##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended: June 30, 2007
 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
    
    76-0319553(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 1401 Enclave Parkway, Suite 300, Houston, Texas
    
    77077(Address of principal executive offices)
    
    (Zip Code)
 281-597-7000
 þ o
  o þ o
 o þ




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##### Table of Contents



THE MERIDIAN RESOURCE CORPORATION
Quarterly Report on Form 10-Q
 INDEX
 PageNumberPART I    FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Operations (unaudited) for the
Three Months and Six Months Ended June 30, 2007 and 2006
    
    3Consolidated Balance Sheets as of June 30, 2007 (unaudited)
and December 31, 2006
    
    4Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended June 30, 2007 and 2006
    
    6Consolidated Statements of Stockholders Equity (unaudited) for the
Six Months Ended June 30, 2007 and 2006
    
    7Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the
Six Months Ended June 30, 2007 and 2006
    
    8Notes to Consolidated Financial Statements (unaudited)
    
    9Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    28Item 4. Controls and Procedures
    
    29PART II    OTHER INFORMATIONItem 1. Legal Proceedings
    
    30Item 1A. Risk Factors
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    31Item 5. Other Information
    
    31Item 6. Exhibits
    
    32SIGNATURES
    
    33Certification of CEO Pursuant to Rule 13a-14(a)Certification of President Pursuant to Rule 13a-14(a)Certification of CAO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Section 1350Certification of President Pursuant to Section 1350Certification of CAO Pursuant to Section 1350
 2




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##### Table of Contents



PART I    FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUES:Oil and natural gas
    
    $
    39,716
    
    
    $
    45,101
    
    
    $
    79,859
    
    
    $
    102,928Price risk management activities
    
    
    4
    
    
    
    1,003
    
    
    
    16
    
    
    
    363Interest and other
    
    
    321
    
    
    
    436
    
    
    
    745
    
    
    
    75540,041
    
    
    
    46,540
    
    
    
    80,620
    
    
    
    104,046OPERATING COSTS AND EXPENSES:Oil and natural gas operating
    
    
    6,988
    
    
    
    5,011
    
    
    
    14,755
    
    
    
    9,564Severance and ad valorem taxes
    
    
    2,619
    
    
    
    2,610
    
    
    
    5,463
    
    
    
    5,345Depletion and depreciation
    
    
    19,607
    
    
    
    27,671
    
    
    
    40,610
    
    
    
    57,170General and administrative
    
    
    3,890
    
    
    
    4,405
    
    
    
    7,785
    
    
    
    9,516Accretion expense
    
    
    574
    
    
    
    319
    
    
    
    1,127
    
    
    
    620Hurricane damage repairs
    
    
    
    
    
    
    404
    
    
    
    
    
    
    
    2,40333,678
    
    
    
    40,420
    
    
    
    69,740
    
    
    
    84,618EARNINGS BEFORE INTEREST AND INCOME TAXES
    
    
    6,363
    
    
    
    6,120
    
    
    
    10,880
    
    
    
    19,428OTHER EXPENSE:Interest expense
    
    
    1,538
    
    
    
    1,489
    
    
    
    3,077
    
    
    
    2,867EARNINGS BEFORE INCOME TAXES
    
    
    4,825
    
    
    
    4,631
    
    
    
    7,803
    
    
    
    16,561INCOME TAXES:Current
    
    
    (26
    )
    
    
    197
    
    
    
    112
    
    
    
    368Deferred
    
    
    2,146
    
    
    
    1,591
    
    
    
    3,318
    
    
    
    6,0192,120
    
    
    
    1,788
    
    
    
    3,430
    
    
    
    6,387NET EARNINGS
    
    $
    2,705
    
    
    $
    2,843
    
    
    $
    4,373
    
    
    $
    10,174NET EARNINGS PER SHARE:Basic
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.05
    
    
    $
    0.12Diluted
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.05
    
    
    $
    0.11WEIGHTED AVERAGE NUMBER OF COMMON SHARES:Basic
    
    
    89,329
    
    
    
    86,950
    
    
    
    89,291
    
    
    
    86,900Diluted
    
    
    94,906
    
    
    
    92,140
    
    
    
    94,792
    
    
    
    92,346
  3




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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  June 30,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    33,599
    
    
    $
    31,424Restricted cash
    
    
    28
    
    
    
    1,282Accounts receivable, less allowance for doubtful accounts of
$232 [2007 and 2006]
    
    
    21,340
    
    
    
    24,285Due from affiliates
    
    
    4,906
    
    
    
    670Prepaid expenses and other
    
    
    7,965
    
    
    
    3,457Assets from price risk management activities
    
    
    2,820
    
    
    
    7,968Total current assets
    
    
    70,658
    
    
    
    69,086PROPERTY AND EQUIPMENT:Oil and natural gas properties, full cost method (including
$59,384 [2007] and $54,356 [2006] not subject to
depletion)
    
    
    1,709,815
    
    
    
    1,663,865Land
    
    
    48
    
    
    
    48Equipment
    
    
    10,813
    
    
    
    7,4921,720,676
    
    
    
    1,671,405Less accumulated depletion and depreciation
    
    
    1,314,116
    
    
    
    1,273,522Total property and equipment, net
    
    
    406,560
    
    
    
    397,883OTHER ASSETS:Assets from price risk management activities
    
    
    949
    
    
    
    490Other
    
    
    215
    
    
    
    436Total other assets
    
    
    1,164
    
    
    
    926TOTAL ASSETS
    
    $
    478,382
    
    
    $
    467,895
  4




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##### Table of Contents



THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(unaudited)LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    5,504
    
    
    $
    6,700Advances from non operators
    
    
    6,865
    
    
    
    3,051Revenues and royalties payable
    
    
    8,990
    
    
    
    7,933Notes payable
    
    
    6,818
    
    
    
    2,754Accrued liabilities
    
    
    20,452
    
    
    
    21,938Liabilities from price risk management activities
    
    
    1,274
    
    
    
    1,024Asset retirement obligations
    
    
    3,863
    
    
    
    4,803Deferred income taxes payable
    
    
    411
    
    
    
    2,336Current income taxes payable
    
    
    30
    
    
    
    Total current liabilities
    
    
    54,207
    
    
    
    50,539LONG TERM DEBT
    
    
    75,000
    
    
    
    75,000OTHER:Deferred income taxes
    
    
    6,708
    
    
    
    3,364Liabilities from price risk management activities
    
    
    662
    
    
    
    190Asset retirement obligations
    
    
    18,818
    
    
    
    18,00526,188
    
    
    
    21,559STOCKHOLDERS EQUITY:Common stock, $0.01 par value (200,000,000 shares authorized,
89,450,466 [2007] and 89,139,600 [2006] shares issued)
07] and 89,139,600 [2006] issued)
    
    
    934
    
    
    
    928Additional paid in capital
    
    
    536,309
    
    
    
    534,441Accumulated deficit
    
    
    (214,906
    )
    
    
    (219,279
    )Accumulated other comprehensive income
    
    
    1,179
    
    
    
    4,707323,516
    
    
    
    320,797Less treasury stock, at cost 194,779 [2007] shares
    
    
    (529
    )
    
    
    Total stockholders equity
    
    
    322,987
    
    
    
    320,797TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    478,382
    
    
    $
    467,895
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Six Months Ended June 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings
    
    $
    4,373
    
    
    $
    10,174Adjustments to reconcile net earnings to net cash
provided by operating activities:Depletion and depreciation
    
    
    40,610
    
    
    
    57,170Amortization of other assets
    
    
    221
    
    
    
    221Non-cash compensation
    
    
    1,360
    
    
    
    1,197Non-cash price risk management activities
    
    
    (16
    )
    
    
    (363
    )Accretion expense
    
    
    1,127
    
    
    
    620Deferred income taxes
    
    
    3,318
    
    
    
    6,019Changes in assets and liabilities:Restricted cash
    
    
    1,254
    
    
    
    (19
    )Accounts receivable
    
    
    2,945
    
    
    
    14,261Prepaid expenses and other
    
    
    (4,508
    )
    
    
    (5,911
    )Due from affiliates
    
    
    (4,236
    )
    
    
    (1,825
    )Accounts payable
    
    
    (1,196
    )
    
    
    (2,460
    )Advances from non-operators
    
    
    3,814
    
    
    
    651Revenues and royalties payable
    
    
    1,057
    
    
    
    (1,799
    )Asset retirement obligations
    
    
    (1,791
    )
    
    
    (590
    )Other assets and liabilities
    
    
    (814
    )
    
    
    (2,400
    )Net cash provided by operating activities
    
    
    47,518
    
    
    
    74,946CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (51,280
    )
    
    
    (64,472
    )Proceeds from sale of property
    
    
    2,530
    
    
    
    10,741Net cash used in investing activities
    
    
    (48,750
    )
    
    
    (53,731
    )CASH FLOWS FROM FINANCING ACTIVITIES:Reductions in long-term debt
    
    
    
    
    
    
    (10,000
    )Reductions in notes payable
    
    
    (4,895
    )
    
    
    (3,065
    )Proceeds from notes payable
    
    
    8,959
    
    
    
    7,919Repurchase of common stock
    
    
    (657
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    3,407
    
    
    
    (5,146
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    2,175
    
    
    
    16,069Cash and cash equivalents at beginning of period
    
    
    31,424
    
    
    
    23,265CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    33,599
    
    
    $
    39,334SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATIONNon-cash activities:Issuance of shares for contract services
    
    $
    (642
    )
    
    $
    (588
    )ARO liability  new wells drilled
    
    $
    321
    
    
    $
    109ARO liability  changes in estimates
    
    $
    216
    
    
    $
    694
  6




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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Six Months Ended June 30, 2007 and 2006
 AccumulatedAdditional
    
    
    Accumulated
    
    
    Other
    
    
    UnamortizedCommon Stock
    
    
    Paid-In
    
    
    Earnings
    
    
    Comprehensive
    
    
    Deferred
    
    
    Treasury StockShares
    
    
    Par Value
    
    
    Capital
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Compensation
    
    
    Shares
    
    
    Cost
    
    
    TotalBalance, December 31, 2005
    
    
    86,818
    
    
    $
    900
    
    
    $
    524,692
    
    
    $
    (145,395
    )
    
    $
    (2,314
    )
    
    $
    (318
    )
    
    
    
    
    
    $
    
    
    
    $
    377,565Effect of adoption of FAS123R
    
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    
    
    
    
    Issuance of rights to common stock
    
    
    
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Companys 401(k) plan contribution
    
    
    45
    
    
    
    1
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -         -
    
    
    
    185Stock-based compensation  FAS123R
    
    
    
    
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167Compensation expense
    
    
    
    
    
    
    
    
    
    
    845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    845Accum. other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,351
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,351Issuance of shares for contract services
    
    
    162
    
    
    
    2
    
    
    
    586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    588Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,174Balance, June 30, 2006
    
    
    87,025
    
    
    $
    905
    
    
    $
    526,154
    
    
    $
    (135,221
    )
    
    $
    1,037
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    392,875Balance, December 31, 2006
    
    
    89,140
    
    
    $
    928
    
    
    $
    534,441
    
    
    $
    (219,279
    )
    
    $
    4,707
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    320,797Issuance of rights to common stock
    
    
    
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Companys 401(k) plan contribution
    
    
    97
    
    
    
    
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )
    
    
    128
    
    
    
    265Shares repurchased
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    (657
    )
    
    
    (657
    )Stock-based compensation  FAS123R
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164Compensation expense
    
    
    
    
    
    
    
    
    
    
    846
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    846Accum. other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,528
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,528
    )Issuance of shares for contract services
    
    
    237
    
    
    
    2
    
    
    
    640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    642Issuance of shares as compensation
stock
    
    
    31
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,373
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,373Balance, June 30, 2007
    
    
    89,255
    
    
    $
    934
    
    
    $
    536,309
    
    
    $
    (214,906
    )
    
    $
    1,179
    
    
    $
    
    
    
    
    195
    
    
    $
    (529
    )
    
    $
    322,987
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THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net earnings
    
    $
    2,705
    
    
    $
    2,843
    
    
    $
    4,373
    
    
    $
    10,174Other comprehensive income (loss), net of tax, for unrealized
gains (losses) from hedging activities:Unrealized holding gains (losses) arising during
period (1)
    
    
    849
    
    
    
    1,761
    
    
    
    (2,082
    )
    
    
    2,605Reclassification adjustments on settlement of
contracts (2)
    
    
    (243
    )
    
    
    (14
    )
    
    
    (1,446
    )
    
    
    746606
    
    
    
    1,747
    
    
    
    (3,528
    )
    
    
    3,351Total comprehensive income
    
    $
    3,311
    
    
    $
    4,590
    
    
    $
    845
    
    
    $
    13,525(1) net income tax (expense) benefit
    
    $
    (457
    )
    
    $
    (948
    )
    
    $
    1,121
    
    
    $
    (1,403
    )(2) net income tax (expense) benefit
    
    $
    131
    
    
    $
    7
    
    
    $
    778
    
    
    $
    (401
    )
  8




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##### Table of Contents



THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1. BASIS OF PRESENTATION
   2. RECENT ACCOUNTING PRONOUNCEMENTS
  3. ACCRUED LIABILITIES
  June 30,
    
    
    December 31,2007
    
    
    2006Capital expenditures
    
    $
    12,400
    
    
    $
    13,851Operating expenses/taxes
    
    
    5,127
    
    
    
    4,024Hurricane damage repairs
    
    
    
    
    
    
    71Compensation
    
    
    819
    
    
    
    1,197Interest
    
    
    485
    
    
    
    506Other
    
    
    1,621
    
    
    
    2,289Total
    
    $
    20,452
    
    
    $
    21,938
 4. DEBT
 Credit Facility .
 9




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##### Table of Contents



1 2
 5. INCOME TAXES
  6. COMMITMENTS AND CONTINGENCIES
 Litigation.
 H. L. Hawkins litigation
 10




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##### Table of Contents



Title/lease disputes.
 Environmental litigation.
  Litigation involving insurable issues
 Commitments.
 7. COMMON STOCK
  11




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8. EARNINGS PER SHARE
  Three Months Ended June 30,2007
    
    
    2006Numerator:Net earnings
    
    $
    2,705
    
    
    $
    2,843Denominator:Denominator for basic earnings per
share  weighted-average shares outstanding
    
    
    89,329
    
    
    
    86,950Effect of potentially dilutive common shares:Warrants
    
    
    5,576
    
    
    
    5,079Employee and director stock options
    
    
    1
    
    
    
    111Denominator for diluted earnings per share -
weighted-average shares outstanding
and assumed conversions
    
    
    94,906
    
    
    
    92,140Basic earnings per share
    
    $
    0.03
    
    
    $
    0.03Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.03
 Six Months Ended June 30,2007
    
    
    2006Numerator:Net earnings
    
    $
    4,373
    
    
    $
    10,174Denominator:Denominator for basic earnings per
share  weighted-average shares outstanding
    
    
    89,291
    
    
    
    86,900Effect of potentially dilutive common shares:Warrants
    
    
    5,501
    
    
    
    5,027Employee and director stock options
    
    
    
    
    
    
    419Denominator for diluted earnings per
share  weighted-average shares outstanding
and assumed conversions
    
    
    94,792
    
    
    
    92,346Basic earnings per share
    
    $
    0.05
    
    
    $
    0.12Diluted earnings per share
    
    $
    0.05
    
    
    $
    0.11
 9. OIL AND NATURAL GAS HEDGING ACTIVITIES
  12




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13




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EstimatedFair ValueCeiling
    
    
    Asset (Liability)Notional
    
    
    Floor Price
    
    
    Price
    
    
    June 30, 2007Type
    
    
    Amount
    
    
    ($ per unit)
    
    
    ($ per unit)
    
    
    (in thousands)Natural Gas (mmbtu)July 2007  Dec 2007
    
    Collar
    
    
    2,460,000
    
    
    $
    7.00
    
    
    $
    11.50
    
    
    $
    920Jan 2008  Dec 2008
    
    Collar
    
    
    2,230,000
    
    
    $
    7.00
    
    
    $
    12.15
    
    
    
    523Jan 2008  Dec 2008
    
    Collar
    
    
    1,010,000
    
    
    $
    7.50
    
    
    $
    11.50
    
    
    
    358Total Natural Gas
    
    
    1,801Crude Oil (bbls)July 2007
    
    Collar
    
    
    12,000
    
    
    $
    50.00
    
    
    $
    74.00
    
    
    
    (12
    )Jan 2008  Dec 2008
    
    Collar
    
    
    40,000
    
    
    $
    55.00
    
    
    $
    83.00
    
    
    
    (102
    )Aug 2007 April 2008
    
    Collar
    
    
    54,000
    
    
    $
    60.00
    
    
    $
    82.00
    
    
    
    (46
    )May 2008  July 2008
    
    Collar
    
    
    15,000
    
    
    $
    60.00
    
    
    $
    82.00
    
    
    
    (25
    )July 2007
    
    Collar
    
    
    3,000
    
    
    $
    60.00
    
    
    $
    96.10
    
    
    
    May 2008  July 2008
    
    Collar
    
    
    52,000
    
    
    $
    65.00
    
    
    $
    93.15
    
    
    
    91Aug 2007  July 2008
    
    Collar
    
    
    40,000
    
    
    $
    70.00
    
    
    $
    87.40
    
    
    
    126Total Crude Oil
    
    
    32$
    1,833
 10. STOCK-BASED COMPENSATION
 Stock Options
   14




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11. ASSET RETIREMENT OBLIGATIONS
   Asset retirement obligation at December 31, 2005
    
    $
    11,964Additional retirement obligations recorded in 2006
    
    
    4,559Settlements during 2006
    
    
    (6,026
    )Revisions to estimates and other changes during 2006
    
    
    10,723Accretion expense for 2006
    
    
    1,588Asset retirement obligation at December 31, 2006
    
    
    22,808Additional retirement obligations recorded in 2007
    
    
    321Settlements during 2007
    
    
    (1,791
    )Revisions to estimates and other changes during 2007
    
    
    216Accretion expense for 2007
    
    
    1,127Asset retirement obligation at June 30, 2007
    
    $
    22,681
  
 ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General.
  15




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Operations Overview.
 East Texas Area
        16




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##### Table of Contents



Texas Gulf Coast and Offshore
      Mid-Continent
   17




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##### Table of Contents



South Louisiana and Offshore
   Deep Archtop
   Unconventional Resource Plays
    18




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Other Conditions
 Industry Conditions.
 Critical Accounting Policies and Estimates
 Results of Operations
 Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
 Operating Revenues.
 19




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Three Months EndedJune 30,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Production Volumes:Oil (Mbbl)
    
    
    201
    
    
    
    199
    
    
    
    1
    %Natural gas (MMcf)
    
    
    3,526
    
    
    
    4,657
    
    
    
    (24
    %)Mmcfe
    
    
    4,734
    
    
    
    5,850
    
    
    
    (19
    %)Average Sales Prices:Oil (per Bbl)
    
    $
    61.20
    
    
    $
    56.01
    
    
    
    9
    %Natural gas (per Mcf)
    
    $
    7.77
    
    
    $
    7.29
    
    
    
    7
    %Mmcfe
    
    $
    8.39
    
    
    $
    7.71
    
    
    
    9
    %Operating Revenues (000s):Oil
    
    $
    12,314
    
    
    $
    11,145
    
    
    
    10
    %Natural gas
    
    
    27,402
    
    
    
    33,956
    
    
    
    (19
    %)Total Operating Revenues
    
    $
    39,716
    
    
    $
    45,101
    
    
    
    (12
    %)
 Operating Expenses.
 Severance and Ad Valorem Taxes .
 20




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Depletion and Depreciation .
 General and Administrative Expense .
 Hurricane Damage Repairs.
 Interest Expense .
 Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
 Operating Revenues.
  21




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##### Table of Contents



Six Months EndedJune 30,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Production Volumes:Oil (Mbbl)
    
    
    450
    
    
    
    423
    
    
    
    6
    %Natural gas (MMcf)
    
    
    7,290
    
    
    
    9,744
    
    
    
    (25
    %)Mmcfe
    
    
    9,991
    
    
    
    12,282
    
    
    
    (19
    %)Average Sales Prices:Oil (per Bbl)
    
    $
    55.17
    
    
    $
    52.43
    
    
    
    5
    %Natural gas (per Mcf)
    
    $
    7.55
    
    
    $
    8.29
    
    
    
    (9
    %)Mmcfe
    
    $
    7.99
    
    
    $
    8.38
    
    
    
    (5
    %)Operating Revenues (000s):Oil
    
    $
    24,833
    
    
    $
    22,179
    
    
    
    12
    %Natural gas
    
    
    55,026
    
    
    
    80,749
    
    
    
    (32
    %)Total Operating Revenues
    
    $
    79,859
    
    
    $
    102,928
    
    
    
    (22
    %)
 Operating Expenses.
 Severance and Ad Valorem Taxes.
 Depletion and Depreciation.
 22




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General and Administrative Expense.
 Hurricane Damage Repairs.
 Interest Expense.
 Liquidity and Capital Resources
 Working Capital .
 Cash Flows.
   Credit Facility .
  23




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1 2
 Oil and Natural Gas Hedging Activities.
  24




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Capital Expenditures .
  Dividends.
 Forward-Looking Information
   Changes in the price of oil and natural gas.
 Operating Risks.
 25




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Drilling Risks.
 Uncertainties in Estimating Reserves and Future Net Cash Flows .
 Full-Cost Ceiling Test.
   26




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Borrowing base for the Credit Facility .
 27




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  Interest Rates
  Hedging Contracts
   28




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##### Table of Contents



EstimatedFair ValueAsset (Liability)Notional
    
    
    Floor Price
    
    
    Ceiling Price
    
    
    June 30, 2007Type
    
    
    Amount
    
    
    ($ per unit)
    
    
    ($ per unit)
    
    
    (in thousands)Natural Gas (mmbtu)July 2007  Dec 2007
    
    Collar
    
    
    2,460,000
    
    
    $
    7.00
    
    
    $
    11.50
    
    
    $
    920Jan 2008  Dec 2008
    
    Collar
    
    
    2,230,000
    
    
    $
    7.00
    
    
    $
    12.15
    
    
    
    523Jan 2008  Dec 2008
    
    Collar
    
    
    1,010,000
    
    
    $
    7.50
    
    
    $
    11.50
    
    
    
    358Total Natural Gas
    
    
    1,801Crude Oil (bbls)July 2007
    
    Collar
    
    
    12,000
    
    
    $
    50.00
    
    
    $
    74.00
    
    
    
    (12
    )Jan 2008  Dec 2008
    
    Collar
    
    
    40,000
    
    
    $
    55.00
    
    
    $
    83.00
    
    
    
    (102
    )Aug 2007 April 2008
    
    Collar
    
    
    54,000
    
    
    $
    60.00
    
    
    $
    82.00
    
    
    
    (46
    )May 2008  July 2008
    
    Collar
    
    
    15,000
    
    
    $
    60.00
    
    
    $
    82.00
    
    
    
    (25
    )July 2007
    
    Collar
    
    
    3,000
    
    
    $
    60.00
    
    
    $
    96.10
    
    
    
    May 2008  July 2008
    
    Collar
    
    
    52,000
    
    
    $
    65.00
    
    
    $
    93.15
    
    
    
    91Aug 2007  July 2008
    
    Collar
    
    
    40,000
    
    
    $
    70.00
    
    
    $
    87.40
    
    
    
    126Total Crude Oil
    
    
    32$
    1,833
 
 ITEM 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  29




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PART II    OTHER INFORMATION
 
 ITEM 1. Legal Proceedings.
 H. L. Hawkins litigation
 Title/lease disputes.
 Environmental litigation.
  Litigation involving insurable issues.
 
 ITEM 1A. Risk Factors.
  30




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##### Table of Contents



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total
    
    
    
    
    
    
    
    
    
    Approximate Dollar ValueNumber of
    
    
    
    
    
    Total Number of Shares
    
    of Shares that May Yet BeShares
    
    Average Price
    
    Purchased as Part of a
    
    Purchased Under the PlanPeriod
    
    Purchased
    
    Paid Per Share
    
    Publicly Announced Plan (a)
    
    During 2007April 2007
    
    
    May 2007
    
    
    June 2007
    
    
    100,000
    
    
    $
    3.05
    
    
    
    100,000
    
    
    $
    4,343,000Total
    
    
    100,000
    
    
    $
    3.05
    
    
    
    100,000
    
    
    $
    4,343,000
 
 (a)
    
    In March 2007, our Board of Directors authorized the repurchase in the open market or
through privately negotiated transactions up to $5 million worth of common shares per year over the
next three years. The timing, volume, and nature of share repurchases will be at the discretion of
management, depending on market conditions, applicable securities laws, and other factors. As of
June 30, 2007, the Company had repurchased 250,000 common shares in the open market at an aggregate
cost of $657,000. Such shares are reflected in the accompanying Consolidated Balance Sheet as
treasury stock. See Note 7 of the Notes to Consolidated Financial Statements. It is our intent
to continue this program through this and future years. 
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  Nominee
    
    Class
    
    For
    
    WithheldC. Mark Pearson
    
    I
    
    
    65,644,701
    
    
    
    10,900,617E. L. Henry
    
    II
    
    
    63,043,927
    
    
    
    13,501,391Joe E. Kares
    
    II
    
    
    63,030,977
    
    
    
    13,514,341Gary Messersmith
    
    II
    
    
    64,541,096
    
    
    
    12,094,222
  Proposal
    
    For
    
    Against
    
    Withheld
    
    Non-Vote2007 Long Term
    
    
    34,677,502
    
    
    
    10,518,784
    
    
    
    384,743
    
    
    
    30,964,289Incentive PlanPerformance Criteria
    
    
    35,477,035
    
    
    
    9,679,178
    
    
    
    424,817
    
    
    
    30,964,288for 2007 Long Term
Incentive Plan
 
 ITEM 5. Other Information.
  31




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##### Table of Contents



ITEM 6. Exhibits.
 31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of President pursuant to Rule 13a-14(a) or Rule 15d-14(a)
under the Securities Exchange Act of 1934, as amended.31.3
    
    Certification of Chief Accounting Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.32.2
    
    Certification of President pursuant to Rule 13a-14(b) or Rule 15d-14(b)
under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.32.3
    
    Certification of Chief Accounting Officer pursuant Rule 13a-14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.
 32




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##### Table of Contents



SIGNATURES
  THE MERIDIAN RESOURCE CORPORATION AND SUBSIDIARIES
 Date: August 9, 2007
    By:
    /s/ LLOYD V. DELANOLloyd V. DeLanoSenior Vice President
Chief Accounting Officer 33




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##### Table of Contents



Exhibit Index
 31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of President pursuant to Rule 13a-14(a) or Rule 15d-14(a)
under the Securities Exchange Act of 1934, as amended.31.3
    
    Certification of Chief Accounting Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.32.2
    
    Certification of President pursuant to Rule 13a-14(b) or Rule 15d-14(b)
under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.32.3
    
    Certification of Chief Accounting Officer pursuant Rule 13a-14(b) or
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.