##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, 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, 2005ORo

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

86-0460233(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)   One BriarLake Plaza, Suite 2000
 2000 West Sam Houston Parkway South
 Houston, Texas 77042
 (Address of principal executive
    offices and zip code)
  (713) 954-5500
 (Registrants telephone
    number, including area code)
      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


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




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##### 



TABLE OF
    CONTENTS
  PART IItems 1 and
    2.

Business and
    Properties


3Item 1A.

Risk Factors


30Item 1B.

Unresolved Staff
    Comments


38Item 3.

Legal
    Proceedings


38Item 4.

Submission of
    Matters to a Vote of Security Holders


39PART IIItem 5.

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


39Item 6.

Selected Financial
    Data


40Item 7.

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


43Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


66Item 8.

Financial
    Statements and Supplementary Data


67Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


105Item 9A.

Controls and
    Procedures


105Item 9B.

Other
    Information


105PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


105Item 11.

Executive
    Compensation


110Item 12.

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


119Item 13.

Certain
    Relationships and Related Transactions


121Item 14.

Principal
    Accounting Fees and Services


121Item 15.

Exhibits and
    Financial Statement Schedules


122First Amendment to Amended and Restated Stock Incentive PlanFirst Amendment to Equity Participation PlanConsent of Deloitte & Touche LLPConsent of Ryder Scott Company, L.P.Certification of CEO pursuant to Section 302Certification of CFO pursuant to Section 302Certification of CEO pursuant to Section 906Certification of CFO pursuant to Section 906    CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING INFORMATION
    
    the volatility of oil and natural gas prices; 1




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##### Table of Contents




    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 disasters
    such as fires, floods and other 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;
    our merger with Forest Energy Resources, including strategic
    plans, expectations and objectives for future operations, and
    the realization of expected benefits from the
    transaction; and
    disruption from the merger with Forest Energy Resources making
    it more difficult to manage our business. 2




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##### Table of Contents



PART I  Unless the context otherwise requires or indicates,
    references to Mariner, we,
    our, ours, and us refer to
    Mariner Energy, Inc. and its 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 Items 1 and 2 of this Annual Report.
    References to pro forma and on a pro forma
    basis mean on a pro forma basis, giving effect to our
    merger with Forest Energy Resources, Inc. as if it had been
    consummated at the applicable date or at the beginning of the
    period referenced. The merger was consummated on March 2,
    2006.  The unaudited pro forma information contained in this
    Annual Report has been derived from the historical consolidated
    financial statements of Mariner and the statements of revenues
    and direct operating expenses of the Forest Gulf of Mexico
    operations. The pro forma information is for illustrative
    purposes only. The financial results may have been different had
    the Forest Gulf of Mexico operations been an independent company
    and had the companies always been combined. You should not rely
    on the pro forma financial information as being indicative of
    the historical results that would have been achieved had the
    merger occurred in the past or the future financial results that
    Mariner will achieve after the merger.
  Items 1
    and 2.
    Business
    and Properties.  General
           3




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##### Table of Contents



Production forEstimated Proved





Year EndedReserve Quantities





December 31,Natural





Total


2005Oil


Gas


Total


Net


(Natural GasGeographic Area

(MMbbls)


(Bcf)


(Bcfe)


Acreage


Equivalent (Bcfe))West Texas Permian Basin


16.7



105.5



205.5



31,199



6.6Gulf of Mexico Deepwater(1)


4.7



83.2



111.1



185,271



11.8Gulf of Mexico Shelf(2)


0.3



19.0



21.0



124,180



10.7Total


21.7



207.7



337.6



340,650



29.1Proved Developed Reserves


9.6



110.0



167.4     (1)
    
    Deepwater refers to water depths greater than 1,300 feet
    (the approximate depth of deepwater designation for royalty
    purposes by the U.S. Minerals Management Service).(2)
    
    Shelf refers to water depths less than 1,300 feet and
    includes an insignificant amount of Gulf Coast onshore
    properties.    Pro FormaPro Forma





Production forEstimated Proved





Year EndedReserve Quantities


Pro Forma


December 31,Natural





Total


2005Oil


Gas


Total


Net


(Natural GasGeographic Area

(MMbbls)


(Bcf)


(Bcfe)


Acreage


Equivalent (Bcfe))West Texas Permian Basin


16.7



105.5



205.5



31,199



6.6Gulf of Mexico Deepwater(1)


4.8



95.7



124.5



241,320



14.0Gulf of Mexico Shelf(2)


12.7



237.6



313.7



652,086



74.3Total


34.2



438.8



643.7



924,605



94.9Proved Developed Reserves


18.4



252.1



362.3     (1)
    
    Deepwater refers to water depths greater than 1,300 feet
    (the approximate depth of deepwater designation for royalty
    purposes by the U.S. Minerals Management Service).(2)
    
    Shelf refers to water depths less than 1,300 feet and
    includes an insignificant amount of Gulf Coast onshore
    properties.  (713) 954-5500.
  Our
    Strategy
    Generate and pursue high-quality prospects.
 4




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Maintain a moderate risk profile.
  Pursue opportunistic acquisitions.
  Our
    Competitive Strengths
    Our high-quality assets with geographic and geological
    diversity.
  Our large inventory of prospects.
  Our successful track record of finding and developing oil and
    gas reserves.
  Our depth of operating experience.
  Our technology and production techniques. vintage 3-D
 5




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##### Table of Contents



Recent
    Developments
  Forest
    Gulf of Mexico Merger
         Hurricanes
    Katrina and Rita
  6-8 Bcfe 15-20 Bcfe
   6




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Insurance
    Credit
    Agreement
  drill-to-earn
  Summary
    Reserve and Operating Data
    Estimated
    Proved Reserves
    7




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##### Table of Contents



Pro FormaYear Ended


As of the Year Ended December,
    31December 31, 2005


2005


2004


2003Estimated proved oil and
    natural gas reserves:Natural gas reserves (Bcf)


438.8



207.7



151.9



127.6Oil (MMbbls)


34.1



21.6



14.3



13.1Total proved oil and natural gas
    reserves (Bcfe)


643.7



337.6



237.5



206.1Total proved developed reserves
    (Bcfe)


362.3



167.4



109.4



96.6PV10 value ($ in
    millions):Proved developed reserves

$
2,023.4


$
849.6


$
335.4


$
314.6Proved undeveloped reserves


1,028.4



432.2



332.6



218.9Total PV10 value


3,051.8



1,281.8



668.0



533.5Standardized measure


2,201.7



906.6



494.4



418.2Prices used in calculating
    end of period proved reserve measures (excluding effects of
    hedging)(1):Natural gas ($/MMBtu)

$
10.05


$
10.05


$
6.15


$
5.96Oil ($/bbl)


61.04



61.04



43.45



32.52     (1)
    
    Our PV10 values have been calculated using NYMEX prices at the
    end of the relevant period, as adjusted for our price
    differentials. Please read note 11 to the Mariner financial
    statements contained in Item 8 of this Annual Report. 8




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##### Table of Contents



Operating
    Data
    Pro FormaYear Ended


Year Ended
    December 31,December 31, 2005


2005


2004


2003Production:Natural gas (Bcf)


67.5



18.4



23.8



23.8Oil (Mbbls)


4.6



1.8



2.3



1.6Total natural gas equivalent (Bcfe)


94.9



29.1



37.6



33.4Average daily natural gas
    equivalent (MMcfe)


260.0



79.7



103.0



91.5Average realized sales price
    per unit (excluding the effects of hedging):Natural gas ($/Mcf)

$
8.04


$
8.33


$
6.12


$
5.43Oil ($/bbl)


48.86



51.66



38.52



26.85Total natural gas equivalent
    ($/Mcfe)


8.07



8.43



6.23



5.15Average realized sales price
    per unit (including the effects of hedging):Natural gas ($/Mcf)

$
6.40


$
6.66


$
5.80


$
4.40Oil ($/bbl)


34.18



41.23



33.17



23.74Total natural gas equivalent
    ($/Mcfe)


6.20



6.74



5.70



4.27Expenses
    ($/Mcfe):Lease operating expenses

$
1.17


$
1.03


$
0.68


$
0.74Transportation


0.06



0.08



0.08



0.19General and administrative,
    net (1)






1.27



0.23



0.24Depreciation, depletion and
    amortization (excluding impairments) (2)


3.47



2.04



1.73



1.45     (1)
    
    Net of overhead reimbursements received from other working
    interest owners and amounts capitalized under the full cost
    accounting method. Includes non-cash stock compensation expense
    of $25.7 million in 2005. General and administrative
    expenses, net, are not included in pro forma 2005 because
    accounts of such costs were not historically maintained for the
    Forest Gulf of Mexico operations as a separate business unit. We
    believe the overhead costs associated with the Forest Gulf of
    Mexico operations in 2006 will approximate $6.4 million,
    net of capitalized amounts.(2)
    
    Pro forma depreciation, depletion and amortization gives effect
    to the acquisition of the Forest Gulf of Mexico operations and a
    preliminary estimate of their step-up in basis using the unit of
    production method under the full cost method of accounting. 9




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Properties
    Date


EstimatedMariner


Approximate


Gross


Production


Proved





StandardizedWorking


Water Depth


Producing


Commenced/


Reserves


PV10 Value


MeasureOperator


Interest(%)


(Feet)


Wells(1)


Expected


(Bcfe)


($ In Millions)(2)


($ In Millions)West Texas Permian
    Basin:Aldwell Unit


Mariner



66.5
(3)


Onshore



246



*



120.7


$
367.0Tamarack/Spraberry Properties


Tamarack



35.0
(4)


Onshore



187



*



67.8



103.2Gulf of Mexico
    Deepwater:Mississippi Canyon 296/252 (Rigel)


Dominion



22.5



5,200



0
(5)


First Quarter
    2006



22.5



161.4Atwater Valley 426 (Bass Lite)


Mariner



38.75
(6)


6,500



0



2008



32.3



137.9Viosca Knoll 917/961/962 (Swordfish)


Mariner(6
)


15.0



4,700



2



Fourth Quarter
    2005



12.9



101.7Mississippi Canyon 718 (Pluto)(8)


Mariner



51.0



2,830



0



1999



9.0



69.3Green Canyon 646 (Daniel Boone)


W&T Offshore



40.0



4,300



0



2008



16.4



61.8Green Canyon 516 (Yosemite)


ENI



44.0



3,900



1



2002



7.8



53.9East Breaks 420**


Noble



50.0



2,560



1



2002



13.4



75.8Gulf of Mexico Shelf:East Cameron 14**


Mariner



50.0



25



2



*



15.2



91.5Eugene Island 292**


Mariner



45.0



195



8



*



8.2



54.7Eugene Island 53**


Mariner



50.0
(9)


40



4



*



10.4



78.1High Island 116**


Mariner



98.9
(10)


45



2



*



9.7



52.7Ship Shoal 26**


Mariner



100.0



10



1



*



7.2



41.5South Marsh Island 18**


Mariner



100.0



75



1



1993



9.5



50.6South Pass 24-NCOC**


Mariner



100.0



10



15



*



23.5



103.8Vermilion 14**


Mariner



100.0



20



16



*



32.8



177.7Vermilion 380**


Mariner



55.0-100.0



320



5



*



11.4



59.2West Cameron 110**


BP/Amoco



37.5



40



5



*



9.0



51.9West Cameron 111/112**


Mariner



55.0



43



1



2004



6.5



49.8West Cameron 205**


Mariner



100.0



50



1



*



5.7



41.9Other Properties














93







48.2



225.6Other Properties (Forest pro
    forma)**














344







143.6



840.8Total:














935







643.7


$
3,051.8


$
2,201.7     *
    
    Production commenced twenty years or more years ago.**
    
    Pro forma properties from Forest Gulf of Mexico operations.(1)
    
    Wells producing or capable of producing as of December 31,
    2005.(2)
    
    Please see  Estimated Proved Reserves for
    a definition of PV10 and a reconciliation of PV10 to the
    standardized measure of discounted future net cash flows.(3)
    
    Mariner operates the field and owns working interests in
    individual wells ranging from approximately 33% to 84%.(4)
    
    Mariner owns an approximate average 35% working interest in
    producing wells. Upon completion of approximately 150 additional
    wells, Mariner will obtain an approximate 35% working interest
    in the entire committed acreage.(5)
    
    The Rigel Prospect commenced production with one well in the
    first quarter of 2006. 10




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##### Table of Contents



(6)
    
    Since December 31, 2005, Mariner has exercised a
    preferential right with respect to the property, thereby
    increasing its working interest to 42.19%.  (7)
    
    Mariner served as operator until December 2005, at which time
    pursuant to certain contractual arrangements, Noble Energy,
    Inc., a 60% partner in the project, began serving as operator.(8)
    
    This field was shut-in in April 2004 pending the drilling of a
    new well and installation of an extension to the existing
    infield flowline and umbilical. As a result, as of
    December 31, 2005, 8.9 Bcfe of our net proved reserves
    attributable to this project were classified as proved behind
    pipe reserves. We expect production from Pluto to recommence in
    the second quarter of 2006.(9)
    
    Mariner operates the field and owns working interests in
    individual wells ranging from approximately 50% to 100%.(10)
    
    Mariner operates the field and owns working interests in
    individual wells ranging from approximately 98.9% to 100%.  West
    Texas Permian Basin
  Aldwell Unit. 18,500-acre Aldwell
    Tamarack/Spraberry Properties. 150-well 150-well
  Other Projects and Activity. 80-acre 40-acre
  40-acre
   11




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##### Table of Contents



Gulf
    of Mexico Deepwater




Mississippi Canyon 296/252 (Rigel).




Atwater Valley 426 (Bass Lite).




Viosca Knoll 917/961/962 (Swordfish).




Mississippi Canyon 718 (Pluto). 29-mile




Green Canyon 646 (Daniel Boone).




Green Canyon 516 (Yosemite).




East Breaks 420.


12



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##### Table of Contents



Other Projects and Activity.








two-well




Gulf
    of Mexico Shelf








East Cameron 14.




Eugene Island 292.




Eugene Island 53.




High Island 116.




Ship Shoal 26.


13



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##### Table of Contents



South Marsh Island 18.




South Pass 24 NCOC.




Vermillion 14.




Vermillion 380.




West Cameron 110.




West Cameron 111/112.




West Cameron 205.




Other Projects and Activity.














14



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##### Table of Contents



Estimated
    Proved Reserves








|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |       |  |       |   |       |              |  |   |         |  |  |   |       | 
|--------------------------- |  | ------------------ | ---- |  | ------- |  | ----- | ------ |  |  | ------------- |  |  | ------------ | ----- |  | ----- | - | ----- | ------------ |  | - | ------- |  |  | - | ----- | 
|                            |  | Estimated Proved   |      |  |         |  |       |        | 
|                            |  | Reserve Quantities |      |  |         |  |       |        |  |  |               |  |  |              |      
|                            |  |                    |      |  | Natural |  |       |        |  |  |               |  |  |              |       |  |       |   |       |              | 
|                            |  | Oil                |      |  | Gas     |  |       | Total  |  |  | PV10 Value(3) |  |  | Standardized |      
|Geographic Area             |  | (MMbbls)           |      |  | (Bcf)   |  |       | (Bcfe) |  |  | Developed     |  |  | Undeveloped  |       |  | Total |   |       | Measure      | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  | ($ Millions) |       |  |       |   |       | ($ Millions) | 
|                           
|West Texas Permian Basin    |  |                    | 16.7 |  |         |  | 105.5 |        |  |  | 205.5         |  |  | $            | 333.7 |  |       | $ | 173.4 |              |  | $ | 507.1   |  |  |   |       | 
|Gulf of Mexico Deepwater(1) |  |                    | 4.7  |  |         |  | 83.2  |        |  |  | 111.1         |  |  |              | 383.3 |  |       |   | 257.4 |              |  |   | 640.7   |  |  |   |       | 
|Gulf of Mexico Shelf(2)     |  |                    | 0.3  |  |         |  | 19.0  |        |  |  | 21.0          |  |  |              | 132.6 |  |       |   | 1.4   |              |  |   | 134.0   |  |  |   |       | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |       |  |       |   |       |              |  |   |         |  |  |   |       | 
|Total                       |  |                    | 21.7 |  |         |  | 207.7 |        |  |  | 337.6         |  |  | $            | 849.6 |  |       | $ | 432.2 |              |  | $ | 1,281.8 |  |  | $ | 906.6 | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |       |  |       |   |       |              |  |   |         |  |  |   |       | 
|Proved Developed Reserves   |  |                    | 9.6  |  |         |  | 110.0 |        |  |  | 167.4         |  |  |              |       |  |       |   |       |              |  |   |         |  |  |   |       | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |       |  |       |   |       |              |  |   |         |  |  |   |       | 









|    |  |                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Deepwater refers to water depths greater than 1,300 feet
    (the approximate depth of deepwater designation for royalty
    purposes by the U.S. Minerals Management Service).
|   
|(2) |  | Shelf refers to water depths less than 1,300 feet and
    includes an insignificant amount of Gulf Coast onshore
    properties.                                               
|   
|(3) |  | Please see below for a definition of PV10 and a reconciliation
    of PV10 to the standardized measure of discounted future net
    cash flows.                                







|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |         |  |       |   |         |              |  |   |         |  |  |   |         | 
|--------------------------- |  | ------------------ | ---- |  | ------- |  | ----- | ------ |  |  | ------------- |  |  | ------------ | ------- |  | ----- | - | ------- | ------------ |  | - | ------- |  |  | - | ------- | 
|                            |  | Pro Forma          |      |  |         |  |       |        | 
|                            |  | Estimated Proved   |      |  |         |  |       |        |  |  |               |  |  |              |        
|                            |  | Reserve Quantities |      |  |         |  |       |        |  |  |               |  |  |              |        
|                            |  |                    |      |  | Natural |  |       |        |  |  | Pro Forma     |  |  | Pro Forma    |        
|                            |  | Oil                |      |  | Gas     |  |       | Total  |  |  | PV10 Value(3) |  |  | Standardized |        
|Geographic Area             |  | (MMbbls)           |      |  | (Bcf)   |  |       | (Bcfe) |  |  | Developed     |  |  | Undeveloped  |         |  | Total |   |         | Measure      | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  | ($ Millions) |         |  |       |   |         | ($ Millions) | 
|                           
|West Texas Permian Basin    |  |                    | 16.7 |  |         |  | 105.5 |        |  |  | 205.5         |  |  | $            | 333.7   |  |       | $ | 173.4   |              |  | $ | 507.1   |  |  |   |         | 
|Gulf of Mexico Deepwater(1) |  |                    | 4.8  |  |         |  | 95.7  |        |  |  | 124.5         |  |  |              | 406.3   |  |       |   | 310.3   |              |  |   | 716.6   |  |  |   |         | 
|Gulf of Mexico Shelf(2)     |  |                    | 12.7 |  |         |  | 237.6 |        |  |  | 313.7         |  |  |              | 1,283.4 |  |       |   | 544.7   |              |  |   | 1,828.1 |  |  |   |         | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |         |  |       |   |         |              |  |   |         |  |  |   |         | 
|Total                       |  |                    | 34.2 |  |         |  | 438.8 |        |  |  | 643.7         |  |  | $            | 2,023.4 |  |       | $ | 1,028.4 |              |  | $ | 3,051.8 |  |  | $ | 2,201.7 | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |         |  |       |   |         |              |  |   |         |  |  |   |         | 
|Proved Developed Reserves   |  |                    | 18.4 |  |         |  | 252.1 |        |  |  | 362.3         |  |  |              |         |  |       |   |         |              |  |   |         |  |  |   |         | 
|                            |  |                    |      |  |         |  |       |        |  |  |               |  |  |              |         |  |       |   |         |              |  |   |         |  |  |   |         | 









|    |  |                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Deepwater refers to water depths greater than 1,300 feet
    (the approximate depth of deepwater designation for royalty
    purposes by the U.S. Minerals Management Service).
|   
|(2) |  | Shelf refers to water depths less than 1,300 feet and
    includes an insignificant amount of Gulf Coast onshore
    properties.                                               

15



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##### Table of Contents



|    |  |                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|(3) |  | Please see below for a definition of PV10 and a reconciliation
    of PV10 to the standardized measure of discounted future net
    cash flows.











|                                                             |  |                 |         |  |                 |   |         |      |  |   |       |  |  |   |       | 
|------------------------------------------------------------ |  | --------------- | ------- |  | --------------- | - | ------- | ---- |  | - | ----- |  |  | - | ----- | 
|                                                             |  | Pro Forma       |         |  |                 |   |         |      |  |   |       | 
|                                                             |  | At December 31, |         |  | At December 31, |  
|                                                             |  | 2005            |         |  | 2005            |   |         | 2004 |  |   | 2003  | 
|                                                            
|PV10                                                         |  | $               | 3,051.8 |  |                 | $ | 1,281.8 |      |  | $ | 668.0 |  |  | $ | 533.5 | 
|Future income taxes, discounted at
    10%                   |  |                 | 850.1   |  |                 |   | 375.2   |      |  |   | 173.6 |  |  |   | 115.3 | 
|                                                             |  |                 |         |  |                 |   |         |      |  |   |       |  |  |   |       | 
|Standardized measure of discounted
    future net cash flows |  | $               | 2,201.7 |  |                 | $ | 906.6   |      |  | $ | 494.4 |  |  | $ | 418.2 | 
|                                                             |  |                 |         |  |                 |   |         |      |  |   |       |  |  |   |       | 











16



---



##### Table of Contents



Production
    Pro FormaYear Ended


Year Ended
    December 31,December 31, 2005


2005


2004


2003Production:Natural Gas (Bcf)


67.5



18.4



23.8



23.8Oil (MMbbls)


4.6



1.8



2.3



1.6Total natural gas equivalent (Bcfe)


94.9



29.1



37.6



33.4Average realized sales price
    per unit (excluding effects of hedging):Natural gas ($/Mcf)

$
8.04


$
8.33


$
6.12


$
5.43Oil ($/bbl)


46.86



51.66



38.52



26.85Total natural gas equivalent
    ($/Mcfe)


8.07



8.43



6.23



5.15Average realized sales price
    per unit (including effects of hedging):Natural gas ($/Mcf)

$
6.40


$
6.66


$
5.80


$
4.40Oil ($/bbl)


34.18



41.23



33.17



23.74Total natural gas equivalent
    ($/Mcfe)


6.20



6.74



5.70



4.27Expenses ($/Mcfe):Lease operating expenses

$
1.17


$
1.03


$
0.68


$
0.74Transportation


0.06



0.08



0.08



0.19General and administrative, net (1)






1.27



0.23



0.24Depreciation, depletion and
    amortization (excluding impairments) (2)


3.47



2.04



1.73



1.45     (1)
    
    Net of overhead reimbursements received from other working
    interest owners and amounts capitalized under the full cost
    accounting method. Includes non-cash stock compensation expense
    of $25.7 million in 2005. General and administrative
    expenses, net, are not included in pro forma 2005 because
    accounts of such costs were not historically maintained for the
    Forest Gulf of Mexico operations as a separate business unit. We
    believe the overhead costs associated with the Forest Gulf of
    Mexico operations in 2006 will approximate $6.4 million,
    net of capitalized amounts.  (2)
    
    Pro forma depreciation, depletion and amortization gives effect
    to the acquisition of the Forest Gulf of Mexico operations and a
    preliminary estimate of their step-up in basis using the unit of
    production method under the full cost method of accounting. 17




---



##### Table of Contents



Productive
    Wells
    Total Productive Wells
    atPro Forma at


December 31,


December 31,December 31, 2005


2005


2004Gross


Net


Gross


Net


Gross


NetOil


669



335.0



492



271.3



197



127.9Gas


266



117.3



37



10.7



34



9.5Total


935



452.3



529



282.0



231



137.4   Acreage
    Pro FormaAt December 31,
    2005


At December 31,
    2005Developed Acres(1)


Undeveloped Acres(2)


Developed Acres(1)


Undeveloped Acres(2)Gross


Net


Gross


Net


Gross


Net


Gross


NetWest Texas


59,974



31,199











59,974



31,199







Gulf of Mexico Deepwater(3)


90,720



36,035



332,528



205,285



79,200



30,275



259,200



154,996Gulf of Mexico Shelf(4)


1,007,882



399,184



399,792



251,915



136,062



40,435



137,128



82,758Other Onshore


3,392



744



856



243



3,392



744



856



243Total


1,161,968



467,162



733,176



457,443



278,628



102,653



397,184



237,997     (1)
    
    Developed acres are acres spaced or assigned to productive wells.(2)
    
    Undeveloped acres are acres on which wells have not been drilled
    or completed to a point that would permit the production of
    commercial quantities of oil and natural gas regardless of
    whether such acreage contains proved reserves.(3)
    
    Deepwater refers to water depths greater than 1,300 feet
    (the approximate depth of deepwater designated for royalty
    purposes by the U.S. Minerals Management Service).(4)
    
    Shelf refers to water depths less than 1,300 feet.    Undeveloped AcreageSubject to Expiration in the
    Year Ended December 31,2006


2007


2008Gross


Net


Gross


Net


Gross


NetGulf of Mexico Deepwater


46,080



12,988



28,800



9,360



51,840



30,240Gulf of Mexico Shelf


10,760



6,260



46,000



31,183



25,760



16,510Total


56,840



19,248



74,800



40,543



77,600



46,750  18




---



##### Table of Contents



Drilling
    Activity
    Year Ended
    December 31,2005


2004


2003Gross


Net


Gross


Net


Gross


NetExploratory wells:Producing


3



1.13



7



3.34



6



2.03Dry


7



2.44



7



2.65



6



2.35Total


10



3.57



14



5.99



12



4.38Development wells:Producing


93



54.20



56



34.84



45



30.07Dry










1



0.68







Total


93



54.20



57



35.52



45



30.07Total wells:Producing


96



55.33



63



38.18



51



32.10Dry


7



2.44



8



3.33



6



2.35Total


103



57.77



71



41.51



57



34.45     Property
    Dispositions
    Marketing
    and Customers
   19




---



##### Table of Contents



Percentage of Total Revenuesfor Year Ended
    December 31,Customer

2005


2004


2003Sempra






*



34
%Bridgeline Gas Distributing Company


15
%


27
%


19
%Trammo Petroleum Inc.


*



9
%


14
%Duke Energy


*



*



6
%Genesis Crude Oil LP






*



4
%Chevron Texaco and affiliates


24
%


18
%


BP Energy


*



12
%


Plains Marketing LP


10
%






     *
    
    Less than 1%  Title to
    Properties
      Competition
  large 3-D
 20




---



##### Table of Contents



Royalty
    Relief
    Water Depth

Royalty Relief200-400 meters


no royalty payable on the first 105 Bcfe produced400-800 meters


no royalty payable on the first 315 Bcfe produced800 meters or deeper


no royalty payable on the first 525 Bcfe produced             Regulation
   21




---



##### Table of Contents



Transportation
    and Sale of Natural Gas
        Regulation
    of Production
   22




---



##### Table of Contents



Environmental
    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.
 23




---



##### Table of Contents



clean-up
  The Oil Pollution Act.
    Water Discharges.
   24




---



##### Table of Contents



Air Emissions.
  Waste Handling.
  Employees
    Insurance
    Matters
     25




---



##### Table of Contents



6-8 Bcfe
      Enron
    Related Matters
     26




---



##### Table of Contents



Glossary
    of Oil and Natural Gas Terms
  Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
  3-D
    seismic. 3-D
  Appraisal well.
  bbl.
  Bcf.
  Bcfe.
  Block.
  Btu or British Thermal Unit.
  Completion.
  Condensate.
  Deep shelf well.
  Deepwater.
  Developed acreage.
  Development well.
  Dry hole.
 27




---



##### Table of Contents



Dry hole costs.
  Exploitation.
  Exploratory well.
  Farm-in or farm-out.
  Field. and/or
  Gross acres or gross wells.
  Lease operating expenses.
  Mbbls.
  Mcf.
  Mcfe.
  MMBls.
  MMBtu.
  MMcf.
  MMcfe.
  Net acres or net wells.
  Net revenue interest.
  Payout.
  PV10 or present value of estimated future net
    revenues.
 28




---



##### Table of Contents



Productive well.
  Prospect.
  Proved developed non-producing
    reserves.
  Proved developed producing reserves.
  Proved developed reserves. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
  Proved reserves. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
  Proved undeveloped reserves. Rule 4-10(a)(2-4) Regulation S-X. http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
  Reservoir. and/or
  Shelf.
  Subsea tieback.
  Subsea trees.
  Undeveloped acreage.
  Working interest.
 29




---



##### Table of Contents



Item 1A.
    Risk
    Factors.  Risks
    Relating to the Oil and Natural Gas Industry and Our
    Business
  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.
   30




---



##### Table of Contents



In
    estimating future net revenues from proved reserves, we assume
    that future prices and costs are fixed and apply a fixed
    discount factor. If these assumptions or discount factor are
    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.
    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.
   31




---



##### Table of Contents



Approximately
    65% of our total estimated proved reserves are developed
    non-producing or undeveloped (71% on a pro forma basis), 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.
   32




---



##### Table of Contents



3-D 3-D
  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 disasters, such as 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 gas.
     33




---



##### Table of Contents



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.
    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.
      Properties
    we acquire (including the Forest Gulf of Mexico properties) 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.
   34




---



##### Table of Contents



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.
    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 or third-party
    operators could adversely affect our ability to timely complete
    the exploration and development of certain
    prospects.
   35




---



##### Table of Contents



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
  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 protect us against our business and operating
    risks.
   36




---



##### Table of Contents



Risks
    Relating to Our Merger with Forest Energy Resources
  The
    integration of the Forest Gulf of Mexico operations will be
    difficult, and will divert our managements attention away
    from our normal operations.
    
    the challenge of integrating the Forest Gulf of Mexico
    operations while carrying on the ongoing operations of our
    business;
    the challenge of managing a significantly larger company, with
    more than twice the PV10 of Mariner prior to the merger;
    the possibility of faulty assumptions underlying our
    expectations;
    the difficulty associated with coordinating geographically
    separate organizations;
    the challenge of integrating the business cultures of the two
    companies;
    attracting and retaining personnel associated with the Forest
    Gulf of Mexico operations following the merger; and
    the challenge and cost of integrating the information technology
    systems of the two companies.    If we
    fail to realize the anticipated benefits of the merger, our
    results of operations may be lower than we expect.
   37




---



##### Table of Contents



We
    expect to incur significant charges relating to the integration
    plan that could materially and adversely affect our
    period-to-period
    results of operations.
    In
    order to preserve the tax-free treatment of the spin-off of
    Forest Energy Resources, we are required to abide by potentially
    significant restrictions which could limit our ability to
    undertake certain corporate actions (such as the issuance of our
    common shares or the undertaking of a change in control) that
    otherwise could be advantageous.
       Item 1B.
    Unresolved
    Staff Comments.     Item 3.
    Legal
    Proceedings.     38




---



##### Table of Contents



and/or
  Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.            Recent
    Sales and Issuances of Unregistered Securities
    
    On March 11, 2005, we issued 16,350,000 shares of our
    common stock in consideration of $212,877,000 before expenses to
    qualified institutional buyers,
    non-U.S. persons
    and accredited investors in transactions exempt from
    registration under Section 4(2) of the Securities Act. We
    paid Friedman, Billings, Ramsey & Co., Inc., who acted
    as placement agent in this transaction, $16,023,000 in discounts
    and placement fees. A selling stockholder in the offering paid
    an additional $10,035,200 in discounts and placement fees to
    Friedman, Billings, Ramsey & Co., Inc.
    On March 11, 2005, we issued 2,267,270 shares of
    restricted common stock to employees pursuant to our Equity
    Participation Plan. The issuance of these shares was exempt from
    the registration requirements of the Securities Act pursuant to
    Rule 701. See Item 11, Equity Participation
    Plan.
    During 2005, we issued options exercisable for an aggregate
    809,000 shares of common stock to employees and directors
    pursuant to our Stock Incentive Plan as follows: options for an
    aggregate of 798,960 shares at $14.00 per share were
    issued on March 11, May 16, July 18 and
    July 25, 2005; options for an aggregate of
    9,000 shares at $15.50 per share were issued on
    August 11, 2005; and an option for 1,040 shares at
    $17.00 per share was issued on September 19, 2005. The
    issuance of those options was exempt from the registration
    requirements of the Securities Act pursuant to Rule 701.
    These options generally vest and become exercisable in one-third
    increments on the first three anniversaries of the grant date
    (or, in the case of directors, on the first three annual
    stockholder meeting dates following grant), subject to
    acceleration in certain instances, including for employee
    options when the deemed change of control occurred upon the
    merger with Forest Energy Resources on March 2, 2006,
    whereupon options for an aggregate of 216,000 shares held
    by non-executive employees fully vested. Mariners
    executive officers waived accelerated vesting of their options
    for an aggregate of 39




---



##### Table of Contents



Form S-1 No. 333-124858),
  Item 6.
    Selected
    Financial Data.     40




---



##### Table of Contents



Post-2004 Merger



Pre-2004 MergerPeriod from



Period fromMarch 3,



January 1,2004



2004Year Ended


through



throughDecember 31,


December 31,



March 2,


Year Ended December
    31,2005


2004



2004


2003


2002


2001(in millions, except per
    share data)Statement of Operations
    Data:Total revenues(1)

$
199.7


$
174.4



$
39.8


$
142.5


$
158.2


$
155.0Lease operating expenses


29.9



21.4




4.1



24.7



26.1



20.1Transportation expenses


2.3



1.9




1.1



6.3



10.5



12.0Depreciation, depletion and
    amortization


59.4



54.3




10.6



48.3



70.8



63.5Impairment of production equipment
    held for use


1.8



1.0
















Derivative settlement















3.2







Impairment of Enron related
    receivables



















3.2



29.5General and administrative expenses


37.1



7.6




1.1



8.1



7.7



9.3Operating income


69.2



88.2




22.9



51.9



39.9



20.6Interest income


0.8



0.2




0.1



0.8



0.4



0.7Interest expense


(8.2
)


(6.0
)







(7.0
)


(10.3
)


(8.9
)Income before income taxes


61.8



82.4




23.0



45.7



30.0



12.4Provision for income taxes


(21.3
)


(28.8
)



(8.1
)


(9.4
)






Income before cumulative effect of
    change in accounting method net of tax effects


40.5



53.6




14.9



36.3



30.0



12.4Income before cumulative effect
    per common shareBasic


1.24



1.80




.50



1.22



1.01



.42Diluted


1.20



1.80




.50



1.22



1.01



.42Cumulative effect of changes in
    accounting method















1.9







Net income

$
40.5


$
53.6



$
14.9


$
38.2


$
30.0


$
12.4Net income per common shareBasic

$
1.24


$
1.80



$
0.50


$
1.29


$
1.01


$
0.42Diluted


1.20



1.80




0.50



1.29



1.01



0.42Capital Expenditure and
    Disposal Data:Exploration, including
    leasehold/seismic

$
60.9


$
40.4



$
7.5


$
31.6


$
40.4


$
66.3Development and other


191.8



93.2




7.8



51.7



65.7



98.2Proceeds from property conveyances















(121.6
)


(52.3
)


(90.5
)Total capital expenditures net of
    proceeds from property conveyances

$
252.7


$
133.6



$
15.3


$
(38.3
)

$
53.8


$
74.0     (1)
    Includes effects of hedging.  Post-2004 Merger



Pre-2004 MergerDecember 31,


December 31,



December 31,2005


2004



2003


2002


2001(in millions)Balance Sheet
    Data:(1)Property and equipment, net, full
    cost method

$
515.9


$
303.8



$
207.9


$
287.6


$
290.6Total assets


665.5



376.0




312.1



360.2



363.9Long-term debt, less current
    maturities


156.0



115.0








99.8



99.8Stockholders equity


213.3



133.9




218.2



170.1



180.1Working capital (deficit)(2)


(46.4
)


(18.7
)



38.3



(24.4
)


(19.6
)  41




---



##### Table of Contents



(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.(2)
    Working capital (deficit) excludes current derivative assets and
    liabilities, deferred tax assets and restricted cash.  Post-2004 Merger



Pre-2004 MergerPeriod from



Period fromMarch 3,



January 1,2004



2004Year Ended


through



throughDecember 31,


December 31,



March 2,


Year Ended December
    31,2005


2004



2004


2003


2002


2001(in millions)Other Financial
    Data:EBITDA(1)

$
130.4


$
143.5



$
33.4


$
100.3


$
113.9


$
113.6Net cash provided by operating
    activities


165.4



135.2




20.3



88.9



60.3



113.5Net cash (used) provided by
    investing activities


(247.8
)


(133.0
)



(15.3
)


52.9



(53.8
)


(74.0
)Net cash (used) provided by
    financing activities


84.4



64.9








(100.0
)






(30.0
)Reconciliation of Non-GAAP
    Measures:EBITDA(1)

$
130.4


$
143.5



$
33.4


$
100.3


$
113.9


$
113.6Changes in working capital


20.0



6.2




(13.2
)


7.2



(20.4
)


7.5Non-cash hedge gain(2)


(4.5
)


(7.9
)







(2.0
)


(23.2
)


Amortization/other


1.2



0.8












(0.1
)


0.6Stock compensation expense


25.7




















Net interest expense


(7.4
)


(5.8
)



0.1



(6.2
)


(9.9
)


(8.2
)Income tax expense






(1.6
)







(10.4
)






Net cash provided by operating
    activities

$
165.4


$
135.2



$
20.3


$
88.9


$
60.3


$
113.5     (1)
    EBITDA means earnings before interest, income taxes,
    depreciation, depletion and amortization and impairments. For
    the year ended December 31, 2005, EBITDA includes
    $25.7 million in non-cash stock compensation expense
    related to restricted stock and stock options granted in 2005.
    We believe that EBITDA is a widely accepted financial indicator
    that provides additional information about our ability to meet
    our future requirements for debt service, capital expenditures
    and working capital, but EBITDA should not be considered in
    isolation or as a substitute for net income, operating income,
    net cash provided by operating activities or any other measure
    of financial performance presented in accordance with generally
    accepted accounting principles or as a measure of a
    companys profitability or liquidity.(2)
    In accordance with SFAS No. 133 Accounting for
    Derivative Instruments and Hedging Activities, as amended
    by SFAS No. 137 and No. 138, we de-designated our
    contracts effective December 2, 2001 after the counterparty
    (an affiliate of Enron Corp.) filed for bankruptcy and
    recognized all market value changes subsequent to such
    de-designation in our earnings. The value recorded up to the
    time of de-designation and included in Accumulated Other
    Comprehensive Income (AOCI), has reversed out of
    AOCI and into earnings as the original corresponding production,
    as hedged by the contracts, is produced. We have designated
    subsequent hedge contracts as cash flow hedges with gains and
    losses resulting from the transactions recorded at market value
    in AOCI, as appropriate, until recognized as operating income in
    our Statement of Operations as the physical production hedged by
    the contracts is delivered. 42




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Overview
      non-U.S. persons
   43




---



##### Table of Contents



Recent
    Developments          2005
    Highlights   44




---



##### Table of Contents



2004
    Highlights          Production       45




---



##### Table of Contents



Oil
    and Gas Property Costs      Oil
    and Gas Reserves   46




---



##### Table of Contents



Year ConvertedNet Proved





to ProvedUndeveloped Reserves





Developed orProperty

(Bcfe)(1)


Year Added


SoldMississippi Canyon 718 (Pluto)(2)


25.1



1998


2000 (100% converted to
    proved developed)Ewing Bank 966 (Black Widow)


14.0



1999


2000 (100% converted to
    proved developed)Mississippi Canyon 773 (Devils
    Tower)


28.0



2000


2001 (100% of Mariners
    interest sold)Mississippi Canyon 305 (Aconcagua)


19.2



2000


2001 (100% of Mariners
    interest sold)Green Canyon 472/473 (King Kong)


25.5



2000


2002 (100% converted to
    proved developed)Green Canyon 516 (Yosemite)


14.9



2001


2002 (100% converted to
    proved developed)East Breaks 579 (Falcon)


66.8



2001


2002 (50% of Mariners
    interest sold) 
    2003 (all of Mariners remaining interest sold)Viosca Knoll 917 (Swordfish)


13.4



2001


2005 (100% converted to
    proved developed)Green Canyon 178 (Baccarat)


4.0



2004


2005 (100% converted to
    proved developed)Mississippi Canyon 296/252 (Rigel)


22.4



2003


2005 (75% converted to
    proved
    developed/25% remains undeveloped)    (1)
    Net proved undeveloped reserves attributable to the project in
    the year it was first added to our proved reserves.(2)
    This field was shut-in in April 2004 pending the drilling of a
    new well and installation of an extension to the existing
    infield flowline and umbilical. As a result, as of
    December 31, 2005, 8.9 Bcfe of our net proved reserves
    attributable to this project were classified as proved behind
    pipe reserves. We expect production from Pluto to recommence in
    the second quarter of 2006. 47




---



##### Table of Contents



Year ExpectedNet Proved





to ConvertUndeveloped Reserves





to ProvedProperty

(Bcfe)(1)


Year Added


Developed StatusGreen Canyon 646 (Daniel Boone)


16.4



2003



2008Atwater Valley 380/381/382/425/426
    (Bass Lite)


32.3



2005



2008     (1)
    Net proved undeveloped reserves attributable to the project as
    of December 31, 2005.  Oil
    and Natural Gas Prices and Hedging Activities        mark-to-market mark-to-market
   48




---



##### Table of Contents



Operating
    Costs     Critical
    Accounting Policies and Estimates    Oil
    and Gas Properties  unit-of-production
    Proved
    Reserves   49




---



##### Table of Contents



Compensation
    Expense      Revenue
    Recognition  marked-to-market
    Income
    Taxes    Accrual
    for Future Abandonment Costs    Hedging
    Program   50




---



##### Table of Contents



Use of
    Estimates in the Preparation of Financial
    Statements   Results
    of Operations    Year
    Ended December 31, 2005 compared to Year Ended
    December 31, 2004  Operating
    and Financial Results for the Year Ended December 31,
    2005
 Compared to the Year Ended December 31, 2004
  Post-Merger


Pre-MergerPeriod from


Period fromNon-GAAP


March 3,


January 1,Combined


2004 through


2004 throughYear Ended
    December 31,


December 31,


March 2,Summary Operating
    Information:

2005


2004


2004


2004(in thousands, except average
    sales price)Net production:Oil (MBbls)


1,791



2,298



1,885



413Natural gas (MMcf)


18,354



23,782



19,549



4,233Total (MMcfe)


29,100



37,569



30,856



6,713Average daily production (MMcfe/d)


80



103



101



112 51




---



##### Table of Contents



Post-Merger


Pre-MergerPeriod from


Period fromNon-GAAP


March 3,


January 1,Combined


2004 through


2004 throughYear Ended
    December 31,


December 31,


March 2,Summary Operating
    Information:

2005


2004


2004


2004(in thousands, except average
    sales price)Hedging activities:Oil revenues (loss)

$
(18,671
)

$
(12,300
)

$
(11,614
)

$
(686
)Gas revenues (loss)


(30,613
)


(7,498
)


(8,929
)


1,431Total hedging revenues (loss)

$
(49,284
)

$
(19,798
)

$
(20,543
)

$
745Average sales prices:Oil (per Bbl) realized(1)

$
41.23


$
33.17


$
33.69


$
30.75Oil (per Bbl) unhedged


51.66



38.52



39.86



32.41Natural gas (per Mcf) realized(1)


6.66



5.80



5.67



6.39Natural gas (per Mcf) unhedged


8.33



6.12



6.13



6.05Total natural gas equivalent
    ($/Mcfe) realized(1)


6.74



5.70



5.65



5.92Total natural gas equivalent
    ($/Mcfe) unhedged


8.43



6.23



6.32



5.81Oil and gas revenues:Oil sales

$
73,831


$
76,207


$
63,498


$
12,709Gas sales


122,291



137,980



110,925



27,055Total oil and gas revenues


196,122


$
214,187


$
174,423


$
39,764Other revenues


3,588











Lease operating expenses


29,882



25,484



21,363



4,121Transportation expenses


2,336



3,029



1,959



1,070Depreciation, depletion and
    amortization


59,426



64,911



54,281



10,630General and administrative expenses


37,053



8,772



7,641



1,131Impairment of production equipment
    held for use


1,845



957



957



Net interest expense (income)


7,393



5,734



5,820



(86
)Income before taxes


61,775



105,300



82,402



22,898Provision for income taxes


21,294



36,855



28,783



8,072     (1)
    Average realized prices include the effects of hedges.  Net production
   52




---



##### Table of Contents



Hedging activities
  Oil and gas revenues
  Other revenues
  Lease operating expenses
  Transportation expenses
  Depreciation, depletion, and amortization
    (DD&A) expense unit-of-production
  General and administrative (G&A)
    expenses
 53




---



##### Table of Contents



Impairment of production equipment held for use
  Net interest expense
  Income before income taxes
  Provision for income taxes
  Year
    Ended December 31, 2004 compared to Year Ended
    December 31, 2003  Operating
    and Financial Results for the Year Ended December 31,
    2004
 Compared to the Year Ended December 31, 2003
  Post-Merger


Pre-MergerPeriod from


Period fromNon-GAAP


March 3,


January 1,Combined


2004 through


2004 throughYear Ended December
    31,


December 31,


March 2,Summary Operating
    Information:

2003


2004


2004


2004(in thousands, except average
    sales price)Net production:Oil (MBbls)


1,600



2,298



1,885



413Natural gas (MMcf)


23,772



23,782



19,549



4,233Total (MMcfe)


33,374



37,569



30,856



6,713Average daily production (MMcfe/d)


91



103



101



112Hedging activities:Oil revenues (loss)

$
(4,969
)

$
(12,299
)

$
(11,613
)

$
(686
)Gas revenues (loss)


(24,494
)


(7,498
)


(8,929
)


1,431Total hedging revenues (loss)

$
(29,463
)

$
(19,797
)

$
(20,542
)

$
745Average sales prices:Oil (per Bbl) realized(1)

$
23.74


$
33.17


$
33.69


$
30.75Oil (per Bbl) unhedged


26.85



38.52



39.85



32.41Natural gas (per Mcf) realized(1)


4.40



5.80



5.67



6.39Natural gas (per Mcf) unhedged


5.43



6.12



6.13



6.05Total natural gas equivalent
    ($/Mcfe) realized(1)


4.27



5.70



5.65



5.92Total natural gas equivalent
    ($/Mcfe) unhedged


5.15



6.23



6.32



5.81 54




---



##### Table of Contents



Post-Merger


Pre-MergerPeriod from


Period fromNon-GAAP


March 3,


January 1,Combined


2004 through


2004 throughYear Ended December
    31,


December 31,


March 2,Summary Operating
    Information:

2003


2004


2004


2004(in thousands, except average
    sales price)Oil and gas revenues:Oil sales

$
37,992


$
76,207


$
63,498


$
12,709Gas sales


104,551



137,980



110,925



27,055Total oil and gas revenues

$
142,543


$
214,187


$
174,423


$
39,764Lease operating expenses


24,719



25,484



21,363



4,121Transportation expenses


6,252



3,029



1,959



1,070Depreciation, depletion and
    amortization


48,339



64,911



54,281



10,630General and administrative expenses


8,098



8,772



7,641



1,131Impairment of production equipment
    held for use






957



957



Net interest expense (income)


6,225



5,734



5,820



(86
)Income before taxes and change in
    accounting method


45,688



105,300



82,402



22,898Provision for income taxes


9,387



36,855



28,783



8,072     (1)
    Average realized prices include the effects of hedges.  Net production
  Hedging activities
  Oil and gas revenues
  Lease operating expenses
  Transportation expenses
  DD&A expense unit-of-production
  G&A expenses
 55




---



##### Table of Contents



Impairment of production equipment held for use
  Net interest expense
  Income before income taxes and change in accounting method
  Provision for income taxes
 Liquidity
    and Capital Resources  Cash
    Flows and Liquidity
         56




---



##### Table of Contents



57




---



##### Table of Contents











1 8








|                                                |  |               |       |  |              |   |       |              |  |   |             |  |  |              |      |  |  |   |      | 
|----------------------------------------------- |  | ------------- | ----- |  | ------------ | - | ----- | ------------ |  | - | ----------- |  |  | ------------ | ---- |  |  | - | ---- | 
|                                                |  |               |       |  | Non-GAAP     |   |       | Post-Merger  |  |   | Pre-Merger  | 
|                                                |  |               |       |  | Combined     |   |       | Period from  |  |   | Period from |  |  |              |     
|                                                |  |               |       |  | Year         |   |       | March 3,     |  |   | January 1,  |  |  |              |     
|                                                |  | Year Ended    |       |  | Ended        |   |       | 2004 to      |  |   | 2004 to     |  |  | Year Ended   |     
|                                                |  | December 31,  |       |  | December 31, |   |       | December 31, |  |   | March 2,    |  |  | December 31, |     
|                                                |  | 2005          |       |  | 2004         |   |       | 2004         |  |   | 2004        |  |  | 2003         |     
|                                                |  | (In millions) |      
|                                               
|Cash flows provided by operating
    activities |  | $             | 165.4 |  |              | $ | 155.5 |              |  | $ | 135.2       |  |  | $            | 20.3 |  |  | $ | 88.9 | 









|                                                          |  |               |        |   |              |   |        |              |  |   |             |   |  |              |       |   |  |   |      | 
|--------------------------------------------------------- |  | ------------- | ------ | - | ------------ | - | ------ | ------------ |  | - | ----------- | - |  | ------------ | ----- | - |  | - | ---- | 
|                                                          |  |               |        |   | Non-GAAP     |   |        | Post-Merger  |  |   | Pre-Merger  |  
|                                                          |  |               |        |   | Combined     |   |        | Period from  |  |   | Period from |   |  |              |      
|                                                          |  |               |        |   | Year         |   |        | March 3,     |  |   | January 1,  |   |  |              |      
|                                                          |  | Year Ended    |        |   | Ended        |   |        | 2004 to      |  |   | 2004 to     |   |  | Year Ended   |      
|                                                          |  | December 31,  |        |   | December 31, |   |        | December 31, |  |   | March 2,    |   |  | December 31, |      
|                                                          |  | 2005          |        |   | 2004         |   |        | 2004         |  |   | 2004        |   |  | 2003         |      
|                                                          |  | (In millions) |       
|                                                         
|Cash flows (used in) provided by
    investing activities |  | $             | (247.8 | ) |              | $ | (148.3 | )            |  | $ | (133.0      | ) |  | $            | (15.3 | ) |  | $ | 52.9 | 







58



---



##### Table of Contents







|                                                          |  |               |      |  |              |   |       |              |  |   |             |   |  |              |   |  |  |   |        |  
|--------------------------------------------------------- |  | ------------- | ---- |  | ------------ | - | ----- | ------------ |  | - | ----------- | - |  | ------------ | - |  |  | - | ------ | -
|                                                          |  |               |      |  | Non-GAAP     |   |       | Post-Merger  |  |   | Pre-Merger  |  
|                                                          |  |               |      |  | Combined     |   |       | Period from  |  |   | Period from |   |  |              |  
|                                                          |  |               |      |  | Year         |   |       | March 3,     |  |   | January 1,  |   |  |              |  
|                                                          |  | Year Ended    |      |  | Ended        |   |       | 2004 to      |  |   | 2004 to     |   |  | Year Ended   |  
|                                                          |  | December 31,  |      |  | December 31, |   |       | December 31, |  |   | March 2,    |   |  | December 31, |  
|                                                          |  | 2005          |      |  | 2004         |   |       | 2004         |  |   | 2004        |   |  | 2003         |  
|                                                          |  | (In millions) |     
|                                                         
|Cash flows (used in) provided by
    financing activities |  | $             | 84.4 |  |              | $ | (64.9 | )            |  | $ | (64.9       | ) |  |              |  |  |  | $ | (100.0 | )









| |                                                    
| | ---------------------------------------------------
| | Commodity
    Prices and Related Hedging Activities











|                                |  |          |           |  |             |   |       |                   |  |   |       |  
|------------------------------- |  | -------- | --------- |  | ----------- | - | ----- | ----------------- |  | - | ----- | -
|                                |  |          |           |  |             |   |       | December 31,      | 
|                                |  |          |           |  |             |   |       | 2005 Fair         | 
|Fixed Price Swaps               |  | Quantity |           |  | Fixed Price |   |       | Value Gain/(Loss) | 
|                                |  |          |           |  |             |   |       | (In millions)     | 
|                               
|Crude Oil (Bbls)                |  |          |           |  |             |   |       |                   |  |   |       |  
|January 1December 31,
    2006 |  |          | 140,160   |  |             | $ | 29.56 |                   |  |   | (4.7  | )
|Natural Gas (MMBtus)            |  |          |           |  |             |   |       |                   |  |   |       |  
|January 1December 31,
    2006 |  |          | 1,827,547 |  |             |   | 5.53  |                   |  |   | (9.9  | )
|                                |  |          |           |  |             |   |       |                   |  |   |       |  
|Total                           |  |          |           |  |             |   |       |                   |  | $ | (14.6 | )
|                                |  |          |           |  |             |   |       |                   |  |   |       |  





|                                |  |          |           |  |       |   |       |     |  |   |                   |  |  |   |       |  
|------------------------------- |  | -------- | --------- |  | ----- | - | ----- | --- |  | - | ----------------- |  |  | - | ----- | -
|                                |  |          |           |  |       |   |       |     |  |   | December 31,      | 
|                                |  |          |           |  |       |   |       |     |  |   | 2005 Fair         | 
|Costless Collars                |  | Quantity |           |  | Floor |   |       | Cap |  |   | Value Gain/(Loss) | 
|                                |  |          |           |  |       |   |       |     |  |   | (In millions)     | 
|                               
|Crude Oil (Bbls)                |  |          |           |  |       |   |       |     |  |   |                   |  |  |   |       |  
|January 1December 31,
    2006 |  |          | 251,850   |  |       | $ | 32.65 |     |  | $ | 41.52             |  |  |   | (5.3  | )
|January 1December 31,
    2007 |  |          | 202,575   |  |       |   | 31.27 |     |  |   | 39.83             |  |  |   | (4.7  | )
|Natural Gas (MMBtus)            |  |          |           |  |       |   |       |     |  |   |                   |  |  |   |       |  
|January 1December 31,
    2006 |  |          | 7,347,450 |  |       |   | 5.78  |     |  |   | 7.85              |  |  |   | (22.3 | )
|January 1December 31,
    2007 |  |          | 5,310,750 |  |       |   | 5.49  |     |  |   | 7.22              |  |  |   | (16.9 | )
|                                |  |          |           |  |       |   |       |     |  |   |                   |  |  |   |       |  
|Total                           |  |          |           |  |       |   |       |     |  |   |                   |  |  | $ | (49.2 | )
|                                |  |          |           |  |       |   |       |     |  |   |                   |  |  |   |       |  



59



---



##### Table of Contents



December 31,2004 FairFixed Price Swaps

Quantity


Fixed Price


Value Gain/(Loss)(In millions)Crude Oil (Bbls)January 1December 31,
    2005


606,000


$
26.15


$
(10.0
)January 1December 31,
    2006


140,160



29.56



(1.5
)Natural Gas (MMBtus)January 1December 31,
    2005


8,670,159



5.41



(7.0
)January 1December 31,
    2006


1,827,547



5.53



(1.9
)Total









$
(20.4
)   December 31,2004 FairCostless Collars

Quantity


Floor


Cap


Value Gain/(Loss)(In millions)Crude Oil (Bbls)January 1December 31,
    2005


229,950


$
35.60


$
44.77


$
(0.4
)January 1December 31,
    2006


251,850



32.65



41.52



(0.7
)January 1December 31,
    2007


202,575



31.27



39.83



(0.6
)Natural Gas (MMBtus)January 1December 31,
    2005


2,847,000



5.73



7.80



0.4January 1December 31,
    2006


3,514,950



5.37



7.35



(0.3
)January 1December 31,
    2007


1,806,750



5.08



6.26



(0.4
)Total













$
(2.0
)       Year Ended December
    31,2005


2004


2003(Dollars in millions)Natural GasQuantity settled (MMBtus)


15,917,159



18,823,063



25,520,000Increase (Decrease) in Natural Gas
    Sales

$
(33.0
)

$
(10.8
)

$
(27.1
)Crude OilQuantity settled (Mbbls)


836



1,554



730Increase (Decrease) in Crude Oil
    Sales

$
(20.8
)

$
(16.9
)

$
(5.0
)   mark-to-market
 60




---



##### Table of Contents



Interest
    Rate Hedges    Credit
    Facility  drill-to-earn
      Applicable
    Margin
  Usage as a %

LIBOR


Reference


UnusedBorrowing Base

Loans


Rate Loans


FeeLess than 50%


1.25
%


0.00
%


0.375
%51% to 75%


1.50
%


0.00
%


0.375
%76% to 90%


1.75
%


0.25
%


0.250
%Greater than 90%


2.00
%


0.5
%


0.250
%         
    incur certain indebtedness;
    grant certain liens;
    merge or consolidate with another entity; 61




---



##### Table of Contents




    sell property or other assets which generate proceeds in excess
    of 5% of the then current borrowing base;
    make certain loans or investments, or dividends or other
    payments in respect of equity or bonds; and
    enter new lines of business.    
    consolidated current assets plus the unused borrowing base to
    consolidated current liabilities of not less than 1.0 to 1.0; and
    total debt to consolidated EBITDA of not more than 2.5 to 1.0.      JEDI
    Term Promissory Note   62




---



##### Table of Contents



Capital
    Expenditures and Capital Resources    Post-Merger


Pre-MergerPeriod


Periodfrom


fromCombined


March 3,


January 1,Year


Year


2004


2004Ended


Ended


to


to


Year EndedDecember 31,


December 31,


December 31,


March 2,


December 31,2005


2004


2004


2004


2003(In millions)Capital expenditures:Leasehold acquisition

$
11.5


$
4.8


$
4.4


$
0.4


$
4.8Oil and natural gas exploration


50.0



43.0



35.9



7.1



26.8Oil and natural gas development


121.7



88.6



82.0



6.6



44.3Proceeds from property conveyances


















(121.6
)Acquisitions


53.4



4.9



4.9







Other items (primarily gathering
    system, capitalized overhead and interest)


16.1



7.6



6.4



1.2



7.4Total capital expenditures, net of
    proceeds from property conveyances

$
252.7


$
148.9


$
133.6


$
15.3


$
(38.3
)      63




---



##### Table of Contents



Contractual
    Commitments    Less








MoreThan








ThanOne


1-3


3-5


5Total


Year


Years


Years


Years(In millions)Debt obligations(1)

$
156.0


$
4.0


$
152.0


$



$
Interest obligations(2)


0.1



0.1











Operating leases


7.4



1.2



2.8



2.4



1.0Abandonment liabilities


49.5



11.4



4.0



12.1



22.0Derivative liability


63.8



42.2



21.6







Other liabilities


21.0



14.5



6.5







Total contractual cash commitments

$
297.8


$
73.4


$
186.9


$
14.5


$
23.0     (1)
    As of December 31, 2005, we had incurred debt obligations
    under our credit facility and the JEDI promissory note that are
    due as follows: $4 million in 2006; and $152 million
    in 2007. On March 2, 2006, we incurred an additional
    $176.2 million of debt in connection with the Forest Energy
    Resources merger. Our total debt as of March 2, 2006 was
    approximately $346 million under our amended and restated
    credit facility that extended the maturity date to March 2,
    2010.(2)
    Interest obligations represent approximately 12 months of
    interest due on the JEDI promissory note at 10%. Future interest
    obligations under our credit facility are uncertain, due to the
    variable interest rate on fluctuating balances. Based on a 7.15%
    weighted average interest rate on amounts outstanding under our
    credit facility as of December 31, 2005, $10.9 million
    and $1.8 million would be due under the credit facility in
    2006 and 2007, respectively. Based on a 7.75% weighted average
    interest rate on amounts outstanding under our amended and
    restated credit facility as of March 2, 2006,
    $22.8 million, $81.7 million and $4.5 million
    would be due under the credit facility in less than one year,
    1-3 years and 3-5 years, respectively.  MMS Appeal
 Off-Balance
    Sheet Arrangements  Transportation Contract 29-mile
 64




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##### Table of Contents



Recent
    Accounting Pronouncements  Recent Accounting Pronouncements
  Accounting for Conditional Asset
    Retirement Obligations,
  Accounting Changes and Error
    Corrections  a replacement of APB Opinion
    No. 20 and FASB Statement No. 3.
  Issue 04-13
 65




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.   66




---



##### Table of Contents



|        |                                                 
|------- | ------------------------------------------------
|Item 8. | Financial
    Statements and Supplementary Data.



Index to
    Financial Statements




|                                                                                                                                                                                                                                                                           |  |  |    |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | -----
|                                                                                                                                                                                                                                                                           |  |  |    |  
|Report of Independent Registered
    Public Accounting Firm                                                                                                                                                                                                                |  |  | 68 |      
|                                                                                                                                                                                                                                                                           |  |  |    |  
|Balance Sheets at
    December 31, 2005 and 2004                                                                                                                                                                                                                           |  |  | 69 |      
|                                                                                                                                                                                                                                                                           |  |  |    |  
|Statements of Operations for the
    year ended December 31, 2005; the period from March 3,
    2004 through December 31, 2004; the period from
    January 1, 2004 through March 2, 2004; and the year
    ended December 31, 2003                                        |  |  | 70 |      
|                                                                                                                                                                                                                                                                           |  |  |    |  
|Statements of Stockholders
    Equity and Comprehensive Income for the year ended
    December 31, 2005; the period from March 3, 2004
    through December 31, 2004; the period from January 1,
    2004 through March 2, 2004; and the year ended
    December 31, 2003 |  |  | 71 |      
|                                                                                                                                                                                                                                                                           |  |  |    |  
|Statements of Cash Flows for the
    year ended December 31, 2005; the period from March 3,
    2004 through December 31, 2004; the period from
    January 1, 2004 through March 2, 2004; and the year
    ended December 31, 2003                                        |  |  | 73 |      
|                                                                                                                                                                                                                                                                           |  |  |    |  
|Notes to the Financial Statements                                                                                                                                                                                                                                          |  |  | 74 |      



67



---



##### Table of Contents

REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







































68



---



##### Table of Contents



MARINER
    ENERGY, INC.
  BALANCE SHEETS
  December 31,


December 31,2005


2004(In thousands exceptshare data)Current Assets:Cash and cash equivalents

$
4,556


$
2,541Receivables, net of allowances of
    $500 and $307 at December 31, 2005 and December 31,
    2004, respectively


88,651



52,734Deferred tax asset


26,017



Prepaid expenses and other


22,208



10,471Total current assets


141,432



65,746Property and
    Equipment:Oil and gas properties, full cost
    method:Proved


574,725



319,553Unproved, not subject to
    amortization


40,176



36,245Total


614,901



355,798Other property and equipment


11,048



960Accumulated depreciation,
    depletion and amortization


(110,006
)


(52,985
)Total property and equipment, net


515,943



303,773Deferred Tax Asset






3,029Other Assets, Net of
    Amortization


8,161



3,471TOTAL ASSETS

$
665,536


$
376,019LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
37,530


$
2,526Accrued liabilities


123,689



81,831Accrued interest


614



79Derivative liability


42,173



16,976Total current liabilities


204,006



101,412Long-Term
    Liabilities:Abandonment liability


38,176



19,268Deferred income tax


25,886



Derivative liability


21,632



5,432Bank debt


152,000



105,000Note payable


4,000



10,000Other long-term liabilities


6,500



1,000Total long-term liabilities


248,194



140,700Commitments and Contingencies
    (see Note 7)Stockholders
    Equity:Common stock, $.0001 par
    value; 70,000,000 shares authorized, 35,615,400 and
    29,748,130 shares issued and outstanding at
    December 31, 2005 and December 31, 2004, respectively


4



1Additional
    paid-in-capital


167,318



91,917Unearned compensation


(6,613
)


Accumulated other comprehensive
    (loss)


(41,473
)


(11,630
)Accumulated retained earnings
    (deficit)


94,100



53,619Total stockholders equity


213,336



133,907TOTAL LIABILITIES AND
    STOCKHOLDERS EQUITY

$
665,536


$
376,019   The accompanying notes are an integral part of these
    financial statements
 69




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##### Table of Contents



MARINER
    ENERGY, INC.
  STATEMENTS OF OPERATIONS
  Post-Merger



Pre-MergerPeriod



Periodfrom



fromMarch 3,



January 1,Year


2004



2004


YearEnded


through



through


EndedDecember 31,


December 31,



March 2,


December 31,2005


2004



2004


2003(In thousands except share
    data)Revenues:Oil sales

$
73,831


$
63,498



$
12,709


$
37,992Gas sales


122,291



110,925




27,055



104,551Other revenues


3,588












Total revenues


199,710



174,423




39,764



142,543Costs and Expenses:Lease operating expense


29,882



21,363




4,121



24,719Transportation expense


2,336



1,959




1,070



6,252General and administrative expense


37,053



7,641




1,131



8,098Depreciation, depletion and
    amortization


59,426



54,281




10,630



48,339Derivative settlements















3,222Impairment of production equipment
    held for use


1,845



957








Total costs and expenses


130,542



86,201




16,952



90,630OPERATING INCOME


69,168



88,222




22,812



51,913Interest:Income


779



225




91



756Expense, net of amounts capitalized


(8,172
)


(6,045
)



(5
)


(6,981
)Income before taxes


61,775



82,402




22,898



45,688Provision for income
    taxes


(21,294
)


(28,783
)



(8,072
)


(9,387
)Income before cumulative effect
    of change in accounting method, net of tax effects


40,481



53,619




14,826



36,301Cumulative effect of change in
    accounting method, net of tax effects















1,943NET INCOME

$
40,481


$
53,619



$
14,826


$
38,244Earnings per share:Net income per sharebasicIncome before cumulative effect of
    change in accounting method, net of tax effects

$
1.24


$
1.80



$
.50


$
1.22Cumulative effect of change in
    accounting method, net of tax effects















.07Income per
    sharebasic

$
1.24


$
1.80



$
.50


$
1.29Net income per
    sharedilutedIncome before cumulative effect of
    change in accounting method, net of tax effects

$
1.20


$
1.80



$
.50


$
1.22Cumulative effect of change in
    accounting method, net of tax effects















.07Income per
    sharediluted

$
1.20


$
1.80



$
.50


$
1.29Weighted average shares
    outstandingbasic


32,667,582



29,748,130




29,748,130



29,748,130Weighted average shares
    outstandingdiluted


33,766,577



29,748,130




29,748,130



29,748,130   The accompanying notes are an integral part of these
    financial statements
 70




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##### Table of Contents



MARINER
    ENERGY, INC.
  STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE INCOME
  AccumulatedOther


AccumulatedAdditional





Comprehensive


Retained


TotalCommon Stock


Paid-In


Unearned


Income


Earnings


StockholdersShares


Amount


Capital


Compensation


(Loss)


(Deficit)


Equity(In thousands)Balance at December 31,
    2002


29,748


$
1


$
227,318






$
(14,177
)

$
(43,046
)

$
170,096Net income






















38,244



38,244Change in fair value of derivative
    hedging instruments


















39,280







39,280Hedge settlements reclassified to
    income


















(29,463
)






(29,463
)Total comprehensive income


























48,061Balance at December 31,
    2003


29,748


$
1


$
227,318






$
(4,360
)

$
(4,802
)

$
218,157Pre-Merger Net Income






















14,826



14,826Change in fair value of derivative
    hedging instruments


















(7,312
)






(7,312
)Hedge settlements reclassified to
    income


















(745
)






(745
)Total comprehensive income


























6,769Pre-Merger Balance at March 2,
    2004


29,748


$
1


$
227,318






$
(12,417
)

$
10,024


$
224,926Post-MergerDividend






















(166,432
)


(166,432
)Merger adjustments










(135,401
)






12,417



156,408



33,424Balance at March 3,
    2004


29,748


$
1


$
91,917






$



$



$
91,918Net income






















53,619



53,619Change in fair value of derivative
    hedging instrumentsnet of income taxes


















(32,171
)






(32,171
)Hedge settlements reclassified to
    incomenet of income taxes


















20,541







20,541Total comprehensive income


























41,989Balance at December 31,
    2004


29,748


$
1


$
91,917






$
(11,630
)

$
53,619


$
133,907Common shares issuedprivate
    equity offering


3,600



2



44,331















44,333Common shares
    issuedrestricted stock


2,267



1



31,741



(31,742
)










Amortization of unearned
    compensationnet of income taxes














25,129











25,129Stock compensation expense
    stock optionsnet of income taxes










594















594Contributed capitalMariner
    Energy, LLC and Mariner Holdings, Inc.










3,057















3,057 71




---



##### Table of Contents



AccumulatedOther


AccumulatedAdditional





Comprehensive


Retained


TotalCommon Stock


Paid-In


Unearned


Income


Earnings


StockholdersShares


Amount


Capital


Compensation


(Loss)


(Deficit)


Equity(In thousands)Merger adjustments










(4,322
)














(4,322
)Comprehensive income:Net income






















40,481



40,481Other comprehensive income (loss):Change in fair value of derivative
    hedging instrumentsnet of income taxes


















(61,878
)






(61,878
)Hedge settlements reclassified to
    incomenet of income taxes


















32,035







32,035Total comprehensive income (loss)


























10,638Balance at December 31,
    2005


35,615


$
4


$
167,318


$
(6,613
)

$
(41,473
)

$
94,100


$
213,336   The accompanying notes are an integral part of these
    financial statements
 72




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##### Table of Contents



MARINER
    ENERGY, INC.
  STATEMENTS OF CASH FLOWS
  Post-Merger



Pre-MergerPeriod



Periodfrom



fromMarch 3,



January 1,2004



2004Year Ended


through



through


Year EndedDecember 31,


December 31,



March 2,


December 31,2005


2004



2004


2003(In thousands)Operating
    Activities:Net income

$
40,481


$
53,619



$
14,826


$
38,244Adjustments to reconcile net loss
    to net cash provided by operating activities:Deferred income tax


21,294



27,162




8,072



Depreciation, depletion and
    amortization


60,640



55,067




10,630



48,414Stock compensation expense


25,726












Hedge activities















(2,030
)Impairment of production equipment
    held for use


1,845



957








Cumulative effect of changes in
    accounting method















(2,988
)Changes in operating assets and
    liabilities:Receivables


(32,916
)


(10,615
)



(8,847
)


(3,599
)Prepaid expenses and other


(5,201
)


(965
)



551



(2,257
)Other assets


(184
)


321




(963
)


1,485Accounts payable and accrued
    liabilities


53,759



9,697




(3,974
)


1,208Taxes payable to parent company
    and deferred income tax















10,432Net cash provided by operating
    activities


165,444



135,243




20,295



88,909Investing Activities:Additions to oil and gas properties


(237,729
)


(133,425
)



(15,264
)


(83,228
)Proceeds from property conveyances


18












121,625Additions to other property and
    equipment


(10,088
)


(172
)



(78
)


(50
)Restricted cash






620




1



14,574Net cash (used in) provided by
    investing activities


(247,799
)


(132,977
)



(15,341
)


52,921Financing Activities:Initial borrowings from revolving
    credit facility, net of fees






131,579








Repayment of subordinated notes















(100,000
)Repayment of term note


(6,000
)











Credit facility borrowings
    (repayments), net


47,000



(30,000
)







Proceeds from private equity
    offering


44,331












Deferred offering costs


(3,840
)











Capital contribution from
    affiliates


2,879












Dividend to Mariner Energy LLC






(166,432
)







Net cash (used in) provided by
    financing activities


84,370



(64,853
)







(100,000
)Increase (Decrease) in Cash and
    Cash Equivalents


2,015



(62,587
)



4,954



41,830Cash and Cash Equivalents at
    Beginning of Period


2,541



65,128




60,174



18,344Cash and Cash Equivalents at
    End of Period

$
4,556


$
2,541



$
65,128


$
60,174   The accompanying notes are an integral part of these
    financial statements
 73




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##### Table of Contents



MARINER
    ENERGY, INC.
  NOTES TO THE FINANCIAL STATEMENTS
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
  1.
    Summary
    of Significant Accounting Policies  Operations
  Organization
      Mariner Energy, Inc. bank loan
    proceeds

$
135.0Note payable issued by Mariner
    Energy, Inc. to former parent


10.0Equity from new owners


100.0Distributions from Mariner Energy,
    Inc.


31.2Assignment by Mariner Energy, Inc.
    of receivables


1.9Total

$
278.1Repayment of former parent debt
    obligation

$
197.6Merger consideration to
    stockholders and warrant holders


73.5Acquisition costs and other
    expenses


7.0Total

$
278.1    74




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
      ALLOCATION
    OF PURCHASE PRICE TO MARINER ENERGY, INC.
  March 2,2004(In millions)Oil and natural gas
    propertiesproved

$
203.5Oil and natural gas
    propertiesunproved


25.2Other property and equipment and
    other assets


0.7Current assets


83.2Deferred tax asset(1)


9.1Other assets


4.6Accounts payable and accrued
    expenses


(62.2
)Long-Term Liability


(14.7
)Fair value of oil and natural gas
    derivatives


(12.4
)Debt


(145.0
)Total Allocation

$
92.0     (1)
    Represents deferred income taxes recorded at the date of the
    Merger due to differences between the book basis and the tax
    basis of assets. For book purposes, we had a
    step-up in
    basis related to purchase accounting while our existing tax
    basis carried over.    Twelve MonthsEnding December 31,
    2004(In millions)Revenues and other income

$
214.2Income before taxes and change in
    accounting method


103.0Net income


67.0    75




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
  paid-in
    Net Income Per Share
  Post-Merger



Pre-MergerPeriod



Periodfrom



fromMarch 3,



January 1,Year


2004



2004Ended


through



through


Years EndedDecember 31,


December 31,



March 2,


December 31,2005


2004



2004


2003(In thousands except per share
    data)Numerator:Income before cumulative
    effect of change in accounting method, net of tax effects

$
40,481


$
53,619



$
14,826


$
36,301Cumulative effect of change in
    accounting method, net of tax effects















1,943Net income

$
40,481


$
53,619



$
14,826


$
38,244Denominator:Weighted average shares outstanding


32,668



29,748




29,748



29,748Add dilutive securities


1,099












Total weighted average shares
    outstanding and dilutive securities


33,767



29,748




29,748



29,748Earnings per
    sharebasic:Income before cumulative effect of
    change in accounting method, net of tax effects

$
1.24


$
1.80



$
.50


$
1.22Cumulative effect of change in
    accounting method, net of tax effects















.07Net income per sharebasic

$
1.24


$
1.80



$
.50


$
1.29Earnings per
    sharediluted:Income before cumulative effect of
    change in accounting method, net of tax effects

$
1.20


$
1.80



$
.50


$
1.22Cumulative effect of change in
    accounting method, net of tax effects















.07Net income per sharediluted

$
1.20


$
1.80



$
.50


$
1.29    76




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     Cash and Cash Equivalents
  Receivables
  Oil and Gas Properties unit-of-production
      Unproved Properties
 77




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    Other Property and Equipment
  Prepaid Expenses and Other
  Other Assets
  Production Costs
  General and Administrative Costs and Expenses
   78




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
   Income Taxes
  Capitalized Interest Costs Post-merger Pre-merger,
  Accrual for Future Abandonment Costs
   79




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     (In millions)Abandonment liability as of
    January 1, 2004 (Pre-Merger)

$
15.0Liabilities Incurred


Claims Settled


(1.5
)Accretion Expense


0.2Abandonment Liability as of
    March 2, 2004 (Pre-merger)

$
13.7Abandonment Liability as of
    March 3, 2004 (Post-merger)

$
13.7Liabilities Incurred


11.5Claims Settled


(2.7
)Accretion Expense


1.5Abandonment Liability as of
    December 31, 2004 (Post-merger)(1)

$
24.0Liabilities Incurred


28.6Claims Settled


(5.5
)Accretion Expense


2.4Abandonment Liability as of
    December 31, 2005
    (Post-merger)(2)

$
49.5     (1)
    Includes $4.7 million classified as a current accrued
    liability at December 31, 2004.(2)
    Includes $11.4 million classified as a current accrued
    liability at December 31, 2005.  Hedging Program
       80




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    Revenue Recognition marked-to-market
    Financial Instruments long-term
  Use of Estimates in the Preparation of Financial
    Statements
  Major Customers
  Stock Options
   81




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    Management of
    MarinerEquity Participation Plan Management of MarinerStock Incentive
    Plan
  Recent Accounting Pronouncements
  Accounting for Conditional Asset
    Retirement Obligations,
  Accounting Changes and Error
    Corrections  a replacement of APB Opinion
    No. 20 and FASB Statement No. 3.
 82




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    Issue 04-13
   83




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
   2.
    Related
    Party Transactions  Organization and Ownership of the Company
      Mariner
    Energy LLC  Enron Affiliate Term Loan
  Mariner
    Energy, Inc.    Oil and Gas Production Sales to Enron
    Affiliates
 84




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
   Price Risk Management Activities de-designation de-designation
    Year Ending December
    31,2004


2003Natural gas quantity hedged (MMbtu)






3,650,000Increase (decrease) in natural gas
    sales (thousands)





$
2,603Crude oil quantity hedged (MBbls)






Increase (decrease) in crude oil
    sales (thousands)






   Supplemental ENA Affiliate Data
  December 31,


December 31,2004


2003(Amount in millions)Balance Sheet DataRelated Party Receivable:Derivative Asset

$



$
Settled Hedge Receivable






Oil and Gas Receivable






Accrued Liabilities:Transportation Contract






0.1Service Agreement






0.4Stockholders Equity:Common Stock

$



$
.001Additional Paid in Capital






227.3Accumulated other Comprehensive
    Income

$



$
227.3  85




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
   Year Ended December
    31,2004


2003Income Statement DataOil and Gas Sales

$



$
32.6General and Administrative Expenses






0.4Transportation Expenses






1.9Unrealized gain and other non-cash
    derivative instrument adjustments






   Post-Merger
    Related Party Transactions      3.
    Property
    Conveyances  1 4 non-producing
  4.
    Long-Term
    Debt  Bank Credit Facility
   86




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
            
    maintain a ratio, as of the last day of each fiscal quarter, of
    (a) current assets (excluding cash posted as collateral to
    secure hedging obligations) plus unused availability under the
    credit facility to (b) current liabilities (excluding the
    current portion of debt and the current portion of hedge
    liabilities) of not less than (i) 0.75 to 1.00 until
    June 30, 2004 and (ii) 1.00 to 1.00 thereafter;
    maintain a ratio, as of the last day of each fiscal quarter, of
    (a) EBITDA (earnings before interest, taxes, depreciation,
    amortization and depletion) to (b) the sum of interest
    expense and maintenance capital expenditures for the period and
    20% (on an annualized basis) of outstanding Tranche A
    advances, of not less than 1.20 to 1.00; and
    maintain a ratio, as of the last day of each fiscal quarter, of
    (a) total debt to (b) EBITDA of not greater than 1.75
    to 1.00 prior to the issuance by the Company of bonds as
    described in the credit agreement and 3.00 to 1.00 thereafter.     87




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    
    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 of not more than 2.5 to
    1.0.        JEDI
    Term Promissory Note      Cash
    Interest Expense    5.
    Stockholders
    Equity   88




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
          WeightedAverageExerciseShares


PriceOutstanding at beginning of year





$
Granted


809,000



14.02Exercised






Forfeited






Outstanding at end of year


809,000


$
14.02Outstanding exercisable at end of
    year






Available for future grant as
    options or restricted stock


1,191,000  89




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
      Options Outstanding


Options ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageNumber


Contractual


Exercise


Number


ExerciseRange of Exercise
    Prices

Outstanding


Life (Years)


Price


Exercisable


Price$14.00 - $17.00


809,000



9.2


$
14.02







     RestrictedSharesOutstanding at beginning of year


Granted


2,267,270Vested


Forfeited


Outstanding at end of year


2,267,270Outstanding vested at end of year


Available for future grant under
    Equity Participation Plan


Average Fair Value of Shares
    Granted During Year

$
14.00   6.
    Employee
    Benefit And Royalty Plans  Employee Capital Accumulation Plan
  Overriding Royalty Interests
 90




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##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
   7.
    Commitments
    And Contingencies  Minimum Future Lease Payments
  2006

$
1,161.42007


942.72008


941.02009


941.02010 and thereafter


3,448.1     Hedging Program
    December 31,2005 Fair ValueFixed Price Swaps

Quantity


Fixed Price


Gain/(Loss)(In millions)Crude Oil (Bbls)January 1December 31,
    2006


140,160


$
29.56


$
(4.7
)Natural Gas (MMbtus)January 1December 31,
    2006


1,827,547



5.53



(9.9
)Total









$
(14.6
)     December 31,2005 Fair ValueCostless Collars

Quantity


Floor


Cap


Gain/(Loss)(In millions)Crude Oil (Bbls)January 1December 31,
    2006


251,850


$
32.65


$
41.52


$
(5.3
)January 1December 31,
    2007


202,575



31.27



39.83



(4.7
)Natural Gas (MMbtus)January 1December 31,
    2006


7,347,450



5.78



7.85



(22.3
)January 1December 31,
    2007


5,310,750



5.49



7.22



(16.9
)Total













$
(49.2
)  91




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
       December 31,2004 Fair ValueFixed Price Swaps

Quantity


Fixed Price


Gain/(Loss)(In millions)Crude Oil (Bbls)January 1December 31,
    2005


606,000


$
26.15


$
(10.0
)January 1December 31,
    2006


140,160



29.56



(1.5
)Natural Gas (MMbtus)January 1December 31,
    2005


8,670,159



5.41



(7.0
)January 1December 31,
    2006


1,827,547



5.53



(1.9
)Total









$
(20.4
)     December 31,2004 Fair ValueCostless Collars

Quantity


Floor


Cap


Gain/(Loss)(In millions)Crude Oil (Bbls)January 1December 31,
    2005


229,950


$
35.60


$
44.77


$
(0.4
)January 1December 31,
    2006


251,850



32.65



41.52



(0.7
)January 1December 31,
    2007


202,575



31.27



39.83



(0.6
)Natural Gas (MMbtus)January 1December 31,
    2005


2,847,000



5.73



7.80



0.4January 1December 31,
    2006


3,514,950



5.37



7.35



(0.3
)January 1December 31,
    2007


1,806,750



5.08



6.26



(0.4
)Total













$
(2.0
)    92




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     Post-MergerPeriod fromMarch 3,


Pre-Merger2004


Period fromthrough


January 1December 31,


December 31,


through March 2,


December 31,2005


2004


2004


2003Natural GasQuantity hedged (MMbtu)


15,917,159



16,723,063



2,100,000



25,520,000Increase (Decrease) in Natural Gas
    Sales (in thousands)

$
(33,010
)

$
(12,223
)

$
1,431


$
(27,097
)Crude OilQuantity hedged (MBbls)


836



1,375



179



730Increase (Decrease) in Crude Oil
    Sales (in thousands)

$
(20,789
)

$
(16,221
)

$
(686
)

$
(4,969
)     Other Commitments
  Deepwater Rig
  MMS Appeal
 93




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    Insurance Matters
  start-up
   94




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
   Litigation
  8.
    Income
    Taxes    Post-MergerPeriod from


Pre-MergerMarch 3,


Period from2004


January 1Year Ending


through


through


Year EndingDecember 31,


December 31,


March 2,


December 31,2005


2004


2004


2003$


$


$


$(In thousands)Current














Deferred


21,294



28,783



8,072



10,432Total


21,294



28,783



8,072



10,432     Post-Merger


Pre-MergerPeriod from


Period fromMarch 3, 2004


January 1through


throughYear Ending


December 31,


March 2,


Year Ending December 31,December 31, 2005


2004


2004


2003(In thousands, except
    percentages)$


%


$


%


$


%


$


%Income before income taxes
    including change in accounting in 2003


61,775







82,402







22,898







48,676



Income tax expense (benefit)
    computed at statutory rates


21,621



35
%


28,841



35



8,014



35



17,037



35Change in valuation allowance


























(7,090
)


(14
)Other


(327
)


(1
)%


(58
)






58







485



Tax Expense


21,294



34
%


28,783



35



8,072



35



10,432



21    95




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     Year EndingDecember 31,2005


2004(In thousands)Deferred Tax Assets:Net operating loss carry forwards

$
45,171


$
15,639Alternative minimum Tax Credit


1,606



1,606Differences between book and tax
    basis of receivables






Other comprehensive
    income-derivative instruments


22,332



6,262Employee stock compensation


9,004



Valuation allowance


(5,909
)


(5,909
)Other


671



Total net deferred tax assets


72,875



17,598Deferred Tax
    Liabilities:Differences between book and tax
    basis of properties


(72,744
)


(14,569
)Total net deferred asset
    (liability)


131


$
3,029     9.
    Subsequent
    Events      Mariner Energy, Inc. bank loan
    proceeds

$
180.2Refinancing of assumed debt

$
176.2Acquisition costs and other
    expenses


4.0Total

$
180.2  96




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     Business Combinations
    (In millions)Oil and natural gas properties

$
1,617.0Other assets


14.5Abandonment liabilities


(148.0
)Long-term debt


(176.2
)Fair value of oil and natural gas
    derivatives


(17.5
)Deferred tax liability(1)


(397.6
)Total

$
892.2     (1)
    
    Represents deferred income taxes recorded at the date of the
    transaction due to differences between the book basis and the
    tax basis of assets. For book purposes, the assets of the Forest
    Gulf of Mexico operations had a step-up in basis while the
    existing tax basis carried over.  drill-to-earn
   97




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
          10.
    Oil and
    Gas Producing Activities and Capitalized Costs
    (Unaudited)    Year Ending December
    31,2005


2004


2003(In thousands)Oil and gas sales

$
196,122


$
214,187


$
142,543Lease operating costs


(29,882
)


(25,484
)


(24,719
)Transportation


(2,336
)


(3,029
)


(6,252
)Depreciation, depletion and
    amortization


(59,426
)


(64,911
)


(48,339
)Results of operations

$
104,478


$
120,763


$
63,233  98




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     As of December 31,2005


2004


2003(In thousands)Unevaluated properties, not
    subject to amortization

$
40,176


$
36,245


$
36,619Properties subject to amortization


574,725



319,553



599,762Capitalized costs


614,901



355,798



636,381Accumulated depreciation,
    depletion and amortization


(109,183
)


(52,680
)


(429,323
)Net capitalized costs

$
505,718


$
303,118


$
207,058     Year Ending December
    31,2005


2004


2003(In thousands)Property acquisition costsUnproved properties

$
12,366


$
4,844


$
4,746Proved properties


52,503



4,863



Exploration costs


50,049



43,022



26,823Development costs


121,685



88,626



44,299Capitalized internal costs


6,016



7,334



7,360Total costs incurred

$
242,619


$
148,689


$
83,228Depreciation, depletion and
    amortization rate per equivalent Mcf

$
2.04


$
1.73


$
1.45    99




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     Period Incurred


Total atYear Ended December
    31,





December 31,2005


2004


2003


Prior


2005Unproved leasehold acquisition and
    geological and geophysical costs

$
15,735


$
2,455


$
2,741


$
3,428



24,359Unevaluated exploration and
    development costs


14,975



173











15,148Capitalized interest


450



123



96







669Total

$
31,160


$
2,751


$
2,837


$
3,428


$
40,176     11.
    Supplemental
    Oil and Gas Reserve and Standardized Measure Information
    (Unaudited)     100




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
    ESTIMATED
    QUANTITIES OF PROVED RESERVES
  Natural Gas


Natural GasOil (Mbbl)


(MMcf)


Equivalent (MMcfe)December 31,
    2002


11,018



136,055



202,165Revisions of previous estimates


900



(3,076
)


2,324Extensions, discoveries and other
    additions


2,795



62,609



79,379Sale of reserves in place


(34
)


(44,233
)


(44,437
)Production


(1,600
)


(23,771
)


(33,371
)December 31,
    2003


13,079



127,584



206,060Revisions of previous estimates


1,249



19,797



27,291Extensions, discoveries and other
    additions


2,225



28,334



41,684Sale of reserves in place










Production


(2,298
)


(23,782
)


(37,570
)December 31,
    2004


14,255



151,933



237,465Revisions of previous estimates


835



963



5,971Extensions, discoveries and other
    additions


1,167



22,307



29,309Purchases of reserves in place


7,181



50,837



93,923Sales of reserves in place










Production


(1,791
)


(18,354
)


(29,100
)December 31, 2005


21,647



207,686



337,568   ESTIMATED
    QUANTITIES OF PROVED DEVELOPED RESERVES
  Natural Gas


Natural GasOil (Mbbl)


(MMcf)


Equivalent (MMcfe)December 31, 2002


3,609



64,586



86,240December 31, 2003


5,951



60,881



96,587December 31, 2004


6,339



71,361



109,395December 31, 2005


9,564



110,011



167,395  101




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     STANDARDIZED
    MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
  Year Ending December
    31,2005


2004


2003(In thousands)Future cash inflows

$
3,451,321


$
1,601,240


$
1,182,509Future production costs


(687,583
)


(308,190
)


(196,695
)Future development costs


(386,497
)


(193,689
)


(138,694
)Future income taxes


(695,921
)


(285,701
)


(183,199
)Future net cash flows


1,681,320



813,660



663,921Discount of future net cash flows
    at 10% per annum


(774,755
)


(319,278
)


(245,762
)Standardized measure of discounted
    future net cash flows

$
906,565


$
494,382


$
418,159    102




---



##### Table of Contents



MARINER ENERGY, INC.
  NOTES TO THE FINANCIAL
    STATEMENTS  (Continued)
 For the Year Ended December 31, 2005,
 for the Period from March 3, 2004 through
    December 31, 2004
    (Post-Merger),
 for the Period from January 1, 2004 through
    March 2, 2004
    (Pre-Merger),
 and For the Year Ended December 31, 2003
     Year Ending December
    31,2005


2004


2003(In thousands)Sales and transfers of oil and gas
    produced, net of production costs

$
(213,189
)

$
(185,673
)

$
(111,572
)Net changes in prices and
    production costs


425,317



27,767



27,403Extensions and discoveries, net of
    future development and production costs


119,501



88,167



180,237Purchases of reserves in place


189,782



14,738



Development costs during period
    and net change in development costs


46,632



44,417



31,709Revision of previous quantity
    estimates


16,323



89,814



6,276Sales of reserves in place










(138,016
)Net change in income taxes


(201,647
)


(27,634
)


(63,962
)Accretion of discount before
    income taxes


49,438



41,816



51,500Changes in production rates
    (timing) and other


(19,974
)


(17,189
)


(28,988
)Net change

$
412,183


$
76,223


$
(45,413
)  103




---



##### Table of Contents



12.
    Unaudited
    Quarterly Financial Information    Post-Merger



Pre-MergerPeriod from



Period from2005 Quarter Ended


2004 Quarter Ended


March 3, 2004



January 1, 2004December


September


June


March


December


September


June


through



through31


30


30


31


31


30


30


March 31, 2004



March 2, 2004(In thousands, except share
    data)Total revenues

$
48,465


$
43,662


$
51,776


$
55,807


$
51,897


$
50,202


$
51,086


$
21,238



$
39,764Operating income

$
10,471


$
12,263


$
18,070


$
28,364


$
29,108


$
24,403


$
25,045


$
9,666



$
22,812Income before income taxes

$
7,798


$
10,549


$
16,382


$
27,046


$
27,501


$
22,804


$
23,071


$
9,026



$
22,898Provision for income taxes


2,880



3,606



5,537



9,271



9,562



8,498



7,630



3,093




8,072Net income

$
4,918


$
6,943


$
10,845


$
17,775


$
17,939


$
14,306


$
15,441


$
5,933



$
14,826Earnings per share:(1)Net income per sharebasic

$
0.15


$
0.21


$
0.33


$
0.58


$
0.60


$
0.48


$
0.52


$
0.20



$
0.50Net income per sharediluted

$
0.14


$
0.20


$
0.32


$
0.58


$
0.60


$
0.48


$
0.52


$
0.20



$
0.50Weighted average shares
    outstandingbasic(2)


33,348,130



33,348,130



33,348,130



30,558,130



29,748,130



29,748,130



29,748,130



29,748,130




29,748,130Weighted average shares
    outstandingdiluted


35,189,290



34,806,842



33,822,079



30,599,152



29,748,130



29,748,130



29,748,130



29,748,130




29,748,130     (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)
    Restated for the 1,380 to 29,748,130 stock split, effective
    March 3, 2005.  104




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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) 15d-15(e) Form 10-K.
  Changes
    in Internal Controls Over Financial Reporting.
  Form 10-K
  Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant.      Name

Age


Position with CompanyScott D. Josey


48


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


54


Chief Operating OfficerRick G. Lester


54


Vice President, Chief Financial
    Officer and TreasurerJesus G. Melendrez


47


Vice
    President  Corporate DevelopmentMike C. van den Bold


43


Vice President and Chief
    Exploration OfficerTeresa G. Bushman


56


Vice President, General Counsel
    and SecretaryJudd A. Hansen


50


Vice
    President  Shelf and OnshoreCory L. Loegering


50


Vice
    President  DeepwaterBernard Aronson


59


DirectorJonathan Ginns


41


DirectorJohn F. Greene


65


DirectorH. Clayton Peterson


60


DirectorJohn L. Schwager


57


Director  105




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##### Table of Contents



Scott D. Josey co-managed
  Dalton F. Polasek
  Rick G. Lester
  Jesus G. Melendrez
  Mike C. van den Bold
  Teresa G. Bushman
  Judd A. Hansen
 106




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##### Table of Contents



Cory L. Loegering
  Bernard Aronson
  Jonathan Ginns
  John F. Greene
  H. Clayton Peterson 
  John L. Schwager
 107




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##### Table of Contents



Board of
    Directors        Committees
    of the Board
       108




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##### Table of Contents



Form 10-K, Form 10-Q, Form 8-K, www.mariner-energy.com www.mariner-energy.com:
  
    its audit committee charter;
    its nominating and corporate governance committee charter;
    its compensation committee charter;
    its code of ethics; and
    its corporate governance guidelines.    www.mariner-energy.com. www.mariner-energy.com.
  Executive Sessions.
  Section
    16(a) Beneficial Ownership Reporting Compliance
   109




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##### Table of Contents



Item 11.
    Executive
    Compensation. Executive
    Compensation    Summary
    Compensation Table
  Annual Compensation


Long-Term CompensationAwards


PayoutsRestricted


SecuritiesStock


Underlying


LTIP


All OtherName and Principal
    Position

Year


Salary($)


Bonuses(1)($)


Awards($)(2)


Options(#)


Payouts($)


Compensation($)(3)Scott D. Josey


2005


$
375,000


$



$







$



$
16,210Chairman of the Board,


2004



350,000



550,000



9,522,534



200,000



575,000



15,133Chief Executive Officer


2003



300,290



850,000















514,895and PresidentDalton F. Polasek


2005



250,000



















16,626Chief Operating Officer


2004



215,000



300,000



4,316,886



102,000



248,400



15,2362003



176,698



325,000















280,677Mike C. van den Bold


2005



200,000



















15,819Vice President and


2004



192,500



215,000



3,174,178



74,000



322,000



14,949Chief Exploration Officer


2003



170,150



350,000















45,430Rick G. Lester


2005



200,000



















16,363Vice President,


2004



43,352



120,000



428,512



40,000







3,502Chief Financial Officer


2003























and TreasurerTeresa G. Bushman


2005



200,000



















17,197Vice President, General


2004



190,000



215,000



1,920,380



40,000



59,800



14,834Counsel and Secretary


2003



97,750



200,000















23,270     (1)
    As of March 30, 2006, bonuses for 2005 have not yet been
    paid.(2)
    Dollar amounts are calculated by multiplying the number of
    shares of common stock awarded by $14, the trading price of our
    common stock on the business day immediately preceding the date
    the award was granted. Grantees are entitled to vote, and accrue
    dividends on, the restricted stock prior to vesting; provided,
    that any dividends that accrue on the restricted stock prior to
    vesting will only be paid to grantees to the extent the
    restricted stock vests. Except in specified circumstances, the
    restricted shares will be automatically forfeited in the event a
    grantees employment terminates prior to the vesting date
    of the awards. The restricted stock granted will vest, and
    restrictions will terminate, on the later of (i) the first
    anniversary of the grant date, which was March 11, 2005,
    and (ii) the occurrence of a Public Sale Date,
    as defined in our Equity Participation Plan; but in no event
    later than the second anniversary of the date of grant.
    Notwithstanding this vesting schedule, the unvested shares of
    restricted stock will become fully vested upon death or
    disability of the employee, or if employment is terminated by us
    for reasons other than for cause, or if the employee
    elects to terminate employment with good reason, or
    upon the occurrence of a change of control, as those
    terms are defined in the agreement with us governing the grant.
    In connection with the merger, each of Mariners executive
    officers has agreed, in exchange for a cash payment of $1,000,
    that his or her shares of restricted stock will not vest before
    the later of March 11, 2006 or ninety days after the
    effective date of the merger, which is May 31, 2006. For
    additional information regarding these special long-term grants,
    please see   Equity Participation
    Plan. 110




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##### Table of Contents



Name

No. of Shares


ValueScott D. Josey


680,181


$
12,073,213Dalton F. Polasek


308,349



5,473,195Mike C. van den Bold


226,727



4,024,404Rick G. Lester


30,608



543,292Teresa G. Bushman


137,170



2,434,768   (3)
    Amounts shown reflect insurance premiums paid by us with respect
    to term life insurance for the benefit of the named executive
    officers and retention payments paid during the year. The
    amounts for 2005 for Messrs. Josey, Polasek, van den Bold,
    and Lester and Ms. Bushman include $7,000 of employer
    matching contributions made pursuant to our 401(k) plan and
    $8,400 made pursuant to the profit sharing portion of our 401(k)
    plan. In addition, the 2005 amount for Mr. Josey includes
    $810 of insurance premiums under our group term life insurance.
    The 2005 amount for Mr. Polasek also includes $1,226 of
    insurance premiums under our group term life insurance. The 2005
    amount for Mr. van den Bold also includes $419 of insurance
    premiums under our group term life insurance. The 2005 amount
    for Mr. Lester also includes $963 of insurance premiums
    under our group term life insurance. The 2005 amount for
    Ms. Bushman includes $1,797 of insurance premiums under our
    group term life insurance. Employment
    Agreements and Other Arrangements      gross-up
     111




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##### Table of Contents



Overriding
    Royalty Arrangements  1 2 1 4
           Equity
    Participation Plan     112




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##### Table of Contents



Equity
    Participation Plan
  Restricted Stock Awards
  Officer or Group

No. of Shares


Value at Grant(1)Scott D. Josey


680,181


$
9,522,534Dalton F. Polasek


308,349



4,316,886Mike C. van den Bold


226,727



3,174,178Rick G. Lester


30,608



428,512Teresa G. Bushman


137,170



1,920,380Officers as a group
    (8 persons)


1,803,614



25,250,596     (1)
    Based on a price of $14.00 per share.    
    the 90th day following the date on which our common stock
    is listed on the New York Stock Exchange or admitted to trading
    and quoted on the Nasdaq National Market or Nasdaq SmallCap
    Market; and
    the first date on which both of the following conditions are
    met: (a) a registration statement covering the resale of
    the restricted stock has been declared effective by the SEC, and
    no stop order suspending the effectiveness of such registration
    statement is in effect and (b) the common stock is listed
    on the New York Stock Exchange or admitted to trading and quoted
    on the Nasdaq National Market or Nasdaq SmallCap Market;  lock-up lock-up lock-up
       113




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##### Table of Contents



Amended
    and Restated Stock Incentive Plan
      Shares
    Subject to the Amended and Restated Stock Incentive
    Plan    Administration
    and Eligibility      Awards   114




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##### Table of Contents



Options.
      
    at the time the ISO is granted, the option price is at least
    110% of the fair market value of the common stock subject to the
    option; and
    such ISO, by its terms, is not exercisable after the expiration
    of five years from the date of grant.    Restricted Stock.
    Other
    Provisions   115




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##### Table of Contents




    provide for either the termination of any such award in exchange
    for cash in the amount that would have been attained upon the
    exercise of such award or the replacement of such award with
    other rights or property selected by the Committee;
    provide that such award be assumed by the successor or survivor
    corporation or its parent or be substituted for by similar
    options, rights or awards; or
    make adjustments in the number and type of shares or other
    property subject to outstanding awards.  Amended
    and Restated Stock Incentive Plan Benefits    U.S. Federal
    Tax Consequences    Restricted
    Stock      Stock
    Options     116




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##### Table of Contents




    the excess of the fair market value of such shares on the option
    exercise date over the exercise price paid for the
    shares; or
    the amount realized on the sale or disposition over the exercise
    price paid for the shares.      Option
    Grants in Last Fiscal Year
  % of Total OptionsNo. of Securities


Granted to Employees


Exercise


Expiration


Potential Realizable Value of
    Assumed Annual Rates of Stock Price Appreciation for Option Term
    (1)Name

Underlying Options


in Fiscal Year


Price


Date


5%($)


10%($)Scott D. Josey


200,000



24.7
%

$
14.00



3/11/2015


$
1,760,905


$
4,462,479Dalton F. Polasek


102,000



12.6



14.00



3/11/2015



898,062



2,275,864Mike C. van den Bold


74,000



9.1



14.00



3/11/2015



651,535



1,651,117Rick G. Lester


40,000



4.9



14.00



3/11/2015



352,181



892,496Teresa G. Bushman


40,000



4.9



14.00



3/11/2015



352,181



892,496   (1)
    In accordance with SEC rules, these columns show gain that could
    accrue for the listed options, assuming that the market price
    per share of our common stock appreciates from the date of grant
    over a period of 10 years at an annualized rate of 5% and
    10%, respectively. If the stock price does not increase above
    the exercise price at the time of exercise, the realized value
    from these options will be zero. Compensation
    Committee Interlocks and Insider Participation     117




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##### Table of Contents



Director
    Compensation  1 3
  non-employee out-of-pocket
   Indemnification   118




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##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters. SECURITY
    OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT      Percent ofName of Beneficial
    Owner(1)

Amount(2)


Class5% Stockholder:FMR Corp.(3)(4)


4,852,200



5.6
%Officers and
    Directors(5):Scott D. Josey(6)


746,848



*Dalton F. Polasek(7)


342,349



*Mike C. van den Bold(8)


251,394



*Rick G. Lester(9)


43,942



*Teresa G. Bushman(9)


150,504



*Bernard Aronson(10)


3,406,824



4.0
%Jonathan Ginns(11)


3,405,207



4.0
%John F. Greene(12)


4,737



*H. Clayton Peterson


1,213



*John L. Schwager(12)


1,500



*Executive officers and directors
    as a group (13 persons)(13)


5,412,558



6.3
%     *
    Less than 1%.  (1)
    As a result of the merger with Forest Energy Resources on
    March 2, 2006, Mariner issued 50,637,010 shares of its
    common stock to former Forest Energy Resources shareholders. As
    of March 17, 2006, Mariner had 86,100,994 shares of
    common stock issued and outstanding. As of that date, the only
    stockholder of record holding more than 5% of Mariners
    issued and outstanding common stock was CEDE & CO
    (FAST) which held of record 79,350,067 or 92.2% of such shares.
    Mariner understands that CEDE & CO (FAST) does not
    beneficially own such shares and as of March 17, 2006, had
    not been able to ascertain whether any of the beneficial owners
    of such shares owned more than 5% of Mariners issued and
    outstanding common stock except as indicated in
    footnotes (3) and (4) below. CEDE & CO
    (FAST)s address is PO Box 20, Bowling Green Station,
    New York, NY 10004.(2)
    Includes grants of restricted stock to executive officers under
    our Equity Participation Plan. These shares may be voted, but
    not disposed of, prior to vesting. Also includes shares issuable
    upon exercise of presently exercisable options held by certain
    of the indicated persons.(3)
    Of the amount shown, 1,536,083 shares are held by Fidelity
    Contrafund, 2,081,700 shares are held by Fidelity Puritan
    Trust: Fidelity Low-Priced Stock Fund, 438,717 shares are
    held by Variable Insurance Products Fund II:
    Contrafund Portfolio, 516,300 shares are held by
    Fidelity Puritan Trust: Fidelity Balanced Fund,
    200,000 shares are held by Fidelity Securities Fund:
    Fidelity Small Cap Value Fund, 75,000 shares are held by
    Fidelity Commonwealth Trust: Fidelity Small Cap Retirement Fund,
    and 4,400 shares are held by Fidelity Management Trust
    Company on behalf of accounts managed by it. Fidelity may be
    deemed a beneficial owner of these shares by virtue of its
    affiliation with these holders. 119




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##### Table of Contents



(4)
    On March 17, 2006, Fidelity Investments advised Mariner
    that in addition to the amount shown, Fidelity received shares
    of Mariner in connection with the merger with Forest Energy
    Resources. As of March 17, 2006, Mariner was unable to
    ascertain the number of such additional Mariner shares.(5)
    The address of each officer and director is c/o Mariner
    Energy, Inc., One BriarLake Plaza, Suite 2000, 2000 West Sam
    Houston Parkway South, Houston, Texas 77042.(6)
    Includes 66,667 shares issuable upon exercise of a
    presently exercisable option.(7)
    Includes 34,000 shares issuable upon exercise of a
    presently exercisable option.(8)
    Includes 24,667 shares issuable upon exercise of a
    presently exercisable option.(9)
    Includes 13,334 shares issuable upon exercise of a
    presently exercisable option.  (10)
    Mr. Aronson indirectly owns 1,213 shares that are
    directly owned by the Bolivar International Defined Benefit
    Pension Plan and 404 shares that are directly owned by his
    IRA. Mr. Aronson may be deemed to be a beneficial owner of
    1,895,630 shares and 1,509,577 shares that are beneficially
    owned by ACON E&P, LLC and ACON Investments LLC,
    respectively. MEI Acquisitions Holdings, LLC is the record
    holder of the shares beneficially owned by ACON E&P, LLC.
    MEI Investment Holdings, LLC is the holder of the shares
    beneficially owned by ACON Investments LLC. Mr. Aronson is
    a manager of ACON E&P, LLC and a managing member of ACON
    Investments LLC, the managing member of MEI Investment Holdings,
    LLC. Mr. Aronson disclaims beneficial ownership of these
    shares except to the extent of his pecuniary interest therein.
    Mr. Aronsons address is c/o ACON Investments, LLC,
    1133 Connecticut Avenue, N.W., Suite 700, Washington, D.C.
    20036.(11)
    Mr. Ginns may be deemed to be a beneficial owner of
    1,895,630 shares and 1,509,577 shares that are beneficially
    owned by ACON E&P, LLC and ACON Investments LLC,
    respectively. MEI Acquisitions Holdings, LLC is the record
    holder of the shares beneficially owned by ACON E&P LLC. MEI
    Investment Holdings, LLC is the holder of the shares
    beneficially owned by ACON Investments LLC. Mr. Ginns is a
    managing member of Burns Park Investments LLC, a manager of ACON
    E&P, LLC. Mr. Ginns is a managing member of ACON
    Investments LLC, the managing member of MEI Investment Holdings,
    LLC. Mr. Ginns disclaims beneficial ownership of these
    shares except to the extent of his pecuniary interest therein.
    Mr. Ginns address is c/o ACON Investments, LLC, 1133
    Connecticut Avenue, N.W., Suite 700, Washington, D.C. 20036.(12)
    Includes 1,500 shares issuable upon exercise of a presently
    exercisable option.  (13)
    Includes 197,670 shares issuable upon exercise of presently
    exercisable options.  Equity
    Compensation Plan Information
    Number ofsecurities to beissued upon exercise


Weighted average


Number ofof outstanding


exercise price of


securities remainingoptions, warrants


outstanding options,


available for futureand rights


warrants and rights


issuance(a)


(b)


(c)Equity compensation plans approved
    by security holders(1)


3,076,270
(2)

$
14.02



1,191,000(3
)Equity compensation plans not
    approved by security holders










Total


3,076,270


$
14.02



1,191,000     (1)
    
    These plans consist of our Equity Participation Plan and our
    Stock Incentive Plan.(2)
    
    Includes 2,267,270 restricted shares of our common stock and
    outstanding options to
    purchase 809,000 shares of our common stock issued as
    of December 31, 2005. 120




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##### Table of Contents



(3)
    
    Includes 1,191,000 shares of our common stock available for
    issuance under the Stock Incentive Plan as of December 31,
    2005. In the first quarter of 2006, we amended and restated the
    Stock Incentive Plan to add an additional 4.5 million
    shares of common stock to the plan.  Item 13.
    Certain
    Relationships and Related Transactions.            Item 14.
    Principal
    Accounting Fees and Services.    Audit Fees.
  Audit-Related Fees.
  Tax Fees.
  All Other Fees.
 121




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##### Table of Contents



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules.  Financial Statements:
    Financial Statement Schedules:
    Exhibits:
   122




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##### Table of Contents



SIGNATURES
      /s/ Scott
    D. Josey
  Title:
    Chairman of the Board, Chief Executive     Signature

Title/s/  Scott
    D. JoseyScott
    D. Josey

Chairman of the Board, Chief
    Executive Officer and President (Principal Executive Officer)/s/  Rick
    G. LesterRick
    G. Lester

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

Director/s/  Jonathan
    GinnsJonathan
    Ginns

Director/s/  John
    F. GreeneJohn
    F. Greene

Director/s/  H.
    Clayton PetersonH.
    Clayton Peterson

Director/s/  John
    L. SchwagerJohn
    L. Schwager

Director  123




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##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber

Description of
    Document2
.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. 333-129096)
    filed on October 18, 2005).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 Amendment No. 3 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on February 8, 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.
    amending the transaction agreements (incorporated by reference
    to Exhibit 2.1 to Mariners
    Form 8-K
    filed March 3, 2006).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*

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*

Registration Rights Agreement
    among Mariner Energy, Inc. and each of the investors identified
    therein, dated March 11, 2005 (incorporated by reference to
    Exhibit 4.1 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).4
.2*

Specimen Common Stock Certificate
    (incorporated by reference to Exhibit 4.2 to Mariners
    Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.1*

Credit Agreement by and among
    Mariner Energy Inc. and the Lenders party thereto, dated
    March 2, 2004 (incorporated by reference to
    Exhibit 10.1 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.2*

Amendment No. 1 and
    Assignment Agreement among Mariner Energy, Inc., Mariner
    Holdings, Inc. and Mariner Energy LLC, the Union Bank of
    California, N.A. and the Lenders party thereto, dated
    July 14, 2004 (incorporated by reference to
    Exhibit 10.2 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.3*

Waiver and Consent among Mariner
    Energy, Inc., Mariner Holdings, Inc., Mariner Energy LLC, the
    Union Bank of California, N.A. and the Lenders party thereto,
    dated December 29, 2004 (incorporated by reference to
    Exhibit 10.3 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.4*

Amendment No. 2 and Consent
    among Mariner Energy, Inc., Mariner Holdings, Inc., Mariner
    Energy LLC, the Union Bank of California, N.A., and the Lenders
    party thereto, dated February 7, 2005 (incorporated by
    reference to Exhibit 10.4 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.5*

Amendment No. 3 and Consent
    among Mariner Energy, Inc., Mariner LP LLC, Mariner Energy Texas
    LP, the Union Bank of California, N.A., and the Lenders party
    thereto, dated March 3, 2005 (incorporated by reference to
    Exhibit 10.5 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.6*

Form of Indemnification Agreement
    between Mariner Energy, Inc. and each of its directors and
    officers (incorporated by reference to Exhibit 10.6 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.7*

Mariner Energy, Inc. Amended and
    Restated Stock Incentive Plan, effective as of March 2,
    2006 (incorporated by reference to Exhibit 10.7 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.8*

Form of Non-Qualified Stock Option
    Agreement, Mariner Energy, Inc. Stock Incentive Plan for
    employees without employment agreements (incorporated by
    reference to Exhibit 10.8 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).




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##### Table of Contents



ExhibitNumber

Description of
    Document10
.9*

Form of Non-Qualified Stock Option
    Agreement, Mariner Energy, Inc. Stock Incentive Plan for
    employees with employment agreements (incorporated by reference
    to Exhibit 10.9 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.10*

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. 333-129096)
    filed on October 18, 2005).10
.11*

Form of Restricted Stock
    Agreement, Mariner Energy, Inc. Equity Participation Plan for
    employees with employment agreements (incorporated by reference
    to Exhibit 10.11 to Mariners Registration Statement
    on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.12*

Form of Restricted Stock
    Agreement, Mariner Energy, Inc. Equity Participation Plan for
    employees without employment agreements (incorporated by
    reference to Exhibit 10.12 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.13*

Employment Agreement by and
    between Mariner Energy, Inc. and Scott D. Josey, dated
    February 7, 2005 (incorporated by reference to
    Exhibit 10.13 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.14*

Employment Agreement by and
    between Mariner Energy, Inc. and Dalton F. Polasek, dated
    February 7, 2005 (incorporated by reference to
    Exhibit 10.14 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.15*

Employment Agreement by and
    between Mariner Energy, Inc. and Michiel C. van den Bold, dated
    February 7, 2005 (incorporated by reference to
    Exhibit 10.15 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.16*

Employment Agreement by and
    between Mariner Energy, Inc. and Judd Hansen, dated
    February 7, 2005 (incorporated by reference to
    Exhibit 10.16 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.17*

Employment Agreement by and
    between Mariner Energy, Inc. and Teresa Bushman, dated
    February 7, 2005 (incorporated by reference to
    Exhibit 10.17 to Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).10
.18*

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 4.1 to Mariners Registration
    Statement on
    Form S-8
    (File
    No. 333-132800)
    filed on March 29, 2006).10
.19*

Amendment No. 6, Waiver and
    Agreement among Mariner Energy, Inc., Mariner LP LLC, Mariner
    Energy Texas LP, the Union Bank of California, N.A. and the
    lenders party thereto, dated January 20, 2006 (incorporated
    by reference to Exhibit 10.19 to Amendment No. 2 to
    Mariners Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on January 25, 2006).10
.20*

Employment Agreement by and
    between Mariner Energy, Inc. and Ricky G. Lester, dated
    February 7, 2005 (incorporated by reference to
    Exhibit 10.20 to Amendment No. 3 to Mariners
    Registration Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on January 25, 2006).10
.21*

Amended and Restated Credit
    Agreement, dated as March 2, 2006, among Mariner Energy,
    Inc. and Mariner Energy Resources, Inc., as Borrowers, the
    Lenders Party thereto from time to time, as Lenders, Union Bank
    of California, N.A., as Administrative Agent and Issuing Lender,
    and BNP Paribas, as Syndication Agent (incorporated by reference
    to Exhibit 4.1 to
    Form 8-K
    filed on March 3, 2006).10
.22

First Amendment to Mariner Energy,
    Inc. Amended and Restated Stock Incentive Plan, effective as of
    March 16, 2006.10
.23

First Amendment to Mariner Energy,
    Inc. Equity Participation Plan, effective as of March 16,
    2006.21
*

List of subsidiaries (incorporated
    by reference to Exhibit 21 to Mariners Registration
    Statement on
    Form S-4
    (File
    No. 333-129096)
    filed on October 18, 2005).23
.1

Consent of Deloitte &
    Touche LLP.23
.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.




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##### Table of Contents



ExhibitNumber

Description of
    Document31
.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 contracts or compensatory plans or arrangements.