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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 1-10671
 THE MERIDIAN RESOURCE CORPORATION
  TEXAS
(State of incorporation)
    
    76-0319553
(I.R.S. Employer Identification No.)1401 Enclave Parkway, Suite 300, Houston, Texas
(Address of principal executive offices)
    
    77077
(Zip Code)
 281-597-7000
 Securities registered pursuant to Section 12(b) of the Act:
 (Title of each class) 
Common Stock, $0.01 par value
    
    (Name of each exchange on which registered)
New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act: None
 
 o þ
 o þ
 o o
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



THE MERIDIAN RESOURCE CORPORATION
INDEX TO FORM 10-K
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    15Item 1B.
    
    Unresolved Staff Comments
    
    
    25Item 2.
    
    Properties
    
    
    25Item 3.
    
    Legal Proceedings
    
    
    25Item 4.
    
    [Reserved]
    
    
    27PART IIItem 5.
    
    Market for Registrants Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    27Item 6.
    
    Selected Financial Data
    
    
    30Item 7.
    
    Managements Discussion and Analysis of  Financial Condition and Results of Operations
    
    
    31Item 7A.
    
    Quantitative and Qualitative Disclosures about  Market Risk
    
    
    52Item 8.
    
    Financial Statements and Supplementary Data
    
    
    57Item 9.
    
    Changes in and Disagreements with Accountants  on Accounting and Financial Disclosure
    
    
    106Item 9A.
    
    Controls and Procedures
    
    
    106Item 9B.
    
    Other Information
    
    
    107PART IIIItem 10.
    
    Directors, Executive Officers and Corporate  GovernanceItem 11.
    
    Executive CompensationItem 12.
    
    Security Ownership of Certain Beneficial Owners  and Management and Related Stockholder MattersItem 13.
    
    Certain Relationships and Related Transactions,  and Director IndependenceItem 14.
    
    Principal Accountant Fees and ServicesPART IVItem 15.
    
    Exhibits
    
    
    108Signatures
    
    
    116EX-10.53EX-10.54EX-23.1EX-23.2EX-23.3EX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I
 
 Item 1. Business
 General
    Recent developments, 2008-2009
    3




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4




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Proposed Merger
      5




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Our oil and natural gas properties.
       Oil and Natural Gas Properties
  6




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Gulf ofLouisiana
    
    
    Texas
    
    
    Mexico
    
    
    TotalProduction for the year ended
December 31, 2009Oil (MBbls)
    
    
    613
    
    
    
    184
    
    
    
    37
    
    
    
    834Natural Gas (MMcf)
    
    
    6,567
    
    
    
    690
    
    
    
    292
    
    
    
    7,549Reserves as of December 31, 2009Oil (MBbls)
    
    
    2,336
    
    
    
    1,309
    
    
    
    123
    
    
    
    3,768Natural Gas (MMcf)
    
    
    44,616
    
    
    
    6,363
    
    
    
    1,384
    
    
    
    52,363
 Estimated future net cash flows ($000)(1)
    
    $
    189,163Standardized measure of discounted future net cash flows ($000)(2)
    
    $
    138,955
 
 (1)
    
    Estimated Future Net Cash Flows represent the net undiscounted future revenues to be
generated from the production of proved reserves, net of estimated production and future
development costs, using expected realized prices based on the average prices for the most
recent twelve months at December 31, 2009. Over the estimated life of the properties, the
prices average $59.94 per Bbl of oil and $3.97 per Mcf of natural gas.(2)
    
    The Standardized Measure of Discounted Future Net Cash Flows represents the Present Value of
Future Net Cash Flows after income taxes of zero. Income taxes are zero because the tax basis
of oil and natural gas properties exceeds the estimated future taxable income. Productive Wells
  2009
    
    
    2008
    
    
    2007Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetOil Wells
    
    
    27
    
    
    
    16
    
    
    
    34
    
    
    
    20
    
    
    
    33
    
    
    
    19Natural Gas Wells
    
    
    49
    
    
    
    24
    
    
    
    66
    
    
    
    37
    
    
    
    88
    
    
    
    43Total
    
    
    76
    
    
    
    40
    
    
    
    100
    
    
    
    57
    
    
    
    121
    
    
    
    62
  Oil and Natural Gas Reserves
  7




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##### Table of Contents



Proved Reserves at December 31, 2009Developed
    
    
    DevelopedProducing
    
    
    Non-Producing
    
    
    Undeveloped
    
    
    Total(dollars in thousands)Net Proved Reserves:Oil (MBbls)
    
    
    1,432
    
    
    
    1,139
    
    
    
    1,197
    
    
    
    3,768Natural Gas (MMcf)
    
    
    18,058
    
    
    
    14,502
    
    
    
    19,803
    
    
    
    52,363Natural Gas Equivalent (MMcfe)
    
    
    26,650
    
    
    
    21,336
    
    
    
    26,985
    
    
    
    74,971Estimated Future Net Cash Flows(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    189,163Standardized Measure of
Discounted Future Net Cash
Flows(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    138,955
 
 (1)
    
    Estimated Future Net Cash Flows represent the net undiscounted future revenues to be
generated from the production of proved reserves, net of estimated production and future
development costs, using expected realized prices based on the most recent twelve months at
December 31, 2009. Over the estimated life of the properties, the prices average $59.94 per
Bbl of oil and $3.97 per Mcf of natural gas.(2)
    
    The Standardized Measure of Discounted Future Net Cash Flows represents the Present Value of
Future Net Cash Flows after income taxes of zero. Income taxes are zero because the tax basis
of oil and natural gas properties exceeds the book basis.   8




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Proved Undeveloped Reserves
    Oil and Natural Gas Drilling Activities
  9




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Gross Wells
    
    Net WellsProductive
    
    Dry
    
    Total
    
    Productive
    
    Dry
    
    TotalExploratory WellsYear ended December
31, 2009
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Year ended December
31, 2008
    
    
    6
    
    
    
    4
    
    
    
    10
    
    
    
    2.7
    
    
    
    3.1
    
    
    
    5.8Year ended December
31, 2007
    
    
    13
    
    
    
    12
    
    
    
    25
    
    
    
    4.2
    
    
    
    6.6
    
    
    
    10.8Development WellsYear ended December
31, 2009
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    0.7
    
    
    
    
    
    
    
    0.7Year ended December
31, 2008
    
    
    7
    
    
    
    4
    
    
    
    11
    
    
    
    5.0
    
    
    
    3.2
    
    
    
    8.2Year ended December
31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Production
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Production:Oil (MBbls)
    
    
    834
    
    
    
    765
    
    
    
    838Natural gas (MMcf)
    
    
    7,549
    
    
    
    9,369
    
    
    
    13,239Natural gas equivalent (MMcfe)
    
    
    12,551
    
    
    
    13,958
    
    
    
    18,269Average Prices:Oil ($/Bbl)
    
    $
    59.02
    
    
    $
    83.18
    
    
    $
    64.70Natural gas ($/Mcf)
    
    $
    5.30
    
    
    $
    9.07
    
    
    $
    7.29Natural gas equivalent ($/Mcfe)
    
    $
    7.11
    
    
    $
    10.65
    
    
    $
    8.25Production Expenses:Lease operating expenses ($/Mcfe)
    
    $
    1.40
    
    
    $
    1.74
    
    
    $
    1.55Severance and ad valorem taxes ($/Mcfe)
    
    $
    0.53
    
    
    $
    0.70
    
    
    $
    0.52
 Acreage
  10




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December 31, 2009Developed
    
    
    UndevelopedRegion
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetLouisiana
    
    
    27,828
    
    
    
    19,447
    
    
    
    13,763
    
    
    
    11,942Oklahoma
    
    
    1,809
    
    
    
    699
    
    
    
    
    
    
    
    Kentucky
    
    
    
    
    
    
    
    
    
    
    27,094
    
    
    
    22,615Texas
    
    
    14,805
    
    
    
    8,593
    
    
    
    73,222
    
    
    
    33,032Gulf of Mexico
    
    
    28,759
    
    
    
    5,613
    
    
    
    5,000
    
    
    
    765Total
    
    
    73,201
    
    
    
    34,352
    
    
    
    119,079
    
    
    
    68,354
  Employees
  Marketing of Production
   Year Ended December 31,Customer
    
    2009
    
    2008
    
    2007Shell Trading (U.S.)
    
    
    28
    %
    
    
    21
    %
    
    
    14
    %Stone Energy Corporation
    
    
    17
    %
    
    
    8
    %
    
    
    8
    %Superior Natural Gas
    
    
    11
    %
    
    
    17
    %
    
    
    23
    %Crosstex Gulfcoast Marketing
    
    
    10
    %
    
    
    14
    %
    
    
    16
    %
  Market Conditions
  11




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Competition
  Regulation
     12




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Federal Regulation.
 Price Controls.
 State Regulation of Oil and Natural Gas Production
 Environmental Regulation.
  OPA.
  13




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CERCLA.
 Clean Water Act.
 Resource Conservation and Recovery Act.
 14




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Title to Properties
   
 Item 1A. Risk Factors
  We are currently in payment default under our Credit Facility and in covenant default under certain
of the covenants in our Credit Facility. As a result of such defaults under the Credit Facility, we
are also in default under our drilling rig financing with CIT Group/Equipment Financing, Inc. due
to cross default provisions therein. It is unlikely that we will be able to return to compliance
with the Credit Facility and the drilling rig financing, and if we are unable to return to
compliance, our Lenders may exercise remedies that would have a material adverse effect on us and
our shareholders.
    15




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As a result of our current lack of financial liquidity, we have received a going concern
modification to our independent registered public accounting firms opinion on our consolidated
financial statements.
  If the merger with Alta Mesa is not completed, we may be forced to liquidate or to otherwise seek
protection under federal bankruptcy laws.
  Our efforts to cure the deficiency under the Credit Facility may not be successful and we may be
required to seek bankruptcy protection under Chapter 11 of Title 11 of the United States Code (the
Bankruptcy Code). Even if our efforts are successful, we may still be required to seek protection
under the Bankruptcy Code to consummate a corporate transaction such as a merger or sale of the
Company.
  16




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Our common stock could be delisted from the New York Stock Exchange.
      17




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Our Credit Facility has substantial restrictions and financial covenants. We are currently in
default under, and it is unlikely that we will be able to return to compliance with, certain of the
covenants in our Credit Facility, including our covenant to maintain a ratio of current assets to
current liabilities of not less than 1.0 to 1.0, and our covenant to deliver to our Lenders audited
financial statements for each fiscal year that do not have a going concern or like qualification
or exception.
    Our Credit Facility has periodic borrowing base redeterminations and we will have difficulty
maintaining our total borrowing base at the current level of $60 million at future
redeterminations, or maintaining or obtaining additional credit at similar terms, which could
adversely affect our operations.
  18




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Because of the recent deterioration of the credit and capital markets, we may be unable to obtain
financing from sources other than our Credit Facility on acceptable terms or at all.
    We have significant near-term contractual obligations, which we may not be able to meet; our
working capital is currently a net deficit.
  If oil or natural gas prices decrease or exploration and development efforts are unsuccessful, we
may be required to take further write-downs.
  19




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The oil and natural gas markets are volatile and expose us to financial risks.
   20




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Our hedging transactions may not adequately prevent losses.
  Our reserve estimates may prove to be inaccurate and future net cash flows are uncertain.
  We depend on key personnel to execute our business plans.
  We compete against significant players in the oil and natural gas industry, and our failure in the
long-term to complete future property acquisitions successfully and generate commercial exploration
and development drilling opportunities could reduce our earnings and cause revenues to decline.
  The oil and natural gas markets are heavily regulated.
  21




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The nature of our operations exposes us to environmental liabilities.
  
    
    from a well or drilling equipment at a drill site,
    
    from a leak in storage tanks, pipelines or other gathering and transportation facilities,
    
    from damage to oil or natural gas wells resulting from accidents during normal operations
or natural disasters, or
    
    from blowouts, cratering or explosions.
    Our operations entail inherent casualty risks for which we may not have adequate insurance.
   22




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Our operations also entail significant operating risks.
  We may not be able to effectively market our oil and natural gas production.
  We are dependent on other operators who influence our productivity.
  Our working interest owners may face cash flow and liquidity concerns.
  23




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Our drilling projects are based in part on seismic data, which is costly and cannot ensure the
commercial success of the project.
  Our inability to develop new exploration prospects will inhibit our growth.
  Terrorist attacks and threats or actual war may negatively affect our business, financial condition
and results of operations.
  Forward-Looking Information
  24




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Item 1B.
    
    Unresolved Staff Comments.
  
 Item 2.
    
    Properties
 Producing Properties
  
 Item 3.
    
    Legal Proceedings
 Default under Credit Agreement.
 H. L. Hawkins litigation Amoco
 25




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Title/lease disputes.
 Environmental litigation.
  Litigation involving insurable issues
 Property tax litigation.
 26




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Shareholder litigation Leider, derivatively on behalf of The
Meridian Resource Corporation v. Ching, et al. . Leider
 
 Item 4.
    
    [Reserved]
 
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
 Price Range of Common Stock and Dividend Policy
  High
    
    
    Low2009:First quarter
    
    $
    0.70
    
    
    $
    0.13Second quarter
    
    
    0.67
    
    
    
    0.20Third quarter
    
    
    0.57
    
    
    
    0.26Fourth quarter
    
    
    0.43
    
    
    
    0.182008:First quarter
    
    $
    1.88
    
    
    $
    1.32Second quarter
    
    
    3.30
    
    
    
    1.45Third quarter
    
    
    3.29
    
    
    
    1.66Fourth quarter
    
    
    1.90
    
    
    
    .55
 27




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28




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COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG THE MERIDIAN
RESOURCE CORPORATION, NYSE COMPOSITE INDEX AND PEER GROUP INDEX
 
 
 Fiscal Year Ending December 31,Company/Index/Market
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009Meridian Resource Corporation
    
    $
    100.00
    
    
    $
    69.42
    
    
    $
    51.07
    
    
    $
    29.92
    
    
    $
    9.42
    
    
    $
    4.38NYSE Composite Index
    
    $
    100.00
    
    
    $
    109.36
    
    
    $
    131.75
    
    
    $
    143.43
    
    
    $
    87.12
    
    
    $
    111.76Peer Group Index
    
    $
    100.00
    
    
    $
    143.85
    
    
    $
    160.16
    
    
    $
    214.41
    
    
    $
    110.43
    
    
    $
    152.74
 The Peer Group Index consists of the common stocks of the following companies:
  29




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Securities Authorized for Issuance Under Equity Compensation Plans
  (c)(a)

    
    
    
    
    
    
    Number of securitiesNumber of
    
    
    (b)

    
    
    remaining availablesecurities to
    
    
    Weighted-
    
    
    forbe issued upon
    
    
    average
    
    
    future issuance underexercise
    
    
    exercise price of
    
    
    equity compensationof outstanding
    
    
    outstanding
    
    
    plansoptions,
    
    
    options,
    
    
    (excluding securitieswarrants and
    
    
    warrants and
    
    
    reflected in columnPlan Category
    
    rights
    
    
    rights
    
    
    (a))Equity compensation plans approved by security holders
    
    
    2,276,998
    
    
    $
    0.36
    
    
    
    4,140,000Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,276,998
    
    
    $
    0.36
    
    
    
    4,140,000
 
 Item 6. Selected Financial Data
  Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except prices and per share information)A. Summary of Operating DataProduction:Oil (MBbls)
    
    
    834
    
    
    
    765
    
    
    
    838
    
    
    
    859
    
    
    
    882Natural gas (MMcf)
    
    
    7,549
    
    
    
    9,369
    
    
    
    13,239
    
    
    
    18,170
    
    
    
    20,490Natural gas equivalent (MMcfe)
    
    
    12,551
    
    
    
    13,958
    
    
    
    18,269
    
    
    
    23,323
    
    
    
    25,781Average prices:Oil ($/Bbl)
    
    $
    59.02
    
    
    $
    83.18
    
    
    $
    64.70
    
    
    $
    55.73
    
    
    $
    39.29Natural gas ($/Mcf)
    
    
    5.30
    
    
    
    9.07
    
    
    
    7.29
    
    
    
    7.77
    
    
    
    7.84Natural gas equivalent ($/Mcfe)
    
    
    7.11
    
    
    
    10.65
    
    
    
    8.25
    
    
    
    8.11
    
    
    
    7.57B. Summary of OperationsTotal revenues
    
    $
    89,254
    
    
    $
    149,165
    
    
    $
    152,178
    
    
    $
    190,957
    
    
    $
    195,696Depletion and depreciation
    
    
    37,102
    
    
    
    72,072
    
    
    
    77,076
    
    
    
    106,067
    
    
    
    97,354Net earnings (loss)(1)(2)
    
    
    (72,636
    )
    
    
    (209,886
    )
    
    
    7,137
    
    
    
    (73,884
    )
    
    
    27,849Net earnings (loss) per share:(1)(2)Basic
    
    $
    (0.79
    )
    
    $
    (2.30
    )
    
    $
    0.08
    
    
    $
    (0.84
    )
    
    $
    0.33Diluted
    
    
    (0.79
    )
    
    
    (2.30
    )
    
    
    0.08
    
    
    
    (0.84
    )
    
    
    0.31Dividends per:Common share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Redeemable preferred share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.60Weighted average common shares outstanding  basic
    
    
    92,465
    
    
    
    91,382
    
    
    
    89,307
    
    
    
    87,670
    
    
    
    84,527C. Summary Balance Sheet DataTotal assets
    
    $
    183,130
    
    
    $
    304,575
    
    
    $
    483,775
    
    
    $
    467,895
    
    
    $
    555,802Long-term obligations, inclusive of current maturities
    
    
    93,666
    
    
    
    103,849
    
    
    
    75,000
    
    
    
    75,000
    
    
    
    75,000Stockholders equity
    
    
    40,744
    
    
    
    122,511
    
    
    
    325,430
    
    
    
    320,797
    
    
    
    377,565
 
 (1)
    
    Applicable to common stockholders.(2)
    
    Includes the impact (before tax) of impairments of long-lived assets of $63.5 million,
$223.5 million and $134.9 million, in 2009, 2008, and 2006 respectively. 30




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
    Industry and economic conditions
   31




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Credit agreements
  Proposed merger
    32




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Reserves
 Prices for oil and natural gas.
   Ceiling test.
  Production
 Non-routine contract settlement expense.
 33




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Expenses.
  Drilling rig obligations.
    34




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Tax Rate.
 Operations Overview
     35




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Results of Operations
 Year Ended December 31, 2009, Compared to Year Ended December 31, 2008
 Revenue.
  Year EndedDecember 31,
    
    
    Increase2009
    
    
    2008
    
    
    (Decrease)Production:Oil (MBbls)
    
    
    834
    
    
    
    765
    
    
    
    9
    %Natural gas (MMcf)
    
    
    7,549
    
    
    
    9,369
    
    
    
    (19
    %)Natural gas equivalent (MMcfe)
    
    
    12,551
    
    
    
    13,958
    
    
    
    (10
    %)Average Sales Price:Oil (per Bbl)
    
    $
    59.02
    
    
    $
    83.18
    
    
    
    (29
    %)Natural gas (per Mcf)
    
    
    5.30
    
    
    
    9.07
    
    
    
    (42
    %)Natural gas equivalent (per Mcfe)
    
    
    7.11
    
    
    
    10.65
    
    
    
    (33
    %)Operating Revenues (000s):Oil
    
    $
    49,222
    
    
    $
    63,636
    
    
    
    (23
    %)Natural gas
    
    
    40,023
    
    
    
    84,998
    
    
    
    (53
    %)Total
    
    $
    89,245
    
    
    $
    148,634
    
    
    
    (40
    %)
 Operating Expenses.
  Severance and Ad Valorem Taxes.
  36




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Depletion and Depreciation.
  Impairment of Long-Lived Assets.
   General and Administrative Expense.
   37




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Contract and Indemnification Settlement Expenses.
   Accretion Expense.
  Hurricane Damage Repairs.
  Interest Expense.
  Taxes on Income.
  Year Ended December 31, 2008, Compared to Year Ended December 31, 2007
 Revenue.
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Year EndedDecember 31,
    
    
    Increase2008
    
    
    2007
    
    
    (Decrease)Production:Oil (MBbls)
    
    
    765
    
    
    
    838
    
    
    
    (9
    %)Natural gas (MMcf)
    
    
    9,369
    
    
    
    13,239
    
    
    
    (29
    %)Natural gas equivalent (MMcfe)
    
    
    13,958
    
    
    
    18,269
    
    
    
    (24
    %)Average Sales Price:Oil (per Bbl)
    
    $
    83.18
    
    
    $
    64.70
    
    
    
    29
    %Natural gas (per Mcf)
    
    
    9.07
    
    
    
    7.29
    
    
    
    24
    %Natural gas equivalent (per Mcfe)
    
    
    10.65
    
    
    
    8.25
    
    
    
    29
    %Operating Revenues (000s):Oil
    
    $
    63,636
    
    
    $
    54,218
    
    
    
    17
    %Natural gas
    
    
    84,998
    
    
    
    96,491
    
    
    
    (12
    %)Total
    
    $
    148,634
    
    
    $
    150,709
    
    
    
    (1
    %)
 Operating Expenses.
  Severance and Ad Valorem Taxes.
  39




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Depletion and Depreciation.
  Impairment of Long-Lived Assets.
  General and Administrative Expense.
  Contract Settlement Expense .
  Accretion Expense.
  Hurricane Damage Repairs.
  Interest Expense.
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Taxes on Income.
  Liquidity and Capital Resources
 Cash Flows .
   2009
    
    
    2008
    
    
    2007Cash provided byOperating activities
    
    $
    27,017
    
    
    $
    92,767
    
    
    $
    96,991Net drawdown under credit facility
    
    
    
    
    
    
    20,000
    
    
    
    New debt for drilling rig
    
    
    
    
    
    
    10,000
    
    
    
    Sales of property
    
    
    2,432
    
    
    
    7,171
    
    
    
    3,06029,449
    
    
    
    129,938
    
    
    
    100,051Cash utilized inAdditions to property and equipment
    
    
    25,377
    
    
    
    124,059
    
    
    
    116,696Repurchase of common stock
    
    
    
    
    
    
    75
    
    
    
    1,158Net payments of credit facility debt
    
    
    7,500
    
    
    
    
    
    
    
    Reductions of drilling rig debt
    
    
    2,683
    
    
    
    1,150
    
    
    
    35,560
    
    
    
    125,284
    
    
    
    117,854Other uses, net
    
    
    (1,970
    )
    
    
    (4,826
    )
    
    
    (95
    )Net decrease in cash
    
    $
    (8,081
    )
    
    $
    (172
    )
    
    $
    (17,898
    )
 41




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##### Table of Contents



Cash Obligations
 Less Than
    
    
    1-3
    
    
    AfterOne Year
    
    
    Years
    
    
    3 Years
    
    
    TotalDebt
    
    $
    93,666
    
    
    $
    
    
    
    $
    
    
    
    $
    93,666Interest (5)
    
    
    3,379
    
    
    
    
    
    
    
    
    
    
    
    3,379Drilling rigs (1) (2)
    
    
    12,385
    
    
    
    899
    
    
    
    
    
    
    
    13,284Exploration contract settlement (3)
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    360Settlement obligations (4)
    
    
    2,383
    
    
    
    3,200
    
    
    
    1,000
    
    
    
    6,583Non-cancelable operating leases
    
    
    2,099
    
    
    
    1,601
    
    
    
    
    
    
    
    3,700Total contractual cash obligations
    
    $
    114,272
    
    
    $
    5,700
    
    
    $
    1,000
    
    
    $
    120,972
  42




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##### Table of Contents



(1)
    
    Commitments for drilling rigs include $1.8 million for a dayrate contract for operation of a
rig owned by Meridian. The rig is leased to the operator with whom we have the dayrate
contract. Offsetting this obligation for the dayrate contract, but not included above, are the
payments we receive from the operator for his lease of the rig, which are based on a
percentage of the monthly net profits of rig operation. The total rental income related to the
rig in 2009 was $1.1 million. We have a dayrate contract for an additional rig which we do not
own; the obligation under that dayrate contract is $10.6 million and $0.9 million in each of
the years 2010 and 2011, respectively.(2)
    
    Actual net cash outflow for rig obligations will be impacted by the outcome of events which
are currently uncertain. Under each of these contracts, when the rig is drilling for the
Company, the entire dayrate is payable, but can be expected to be partially recovered if other
working interest owners share costs of the well. When the Company is unable to utilize the
rig, the Company is liable for the entire dayrate. However, the operator has credited our
obligation to some extent, based on revenues from other parties who utilize the rig when the
Company is unable to. During 2009, both rigs have been effectively subleased to others under
short-term contracts. No such reduction in our net obligation has been included in the table
above.(3)
    
    This settlement obligation relates to an exploration commitment under a contract for
exploration in an area which management no longer believes has potential.(4)
    
    This obligation primarily relates to settlement of an indemnification dispute between the
Company and Shell Oil Company and one of its subsidiaries (Shell), relating to properties
the Company acquired from Shell some years ago. The settlement contract will become binding
when the first payment of $1.0 million is made; this payment is due by May 1, 2010, unless
extended at Shells discretion. Subsequent payments, should the contract become binding, are
required on January 4th of each succeeding year (2011 through 2014), for a total of $5.0
million. Although contingent, the obligation is included in the table above.Also included in the first and second year projections are obligations for payments totaling
$1,481,000 and $200,000, respectively, under various settlement contracts.(5)
    
    Interest has been computed through the end of the forbearance period for both the debt under
the Companys Credit Facility and the rig note. The forbearance period is anticipated to
terminate May 31, 2010; see below for further details. Credit Facility .
  43




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44




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th th th
 th
   .
 Rig Note .
  45




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th th
  Capital Expenditures .
  Dividends
 Off-Balance Sheet Arrangements
 Share Repurchase Program.
 Critical Accounting Policies and Estimates
  46




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Use of Estimates
 Property and Equipment
       47




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Full-Cost Ceiling Test
     Price Risk Management Activities
 48




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Fair Value of Financial Instruments
 Deferred Tax Asset Valuation Allowance
 49




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Rig Operations
   New Accounting Pronouncements
   50




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Modernization of Oil and Gas Reporting  a b c
  51




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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
  Interest Rates
  Hedging Contracts
  52




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GLOSSARY OF CERTAIN OIL AND NATURAL GAS TERMS
  Bbl One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to crude oil or
other liquid hydrocarbons.Bbl/d One barrel per day.Bcf Billion cubic feet.Bcfe Billion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one
Bbl of crude oil, condensate or natural gas liquids.
 Btu British thermal unit, which is the heat required to raise the temperature of a one-pound
mass of water from 58.5 to 59.5 degrees Fahrenheit.
 Completion The installation of permanent equipment for the production of oil or natural gas, or
in the case of a dry hole, the reporting of abandonment to the appropriate agency.
 Developed acreage The number of acres allocated or assignable to producing wells or wells
capable of production.
 Developed well A well drilled within the proved area of an oil or natural gas reservoir to the
depth of a stratigraphic horizon known to be productive.
 Dry hole or well A well found to be incapable of producing hydrocarbons in sufficient
quantities such that proceeds from the sale of the production exceed production expenses and
taxes.
 Equivalents When we refer to equivalents, we are doing so to compare quantities of oil with
quantities of natural gas or to express these different commodities in a common unit. In
calculating equivalents, we use a generally recognized standard in which one barrel of oil is
equal to six thousand cubic feet of natural gas.
 Exploratory well A well drilled to find and produce oil or natural gas reserves not classified
as proved, to find a new reservoir in a field previously found to be productive of oil or natural
gas in another reservoir or to extend a known reservoir.
 Farm-in or farm-out An agreement where the owner of a working interest in a natural gas and oil
lease assigns the working interest or a portion of the working interest to another party who
desires to drill on the leased acreage. Generally, the assignee is required to drill one or more
wells in order to earn its interest in the acreage. The assignor
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usually retains a royalty or reversionary interest in the lease. The interest received by an
assignee is a farm-in while the interest transferred by the assignor is a farm-out.
 Field An area consisting of a single reservoir or multiple reservoirs all grouped on or related
to the same individual geological structural feature or stratigraphic condition.
 Gross acres or gross wells The total acres or wells, as the case may be, in which a working
interest is owned.
 Intangible Drilling and Development Costs Expenditures made by an operator for wages, fuel,
repairs, hauling, supplies, surveying, geological works, etc., incident to and necessary for the
preparing for and drilling of wells and the construction of production facilities and pipelines.
 Lease Operating Expense Recurring expenses incurred to operate wells and equipment on a
producing lease. Examples include pumping and gauging, chemicals, compression, fuel and water,
insurance and property taxes.MBbls One thousand barrels of crude oil or other liquid hydrocarbons.Mcf One thousand cubic feet.Mcfe One thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas
to one Bbl of crude oil, condensate or natural gas liquids.Mcfe/d One thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas
to one Bbl of crude oil, condensate or natural gas liquids, per day.MD Measured depth.MMBls One million barrels of crude oil or other liquid hydrocarbons.MMbtu One million Btus.MMMbtu One billion Btus.MMcf One million cubic feet.MMcf/d One million cubic feet per day.MMcfe One million cubic feet equivalent, determined using the ratio of six Mcf of natural gas
to one Bbl of crude oil, condensate or natural gas liquids.Net acres or net wells The sum of the fractional working interests owned in gross acres or
gross wells.Net revenue interest An interest in the production and revenues created from the working
interest which is generally calculated net or after deducting any royalty interests.NYMEX New York Mercantile Exchange.OCS Outer Continental Shelf in the Gulf of Mexico.
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Oil Crude oil and condensatePresent value or PV10 or SEC PV-10 When used with respect to natural gas and oil reserves, the
estimated future gross revenue to be generated from the production of proved reserves, net of
estimated production and future development costs, using prices based on an average of the most
recent twelve months and costs in effect as of the date indicated, without giving effect to
non-property related expenses such as general and administrative expenses, debt service and
future income tax expenses or to depreciation, depletion and amortization, discounted using an
annual discount rate of 10%.Productive well A well that is found to be capable of producing hydrocarbons in sufficient
quantities such that proceeds from the sale of the production exceed production expenses and
taxes.Proved developed nonproducing reserves Proved developed reserves expected to be recovered from
zones behind casing in existing wells.Proved developed producing reserves Proved developed reserves that are expected to be recovered
from completion intervals currently open in existing wells and able to produce to market.Proved reserves The estimated quantities of crude oil, natural gas and natural gas liquids
which analysis of geoscience and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and operating
conditions. In addition, please refer to the definitions of proved oil and natural gas reserves
as provided in Rule 4-10(a)(2)(3)(4) of Regulation S-X of the federal securities laws.Proved undeveloped location A site on which a development well can be drilled consistent with
spacing rules for purposes of recovering proved undeveloped reserves.Proved undeveloped reserves Proved reserves that are expected to be recovered from new wells on
undrilled acreage or from existing wells where a relatively major expenditure is required for
recompletion.Recompletion The completion for production of an existing well bore to another formation from
that in which the well has been previously completed.Reservoir A porous and permeable underground formation containing a natural accumulation of
producible oil or natural gas that is confined by impermeable rock or water barriers and is
individual and separate from other reservoirs.Royalty interest An interest in a natural gas and oil property entitling the owner to a share
of natural gas or oil production free of costs of production.Tangible Drilling and Development Costs The costs of physical lease and well equipment and
structures and the costs of assets that themselves have a salvage value.TVD Total vertical depth.Undeveloped acreage Lease acreage on which wells have not been drilled or completed to a point
that would permit the production of commercial quantities of natural gas and oil, regardless of
whether the acreage contains proved reserves.WI Working interest.
 55




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Working interest The operating interest which gives the owner the right to drill, produce and
conduct operating activities on the property and a share of production.Workover Operations on a producing well to restore or increase production.
 56




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Item 8. Financial Statements and Supplementary Data
 Index to Financial Statements
  PageReport of Independent Registered Public Accounting Firm
    
    
    59Consolidated Statements of Operations
    
    
    60Consolidated Balance Sheets
    
    
    61-62Consolidated Statements of Cash Flows
    
    
    63Consolidated Statements of Stockholders Equity
    
    
    64Consolidated Statements of Comprehensive Income (Loss)
    
    
    65Notes to Consolidated Financial Statements
    
    
    661. Organization, Basis of Presentation, and Going Concern
    
    
    662. Summary of Significant Accounting Policies
    
    
    673. Asset Retirement Obligations
    
    
    754. Impairment of Long-Lived Assets
    
    
    765. Debt
    
    
    776. Contractual Obligations
    
    
    797. Commitments and Contingencies
    
    
    808. Taxes on Income
    
    
    849. Fair Value Measurement
    
    
    8510. Stockholders Equity
    
    
    8711. Profit Sharing and Savings Plan
    
    
    9212. Contract Settlement, Rabbi Trust, Employee Retention, and
Indemnification Settlement
    
    
    9313. Risk Management Activities
    
    
    9414. Major Customers
    
    
    9715. Related Party Transactions
    
    
    9716. Earnings Per Share
    
    
    9917. Accrued Liabilities
    
    
    10018. Quarterly Results of Operations (Unaudited)
    
    
    10019. Supplemental Oil and Natural Gas Disclosures (Unaudited)
    
    
    101
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CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
  58




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      Internal Control  Integrated
Framework
  
 59




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##### Table of Contents



THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2009
    
    
    2008
    
    
    2007REVENUES:Oil and natural gas
    
    $
    89,245
    
    
    $
    148,634
    
    
    $
    150,709Price risk management activities
    
    
    (6
    )
    
    
    (18
    )
    
    
    21Interest and other
    
    
    15
    
    
    
    549
    
    
    
    1,44889,254
    
    
    
    149,165
    
    
    
    152,178OPERATING COSTS AND EXPENSES:Oil and natural gas operating
    
    
    17,550
    
    
    
    24,280
    
    
    
    28,338Severance and ad valorem taxes
    
    
    6,696
    
    
    
    9,727
    
    
    
    9,409Depletion and depreciation
    
    
    37,102
    
    
    
    72,072
    
    
    
    77,076General and administrative
    
    
    18,121
    
    
    
    19,063
    
    
    
    16,221Rig operations, net
    
    
    4,254
    
    
    
    
    
    
    
    Contract settlement
    
    
    
    
    
    
    9,894
    
    
    
    Indemnification settlement
    
    
    4,223
    
    
    
    
    
    
    
    Accretion expense
    
    
    2,083
    
    
    
    2,064
    
    
    
    2,230Impairment of long-lived assets
    
    
    63,495
    
    
    
    223,543
    
    
    
    Hurricane damage repairs
    
    
    
    
    
    
    1,462
    
    
    
    153,524
    
    
    
    362,105
    
    
    
    133,274EARNINGS (LOSS) BEFORE OTHER EXPENSES &
INCOME TAXES
    
    
    (64,270
    )
    
    
    (212,940
    )
    
    
    18,904OTHER EXPENSES:Interest expense
    
    
    8,486
    
    
    
    5,408
    
    
    
    6,090EARNINGS (LOSS) BEFORE INCOME TAXES
    
    
    (72,756
    )
    
    
    (218,348
    )
    
    
    12,814INCOME TAX EXPENSE (BENEFIT):Current
    
    
    (120
    )
    
    
    (269
    )
    
    
    650Deferred
    
    
    
    
    
    
    (8,193
    )
    
    
    5,027(120
    )
    
    
    (8,462
    )
    
    
    5,677NET EARNINGS (LOSS)
    
    
    (72,636
    )
    
    
    (209,886
    )
    
    
    7,137NET EARNINGS (LOSS) APPLICABLE TO COMMON
STOCKHOLDERS
    
    $
    (72,636
    )
    
    $
    (209,886
    )
    
    $
    7,137NET EARNINGS (LOSS) PER SHARE:Basic
    
    $
    (0.79
    )
    
    $
    (2.30
    )
    
    $
    0.08Diluted
    
    $
    (0.79
    )
    
    $
    (2.30
    )
    
    $
    0.08WEIGHTED AVERAGE NUMBER OF COMMON SHARES:Basic
    
    
    92,465
    
    
    
    91,382
    
    
    
    89,307Diluted
    
    
    92,465
    
    
    
    91,382
    
    
    
    94,944
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2009
    
    
    2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    5,273
    
    
    $
    13,354Restricted cash
    
    
    35
    
    
    
    9,971Accounts receivable, less allowance for doubtful accounts of $110 [2009] and $210 [2008]
    
    
    12,185
    
    
    
    16,980Prepaid expenses and other
    
    
    2,195
    
    
    
    3,292Assets from price risk management activities
    
    
    
    
    
    
    8,447Total current assets
    
    
    19,688
    
    
    
    52,044PROPERTY AND EQUIPMENT:Oil and natural gas properties, full cost method (including $1,647 [2009] and $39,927
[2008] not subject to depletion)
    
    
    1,890,079
    
    
    
    1,877,925Land
    
    
    
    
    
    
    48Equipment and other
    
    
    20,469
    
    
    
    21,3711,910,548
    
    
    
    1,899,344Less accumulated depletion and depreciation
    
    
    1,747,274
    
    
    
    1,647,496Total property and equipment, net
    
    
    163,274
    
    
    
    251,848OTHER ASSETS:Other
    
    
    168
    
    
    
    683Total other assets
    
    
    168
    
    
    
    683TOTAL ASSETS
    
    $
    183,130
    
    
    $
    304,575
  61




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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 December 31,2009
    
    
    2008LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    6,133
    
    
    $
    15,097Advances from non-operators
    
    
    3
    
    
    
    5,517Revenues and royalties payable
    
    
    4,890
    
    
    
    6,267Due to affiliates
    
    
    542
    
    
    
    8,145Notes payable
    
    
    
    
    
    
    1,775Accrued liabilities
    
    
    10,109
    
    
    
    18,831Liabilities from price risk management activities
    
    
    
    
    
    
    311Asset retirement obligations
    
    
    4,570
    
    
    
    1,457Current income taxes payable
    
    
    
    
    
    
    47Current maturities of long-term debt
    
    
    93,666
    
    
    
    103,849Total current liabilities
    
    
    119,913
    
    
    
    161,296LONG-TERM DEBT
    
    
    
    
    
    
    OTHER:Asset retirement obligations
    
    
    19,253
    
    
    
    20,768Other
    
    
    3,220
    
    
    
    22,473
    
    
    
    20,768COMMITMENTS AND CONTINGENCIES (Notes 5, 6, 7, 11, and 12)STOCKHOLDERS EQUITY:Common stock, $0.01 par value (200,000,000 shares authorized,
92,475,527 [2009] and 93,045,592 [2008] shares issued)
    
    
    925
    
    
    
    948Additional paid-in capital
    
    
    535,443
    
    
    
    538,561Accumulated deficit
    
    
    (495,624
    )
    
    
    (422,028
    )Accumulated other comprehensive income
    
    
    
    
    
    
    8,12940,744
    
    
    
    125,610Less treasury stock, at cost, -0- [2009] and 1,712,114 [2008] shares
    
    
    
    
    
    
    3,099Total stockholders equity
    
    
    40,744
    
    
    
    122,511TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    183,130
    
    
    $
    304,575
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2009
    
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings (loss)
    
    $
    (72,636
    )
    
    $
    (209,886
    )
    
    $
    7,137Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:Depletion and depreciation
    
    
    37,102
    
    
    
    72,072
    
    
    
    77,076Impairment of long-lived assets
    
    
    63,495
    
    
    
    223,543
    
    
    
    Amortization of other assets
    
    
    516
    
    
    
    224
    
    
    
    436Non-cash compensation
    
    
    153
    
    
    
    1,728
    
    
    
    2,549Non-cash gain on change in fair value of outstanding warrants
    
    
    (549
    )
    
    
    
    
    
    
    Non-cash price risk management activities
    
    
    6
    
    
    
    18
    
    
    
    (21
    )Accretion expense
    
    
    2,083
    
    
    
    2,064
    
    
    
    2,230Deferred income taxes
    
    
    
    
    
    
    (8,193
    )
    
    
    5,027Changes in assets and liabilities:Restricted cash
    
    
    9,936
    
    
    
    (9,941
    )
    
    
    1,252Accounts receivable
    
    
    4,044
    
    
    
    3,645
    
    
    
    4,411Prepaid expenses and other
    
    
    1,191
    
    
    
    1,246
    
    
    
    (1,081
    )Accounts payable
    
    
    (3,022
    )
    
    
    4,629
    
    
    
    (946
    )Advances from non-operators
    
    
    (5,514
    )
    
    
    (1,480
    )
    
    
    3,945Due to (from) affiliates
    
    
    (7,603
    )
    
    
    10,725
    
    
    
    (1,910
    )Revenues and royalties payable
    
    
    (1,377
    )
    
    
    (325
    )
    
    
    (1,341
    )Asset retirement obligations
    
    
    (2,243
    )
    
    
    (613
    )
    
    
    (2,055
    )Other assets and liabilities
    
    
    1,435
    
    
    
    3,311
    
    
    
    282Net cash provided by operating activities
    
    
    27,017
    
    
    
    92,767
    
    
    
    96,991CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (25,377
    )
    
    
    (124,059
    )
    
    
    (116,696
    )Proceeds from sale of property
    
    
    2,432
    
    
    
    7,171
    
    
    
    3,060Net cash used in investing activities
    
    
    (22,945
    )
    
    
    (116,888
    )
    
    
    (113,636
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term debt
    
    
    
    
    
    
    48,000
    
    
    
    3,000Reductions in long-term debt
    
    
    (10,183
    )
    
    
    (19,150
    )
    
    
    (3,000
    )Proceeds  Notes payable
    
    
    2,232
    
    
    
    5,684
    
    
    
    9,540Reductions  Notes payable
    
    
    (4,007
    )
    
    
    (6,571
    )
    
    
    (9,632
    )Repurchase of common stock
    
    
    
    
    
    
    (75
    )
    
    
    (1,158
    )Payment of taxes due on vested stock
    
    
    (195
    )
    
    
    (3,035
    )
    
    
    Additions to deferred loan costs
    
    
    
    
    
    
    (904
    )
    
    
    (3
    )Net cash provided by (used in) financing activities
    
    
    (12,153
    )
    
    
    23,949
    
    
    
    (1,253
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (8,081
    )
    
    
    (172
    )
    
    
    (17,898
    )Cash and cash equivalents at beginning of year
    
    
    13,354
    
    
    
    13,526
    
    
    
    31,424CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    5,273
    
    
    $
    13,354
    
    
    $
    13,526SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONNon-cash activities:Issuance of shares for contract services
    
    $
    
    
    
    $
    144
    
    
    $
    (1,033
    )Capital expenditures
    
    $
    (12,585
    )
    
    $
    (6,460
    )
    
    $
    4,799Rig depreciation capitalized to oil and natural gas properties
    
    $
    91
    
    
    $
    1,538
    
    
    $
    ARO Liability  new wells drilled
    
    $
    47
    
    
    $
    451
    
    
    $
    476ARO Liability  changes in estimates
    
    $
    1,711
    
    
    $
    (3,160
    )
    
    $
    24
  63




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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Years Ended December 31, 2007, 2008 and 2009
 AccumulatedAdditional
    
    
    Accumulated
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Par Value
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Shares
    
    
    Cost
    
    
    TotalBalance, December 31, 2006
    
    
    89,140
    
    
    $
    928
    
    
    $
    534,441
    
    
    $
    (219,279
    )
    
    $
    4,707
    
    
    
    
    
    
    $
    
    
    
    $
    320,797Shares repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    501
    
    
    
    (1,158
    )
    
    
    (1,158
    )Issuance of rights to common stock
    
    
    
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Companys 401(k) plan contribution
    
    
    42
    
    
    
    1
    
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    390
    
    
    
    546Share-based compensation
    
    
    
    
    
    
    
    
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Compensation expense
    
    
    
    
    
    
    
    
    
    
    1,598
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,598Accum. other comprehensive income
activity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,928
    )
    
    
    
    
    
    
    
    
    
    
    (4,928
    )Issuance of shares for contract services
    
    
    237
    
    
    
    2
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    447
    
    
    
    1,033Issuance of shares as compensation
    
    
    31
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    33
    
    
    
    111Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,137Balance, December 31, 2007
    
    
    89,450
    
    
    $
    936
    
    
    $
    537,145
    
    
    $
    (212,142
    )
    
    $
    (221
    )
    
    
    159
    
    
    $
    (288
    )
    
    $
    325,430Issuance of rights to common stock
    
    
    
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expensestock rights
    
    
    
    
    
    
    
    
    
    
    968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    968Issuance of shares for rights to common
stock
    
    
    3,515
    
    
    
    17
    
    
    
    3,082
    
    
    
    
    
    
    
    
    
    
    
    1,712
    
    
    
    (3,099
    )
    
    
    Reductions of rights to common stock
    
    
    
    
    
    
    (10
    )
    
    
    (3,025
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,035
    )Companys 401(k) plan contribution
    
    
    103
    
    
    
    1
    
    
    
    240
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    181
    
    
    
    422Share-based compensation
    
    
    
    
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193Accum. other comprehensive income
activity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,350
    
    
    
    
    
    
    
    
    
    
    
    8,350Issuance of shares for contract services
    
    
    11
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    107
    
    
    
    144Shares repurchased and retired
    
    
    (34
    )
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209,886
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209,886
    )Balance, December 31, 2008
    
    
    93,045
    
    
    
    948
    
    
    
    538,561
    
    
    
    (422,028
    )
    
    
    8,129
    
    
    
    1,712
    
    
    
    (3,099
    )
    
    
    122,511Effect of adoption of EITF Issue 07- 05
(to record outstanding warrants at fair
value)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (960
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (960
    )Distribution of shares from Rabbi Trust:From treasury shares
    
    
    
    
    
    
    (17
    )
    
    
    (3,082
    )
    
    
    
    
    
    
    
    
    
    
    (1,712
    )
    
    
    3,099
    
    
    
    Repurchased in exchange for
payment of withholding tax on vested
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610
    
    
    
    (195
    )
    
    
    (195
    )Retired
    
    
    (610
    )
    
    
    (6
    )
    
    
    (189
    )
    
    
    
    
    
    
    
    
    
    
    (610
    )
    
    
    195
    
    
    
    Share-based compensation
    
    
    40
    
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153Accum. other comprehensive income activity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,129
    )
    
    
    
    
    
    
    
    
    
    
    (8,129
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,636
    )Balance, December 31, 2009
    
    
    92,475
    
    
    $
    925
    
    
    $
    535,443
    
    
    $
    (495,624
    )
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    40,744
 64




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##### Table of Contents



THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Net earnings (loss) applicable to common stockholders
    
    $
    (72,636
    )
    
    $
    (209,886
    )
    
    $
    7,137Other comprehensive income (loss), net of tax, for unrealized
gains (losses) from hedging activities:Unrealized holding gains (losses) arising during period (1)
    
    
    3,616
    
    
    
    3,806
    
    
    
    (2,814
    )Reclassification adjustments on settlement of contracts (2)
    
    
    (11,745
    )
    
    
    4,544
    
    
    
    (2,114
    )(8,129
    )
    
    
    8,350
    
    
    
    (4,928
    )Total comprehensive income (loss)
    
    $
    (80,765
    )
    
    $
    (201,536
    )
    
    $
    2,209(1)       Net income tax (expense) benefit
    
    $
    
    
    
    $
    
    
    
    $
    1,515(2)       Net income tax (expense) benefit
    
    $
    
    
    
    $
    (119
    )
    
    $
    1,138
  65




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##### Table of Contents



THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1. ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN
    Proposed Merger.
  66




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##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  Restricted Cash
  67




---



##### Table of Contents



Property and Equipment
     Rig Operations
  68




---



##### Table of Contents



Statement of Cash Flows
  Concentrations of Credit Risk
   Revenue Recognition and Accounts Receivable
 69




---



##### Table of Contents



Hurricane Damage Repairs
  Capitalized Interest
  Earnings Per Share
  Stock Options
   Fair Value of Financial Instruments
 70




---



##### Table of Contents



Notes Payable
  Lease Accounting
  Derivative Financial Instruments
    71




---



##### Table of Contents



Income Taxes
    Environmental Expenditures
  72




---



##### Table of Contents



Recent Accounting Pronouncements
      73




---



##### Table of Contents



  a b c
   74




---



##### Table of Contents



Use of Estimates
  Reclassification of Prior Period Statements
  
 3. ASSET RETIREMENT OBLIGATIONS
     2009
    
    
    2008Asset retirement obligation at beginning of year
    
    $
    22,225
    
    
    $
    23,483Additional retirement obligations incurred
    
    
    47
    
    
    
    451Settlements
    
    
    (2,243
    )
    
    
    (613
    )Revisions to estimates and other changes
    
    
    1,711
    
    
    
    (3,160
    )Accretion expense
    
    
    2,083
    
    
    
    2,064Asset retirement obligation at end of year
    
    
    23,823
    
    
    
    22,225Less: current portion
    
    
    4,570
    
    
    
    1,457Asset retirement obligation, long-term
    
    $
    19,253
    
    
    $
    20,768
 75




---



##### Table of Contents



4. IMPAIRMENT OF LONG-LIVED ASSETS
       76




---



##### Table of Contents



5. DEBT
 Credit Facility .
      77




---



##### Table of Contents



th th th
    78




---



##### Table of Contents



.
 Rig Note .
  th th
  Current Debt Maturities
  
 6. CONTRACTUAL OBLIGATIONS
  79




---



##### Table of Contents



7. COMMITMENTS AND CONTINGENCIES
 Default under Credit Agreement
  Proposed Merger Termination Fee
  Litigation
 80




---



##### Table of Contents



H. L. Hawkins litigation Amoco
 Title/lease disputes.
 Environmental litigation.
 81




---



##### Table of Contents



Litigation involving insurable issues
 Property tax litigation.
  Shareholder litigation Leider, derivatively on behalf of The
Meridian Resource Corporation v. Ching, et al. . Leider
 Other contingencies
 82




---



##### Table of Contents



Ceiling Test
   Drilling rigs.
  83




---



##### Table of Contents



8. TAXES ON INCOME
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    (96
    )
    
    $
    (304
    )
    
    $
    560State
    
    
    (24
    )
    
    
    35
    
    
    
    90Deferred:Federal
    
    
    
    
    
    
    (7,984
    )
    
    
    4,470State
    
    
    
    
    
    
    (209
    )
    
    
    557Income tax expense (benefit)
    
    $
    (120
    )
    
    $
    (8,462
    )
    
    $
    5,677
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Income tax provision (benefit) computed at
statutory rate
    
    $
    (25,465
    )
    
    $
    (76,422
    )
    
    $
    4,485Nondeductible costs
    
    
    2,005
    
    
    
    1,956
    
    
    
    577State income tax, net of federal tax benefit
    
    
    (2,864
    )
    
    
    (1,475
    )
    
    
    615Tax on other comprehensive income
    
    
    (2,846
    )
    
    
    2,846
    
    
    
    Change in valuation allowance
    
    
    29,050
    
    
    
    64,633
    
    
    
    Income tax expense (benefit)
    
    $
    (120
    )
    
    $
    (8,462
    )
    
    $
    5,677
  December 31,2009
    
    
    2008Deferred tax assets:Net operating tax loss carryforward
    
    $
    57,674
    
    
    $
    32,745Statutory depletion carryforward
    
    
    950
    
    
    
    950Tax credits
    
    
    1,805
    
    
    
    1,901Deferred compensation
    
    
    
    
    
    
    5,474Tax basis in excess of book basis in property and equipment
    
    
    31,717
    
    
    
    25,655Valuation allowance
    
    
    (93,683
    )
    
    
    (64,633
    )Other
    
    
    1,537
    
    
    
    754Total deferred tax assets
    
    
    
    
    
    
    2,846Deferred tax liabilities:Unrealized hedge gain
    
    
    
    
    
    
    2,846Total deferred tax liabilities
    
    
    
    
    
    
    2,846Net deferred tax liability
    
    $
    
    
    
    $
    
 84




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##### Table of Contents



Year of
    
    Net
    
    
    AMTExpiration
    
    Operating Loss
    
    
    Operating Loss2018
    
    $
    10,549
    
    
    $
    13,8202019
    
    
    47,730
    
    
    
    48,6302020
    
    
    31
    
    
    
    312021
    
    
    36
    
    
    
    362022
    
    
    3,719
    
    
    
    6,2322023
    
    
    36,376
    
    
    
    44,5162025
    
    
    42
    
    
    
    112026
    
    
    52
    
    
    
    2027
    
    
    77
    
    
    
    1,3692028
    
    
    6,596
    
    
    
    8,0622029
    
    
    59,574
    
    
    
    61,896Total
    
    $
    164,782
    
    
    $
    184,603
   
 9.
    
    FAIR VALUE MEASUREMENT
  85




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##### Table of Contents



Assets and liabilities measured at fair value on a recurring basis
 Fair Value Measurements at December 31, 2009Using (thousands of dollars)QuotedPrices inActive
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    UnobservableDecember
    
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets from price risk management activities (1)
    
    $
    
    
    
    
    
    
    
    $
    Liabilities from price risk management
activities (1)
    
    $
    
    
    
    
    
    
    
    $
    General partner warrants (2)
    
    $
    412
    
    
    
    
    
    
    $
    412
 86




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##### Table of Contents



Fair Value Measurements at December 31, 2008Using (thousands of dollars)QuotedPrices inActive
    
    
    Significant
    
    
    SignificantMarkets for
    
    
    Other
    
    
    OtherIdentical
    
    
    Observable
    
    
    UnobservableDecember
    
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets from price risk management activities (1)
    
    $
    8,447
    
    
    
    
    
    
    $
    8,447Liabilities from price risk management
activities (1)
    
    $
    311
    
    
    
    
    
    
    $
    311General partner warrants (2)
    
    $
    
    
    
    
    
    
    
    $
    
 
 (1)

    Assets and liabilities from price risk management activities are oil and natural gas
derivative contracts, primarily in the form of floor contracts to sell oil and natural gas within
specific future time periods. These contracts are more fully described in Note 12. As of December
31, 2009, all of the Companys oil and natural gas derivative contracts had expired.(2)

    General partner warrants are more fully described in Note 10. The warrants were carried at
historical cost at December 31, 2008; historical cost was replaced with fair value upon adoption of
new accounting guidance on January 1, 2009 (see Note 2).   
 10.
    
    STOCKHOLDERS EQUITY
 Proposed Merger
  87




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##### Table of Contents



Common Stock
   Warrants
   88




---



##### Table of Contents



Share-based Compensation
   WeightedNumber
    
    
    Averageof Share Options
    
    
    Exercise PriceOutstanding at December 31, 2006
    
    
    3,458,968
    
    
    $
    3.84Granted
    
    
    115,000
    
    
    
    2.69Exercised
    
    
    
    
    
    
    Canceled
    
    
    (174,280
    )
    
    
    8.80Outstanding at December 31, 2007
    
    
    3,399,688
    
    
    $
    3.55Granted
    
    
    115,000
    
    
    
    2.34Exercised
    
    
    
    
    
    
    Canceled or Expired
    
    
    (3,053,188
    )
    
    
    3.37Outstanding at December 31, 2008
    
    
    461,500
    
    
    $
    4.41Granted
    
    
    250,000
    
    
    $
    0.58Exercised
    
    
    
    
    
    
    Canceled or Expired
    
    
    (307,500
    )
    
    $
    5.01Outstanding at December 31, 2009
    
    
    404,000
    
    
    $
    1.59Share options exercisable:December 31, 2007
    
    
    3,252,001
    
    
    $
    3.57December 31, 2008
    
    
    265,875
    
    
    $
    5.74December 31, 2009
    
    
    226,500
    
    
    $
    1.90
 89




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##### Table of Contents



WeightedNumber
    
    
    Averageof Non-Vested
    
    
    Grant DateShares
    
    
    Fair ValueOutstanding non-vested at December 31, 2007
    
    
    
    
    
    $
    Granted
    
    
    40,873
    
    
    
    2.32Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding non-vested at December 31, 2008
    
    
    40,873
    
    
    $
    2.32Granted
    
    
    
    
    
    
    Vested
    
    
    (40,873
    )
    
    $
    2.32Forfeited
    
    
    
    
    
    
    Outstanding non-vested at December 31, 2009
    
    
    
    
    
    
    
    Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    WeightedRange of
    
    Outstanding at
    
    
    Average
    
    
    Exercisable at
    
    
    AverageExercisable Prices
    
    December 31, 2009
    
    
    Exercise Price
    
    
    December 31, 2009
    
    
    Exercise Price$0.58  $1.93
    
    
    267,500
    
    
    
    0.66
    
    
    
    129,375
    
    
    
    .62$2.31  $3.99
    
    
    114,000
    
    
    
    3.06
    
    
    
    74,625
    
    
    
    3.16$4.42  $5.32
    
    
    22,500
    
    
    
    5.11
    
    
    
    22,500
    
    
    
    5.11404,000
    
    
    
    1.59
    
    
    
    226,500
    
    
    
    1.90
  90




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Deferred Compensation
   91




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##### Table of Contents



WeightedAverageNumber
    
    
    Grant Dateof Share Rights*
    
    
    Fair ValueOutstanding at December 31, 2006
    
    
    3,640,188
    
    
    
    4.54Granted
    
    
    523,144
    
    
    
    3.06Outstanding at December 31, 2007
    
    
    4,163,332
    
    
    
    4.36Granted
    
    
    353,584
    
    
    
    1.81Converted to shares of common stock
    
    
    (4,516,916
    )
    
    
    4.16Outstanding at December 31, 2008
    
    
    
    
    
    
    
 
 *
    
    For simplicity, share rights vesting on a routine schedule are not separately shown; only the
original granting of the share rights is presented, and outstanding year-end balances include
both vested and unvested shares. As the Company matching portion of share rights vested
monthly over a one year period, each years activity actually included vesting of
approximately one-half of the prior years matching rights, and non-vesting of approximately
one-half of the current years matching rights. When the plan was discontinued in 2008, all
remaining unvested rights (approximately 180,478 rights) were vested on an accelerated basis,
then all rights were converted to shares of common stock. As of December 31, 2008, there were
no rights remaining in the notional accounts and no cost related to any rights granted which
had not yet been recognized.  
 11.
    
    PROFIT SHARING AND SAVINGS PLAN
 The Company has a 401(k) profit sharing and savings plan (the Plan) that covers substantially all
employees and entitles them to contribute up to 15% of their annual compensation, subject to
maximum limitations imposed by the Internal Revenue Code. The Company matches 100% of each
employees contribution up to 6.5% of annual compensation subject to certain limitations as
outlined in the Plan. In addition, the Company may make discretionary contributions which are
allocable to participants in accordance with the Plan. Total expense related to the Companys
401(k) plan was $382,000, $531,000, and $545,000, in 2009, 2008, and 2007, respectively.
  92




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12.
    
    CONTRACT SETTLEMENTS, RABBI TRUST, EMPLOYEE RETENTION, AND INDEMNIFICATION SETTLEMENT
   93




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13.
    
    RISK MANAGEMENT ACTIVITIES
 Management of Financial Risk
    Oil and Natural Gas Hedging Contracts
 94




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Accounting and financial statement presentation for derivatives
  Fair Values of Derivative Contracts atDescription and location within
    
    December 31,
    
    
    December 31,Consolidated Balance Sheet
    
    2009
    
    
    2008Derivative contracts designated as hedging instrumentsCommodities ContractsCurrent assets from price risk management activities
    
    
    
    
    
    $
    8,447Non-current assets from price risk management activities
    
    
    
    
    
    
    Current liabilities from price risk management activities
    
    
    
    
    
    $
    311Non-current liabilities from price risk management
activities
    
    
    
    
    
    
    Derivative contracts not designated as hedging instruments
    
    NONE
    
    
    NONE
 95




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For the year endedLocation of Gain(Loss) within
    
    December 31,
    
    December 31,Description
    
    Financial Statements
    
    2009
    
    2008Derivative contracts designated as cash flow hedging instruments:Gain (loss) on derivative contracts recognized in Other Comprehensive Income (OCI)Commodities Contracts
    
    Accumulated Other Comprehensive Income
    
    
    3,616
    
    
    
    3,806Gain (loss) on derivative contracts reclassified from OCI to earningsCommodities Contracts
    
    Oil and Natural Gas Revenues
    
    
    11,745
    
    
    
    (4,663
    )Gain (loss) due to hedging ineffectiveness reported in earningsCommodities Contracts
    
    Revenues from Price Risk Management
Activities
    
    
    (6
    )
    
    
    (18
    )Fair value of derivative contracts designated as cash flow hedging instruments,
excluded from effectiveness assessments
    
    
    
    NONE
    
    NONEDerivative contracts not designated as hedging instruments
    
    
    
    NONE
    
    NONE
 96




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14.
    
    MAJOR CUSTOMERS
  Year Ended December 31,Customer
    
    2009
    
    
    2008
    
    
    2007Shell Trading (U.S.)
    
    
    28
    %
    

    

    21

    %
    
    
    14
    %Stone Energy Corporation
    
    
    17
    %
    
    
    8
    %
    
    
    8
    %Superior Natural Gas
    
    
    11
    %
    
    
    17
    %

    
    
    23
    %Crosstex Gulfcoast Marketing
    
    
    10
    %
    
    
    14
    %
    
    
    16
    %
 
 15.
    
    RELATED PARTY TRANSACTIONS
   97




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16. EARNINGS PER SHARE
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(in thousands, except per share)Numerator:Net earnings (loss) applicable to common stockholders
    
    $
    (72,636
    )
    
    $
    (209,886
    )
    
    $
    7,137Denominator:Denominator for basic earnings (loss) per share 
weighted-average shares outstanding
    
    
    92,465
    
    
    
    91,382
    
    
    
    89,307Effect of potentially dilutive common shares:Warrants and rights (a)
    
    NA
    
    NA
    
    
    5,637Employee and director stock options (b)
    
    NA
    
    NA
    
    


    Denominator for diluted earnings (loss) per share 
weighted-average shares outstanding and assumed
conversions
    
    
    92,465
    
    
    
    91,382
    
    
    
    94,944Basic earnings (loss) per share
    
    $
    (0.79
    )
    
    $
    (2.30
    )
    
    $
    0.08Diluted earnings (loss) per share
    
    $
    (0.79
    )
    
    $
    (2.30
    )
    
    $
    0.08
 99




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(a)
    
    The number of warrants excluded totaled approximately 1.9 million, 3.3 million, and 1.4
million, in 2009, 2008, and 2007, respectively.(b)
    
    The number of stock options excluded totaled approximately
0.4 million, 0.5 million, and 3.6
million, in 2009, 2008, and 2007, respectively.
 
 17. ACCRUED LIABILITIES AND OTHER LIABILITIES
  2009
    
    
    2008Capital expenditures
    
    $
    830
    
    
    $
    8,227Operating expenses/taxes
    
    
    4,072
    
    
    
    4,452Hurricane damage repairs
    
    
    
    
    
    
    1,555Compensation
    
    
    918
    
    
    
    2,478Interest and accrued bank fees
    
    
    353
    
    
    
    261General partner warrants
    
    
    412
    
    
    
    Shell settlement
    
    
    1,003
    
    
    
    Other
    
    
    2,521
    
    
    
    1,858Total
    
    $
    10,109
    
    
    $
    18,831
  
 18. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
  Quarter Ended2009
    
    March 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31Revenues
    
    $
    22,109
    
    
    $
    22,710
    
    
    $
    21,950
    
    
    $
    22,476Results of
operations from
exploration and
production
activities(1) (2)
    
    
    (55,672
    )
    
    
    4,550
    
    
    
    6,923
    
    
    
    (851
    )Net (loss)
    
    $
    (60,961
    )
    
    $
    (1,462
    )
    
    $
    (768
    )
    
    $
    (9,445
    )Net (loss) per share:Basic
    
    $
    (0.66
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.10
    )Diluted
    
    $
    (0.66
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.10
    )
 100




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Quarter Ended2008
    
    March 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31Revenues
    
    $
    38,448
    
    
    $
    46,534
    
    
    $
    36,806
    
    
    $
    26,846Results of operations from
exploration and production
activities(1) (3)
    
    
    11,586
    
    
    
    18,136
    
    
    
    10,595
    
    
    
    (224,406
    )Net earnings (loss)
    
    $
    3,563
    
    
    $
    839
    
    
    $
    699
    
    
    $
    (214,987
    )Net earnings (loss) per share:Basic
    
    $
    0.04
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    (2.33
    )Diluted
    
    $
    0.04
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    (2.33
    )
 
 (1)
    
    Results of operations from exploration and production activities, which approximate
gross profit, are computed as operating revenues less lease operating expenses, severance
and ad valorem taxes, depletion, impairment of long-lived assets, accretion and hurricane
damage repairs.(2)
    
    Includes impairments of long-lived assets of $59.5 million and $4.0 million in the
first and fourth quarters, respectively.(3)
    
    Includes impairment of long-lived assets of $223.5 million in the fourth quarter. 
 19. SUPPLEMENTAL OIL AND NATURAL GAS DISCLOSURES (Unaudited)
 Modernization of Oil and Gas Reporting  a b c
  101




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Costs Incurred in Oil and Natural Gas Acquisition, Exploration and Development Activities
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Costs incurred during the year:(1)(2)Property acquisition costs
Unproved (3)
    
    $
    (2,136
    )
    
    $
    21,879
    
    
    $
    9,589Proved
    
    
    
    
    
    
    
    
    
    
    Exploration
    
    
    5,838
    
    
    
    51,752
    
    
    
    92,320Development
    
    
    10,765
    
    
    
    38,159
    
    
    
    9,026$
    14,467
    
    
    $
    111,790
    
    
    $
    110,935
 
 (1)
    
    Costs incurred during the years ended December 31, 2009, 2008 and 2007 include general and
administrative costs related to acquisition, exploration and development of oil and natural
gas properties, net of third party reimbursements, of $2,567,000, $17,390,000, and
$16,492,000, respectively.(2)
    
    Costs incurred during the years ended December 31, 2009 and 2008 include $180,000 and $1.1
million in net profit (loss) related to the lease of a drilling rig by TMRD. The rig was used
to drill wells which the Company owns and operates. The amount transferred to the full cost
pool represents the portion of profits (losses) on the lease related to services performed on
behalf of others, primarily our joint interest partners. Profits from the rig reduce the
costs incurred.(3)
    
    Property acquisition costs for unproved properties reflect a negative value for 2009, due to
the reimbursement of costs upon the partial sale of interests in various unproven leaseholds.
The Company retained an interest in the properties. Capitalized Costs Relating to Oil and Natural Gas Producing Activities
  December 31,2009
    
    
    2008Capitalized costs
    
    $
    1,890,079
    
    
    $
    1,877,925Accumulated depletion
    
    
    1,732,112
    
    
    
    1,632,622Net capitalized costs
    
    $
    157,967
    
    
    $
    245,303
  102




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Costs Not Being Amortized
   Total
    
    
    2009
    
    
    2008
    
    
    2007 & PriorLeasehold acquisition costs
    
    $
    1,440
    
    
    $
    46
    
    
    $
    1,394
    
    
    $
    Capitalized general and
administrative costs
    
    
    207
    
    
    
    
    
    
    
    207
    
    
    
    Total
    
    $
    1,647
    
    
    $
    46
    
    
    $
    1,601
    
    
    $
    
 Results of Operations from Oil and Natural Gas Producing Activities
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Operating Revenues:Oil
    
    $
    49,222
    
    
    $
    63,636
    
    
    $
    54,218Natural Gas
    
    
    40,023
    
    
    
    84,998
    
    
    
    96,49189,245
    
    
    
    148,634
    
    
    
    150,709Less:Oil and natural gas operating costs
    
    
    17,550
    
    
    
    24,280
    
    
    
    28,338Severance and ad valorem taxes
    
    
    6,696
    
    
    
    9,727
    
    
    
    9,409Depletion
    
    
    35,994
    
    
    
    71,647
    
    
    
    76,660Accretion expense
    
    
    2,083
    
    
    
    2,064
    
    
    
    2,230Impairment of long-lived assets (1)
    
    
    63,495
    
    
    
    223,543
    
    
    
    Hurricane damage repairs
    
    
    
    
    
    
    1,462
    
    
    
    Rig operations, net
    
    
    4,254
    
    
    
    
    
    
    
    Indemnification settlement
    
    
    4,223
    
    
    
    
    
    
    
    Income tax expense (benefit)
    
    
    (120
    )
    
    
    (8,462
    )
    
    
    14,992134,175
    
    
    
    324,261
    
    
    
    131,629Results of operations from oil and
natural gas producing activities
    
    
    (44,930
    )
    
    
    (175,627
    )
    
    $
    19,080Depletion expense per Mcfe
    
    $
    2.87
    
    
    $
    5.13
    
    
    $
    4.20
 
 (1)
    
    For 2008, includes impairment of oil and natural gas properties of $216.8 million and
impairment of drilling rig of $6.7 million; for 2009, all impairments are to oil and natural
gas properties. Estimated Quantities of Proved Reserves
  103




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Oil
    
    
    Gas(MBbls)
    
    
    (MMcf)Total Proved Reserves:Balance at December 31, 2006
    
    
    4,736
    
    
    
    66,815Production during 2007
    
    
    (838
    )
    
    
    (13,239
    )Sale of reserves in-place
    
    
    (3
    )
    
    
    (413
    )Discoveries and extensions
    
    
    634
    
    
    
    5,465Revisions of previous quantity estimates and other
    
    
    327
    
    
    
    2,701Balance at December 31, 2007
    
    
    4,856
    
    
    
    61,329Production during 2008
    
    
    (765
    )
    
    
    (9,369
    )Sale of reserves in-place
    
    
    (3
    )
    
    
    (170
    )Discoveries and extensions
    
    
    1,934
    
    
    
    3,817Revisions of previous quantity estimates and other
    
    
    (1,119
    )
    
    
    (4,711
    )Balance at December 31, 2008
    
    
    4,903
    
    
    
    50,896Production during 2009
    
    
    (834
    )
    
    
    (7,549
    )Sale of reserves in-place
    
    
    
    
    
    
    Discoveries and extensions
    
    
    516
    
    
    
    3,666Revisions of previous quantity estimates and other
    
    
    (817
    )
    
    
    5,350Balance at December 31, 2009
    
    
    3,768
    
    
    
    52,363Proved Developed Reserves:Balance at December 31, 2006
    
    
    3,151
    
    
    
    49,253Balance at December 31, 2007
    
    
    2,892
    
    
    
    42,555Balance at December 31, 2008
    
    
    2,732
    
    
    
    35,054Balance at December 31, 2009
    
    
    2,571
    
    
    
    32,560
 Proved Undeveloped Reserves
   104




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Standardized Measure of Discounted Future Net Cash Flows
    At December 31,2009
    
    
    2008
    
    
    2007Future cash flows
    
    $
    414,043
    
    
    $
    490,602
    
    
    $
    842,986Future production costs
    
    
    (138,982
    )
    
    
    (168,160
    )
    
    
    (185,768
    )Future development costs
    
    
    (85,898
    )
    
    
    (82,866
    )
    
    
    (80,656
    )Future taxes on income
    
    
    
    
    
    
    
    
    
    
    (80,029
    )Future net cash flows
    
    
    189,163
    
    
    
    239,576
    
    
    
    496,533Discount to present value at 10 percent per annum
    
    
    (50,208
    )
    
    
    (60,139
    )
    
    
    (105,069
    )Standardized measure of discounted future net
cash flows
    
    $
    138,955
    
    
    $
    179,437
    
    
    $
    391,464
  Changes in Standardized Measure of Discounted Future Net Cash Flows
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Balance at Beginning of Period
    
    $
    179,437
    
    
    $
    391,464
    
    
    $
    327,899Sales of oil and natural gas, net of production costs
    
    
    (65,000
    )
    
    
    (114,626
    )
    
    
    (112,962
    )Changes in sales & transfer prices, net of
production costs
    
    
    (12,019
    )
    
    
    (165,125
    )
    
    
    125,623Revisions of previous quantity estimates
    
    
    1,192
    
    
    
    (32,842
    )
    
    
    25,751Purchase of reserves-in-place
    
    
    
    
    
    
    
    
    
    
    Sale of reserves in-place
    
    
    
    
    
    
    177
    
    
    
    (2,233
    )Current year discoveries, extensions and improved
recovery
    
    
    7,407
    
    
    
    44,112
    
    
    
    32,939Changes in estimated future development costs
    
    
    8,778
    
    
    
    (1,417
    )
    
    
    (7,917
    )Development costs incurred during the period
    
    
    979
    
    
    
    8,298
    
    
    
    8,526Accretion of discount
    
    
    17,944
    
    
    
    39,146
    
    
    
    32,790Net change in income taxes
    
    
    
    
    
    
    23,453
    
    
    
    (14,451
    )Change in production rates (timing) and other
    
    
    237
    
    
    
    (13,203
    )
    
    
    (24,501
    )Net change
    
    
    (40,482
    )
    
    
    (212,027
    )
    
    
    63,565Balance at End of Period
    
    $
    138,955
    
    
    $
    179,437
    
    
    $
    391,464
 105




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
     Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
  106




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Internal Control  Integrated Framework
    .
   
 
 Item 9B. Other Information.
 107




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##### Table of Contents



PART III
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Documents filed as part of this report:1.
    
    Financial Statements included in Item 8:
 (i)
    
    Independent Registered Public Accounting Firms Report(ii)
    
    Consolidated Statements of Operations for each of the three years in the period
ended December 31, 2009(iii)
    
    Consolidated Balance Sheets as of December 31, 2009 and 2008(iv)
    
    Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 2009(v)
    
    Consolidated Statements of Changes in Stockholders Equity for each of the three
years in the period ended December 31, 2009(vi)
    
    Consolidated Statements of Comprehensive Income (Loss) for each of the three
years in the period ended December 31, 2009(vii)
    
    Notes to Consolidated Financial Statements(viii)
    
    Supplemental Oil and Natural Gas Information (Unaudited)
 2.
    
    Financial Statement Schedules:
 (i)
    
    All schedules are omitted as they are not applicable, not required or the
required information is included in the consolidated financial statements or notes
thereto.
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*
    
    Management contract or compensatory plan.**
    
    Filed herewith. 115




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SIGNATURES
  THE MERIDIAN RESOURCE CORPORATIONBY:
    /s/ PAUL D. CHINGChief Executive Officer(Principal Executive Officer)
President Director and Chairman of the Board   Name
    
    Title
    
    DateBY:
    
    /s/ PAUL D. CHING
    
    Chief Executive Officer
    
    April 15, 2010Paul D. Ching
    
    (Principal Executive Officer)President Director andChairman of the BoardBY:
    
    /s/ LLOYD V. DELANO
    
    Senior Vice President
    
    April 15, 2010Lloyd V. DeLano
    
    (Chief Accounting Officer)BY:
    
    /s/ E. L. HENRY
    
    Director
    
    April 15, 2010E. L. HenryBY:
    
    /s/ MICHAEL J. MAYELL
    
    Director
    
    April 15, 2010Michael J. MayellBY:
    
    /s/ C. MARK PEARSON
    
    Director
    
    April 15, 2010C. Mark PearsonBY:
    
    /s/ JOSEPH A. REEVES, JR.
    
    Director
    
    April 15, 2010Joseph A. Reeves, Jr.BY:
    
    /s/ JOHN B. SIMMONS
    
    Director
    
    April 15, 2010John B. SimmonsBY:
    
    /s/ FENNER R. WELLER, JR.
    
    Director
    
    April 15, 2010Fenner R. Weller, Jr.
 116