Filed by Forest Oil Corporation

Pursuant to Rule 425 under the Securities Act of 1933

 

Subject Company:  Mariner Energy, Inc.

File No. 333-129096

 

These materials are not a substitute for the registration statement that was filed with the Securities and Exchange Commission in connection with the transaction, or the proxy statement/prospectus-information statement to be mailed to stockholders. The registration statement has not yet been declared effective.  Investors are urged to read the proxy statement/prospectus-information statement which will contain important information, including detailed risk factors, when it becomes available. The proxy statement/prospectus-information statement and other documents that will be filed by Forest and Mariner with the Securities and Exchange Commission will be available free of charge at the SEC’s website, www.sec.gov, or by directing a request when such a filing is made to Forest Oil Corporation, 707 17th Street, Suite 3600, Denver, CO 80202, Attention: Investor Relations; or by directing a request when such a filing is made to Mariner Energy, Inc., 2101 CityWest Blvd., Bldg. 4, Ste. 900, Houston, TX 77042-2831, Attention: Investor Relations.

 

Mariner, Forest and their respective directors, and executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the participants in the solicitation will be set forth in the proxy statement/prospectus-information statement when it becomes available.

 

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[GRAPHIC]

 

THE “NEW” FST

 

Same Leadership. Same Strategies. Same Discipline. Improved Focus.

 

[LOGO]

GROWTH

PROGRESS

MOMENTUM

 

Corporate Update

November 28, 2005

 



 

THE “NEW” FST – Operations Spin-Off Drives Value

 

                  Innovative transaction provides new optionality and returns value directly to Forest’s shareholders

 

                  Opportunistic tax-free spin / merge of offshore Gulf operations creates two highly focused and valuable enterprises

 

                  Investment in Mariner Energy creates high quality, well positioned GOM independent with excellent track record and growth outlook

 

                  Remaining Forest creates highly-focused onshore resource company to execute a more focused “acquire and exploit” strategy

 

                  Forest’s portfolio of long-life, concentrated assets in high quality basins provides a foundation for sustainable organic growth

 

STREAMLINED ASSET BASE, IMPROVED FOCUS AND BETTER POSITIONED FOR GROWTH

 

[LOGO]

 

2



 

KEY TRANSACTION TERMS

 

Asset Contribution

 

                  344 Bcfe of Forest offshore proved reserves (12/31/04)

 

Liability Contribution

 

                  $200 Million of debt

                  $50 Million of derivatives at 6/30/2005

                  $157 Million of ARO

 

Structure

 

                  Tax-free Reverse Morris Trust transaction

                  Spin-off of offshore Gulf of Mexico operations

                  Stock-for-stock merger of “SpinCo” and Mariner

 

Mariner Equity Ownership

 

                  58.2% Forest shareholders

                  41.8% Mariner shareholders

 

Mariner Management & Governance

 

                  Scott D. Josey, Chairman & CEO

                  7 member board

                  2 members to be mutually agreed by Forest and Mariner

 

Expected Close

 

                  Q1 2006 (economic effective date of July 1, 2005)*

                  Forest and Mariner shareholders will each own freely tradable registered stock in Mariner upon closing

 


*  Subject to Mariner shareholder vote and SEC registration requirements and Forest bondholder consent

 

3



 

Combination

[LOGO]

 

Mariner Contribution                               [LOGO]

 

                  Management

                  Deepwater, shelf, West Texas assets

                  Exploration track record

                  Prospect inventory

 

Forest Contribution                                       [LOGO]

 

                                          Development expertise/personnel

                                          Underexploited shelf assets

                                          Identified exploitation opportunities

                                          Cash flow

 

42% Equity ownership

[GRAPHIC]

58% Equity ownership

 

                  Dynamic GOM player with scale and expertise to effectively compete in the shelf, deep shelf, and deepwater

                  Strong cash flow

                  Modest debt level

                  Shareholders benefit from the diversity and upside potential intrinsic in these complementary asset bases

                  Blend of exploration and exploitation opportunities

 



 

Mariner – SpinCo Trend Map

 

[GRAPHIC]

 

Shelf and Deepwater (470,000+ net undeveloped acres)

 

                  Creates a leading Gulf of Mexico focused independent

                  Balances deepwater exploration with low risk shelf production

                  Adds high impact deep shelf and ultra-deep shelf opportunities

                  Extensive prospects in inventory

                  Synergies achieved through property overlap and operating efficiencies

 

Combined Reserves as of 12/31/04 615 Bcfe*

 

[CHART]

 


*Reserves are pro-forma acquisition of Bass Lite

 



 

GOM Lease Expirations 2004-2005: 563 Leases

 

[GRAPHIC]

 



 

GOM Lease Expirations 2006-07: 2,411 Leases

 

[GRAPHIC]

 



 

GOM Lease Expirations

 

[GRAPHIC]

 



 

Mariner Organization

 

Chairman

 

CEO

 

Scott Josey

 

(25 years)

 

 

 

 

 

 

 

 

 

 

COO

 

 

 

 

 

 

 

Dalton Polasek

 

 

 

(30 years)

 

 

 

 

 

 

VP

VP

VP

VP

VP

VP

General Counsel

Corporate Development

CFO

CXO

Shelf & Onshore

Deepwater

Teresa Bushman

Jesus Melendrez

Rick Lester

Mike van den Bold

Judd Hansen

Cory Loegering

(20 years)

(25 years)

(31 years)

(19 years)

(27 years)

(28 years)

 



 

Exploration Track Record

 

[GRAPHIC]

 

Significant Discoveries….over 80% Internally Generated

 



 

Deepwater Operations Expertise

 

[GRAPHIC]

 



 

Historical Performance

 

Proved Reserves

 

[CHART]

 


*Reserves are pro-forma acquisition of Bass Lite

 

Daily Production

 

[CHART]

 

EBITDA

 

[CHART]

 


*Includes $10MM for non-cash stock compensation

 

Reserves Replacement Rate

 

[CHART]

 

Rolling 3-Year F&D Costs

 

[CHART]

 


*Excludes future development capital of $255MM

 

CAPEX

 

[CHART]

 

 



 

Strong Competitive Positioning and Value

 

2004 Proved Reserves

 

2005 Production

 

 

 

[CHART]

 

[CHART]

 

 

 

2005 EV/Proved Reserves

 

2005 EV/Production

 

 

 

[CHART]

 

[CHART]

 


*Reserves are pro-forma for acquisition of Bass Lite

Note: Enterprise values as of November 22, 2005

 



 

FOREST OIL’S REMAINING ASSETS

 

[GRAPHIC]

 

Alaska

 

 

 

12/31/04 Reserves (Bcfe)

 

117

 

YTD 2005 Production (MMcfe/d)

 

41

 

12/31/04 Net Acreage (M)

 

1,182

 

Reserve Life

 

7.9

 

 

 

 

 

Canada

 

 

 

12/31/04 Reserves (Bcfe)

 

152

 

YTD 2005 Production (MMcfe/d)

 

71

 

12/31/04 Net Acreage (M)

 

930

 

Reserve Life

 

5.9

 

 

 

 

 

Western

 

 

 

12/31/04 Reserves (Bcfe)*

 

643

 

YTD 2005 Production (MMcfe/d)

 

112

 

12/31/04 Net Acreage (M)*

 

254

 

Reserve Life*

 

15.8

 

 

 

 

 

Southern

 

 

 

12/31/04 Reserves (Bcfe)*

 

198

 

YTD 2005 Production (MMcfe/d)

 

45

 

12/31/04 Net Acreage (M)*

 

147

 

Reserve Life

 

12.1

 

 

 

 

 

Consolidated

 

 

 

12/31/04 Reserves (Bcfe)*

 

1,110

 

YTD 2005 Production (MMcfe/d)

 

269

 

12/31/04 Net Acreage (M)*

 

7,698

 

Reserve Life

 

11.3

 

 


* Pro Forma for the Buffalo Wallow Acquisition and offshore spin-off

 

[LOGO]

 

14



 

REALIGNING ASSET BASE – “The Perfect Pie”

 

Old Forest Oil

 

New Forest Oil

 

 

 

[CHART]

 

[CHART]

 

 

 

2004 Reserves: 1,454 Bcfe *
61% Gas
75% PD

 

2004 Reserves: 1,110 Bcfe *
55% Gas
74% PD

 

 

 

[CHART]

 

[CHART]

 

 

 

YTD 2005 Production: 475 MMcfe/d
2005 R/P: 8.0

 

YTD 2005 Production: 269 MMcfe/d
2005 R/P: 11.3

 


*  Pro-Forma for the Buffalo Wallow acquisition and offshore spin-off

 

15



 

…FOCUSED STRATEGY…

 

“4 Point” Philosophy

 

1.              Leadership

                  Superb technical talent pool

                  Deep managerial bench

                  Proven acquiror

 

2.              Strategies

                  Sustainable growth at high returns

                  Intense focus on costs

 

3.              Discipline

                  Rigorous evaluation criteria

                  Capital budget adherence

 

4.              Focus

                  Focused onshore portfolio

                  Critical mass in core areas

 

Revised “4 Point” Strategy

 

1.              Grow organically

                  12% prod. growth in 2006 (10% organic)

                  Exploit “new” portfolio and resource plays

 

2.              Identify attractive acquisition opportunities

                  Strong track record and momentum

                  Target prospect rich opportunities supported by land

                  Tax-efficient acquiror ($706 MM NOLs)

 

3.              Reduce costs

                  Cost control in all areas

 

4.              Preserve financial flexibility

                  Strong free cash flow profile

                  Remain in targeted Net Debt / Book Cap range of 30% - 40%

 

16



 

…AND COMPELLING INVESTOR APPEAL

 

                  Uniquely positioned mid-cap with critical mass in multiple high quality basins

 

                  Extensive drilling inventory in Texas Panhandle / Mid-Continent area

                  Large scale Permian footprint and Haley Atoka exposure

                  High quality Alberta Plains and Canadian Foothills inventory

                  Significant Rockies acreage position

                  High impact Onshore Louisiana and Texas exploration

                  Significant acreage in developing Alaska gas

 

                  Well-balanced resource play with visible organic growth profile

 

                  Extensive exploitation inventory; over 2,350 projects

                  Attractive exploration upside; 7.1 million net undeveloped acres

 

                  Successful acquisition and exploitation track record fueling steady replenishment of drilling opportunities

 

                  In excess of $1 billion in strategic acquisitions over last 2 years adding 681 Bcfe at an all-in cost of $1.51 / Mcfe

 

                  Demonstrated ability to be disciplined with capital spending

 

                  Excellent tax loss carryforward position (US $466 MM and Canada $240 MM)

 

17



 

SUSTAINABLE GROWTH PROFILE

 

[CHART]

 


* Adjusted for 7 MMcfe/d announced deferrals due to Hurricanes

 

18



 

EXTENSIVE PROSPECT INVENTORY

 

 

 

Project

 

Net Reserve

 

Key Growth Platforms

 

Inventory

 

Potential (Bcfe)

 

 

 

 

 

 

 

Buffalo Wallow (Texas Panhandle)

 

 

 

 

 

•  From 40 to 20-acre spacing

 

346

 

377

 

 

 

 

 

 

 

Permian Basin

 

 

 

 

 

•  30,000 net acres in Haley Atoka

 

679

 

565

 

 

 

 

 

 

 

Wild River

 

 

 

 

 

•  From 640 to 160 acre spacing

 

120

 

54

 

 

 

 

 

 

 

Southern

 

 

 

 

 

•  Frio, Yegua, Wilcox, Vicksburg trend

 

419

 

513

 

 

 

 

 

 

 

Rockies (Tight gas & Williston oil)

 

371

 

243

 

 

 

 

 

 

 

Onshore Cook Inlet Gas

 

35

 

1,875

 

 

 

 

 

 

 

Total

 

1,970

 

3,627

 

 

19



 

WESTERN BUSINESS UNIT - Buffalo Wallow

 

[GRAPHIC]

 

                  120 Bcfe of estimated proved reserves and production of 32 MMcfe/d

                  370 drillsites identified (40 identified as PUD)

                  Field approved for 20 acre downspacing

                  Production increased 60% since acquisition (100% success rate)

                  Production expected to increase to 40 to 45 MMcfe/d in 2006

                  33,000+ gross acres in trend

                  Deep pay found in the Atoka

 

20



 

WESTERN BUSINESS UNIT – Greater Haley Deep Gas Play

 

[GRAPHIC]

 

Greater Haley Area

                  Rejuvenated by Anadarko in 2003

                  Forest is actively leasing in the play; currently 30,000 net acres

 

Slash Ranch/Demmit

                  Fusselman/Atoka/Morrow stacked pay potential

                  Bell Canyon and Cherry Canyon Recompletion program

 

Apollo

                  Active recompletion and re-entry program

 

Vermejo Field

                  Active 2 rig drilling program

                  Active recompletion and re-entry program

                  Atoka sidetrack opportunities may exist

 

21



 

CANADIAN BUSINESS UNIT – Wild River

 

[GRAPHIC]

 

                  Very active area for shallow and deep gas exploration on 21,000 acres

                  Gross production increased from 17 to 49 MMcfe/d

                  Well costs reduced

                  Four wells awaiting pipeline connection

                  Two drilling rigs in the field

                  160 acre down-spacing and commingling recently approved

                  Over 100 down-spacing locations identified

 

22



 

SOUTHERN BUSINESS UNIT - Sabine

 

[GRAPHIC]

 

                  Approximately 157,000 acres leased or optioned in this prolific Yegua and Wilcox trend (45% WI)

                  260 square miles of 3-D and 2,000 linear miles of 2-D data available to map

                  Five wells in the field completed at an average of 3.7 MMcfe/d

                  One well completing

 

23



 

SOUTHERN BUSINESS UNIT – Katy

 

[GRAPHIC]

 

Katy Field

 

                  Took over drilling operations

                  Drilled 2 Frio discoveries in 2005

                  Combined IP’s < 1 MMcf/d for total investment of $585M

                  Sparks recompletion tested at 2 MMcfe/d

                  Virgin pressure discovered on Wilcox recompletion

                  Yegua has produced 6 Tcf from this field

                  122 square miles of 3D seismic coverage

 

24



 

ALASKA BUSINESS UNIT -- Onshore Alaska Gas

 

[GRAPHIC]

 

                  Undeveloped onshore net acreage in excess of 1,100,000 acres

                  West Foreland #2 (100% WI) tested 15 MMcfe/d

                  Three Mile Creek Unit #1 (30% WI) tested 5 MMcfe/d from shallow zone

                  Net undeveloped acreage of approximately 100,000 acres surrounding the three discoveries

                  New supply contract commences in Q4 2005

                  2 additional tests planned in 2005

 

25



 

ACQUISITION LOOKBACK SUMMARY – 6/30/2005

 

Unocal, New Permian, Wiser, S. Bonus, Minihan, McAllen & Oxy

 

 

 

Investment

 

Reserves

 

 

 

 

 

($MM)

 

(Bcfe)

 

$ / Mcfe

 

Original Acquisition

 

775

 

517

 

1.50

 

Cash Flow / Production

 

(346

)

(91

)

3.80

 

Subtotal

 

429

 

426

 

1.01

 

Capital Projects

 

188

 

133

 

1.41

 

Total Investment

 

617

 

559

 

1.10

 

 

                  45% of original investment paid out with 82% of reserves remaining

                  36% of total investment paid out with 108% of reserves remaining

 

26



 

ADDITIONAL REMAINING VALUE

 

                  Unbooked discoveries

 

                  S. Africa (tested 220 MMcfe/d)

                  Mackenzie Delta (approximately 200 Bcfe of unbooked reserves)

 

                  Carried interest on frontier acreage

 

                  Gabon (100% carry on seismic and well to be spud in Q1 2006)

                  S. Africa deepwater

 

                  Cook Inlet Pipeline Company

 

                  Lantern Drilling Company

 

                  8 company-owned drilling rigs operating in the Permian Basin

 

                  Tax attributes

 

                  $706 Million NOL (including Canadian tax pools of $240 MM)

 

                  Extensive undeveloped acreage and seismic database worldwide

 

27



 

VALUE PROPOSITION – Peer Group Comparison

 

2004 Proved Reserves

 

2005 Production

 

 

 

[CHART]

 

[CHART]

 

 

 

2005 EV/Proved Reserves

 

2005 EV/Production

 

 

 

[CHART]

 

[CHART]

 


Note:  Enterprise values as of November 22, 2005.

* Pro forma for Buffalo Wallow acquisition

 

28



 

THE “NEW” FST – Summary of Opportunity

 

                  Unlocks intrinsic shareholder value in a tax efficient manner and clarifies the value proposition

 

                  Intensifies focus on two discreet asset bases, each with critical mass and competitive advantage

 

                  Integrates offshore portfolio into high growth vehicle with deepwater exploration potential

 

                  Unleashes Forest’s management to aggressively execute the onshore resource-focused growth strategy

 

Value Proposition

 

                  Public valuations and M&A transactions support values of $2.97 per proved reserve and $13,629 per flowing Mcfe/d for remaining Forest

 

                  Public valuations and M&A transactions support values of $3.58 per proved reserve and $10,336 per flowing Mcfe/d for Mariner/Spinco

 

29



 

EBITDA Reconciliation

[LOGO]

 

 

 

1H05

 

 

 

 

 

EBITDA

 

77.5

 

Changes in working capital

 

(14.9

)

Non-cash hedge gain

 

(2.5

)

Amortization/other

 

0.6

 

Stock compensation exp.

 

9.5

 

Net interest expense

 

(3.0

)

Income tax benefit

 

5.5

 

 

 

 

 

Net cash provided by operating activities

 

72.7

 

 



 

CAUTIONARY STATEMENTS

 

The United States Securities and Exchange Commission permits 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.  We use the terms “probable” and “possible” 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 strictly prohibit Forest 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 us.  Investors are urged to consider closely the disclosure in Forest’s Form 10-K for fiscal year ended December 31, 2004, available from Forest at 707 17th Street, Suite 3600, Denver, CO 80202, Attention: Investor Relations.  You can also obtain this form from the SEC by calling 1-800-SEC-0330.

 

This presentation 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 Forest and Mariner assumes, plans, expects, believes, projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements.  The forward-looking statements provided in this presentation are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.  Forest and Mariner cautions that their future natural gas and liquids production, revenues and expenses and other forward-looking statements are subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas.  These risks include, but are not limited to, price volatility, inflation or lack of availability of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks as described in Forest’s 2004 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.  Also, the financial results of Forest’s foreign operations are subject to currency exchange rate risks.  Any of these factors could cause Forest’s or Mariner’s actual results and plans to differ materially from those in the forward-looking statements.

 

These materials are not a substitute for the registration statement that was filed with the Securities and Exchange Commission in connection with the spin-off transaction, or the proxy statement/prospectus-information statement to be mailed to shareholders.  The registration statement has not yet been declared effective.  Investors are urged to read the proxy statement/prospectus-information statement which will contain important information, including detailed risk factors, when it becomes available.  The proxy statement/prospectus-information statement and other documents that will be filed by Forest and Mariner with the Securities and Exchange Commission will be available free of charge at the SEC’s website, www.sec.gov, or by directing a request when such a filing is made to Forest Oil Corporation, 707 17th Street, Suite 3600, Denver, CO 80202, Attention:  Investor Relations; or by directing a request when such a filing is made to Mariner Energy, Inc., 2101 CityWest Blvd., Bldg. 4, Suite 900, Houston, TX 77042-2831, Attention:  Investor Relations.

 

Mariner, Forest and their respective directors, and executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the participants in the solicitation will be set forth in the proxy statement/prospectus-information statement when it becomes available.

 

[LOGO]

 

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