##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number 1-32747
      MARINER ENERGY, INC.
 (Exact name of registrant as
    specified in its charter)
      Delaware(State or other jurisdiction
    of
    incorporation or organization)

86-0460233(I.R.S. Employer
    Identification Number)   One
    BriarLake Plaza, Suite 2000
    2000 West Sam Houston Parkway South
    Houston, Texas 77042 (Address
    of principal executive offices and zip code)
  (713) 954-5500
  (Registrants telephone
    number, including area code)
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.0001 par value
    Rights to Purchase Preferred Stock

New York Stock Exchange
    New York Stock Exchange   Securities
    registered pursuant to section 12(g) of the Act:
  None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
 Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





TABLE OF
    CONTENTS
   
 PART IItem 1.


Business


3Item 1A.


Risk Factors


23Item 1B.


Unresolved Staff Comments


33Item 2.


Properties


33Item 3.


Legal Proceedings


33Item 4.


Submission of Matters to a Vote of Security
    Holders


34PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


36Item 6.


Selected Financial Data


39Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


40Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


61Item 8.


Financial Statements and Supplementary Data


63Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures


115Item 9A.


Controls and Procedures


115Item 9B.


Other Information


115PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


115Item 11.


Executive Compensation


115Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


115Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


116Item 14.


Principal Accounting Fees and Services


116PART IVItem 15.


Exhibits, Financial Statement Schedules


116EX-12EX-21EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2    CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    the volatility of oil and natural gas prices; 1




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
    discovery, estimation, development and replacement of oil and
    natural gas reserves;
    cash flow, liquidity and financial position;
    business strategy;
    amount, nature and timing of capital expenditures, including
    future development costs;
    availability and terms of capital;
    timing and amount of future production of oil and natural gas;
    availability of drilling and production equipment;
    operating costs and other expenses;
    prospect development and property acquisitions;
    risks arising out of our hedging transactions;
    marketing of oil and natural gas;
    competition in the oil and natural gas industry;
    the impact of weather and the occurrence of natural events and
    natural disasters such as loop currents, hurricanes, fires,
    floods and other natural events, catastrophic events and natural
    disasters;
    governmental regulation of the oil and natural gas industry;
    environmental liabilities;
    developments in oil-producing and natural gas-producing
    countries;
    uninsured or underinsured losses in our oil and natural gas
    operations;
    risks related to our level of indebtedness; and
    risks related to significant acquisitions or other strategic
    transactions, such as failure to realize expected benefits or
    objectives for future operations. 2




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PART I  The following discussion is intended to assist you in
    understanding our business and the results of our operations. It
    should be read in conjunction with the Consolidated Financial
    Statements and the related notes that appear elsewhere in this
    report. Certain statements made in our discussion may be forward
    looking. Forward-looking statements involve risks and
    uncertainties and a number of factors could cause actual results
    or outcomes to differ materially from our expectations. See
    Cautionary Statements at the beginning of this
    report on
    Form 10-K
    for additional discussion of some of these risks and
    uncertainties. Unless the context otherwise requires or
    indicates, references to Mariner, we,
    our, ours, and us refer to
    Mariner Energy, Inc. and its consolidated subsidiaries
    collectively. Certain oil and natural gas industry terms used in
    this annual report are defined in the Glossary of Oil and
    Natural Gas Terms set forth in Item 1.
    Business of this annual report.
  Item 1.
    Business.  General
  (713) 954-5500
    
    Permian Basin, where we are an active driller in the prolific
    Spraberry field at depths between 6,000 and
    10,000 feet. Our increasing Permian Basin operation, which
    is characterized by long reserve life, stable drilling and
    production performance, and relatively lower capital
    requirements, somewhat counterbalances the higher geological
    risk, operational challenges and capital requirements attendant
    to most of our Gulf of Mexico deepwater operations. We have
    expanded our presence in the region, targeting a combination of
    infill drilling activities in established producing trends,
    including the Spraberry, Dean and Wolfcamp trends, as well as
    exploration activities in emerging plays such as the Wolfberry
    and newer Wolfcamp trends.
    Gulf of Mexico Deepwater, where we have actively conducted
    exploration and development projects since 1996 in water depths
    ranging from 1,300 feet up to 7,000 feet. Employing
    our experienced geoscientists, rich seismic database, and
    extensive subsea tieback expertise, we have participated in more
    than 84 deepwater wells. Our deepwater exploration operation
    targets larger potential reserve accumulations than are
    generally accessible onshore or on the Gulf of Mexico shelf.
    Gulf of Mexico Shelf, where we drill or participate in
    conventional shelf wells and deep shelf wells extending to 1,300
    foot water depths. We currently pursue a two-pronged strategy on
    the shelf, combining opportunistic acquisitions of legacy
    producing fields believed to hold exploitation potential and
    active exploration activities targeting conventional and deep
    shelf opportunities. Given the highly mature nature of this area
    and the steep production declines characteristic of most wells
    in this region, the goal of our shallow water or shelf operation
    is to maximize cash flow for reinvestment in our deepwater and
    Permian Basin operations, as well as for expansion into new
    operating areas.    1-800-SEC-0330
 3




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Recent
    Developments
  Gulf of Mexico Deepwater Acquisition
  Acquisition of Incremental Spraberry
    Interests
  Impact of
    Worldwide Financial Crisis and Lower Commodity Prices on Capital
    Program
        Balanced
    Growth Strategy
    
    Exploration:  Our exploration program is
    designed to facilitate organic growth through exploration in a
    wide variety of exploratory drilling projects, including
    higher-risk, high-impact projects that have the potential to
    create substantial value for our stockholders. We view
    exploration as a core competency. We typically dedicate a
    significant portion of our capital program each year to
    prospecting for new oil 4




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and gas fields, including in the Gulf of Mexico deepwater where
    reserve accumulations are typically much larger than those found
    onshore or on the shelf. Our explorationists have a
    distinguished track record in the Gulf of Mexico. Our reputation
    for generating high-quality exploration prospects also can
    create potentially valuable partnering opportunities, which can
    enable us to participate in exploration projects developed by
    other operators.  
    Development:  Our development efforts are
    intended to complement our higher-risk exploration projects
    through a variety of moderate-risk activities targeted at
    maximizing recovery and production from known reservoirs as well
    as finding overlooked oil and gas accumulations in and around
    existing fields. Our geoscientists and engineers have a solid
    track record in effectively developing new fields, redeveloping
    legacy fields, rejuvenating production, controlling unit costs,
    and adding incremental reserves at attractive finding costs in
    both onshore and offshore fields. Our development and
    exploitation program strives to enhance the rate of returns of
    our projects, allowing us to establish critical operating mass
    from which to expand in our focus areas, and generate a rich
    portfolio of relatively lower-risk engineering/exploitation
    projects that counterbalance our higher-risk exploration
    activities.
    Acquisitions:  In addition to our internal
    exploration and development activities on our existing
    properties, we also compete actively for new oil and gas
    properties through property acquisitions as well as corporate
    transactions. Our management team has substantial experience
    identifying and executing a wide variety of tactical and
    strategic transactions that augment our existing operations or
    present opportunities to expand into new operating regions. We
    primarily focus our acquisition efforts on stable, onshore
    basins such as the Permian Basin, which can counterbalance our
    growing deepwater exploration operations, but we also respond in
    an opportunistic fashion to attractive acquisition opportunities
    in the Gulf of Mexico. Due to our existing prospect inventory,
    we are not compelled to make acquisitions in order to grow;
    however we expect to continue to pursue acquisitions
    aggressively on an opportunistic basis as an integral part of
    our growth strategy.  Our
    Competitive Strengths
    Diversity of assets and activities.
  Large prospect inventory.
 5




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Exploration expertise.
  Operational control and substantial working
    interests.
  Extensive seismic library. 3-D 3-D
  Subsea tieback expertise.
  Properties
    NetApproximate





Estimated


EstimatedWorking


2008 Net


Proved


Proved ReservesOperator


Interest %


Production


Reserves


% Oil /% Gas(1)(Bcfe)


(Bcfe)Permian Basin:Spraberry


Mariner



80
%


13.5



419.1



69%/31%Gulf Of Mexico Deepwater:Atwater Valley 426 (Bass Lite)


Mariner



54
%


8.5



95.8



0%/100%Garden Banks 462 (Geauxpher)


Mariner



60
%






32.7



3%/97%Green Canyon 646 (Daniel Boone)


W&T Offshore



40
%






18.3



68%/32%East Breaks 558/602 (Northwest Nansen)


Anadarko



33-50
%


12.9



16.6



34%/66%Ewing Bank 921 (North Black Widow)


ENI



35
%


1.9



7.8



91%/9%Gulf Of Mexico Shelf:Vermilion 380


Mariner



80
%


0.5



33.1



50%/50%Vermilion 14/26/35


Mariner



100
%


1.5



30.1



8%/92%West Cameron 110


Mariner



100
%


4.7



29.3



4%/96%South Pass 24


Mariner



97
%


1.8



21.5



61%/39%High Island 116


Mariner



100
%


0.8



19.5



3%/97%     (1)
    
    NGLs are included in Oil 6




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Permian
    Basin Operations
       7




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Gulf
    of Mexico Deepwater Operations
      56-mile
          Gulf
    of Mexico Shelf Operations
   8




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14/26/35,
       9




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Volumes


Revenue(In thousands)Permian Basin:Natural Gas (Bcf)


4.0


$
31,339Oil (Mbbls)


1,242.8



122,005NGLs (Mbbls)


578.5



30,765Total Natural Gas Equivalent (Bcfe)


14.9


$
184,109Gulf of Mexico Deepwater:Natural Gas (Bcf)


27.7


$
271,979Oil (Mbbls)


1,850.5



180,131NGLs (Mbbls)


264.7



15,053Total Natural Gas Equivalent (Bcfe)


40.4


$
467,163Gulf of Mexico Shelf:Natural Gas (Bcf)


48.1


$
467,099Oil (Mbbls)


1,787.7



190,504NGLs (Mbbls)


714.7



39,897Total Natural Gas Equivalent (Bcfe)


63.0


$
697,500Total Production:Natural Gas (Bcf)


79.8


$
770,417Oil (Mbbls)


4,881.0



492,640NGLs (Mbbls)


1,557.9



85,715Total Natural Gas Equivalent (Bcfe)


118.4


$
1,348,772  10




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##### Table of Contents



Estimated
    Proved Reserves
    Year Ended December, 312008


2007


2006Estimated proved oil and natural gas reserves:Natural gas reserves (Bcf)


558.0



448.4



426.7Oil (MMbbls)


43.8



41.9



32.0Natural gas liquids (MMbbls)


25.5



22.6



16.1Total proved oil and natural gas reserves (Bcfe)


973.9



835.8



715.5Total proved developed reserves (Bcfe)


677.7



563.9



408.7PV10 value(1) ($ in millions):Proved developed reserves

$
1,530.1


$
2,389.1


$
1,198.9Proved undeveloped reserves


137.4



675.1



362.6Total PV10 value(1)

$
1,667.5


$
3,064.2


$
1,561.5Standardized measure of discounted future net cash flows

$
1,483.0


$
2,231.9


$
1,239.8Prices used in calculating end of period proved reserve
    measures (excluding effects of hedging):Natural gas ($/MMBtu)

$
5.71


$
6.79


$
5.62Oil ($/bbl)

$
44.61


$
96.01


$
61.06     Estimated ProvedReserve QuantitiesNaturalGas


Oil


NGLs


Total


PV10 Value(1)


StandardizedGeographic Area

(Bcf)


(MMbbls)


(MMbbls)


(Bcfe)


Developed


Undeveloped


Total


Measure(In millions of dollars)


(In millions)Permian Basin


136.2



27.3



22.7



436.6



359.3



(46.3
)


313.0Gulf of Mexico Deepwater


165.9



5.4



0.1



198.7



608.5



25.2



633.7Gulf of Mexico Shelf


255.9



11.1



2.7



338.6



562.3



158.5



720.8Total


558.0



43.8



25.5



973.9



1,530.1



137.4



1,667.5Proved Developed Reserves


420.9



25.9



16.9



677.7














$
1,483.0     (1)
    
    PV10 value (PV10) is not a measure under generally
    accepted accounting principles in the United States of America
    (GAAP) and differs from the corollary GAAP measure
    standardized measure of discounted future net cash
    flows in that PV10 is calculated without regard to future
    income taxes. Management believes that the presentation of PV10
    values is relevant and useful to our investors because it
    presents the discounted future net cash flows attributable to
    our estimated proved reserves independent of our individual
    income tax attributes, thereby isolating the intrinsic value of
    the estimated future cash flows attributable to our reserves.
    Because many factors that are unique to each individual company
    affect the amount of future income taxes to be paid, the use of
    a pre-tax measure provides greater comparability of assets when
    evaluating companies. For these reasons, management uses, and
    believes the industry generally uses, 11




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the PV10 measure in evaluating and comparing acquisition
    candidates and assessing the potential return on investment
    related to investments in oil and natural gas properties.PV10 is not a measure of financial or operating performance
    under GAAP, nor should it be considered in isolation or as a
    substitute for the standardized measure of discounted future net
    cash flows as defined under GAAP. For our presentation of the
    standardized measure of discounted future net cash flows, please
    see Note 16. Supplemental Oil and Gas Reserve and
    Standardized Measure Information in the Notes to the
    Consolidated Financial Statements in Part II, Item 8
    in this Annual Report on
    Form 10-K.
    The table below provides a reconciliation of PV10 to
    standardized measure of discounted future net cash flows.  Year Ended December 31,Non-GAAP Reconciliation:

2008


2007


2006(In millions)Present value of estimated future net revenues (PV10)

$
1,667.5


$
3,064.2


$
1,561.5Future income taxes, discounted at 10%


(184.5
)


(832.3
)


(321.7
)Standardized measure of discounted future net cash flows

$
1,483.0


$
2,231.9


$
1,239.8     Productive
    Wells
    Year Ended December 31,2008


2007Gross


Net


Gross


NetOil


936.0



733.0



939.0



684.0Natural Gas


154.0



90.2



223.0



130.0Total


1,090.0



823.2



1,162.0



814.0   Acreage
    Year Ended December 31, 2008Developed Acres


Undeveloped AcresGross


Net


Gross


NetPermian Basin


72,818



60,801



79,299



48,827Gulf of Mexico Deepwater


102,560



48,618



393,120



224,275Gulf of Mexico Shelf


821,250



433,384



455,153



345,204Other Onshore


1,477



373



5



127Total


998,105



543,176



927,577



618,433  12




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##### Table of Contents



Undeveloped AcreageSubject to Expiration in the Year Ended December 31,2009


2010


2011Gross


Net


Gross


Net


Gross


NetPermian Basin


1,520



928



27,439



14,474



35,624



17,665Gulf of Mexico Deepwater


17,280



14,112



23,040



3,456



40,320



30,960Gulf of Mexico Shelf


83,526



59,646



37,665



25,364



135,087



103,508Total


102,326



74,686



88,144



43,294



211,031



152,133   Drilling
    Activity
    Year Ended December 31,2008


2007


2006Gross


Net


Gross


Net


Gross


NetExploratory wells:Productive


17.00



10.59



11.00



5.96



14.00



5.83Dry


5.00



2.98



8.00



4.91



8.00



3.65Total


22.00



13.57



19.00



10.87



22.00



9.48Development wells:Productive


125.00



88.93



121.00



60.43



168.00



86.23Dry






















Total


125.00



88.93



121.00



60.43



168.00



86.23Total wells:Productive


142.00



99.52



132.00



66.39



182.00



92.06Dry


5.00



2.98



8.00



4.91



8.00



3.65Total


147.00



102.5



140.00



71.30



190.00



95.71   Marketing
    and Customers
    Percentage of TotalRevenues forYear EndedDecember 31,Customer

2008


2007


2006BP Energy


5
%


9
%


14
%ChevronTexaco and affiliates


16
%


23
%


23
%Louis Dreyfus Energy


6
%


9
%


10
%Plains Marketing LP


5
%


7
%


11
%Shell


10
%


10
%


8
%  13




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##### Table of Contents



Title to
    Properties
      Competition
  3-D
  Royalty
    Relief
    Water Depth

Royalty Relief200-400
    meters

no royalty payable on the first 17.5 million BOE produced400-800
    meters

no royalty payable on the first 52.5 million BOE produced800 meters or deeper

no royalty payable on the first 87.5  million BOE produced        14




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Regulation
    Transportation
    and Sale of Natural Gas
   15




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Regulation
    of Production
     16




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Environmental
    and Safety Regulations
    
    require acquisition of a permit before drilling commences;
    restrict the types, quantities and concentrations of various
    materials that can be released into the environment in
    connection with drilling and production activities; and
    limit or prohibit construction or drilling activities in certain
    ecologically sensitive and other protected areas.      Spills and Releases.
   17




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##### Table of Contents



clean-up
  The Oil Pollution Act (OPA). clean-up.
    Water Discharges.
    Air Emissions.
 18




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Massachusetts,
    et al. v. EPA Massachusetts
  Waste Handling.
  Endangered Species Act.
  Safety.
  Employees
    Insurance
    Matters
   19




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##### Table of Contents



60-day
      Glossary
    of Oil and Natural Gas Terms
  Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/about/forms/forms-x.pdf. Forms 10-K Rule 4-10(a)
  3-D
    seismic data. 3-D
  Appraisal well.
  Bbl.
  Bcf.
  Bcfe.
 20




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##### Table of Contents



Block.
  Boe.
  Btu or British Thermal Unit.
  Completion.
  Condensate.
  Conventional shelf well.
  Deep shelf well.
  Deepwater.
  Developed acreage.
  Development costs. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/about/forms/forms-x.pdf.
  Development well.
  Differential. and/or
  Dry hole.
  Dry hole costs.
  Exploitation.
  Exploration costs. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/about/forms/forms-x.pdf.
  Exploratory well.
  Farm-in or farm-out.
  Field. and/or
  Gas.
 21




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Gross acres or gross wells.
  Lease operating expenses.
  Mbbls.
  Mcf.
  Mcfe.
  MMBls.
  MMBtu.
  MMcf.
  MMcfe.
  MMS.
  Net acres or net wells.
  Net revenue interest.
  Operator. and/or and/or
  Payout.
  Plugging and abandonment.
  PV10 or present value of estimated future net
    revenues.
  Productive well.
  Prospect.
  Proved developed non-producing
    reserves.
  Proved developed producing reserves.
 22




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Proved developed reserves. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/about/forms/forms-x.pdf.
  Proved reserves. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/about/forms/forms-x.pdf.
  Proved undeveloped reserves. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/about/forms/forms-x.pdf.
  Recompletion.
  Reservoir. and/or
  Shelf.
  Subsea tieback.
  Subsea trees.
  Standardized measure of discounted future net cash
    flows.
  Undeveloped acreage.
  Working interest.
  Item 1A.
    Risk
    Factors.  Risks
    Relating to the Oil and Natural Gas Industry and to Our
    Business
  The
    recent worldwide financial and credit crisis could lead to an
    extended worldwide economic recession and have a material
    adverse effect on our results of operations and
    liquidity.
     23




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Oil
    and natural gas prices are volatile, and a decline in oil and
    natural gas prices would reduce our revenues, profitability and
    cash flow and impede our growth.
    
    domestic and foreign supply of oil and natural gas;
    price and quantity of foreign imports;
    actions of the Organization of Petroleum Exporting Countries and
    other state-controlled oil companies relating to oil price and
    production controls;
    level of consumer product demand;
    domestic and foreign governmental regulations;
    political conditions in or affecting other oil-producing and
    natural gas-producing countries, including the current conflicts
    in the Middle East and conditions in South America and Russia;
    weather conditions;
    technological advances affecting oil and natural gas consumption;
    overall U.S. and global economic conditions; and
    price and availability of alternative fuels.    Reserve
    estimates depend on many assumptions that may turn out to be
    inaccurate. Any material inaccuracies in these reserve estimates
    or underlying assumptions will affect materially the quantities
    and present value of our reserves, which may lower our bank
    borrowing base and reduce our access to capital.
   24




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In
    estimating future net revenues from estimated proved reserves,
    we assume that future prices and costs are fixed and apply a
    fixed discount factor. If any such assumption or the discount
    factor is materially inaccurate, our revenues, profitability and
    cash flow could be materially less than our
    estimates.
      If oil
    and natural gas prices decrease, we may be required to
    write-down the carrying value and/or the estimates of total
    reserves of our oil and natural gas properties.
  Form 10-K
  We
    need to replace our reserves at a faster rate than companies
    whose reserves have longer production periods. Our failure to
    replace our reserves would result in decreasing reserves and
    production over time.
   25




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Approximately
    50% of our total estimated proved reserves are either developed
    non-producing or undeveloped and those reserves may not
    ultimately be produced or developed.
    Any
    production problems related to our Gulf of Mexico properties
    could reduce our revenue, profitability and cash flow
    materially.
    Our
    exploration and development activities may not be commercially
    successful.
    
    unexpected drilling conditions;
    pressure or irregularities in formations;
    equipment failures or accidents;
    adverse weather conditions, including hurricanes, which are
    common in the Gulf of Mexico during certain times of the year;
    compliance with governmental regulations;
    unavailability or high cost of drilling rigs, equipment or labor;
    reductions in oil and natural gas prices; and
    limitations in the market for oil and natural gas.    Our
    exploratory drilling projects are based in part on seismic data,
    which is costly and cannot ensure the commercial success of the
    project.
  3-D 3-D 3-D
 26




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##### Table of Contents



Oil
    and gas drilling and production involve many business and
    operating risks, any one of which could reduce our levels of
    production, cause substantial losses or prevent us from
    realizing profits.
    
    fires;
    explosions;
    blow-outs and surface cratering;
    uncontrollable flows of underground natural gas, oil and
    formation water;
    natural events and natural disasters, such as loop currents, and
    hurricanes and other adverse weather conditions;
    pipe or cement failures;
    casing collapses;
    lost or damaged oilfield drilling and service tools;
    abnormally pressured formations; and
    environmental hazards, such as natural gas leaks, oil spills,
    pipeline ruptures and discharges of toxic gases.  clean-up
  Our
    offshore operations involve special risks that could increase
    our cost of operations and adversely affect our ability to
    produce oil and natural gas.
    Form 10-K
  Our
    hedging transactions may not protect us adequately from
    fluctuations in oil and natural gas prices and may limit future
    potential gains from increases in commodity prices or result in
    losses.
   27




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##### Table of Contents



Counterparty
    contract default could have an adverse effect on
    us.
    Properties
    we acquire may not produce as projected, and we may be unable to
    determine reserve potential, identify liabilities associated
    with the properties or obtain protection from sellers against
    such liabilities.
    Market
    conditions or transportation impediments may hinder our access
    to oil and natural gas markets or delay our
    production.
    The
    unavailability or high cost of drilling rigs, equipment,
    supplies or personnel could affect adversely our ability to
    execute on a timely basis our exploration and development plans
    within budget, which could have a material adverse effect on our
    financial condition and results of operations.
   28




---



##### Table of Contents



Competition
    in the oil and natural gas industry is intense and many of our
    competitors have resources that are greater than ours, giving
    them an advantage in evaluating and obtaining properties and
    prospects.
    Financial
    difficulties encountered by our farm-out partners, working
    interest owners or third-party operators could adversely affect
    our ability to timely complete the exploration and development
    of our prospects.
    We
    cannot control the timing or scope of drilling and development
    activities on properties we do not operate, and therefore we may
    not be in a position to control the associated costs or the rate
    of production of the reserves.
    Compliance
    with environmental and other government regulations could be
    costly and could affect production negatively.
    clean-up
 29




---



##### Table of Contents



Compliance
    with MMS regulations could significantly delay or curtail our
    operations or require us to make material expenditures, all of
    which could have a material adverse effect on our financial
    condition or results of operations.
    Our
    insurance may not fully protect us against our business and
    operating risks.
      Risks
    Relating to Significant Acquisitions and Other Strategic
    Transactions
  The
    evaluation and integration of significant acquisitions may be
    difficult.
    
    diversion of our managements attention to evaluating,
    negotiating and integrating significant acquisitions and
    strategic transactions; 30




---



##### Table of Contents




    challenge and cost of integrating acquired operations,
    information management and other technology systems and business
    cultures with those of ours while carrying on our ongoing
    business;
    our exposure to unforeseen liabilities of acquired businesses,
    operations or properties;
    possibility of faulty assumptions underlying our expectations,
    including assumptions relating to reserves, future production,
    volumes, revenues, costs and synergies;
    difficulty associated with coordinating geographically separate
    organizations; and
    challenge of attracting and retaining personnel associated with
    acquired operations.    If we
    fail to realize the anticipated benefits of a significant
    acquisition, our results of operations may be lower than we
    expect.
    Financing
    and other liabilities of a significant acquisition may adversely
    affect our financial condition and results of operations or be
    dilutive to stockholders.
    Risks
    Relating to Financings
  We
    will require additional capital to fund our future activities.
    If we fail to obtain additional capital, we may not be able to
    implement fully our business plan, which could lead to a decline
    in reserves.
     31




---



##### Table of Contents



We may
    not be able to generate enough cash flow to meet our debt
    obligations.
    Our
    debt level and the covenants in the agreements governing our
    debt could negatively impact our financial condition, results of
    operations and business prospects and prevent us from fulfilling
    our obligations under our debt obligations.
    
    making it more difficult for us to satisfy our debt obligations
    and increasing the risk that we may default on our debt
    obligations;
    requiring us to dedicate a substantial portion of our cash flow
    from operations to required payments on debt, thereby reducing
    the availability of cash flow for working capital, capital
    expenditures and other general business activities;
    limiting our ability to obtain additional financing in the
    future for working capital, capital expenditures, acquisitions
    and general corporate and other activities;
    limiting managements discretion in operating our business;
    limiting our flexibility in planning for, or reacting to,
    changes in our business and the industry in which we operate;
    detracting from our ability to withstand, successfully, a
    downturn in our business or the economy generally;
    placing us at a competitive disadvantage against less leveraged
    competitors; and
    making us vulnerable to increases in interest rates, because
    debt under our bank credit facility will, in some cases, vary
    with prevailing interest rates.       32




---



##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.      Item 3.
    Legal
    Proceedings.    Kerr-McGee
    Oil & Gas Corp. v. Allred No. 08-30069 Kerr-McGee Kerr-McGee Oil & Gas
    Corp. v. Allred Kerr-McGee Oil & Gas Corp. v.
    U.S. Dept of Interior
  and/or
 33




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders.    Executive
    Officers of the Registrant
    Name

Age

Position with CompanyScott D. Josey


51


Chairman of the Board, Chief Executive Officer and PresidentDalton F. Polasek


57


Chief Operating OfficerJohn H. Karnes


47


Senior Vice President, Chief Financial Officer and TreasurerMike C. van den Bold


46


Senior Vice President and Chief Exploration OfficerJudd A. Hansen


53


Senior Vice President  Shelf and OnshoreTeresa G. Bushman


59


Senior Vice President, General Counsel and SecretaryCory L. Loegering


53


Senior Vice President  DeepwaterJesus G. Melendrez


50


Senior Vice President  Corporate  DevelopmentRichard A. Molohon


54


Vice President  Reservoir EngineeringMichael C. McCullough


63


Vice President  Acquisitions and DivestituresKenneth E. Moore, Jr.


62


Vice President  Onshore Land   Scott D. Josey
  Dalton F. Polasek
  John H. Karnes
 34




---



##### Table of Contents



Mike C. van den Bold
  Judd A. Hansen
  Teresa G. Bushman
  Cory L. Loegering
  Jesus G. Melendrez
  Richard A. Molohon
  Michael C. McCullough
 35




---



##### Table of Contents



Kenneth E. Moore, Jr.
 PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity
    Securities.    Year


Period Ended

High


Low2007


First Quarter

$
20.33


$
16.95Second Quarter


25.65



19.30Third Quarter


25.26



18.87Fourth Quarter


25.00



20.672008


First Quarter

$
29.60


$
23.69Second Quarter


37.01



26.84Third Quarter


36.45



19.77Fourth Quarter


19.54



7.48     Form 10-K
 36




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##### Table of Contents



Performance
    Graph
    COMPARISON
    OF CUMULATIVE TOTAL RETURN AMONG
    MARINER ENERGY, INC., THE S&P 500 INDEX AND A DEFINED PEER
    GROUP(1),(2)
  
    Cumulative Total Return(1)Initial

12/31/06

12/31/07

12/31/08Mariner Energy, Inc.

$
100.00


$
96.69


$
112.88


$
50.32S&P 500 Index

$
100.00


$
110.18


$
114.07


$
70.17Peer Group(2)

$
100.00


$
97.09


$
103.74


$
37.16   (1)
    Total return assuming reinvestment of dividends. Assumes $100
    invested on March 3, 2006 in each of Mariners common
    stock, the S&P 500 Index, and a peer group of companies.
    Initial data is taken from March 3, 2006, the date on which
    Mariners common stock began regular way trading on the
    NYSE.(2)
    Composed of the following seven independent oil and gas
    exploration and production companies: ATP Oil &
    Gas Corporation, Callon Petroleum Co., Energy Partners, Ltd.,
    McMoRan Exploration Co., Plains Exploration &
    Production Company, Stone Energy Corporation, and W&T
    Offshore, Inc. This peer group differs by one member from the
    peer group for the stock performance graph included in our 2007
    annual report. McMoRan Exploration Co. replaces Bois dArc
    Energy, Inc. which ceased to exist in 2008 when it was merged
    into a wholly-owned subsidiary of peer group member Stone Energy
    Corporation.  The above information under the caption Performance
    Graph shall not be deemed to be soliciting
    material and shall not be deemed to be incorporated by
    reference by any general statement incorporating by reference
    this
    Form 10-K
    into any filing under the Securities Act of 1933, as amended, or
    the Securities Exchange Act of 1934, as amended, and shall not
    otherwise be deemed filed under such acts.
 37




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##### Table of Contents



Issuer
    Purchases of Equity Securities
  Total Numberof Shares


Maximum Number(or Units)


(or ApproximatePurchased as


Dollar Value) ofTotal Number


Average


Part of Publicly


Shares (or Units)of Shares


Price Paid


Announced


that May Yet Be(or Units)


per Share


Plans or


Purchased Under thePeriod

Purchased


(or Unit)


Programs


Plans or ProgramsOctober 1, 2008 to October 31, 2008(1)


3,235


$
16.31







November 1, 2008 to November 30, 2008(1)





$








December 1, 2008 to December 31, 2008(1)


2,639


$
8.96







Total


5,874


$
13.01







     (1)
    
    These shares were withheld upon the vesting of employee
    restricted stock grants in connection with payment of required
    withholding taxes. 38




---



##### Table of Contents



Item 6.
    Selected
    Financial
    Data.    Form 10-K,
  Post-2004 Merger


Pre-2004 MergerPeriod from


Period fromMarch 3,


January 1,through


throughYear Ended December 31,


December 31,


March 2,2008


2007


2006


2005


2004


2004(In thousands, except per share data)Statement of Operations Data:Total revenues(1)

$
1,300,507


$
874,765


$
659,505


$
199,710


$
174,423


$
39,764Operating expenses(2)


264,832



174,522



105,739



32,218



23,322



5,191Depreciation, depletion and amortization


467,265



384,321



292,180



59,469



54,281



10,630General and administrative expense


60,613



42,151



33,622



36,766



7,641



1,131Operating (loss) income(3)


(381,712
)


268,710



227,470



69,168



88,222



22,812Interest expense, net of amounts capitalized


56,398



54,665



39,649



8,172



6,045



5(Benefit) Provision for income taxes


(48,223
)


77,324



67,344



21,294



28,783



8,072Net (loss) income


(388,713
)


143,934



121,462



40,481



53,619



14,826Earnings per common share:Net (loss) income per common share  basic

$
(4.44
)

$
1.68


$
1.59


$
1.24


$
1.80


$
0.50Net (loss) income per common share  diluted

$
(4.44
)

$
1.67


$
1.58


$
1.20


$
1.80


$
0.50    (1)
    
    Includes effects of hedging.(2)
    
    Operating expenses include lease operating expense, severance
    and ad valorem taxes and transportation expenses.(3)
    
    2008 includes $575.6 million of full cost ceiling test
    impairment, $295.6 million of goodwill impairment and
    $15.3 million of other property impairment.  39




---



##### Table of Contents



December 31,2008


2007


2006


2005


2004(In thousands)Balance Sheet Data:(1)Current Assets

$
374,953


$
248,980


$
306,018


$
141,432


$
65,746Current Liabilities


425,564



315,189



239,727



204,006



101,412Working capital deficit

$
(50,611
)

$
(66,209
)

$
66,291


$
(62,574
)

$
(35,666
)Property and equipment, net


2,929,877



2,420,194



2,012,062



515,943



303,773Total assets


3,392,793



3,083,635



2,680,153



665,536



376,019Long-term debt, less current maturities


1,170,000



779,000



654,000



156,000



115,000Stockholders equity


1,120,320



1,391,018



1,302,591



213,336



133,907     (1)
    
    Balance sheet data as of December 31, 2004 reflects
    purchase accounting adjustments to oil and gas properties, total
    assets and stockholders equity resulting from the
    acquisition of our former indirect parent on March 2, 2004.  Post-2004 Merger


Pre-2004 MergerPeriod from


Period fromMarch 3,


January 1,through


throughYear Ended December 31,


December 31,


March 2,2008


2007


2006


2005


2004


2004(In thousands)Cash Flow Data:Net cash provided by operating activities

$
862,017


$
536,113


$
277,161


$
165,444


$
135,243


$
20,295Net cash used in investing activities

$
(1,264,784
)

$
(643,779
)

$
(561,390
)

$
(247,799
)

$
(132,977
)

$
(15,341
)Net cash provided (used) by financing activities

$
387,429


$
116,676


$
289,252


$
84,370


$
(64,853
)

$
   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Business
    Overview
       40




---



##### Table of Contents



Acquisitions.
    
    Ryder Scott Company, L.P. estimated proved oil and gas reserves
    of 49.7 Bcfe, 93% of which are developed;
    interests in 36 (16 net) producing wells producing approximately
    53 MMcfe per day net to MGOMs interest, 76% of which
    Mariner now operates;
    gas gathering systems comprised of 31 miles of
    10-inch,
    12-inch and
    16-inch
    pipelines; and
    approximately 106,000 net acres of developed leasehold and
    256,000 net acres of undeveloped leasehold.       41




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##### Table of Contents



Results
    of Operations
  Year
    Ended December 31, 2008 compared to Year Ended
    December 31, 2007
  Operating
    and Financial Results for the Year Ended December 31,
    2008
    Compared to the Year Ended December 31, 2007
  Year Ended December 31,


Increase2008


2007


(Decrease)


% change(In thousands, except average sales price)Summary Operating Information:Net Production:Natural gas (MMcf)


79,756



67,793



11,963



18
%Oil (Mbbls)


4,881



4,214



667



16
%Natural gas liquids (Mbbls)


1,558



1,200



358



30
%Total natural gas equivalent (MMcfe)


118,389



100,273



18,116



18
%Average daily production (MMcfe per day)


323



275



48



18
%Hedging Activities:Natural gas revenue gain (loss)

$
(28,047
)

$
58,465


$
(86,512
)


(148
)%Oil revenue loss


(72,762
)


(13,388
)


(59,374
)


443
%Total hedging revenue gain (loss)

$
(100,809
)

$
45,077


$
(145,886
)


(324
)%Average Sales Prices:Natural gas (per Mcf) realized(1)

$
9.31


$
7.88


$
1.43



18
%Natural gas (per Mcf) unhedged


9.66



7.02



2.64



38
%Oil (per Bbl) realized(1)


86.02



67.50



18.52



27
%Oil (per Bbl) unhedged


100.93



70.68



30.25



43
%Natural gas liquids (per Bbl) realized(1)


55.02



45.16



9.86



22
%Natural gas liquids (per Bbl) unhedged


55.02



45.16



9.86



22
%Total natural gas equivalent ($/Mcfe) realized(1)


10.54



8.71



1.83



21
%Total natural gas equivalent ($/Mcfe) unhedged


11.39



8.26



3.13



38
%Summary of Financial Information:Natural gas revenue

$
742,370


$
534,537


$
207,833



39
%Oil revenue


419,878



284,405



135,473



48
%Natural gas liquids revenue


85,715



54,192



31,523



58
%Other revenues


52,544



1,631



50,913



3,122
%Lease operating expense


231,645



152,627



79,018



52
%Severance and ad valorem taxes


18,191



13,101



5,090



39
%Transportation expense


14,996



8,794



6,202



71
%General and administrative expense


60,613



42,151



18,462



44
%Depreciation, depletion and amortization


467,265



384,321



82,944



22
%Full cost ceiling test impairment


575,607







575,607



N/AGoodwill impairment


295,598







295,598



N/AOther property impairment


15,252







15,252



N/ANet interest expense


56,398



53,262



3,136



6
%Income (Loss) before taxes and minority interest


(436,748
)


221,259



(658,007
)


(297
)%(Benefit) Provision for income taxes


(48,223
)


77,324



(125,547
)


(162
)%Net income (loss)


(388,713
)


143,934



(532,647
)


(370
)%Average Unit Costs per Mcfe:Lease operating expense

$
1.96


$
1.52


$
0.44



29
%Severance and ad valorem taxes


0.15



0.13



0.02



15
%Transportation expense


0.13



0.09



0.04



44
%General and administrative expense


0.51



0.42



0.09



21
%Depreciation, depletion and amortization


3.95



3.83



0.12



3
%     (1)
    
    Average realized prices include the effects of hedges. 42




---



##### Table of Contents



Net loss
  Net production
      Natural gas, oil and NGL revenues
      HedgingRealized


Unhedged


(Loss) Gain


% ChangeYear Ended December 31, 2008:Natural gas (per Mcf)

$
9.31


$
9.66


$
(0.35
)


(4
)%Oil (per Bbl)


86.02



100.93



(14.91
)


(15
)%Year Ended December 31, 2007:Natural gas (per Mcf)

$
7.88


$
7.02


$
0.86



12
%Oil (per Bbl)


67.50



70.68



(3.18
)


(4
)%   Other revenues
  Lease operating expense start-up per-unit
  Severance and ad valorem tax
 43




---



##### Table of Contents



Transportation expense
  General and administrative expense Form 10-K
  Depreciation, depletion, and amortization expense start-up
  Full cost ceiling test impairment
  Goodwill impairment
  Other property impairment
  Net interest expense
  Income before taxes and minority interest
  Provision for income taxes
 44




---



##### Table of Contents



Year
    Ended December 31, 2007 compared to Year Ended
    December 31, 2006
  Operating and Financial Results for the Year Ended
    December 31, 2007
 Compared to the Year Ended December 31, 2006
  Year Ended December 31,


Increase2007


2006


(Decrease)


% change(In thousands, except average sales price)Summary Operating Information:Net Production:Natural gas (MMcf)


67,793



56,064



11,729



21
%Oil (Mbbls)


4,214



3,237



977



30
%Natural gas liquids (Mbbls)


1,200



838



362



43
%Total natural gas equivalent (MMcfe)


100,273



80,512



19,761



25
%Average daily production (MMcfe per day)


275



221



54



25
%Hedging Activities:Natural gas revenue gain

$
58,465


$
32,881


$
25,584



78
%Oil revenue gain (loss)


(13,388
)


90



(13,478
)


(100
)%Total hedging revenue gain

$
45,077


$
32,971


$
12,106



37
%Average Sales Prices:Natural gas (per Mcf) realized(1)

$
7.88


$
7.37


$
0.51



7
%Natural gas (per Mcf) unhedged


7.02



6.78



0.24



4
%Oil (per Bbl) realized(1)


67.50



62.63



4.87



8
%Oil (per Bbl) unhedged


70.68



62.61



8.07



13
%Natural gas liquids (per Bbl) realized(1)


45.16



48.37



(3.21
)


(7
)%Natural gas liquids (per Bbl) unhedged


45.16



48.37



(3.21
)


(7
)%Total natural gas equivalent ($/Mcfe) realized(1)


8.71



8.15



0.56



7
%Total natural gas equivalent ($/Mcfe) unhedged


8.26



7.74



0.52



7
%Summary of Financial Information:Natural gas revenue

$
534,537


$
412,967


$
121,570



29
%Oil revenue


284,405



202,744



81,661



40
%Natural gas liquids revenue


54,192



40,507



13,685



34
%Other revenues


1,631



3,287



(1,656
)


(50
)%Lease operating expense


152,627



91,592



61,035



67
%Severance and ad valorem taxes


13,101



9,070



4,031



44
%Transportation expense


8,794



5,077



3,717



73
%General and administrative expense


42,151



33,622



8,529



25
%Depreciation, depletion and amortization


384,321



292,180



92,141



32
%Net interest expense


53,262



38,664



14,598



38
%Income before taxes and minority interest


221,259



188,806



32,453



17
%Provision for income taxes


77,324



67,344



9,980



15
%Net income


143,934



121,462



22,472



19
%Average Unit Costs per Mcfe:Lease operating expense

$
1.52


$
1.14


$
0.38



33
%Severance and ad valorem taxes


0.13



0.11



0.02



18
%Transportation expense


0.09



0.06



0.03



50
%General and administrative expense


0.42



0.42







Depreciation, depletion and amortization


3.83



3.63



0.20



6
%     (1)
    
    Average realized prices include the effects of hedges.  Net income
  Net production
 45




---



##### Table of Contents



Natural gas, oil and NGL revenues
      HedgingRealized


Unhedged


Gain (Loss)


% ChangeYear Ended December 31, 2007:Natural gas (per Mcf)

$
7.88


$
7.02


$
0.86



12
%Oil (per Bbl)


67.50



70.68



(3.18
)


(4
)%Year Ended December 31, 2006:Natural gas (per Mcf)

$
7.37


$
6.78


$
0.59



9
%Oil (per Bbl)


62.63



59.68



2.95



5
%   Lease operating expense year-over-year
  Severance and ad valorem taxes
  Transportation expense
  Depreciation, depletion and amortization
    (DD&A) expense unit-of-production
 46




---



##### Table of Contents



General and administrative expense
      Net interest expense
  Income before taxes and minority interest
  Provision for income taxes
  Liquidity
    and Capital Resources
  Financial
    Condition
  Years Ended December 31,2008


2007(In thousands, except ratios)Current ratio(1)


0.9 to 1



0.8 to 1Working capital deficit(2)


(50,611
)


(66,209
)Total debt


1,170,000



779,000Operating cash flow(3)


885,887



622,610Interest expense, net of capitalization


56,398



54,665Fixed-charge coverage ratio(4)


(5.63
)


4.93Total cash and marketable securities less debt


(1,166,749
)


(760,411
)Stockholders equity


1,120,320



1,391,018Total liabilities to equity


2.03 to 1



1.22 to 1     (1)
    
    Current ratio is current assets divided by current liabilities.(2)
    
    Working capital deficit is the difference between current assets
    and current liabilities.(3)
    
    Operating cash flow is net income before allowance for doubtful
    accounts, deferred income tax, DD&A, amortization of
    deferred financing costs, ineffectiveness of derivative
    instruments, share-based compensation expense, impairments and
    minority interest. See the following Reconciliation of
    Non-GAAP Measure: Operating Cash Flow. 47




---



##### Table of Contents



(4)
    
    Fixed-charge coverage ratio is net earnings before taxes,
    minority interest and fixed charges divided by fixed charges
    (interest expense, net of capitalization plus amortization of
    discounts.)  Reconciliation
    of Non-GAAP Measure: Operating Cash Flow
    Years Ended December 31,2008


2007(In thousands)Cash flow from operating activities (GAAP)

$
862,017


$
536,113Changes in operating assets and liabilities


23,870



86,497Operating cash flow (Non-GAAP)

$
885,887


$
622,610   2008 Cash
    Flows
    Years Ended December 31,2008


2007


2006(In millions)Cash payments for interest

$
62.2


$
49.1


$
28.8Cash payments for income taxes


2.9


$
0.6


$
           2008 Uses of Capital.
  
    funding capital expenditures (excluding hurricane repairs and
    acquisitions) of approximately $1,005.7 million;
    funding hurricane repairs and hurricane-related abandonment
    expenditures of approximately $55.6 million;
    paying interest of approximately $62.2 million; 48




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##### Table of Contents




    funding the purchase of MGOM for approximately
    $223.5 million; and
    paying routine operating and administrative expenses.  2008 Capital Expenditures.
  Year Ended December 31,2008


2007(In thousands)Capital expenditures:Oil and natural gas development

$
588,456


$
448,577Oil and natural gas property acquisitions


302,629



122,895Oil and natural gas exploration


270,767



182,645Leasehold acquisitions


152,567



24,189Corporate expenditures and other


66,668



15,952Proceeds from property conveyances(1)






(4,116
)Total capital expenditures, net of proceeds from property
    conveyances

$
1,381,087


$
790,142     (1)
    
    Proceeds from sale of Cottonwood project in 2006 (Garden Banks
    244) were recorded as restricted cash of which
    $5.0 million remained as of December 31, 2007 (Refer
    to Restricted Cash under
    Note 1.  Summary of Significant Accounting
    Policies in the Notes to the Consolidated Financial
    Statements in Part II, Item 8 of this Annual Report on
    Form 10-K).  2008 Hurricane Expenditures.
  2008 Sources of Capital.
  
    cash flow from operations;
    borrowings under our revolving bank credit facility; and
    insurance proceeds.  Bank Credit Facility
   49




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##### Table of Contents




    maintain a ratio of consolidated current assets plus the unused
    borrowing base to consolidated current liabilities of not less
    than 1.0 to 1.0; and
    maintain a ratio of total debt to EBITDA (as defined in the
    credit agreement) of not more than 2.5 to 1.0.    Senior Notes
  
    $300 million principal amount of
    71/2% Senior
    Notes due 2013 issued in March 2006 (the
    71/2% Notes)
    $300 million principal amount of 8% Senior Notes due
    2017 issued in April 2007 (the 8% Notes)      1 2 1 2
 50




---



##### Table of Contents



1 2
  71/2% Notes

8% NotesApril 15, 2010 at 103.750%

May 15, 2012 at 104.000%April 15, 2011 at 101.875%

May 15, 2013 at 102.667%April 15, 2012 and thereafter at 100.000%

May 15, 2014 at 101.333%May 15, 2015 and thereafter at 100.000%   1 2 1 2
      
    make investments;
    incur additional indebtedness or issue preferred stock;
    create certain liens;
    sell assets;
    enter into agreements that restrict dividends or other payments
    from its subsidiaries to itself;
    consolidate, merge or transfer all or substantially all of its
    assets;
    engage in transactions with affiliates;
    pay dividends or make other distributions on capital stock or
    subordinated indebtedness; and
    create unrestricted subsidiaries.  1 2
  Future Uses of Capital.
  
    funding future capital expenditures;
    funding hurricane repairs and hurricane-related abandonment
    operations;
    financing any future acquisitions that Mariner may identify;
    paying routine operating and administrative expenses; and
    paying other commitments comprised largely of cash settlement of
    hedging obligations and debt service.  2009 Capital Expenditures.
 51




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##### Table of Contents



Form 10-K
    Obligations
    and Commitments
  Consolidated Contractual Obligations
  Payments Due By PeriodTotal


2009


2010-2011


2012-2013


Thereafter(In thousands)Debt obligations(1)

$
1,170,000


$



$



$
870,000


$
300,000Interest obligations(2)


355,523



65,367



130,734



78,545



80,877Operating leases


21,646



2,240



5,031



4,498



9,877Abandonment liabilities


408,244



82,364



73,393



83,205



169,282Seismic obligations


3,000



2,333



667







Capital accrual obligations


195,833



195,833











OIL Theoretical Withdrawal(3)


36,000



6,391



14,586



15,023



Rig commitment


183,882



124,450



59,432







Other liabilities(4)


99,091



99,091











Total contractual cash commitments

$
2,473,219


$
578,069


$
283,843


$
1,051,271


$
560,036     (1)
    
    As of December 31, 2008, we incurred debt obligations under
    our bank credit facility, the Notes.(2)
    
    Interest obligations represent interest due on the bank credit
    facility and the Notes at 7.5% and 8%. Future interest
    obligations under our bank credit facility are uncertain, due to
    the variable interest rate on fluctuating balances. Based on a
    3.31% weighted average interest rate on amounts outstanding
    under our bank credit facility as of December 31, 2008, our
    cash payments for interest would be $18.9 million annually
    for 2009 through 2011 and $1.6 million in 2012.(3)
    
    We accrued approximately $36.0 million as of
    December 31, 2008, for an insurance premium contingency
    related to our membership in OIL. As part of our membership, we
    are obligated to pay a withdrawal premium if we elect to
    withdraw from OIL. We do not anticipate withdrawing from OIL;
    however, due to the contingency, OIL calculates a potential
    withdrawal premium annually based on past losses and we accrue a
    liability for the potential premium. OIL requires smaller
    members to provide a letter of credit or other acceptable
    security in favor of OIL to secure payment of the withdrawal
    premium. Acceptable security has included a letter of credit or
    a security agreement pursuant to which a member grants OIL a
    security interest in certain claim proceeds payable by OIL to
    the member. We anticipate that we will enter into such a
    security agreement, granting to OIL a security interest in a
    portion of our Hurricane Ike claim proceeds payable by OIL. We
    expect to have the ability to replace the security agreement
    with a letter of credit or other acceptable security in favor of
    OIL. 52




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##### Table of Contents



(4)
    
    Other liabilities include accrued LOE of $30.9 million,
    accrued liabilities of $11.0 million, gas balancing of
    $15.9 million, oil and gas payable of $24.5 million,
    accrued compensation of $10.7 million, other G&A of
    $4.2 million and other liabilities for $1.9 million.  Adequacy
    of Capital Sources and Liquidity
  Future Capital Resources.
  
    cash flow from operations in future periods;
    proceeds under our bank credit facility;
    proceeds from insurance policies relating to hurricane
    repairs; and
    proceeds from future capital markets transactions as needed.        Off-Balance
    Sheet Arrangements
    Fair
    Value Measurement
   53




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
  Form 10-K.
  Oil
    and Gas Properties
   54




---



##### Table of Contents



Estimated
    Proved Reserves
    Unproved
    Properties
  3-D
 55




---



##### Table of Contents



Abandonment
    Liability
      Other
    Property
  Accounting for the
    Impairment or Disposal of Long-Lived Assets
  Goodwill
    Form 10-K.
   56




---



##### Table of Contents



Income
    Taxes
        Derivative
    Financial Instruments
       57




---



##### Table of Contents



Revenue
    Recognition
    over-and-under
  Share-Based
    Compensation Expense
    Recent
    Accounting Pronouncements
  Modernization of Oil and Gas Reporting Forms 10-K
 58




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##### Table of Contents




    Oil and gas reserves must be reported using the average price
    over the prior 12 month period, rather than year-end prices;
    Companies will be allowed to report, on an optional basis,
    probable and possible reserves;
    Non-traditional reserves, such as oil and gas extracted from
    coal and shales, will be included in the definition of oil
    and gas producing activities;
    Companies will be permitted to use new technologies to determine
    proved reserves, as long as those technologies have been
    demonstrated empirically to lead to reliable conclusions with
    respect to reserve volumes;
    Companies will be required to disclose, in narrative form,
    additional details on their proved undeveloped reserves (PUDs),
    including the total quantity of PUDs at year end, any material
    changes to PUDs that occurred during the year, investments and
    progress made to convert PUDs to developed oil and gas reserves
    and an explanation of the reasons why material concentrations of
    PUDs in individual fields or countries have remained undeveloped
    for five years or more after disclosure as PUDs;
    Companies will be required to report the qualifications and
    measures taken to assure the independence and objectivity of any
    business entity or employee primarily responsible for preparing
    or auditing the reserves estimates.  Form 10-K
  No. 157-3, (FSP 157-3). FSP 157-3 FSP 157-3
    No. 142-3, (FSP 142-3). FSP 142-3 FSP 142-3 FSP 142-3
 59




---



##### Table of Contents



No. FAS 157-2,
 60




---



##### Table of Contents



Form 10-K).
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market
    Risk.  Commodity
    Prices and Related Hedging Activities
        Year Ended December 31,2008


2007


2006(In thousands)Cash (Loss) Gain on Settlements

$
(98,814
)

$
46,732


$
11,273(Loss) Gain on Hedge Ineffectiveness(1)


(1,995
)


(1,655
)


4,175Non-cash Gain on hedges acquired(2)










17,523Total

$
(100,809
)

$
45,077


$
32,971     (1)
    
    Unrealized (loss) gain recognized in natural gas revenue related
    to the ineffective portion of open contracts that are not
    eligible for deferral under SFAS 133 Accounting for
    Derivative Instruments and Hedging Activities, due
    primarily to the basis differentials between the contract price
    and the indexed price at the point of sale.(2)
    
    In 2006, relating to the hedges acquired through the Forest
    transaction. 61




---



##### Table of Contents



Weighted-Average


Fair ValueFixed Price Swaps

Quantity


Fixed Price


Asset(In thousands)Natural Gas (MMbtus)January 1  December 31, 2009


31,642,084


$
8.48


$
74,709Crude Oil (Bbls)January 1  December 31, 2009


2,172,210


$
76.15



47,220Total









$
121,929     Weighted-Average


Fair ValueFixed Price Swaps

Quantity


Fixed Price


Asset/(Liability)(In thousands)Natural Gas (MMBtus)January 1  December 31, 2008


40,583,847


$
8.46


$
27,672January 1  December 31, 2009


31,642,084


$
8.48



(1,494
)Crude Oil (Bbls)January 1  December 31, 2008


2,263,552


$
78.99



(31,219
)January 1  December 31, 2009


2,172,210


$
76.15



(23,158
)Total









$
(28,199
)   Fair ValueCostless Collars

Quantity


Floor


Cap


Asset/(Liability)(In thousands)Natural Gas (MMBtus)January 1  December 31, 2008


12,347,000


$
7.83


$
14.60


$
7,201Crude Oil (Bbls)January 1  December 31, 2008


1,195,495


$
61.66


$
86.81



(11,259
)Total













$
(4,058
)     Weighted AveragePeriod

Instrument Type


Quantity


PriceNatural Gas (MMbtus) 2009January 1  December 31


Fixed Price Swaps



19,665,000


$
6.19 FixedCrude Oil (Bbls) 2009February 1  December 31


Fixed Price Swaps



977,047


$
51.46 Fixed      62




---



##### Table of Contents



Interest
    Rates
    Item 8.
    Financial
    Statements and Supplementary
    Data.  Index to
    Financial Statements
  Managements Report on Internal Control over
    Financial Reporting


64Report of Independent Registered Public
    Accounting Firm


65Consolidated Balance Sheets at December 31,
    2008 and 2007


66Consolidated Statements of Operations for the
    years ended December 31, 2008, 2007 and 2006


67Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2008, 2007 and
    2006


68Consolidated Statements of Cash Flows for the
    years ended December 31, 2008, 2007 and 2006


69Notes to the Consolidated Financial Statements


70   63




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##### Table of Contents



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING    Internal Control  Integrated Framework
  /s/  SCOTT
    D. JOSEY

/s/  JOHN
    H. KARNESScott D. Josey,
    Chairman of the Board,
    Chief Executive Officer and President

John H. Karnes,
    Senior Vice President,
    Chief Financial Officer and Treasurer     64




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 DELOITTE &
    TOUCHE LLP
    65




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##### Table of Contents



MARINER
    ENERGY, INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,


December 31,2008


2007(In thousands, except share data)Current Assets:Cash and cash equivalents

$
3,251


$
18,589Receivables, net of allowances of $3,868 and $2,449, respectively


219,920



157,774Insurance receivables


13,123



26,683Derivative financial instruments


121,929



11,863Intangible assets


2,353



17,209Prepaid expenses and other


14,377



10,630Deferred tax asset






6,232Total current assets


374,953



248,980Property and Equipment:Proved oil and gas properties, full-cost method


4,448,146



3,118,273Unproved properties, not subject to amortization


201,121



40,455Total oil and gas properties


4,649,267



3,158,728Other property and equipment


53,115



15,545Accumulated depreciation, depletion and amortization:Proved oil and gas properties


(1,767,028
)


(751,127
)Other properties


(5,477
)


(2,952
)Total accumulated depreciation, depletion and amortization


(1,772,505
)


(754,079
)Total property and equipment, net


2,929,877



2,420,194Restricted Cash






5,000Goodwill






295,598Insurance Receivables


22,132



56,924Derivative Financial Instruments






691Other Assets, net of amortization


65,831



56,248TOTAL ASSETS

$
3,392,793


$
3,083,635Current Liabilities:Accounts payable

$
3,837


$
1,064Accrued liabilities


107,815



96,936Accrued capital costs


195,833



159,010Deferred income tax


23,148



Abandonment liability


82,364



30,985Accrued interest


12,567



7,726Derivative financial instruments






19,468Total current liabilities


425,564



315,189Long-Term Liabilities:Abandonment liability


325,880



191,021Deferred income tax


319,766



343,948Derivative financial instruments






25,343Long-term debt


1,170,000



779,000Other long-term liabilities


31,263



38,115Total long-term liabilities


1,846,909



1,377,427Commitments and Contingencies (see Note 8)Minority Interest






1Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
    authorized, no shares issued and outstanding at
    December 31, 2008 and December 31, 2007






Common stock, $.0001 par value; 180,000,000 shares
    authorized, 88,846,073 shares issued and outstanding at
    December 31, 2008; 180,000,000 shares authorized,
    87,229,312 shares issued and outstanding at
    December 31, 2007


9



9Additional
    paid-in-capital


1,071,347



1,054,089Accumulated other comprehensive income/(loss)


78,181



(22,576
)Accumulated retained earnings


(29,217
)


359,496Total stockholders equity


1,120,320



1,391,018TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
3,392,793


$
3,083,635   The accompanying Notes to the Consolidated Financial
    Statements
 are an integral part of these financial statements
 66




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##### Table of Contents



MARINER
    ENERGY, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2008


2007


2006(In thousands except share data)Revenues:Natural gas

$
742,370


$
534,537


$
412,967Oil


419,878



284,405



202,744Natural gas liquids


85,715



54,192



40,507Other revenues


52,544



1,631



3,287Total revenues


1,300,507



874,765



659,505Costs and Expenses:Lease operating expense


231,645



152,627



91,592Severance and ad valorem taxes


18,191



13,101



9,070Transportation expense


14,996



8,794



5,077General and administrative expense


60,613



42,151



33,622Depreciation, depletion and amortization


467,265



384,321



292,180Full cost ceiling test impairment


575,607







Goodwill impairment


295,598







Other property impairment


15,252







Other miscellaneous expense


3,052



5,061



494Total costs and expenses


1,682,219



606,055



432,035OPERATING (LOSS) INCOME


(381,712
)


268,710



227,470Other Income/(Expenses):Interest income


1,362



1,403



985Interest expense, net of amounts capitalized


(56,398
)


(54,665
)


(39,649
)Other income






5,811



(Loss) Income Before Taxes and Minority Interest


(436,748
)


221,259



188,806Benefit (Provision) for Income Taxes


48,223



(77,324
)


(67,344
)Minority Interest


(188
)


(1
)


NET (LOSS) INCOME

$
(388,713
)

$
143,934


$
121,462Earnings per share:Net (loss) income per share  basic

$
(4.44
)

$
1.68


$
1.59Net (loss) income per share  diluted

$
(4.44
)

$
1.67


$
1.58Weighted average shares outstanding  basic


87,491,385



85,645,199



76,352,666Weighted average shares outstanding  diluted


87,491,385



86,125,811



76,810,466   The accompanying Notes to the Consolidated Financial
    Statements
 are an integral part of these financial statements
 67




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##### Table of Contents



MARINER
    ENERGY, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  AccumulatedOtherAdditional


Comprehensive


Accumulated


TotalCommon


Stock


Paid-In-


Income/


Retained


StockholdersStock


Amount


Capital


(Loss)


Earnings


Equity(In thousands)Balance at December 31, 2005


35,615


$
4


$
160,705


$
(41,473
)

$
94,100


$
213,336Common shares issued  Forest transaction


50,637



5



886,142











886,147Common shares issued  restricted stock


907



















Treasury stock bought and cancelled on same day


(808
)






(14,027
)










(14,027
)Forfeiture of restricted stock


(27
)


















Amortization of unearned compensation










9,247











9,247Share-based compensation expense  stock options










980











980Stock options exercised


52







718











718Merger adjustments










158











158Comprehensive income:Net income


















121,462



121,462Change in fair value of derivative hedging
    instruments  net of income taxes of $35,930














63,139







63,139Hedge settlements reclassified to income  net of
    income taxes of $11,540














21,431







21,431Total comprehensive loss














84,570



121,462



206,032Balance at December 31, 2006


86,376


$
9


$
1,043,923


$
43,097


$
215,562


$
1,302,591Common shares issued  restricted stock


906



















Treasury stock bought and cancelled on same day


(72
)






(1,553
)










(1,553
)Forfeiture of restricted stock


(45
)






(907
)










(907
)Amortization of unearned compensation










10,375











10,375Share-based compensation expense  stock options










1,422











1,422Stock options exercised


64







829











829Comprehensive income:Net income


















143,934



143,934Change in fair value of derivative hedging
    instruments  net of income taxes of ($52,385)














(94,935
)






(94,935
)Hedge settlements reclassified to income  net of
    income taxes of $15,815














29,262







29,262Total comprehensive income














(65,673
)


143,934



78,261Balance at December 31, 2007


87,229


$
9


$
1,054,089


$
(22,576
)

$
359,496


$
1,391,018Common shares issued  restricted stock


1,734



















Treasury stock bought and cancelled on same day


(144
)






(4,313
)










(4,313
)Forfeiture of restricted stock


(29
)


















Amortization of unearned compensation










20,327











20,327Share-based compensation expense  stock options










502











502Stock options exercised


56







742











742Comprehensive income (loss):Net loss


















(388,713
)


(388,713
)Change in fair value of derivative hedging
    instruments  net of income taxes of ($35,891)














(64,918
)






(64,918
)Hedge settlements reclassified to income  net of
    income taxes of $91,316














165,675







165,675Total comprehensive income (loss)














100,757



(388,713
)


(287,956
)Balance at December 31, 2008


88,846


$
9


$
1,071,347


$
78,181


$
(29,217
)

$
1,120,320   The accompanying Notes to the Consolidated Financial
    Statements
 are an integral part of these financial statements
 68




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##### Table of Contents



MARINER
    ENERGY, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008


2007


2006(In thousands)Cash flow from operating activities:Net (loss) income

$
(388,713
)

$
143,934


$
121,462Adjustments to reconcile net income to net cash provided byoperating activities:Deferred income tax


(49,403
)


77,324



67,344Depreciation, depletion and amortization


467,265



384,321



295,292Ineffectiveness of derivative instruments


1,995



1,655



(4,175
)Full cost ceiling test impairment


575,607







Goodwill impairment


295,598







Other property impairment


15,252







Share-based compensation


21,017



10,890



10,229MMS royalty relief and other


(52,731
)


4,486



226Changes in operating assets and liabilities:Receivables


(63,015
)


(9,805
)


(12,972
)Insurance receivables


47,839



(22,606
)


(55,690
)Prepaid expenses and other


(1,853
)


(23,406
)


18,626Accounts payable and accrued liabilities


(6,841
)


(30,680
)


(169,819
)Net realized loss on derivative contracts acquired










6,638Net cash provided by operating activities


862,017



536,113



277,161Cash flow from investing activities:Acquisitions and additions to oil and gas properties


(1,220,067
)


(674,740
)


(540,374
)Additions to other property and equipment


(49,717
)






(2,207
)Property conveyances






4,130



33,829Purchase price adjustment










(20,808
)Restricted cash designated for investment


5,000



26,830



(31,830
)Minority interest






1



Net cash used in investing activities


(1,264,784
)


(643,779
)


(561,390
)Cash flow from financing activities:Debt and working capital acquired from Forest Energy Resources,
    Inc.










(176,200
)Repayment of term note










(4,000
)Credit facility borrowings


1,268,000



564,000



682,000Credit facility repayments


(877,000
)


(739,000
)


(480,000
)Proceeds from note offering






300,000



300,000Repurchase of stock


(4,313
)


(1,553
)


(14,027
)Net realized loss on derivative contracts acquired










(6,638
)Proceeds from exercise of stock options


742



829



718Deferred offering costs






(6,600
)


(12,601
)Partner contributions/(distributions)






(1,000
)


Net cash provided by financing activities


387,429



116,676



289,252(Decrease) Increase in Cash and Cash Equivalents


(15,338
)


9,010



5,023Cash and Cash Equivalents at Beginning of Period


18,589



9,579



4,556Cash and Cash Equivalents at End of Period

$
3,251


$
18,589


$
9,579   The accompanying Notes to the Consolidated Financial
    Statements
 are an integral part of these financial statements
 69




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 For
    the Years Ended December 31, 2008, 2007 and 2006
  Note 1.
    Summary
    of Significant Accounting Policies    Principles of Consolidation
  Reclassifications and Use of Estimates in the Preparation of
    Financial Statements
    Cash and Cash Equivalents
  Restricted Cash
  Receivables
  Insurance receivables 
  Oil and Gas Properties
 70




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
        Unproved Properties 3-D
  Abandonment Liability
 71




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
        2008


2007(In thousands)Abandonment Liability at beginning of period: January 1

$
222,006


$
217,970Liabilities incurred


46,514



6,662Liabilities settled


(73,164
)


(57,825
)Accretion expense


23,511



16,976Revisions to previous estimates


144,957



38,223Liabilities from assets acquired


44,420



Abandonment Liability at end of period: December 31(1)

$
408,244


$
222,006     (1)
    
    Includes $82.4 million and $31.0 million classified as
    a current accrued liability at December 31, 2008 and 2007.  Estimated Proved Reserves
  Other Property and Equipment Accounting for the
    Impairment or Disposal of Long-Lived Assets
 72




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Other Assets
  2008


2007(In thousands)Oil and gas lease and well equipment held in inventory

$
41,051


$
18,918Earnest money for MGOM acquisition






17,625Amortizable note offering costs and discounts


11,405



13,912Prepaid compression


6,435



Long term deposits


3,767



4,896Amortizable bank fees


2,034



621Prepaid seismic


667



Guarantor payments


472



Deferred acquisition costs






276Other Assets, net of amortization(1)

$
65,831


$
56,248     (1)
    
    Net of accumulated amortization as of December 31, 2008 and
    2007 of $6.4 million and $3.6 million, respectively.  Derivative Financial Instruments
       73




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
      Goodwill
    Income Taxes
   74




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
      Revenue Recognition
  over-and-under
  Operating Costs
      General and Administrative Expense
  Capitalized G&A
 75




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Overhead Recovery
  Concentration of Credit Risk
  Use of Estimates
  Net Income per Share
  Comprehensive Income
  Years Ended December 31,2008


2007


2006(In thousands)Net (Loss) Income

$
(388,713
)

$
143,934


$
121,462Other comprehensive (loss) income, net of tax:Derivative contracts settled and reclassified, net of tax


(64,918
)


29,262



21,431Change in unrealized mark-to-market gains (losses) arising
    during period, net of tax


165,675



(94,935
)


63,139Change in accumulated other comprehensive income (loss)


100,757



(65,673
)


84,570Comprehensive (loss) income

$
(287,956
)

$
78,261


$
206,032  76




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Major Customers
  Percentage of TotalRevenues forYear EndedDecember 31,Customer

2008


2007


2006BP Energy


5
%


9
%


14
%ChevronTexaco and affiliates


16
%


23
%


23
%Louis Dreyfus Energy


6
%


9
%


10
%Plains Marketing LP


5
%


7
%


11
%Shell


10
%


10
%


8
%   Recent
    Accounting Pronouncements
  Forms 10-K
  
    Oil and gas reserves must be reported using the average price
    over the prior 12 month period, rather than year-end prices;
    Companies will be allowed to report, on an optional basis,
    probable and possible reserves;
    Non-traditional reserves, such as oil and gas extracted from
    coal and shales, will be included in the definition of oil
    and gas producing activities;
    Companies will be permitted to use new technologies to determine
    proved reserves, as long as those technologies have been
    demonstrated empirically to lead to reliable conclusions with
    respect to reserve volumes;
    Companies will be required to disclose, in narrative form,
    additional details on their proved undeveloped reserves (PUDs),
    including the total quantity of PUDs at year end, any material
    changes to PUDs that occurred during the year, investments and
    progress made to convert PUDs to developed oil and gas reserves
    and an explanation of the reasons why material concentrations of
    PUDs in individual fields or countries have remained undeveloped
    for five years or more after disclosure as PUDs;
    Companies will be required to report the qualifications and
    measures taken to assure the independence and objectivity of any
    business entity or employee primarily responsible for preparing
    or auditing the reserves estimates.  Form 10-K
  No. 157-3, (FSP 157-3). FSP 157-3
 77




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  FSP 157-3
    No. 142-3, (FSP 142-3). FSP 142-3 FSP 142-3 FSP 142-3
     78




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
      No. FAS 157-2,
 79




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Note 2.
    Acquisitions
    and Dispositions  Gulf of Mexico Shelf Acquisition.
  Pro Forma Financial Information
  For the Year Ended December 31,2008


2007(Unaudited)(In thousands, except pershare amounts)Pro Forma:Revenue

$
1,315,200


$
1,091,372Net (loss) income available to common stockholders

$
(383,914
)

$
182,628Basic (loss) earnings per share

$
(4.39
)

$
2.13Diluted (loss) earnings per share

$
(4.39
)

$
2.12   Permian Basin Acquisitions
  Bass Lite
  Interest in Cottonwood
  West Cameron 110/111
 80




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Forest Gulf of Mexico Operations
      (In millions)Oil and natural gas properties

$
1,211.4Abandonment liabilities


(165.2
)Long-term debt


(176.2
)Fair value of oil and natural gas derivatives


(17.5
)Deferred tax liability


(199.4
)Other assets and liabilities


(24.5
)Goodwill


261.4Net Assets Acquired

$
890.0      81




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  .
    Pro Forma Financial Information
  Year EndedDecember 31, 2006(Unaudited)(In thousands, exceptper share amounts)Pro Forma:Revenue

$
725,321Net income available to common stockholders

$
134,428Basic earnings per share

$
1.76Diluted earnings per share

$
1.75   Note 3.
    Long-Term
    Debt    December 31,


December 31,2008


2007(In thousands)Bank credit facility

$
570,000


$
179,0008% Senior Notes


300,000



300,00071/2% Senior
    Notes


300,000



300,000Total long-term debt

$
1,170,000


$
779,000   Bank Credit Facility
   82




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
          
    maintain a ratio of consolidated current assets plus the unused
    borrowing base to consolidated current liabilities of not less
    than 1.0 to 1.0; and
    maintain a ratio of total debt to EBITDA (as defined in the
    credit agreement) of not more than 2.5 to 1.0.    Senior Notes 1 2 1 2 1 2
  1 2
   83




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    1 2 1 2
  1 2
  71/2% Notes

8% NotesApril 15, 2010 at 103.750%

May 15, 2012 at 104.000%April 15, 2011 at 101.875%

May 15, 2013 at 102.667%April 15, 2012 and thereafter at 100.000%

May 15, 2014 at 101.333%May 15, 2015 and thereafter at 100.000%   1 2 1 2
      
    make investments;
    incur additional indebtedness or issue preferred stock;
    create certain liens;
    sell assets;
    enter into agreements that restrict dividends or other payments
    from its subsidiaries to itself;
    consolidate, merge or transfer all or substantially all of its
    assets;
    engage in transactions with affiliates, pay dividends or make
    other distributions on capital stock or subordinated
    indebtedness, and;
    create unrestricted subsidiaries. 84




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
   1 2
  Capitalized Interest
  Cash Interest Expense
  Bank Debt Issuance Costs
  Note 4.
    Stockholders
    Equity  Earnings Per Share
    2008


2007


2006Net








Net








NetIncome





Per-


Income





Per-


Income





Per-Attributed


Weighted-


Share


Attributed


Weighted-


Share


Attributed


Weighted-


Shareto Common


Average


Income/


to Common


Average


Income/


to Common


Average


Income/Stock


Shares


(Loss)


Stock


Shares


(Loss)


Stock


Shares


(Loss)(In thousands, except per share data)Basic net (loss) income per share

$
(388,713
)


87,491


$
(4.44
)

$
143,934



85,645


$
1.68


$
121,462



76,353


$
1.59Effect of dilutive securities:


















481



(0.01
)






458



(0.01
)Diluted net (loss) income earnings per share

$
(388,713
)


87,491


$
(4.44
)

$
143,934



86,126


$
1.67


$
121,462



76,811


$
1.58     Authorized Stock
 85




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Rights Plan
        one-for-one
  Note 5.
    Share-Based
    Compensation   86




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Year Ended December 312008


2007


2006(In thousands)Share-based compensation included in:General and administrative expense

$
21,017


$
10,890


$
10,227Oil and natural gas properties under full cost method


2,956







Total stock-based compensation

$
23,973


$
10,890


$
10,227   Stock Incentive Plan
  Rollover Options
  Equity Participation Plan
 87




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Restricted
    Stock Grants
      WeightedAggregate


AverageEquity


Weighted


Intrinsic


RemainingInstruments


Average


Value


Contractual(thousands)


Fair Value


($ thousands)


Life (Years)Unvested at January 1, 2008


1,484,552


$
21.00


$
31,182Granted


1,734,070



32.28



55,974Vested


(490,881
)


20.96



(10,287
)Forfeited


(29,815
)


24.89



(742
)Unvested at December 31, 2008


2,697,926



28.22


$
76,127



7.79  88




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Restricted Shares under the Stock Incentive Plan2008


2007


2006Total unvested shares at beginning of period: January 1


1,484,552



875,380



Shares granted


1,734,070



906,104



907,371Shares vested


(490,881
)


(251,332
)


(4,500
)Shares forfeited


(29,815
)


(45,600
)


(27,491
)Total unvested shares at end of period: December 31


2,697,926



1,484,552



875,380Total shares vested at end of period: December 31


746,713



255,832



4,500Available for future grant as options or restricted stock


2,530,388



4,072,801



4,862,132Average fair value of shares granted during the period

$
30.27


$
21.73


$
19.54     Long-Term Performance-Based Restricted Stock
    Program
    Year EndedDecember 31,2008Weighted average fair value of grants

$
33.73Expected volatility


42.29
%Risk-free interest rate


4.57
%Dividend yield


0.00
%Expected life


10 years   10-year,
 89




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Stock
    Option Grants
      Weighted


AggregateAverage


IntrinsicExercise


Value(1)Shares


Price


($000)Outstanding at beginning of year January 1, 2008


720,488


$
13.82


$
(2,608
)Granted










Exercised


(56,348
)


13.18



168Forfeited


(18,792
)


13.90



69Outstanding at end of year December 31, 2008


645,348


$
13.88


$
(2,371
)Exercisable at end of year


645,348


$
13.88


$
(2,371
)     (1)
    
    Based upon the difference between the market price of the common
    stock on the last trading date of the year ($10.20) and the
    option exercise price of
    in-the-money
    options.      Options Outstanding


Options ExercisableWeightedShares


Average





WeightedSubject to


Remaining





AverageOutstanding


Contractual


Expected


SharesExercise Price

Options


Life (Years)


Term


Exercisable$9.67


660



5.08



6.08



660$11.44


1,650



5.88



6.88



1,650$11.59


30,233



5.94



6.94



30,233$14.00


612,805



6.26



10.50



612,805Total number of shares subject to options


645,348











645,348    90




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    12 Months EndedDecember 31, 2006Black-Scholes Assumptions

Rollover OptionsExpected Term (years)


4.7Risk Free Interest Rate


4.79
%Expected Volatility


35.00
%Dividend Yield


0.00
%     Note 6.
    Employee
    Benefit and Royalty Plans  Employee Capital Accumulation Plan
  Overriding Royalty Interests
  Note 7.
    Derivative
    Financial Instruments  Derivative Financial Instruments
 91




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Year Ended December 31,2008


2007


2006(In thousands)Cash (Loss) Gain on Settlements

$
(98,814
)

$
46,732


$
11,273(Loss) Gain on Hedge Ineffectiveness(1)


(1,995
)


(1,655
)


4,175Non-cash Gain on hedges acquired(2)










17,523Total

$
(100,809
)

$
45,077


$
32,971     (1)
    
    Unrealized (loss) gain recognized in natural gas revenue related
    to the ineffective portion of open contracts that are not
    eligible for deferral under SFAS 133 Accounting for
    Derivative Instruments and Hedging Activities, due
    primarily to the basis differentials between the contract price
    and the indexed price at the point of sale.(2)
    
    In 2006, relating to the hedges acquired through the Forest
    transaction.    Weighted-Average


Fair ValueFixed Price Swaps

Quantity


Fixed Price


Asset(In thousands)Natural Gas (MMbtus)January 1  December 31, 2009


31,642,084


$
8.48


$
74,709Crude Oil (Bbls)January 1  December 31, 2009


2,172,210


$
76.15



47,220Total









$
121,929     Weighted-Average


Fair ValueFixed Price Swaps

Quantity


Fixed Price


Asset/(Liability)(In thousands)Natural Gas (MMBtus)January 1  December 31, 2008


40,583,847


$
8.46


$
27,672January 1  December 31, 2009


31,642,084


$
8.48



(1,494
)Crude Oil (Bbls)January 1  December 31, 2008


2,263,552


$
78.99



(31,219
)January 1  December 31, 2009


2,172,210


$
76.15



(23,158
)Total









$
(28,199
)   Fair ValueCostless Collars

Quantity


Floor


Cap


Asset/(Liability)(In thousands)Natural Gas (MMBtus)January 1  December 31, 2008


12,347,000


$
7.83


$
14.60


$
7,201Crude Oil (Bbls)January 1  December 31, 2008


1,195,495


$
61.66


$
86.81



(11,259
)Total













$
(4,058
)  92




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    WeightedInstrument





AveragePeriod

Type


Quantity


PriceNatural Gas (MMbtus) 2009January 1  December 31


Fixed Price Swaps



19,665,000


$
6.19 FixedCrude Oil (Bbls) 2009February 1  December 31


Fixed Price Swaps



977,047


$
51.42 Fixed       Note 8.
    Commitments
    and Contingencies  Minimum Future Lease Payments
  2009

$
2,2402010


2,5322011


2,4992012


2,4142013 and thereafter


11,961Total

$
21,646     Other Commitments
  Current
    Insurance Against Hurricanes
     93




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  60-day
    Hurricane
    Ike (2008)
    Hurricanes
    Katrina and Rita (2005)
     94




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    MMS Proceedings
  Kerr-McGee
    Oil & Gas Corp. v. Allred No. 08-30069 Kerr-McGee Kerr-McGee Oil & Gas
    Corp. v. Allred Kerr-McGee Oil & Gas Corp. v.
    U.S. Dept of Interior
  Litigation and/or
  Letters of Credit
 95




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  drill-to-earn
  Note 9.
    Fair
    Value Measurement          As of December 31, 2008Fair Value Measurements Using:SignificantQuoted Prices


Other


Significantin Active


Observable


UnobservableCarrying


Total Fair


Markets


Inputs


InputsDerivative Financial Instruments

Amount


Value


(Level 1)


(Level 2)


(Level 3)(In thousands)Natural gas and crude oil fixed price swaps  Short
    Term

$
121,929


$
121,929


$



$
121,929


$
Natural gas and crude oil fixed price swaps   Long
    Term


















Total

$
121,929


$
121,929


$



$
121,929


$
    96




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Level 2
    Fair Value Measurements
    Level 3
    Fair Value Measurements
    Fair Value Measurements Using Significant Unobservable Inputs
    (Level 3)
  For the TwelveMonths EndedDecember 31,2008(In thousands)Fair value of costless collars, beginning of period

$
(4,058
)Total gains/(losses):Included in natural gas and oil revenues (realized/unrealized)


(22,477
)Included in other comprehensive loss (realized/unrealized)


4,058Purchases, issuances, and settlements, net


22,477Transfers in and/or out of Level 3


Fair value of costless collars, end of period

$
The amount of net gains/(losses) for the period included in
    earnings attributable to the change in net unrealized losses
    relating to costless collars still held at the reporting date

$
   Note 10.
    Income
    Taxes    For the Year Ended December 31,2008


2007


2006(In thousands)Current

$
1,939


$



$
Deferred


(50,172
)


77,324



67,344Total (Benefit) Provision for Income Taxes

$
(48,223
)

$
77,324


$
67,344  97




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Year Ended December 31,2008


2007


2006(In thousands, except percentages)Income before taxes and minority interest

$
(436,748
)





$
221,259






$
188,806Income tax expense computed at statutory rates

$
(152,862
)


35.0
%

$
77,440



35.0
%

$
66,081



35.0
%State tax expense, net of the federal benefit

$
(619
)


(0.2
)%


2,452



1.1
%


946



0.5
%Forest purchase price adjustment










(2,034
)


(0.9
)%






Goodwill Impairment

$
103,460



(23.7
)%Other

$
1,798



(0.5
)%


(534
)


(0.3
)%


317



0.2
%Total (Benefit) Provision for Income Taxes

$
(48,223
)


11.0
%

$
77,324



34.9
%

$
67,344



35.7
%       At December 31,2008


2007(In thousands)Current Deferred Tax Assets:Employee share-based compensation

$
2,484


$
3,562Net operating loss carry forwards (current)


17,591



Total current deferred tax assets


20,075



3,562Long-Term Deferred Tax Assets:Net operating loss carry forwards


154,711



215,834Alternative minimum tax credit


3,342



1,607Valuation allowance


(408
)


(468
)Reserve accruals


439



460Other


4,499



47Total net deferred tax assets


162,583



217,480Current Deferred Tax Liabilities:Deferred gain






(808
)Other comprehensive income-derivative instruments


(43,223
)


3,478Other






Total current deferred tax liabilities


(43,223
)


2,670Long-Term Deferred Tax Liabilities:Deferred gain






(74
)Other comprehensive income-derivative instruments






8,723Differences between book and tax basis properties


(472,718
)


(560,566
)Texas margins tax


(98
)


(189
)Louisiana franchise tax


(9,533
)


(9,357
)Other






35Total long-term deferred tax liabilities


(482,349
)


(561,428
)Total net deferred liability

$
(342,914
)

$
(337,716
)  98




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    FIN 48-1
      Note 11.
    Segment
    Information    project-by-project
 99




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Note 12.
    Quarterly
    Financial Information (Unaudited)    Quarter Ended 2008December 31


September 30


June 30


March 31(In thousands, except share data)Total revenues

$
237,268


$
317,890


$
429,452


$
315,897Operating (loss) income(2)


(839,221
)


117,668



208,186



131,655(Loss) Income before taxes and minority interest(2)


(841,592
)


100,530



190,904



113,410(Benefit) Provision for income taxes(2)


(192,672
)


35,839



67,416



41,194Net (loss) income(2)

$
(648,920
)

$
64,691


$
123,390


$
72,126Earnings per share:(1)Net (loss) income per share  basic(2)

$
(7.41
)

$
0.74


$
1.40


$
0.83Net (loss) income per share  diluted(2)

$
(7.41
)

$
0.73


$
1.39


$
0.82Weighted average shares outstanding  basic


87,622,740



87,595,792



87,983,902



87,293,730Weighted average shares outstanding  diluted


87,622,740



88,183,715



88,828,904



88,012,901   Quarter Ended 2007December 31


September 30


June 30


March 31(In thousands, except share data)Total revenues

$
253,595


$
196,484


$
213,081


$
211,605Operating income


91,254



51,196



63,218



63,042Income before taxes and minority interest


77,971



37,668



49,203



56,417Provision for income taxes


27,729



15,140



16,245



18,210Net income

$
50,241


$
22,528


$
32,958


$
38,207Earnings per share:(1)Net income per share  basic

$
0.59


$
0.26


$
0.38


$
0.45Net income per share  diluted

$
0.58


$
0.26


$
0.38


$
0.45Weighted average shares outstanding  basic


85,744,760



85,701,696



85,627,433



85,515,561Weighted average shares outstanding  diluted


86,276,871



85,964,108



85,905,296



85,704,529     (1)
    
    The sum of quarterly net income per share may not agree with
    total year net income per share, as each quarterly computation
    is based on the weighted average shares outstanding.(2)
    
    Fourth quarter amounts include $575.6 million in full cost
    ceiling test impairment, $295.6 million in goodwill
    impairment, $15.3 million in other property impairment,
    $21.6 million contingent withdrawl premium relating to
    Mariners participation in OIL, and $46.5 million
    release of suspended revenue associated with the disputed MMS
    Royalty Relief liability. 100




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
   Note 13.
    Supplemental
    Guarantor Information  1 2
     101




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONSOLIDATING BALANCE SHEET
    December 31, 2008
    (In thousands except share data)
  ConsolidatedParent


Subsidiary





MarinerCompany


Guarantors


Eliminations


Energy, Inc.Current Assets:Cash and cash equivalents

$
2,851


$
400


$



$
3,251Receivables, net of allowances


157,362



62,558







219,920Insurance receivables


5,886



7,237







13,123Derivative financial instruments


121,929











121,929Intagible assets


2,334



19







2,353Prepaid expenses and other


12,923



1,454







14,377Total current assets


303,285



71,668







374,953Property and Equipment:Proved oil and gas properties, full-cost method


2,181,238



2,266,908







4,448,146Unproved properties, not subject to amortization


185,012



16,109







201,121Total oil and gas properties


2,366,250



2,283,017







4,649,267Other property and equipment


33,351



19,764







53,115Accumulated depreciation, depletion and amortization


(915,887
)


(856,618
)






(1,772,505
)Total property and equipment, net


1,483,714



1,446,163







2,929,877Investment in Subsidiaries


704,971







(704,971
)


Intercompany Receivables


123,142



113,064



(236,206
)


Intercompany Note Receivable


176,200







(176,200
)


Insurance Receivables


3,924



18,208







22,132Other Assets, net of amortization


64,726



1,105







65,831TOTAL ASSETS

$
2,859,962


$
1,650,208


$
(1,117,377
)

$
3,392,793Current Liabilities:Accounts payable

$
3,837


$



$



$
3,837Accrued liabilities


72,743



35,072







107,815Accrued capital costs


144,710



51,123







195,833Deferred Tax Liability


23,148











23,148Abandonment liability


1,554



80,810







82,364Accrued interest


12,567











12,567Total current liabilities


258,559



167,005







425,564Long-Term Liabilities:Abandonment liability


56,920



268,960







325,880Deferred income tax


110,431



209,335







319,766Intercompany payables


113,064



123,142



(236,206
)


Long-term debt


1,170,000











1,170,000Other long-term liabilities


30,668



595







31,263Intercompany not payable






176,200



(176,200
)


Total long-term liabilities


1,481,083



778,232



(412,406
)


1,846,909Commitments and Contingencies (see Note 8)Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
    authorized, no shares issued and outstanding at
    December 31, 2008














Common stock, $.0001 par value; 180,000,000 shares
    authorized, 88,846,073 shares issued and outstanding at
    December 31, 2008


9



5



(5
)


9Additional
    paid-in-capital


1,071,347



886,143



(886,143
)


1,071,347Partner capital






30,646



(30,646
)


Accumulated other comprehensive income


78,181











78,181Accumulated retained earnings


(29,217
)


(211,823
)


211,823



(29,217
)Total stockholders equity


1,120,320



704,971



(704,971
)


1,120,320TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
2,859,962


$
1,650,208


$
(1,117,377
)

$
3,392,793  102




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONSOLIDATING BALANCE SHEET
    December 31, 2007
    (In thousands except share data)
  ConsolidatedParent


Subsidiary





MarinerCompany


Guarantors


Eliminations


Energy, Inc.Current Assets:Cash and cash equivalents

$
18,589


$



$



$
18,589Receivables, net of allowances


64,714



93,060







157,774Insurance receivables


3,950



22,733







26,683Derivative financial instruments


11,863











11,863Intangible assets


16,209



1,000







17,209Prepaid expenses and other


9,105



1,525







10,630Deferred tax asset


6,232











6,232Total current assets


130,662



118,318







248,980Property and Equipment:Proved oil and gas properties, full-cost method


1,469,989



1,648,284







3,118,273Unproved properties, not subject to amortization


40,025



430







40,455Total oil and gas properties


1,510,014



1,648,714







3,158,728Other property and equipment


15,495



50







15,545Accumulated depreciation, depletion and amortization


(403,159
)


(350,920
)






(754,079
)Total property and equipment, net


1,122,350



1,297,844







2,420,194Investment in Subsidiaries


1,014,548







(1,014,548
)


Intercompany Receivables


46,015







(46,015
)


Intercompany Note Receivable


176,200







(176,200
)


Restricted Cash






5,000







5,000Goodwill






295,598







295,598Insurance Receivables


2,663



54,261







56,924Derivative Financial Instruments


691











691Other Assets, net of amortization


55,607



641







56,248TOTAL ASSETS

$
2,548,736


$
1,771,662


$
(1,236,763
)

$
3,083,635Current Liabilities:Accounts payable

$
1,064


$



$



$
1,064Accrued liabilities


70,467



26,469







96,936Accrued capital costs


85,839



73,171







159,010Abandonment liability


4,383



26,602







30,985Accrued interest


7,726











7,726Derivative financial instruments


19,468











19,468Total current liabilities


188,947



126,242







315,189Long-Term Liabilities:Abandonment liability


49,827



141,194







191,021Deferred income tax


80,095



263,853







343,948Derivative financial instruments


25,343











25,343Intercompany payables






46,015



(46,015
)


Long-term debt


779,000











779,000Other long-term liabilities


34,506



3,609







38,115Intercompany note payable






176,200



(176,200
)


Total long-term liabilities


968,771



630,871



(222,215
)


1,377,427Commitments and Contingencies (see Note 8)Minority Interest






1







1Stockholders Equity:Preferred stock, $.0001 par value; 20,000,000 shares
    authorized, no shares issued and outstanding at
    December 31, 2007














Common stock, $.0001 par value; 180,000,000 shares
    authorized, 87,229,312 shares issued and outstanding at
    December 31, 2007


9



5



(5
)


9Additional
    paid-in-capital


1,054,089



886,142



(886,142
)


1,054,089Partner capital






6,000



(6,000
)


Accumulated other comprehensive (loss)


(22,576
)










(22,576
)Accumulated retained earnings


359,496



122,401



(122,401
)


359,496Total stockholders equity


1,391,018



1,014,548



(1,014,548
)


1,391,018TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
2,548,736


$
1,771,662


$
(1,236,763
)

$
3,083,635  103




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
    Year Ended December 31, 2008
    (In thousands)
  ConsolidatedParent


Subsidiary





MarinerCompany


Guarantors


Eliminations


Energy, Inc.Revenues:Natural gas

$
358,585


$
383,785


$



$
742,370Oil


239,842



180,036







419,878Natural gas liquids


56,307



29,408







85,715Other revenues


41,851



10,693







52,544Total revenues


696,585



603,922







1,300,507Costs and Expenses:Operating expenses


137,917



126,915







264,832General and administrative


58,617



1,996







60,613Depreciation, depletion and amortization


251,783



215,482







467,265Full cost ceiling test impairment


266,326



309,281







575,607Goodwill impairment






295,598







295,598Other property impairment






15,252







15,252Other miscellaneous expense


2,538



514







3,052Total costs and expenses


717,181



965,038







1,682,219OPERATING LOSS


(20,596
)


(361,116
)






(381,712
)Earnings of Affiliates


(334,223
)






334,223



Other Income/(Expenses):Interest income


10,239



84



(8,961
)


1,362Interest expense, net of amounts capitalized


(56,206
)


(9,153
)


8,961



(56,398
)Loss Before Taxes and Minority Interest


(400,786
)


(370,185
)


334,223



(436,748
)Benefit for Income Taxes


12,073



36,150







48,223Minority Interest






(188
)






(188
)NET LOSS

$
(388,713
)

$
(334,223
)

$
334,223


$
(388,713
)  104




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
    Year Ended December 31, 2007
    (In thousands)
  ConsolidatedParent


Subsidiary





MarinerCompany


Guarantors


Eliminations


Energy, Inc.Revenues:Natural gas

$
266,418


$
268,119


$



$
534,537Oil


146,909



137,496







284,405Natural gas liquids


30,513



23,679







54,192Other revenues


1,491



140







1,631Total revenues


445,331



429,434







874,765Costs and Expenses:Operating expenses


59,232



106,377







165,609General and administrative


43,004



8,060







51,064Depreciation, depletion and amortization


175,147



209,174







384,321Other miscellaneous expense


2,010



3,051







5,061Total costs and expenses


279,393



326,662







606,055OPERATING INCOME


165,938



102,772







268,710Earnings of Affiliates


63,440







(63,440
)


Other Income/(Expenses):Interest income


15,611



15



(14,223
)


1,403Interest expense, net of amounts capitalized


(54,302
)


(14,586
)


14,223



(54,665
)Other income






5,811







5,811Income Before Taxes and Minority Interest


190,687



94,012



(63,440
)


221,259Provision for Income Taxes


(46,753
)


(30,571
)






(77,324
)Minority Interest






(1
)






(1
)NET INCOME

$
143,934


$
63,440


$
(63,440
)

$
143,934  105




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
    Year Ended December 31, 2006
    (In thousands)
  ConsolidatedParent


Subsidiary





MarinerCompany


Guarantors


Eliminations


Energy, Inc.Revenues:Natural gas

$
185,175


$
227,792


$



$
412,967Oil


120,269



82,475







202,744Natural gas liquids


21,593



18,914







40,507Other revenues


3,287











3,287Total revenues


330,324



329,181







659,505Costs and Expenses:Operating expenses


41,569



55,775







97,344General and administrative expense


35,740



6,277







42,017Depreciation, depletion and amortization


128,413



163,767







292,180Other miscellaneous expense


473



21







494Total costs and expenses


206,195



225,840







432,035OPERATING INCOME


124,129



103,341







227,470Earnings of Affiliates


58,961







(58,961
)


Other Income/(Expense):Interest income


8,737



1



(7,753
)


985Interest expense, net of amounts capitalized


(35,714
)


(11,688
)


7,753



(39,649
)Income Before Taxes


156,113



91,654



(58,961
)


188,806Provision for Income Taxes


(34,651
)


(32,693
)






(67,344
)NET INCOME

$
121,462


$
58,961


$
(58,961
)

$
121,462  106




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
    Year Ended December 31, 2008
    (In thousands)
  ConsolidatedParent


Subsidiary


MarinerCompany


Guarantors


Energy, Inc.Net cash provided by operating activities

$
430,526


$
431,491


$
862,017Cash flow from investing activities:Acquisitions and additions to property and equipment


(793,948
)


(426,119
)


(1,220,067
)Additions to other property and equipment


(15,099
)


(34,618
)


(49,717
)Other investing activities






5,000



5,000Net cash used in investing activities


(809,047
)


(455,737
)


(1,264,784
)Cash flow from financing activities:Credit facility borrowings


1,268,000







1,268,000Credit facility repayments


(877,000
)






(877,000
)Other financing activities


(28,217
)


24,646



(3,571
)Net cash provided by financing activities


362,783



24,646



387,429(Decrease) Increase in Cash and Cash Equivalents


(15,738
)


400



(15,338
)Cash and Cash Equivalents at Beginning of Period


18,589







18,589Cash and Cash Equivalents at End of Period

$
2,851


$
400


$
3,251  107




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
    Year Ended December 31, 2007
    (In thousands)
  ConsolidatedParent


Subsidiary


MarinerCompany


Guarantors


Energy, Inc.Net cash provided by operating activities

$
282,664


$
253,449


$
536,113Cash flow from investing activities:Acquisitions and additions to property and equipment


(527,926
)


(146,786
)


(674,712
)Property conveyances


2,988



1,114



4,102Other investing activities


26,830



1



26,831Net cash used in investing activities


(498,108
)


(145,671
)


(643,779
)Cash flow from financing activities:Credit facility borrowings


564,000







564,000Credit facility repayments


(739,000
)






(739,000
)Proceeds from note offering


300,000







300,000Other financing activities


99,454



(107,778
)


(8,324
)Net cash provided by (used in) financing activities


224,454



(107,778
)


116,676Increase in Cash and Cash Equivalents


9,010







9,010Cash and Cash Equivalents at Beginning of Period


9,579







9,579Cash and Cash Equivalents at End of Period

$
18,589


$



$
18,589  108




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  MARINER
    ENERGY, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
    Year Ended December 31, 2006
    (In thousands)
  ConsolidatedParent


Subsidiary


MarinerCompany


Guarantors


Energy, Inc.Net cash provided by operating activities

$
191,225


$
85,936


$
277,161Cash flow from investing activities:Acquisitions and additions to property and equipment


(330,298
)


(212,283
)


(542,581
)Property conveyances


33,829







33,829Other investing activities


(31,830
)


(20,808
)


(52,638
)Net cash used in investing activities


(328,299
)


(233,091
)


(561,390
)Cash flow from financing activities:Credit facility borrowings


682,000







682,000Credit facility repayments


(480,000
)






(480,000
)Debt and working capital acquired from Forest Energy Resources,
    Inc.






(176,200
)


(176,200
)Proceeds from note offering


300,000







300,000Other financing activities


(359,903
)


323,355



(36,548
)Net cash provided by financing activities


142,097



147,155



289,252Increase in Cash and Cash Equivalents


5,023







5,023Cash and Cash Equivalents at Beginning of Period


4,556







4,556Cash and Cash Equivalents at End of Period

$
9,579


$



$
9,579   Note 14.
    Subsequent
    Events    Note 15.
    Oil and
    Gas Producing Activities and Capitalized Costs
    (Unaudited)    109




---



##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  Year Ended December 31,2008


2007


2006(In thousands)Oil and gas sales

$
1,247,963


$
873,134


$
656,218Lease operating costs


(231,644
)


(152,627
)


(91,592
)Severance and ad valorem taxes


(18,191
)


(13,101
)


(9,070
)Transportation


(14,996
)


(8,794
)


(5,077
)Depreciation, depletion and amortization


(463,989
)


(383,154
)


(293,370
)Full Cost Ceiling Test Impairment


(575,607
)






Income tax benefit (expense)


20,214



(110,095
)


(91,788
)Results of operations

$
(36,250
)

$
205,363


$
165,321     At December 31,2008


2007


2006(In thousands)Unevaluated properties, not subject to amortization

$
201,121


$
40,455


$
40,246Properties subject to amortization


4,448,146



3,118,273



2,345,041Capitalized costs


4,649,267



3,158,728



2,385,287Accumulated depreciation, depletion and amortization


(1,767,027
)


(751,126
)


(384,948
)Net capitalized costs

$
2,882,240


$
2,407,602


$
2,000,339     Year Ended December 31,2008


2007


2006(In thousands, except DD&A rate)Property acquisition costs:Unproved properties

$
173,531


$
48,891


$
47,655Unproved properties  Forest Merger










116,699Proved properties  MGOM Acquisition


228,799







Proved properties  Spraberry


42,541



122,895



Proved properties  Atwater Valley Block 426
    (Bass Lite)


30,159







Proved properties  Forest Merger










929,451Proved properties  West Cameron 110/111










70,928Proved properties  Other


1,130







Exploration costs


231,433



146,450



141,910Development costs


533,918



398,130



294,058Asset retirement obligation(1)


259,402



61,861



199,301Capitalized internal costs(2)


29,465



14,428



12,525Total costs incurred(3)

$
1,530,378


$
792,655


$
1,812,527  110




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    (1)
    
    Includes asset retirement cost in conjunction with the MGOM
    acquisition for the year ended December 31, 2008 of
    approximately $44.4 million and the Forest Merger for the
    year ended December 31, 2006 of approximately
    $165.2 million.(2)
    
    Costs included capitalized general and administrative expense of
    $19.8 million, $14.0 million and $11.0 million in
    2008, 2007 and 2006, respectively and capitalized interest
    expense of $9.7 million, $0.5 million and
    $1.5 million in 2008, 2007 and 2006, respectively.(3)
    
    Total costs are inclusive of non cash items such as capital
    expenditures and asset retirement obligation accruals.      Period Incurred


Total atYear Ended December 31,


December 31,2008


2007


2006


Prior


2008(In thousands)Unproved leasehold acquisition and geological and geophysical
    costs

$
128,908


$
15,618


$
11,988


$
11,387


$
167,901Unevaluated exploration and development costs


22,880



990



2



146



24,018Capitalized interest


8,878



132



19



173



9,202Total

$
160,666


$
16,740


$
12,009


$
11,706


$
201,121     Note 16.
    Supplemental
    Oil and Gas Reserve and Standardized Measure Information
    (Unaudited)     111




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    ESTIMATED
    QUANTITIES OF PROVED RESERVES
  Natural GasOil & NGLs


Natural Gas


Equivalent(Mbbl)


(MMcf)


(MMcfe)December 31, 2005


21,647



207,686



337,568Revisions of previous estimates


8,685



(58,055
)


(5,947
)Extensions, discoveries and other additions


9,823



93,112



152,050Purchases of reserves in place


12,410



244,741



319,201Sales of reserves in place


(354
)


(4,733
)


(6,857
)Production


(4,075
)


(56,064
)


(80,512
)December 31, 2006


48,136



426,687



715,503Revisions of previous estimates


5,690



2,506



36,643Extensions, discoveries and other additions


4,671



61,548



89,576Purchases of reserves in place


11,763



25,832



96,407Sales of reserves in place


(283
)


(341
)


(2,041
)Production


(5,414
)


(67,793
)


(100,273
)December 31, 2007


64,563



448,439



835,815Revisions of previous estimates


(2
)


(30
)


(44
)Extensions, discoveries and other additions


7,120



107,913



150,635Purchases of reserves in place


4,102



81,500



106,112Sales of reserves in place


(40
)


(18
)


(258
)Production


(6,439
)


(79,756
)


(118,389
)December 31, 2008


69,304



558,048



973,871  112




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
  ESTIMATED
    QUANTITIES OF PROVED DEVELOPED RESERVES
  Natural GasOil & NGLs


Natural Gas


Equivalent(Mbbl)


(MMcf)


(MMcfe)December 31, 2005


9,564



110,011



167,395December 31, 2006


26,807



247,821



408,663December 31, 2007


39,634



326,069



563,874December 31, 2008


42,802



420,866



677,679     STANDARDIZED
    MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
  Year Ended December 31,2008


2007


2006(In thousands)Future cash inflows

$
5,609,181


$
8,330,819


$
4,858,420Future production costs


(1,823,535
)


(1,970,944
)


(1,278,228
)Future development costs


(1,167,113
)


(955,278
)


(1,016,519
)Future income taxes


(375,593
)


(1,467,999
)


(528,135
)Future net cash flows


2,242,940



3,936,598



2,035,538Discount of future net cash flows at 10% per annum


(759,933
)


(1,704,689
)


(795,677
)Standardized measure of discounted future net cash flows

$
1,483,007


$
2,231,909


$
1,239,861    113




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 For the
    Years Ended December 31, 2008, 2007 and 2006
    Year Ended December 31,2008


2007


2006(In thousands)Standardized Measure  January 1,

$
2,231,909


$
1,239,861


$
906,565Sales and transfers of oil and gas produced, net of production
    costs


(983,131
)


(698,652
)


(553,766
)Net changes in prices and production costs


(1,328,621
)


470,932



(434,364
)Extensions and discoveries, net of future development and
    production costs


245,718



202,272



311,077Purchases of reserves in place


157,125



353,441



568,576Development costs during period and net change in development
    costs


(89,099
)


812,655



245,050Revision of previous quantity estimates


(70,270
)


175,039



101,331Sales of reserves in place


(1,956
)


(1,383
)


(10,642
)Net change in income taxes


647,837



(510,611
)


53,549Accretion of discount before income taxes


306,421



123,986



90,656Changes in production rates (timing) and other


367,074



64,369



(38,171
)Standardized Measure  December 31,

$
1,483,007


$
2,231,909


$
1,239,861  114




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial
    Disclosures.    Item 9A.
    Controls
    and
    Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Managements
    Report on Internal Control over Financial Reporting
  Form 10-K.
  Changes
    in Internal Controls over Financial Reporting.
  Form 10-K
  Item 9B.
    Other
    Information.   PART III Item 10.
    Directors,
    Executive Officers and Corporate
    Governance.  Form 10-K, Form 10-K.
  Item 11.
    Executive
    Compensation.  Form 10-K.
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder
    Matters.  Form 10-K.
 115




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##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.  Form 10-K.
  Item 14.
    Principal
    Accounting Fees and
    Services.  Form 10-K.
 PART IV  Item 15.
    Exhibits,
    Financial Statement
    Schedules.  Financial Statements:
  Form 10-K.
  Financial Statement Schedules:
    Exhibits:
  Form 10-K.
 116




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##### Table of Contents



SIGNATURES
      By:
    /s/  Scott
    D. Josey        Signature

Title/s/  Scott
    D. JoseyScott
    D. Josey

Chairman of the Board, Chief Executive Officer and President
    (Principal Executive Officer)/s/  John
    H. KarnesJohn
    H. Karnes

Senior Vice President, Chief Financial Officer and Treasurer
    (Principal Financial and Accounting Officer)/s/  Bernard
    AronsonBernard
    Aronson

Director/s/  Alan
    R. Crain, Jr.Alan
    R. Crain, Jr.

Director/s/  Jonathan
    GinnsJonathan
    Ginns

Director/s/  John
    F. GreeneJohn
    F. Greene

Director/s/  H.
    Clayton PetersonH.
    Clayton Peterson

Director  117




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##### Table of Contents



INDEX TO
    EXHIBITS
  Number

Description2
.1*

Agreement and Plan of Merger dated as of September 9, 2005
    among Forest Oil Corporation, SML Wellhead Corporation, Mariner
    Energy, Inc. and MEI Sub, Inc. (incorporated by reference to
    Exhibit 2.1 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).2
.2*

Letter Agreement dated as of February 3, 2006 among Forest
    Oil Corporation, Forest Energy Resources, Inc., Mariner Energy,
    Inc. and MEI Sub, Inc. amending the transaction agreements
    (incorporated by reference to Exhibit 2.2 to Mariners
    Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).2
.3*

Letter Agreement, dated as of February 28, 2006, among
    Forest Oil Corporation, Forest Energy Resources, Inc., Mariner
    Energy, Inc. and MEI Sub, Inc. amended the transaction
    agreements (incorporated by reference to Exhibit 2.1 to
    Mariners
    Form 8-K
    filed on March 3, 2006).2
.4*

Letter Agreement, dated April 12, 2006, among Forest Oil
    Corporation, Mariner Energy Resources, Inc. and Mariner Energy,
    Inc. amended the transaction agreements (incorporated by
    reference to Exhibit 2.1 to Mariners
    Form 8-K
    filed on April 13, 2006).2
.5*

Membership Interest Purchase Agreement by and between Hydro Gulf
    of Mexico, Inc. and Mariner Energy, Inc., executed
    December 23, 2007 (incorporated by reference to
    Exhibit 2.1 to Mariners
    Form 8-K
    filed on February 5, 2008).3
.1*

Second Amended and Restated Certificate of Incorporation of
    Mariner Energy, Inc., as amended (incorporated by reference to
    Exhibit 3.1 to Mariners Registration Statement on
    Form S-8
    (File
    No. 333-132800)
    filed on March 29, 2006).3
.2*

Certificate of Designations of Series A Junior
    Participating Preferred Stock of Mariner Energy, Inc.
    (incorporated by reference to Exhibit 3.1 to Mariners
    Form 8-K
    filed on October 14, 2008).3
.3*

Fourth Amended and Restated Bylaws of Mariner Energy, Inc.
    (incorporated by reference to Exhibit 3.2 to Mariners
    Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).4
.1*

Indenture, dated as of April 30, 2007, among Mariner
    Energy, Inc., the guarantors party thereto and Wells Fargo Bank,
    N.A., as trustee (incorporated by reference to Exhibit 4.1
    to Mariners
    Form 8-K
    filed on May 1, 2007).4
.2*

Indenture, dated as of April 24, 2006, among Mariner
    Energy, Inc., the guarantors party thereto and Wells Fargo Bank,
    N.A., as trustee (incorporated by reference to Exhibit 4.1
    to Mariners
    Form 8-K
    filed on April 25, 2006).4
.3*

Exchange and Registration Rights Agreement, dated as of
    April 24, 2006, among Mariner Energy, Inc., the guarantors
    party thereto and the initial purchasers party thereto
    (incorporated by reference to Exhibit 4.2 to Mariners
    Form 8-K
    filed on April 25, 2006).4
.4*

Rights Agreement, dated as of October 12, 2008, between
    Mariner Energy, Inc. and Continental Stock Transfer &
    Trust Company, as Rights Agent (incorporated by reference
    to Exhibit 4.1 to Mariners
    Form 8-K
    filed on October 14, 2008).4
.5*

Amended and Restated Credit Agreement, dated as of March 2,
    2006, among Mariner Energy, Inc. and Mariner Energy Resources,
    Inc., as Borrowers, the Lenders party thereto from time to time,
    as Lenders, and Union Bank of California, N.A., as
    Administrative Agent and as Issuing Lender (incorporated by
    reference to Exhibit 4.1 to Mariners
    Form 8-K
    filed on March 3, 2006).4
.6*

Amendment No. 1 and Consent, dated as of April 7,
    2006, among Mariner Energy, Inc. and Mariner Energy Resources,
    Inc., as Borrowers, the Lenders party thereto, and Union Bank of
    California, N.A., as Administrative Agent for such Lenders and
    as Issuing Lender for such Lenders (incorporated by reference to
    Exhibit 4.1 to Mariners
    Form 8-K
    filed on April 13, 2006).4
.7*

Amendment No. 2, dated as of October 13, 2006, among
    Mariner Energy, Inc. and Mariner Energy Resources, Inc., as
    Borrowers, the Lenders party thereto, and Union Bank of
    California, N.A., as Administrative Agent for such Lenders and
    as Issuing Lender for such Lenders (incorporated by reference to
    Exhibit 4.1 to Mariners
    Form 8-K
    filed on October 18, 2006).4
.8*

Amendment No. 3 and Consent, dated as of April 23,
    2007, among Mariner Energy, Inc. and Mariner Energy Resources,
    Inc., as Borrowers, the Lenders party thereto, and Union Bank of
    California, N.A., as Administrative Agent for such Lenders and
    as Issuing Lender for such Lenders (incorporated by reference to
    Exhibit 4.1 to Mariners
    Form 8-K
    filed on April 24, 2007).




---



##### Table of Contents



Number

Description4
.9*

Amendment No. 4, dated as of August 24, 2007, among
    Mariner Energy, Inc. and Mariner Energy Resources, Inc., as
    Borrowers, the Lenders party thereto, and Union Bank of
    California, N.A., as Administrative Agent for such Lenders and
    as Issuing Lender for such Lenders (incorporated by reference to
    Exhibit 4.1 to Mariners
    Form 8-K
    filed on August 27, 2007).4
.10*

Amendment No. 5 and Agreement, dated as of January 31,
    2008, among Mariner Energy, Inc. and Mariner Energy Resources,
    Inc., as Borrowers, the Lenders party thereto, and Union Bank of
    California, N.A., as Administrative Agent for such Lenders and
    as Issuing Lender for such Lenders (incorporated by reference to
    Exhibit 4.1 to Mariners
    Form 8-K
    filed on February 5, 2008).4
.11*

Master Assignment, Agreement and Amendment No. 6, dated as
    of June 2, 2008, among Mariner Energy, Inc. and Mariner
    Energy Resources, Inc., as Borrowers, the Lenders party thereto,
    and Union Bank of California, N.A., as Administrative Agent for
    such Lenders and as Issuing Lender for such Lenders
    (incorporated by reference to Exhibit 4.1 to Mariners
    Form 8-K
    filed on June 3, 2008).4
.12*

Amendment No. 7, dated as of December 12, 2008, among
    Mariner Energy, Inc. and Mariner Energy Resources, Inc., as
    Borrowers, the Lenders party thereto, and Union Bank of
    California, N.A., as Administrative Agent for such Lenders and
    as Issuing Lender for such Lenders (incorporated by reference to
    Exhibit 4.1 to Mariners
    Form 8-K
    filed on December 15, 2008).10
.1*

Underwriting Agreement, dated April 25, 2007, among
    J.P. Morgan Securities Inc., as Representative of the
    several Underwriters listed in Schedule 1 thereto, Mariner
    Energy, Inc., Mariner Energy Resources, Inc., Mariner LP LLC,
    and Mariner Energy Texas LP (incorporated by reference to
    Exhibit 1.1 to Mariners
    Form 8-K
    filed on April 26, 2007).10
.2*

Purchase Agreement, dated as of April 19, 2006, among
    Mariner Energy, Inc., Mariner LP LLC, Mariner Energy Resources,
    Inc., Mariner Energy Texas LP and the initial purchasers party
    thereto (incorporated by reference to Exhibit 10.1 to
    Mariners
    Form 8-K
    filed on April 25, 2006).10
.3*

Form of Indemnification Agreement between Mariner Energy, Inc.
    and each of its directors and officers (incorporated by
    reference to Exhibit 10.2 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.4*

Mariner Energy, Inc. Second Amended and Restated Stock Incentive
    Plan, effective as of February 6, 2007 (incorporated by
    reference to Exhibit 10.3 to Mariners
    Form 10-K
    filed on April 2, 2007).10
.5*

Form of Non-Qualified Stock Option Agreement, Mariner Energy,
    Inc. Amended and Restated Stock Incentive Plan for employees
    without employment agreements (incorporated by reference to
    Exhibit 10.5 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.6*+

Form of Non-Qualified Stock Option Agreement, Mariner Energy,
    Inc. Amended and Restated Stock Incentive Plan for employees
    with employment agreements (incorporated by reference to
    Exhibit 10.6 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.7*+

Form of Restricted Stock Agreement (directors) under Mariner
    Energy, Inc. Second Amended and Restated Stock Incentive Plan
    (incorporated by reference to Exhibit 10.6 to
    Mariners
    Form 10-K
    filed on April 2, 2007).10
.8*+

Form of Restricted Stock Agreement (employee with employment
    agreement) under Mariner Energy, Inc. Second Amended and
    Restated Stock Incentive Plan (incorporated by reference to
    Exhibit 10.7 to Mariners
    Form 10-K
    filed on April 2, 2007).10
.9*

Form of Restricted Stock Agreement (employee without employment
    agreement) under Mariner Energy, Inc. Second Amended and
    Restated Stock Incentive Plan (incorporated by reference to
    Exhibit 10.8 to Mariners
    Form 10-K
    filed on April 2, 2007).10
.10*+

Form of Restricted Stock Agreement for grants made after
    August 24, 2008 as part of 2008 Long-Term Performance-Based
    Restricted Stock Program under Mariner Energy, Inc. Second
    Amended and Restated Stock Incentive Plan (incorporated by
    reference to Exhibit 10.3 to Mariners
    Form 10-Q
    filed on November 7, 2008).




---



##### Table of Contents



Number

Description10
.11*+

Form of Restricted Stock Agreement for grants made before
    August 25, 2008 as part of 2008 Long-Term Performance-Based
    Restricted Stock Program under Mariner Energy, Inc. Second
    Amended and Restated Stock Incentive Plan (incorporated by
    reference to Exhibit 10.2 to Mariners
    Form 8-K
    filed on June 19, 2008).10
.12*+

Amendment, dated as of August 25, 2008, to outstanding
    Restricted Stock Agreements covering grants made before
    August 25, 2008 as part of 2008 Long-Term Performance-Based
    Restricted Stock Program under Mariner Energy, Inc. Second
    Amended and Restated Stock Incentive Plan (incorporated by
    reference to Exhibit 10.5 to Mariners
    Form 10-Q
    filed on November 7, 2008).10
.13*

Form of Nonstatutory Stock Option Agreement for certain
    employees of Mariner Energy, Inc. or Mariner Energy Resources,
    Inc. who formerly held unvested options issued by Forest Oil
    Corporation (incorporated by reference to Exhibit 10.14 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.14*

Mariner Energy, Inc. Equity Participation Plan, effective
    March 11, 2005 (incorporated by reference to
    Exhibit 10.10 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.15*

First Amendment to Mariner Energy, Inc. Equity Participation
    Plan, effective as of March 16, 2006 (incorporated by
    reference to Exhibit 10.11 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.16*+

Form of Restricted Stock Agreement, Mariner Energy, Inc. Equity
    Participation Plan for employees with employment agreements
    (incorporated by reference to Exhibit 10.12 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.17*

Form of Restricted Stock Agreement, Mariner Energy, Inc. Equity
    Participation Plan for employees without employment agreements
    (incorporated by reference to Exhibit 10.13 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.18*+

Compensation of Non-Employee Directors of Mariner Energy, Inc.
    (incorporated by reference to Exhibit 10.3 to
    Mariners
    Form 10-Q
    filed on November 14, 2007).10
.19*+

Employment Agreement by and between Mariner Energy, Inc. and
    Scott D. Josey, dated February 7, 2005 (incorporated by
    reference to Exhibit 10.15 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.20*+

Employment Agreement by and between Mariner Energy, Inc. and
    Dalton F. Polasek, dated February 7, 2005 (incorporated by
    reference to Exhibit 10.16 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.21*+

Employment Agreement, by and between Mariner Energy, Inc. and
    John H. Karnes, dated as of October 16, 2006 (incorporated
    by reference to Exhibit 10.1 to Mariners current
    report on
    Form 8-K
    filed on October 18, 2006).10
.22*+

Employment Agreement by and between Mariner Energy, Inc. and
    Michiel C. van den Bold, dated February 7, 2005
    (incorporated by reference to Exhibit 10.17 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.23*+

Amendment to Employment Agreement by and between Mariner Energy,
    Inc. and Michiel C. van den Bold, dated as of June 8, 2006
    (incorporated by reference to Exhibit 10.18 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.24*+

Second Amended and Restated Employment Agreement by and between
    Mariner Energy, Inc., Mariner Energy Resources, Inc. and Judd
    Hansen, dated June 8, 2006 (incorporated by reference to
    Exhibit 10.19 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).10
.25*

Registration Rights Agreement among Mariner Energy, Inc. and
    each of the investors identified therein, dated March 11,
    2005 (incorporated by reference to Exhibit 10.24 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-137441)
    filed on September 19, 2006).12


Statement regarding Computation of Ratio of Earnings to Fixed
    Charges.21


List of subsidiaries of Mariner Energy, Inc.23
.1

Consent of Deloitte & Touche LLP.




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##### Table of Contents



Number

Description23
.2

Consent of Ryder Scott Company, L.P.31
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Incorporated by reference as indicated.+
    
    Management contract, plan or arrangement.  33-8238,