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##### Table of Contents



MARINER ENERGY, INC.
CONSOLIDATING BALANCE SHEET (Unaudited)
March 31, 2009
(In thousands except share data)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Current Assets:Cash and cash equivalents
    
    $
    7,339
    
    
    $
    
    
    
    $
    
    
    
    $
    7,339Receivables, net of allowances
    
    
    156,802
    
    
    
    53,652
    
    
    
    
    
    
    
    210,454Insurance receivables
    
    
    185
    
    
    
    15,963
    
    
    
    
    
    
    
    16,148Derivative financial instruments
    
    
    149,224
    
    
    
    
    
    
    
    
    
    
    
    149,224Intangible assets
    
    
    1,737
    
    
    
    68
    
    
    
    
    
    
    
    1,805Prepaid expenses and other
    
    
    25,899
    
    
    
    1,553
    
    
    
    
    
    
    
    27,452Total current assets
    
    
    341,186
    
    
    
    71,236
    
    
    
    
    
    
    
    412,422Property and Equipment:Proved oil and gas properties, full-cost method
    
    
    2,268,384
    
    
    
    2,366,339
    
    
    
    
    
    
    
    4,634,723Unproved properties, not subject to amortization
    
    
    178,971
    
    
    
    13,767
    
    
    
    
    
    
    
    192,738Total oil and gas properties
    
    
    2,447,355
    
    
    
    2,380,106
    
    
    
    
    
    
    
    4,827,461Other property and equipment
    
    
    33,847
    
    
    
    19,765
    
    
    
    
    
    
    
    53,612Accumulated depreciation, depletion and amortization:Proved oil and gas properties
    
    
    (1,305,219
    )
    
    
    (1,251,950
    )
    
    
    
    
    
    
    (2,557,169
    )Other property and equipment
    
    
    (4,850
    )
    
    
    (1,313
    )
    
    
    
    
    
    
    (6,163
    )Total accumulated depreciation, depletion and
amortization
    
    
    (1,310,069
    )
    
    
    (1,253,263
    )
    
    
    
    
    
    
    (2,563,332
    )Total property and equipment, net
    
    
    1,171,133
    
    
    
    1,146,608
    
    
    
    
    
    
    
    2,317,741Investment in Subsidiaries
    
    
    461,031
    
    
    
    
    
    
    
    (461,031
    )
    
    
    Intercompany Receivables
    
    
    128,825
    
    
    
    (133,427
    )
    
    
    (262,252
    )
    
    
    Intercompany Note Receivable
    
    
    176,200
    
    
    
    
    
    
    
    (176,200
    )
    
    
    Insurance Receivables
    
    
    124
    
    
    
    23,657
    
    
    
    
    
    
    
    23,781Other Assets, net of amortization
    
    
    65,275
    
    
    
    622
    
    
    
    
    
    
    
    65,897TOTAL ASSETS
    
    $
    2,343,774
    
    
    $
    1,375,550
    
    
    $
    (899,483
    )
    
    $
    2,819,841Current Liabilities:Accounts payable
    
    $
    2,490
    
    
    $
    
    
    
    $
    
    
    
    $
    2,490Accrued liabilities
    
    
    58,637
    
    
    
    33,052
    
    
    
    
    
    
    
    91,689Accrued capital costs
    
    
    97,231
    
    
    
    55,059
    
    
    
    
    
    
    
    152,290Deferred income tax
    
    
    12,594
    
    
    
    
    
    
    
    
    
    
    
    12,594Abandonment liability
    
    
    20,870
    
    
    
    88,848
    
    
    
    
    
    
    
    109,718Accrued interest
    
    
    21,284
    
    
    
    
    
    
    
    
    
    
    
    21,284Total current liabilities
    
    
    213,106
    
    
    
    176,959
    
    
    
    
    
    
    
    390,065Long-Term Liabilities:Abandonment liability
    
    
    46,524
    
    
    
    281,024
    
    
    
    
    
    
    
    327,548Deferred income tax
    
    
    (42,040
    )
    
    
    150,916
    
    
    
    
    
    
    
    108,876Intercompany payable
    
    
    133,427
    
    
    
    128,825
    
    
    
    (262,252
    )
    
    
    Long-term debt,
    
    
    1,240,000
    
    
    
    
    
    
    
    
    
    
    
    1,240,000Other long-term liabilities
    
    
    28,805
    
    
    
    595
    
    
    
    
    
    
    
    29,400Intercompany note payable
    
    
    
    
    
    
    176,200
    
    
    
    (176,200
    )
    
    
    Total long-term liabilities
    
    
    1,406,716
    
    
    
    737,560
    
    
    
    (438,452
    )
    
    
    1,705,824Commitments and Contingencies (see Note 8)Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
authorized, no shares issued and outstanding at
March 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, $.0001 par value; 180,000,000 shares
authorized, 90,006,593 shares issued and outstanding
at March 31, 2009
    
    
    9
    
    
    
    5
    
    
    
    (5
    )
    
    
    9Additional paid-in capital
    
    
    1,077,677
    
    
    
    886,142
    
    
    
    (886,142
    )
    
    
    1,077,677Partner capital
    
    
    
    
    
    
    31,611
    
    
    
    (31,611
    )
    
    
    Accumulated other comprehensive income
    
    
    99,601
    
    
    
    
    
    
    
    
    
    
    
    99,601Accumulated deficit
    
    
    (453,335
    )
    
    
    (456,727
    )
    
    
    456,727
    
    
    
    (453,335
    )Total stockholders equity
    
    
    723,952
    
    
    
    461,031
    
    
    
    (461,031
    )
    
    
    723,952TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,343,774
    
    
    $
    1,375,550
    
    
    $
    (899,483
    )
    
    $
    2,819,841
 21




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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
    
    $
    2,851
    
    
    $
    400
    
    
    $
    
    
    
    $
    3,251Receivables, 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
    
    
    
    19
    
    
    
    
    
    
    
    2,353Prepaid expenses and other
    
    
    12,923
    
    
    
    1,454
    
    
    
    
    
    
    
    14,377Total 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 8)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
 22




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##### Table of Contents



MARINER ENERGY, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2009
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    103,451
    
    
    $
    49,887
    
    
    $
    
    
    
    $
    153,338Oil
    
    
    48,783
    
    
    
    12,142
    
    
    
    
    
    
    
    60,925Natural gas liquids
    
    
    4,046
    
    
    
    2,423
    
    
    
    
    
    
    
    6,469Other revenues
    
    
    4,960
    
    
    
    17,644
    
    
    
    
    
    
    
    22,604Total revenues
    
    
    161,240
    
    
    
    82,096
    
    
    
    
    
    
    
    243,336Costs and Expenses:Operating expenses
    
    
    34,540
    
    
    
    26,975
    
    
    
    
    
    
    
    61,515General and administrative expense
    
    
    17,052
    
    
    
    359
    
    
    
    
    
    
    
    17,411Depreciation, depletion and amortization
    
    
    51,743
    
    
    
    43,062
    
    
    
    
    
    
    
    94,805Full cost ceiling test impairment
    
    
    342,595
    
    
    
    362,136
    
    
    
    
    
    
    
    704,731Other miscellaneous expense
    
    
    7,438
    
    
    
    571
    
    
    
    
    
    
    
    8,009Total costs and expenses
    
    
    453,368
    
    
    
    433,103
    
    
    
    
    
    
    
    886,471OPERATING LOSS
    
    
    (292,128
    )
    
    
    (351,007
    )
    
    
    
    
    
    
    (643,135
    )(Loss) Earnings of Affiliates
    
    
    (244,904
    )
    
    
    
    
    
    
    244,904
    
    
    
    Other Income (Expense):Interest income
    
    
    1,532
    
    
    
    
    
    
    
    (1,447
    )
    
    
    85Interest expense, net of amounts capitalized
    
    
    (14,275
    )
    
    
    (1,574
    )
    
    
    1,447
    
    
    
    (14,402
    )(Loss) Before Taxes
    
    
    (549,775
    )
    
    
    (352,581
    )
    
    
    244,904
    
    
    
    (657,452
    )Benefit for Income Taxes
    
    
    125,657
    
    
    
    107,677
    
    
    
    
    
    
    
    233,334NET LOSS
    
    $
    (424,118
    )
    
    $
    (244,904
    )
    
    $
    244,904
    
    
    $
    (424,118
    )
 23




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##### Table of Contents



MARINER ENERGY, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2008
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    
    
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Eliminations
    
    
    Energy, Inc.Revenues:Natural gas
    
    $
    85,533
    
    
    $
    94,090
    
    
    $
    
    
    
    $
    179,623Oil
    
    
    61,931
    
    
    
    51,683
    
    
    
    
    
    
    
    113,614Natural gas liquids
    
    
    11,743
    
    
    
    9,238
    
    
    
    
    
    
    
    20,981Other revenues
    
    
    334
    
    
    
    1,345
    
    
    
    
    
    
    
    1,679Total revenues
    
    
    159,541
    
    
    
    156,356
    
    
    
    
    
    
    
    315,897Costs and Expenses:Operating expenses
    
    
    21,518
    
    
    
    31,758
    
    
    
    
    
    
    
    53,276General and administrative expense
    
    
    10,815
    
    
    
    296
    
    
    
    
    
    
    
    11,111Depreciation, depletion and amortization
    
    
    60,155
    
    
    
    59,163
    
    
    
    
    
    
    
    119,318Other miscellaneous expense
    
    
    521
    
    
    
    16
    
    
    
    
    
    
    
    537Total costs and expenses
    
    
    93,009
    
    
    
    91,233
    
    
    
    
    
    
    
    184,242OPERATING INCOME
    
    
    66,532
    
    
    
    65,123
    
    
    
    
    
    
    
    131,655Earnings of Affiliates
    
    
    45,188
    
    
    
    
    
    
    
    (45,188
    )
    
    
    Other Income (Expense):Interest income
    
    
    3,043
    
    
    
    7
    
    
    
    (2,724
    )
    
    
    326Interest expense, net of amounts capitalized
    
    
    (18,374
    )
    
    
    (2,921
    )
    
    
    2,724
    
    
    
    (18,571
    )Income Before Taxes
    
    
    96,389
    
    
    
    62,209
    
    
    
    (45,188
    )
    
    
    113,410Provision for Income Taxes
    
    
    (24,263
    )
    
    
    (16,931
    )
    
    
    
    
    
    
    (41,194
    )NET INCOME
    
    
    72,126
    
    
    
    45,278
    
    
    
    (45,188
    )
    
    
    72,216Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    90NET INCOME ATTRIBUTABLE TO MARINER ENERGY, INC.
    
    $
    72,126
    
    
    $
    45,188
    
    
    $
    (45,188
    )
    
    $
    72,126
 24




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##### Table of Contents



MARINER ENERGY, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 2009
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Energy, Inc.Net cash provided by operating activities
    
    $
    (14,273
    )
    
    $
    140,230
    
    
    $
    125,957Cash flow from investing activities:Acquisitions and additions to oil and gas properties
    
    
    (124,965
    )
    
    
    (65,915
    )
    
    
    (190,880
    )Additions to other property and equipment
    
    
    (524
    )
    
    
    
    
    
    
    (524
    )Net cash used in investing activities
    
    
    (125,489
    )
    
    
    (65,915
    )
    
    
    (191,404
    )Cash flow from financing activities:Credit facility borrowings
    
    
    140,000
    
    
    
    
    
    
    
    140,000Credit facility repayments
    
    
    (70,000
    )
    
    
    
    
    
    
    (70,000
    )Other financing activities
    
    
    74,250
    
    
    
    (74,715
    )
    
    
    (465
    )Net cash provided by financing activities
    
    
    144,250
    
    
    
    (74,715
    )
    
    
    69,535Increase (Decrease) in Cash and Cash Equivalents
    
    
    4,488
    
    
    
    (400
    )
    
    
    4,088Cash and Cash Equivalents at Beginning of Period
    
    
    2,851
    
    
    
    400
    
    
    
    3,251Cash and Cash Equivalents at End of Period
    
    $
    7,339
    
    
    $
    
    
    
    $
    7,339
 25




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##### Table of Contents



MARINER ENERGY, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 2008
(In thousands)
 ConsolidatedParent
    
    
    Subsidiary
    
    
    MarinerCompany
    
    
    Guarantors
    
    
    Energy, Inc.Net cash (used in) provided by operating activities
    
    $
    89,222
    
    
    $
    124,949
    
    
    $
    214,171Cash flow from investing activities:Acquisitions and additions to oil and gas properties
    
    
    (176,853
    )
    
    
    (260,712
    )
    
    
    (437,565
    )Additions to other property and equipment
    
    
    (347
    )
    
    
    (47,301
    )
    
    
    (47,648
    )Restricted cash designated for investment
    
    
    
    
    
    
    5,000
    
    
    
    5,000Net cash used in investing activities
    
    
    (177,200
    )
    
    
    (303,013
    )
    
    
    (480,213
    )Cash flow from financing activities:Credit facility borrowings
    
    
    412,000
    
    
    
    
    
    
    
    412,000Credit facility repayments
    
    
    (161,000
    )
    
    
    
    
    
    
    (161,000
    )Other financing activities
    
    
    (178,136
    )
    
    
    178,461
    
    
    
    325Net cash provided by financing activities
    
    
    72,864
    
    
    
    178,461
    
    
    
    251,325(Decrease) Increase in Cash and Cash Equivalents
    
    
    (15,114
    )
    
    
    397
    
    
    
    (14,717
    )Cash and Cash Equivalents at Beginning of Period
    
    
    18,589
    
    
    
    
    
    
    
    18,589Cash and Cash Equivalents at End of Period
    
    $
    3,475
    
    
    $
    397
    
    
    $
    3,872
 14. Subsequent Events
  26




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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
    Acquisitions.
   27




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##### Table of Contents



First Quarter 2009 Highlights
  
    
    Total revenues for first quarter 2009 decreased 23% to $243.3 million, down from $315.9
million reported for first quarter 2008.
    
    Net cash provided by operations for the three-month period ended March 31, 2009
decreased 41% to $126.0 million, down from $214.2 million for the same period in 2008.
    
    Estimated average daily production for first quarter 2009 decreased to 328 MMcfe per
day, compared to 344 MMcfe per day for first quarter 2008.
    
    Ceiling test impairment for first quarter 2009 of $704.7 million as compared to no
impairment for the same period in 2008.
 Operational Update
 Offshore
 ApproximateWell Name
    
    Operator
    
    Working Interest
    
    Water Depth (Ft)
    
    LocationGreen Canyon 859 #1
    
    Anadarko
    
    13%
    
    
    5,000
    
    
    DeepwaterSouth Marsh 150 D2
    
    Mariner
    
    100%
    
    
    230
    
    
    Conventional ShelfSouth Marsh 150 D3
    
    Mariner
    
    100%
    
    
    230
    
    
    Conventional Shelf
   Onshore
 Results of Operations
 Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
  28




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##### Table of Contents



Three Months EndedMarch 31,
    
    
    Increase
    
    
    %Summary Operating Information:
    
    2009
    
    
    2008
    
    
    (Decrease)
    
    
    Change(In thousands, except net production, average sales prices and %change)Net Production:Natural gas (MMcf)
    
    
    22,048
    
    
    
    20,956
    
    
    
    1,092
    
    
    
    5
    %Oil (MBbls)
    
    
    970
    
    
    
    1,350
    
    
    
    (380
    )
    
    
    (28
    )%Natural gas liquids (MBbls)
    
    
    273
    
    
    
    377
    
    
    
    (104
    )
    
    
    (28
    )%Total natural gas equivalent (MMcfe)
    
    
    29,502
    
    
    
    31,315
    
    
    
    (1,813
    )
    
    
    (6
    )%Average daily production (MMcfe/d)
    
    
    328
    
    
    
    344
    
    
    
    (16
    )
    
    
    (5
    )%Hedging Activities:Natural gas revenue gain
    
    $
    42,966
    
    
    $
    1,936
    
    
    $
    41,030
    
    
    
    2119
    %Oil revenue gain (loss)
    
    
    20,835
    
    
    
    (16,167
    )
    
    
    37,002
    
    
    
    229
    %Total hedging revenue gain (loss)
    
    $
    63,801
    
    
    $
    (14,231
    )
    
    $
    78,032
    
    
    
    548
    %Average Sales Prices:Natural gas (per Mcf) realized(1)
    
    $
    6.95
    
    
    $
    8.57
    
    
    $
    (1.62
    )
    
    
    (19
    )%Natural gas (per Mcf) unhedged
    
    
    5.01
    
    
    
    8.48
    
    
    
    (3.47
    )
    
    
    (41
    )%Oil (per Bbl) realized(1)
    
    
    62.81
    
    
    
    84.16
    
    
    
    (21.35
    )
    
    
    (25
    )%Oil (per Bbl) unhedged
    
    
    41.33
    
    
    
    96.13
    
    
    
    (54.80
    )
    
    
    (57
    )%Natural gas liquids (per Bbl) realized(1)
    
    
    23.70
    
    
    
    55.65
    
    
    
    (31.95
    )
    
    
    (57
    )%Natural gas liquids (per Bbl) unhedged
    
    
    23.70
    
    
    
    55.65
    
    
    
    (31.95
    )
    
    
    (57
    )%Total natural gas equivalent ($/Mcfe) realized(1)
    
    
    7.48
    
    
    
    10.03
    
    
    
    (2.55
    )
    
    
    (25
    )%Total natural gas equivalent ($/Mcfe) unhedged
    
    
    5.32
    
    
    
    10.49
    
    
    
    (5.17
    )
    
    
    (49
    )%Summary of Financial Information:Natural gas revenue
    
    $
    153,338
    
    
    $
    179,623
    
    
    $
    (26,285
    )
    
    
    (15
    )%Oil revenue
    
    
    60,925
    
    
    
    113,614
    
    
    
    (52,689
    )
    
    
    (46
    )%Natural gas liquids revenue
    
    
    6,469
    
    
    
    20,981
    
    
    
    (14,512
    )
    
    
    (69
    )%Other revenues
    
    
    22,604
    
    
    
    1,679
    
    
    
    20,925
    
    
    
    1246
    %Lease operating expense
    
    
    53,399
    
    
    
    45,647
    
    
    
    7,752
    
    
    
    17
    %Severance and ad valorem taxes
    
    
    3,532
    
    
    
    4,610
    
    
    
    (1,078
    )
    
    
    (23
    )%Transportation expense
    
    
    4,584
    
    
    
    3,019
    
    
    
    1,565
    
    
    
    52
    %General and administrative expense
    
    
    17,411
    
    
    
    11,111
    
    
    
    6,300
    
    
    
    57
    %Depreciation, depletion and amortization
    
    
    94,805
    
    
    
    119,318
    
    
    
    (24,513
    )
    
    
    (21
    )%Full cost ceiling test impairment
    
    
    704,731
    
    
    
    
    
    
    
    704,731
    
    
    
    N/AOther miscellaneous expense
    
    
    8,009
    
    
    
    537
    
    
    
    7,472
    
    
    
    1391
    %Net interest expense
    
    
    14,317
    
    
    
    18,245
    
    
    
    (3,928
    )
    
    
    (22
    )%(Loss) Income before taxes
    
    
    (657,452
    )
    
    
    113,410
    
    
    
    (770,862
    )
    
    
    (680
    )%(Benefit) Provision for income taxes
    
    
    (233,334
    )
    
    
    41,194
    
    
    
    (274,528
    )
    
    
    (666
    )%Net (Loss) Income
    
    $
    (424,118
    )
    
    $
    72,216
    
    
    $
    (496,334
    )
    
    
    (687
    )%Average Unit Costs per Mcfe:Lease operating expense
    
    $
    1.81
    
    
    $
    1.46
    
    
    $
    0.35
    
    
    
    24
    %Severance and ad valorem taxes
    
    
    0.12
    
    
    
    0.15
    
    
    
    (0.03
    )
    
    
    (20
    )%Transportation expense
    
    
    0.16
    
    
    
    0.10
    
    
    
    0.06
    
    
    
    60
    %General and administrative expense
    
    
    0.59
    
    
    
    0.35
    
    
    
    0.24
    
    
    
    69
    %Depreciation, depletion and amortization
    
    
    3.21
    
    
    
    3.81
    
    
    
    (0.60
    )
    
    
    (16
    )%
 
 (1)
    
    Average sales prices include the effects of hedging Net
(Loss) Income
 Net Production
 
    
    decreased production of 4.4 Bcfe, or 24%, from our Gulf of Mexico shelf properties as a
result of production that remains shut-in due to the impact of Hurricane Ike in
third quarter of 2008;
 29




---



##### Table of Contents




    
    offset by increased production of 2.1 Bcfe, or 24%, from our Gulf of Mexico deepwater
properties primarily due to Bass Lite located in Atwater 426 (which contributed 4.0 Bcfe),
partially offset by decreased production of 1.6 Bcfe from Pluto located in Mississippi
Canyon 674; and
    
    further offset by increased production of 0.5 Bcfe, or 14%, 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
    
    % ChangeThree Months Ended March 31, 2009:Natural gas (per Mcf)
    
    $
    6.95
    
    
    $
    5.01
    
    
    $
    1.94
    
    
    
    39
    %Oil (per Bbl)
    
    
    62.81
    
    
    
    41.33
    
    
    
    21.48
    
    
    
    52
    %Three Months Ended March 31, 2008:Natural gas (per Mcf)
    
    $
    8.57
    
    
    $
    8.48
    
    
    $
    0.09
    
    
    
    1
    %Oil (per Bbl)
    
    
    84.16
    
    
    
    96.13
    
    
    
    (11.97
    )
    
    
    (12
    )%
 Other revenues
 Lease operating expense LOE
 Severance and ad valorem tax
 Transportation expense
 30




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##### Table of Contents



General and administrative expense
 Depreciation, depletion, and amortization expense
 Full cost ceiling test impairment
 Other miscellaneous expense
 Net interest expense
 Income before taxes
 Provision for income taxes
 Liquidity and Capital Resources
     Capital Expenditures 
 31




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##### Table of Contents



In thousands
    
    
    PercentageCapital Expenditures:Offshore natural gas and oil development
    
    $
    99,004
    
    
    
    59
    %Natural gas and oil exploration
    
    
    40,099
    
    
    
    24
    %Onshore natural gas and oil development
    
    
    18,118
    
    
    
    11
    %Other items (primarily capitalized overhead)
    
    
    7,757
    
    
    
    5
    %Acquisitions (property and leasehold)
    
    
    1,436
    
    
    
    1
    %Total capital expenditures
    
    $
    166,414
    
    
    
    100
    %
  Bank Credit Facility
     
    
    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.
  Future Uses of Capital.
 
    
    funding future capital expenditures;
 32




---



##### Table of Contents




    
    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.
   33




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##### Table of Contents



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




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##### Table of Contents



Kerr-McGee Oil & Gas Corp. v. Allred Kerr-McGee Kerr-McGee Oil & Gas Corp. v. Allred Kerr-McGee Oil & Gas Corp. v. U.S. Dept of Interior
 U.S. Department of the Interior Five-Year Leasing Program. et seq.
 Center for Biological Diversity v. Department of the Interior
  35




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##### Table of Contents



Recent Accounting Pronouncements
 Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly, Interim Disclosures about Fair Value of Financial Instruments, Recognition and Presentation of Other-Than-Temporary Impairments,
  
    
    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;
    
    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.
   36




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Commodity Prices and Related Hedging Activities
     Three Months Ended March 31,2009
    
    
    2008(In thousands)Cash Gain (Loss) on Settlements (1)
    
    $
    57,457
    
    
    $
    (10,307
    )Gains on
liquidated swaps (2)
    
    
    6,523
    
    
    
    Loss on Hedge Ineffectiveness (3)
    
    
    (179
    )
    
    
    (3,924
    )Total
    
    $
    63,801
    
    
    $
    (14,231
    )
 
 (1)
    
    Designated as cash flow hedges pursuant to SFAS 133.(2)
    
    Crude oil fixed price swaps liquidated on January 29, 2009 that do not qualify for hedge
accounting. Includes $2.6 million, net of premium, related to
the $10.0 million cash liquidation, and $3.9 million, net
of discount, related to the $13.5 million installment
liquidation. 37




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##### Table of Contents



(3)
    
    Unrealized loss recognized in natural gas revenue related to the ineffective portion of open
contracts that are not eligible for deferral under SFAS 133 due primarily to the basis
differentials between the contract price and the indexed price at the point of sale.  Weighted Average
    
    
    Fair ValueFixed Price Swaps
    
    Quantity
    
    
    Fixed Price
    
    
    Asset(In thousands)Natural Gas (MMbtus)April 1December 31, 2009
    
    
    36,923,804
    
    
    $
    7.57
    
    
    $
    121,718Crude Oil (Bbls)April 1December 31, 2009
    
    
    769,485
    
    
    $
    76.56
    
    
    
    16,494Total
    
    
    
    
    
    
    
    
    
    $
    138,212
    Weighted AverageFixed Price Swaps
    
    Quantity
    
    Fixed PriceNatural Gas (MMbtus)January 1December 31, 2010
    
    
    12,775,000
    
    
    $
    5.84January 1June 30, 2011
    
    
    4,525,000
    
    
    $
    6.65Crude Oil (Bbls)January 1December 31, 2010
    
    
    1,277,500
    
    
    $
    62.28January 1June 30, 2011
    
    
    452,500
    
    
    $
    65.65
 Interest Rate Market Risk 
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  38




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##### Table of Contents



Changes in Internal Controls Over Financial Reporting
  39




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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;
    
    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
 40




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##### Table of Contents




    
    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
    
    ProgramsJanuary 1, 2009 to January 31, 2009 (1)
    
    
    1,386
    
    
    $
    10.54
    
    
    
    
    
    
    
    February 1, 2009 to February 28, 2009 (1)
    
    
    65
    
    
    $
    11.16
    
    
    
    
    
    
    
    March 1, 2009 to March 31, 2009 (1)
    
    
    50,683
    
    
    $
    7.80
    
    
    
    
    
    
    
    Total
    
    
    52,134
    
    
    $
    7.88
    
    
    
    
    
    
    
    
 
 (1)
    
    These shares were withheld upon the vesting of employee restricted stock grants in connection
with payment of required withholding taxes. 
 Item 5. Other Information
   2008
    
    2007
    
    2006As
    
    
    
    
    
    As
    
    
    
    
    
    AsPreviously
    
    As
    
    Previously
    
    As
    
    Previously
    
    AsReported
    
    Revised
    
    Reported
    
    Revised
    
    Reported
    
    RevisedConsolidated Statements of Income:Minority Interest
    
    $
    (188
    )
    
    $
    
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    
    
    
    $
    Net (loss) income
    
    
    (388,713
    )
    
    
    (388,525
    )
    
    
    143,934
    
    
    
    143,935
    
    
    
    121,462
    
    
    
    121,462Net (loss) income attributable to Mariner Energy, Inc. (1)
    
    
    
    
    
    
    (388,713
    )
    
    
    
    
    
    
    143,934
    
    
    
    
    
    
    
    121,462Net income attributable to noncontrolling interests (1)
    
    
    
    
    
    
    (188
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    Total earnings per common share, basic
    
    
    (4.44
    )
    
    
    
    
    
    
    1.68
    
    
    
    
    
    
    
    1.59
    
    
    
    Total earnings per common share, diluted
    
    
    (4.44
    )
    
    
    
    
    
    
    1.67
    
    
    
    
    
    
    
    1.58
    
    
    
    Earnings per common share attributable to Mariner Energy, Inc.:Basic (1)
    
    
    
    
    
    
    (4.44
    )
    
    
    
    
    
    
    1.68
    
    
    
    
    
    
    
    1.59Diluted (1)
    
    
    
    
    
    
    (4.44
    )
    
    
    
    
    
    
    1.67
    
    
    
    
    
    
    
    1.58
 41




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##### Table of Contents



2008
    
    2007
    
    2006As
    
    
    
    
    
    As
    
    
    
    
    
    AsPreviously
    
    As
    
    Previously
    
    As
    
    Previously
    
    AsReported
    
    Revised
    
    Reported
    
    Revised
    
    Reported
    
    RevisedConsolidated Balance Sheets:Minority interest
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Noncontrolling interest (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Total Mariner Energy, Inc. Stockholders Equity (1)
    
    
    
    
    
    
    1,120,320
    
    
    
    
    
    
    
    1,391,018
    
    
    
    
    
    
    
    1,302,591Total stockholders equity
    
    
    1,120,320
    
    
    
    1,120,320
    
    
    
    1,391,018
    
    
    
    1,391,019
    
    
    
    1,302,591
    
    
    
    1,302,591Consolidated Statements of Cash Flows:Operating Activities:Net (loss) income
    
    
    (388,713
    )
    
    
    (388,525
    )
    
    
    143,934
    
    
    
    143,935
    
    
    
    121,462
    
    
    
    121,462MMS Royalty Relief and other
    
    
    (52,731
    )
    
    
    (52,919
    )
    
    
    4,486
    
    
    
    4,486
    
    
    
    226
    
    
    
    226Investing Activities:Minority interest
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Consolidated Statements of Stockholders Equity:Net (loss) income
    
    
    (388,713
    )
    
    
    (388,525
    )
    
    
    143,934
    
    
    
    143,935
    
    
    
    121,462
    
    
    
    121,462Noncontrolling interest (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Total stockholders equity
    
    
    1,120,320
    
    
    
    1,120,320
    
    
    
    1,391,018
    
    
    
    1,391,019
    
    
    
    1,302,591
    
    
    
    1,302,591
 
 (1)
    
    Represents a new financial statement line item included as a result of the retrospective application of SFAS 160. 
 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 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).
 42




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##### Table of Contents



Number
    
    Description4.2*
    
    Indenture, dated as of April 24, 2006, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on April 25, 2006).4.3*
    
    Exchange and Registration Rights Agreement, dated as of April 24, 2006, among Mariner Energy,
Inc., the guarantors party thereto and the initial purchasers party thereto (incorporated by
reference to Exhibit 4.2 to Mariners Form 8-K filed on April 25, 2006).4.4*
    
    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).4.5*
    
    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).4.6*
    
    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).4.7*
    
    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).4.8*
    
    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).4.9*
    
    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).4.10*
    
    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).4.11*
    
    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).4.12*
    
    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).4.13*
    
    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).10.1*
    
    Underwriting Agreement, dated April 25, 2007, among J.P. Morgan Securities Inc., as Representative
of the several Underwriters listed in Schedule 1 thereto, Mariner Energy, Inc., Mariner Energy
Resources, Inc., Mariner LP LLC, and Mariner Energy Texas LP (incorporated by reference to Exhibit
1.1 to Mariners Form 8-K filed on April 26, 2007).
 43




---



##### Table of Contents



Number
    
    Description10.2*
    
    Purchase Agreement, dated as of April 19, 2006, among Mariner Energy, Inc., Mariner LP LLC,
Mariner Energy Resources, Inc., Mariner Energy Texas LP and the initial purchasers party thereto
(incorporated by reference to Exhibit 10.1 to Mariners Form 8-K filed on April 25, 2006).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.  44




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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/John H. KarnesJohn H. Karnes,Senior Vice President, Chief Financial Officer
and Treasurer 45




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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 April 30, 2007, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on May 1, 2007).4.2*
    
    Indenture, dated as of April 24, 2006, among Mariner Energy, Inc., the guarantors party thereto
and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Mariners Form
8-K filed on April 25, 2006).4.3*
    
    Exchange and Registration Rights Agreement, dated as of April 24, 2006, among Mariner Energy,
Inc., the guarantors party thereto and the initial purchasers party thereto (incorporated by
reference to Exhibit 4.2 to Mariners Form 8-K filed on April 25, 2006).4.4*
    
    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).4.5*
    
    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).4.6*
    
    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).4.7*
    
    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
 46




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##### Table of Contents



Number
    
    DescriptionAdministrative 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).4.8*
    
    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).4.9*
    
    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).4.10*
    
    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).4.11*
    
    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).4.12*
    
    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).4.13*
    
    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).10.1*
    
    Underwriting Agreement, dated April 25, 2007, among J.P. Morgan Securities Inc., as Representative
of the several Underwriters listed in Schedule 1 thereto, Mariner Energy, Inc., Mariner Energy
Resources, Inc., Mariner LP LLC, and Mariner Energy Texas LP (incorporated by reference to Exhibit
1.1 to Mariners Form 8-K filed on April 26, 2007).10.2*
    
    Purchase Agreement, dated as of April 19, 2006, among Mariner Energy, Inc., Mariner LP LLC,
Mariner Energy Resources, Inc., Mariner Energy Texas LP and the initial purchasers party thereto
(incorporated by reference to Exhibit 10.1 to Mariners Form 8-K filed on April 25, 2006).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.  47