Mariner Energy Reports Third Quarter 2007 Results
HOUSTON, Nov. 8 /PRNewswire-FirstCall/ — Mariner Energy, Inc. today announced third-quarter 2007 net income of $22.5 million, compared to $36.4 million (including a non-cash hedging gain of $4.5 million) for the third quarter 2006. Net income in the third quarter 2007 includes non-recurring expenses relating to Mariner’s 2006 Gulf of Mexico acquisition from Forest Oil Corporation of $2.7 million and a non-cash loss related to hedge ineffectiveness under FAS 133 of $0.4 million. Basic and fully-diluted earnings per share (EPS) for the third quarter 2007 were $0.26, compared to $0.43 ($0.03 of which represented a non-cash hedging gain) for each measure in the third quarter 2006. Cash flows from operations for the nine-month period ended September 30, 2007 was $437.4 million, compared to $325.0 million for the same period in 2006, an increase of 35%.
For the third quarter 2007, Mariner reported net production of 23.2 billion cubic feet equivalents of natural gas (Bcfe), compared to 22.7 Bcfe for the third quarter 2006. Total natural gas net production was 15.5 billion cubic feet (Bcf), compared to 16.1 Bcf for the third quarter 2006. Total oil net production was 0.99 million barrels (MMBbls), compared to 0.91 MMBbls in the third quarter 2006. Natural gas liquids (NGL) net production was 0.29 MMBbls compared, to 0.18 MMBbls in the third quarter 2006.
Delays during the quarter in executing recompletions and initiating first production from new projects in the Gulf of Mexico resulted in the deferral of significant production affecting the second half of 2007. As a result, Mariner has revised its 2007 full-year production guidance to approximately 100 Bcfe.
Scott D. Josey, Mariner’s Chief Executive Officer, elaborated on the results: “While frustrating, the production delays experienced in the third quarter do not overshadow Mariner’s impressive 24% year-over-year production growth. We have numerous new projects with significant production potential — including our Bass Lite and Northwest Nansen deepwater projects — set to commence production over the next ninety days. Production from these new projects, combined with deferred production from the second half of 2007, should position Mariner for continued strong production growth in 2008.”
Third quarter 2007 total revenues were $196.5 million, compared to $190.5 million for third quarter 2006. Settlements under Mariner’s hedge positions resulted in a gain of $11.5 million in the third quarter 2007, compared to a gain of $3.5 million in the third quarter 2006. For the third quarter 2007, Mariner’s average realized natural gas price, including the effects of hedging, was $7.18 per thousand cubic feet (Mcf), compared to $7.48/Mcf for the same period last year. Mariner’s average realized oil price, including the effects of hedging, was $70.68 per barrel (Bbl) for the third quarter 2007, compared to $65.25/Bbl last year. The third-quarter 2007 average realized NGL price was $49.02/Bbl, compared to $53.12/Bbl in the year ago quarter. In the third quarter 2007, natural gas comprised 57% of total revenues, compared to 63% in the third quarter 2006.
OPERATIONAL UPDATE
Offshore — Mariner drilled five offshore wells in the third quarter 2007, two of which were successful. Information regarding the successful wells is shown below:
Working Water Depth Well Name Operator Interest (Ft) Location Sabine Pass 8#1 Mariner 57% 40 Conventional Shelf Viosca Knoll 917#1ST1 Noble 15% 4,370 Deepwater As of September 30, 2007, two offshore wells were drilling.
Onshore — In the third quarter of 2007, Mariner drilled 33 development wells in West Texas, all of which were successful. As of September 30, 2007, Mariner had five rigs operating on its West Texas properties.
Mariner expanded its acreage position in West Texas through three separate transactions involving an aggregate of 8,400 net acres. The acreage contains an estimated 200 drilling locations with Spraberry, Wolfberry, Dean and Fusselman reserve potential estimated at 19 million barrels of oil equivalent (MMBoe) net to Mariner’s interest. Including the acreage acquired in these transactions, Mariner’s current net acreage position in West Texas stands at approximately 44,400 net acres, up from 31,800 reported as of year end 2006.
Subsequent to the third quarter, Mariner completed its 150-well drilling commitment under its 2005 Tamarack acquisition. Mariner satisfied the commitment achieving a 100% success rate and earning an approximate 38% working interest in approximately 33,000 gross acres in the Spraberry trend in Reagan County, West Texas.
Mariner’s capital expenditures for the periods ended September 30, 2007 and September 30, 2006 are summarized below:
Capital Expenditures (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (Dollars in Millions) (Dollars in Millions) Oil and Natural Gas Exploration $ 28.9 $ 29.1 $ 145.4 $ 169.1 Oil and Natural Gas Development 111.1 137.0 337.5 262.9 Acquisitions/Dispositions/Other 2.9 74.0 8.1 83.0 Total Capital Expenditures $ 142.9 $ 240.1 $ 491.0 $ 515.0
Mariner anticipates that total capital expenditures for 2007 will range between $660 million and $730 million (excluding hurricane expenditures). The total amount of capital expenditures will be determined primarily by the extent to which the $66.6 million of leases with respect to which Mariner was apparent high bidder at the October 2007 MMS Lease Sale 205 are awarded before year end. Additional factors include Mariner’s election to accelerate drilling of its Sofia prospect at East Breaks 414 and its expansion initiative in West Texas.
CONFERENCE CALL TO DISCUSS RESULTS
Mariner has scheduled a conference call to review third quarter 2007 results on November 9, 2007, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). To participate in the call, callers in the United States and Canada can dial (866) 356-4441. International callers can dial (617) 597-5396. The conference pass code for both numbers is 20013868.
The call will also be webcast live over the internet and can be accessed through the Investor Relations’ Webcasts and Presentations section of Mariner’s website at http://www.mariner-energy.com/.
IMPORTANT INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS AND OTHER DISCLOSURES
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, that address activities that Mariner assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future, including our guidance estimates, are forward-looking statements. Our forward-looking statements are generally accompanied by words such as “may”, “estimate”, “project”, “predict”, “believe”, “expect”, “anticipate”, “potential”, “plan”, “goal”, or other words that convey the uncertainty of future events or outcomes. The forward-looking statements provided in this press release are based on the current belief of Mariner based on currently available information as to the outcome and timing of future events and assumptions that Mariner believes are reasonable. Mariner cautions that its forward-looking statements are subject to all of the risks and uncertainties normally incident to the exploration for and development, production and sale of oil and natural gas. These risks include, but are not limited to, price volatility or inflation, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and other documents filed by Mariner with the Securities and Exchange Commission (SEC). Any of these factors could cause the actual results and plans of Mariner to differ materially from those in the forward-looking statements. Investors are urged to read the Annual Report on Form 10-K for the year ended December 31, 2006 and other documents filed by Mariner with the SEC.
The SEC has generally permitted oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Mariner uses the terms “probable,”"possible” and “non-proved” reserves, reserve “potential” or “upside” or other descriptions of volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines may prohibit it from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the company.
This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities of Mariner.
About Mariner Energy, Inc.
Mariner Energy, Inc. is an independent oil and gas exploration, development and production company headquartered in Houston, Texas, with principal operations in the Gulf of Mexico and West Texas. For more information about Mariner, please visit its website at http://www.mariner-energy.com/.
COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2007 AND 2006 MARINER ENERGY, INC. SELECTED OPERATIONAL RESULTS (Unaudited) Net Production, Realized Pricing and Operating Costs Three Months Ended September 30, 2007 2006 Net Production: Natural gas (Bcf) 15.5 16.1 Oil (MMBbls) 0.99 0.91 Natural gas liquids (MMBbls) 0.29 0.18 Natural gas equivalents (Bcfe) 23.2 22.7 Realized Prices (including the effects of hedging) Gas ($/Mcf) $ 7.18 $ 7.48 Oil ($/Bbl) 70.68 65.25 Natural gas liquids ($/Bbl) 49.02 53.12 Operating Costs per Mcfe Lease operating expense $ 1.51 $ 1.27 Severance and ad valorem taxes 0.13 0.10 Transportation expense 0.10 0.08 General and administrative expense 0.41 0.33 Depreciation, depletion and amortization 3.93 3.63
Commencing January 1, 2007, revenues, production and realized prices associated with natural gas liquids are reported separately. In addition, the corresponding prior year amounts have been reclassified to conform to current year presentation.
COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2007 AND 2006 (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended September 30, 2007 2006 Revenues: Oil $ 69,842 $ 59,427 Natural gas 111,455 120,546 Natural gas liquids 14,317 9,715 Other revenues 870 778 Total revenues 196,484 190,466 Expenses: Lease operating expense 35,066 28,744 Severance and ad valorem taxes 3,085 2,262 Transportation expense 2,215 1,754 General and administrative expense 9,572 7,577 Depreciation, depletion and amortization 91,136 82,416 Total expenses 141,074 122,753 OPERATING INCOME 55,410 67,713 Other Income (Expense): Interest income 475 237 Interest expense, net of capitalized amounts (14,003) (11,724) Other (4,214) – Income before taxes 37,668 56,226 Provision for income taxes (15,140) (19,836) NET INCOME $ 22,528 $ 36,390 Earnings per share: Net income per share – basic $0.26 $0.43 Net income per share – diluted $0.26 $0.43 Weighted average shares outstanding – basic 85,702 85,493 Weighted average shares outstanding – diluted 85,964 85,581
Commencing January 1, 2007, revenues, production and realized prices associated with natural gas liquids are reported separately. In addition, the corresponding prior year amounts have been reclassified to conform to current year presentation.
MARINER ENERGY, INC. BALANCE SHEET (In Thousands) (Unaudited) September 30, December 31, 2007 2006 Current Assets: Cash and cash equivalents $ 5,582 $ 9,579 Receivables 165,318 149,692 Insurance receivables 27,926 61,001 Derivative assets 22,246 54,488 Prepaid seismic 20,209 20,835 Prepaid expenses and other 24,806 12,846 Total Current Assets 266,087 308,441 Property and equipment (net) 2,197,409 2,012,062 Restricted cash – 31,830 Goodwill 288,504 288,504 Derivative assets 1,596 17,153 Insurance receivables 60,215 – Other assets, net of amortization 21,523 22,163 TOTAL ASSETS $ 2,835,334 $ 2,680,153 Current Liabilities: Accounts payable $4,498 $1,822 Accrued liabilities 113,657 74,880 Accrued capital costs 129,879 99,028 Deferred income tax 2,850 26,857 Derivative liabilities 2,925 – Abandonment liability 31,136 29,660 Accrued interest 21,607 7,480 Total Current Liabilities 306,552 239,727 Long-Term Liabilities: Abandonment liability 169,776 188,310 Derivative liabilities 6,686 – Deferred income tax 315,146 262,888 Long-term debt, bank credit facility 33,000 354,000 Long-term debt, senior unsecured notes 600,000 300,000 Other long-term liabilities 37,624 32,637 Total Long-Term Liabilities 1,162,232 1,137,835 Stockholders’ Equity: Common stock and additional paid in capital 1,049,050 1,043,932 Accumulated other comprehensive income 8,245 43,097 Accumulated retained earnings 309,255 215,562 Total Stockholders’ Equity 1,366,550 1,302,591 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,835,334 $ 2,680,153 MARINER ENERGY, INC. SELECTED CASH FLOW INFORMATION (In Thousands) (Unaudited) Nine Months Ended September 30, 2007 2006 Cash flows from operations $ 437,363 $ 325,002 Changes in operating assets and liabilities (34,909) (152,213) Net Cash Provided by Operating Activities $ 402,454 $ 172,789 Net Cash Used in Investing Activities $(377,993) $(423,466) Net Cash (Used in) / Provided by Financing Activities $ (28,458) $ 250,995 (Decrease) / Increase in Cash and Cash Equivalents $ (3,997) $ 318
Mariner Energy, Inc.
CONTACT: Jaime F. Brito, Director, Investor Relations of Mariner Energy,Inc., +1-713-954-5558, ir@mariner-energy.com
Web site: http://www.mariner-energy.com/