e424b3
Filed pursuant to 424(b)(3)
Registration No. 333-124858
462(b) Registration No. 333-134506
PROSPECTUS
35,615,400 Shares
Common Stock
This prospectus relates to up to 35,615,400 shares of the
common stock of Mariner Energy, Inc., which may be offered for
sale by the selling stockholders named in this prospectus. The
selling stockholders acquired the shares of common stock offered
by this prospectus in private equity placements. We are
registering the offer and sale of the shares of common stock to
satisfy registration rights we have granted.
We are not selling any shares of common stock under this
prospectus and will not receive any proceeds from the sale of
common stock by the selling stockholders. The shares of common
stock to which this prospectus relates may be offered and sold
from time to time directly from the selling stockholders or
alternatively through underwriters or broker-dealers or agents.
The shares of common stock may be sold in one or more
transactions, at fixed prices, at prevailing market prices at
the time of sale or at negotiated prices. Because all of the
shares being offered under this prospectus are being offered by
selling stockholders, we cannot currently determine the price or
prices at which our shares of common stock may be sold under
this prospectus. Shares of our common stock are listed on the
New York Stock Exchange under the symbol ME. On
December 19, 2006, the closing price of our common stock as
reported on the New York Stock Exchange was $19.72 per
share. Please read Plan of Distribution.
Investing in our common stock involves risks. You should read
the section entitled Risk Factors beginning on
page 18 of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2005, which is incorporated
by reference herein, for a discussion of certain risk factors
that you should consider before investing in our common
stock.
You should rely only on the information contained in or
incorporated by reference into this prospectus or any prospectus
supplement or amendment. We have not authorized anyone to
provide you with different information. We are not making an
offer of these securities in any state where the offer is not
permitted.
Neither the Securities and Exchange Commission (the
SEC) nor any state securities commission has
approved or disapproved of these securities or determined
whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is December 20, 2006.
TABLE OF
CONTENTS
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(i
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(ii
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WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC, under the Securities Act of 1933, as
amended (the Securities Act), a registration
statement on
Form S-1
with respect to the common stock offered by this prospectus.
This prospectus, which constitutes part of the registration
statement, does not contain all the information set forth in the
registration statement or the exhibits and schedules which are
part of the registration statement, portions of which are
omitted as permitted by the rules and regulations of the SEC.
Statements made in this prospectus regarding the contents of any
contract or other documents are summaries of the material terms
of the contract or document. You should not assume that the
information contained in this prospectus is accurate as of any
date other than the date on the front of this document. Our
business, financial condition, results of operations and
prospects may have changed since that date. Any information we
have incorporated by reference is accurate only as of the date
of the document incorporated by reference. With respect to each
contract or document filed as an exhibit to the registration
statement, reference is made to the corresponding exhibit. For
further information pertaining to us and to the common stock
offered by this prospectus, reference is made to the
registration statement, including the exhibits and schedules
thereto, copies of which may be inspected without charge at the
public reference facilities of the SEC at 100 F Street,
N.E., Washington, D.C. 20549. Copies of all or any portion
of the registration statement may be obtained from the SEC at
prescribed rates. Information on the public reference facilities
may be obtained by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains a web site that contains reports,
proxy and information statements and other information that is
filed electronically with the SEC. The web site can be accessed
at www.sec.gov.
Upon completion of this offering, we will be required to comply
with the informational requirements of the Securities Exchange
Act of 1934, as amended (the Exchange Act), and,
accordingly, will file current reports on
Form 8-K,
quarterly reports on
Form 10-Q,
annual reports on
Form 10-K,
proxy statements and other information with the SEC. Those
reports, proxy statements and other information will be
available for inspection and copying at the public reference
facilities and internet site of the SEC referred to above.
We have elected to incorporate by reference certain
information into this prospectus, which means we can disclose
important information to you by referring you to another
document filed with the SEC. The information incorporated by
reference is deemed to be part of this prospectus. Please read
Incorporation by Reference. You should only rely on
the information contained in this prospectus and incorporated by
reference in it. We have not authorized anyone to provide you
with any additional information.
(i)
INCORPORATION
BY REFERENCE
We are incorporating by reference into this prospectus the
following documents filed with the SEC (excluding any portions
of such documents that have been furnished but not
filed for purposes of the Securities Exchange Act of
1934, as amended):
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Our annual report on
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
SEC on March 31, 2006, except for (i) the consolidated
financial statements of Mariner Energy, Inc. as of December 31,
2005, December 31, 2004 (Post-2004 Merger), December 31, 2003
(Pre-2004 Merger) and for the period from January 1, 2004
through March 2, 2004 (Pre-2004 Merger), for the period from
March 3, 2004 through December 31, 2004 (Post-2004 Merger), and
for each of the two years in the period ended December 31, 2003
which are superseded by the consolidated financial statements of
Mariner Energy, Inc. as of December 31, 2005, December 31, 2004
(Post-2004 Merger), December 31, 2003 (Pre-2004 Merger) and
for the period from January 1, 2004 through March 2, 2004
(Pre-2004 Merger), for the period from March 3, 2004 through
December 31, 2004 (Post-2004 Merger), and for each of the two
years in the period ended December 31, 2003 contained in this
prospectus, and (ii) the report of Deloitte & Touche LLP
dated March 30, 2006 relating to such financial statements which
is superseded by the report of Deloitte & Touche LLP dated
March 30, 2006 (September 18, 2006 as to Note 13) contained in
this prospectus;
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Our quarterly report on
Form 10-Q
for the quarterly period ended March 31, 2006, filed with
the SEC on May 12, 2006;
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Our quarterly report on Form 10-Q for the quarterly period ended
June 30, 2006, filed with the SEC on August 11, 2006;
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Our quarterly report on Form 10-Q for the quarterly period
ended September 30, 2006, filed with the SEC on
November 13, 2006; and
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Our current report on
Form 8-K/A
filed with the SEC on March 31, 2006 and our current
reports on
Form 8-K
filed with the SEC on April 4, 2006, April 13, 2006,
April 25, 2006, May 3, 2006, May 10, 2006,
June 9, 2006, June 29, 2006, July 18, 2006,
August 7, 2006, August 17, 2006, October 4, 2006,
October 11, 2006, October 18, 2006 and
November 16, 2006, except Exhibit 99.3 thereto
(Transcript of Earnings Conference Call held November 10,
2006).
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Any statement contained in this prospectus or a document
incorporated by reference in this prospectus will be deemed to
be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or in any
other subsequently filed document that is incorporated by
reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a
part of this prospectus.
The documents incorporated by reference in this prospectus are
available from us upon request. We will provide a copy of any
and all of the information that is incorporated by reference in
this prospectus to any person, without charge, upon written or
oral request. Requests for such copies should be directed to the
following:
Mariner Energy, Inc.
One BriarLake Plaza, Suite 2000
2000 West Sam Houston Parkway South
Houston, Texas 77042
Telephone Number: (713) 954-5500
Attention: General Counsel
(ii)
SUMMARY
This summary highlights information contained herein and
incorporated by reference in this prospectus. It is not complete
and does not contain all of the information you may wish to
consider before investing in the shares. We urge you to read
this entire prospectus and the information incorporated herein
by reference carefully, including the Risk Factors
beginning on page 18 of our Annual Report on Form 10-K
for the year ended December 31, 2005, which is incorporated
by reference herein and the financial statements incorporated by
reference in this prospectus. References to Mariner,
the Company, we, us, and
our refer to Mariner Energy, Inc. The estimates of
our proved reserves as of December 31, 2005, 2004 and 2003
included or incorporated by reference in this prospectus are
based on reserve reports prepared by Ryder Scott Company, L.P.,
independent petroleum engineers (Ryder Scott). We
have provided definitions for some of the industry terms used in
this prospectus in the Glossary of Oil and Natural Gas
Terms beginning on page 29 of this prospectus.
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. which was completed on
March 2, 2006, as if this merger had occurred on the
applicable date of determination or on the first day of the
applicable period. The unaudited pro forma information
incorporated by reference in this prospectus has been derived
from and should be read together with the historical
consolidated financial statements of Mariner and the statements
of revenues and direct operating expenses of the Forest Gulf of
Mexico operations. The statements of revenues and direct
operating expenses of the Forest Gulf of Mexico operations do
not include all of the costs of doing business. 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 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.
Our
Company
Mariner Energy, Inc. is an independent oil and gas exploration,
development and production company with principal operations in
the Gulf of Mexico, both shelf and deepwater, and in West Texas.
Our management has significant expertise and a successful
operating track record in these areas. In the three-year period
ended December 31, 2005, we added approximately
280 Bcfe of proved reserves and produced approximately
100 Bcfe, while deploying approximately $475 million
of capital on acquisitions, exploration and development.
Our primary operating strategy is to generate high-quality
exploration and development projects, which enables us to add
value through the drill bit. Our expertise in project generation
also facilitates our participation in high-quality projects
generated by other operators. We will also pursue acquisitions
of producing assets that have the potential to provide
acceptable risk-adjusted rates of return and further reserve
additions through exploration, exploitation, and development
opportunities. We target a balanced exposure to development,
exploitation and exploration opportunities, both offshore and
onshore and seek to maintain a moderate risk profile.
On March 2, 2006, we completed a merger transaction with
Forest Energy Resources, Inc., which we refer to as Forest
Energy Resources. As a result of this merger, we acquired the
offshore Gulf of Mexico operations of Forest Oil Corporation
(NYSE: FST), which we refer to as the Forest Gulf of Mexico
operations. We refer to Forest Oil Corporation as Forest.
As of December 31, 2005, we had 338 Bcfe of estimated
proved reserves, of which approximately 62% were natural gas and
38% were oil and condensate, and 50% of which were proved
developed. Pro forma for the merger transaction, as of
December 31, 2005, we had 644 Bcfe of estimated proved
reserves, of which approximately 68% were natural gas and 32%
were oil and condensate, and 56% of which were proved developed.
Our production for 2005 was approximately 29 Bcfe, or
80 MMcfe per day on average, and 95 Bcfe, or
260 MMcfe per day on average, pro forma for the merger.
1
The following table sets forth certain information with respect
to our estimated proved reserves, production and acreage by
geographic area as of December 31, 2005. Reserve volumes
and values were determined under the method prescribed by the
SEC which requires the application of period-end prices and
costs held constant throughout the projected reserve life.
Proved reserve estimates do not include any value for probable
or possible reserves which may exist, nor do they include any
value for undeveloped acreage. The proved reserve estimates
represent our net revenue interest in our properties. The
reserve information for Mariner as of December 31, 2005 is
based on estimates made in a reserve report prepared by Ryder
Scott Company, L.P., independent petroleum engineers
(Ryder Scott).
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Production for
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Estimated Proved
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Year Ended
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Reserve Quantities
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December 31,
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Natural
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Total
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2005
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Oil
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Gas
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Total
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Net
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(Natural Gas
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Geographic Area
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(MMbbls)
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(Bcf)
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(Bcfe)
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Acreage
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Equivalent (Bcfe))
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West Texas Permian Basin
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16.7
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105.5
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205.5
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31,199
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6.6
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Gulf of Mexico Deepwater(1)
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4.7
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83.2
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111.1
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185,271
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11.8
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Gulf of Mexico Shelf(2)
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0.3
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19.0
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21.0
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124,180
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10.7
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Total
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21.7
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207.7
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337.6
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340,650
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29.1
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Proved Developed Reserves
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9.6
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110.0
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167.4
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(1)
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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). |
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(2)
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Shelf refers to water depths less than 1,300 feet and
includes an insignificant amount of Gulf Coast onshore
properties. |
The following table sets forth certain information with respect
to our pro forma estimated proved reserves, production and
acreage by geographic area as of December 31, 2005. The
reserve information as of December 31, 2005 for the Forest
Gulf of Mexico operations is based on estimates made by internal
staff engineers of Forest, which estimates were audited by Ryder
Scott. This information is presented on a pro forma basis,
giving effect to our merger with Forest Energy Resources as
though it had been consummated on December 31, 2005. We
consummated the merger on March 2, 2006.
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Pro Forma
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Pro Forma
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Production for
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Estimated Proved
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Year Ended
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Reserve Quantities
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Pro Forma
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December 31,
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Natural
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Total
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2005
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Oil
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Gas
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Total
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Net
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(Natural Gas
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Geographic Area
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(MMbbls)
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(Bcf)
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(Bcfe)
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Acreage
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Equivalent (Bcfe))
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West Texas Permian Basin
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16.7
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105.5
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205.5
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31,199
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6.6
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Gulf of Mexico Deepwater(1)
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4.8
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95.7
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124.5
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241,320
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14.0
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Gulf of Mexico Shelf(2)
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12.7
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237.6
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313.7
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652,086
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74.3
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Total
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34.2
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438.8
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643.7
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924,605
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94.9
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Proved Developed Reserves
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18.4
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252.1
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362.3
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(1)
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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). |
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(2)
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Shelf refers to water depths less than 1,300 feet and
includes an insignificant amount of Gulf Coast onshore
properties. |
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Our
Strategy and Our Competitive Strengths
Our
Strategy
The principal elements of our operating strategy include:
Generate and pursue high-quality prospects. We
expect to continue our strategy of growth through the drill bit
by continuing to identify and develop high-impact shelf, deep
shelf and deepwater projects in the Gulf of Mexico. Our
technical team has significant expertise in, and a successful
track record of achieving growth by, generating prospects
internally and selectively participating in prospects generated
by other operators. We believe the Gulf of Mexico is an area
that offers substantial growth opportunities, and our
acquisition of the Forest Gulf of Mexico operations has more
than doubled our existing undeveloped acreage position in the
Gulf, providing numerous additional exploration, exploitation
and development opportunities.
Maintain a moderate risk profile. We seek to
manage our risk profile by targeting a balanced exposure to
development, exploitation and exploration opportunities. For
example, we intend to continue to develop and seek to expand our
West Texas asset base which contributes stable cash flows and
long-lived reserves to our portfolio as a counterbalance to our
high-impact, high-production Gulf of Mexico assets. We also seek
to mitigate and diversify our risk in drilling projects by
selling partial or entire interests in projects to industry
partners or by entering into arrangements with industry partners
in which they agree to pay a disproportionate share of drilling
costs and compensate us for expenses incurred in prospect
generation. We also enter into trades or farm-in transactions
whereby we acquire interests in third-party generated prospects,
thereby gaining exposure to a greater number of prospects. We
expect more opportunities to participate in these prospects in
the future as a result of our larger scale and increased cash
flow from the Forest Gulf of Mexico operations.
Pursue opportunistic acquisitions. Until 2005,
we grew our reserves primarily through the drill bit. In 2005 we
added significant proved reserves primarily through acquisitions
in West Texas and subsequently in March 2006, through the
acquisition of the Forest Gulf of Mexico operations. As part of
our growth strategy, we will seek to continue to acquire
producing assets that have the potential to provide acceptable
risk-adjusted rates of return and further reserve additions
through exploration, exploitation and development opportunities.
Our
Competitive Strengths
We believe our core resources and strengths include:
Our high-quality assets with geographic and geological
diversity. Our assets and operations are
diversified among the Gulf of Mexico shelf, deep shelf and
deepwater, and West Texas. Our asset portfolio provides a
balanced exposure to long-lived West Texas reserves, Gulf of
Mexico shelf growth opportunities and high-impact deepwater
prospects.
Our large inventory of prospects. We believe
we have significant potential for growth through the development
of our existing asset base. The acquisition of the Forest Gulf
of Mexico operations more than doubled our existing undeveloped
acreage position in the Gulf of Mexico to approximately
450,000 net acres and increased our total net leasehold
acreage offshore to nearly one million acres, providing numerous
exploration, exploitation and development opportunities. As of
September 30, 2006, we have an inventory of approximately
890 drilling locations in West Texas, which we believe
would require approximately six years to drill at our current
rate. These include approximately 430 locations pertaining
to 98 Bcfe of estimated net proved undeveloped reserves and
approximately 460 other locations.
Our successful track record of finding and developing oil and
gas reserves. We have demonstrated our expertise
in finding and developing additional proved reserves. In the
three-year period ended December 31, 2005, we deployed
approximately $475 million of capital on acquisitions,
exploration and development, while adding approximately
280 Bcfe of proved reserves and producing approximately
100 Bcfe.
Our depth of operating experience. Our team of
41 geoscientists, engineers, geologists and other technical
professionals and landmen as of September 30, 2006 average
more than 22 years of experience in the exploration and
production business (including extensive experience in the Gulf
of Mexico), much of it with major oil
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companies. The addition of experienced Forest personnel to
Mariners team of technical professionals has further
enhanced our ability to generate and maintain an inventory of
high-quality drillable prospects and to further develop and
exploit our assets. Mariners technical team has also
proven to be an effective and efficient operator in West Texas,
as evidenced by our successful production and reserve growth
there in recent years.
Our technology and production techniques. Our
team of geoscientists currently has access to seismic data from
multiple, recent
vintage 3-D
seismic databases covering more than 7,000 blocks in the Gulf of
Mexico that we intend to continue to use to develop prospects on
acreage being evaluated for leasing and to develop and further
refine prospects on our expanded acreage position. We also have
extensive experience and a successful track record in the use of
subsea tieback technology to connect offshore wells to existing
production facilities. This technology facilitates production
from offshore properties without the necessity of fabrication
and installation of platforms and top side facilities that
typically are more costly and require longer lead times. We
believe the use of subsea tiebacks in appropriate projects
enables us to bring production online more quickly, makes target
prospects more profitable and allows us to exploit reserves that
may otherwise be considered non-commercial because of the high
cost of infrastructure. In the Gulf of Mexico, in the three
years ended December 31, 2005, we were directly involved in
14 projects (five of which we operated) utilizing subsea
tieback systems in water depths ranging from 475 feet to
more than 6,700 feet. As of September 30, 2006, we had
18 subsea wells in water depths ranging from 450 feet to more
than 4,700 feet. These wells were tied back to 13 host
production facilities for production processing. An additional
nine wells in water depths ranging from 465 feet to more than
6,800 feet were then under development for tieback to five
additional host production facilities.
Corporate
Information
We were incorporated in August 1983 as a Delaware corporation.
We have three subsidiaries, Mariner Energy Resources, Inc., a
Delaware corporation, Mariner LP LLC, a Delaware limited
liability company, and Mariner Energy Texas LP, a Delaware
limited partnership. Our principal executive office is located
at One BriarLake Plaza, Suite 2000, 2000 West Sam
Houston Parkway South, Houston, Texas 77042. Our telephone
number is
(713) 954-5500.
The
Offering
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Common stock offered by selling stockholders |
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35,615,400 shares. |
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Use of proceeds |
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We will not receive any proceeds from the sale of the shares of
common stock by the selling stockholders. |
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Listing |
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Our common stock is listed on the New York Stock Exchange under
the symbol ME. |
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Common stock split |
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Unless specifically indicated or the context requires otherwise,
the share and per share information of this offering gives
effect to a 21,556.61594 to 1 stock split, which was effected on
March 3, 2005. |
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Dividend Policy |
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We do not expect to pay dividends in the near future. |
Risk
Factors
You should carefully consider all of the information contained
in or incorporated by reference into this prospectus prior to
investing in the common stock. In particular, we urge you to
carefully consider the information under Risk
Factors incorporated by reference into this prospectus so
that you understand the risks associated with an investment in
our company and the common stock. These risks include the
following:
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Oil and natural gas prices are volatile, and a decline in oil
and natural gas prices would affect significantly our financial
results and impede our growth.
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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.
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Unless we replace our oil and natural gas reserves, our reserves
and production will decline.
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Relatively short production periods or reserve life for Gulf of
Mexico properties subject us to higher reserve replacement needs
and may impair our ability to replace production during periods
of low oil and natural gas prices.
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5
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements contained in or incorporated by reference
into this prospectus, including those that express a belief,
expectation, or intention, as well as those that are not
statements of historical fact, are forward-looking statements.
The forward-looking statements may include projections and
estimates concerning the timing and success of specific projects
and our future production, revenues, income and capital
spending. Our forward-looking statements are generally
accompanied by words such as 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 in this prospectus
speak only as of the date of this prospectus; we disclaim any
obligation to update these statements unless required by
securities law, and we caution you not to rely on them unduly.
We have based these forward-looking statements on our current
expectations and assumptions about future events. While our
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and
many of which are beyond our control. We disclose important
factors that could cause our actual results to differ materially
from our expectations under Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations incorporated by
reference into this prospectus, and elsewhere in this
prospectus. These risks, contingencies and uncertainties relate
to, among other matters, the following:
|
|
|
|
|
the volatility of oil and natural gas prices;
|
|
|
|
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 hurricanes, 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;
|
|
|
|
the merger, including strategic plans, expectations and
objectives for future operations, and the realization of
expected benefits from the transaction; and
|
|
|
|
disruption from the merger making it more difficult to manage
Mariners business.
|
6
USE OF
PROCEEDS
We will not receive any of the proceeds from the sale of the
shares of common stock offered by this prospectus. Any proceeds
from the sale of the shares offered by this prospectus will be
received by the selling stockholders.
7
DILUTION
Our net tangible book value as of September 30, 2006 was
$11.63 per share of common stock. Net tangible book value
per share is determined by dividing our tangible net worth
(tangible assets less total liabilities) by the
86,269,563 shares of our common stock that were outstanding
on September 30, 2006. Investors who purchase our common
stock in this offering may pay a price per share that exceeds
the net tangible book value per share of our common stock. If
you purchase our common stock from the selling stockholders
identified in this prospectus, you will experience immediate
dilution of $6.74 in the net tangible book value per share of
our common stock assuming a sale price of $18.37 per share,
representing the closing price per share on the New York Stock
Exchange on September 29, 2006, the last trading day in
September 2006. The following table illustrates the per share
dilution to new investors purchasing shares from the selling
stockholders identified in this prospectus:
|
|
|
|
|
|
|
|
|
Assumed offering price per share
|
|
$
|
18.37
|
|
Net tangible book value per share
at September 30, 2006
|
|
$
|
11.63
|
|
|
|
|
|
Increase per share attributable to
new investors
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible book value per share
after this offering
|
|
|
11.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors
|
|
|
6.74
|
|
|
|
|
|
|
The foregoing discussion and table are based upon the number of
shares actually issued and outstanding as of September 30,
2006. As of September 30, 2006, we had options outstanding
to purchase an aggregate 818,062 shares of common stock at
a weighted average exercise price of approximately
$13.69 per share, 349,377 of which were exercisable as of
September 30, 2006. To the extent the market value of our
shares is greater than $13.69 per share and any of these
outstanding options are exercised, there may be further dilution
to new investors.
DIVIDEND
POLICY
We do not expect to pay dividends in the near future. Our
secured credit facility and senior unsecured notes contain
restrictions on the payment of dividends to stockholders.
8
SELLING
STOCKHOLDERS
This prospectus covers shares currently owned by an affiliate of
our former sole stockholder as well as shares sold in our
private equity placement in March 2005. Some of the shares sold
in the private equity placement were sold directly to
accredited investors as defined by Rule 501(a)
under the Securities Act pursuant to an exemption from
registration provided in Regulation D, Rule 506 under
Section 4(2) of the Securities Act. In addition, we and our
former sole stockholder sold shares to FBR, who acted as initial
purchaser and sole placement agent in the offering. FBR sold the
shares it purchased from us and our sole stockholder in
transactions exempt from the registration requirements of the
Securities Act to persons that it reasonably believed were
qualified institutional buyers, as defined by
Rule 144A under the Securities Act or to
non-U.S. persons
pursuant to Regulation S under the Securities Act. An
affiliate of our former sole stockholder, the selling
stockholders who purchased shares from us or FBR in the private
equity placement and their transferees, pledgees, donees,
assignees or successors, may from time to time offer and sell
under this prospectus any or all of the shares listed opposite
each of their names below. Some of the shares reflected in the
following table were issued as restricted stock to our employees
pursuant to our Equity Participation Plan.
The following table sets forth information about the number of
shares owned by each selling stockholder that may be offered
from time to time under this prospectus. Certain selling
stockholders may be deemed to be underwriters as
defined in the Securities Act. Any profits realized by the
selling stockholder may be deemed to be underwriting commissions.
The table below has been prepared based upon the information
furnished to us by the selling stockholders. The selling
stockholders identified below may have sold, transferred or
otherwise disposed of some or all of their shares since the date
on which the information in the following table is presented in
transactions exempt from or not subject to the registration
requirements of the Securities Act. Information concerning the
selling stockholders may change from time to time and, if
necessary, we will supplement this prospectus accordingly. We
cannot give an estimate as to the amount of shares of common
stock that will be held by the selling stockholders upon
termination of this offering because the selling stockholders
may offer some or all of their common stock under the offering
contemplated by this prospectus. The total amount of shares that
may be sold hereunder will not exceed the number of shares
offered hereby. Please read Plan of Distribution.
Except as noted below, to our knowledge, none of the selling
stockholders has, or has had within the past three years, any
position, office or other material relationship with us or any
of our predecessors or affiliates, other than their ownership of
shares described below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
ACON E&P, LLC(1)
|
|
|
394,044
|
|
|
|
*
|
|
ACON Investments LLC(2)
|
|
|
178,627
|
|
|
|
*
|
|
Acorn Overseas Securities Co
|
|
|
2,600
|
|
|
|
*
|
|
Alexander, Leslie
|
|
|
570,000
|
|
|
|
*
|
|
Alexandra Global Master Fund, Ltd
|
|
|
300,000
|
|
|
|
*
|
|
Alexis A. Shehata-Personal Portfolio
|
|
|
1,840
|
|
|
|
*
|
|
Allied Funding, Inc.
|
|
|
17,000
|
|
|
|
*
|
|
America
|
|
|
40,000
|
|
|
|
*
|
|
Anderson, William J.(3)
|
|
|
22,673
|
|
|
|
*
|
|
Anima S.G.R.P.A.
|
|
|
112,000
|
|
|
|
*
|
|
Anita L. Rankin Revocable Trust-U/A
DTD 4/28/1995-Anita L. Rankin, TTEE
|
|
|
380
|
|
|
|
*
|
|
Ann K. Miller-Personal Portfolio
|
|
|
6,300
|
|
|
|
*
|
|
Anne Marie Romer-Personal Portfolio
|
|
|
1,290
|
|
|
|
*
|
|
Anthony L. Kremer Revocable Living
Trust-U/A DTD 1/27/1998-Anthony L. Kremer TTEE
|
|
|
1,000
|
|
|
|
*
|
|
Anthony L. Kremer-IRA
|
|
|
1,010
|
|
|
|
*
|
|
Atlas (QP), LP
|
|
|
5,550
|
|
|
|
*
|
|
Atlas Capital ID Fund LP
|
|
|
875
|
|
|
|
*
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Atlas Capital (Q.P.), L.P.
|
|
|
50,809
|
|
|
|
*
|
|
Atlas Capital Master Fund Ltd.
|
|
|
107,846
|
|
|
|
*
|
|
Atlas Master Fund
|
|
|
10,920
|
|
|
|
*
|
|
Auto Disposal Systems-401(k)-All
Cap Value Account
|
|
|
650
|
|
|
|
*
|
|
Auto Disposal
Systems-401(k)-Balanced 60 Account
|
|
|
480
|
|
|
|
*
|
|
Auto Disposal Systems-401(k)-Small
Cap Value Account
|
|
|
850
|
|
|
|
*
|
|
Aviation Sales Inc.-401(k) Profit
Sharing Plan-Rick J. Penwell TTEE
|
|
|
1,470
|
|
|
|
*
|
|
Axia Offshore Partners, LTD
|
|
|
9,315
|
|
|
|
*
|
|
Axia Partners Qualified, LP
|
|
|
95,739
|
|
|
|
*
|
|
Axia Partners, LP
|
|
|
42,136
|
|
|
|
*
|
|
Baker-Hazel Funeral Home,
Inc.-401(k) Plan
|
|
|
550
|
|
|
|
*
|
|
Baker-Hazel Funeral Home-Corporate
Investment Fund
|
|
|
330
|
|
|
|
*
|
|
Banks, Michael R.(3)
|
|
|
7,935
|
|
|
|
*
|
|
Basso Fund Ltd.
|
|
|
21,100
|
|
|
|
*
|
|
Basso Multi-Strategy Holding
Fund Ltd
|
|
|
78,700
|
|
|
|
*
|
|
Basso Private Opportunities Holding
Fund Ltd.
|
|
|
40,800
|
|
|
|
*
|
|
BBT Fund, L.P.
|
|
|
505,811
|
|
|
|
*
|
|
BBVA
|
|
|
321,429
|
|
|
|
*
|
|
Beach, Patrick & Christine
JTWROS
|
|
|
6,666
|
|
|
|
*
|
|
Bear Stearns Sec. Corp. Cust. FBO
Emerson Partners
|
|
|
50,000
|
|
|
|
*
|
|
Bear Stearns Sec. Corp. Cust. FBO
J. Steven Emerson IRA R/O II
|
|
|
720,000
|
|
|
|
*
|
|
Bear Stearns Sec. Corp. Cust. FBO
J. Steven Emerson Roth IRA
|
|
|
420,000
|
|
|
|
*
|
|
Bear Stearns Sec. Corp. Cust. FBO
J. Steven Emerson
|
|
|
186,000
|
|
|
|
*
|
|
Belmont, Francis E
|
|
|
1,500
|
|
|
|
*
|
|
Bennett Family LLC
|
|
|
2,000
|
|
|
|
*
|
|
Benny L. & Alexandra P.
Tumbleston JT WROS
|
|
|
1,890
|
|
|
|
*
|
|
Bermuda Partners, LP
|
|
|
33,000
|
|
|
|
*
|
|
Black Sheep Partners, LLC
|
|
|
33,177
|
|
|
|
*
|
|
Black Sheep Partners II, LLC
|
|
|
10,973
|
|
|
|
*
|
|
BLT Enterprises, LLLP-Partnership
|
|
|
1,100
|
|
|
|
*
|
|
Blueprint Partners, L.P.
|
|
|
20,000
|
|
|
|
*
|
|
Borman, Casey J.
|
|
|
5,000
|
|
|
|
*
|
|
Boston Partners Asset Management,
LLC(4)
|
|
|
536,115
|
|
|
|
*
|
|
Bradley J. Hausfeld-IRA
|
|
|
400
|
|
|
|
*
|
|
Brady Retirement Fund L.P.
|
|
|
27,500
|
|
|
|
*
|
|
Brunswick Master Pension Trust
|
|
|
23,600
|
|
|
|
*
|
|
Bushman, Teresa G.(7)
|
|
|
137,170
|
|
|
|
*
|
|
Caisse de depot et placement du
Quebec(8)
|
|
|
1,501,586
|
|
|
|
1.74
|
%
|
Calm Waters Partnership
|
|
|
201,500
|
|
|
|
*
|
|
Campbell, Thomas M.(3)
|
|
|
46,932
|
|
|
|
*
|
|
Canyon Capital Balanced Equity
Master Fund, Ltd(4)
|
|
|
71,429
|
|
|
|
*
|
|
Canyon Value Realization Fund
(Cayman) Ltd.(4)
|
|
|
500,000
|
|
|
|
*
|
|
Canyon Value Realization
Fund L.P.(4)
|
|
|
121,428
|
|
|
|
*
|
|
Canyon Value Realization MAC- 18
Ltd(4)
|
|
|
7,143
|
|
|
|
*
|
|
Cap Fund, L.P.
|
|
|
185,619
|
|
|
|
*
|
|
Carmine and Wendy Guerro Living
Trust-U/A DTD 7/31/2000-C Guerro and W Guerro, TTEES
|
|
|
1,080
|
|
|
|
*
|
|
Carmine Guerro-IRA Rollover
|
|
|
2,090
|
|
|
|
*
|
|
Carol D. Shellabarger
Green-Revocable Trust DTD 4/21/00-Carol Downing Green TTEE
|
|
|
890
|
|
|
|
*
|
|
Carol Downing Green-IRA
|
|
|
470
|
|
|
|
*
|
|
Carol V. Hicks-Personal Portfolio
|
|
|
30
|
|
|
|
*
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Carter, Debra R.(3)
|
|
|
5,441
|
|
|
|
*
|
|
Castle Rock Fund Ltd
|
|
|
126,800
|
|
|
|
*
|
|
Castlerock Partners II, L.P.
|
|
|
15,800
|
|
|
|
*
|
|
Castlerock Partners, L.P.
|
|
|
392,000
|
|
|
|
*
|
|
Catalyst Fund Offshore Ltd.
|
|
|
6,434
|
|
|
|
*
|
|
Caxton International Limited(4)
|
|
|
714,200
|
|
|
|
*
|
|
CDP Infrastructure Funds G.P.(8)
|
|
|
1,330,950
|
|
|
|
1.54
|
%
|
Ceisel, Charles B
|
|
|
1,500
|
|
|
|
*
|
|
Chamberlain Investments Ltd.
|
|
|
18,794
|
|
|
|
*
|
|
Charles L. & Miriam L.
Bechtel-Joint Personal Portfolio
|
|
|
450
|
|
|
|
*
|
|
Cheyne Special Situations
Fund LP
|
|
|
757,000
|
|
|
|
*
|
|
Chimermine, Lawrence
|
|
|
2,000
|
|
|
|
*
|
|
Christine Hausfeld-IRA
|
|
|
160
|
|
|
|
*
|
|
Christopher M. Ruff-IRA Rollover
|
|
|
200
|
|
|
|
*
|
|
Cindu International Pension Fund
|
|
|
2,900
|
|
|
|
*
|
|
Citi Canyon Ltd.(4)
|
|
|
7,143
|
|
|
|
*
|
|
Clam Partners, LLC
|
|
|
70,000
|
|
|
|
*
|
|
Clark Manufacturing Co.-Pension
Plan DTD 5/16/1998-John A. Barron TTEE
|
|
|
180
|
|
|
|
*
|
|
Clark Manufacturing Co.-PSP DTD
5/16/98-John A. Barron TTEE
|
|
|
360
|
|
|
|
*
|
|
Concentrated Alpha Partners,
L.P.
|
|
|
185,619
|
|
|
|
*
|
|
Congress Ann Hazel-IRA
|
|
|
590
|
|
|
|
*
|
|
Cynthia Mollica Barron-Personal
Portfolio
|
|
|
150
|
|
|
|
*
|
|
David Keith Ray-IRA
|
|
|
940
|
|
|
|
*
|
|
David M. Morad Jr.-IRA Rollover
|
|
|
2,800
|
|
|
|
*
|
|
David R. Kremer Revocable Living
Trust-DTD 5/7/1996-David R. Kremer & Ruth E. Kremer,
TTEES
|
|
|
1,230
|
|
|
|
*
|
|
Davis, John L.(3)
|
|
|
17,005
|
|
|
|
*
|
|
DB AG London(4)
|
|
|
53,571
|
|
|
|
*
|
|
Deanne W. Joseph-IRA Rollover
|
|
|
370
|
|
|
|
*
|
|
Deephaven Event Trading Ltd.(4)
|
|
|
1,176,135
|
|
|
|
1.36
|
%
|
Deephaven Growth Opportunities
Trading Ltd.(4)
|
|
|
481,770
|
|
|
|
*
|
|
Delaware Street Capital Master
Fund, L.P.
|
|
|
1,210,750
|
|
|
|
1.40
|
%
|
Dickerson, Estelle E.(3)
|
|
|
7,935
|
|
|
|
*
|
|
Dinger, Blaine E.(3)
|
|
|
17,005
|
|
|
|
*
|
|
Dominguez, Melissa D.(3)
|
|
|
3,173
|
|
|
|
*
|
|
Don A. Keasel and Judith
Keasel-JTWROS
|
|
|
120
|
|
|
|
*
|
|
Don Keasel-IRA Rollover
|
|
|
810
|
|
|
|
*
|
|
Donald G. Tekamp Revocable
Trust-DTD 8/16/2000-Donald G. Tekamp TTEE
|
|
|
1,460
|
|
|
|
*
|
|
Donald L. and Edythe Aukeman-Joint
Personal Portfolio
|
|
|
400
|
|
|
|
*
|
|
Donald L. Aukerman-IRA
|
|
|
620
|
|
|
|
*
|
|
Donna M. Ruff-IRA Rollover
|
|
|
80
|
|
|
|
*
|
|
Dorothy W. Savage-Kemp-IRA
|
|
|
440
|
|
|
|
*
|
|
Dorothy W. Savage-Kemp-TOD
|
|
|
820
|
|
|
|
*
|
|
Douglas & Melissa
Marchal-Joint Personal Portfolio
|
|
|
290
|
|
|
|
*
|
|
Dr. Donald H. Nguyen &
Lynn A. Buffington-JTWROS
|
|
|
540
|
|
|
|
*
|
|
Dr. Juan M. Palomar-IRA Rollover
|
|
|
1,520
|
|
|
|
*
|
|
Drake Associates, L.P.
|
|
|
53,929
|
|
|
|
*
|
|
Duke, James A.(3)
|
|
|
10,203
|
|
|
|
*
|
|
Edenworld International Ltd.
|
|
|
9,636
|
|
|
|
*
|
|
Edison Sources Ltd.
|
|
|
33,600
|
|
|
|
*
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Edward W. Eppley-IRA SEP
|
|
|
600
|
|
|
|
*
|
|
Edwards, Susan R.(3)
|
|
|
5,895
|
|
|
|
*
|
|
Edythe M. Aukeman-IRA
|
|
|
140
|
|
|
|
*
|
|
Elaine S. Berman Trust-DTD
6/30/95-Elaine S. Berman TTEE
|
|
|
550
|
|
|
|
*
|
|
Elaine S. Berman-Inherited
IRA-Beneficiary of Freda Levine
|
|
|
460
|
|
|
|
*
|
|
Elaine S. Berman-SEP-IRA
|
|
|
540
|
|
|
|
*
|
|
Electrical Workers Pension Funds
Part A
|
|
|
1,855
|
|
|
|
*
|
|
Electrical Workers Pension Funds
Part B
|
|
|
1,335
|
|
|
|
*
|
|
Electrical Workers Pension Funds
Part C
|
|
|
645
|
|
|
|
*
|
|
Emerson Electric Company
|
|
|
32,300
|
|
|
|
*
|
|
Emerson Partners
|
|
|
60,000
|
|
|
|
*
|
|
Emerson, J. Steven
|
|
|
200,000
|
|
|
|
*
|
|
Emerson, J. Steven IRA R/O II
|
|
|
740,000
|
|
|
|
*
|
|
Emerson, J. Steven Roth IRA
|
|
|
400,000
|
|
|
|
*
|
|
Empyrean Capital Fund
|
|
|
96,250
|
|
|
|
*
|
|
Empyrean Capital Overseas Benefit
Plan Fund, Ltd.
|
|
|
18,462
|
|
|
|
*
|
|
Empyrean Capital Overseas Fund,
Ltd.
|
|
|
160,288
|
|
|
|
*
|
|
Endeavor Asset Management
|
|
|
20,000
|
|
|
|
*
|
|
Ernst Enterprises-Deferred
Compensation DTD 05/20/90-fbo Mark Van de Grift
|
|
|
1,360
|
|
|
|
*
|
|
Evan L. Julber-IRA
|
|
|
9,000
|
|
|
|
*
|
|
Excelsior Value and Restructuring
Fund
|
|
|
1,500,000
|
|
|
|
1.74
|
%
|
Farallon Capital Institutional
Partners II, L.P.
|
|
|
5,400
|
|
|
|
*
|
|
Farallon Capital Institutional
Partners III, L.P.
|
|
|
6,400
|
|
|
|
*
|
|
Farallon Capital Institutional
Partners, L.P.
|
|
|
65,600
|
|
|
|
*
|
|
Farallon Capital Offshore
Investors, Inc.
|
|
|
124,006
|
|
|
|
*
|
|
Farallon Capital Offshore Investors
II, L.P.
|
|
|
61,994
|
|
|
|
*
|
|
Farallon Capital Partners,
L.P.
|
|
|
99,086
|
|
|
|
*
|
|
Farvane Limited
|
|
|
2,617
|
|
|
|
*
|
|
FBO Marjorie G. Kasch-U/A/D
3/21/80-Thomas A. Holton TTEE
|
|
|
700
|
|
|
|
*
|
|
Fidelity Contrafund(5)
|
|
|
1,847,200
|
|
|
|
2.14
|
%
|
Fidelity Management
Trust Company on behalf of accounts managed by it(6)
|
|
|
4,400
|
|
|
|
*
|
|
Fidelity Puritan Trust: Fidelity
Balanced Fund(5)
|
|
|
516,300
|
|
|
|
*
|
|
Fidelity Puritan Trust: Fidelity
Low-Priced Stock Fund(5)
|
|
|
1,831,700
|
|
|
|
2.12
|
%
|
Fidelity Securities Fund: Fidelity
Small Cap Growth Fund(5)
|
|
|
75,000
|
|
|
|
*
|
|
Fidelity Securities Fund: Fidelity
Small Cap Value Fund(5)
|
|
|
200,000
|
|
|
|
*
|
|
Fisher, William F.(3)
|
|
|
56,682
|
|
|
|
*
|
|
Flagg Street Offshore, LP
|
|
|
103,538
|
|
|
|
*
|
|
Flagg Street Partners LP
|
|
|
34,345
|
|
|
|
*
|
|
Flagg Street Partners Qualified LP
|
|
|
37,117
|
|
|
|
*
|
|
Fleet Maritime, Inc.
|
|
|
33,139
|
|
|
|
*
|
|
Folksam
|
|
|
35,000
|
|
|
|
*
|
|
Fondo America
|
|
|
40,000
|
|
|
|
*
|
|
Fondo Attivo
|
|
|
17,000
|
|
|
|
*
|
|
Fondo Trading
|
|
|
55,000
|
|
|
|
*
|
|
Fort Mason Master, L.P.
|
|
|
501,829
|
|
|
|
*
|
|
Fort Mason Partners, L.P.
|
|
|
33,171
|
|
|
|
*
|
|
Framtidsfonden
|
|
|
25,000
|
|
|
|
*
|
|
Gallatin, Ronald
|
|
|
25,000
|
|
|
|
*
|
|
Gary M. Youra, M.D.-IRA Rollover
|
|
|
2,060
|
|
|
|
*
|
|
Geary Partners
|
|
|
95,000
|
|
|
|
*
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
George Hicks-Personal Portfolio
|
|
|
860
|
|
|
|
*
|
|
George & Carol V. Hicks Joint
Personal Portfolio
|
|
|
30
|
|
|
|
*
|
|
Gerald Allen-IRA
|
|
|
420
|
|
|
|
*
|
|
Gerald E. & Deanne W.
Joseph-Combined Portfolio
|
|
|
1,180
|
|
|
|
*
|
|
Gerald J. Allen-Personal Portfolio
|
|
|
3,580
|
|
|
|
*
|
|
GLG Market Neutral Fund
|
|
|
178,570
|
|
|
|
*
|
|
GLG North American Opportunity Fund
|
|
|
850,000
|
|
|
|
*
|
|
Global Capital Ltd.
|
|
|
20,000
|
|
|
|
*
|
|
GMI Master Retirement Trust
|
|
|
33,395
|
|
|
|
*
|
|
Goins, Rebecca L.(3)
|
|
|
5,441
|
|
|
|
*
|
|
Goldman Sachs & Co.,
Inc.(4)
|
|
|
317,756
|
|
|
|
*
|
|
Goldstein, Robert B. &
Candy K
|
|
|
4,000
|
|
|
|
*
|
|
Gracie Capital International
|
|
|
75,000
|
|
|
|
*
|
|
Gracie Capital LP
|
|
|
150,000
|
|
|
|
*
|
|
Greek, Cathy & Frank
|
|
|
3,900
|
|
|
|
*
|
|
Gregory A. & Bibi A.
Reber-Joint Personal Portfolio
|
|
|
580
|
|
|
|
*
|
|
Gregory J. Thomas-IRASEP
|
|
|
370
|
|
|
|
*
|
|
Grelsamer, Philippe
|
|
|
2,500
|
|
|
|
*
|
|
Gruber & McBaine
International
|
|
|
15,140
|
|
|
|
*
|
|
Guggenheim Portfolio Company LLC
|
|
|
40,000
|
|
|
|
*
|
|
Guggenheim Portfolio Company XII LLC
|
|
|
35,700
|
|
|
|
*
|
|
H. Joseph & Rosemary
Wood-Joint Personal Portfolio
|
|
|
880
|
|
|
|
*
|
|
Hagan, Dawn E.(3)
|
|
|
5,895
|
|
|
|
*
|
|
Hancock, David H
|
|
|
13,300
|
|
|
|
*
|
|
Hansen, Judd A.(7)
|
|
|
158,709
|
|
|
|
*
|
|
Harbor Advisors, LLC FBO
Butterfield Bermuda General Account
|
|
|
20,000
|
|
|
|
*
|
|
Harold & Congress Hazel
Trust-U/A DTD 4/21/1991-Congress Ann Hazel, TTEE
|
|
|
740
|
|
|
|
*
|
|
Harold A. & Lois M.
Ferguson-Joint Personal Portfolio
|
|
|
1,040
|
|
|
|
*
|
|
Hartley, Steven C.(3)
|
|
|
2,267
|
|
|
|
*
|
|
HCM Energy Holdings LLC
|
|
|
78,571
|
|
|
|
*
|
|
HedgEnergy Master Fund LP
|
|
|
120,000
|
|
|
|
*
|
|
HFR HE Systematic Master Trust
|
|
|
28,500
|
|
|
|
*
|
|
Highbridge Event Driven/Relative
Value Fund, L.P.(4)
|
|
|
98,702
|
|
|
|
*
|
|
Highbridge Event Driven/Relative
Value Fund, Ltd(4)
|
|
|
760,441
|
|
|
|
*
|
|
Highbridge International LLC(4)
|
|
|
671,428
|
|
|
|
*
|
|
Highland Equity Focus Fund, LP
|
|
|
70,000
|
|
|
|
*
|
|
Highland Equity Fund, LP
|
|
|
30,000
|
|
|
|
*
|
|
HSBC Guyerzeller Trust Company
|
|
|
12,630
|
|
|
|
*
|
|
Hsien-Ming Meng-IRA Rollover
|
|
|
990
|
|
|
|
*
|
|
Idnani, Rajesh
|
|
|
7,500
|
|
|
|
*
|
|
Institutional Benchmarks Master
Fund, Ltd(4)
|
|
|
7,143
|
|
|
|
*
|
|
Ironman Energy Capital, L.P.
|
|
|
70,000
|
|
|
|
*
|
|
James R. Goldstein-Personal
Portfolio
|
|
|
570
|
|
|
|
*
|
|
Jan Munroe Trust(4)
|
|
|
10,000
|
|
|
|
*
|
|
Janice S. Hamon-Personal Portfolio
|
|
|
410
|
|
|
|
*
|
|
Jeannine E. Philpot-Personal
Portfolio
|
|
|
820
|
|
|
|
*
|
|
JMG Capital Partners, LP
|
|
|
125,000
|
|
|
|
*
|
|
JMG Triton Offshore Fund Ltd
|
|
|
125,000
|
|
|
|
*
|
|
John & Betty Eubel-Combined
Portfolio
|
|
|
5,100
|
|
|
|
*
|
|
John & Lisa
ONeil-Joint Personal Portfolio
|
|
|
1,290
|
|
|
|
*
|
|
John A. Barron-IRA Rollover
|
|
|
2,300
|
|
|
|
*
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
John A. Barron-Personal Portfolio
|
|
|
170
|
|
|
|
*
|
|
John A. Barron-Personal Portfolio
|
|
|
390
|
|
|
|
*
|
|
John B. Maynard Jr.-Irrevocable
Trust U/A DTD 12/12/93-John B. Maynard Sr., TTEE
|
|
|
320
|
|
|
|
*
|
|
John C. & Sarah L.
Kunesh-JTWROS
|
|
|
610
|
|
|
|
*
|
|
John F. Carroll-IRASEP
|
|
|
130
|
|
|
|
*
|
|
John H. Lienesch-IRA
|
|
|
2,080
|
|
|
|
*
|
|
John Hancock Funds II
|
|
|
37,240
|
|
|
|
*
|
|
John Hancock Trust
|
|
|
41,800
|
|
|
|
*
|
|
John M. Walsh, Jr.-IRA Rollover
|
|
|
980
|
|
|
|
*
|
|
John OMeara-IRA Rollover
|
|
|
400
|
|
|
|
*
|
|
John T. Dahm-IRA
|
|
|
1,870
|
|
|
|
*
|
|
Johnson, Richard J.
|
|
|
10,000
|
|
|
|
*
|
|
Johnson Revocable Living Trust
|
|
|
10,000
|
|
|
|
*
|
|
Jon D. and Linda W. Gruber Trust
|
|
|
15,100
|
|
|
|
*
|
|
Jon R. Yenor-IRA Rollover
|
|
|
910
|
|
|
|
*
|
|
Jon R. Yenor & Caroline L.
Breckner-Joint Tenants
|
|
|
1,230
|
|
|
|
*
|
|
Joseph D. Maloney-Personal Portfolio
|
|
|
810
|
|
|
|
*
|
|
Joseph F. & Mary K.
Scullion-Combined Portfolio
|
|
|
1,400
|
|
|
|
*
|
|
Josey, Scott D.(7)
|
|
|
680,181
|
|
|
|
*
|
|
Judith Keasel-IRA Rollover
|
|
|
340
|
|
|
|
*
|
|
Julber, Evan L
|
|
|
4,000
|
|
|
|
*
|
|
Kandythe J. Miller-Combined
Portfolio
|
|
|
850
|
|
|
|
*
|
|
Kathleen J. Lienesch Family
Trust-DTD 2/2/00-Kathleen J. Lienesch TTEE
|
|
|
1,500
|
|
|
|
*
|
|
Kathleen J. Lienesch-IRA
|
|
|
240
|
|
|
|
*
|
|
Kathryn A. Leeper-Revocable Living
Trust DTD 06/29/95-Kathryn A. Leeper, TTEE
|
|
|
540
|
|
|
|
*
|
|
Keith L. Aukeman-IRA Rollover
|
|
|
1,600
|
|
|
|
*
|
|
Kenneth E. Shelton-IRA Rollover
|
|
|
820
|
|
|
|
*
|
|
Kettering Anesthesia
Associates-Profit Sharing Plan-FBO David J. Pappenfus
|
|
|
1,230
|
|
|
|
*
|
|
Kevin E. Slattery-Trust B DTD
5/17/99-De Ette Rae Hart TTEE
|
|
|
1,270
|
|
|
|
*
|
|
Kirby C. Leeper-IRA Rollover
|
|
|
590
|
|
|
|
*
|
|
Koehler, Anne C.(3)
|
|
|
14,737
|
|
|
|
*
|
|
Lagunitas Partners LP
|
|
|
69,760
|
|
|
|
*
|
|
Lamb Partners LP
|
|
|
165,600
|
|
|
|
*
|
|
Lanza III, Nick(3)
|
|
|
7,935
|
|
|
|
*
|
|
Larry & Marilyn Lehman-Combined
Portfolio
|
|
|
1,600
|
|
|
|
*
|
|
Lawrence J. Harmon Trust A-DTD
1/29/2001-G Harmon & T Harmon & H Wall TTEES
|
|
|
680
|
|
|
|
*
|
|
Leo K. & Katherine H.
Wingate-Joint Personal Portfolio
|
|
|
580
|
|
|
|
*
|
|
Lester J. & Susan A.
Chamock-JTWROS
|
|
|
2,140
|
|
|
|
*
|
|
Lester, Ricky G.(7)
|
|
|
30,608
|
|
|
|
*
|
|
Linda M. Meister-Personal Portfolio
|
|
|
1,000
|
|
|
|
*
|
|
LJB Inc. Savings Plan &
Trust-U/A DTD 1/1/1985 FBO T. Beach-Stephen D. Williams TTEE
|
|
|
490
|
|
|
|
*
|
|
Loegering, Cory L.(7)
|
|
|
124,700
|
|
|
|
*
|
|
Long, Annette R.(3)
|
|
|
7,482
|
|
|
|
*
|
|
Loyola University Employees
Retirement Plan Trust
|
|
|
8,400
|
|
|
|
*
|
|
Loyola University of Chicago
Endowment Fund
|
|
|
8,450
|
|
|
|
*
|
|
MA Deep Event, Ltd.(4)
|
|
|
114,095
|
|
|
|
*
|
|
Magnetar Capital Master Fund, L.P.
|
|
|
90,000
|
|
|
|
*
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Margaret S. Adam Revocable
TRUST-DTD 4/10/02-Margaret S. Adam, TTEE
|
|
|
360
|
|
|
|
*
|
|
Marily E. Lipson-IRA
|
|
|
140
|
|
|
|
*
|
|
Marilyn E. Lehman-IRA Rollover
|
|
|
1,600
|
|
|
|
*
|
|
Martha S. Senklw-Revocable Living
Trust DTD 11/02/98-Martha S. Senkiw, TTEE
|
|
|
240
|
|
|
|
*
|
|
Martin J. Grunder, Jr.-IRASEP
|
|
|
450
|
|
|
|
*
|
|
Marvin E. Nevins-Personal Portfolio
|
|
|
920
|
|
|
|
*
|
|
Mary Ellen Kremer Living Trust-U/A
DTD 01/27/1998-Mary Ellen Kremer TTEE
|
|
|
1,100
|
|
|
|
*
|
|
Mary K. Scullion-IRA
|
|
|
1,400
|
|
|
|
*
|
|
Maureen K. Aukeman-Personal
Portfolio
|
|
|
190
|
|
|
|
*
|
|
Maureen K. Aukerman-IRA Rollover
|
|
|
880
|
|
|
|
*
|
|
McClung, Emily R.(3)
|
|
|
9,069
|
|
|
|
*
|
|
McCullough, Michael C.(3)
|
|
|
19,272
|
|
|
|
*
|
|
Melendrez, Jesus G.(7)
|
|
|
137,170
|
|
|
|
*
|
|
Melodee Ruffo-Combined Portfolio
|
|
|
720
|
|
|
|
*
|
|
Metal Trades
|
|
|
4,500
|
|
|
|
*
|
|
Miami Valleo Cardiologists,
Inc.-Profit Sharing Plan
|
|
|
|
|
|
|
|
|
Trust-EBS Small Cap
|
|
|
6,800
|
|
|
|
*
|
|
Miami Valley Cardiologists,
Inc.-Profit Sharing Plan Trust-EBS Equity 100
|
|
|
10,060
|
|
|
|
*
|
|
Michael & Marilyn E.
Lipson-JTWROS
|
|
|
290
|
|
|
|
*
|
|
Michael A. Houser & H.
Stephen Wargo-JTWROS
|
|
|
270
|
|
|
|
*
|
|
Michael F. & Renee D.
Ciferri-Joint Personal Portfolio
|
|
|
700
|
|
|
|
*
|
|
Michael G. & Dara L.
Bradshaw-Combined Portfolio
|
|
|
1,440
|
|
|
|
*
|
|
Michael G. Lunsford-IRA
|
|
|
640
|
|
|
|
*
|
|
Michael J. Suttman-Personal
Portfolio
|
|
|
620
|
|
|
|
*
|
|
Michael Lipson-IRA
|
|
|
190
|
|
|
|
*
|
|
Milo Noble-Personal Portfolio
|
|
|
3,690
|
|
|
|
*
|
|
Minnesota Mining &
Manufacturing Company
|
|
|
184,300
|
|
|
|
*
|
|
Molohon, Richard A.(7)
|
|
|
56,682
|
|
|
|
*
|
|
Monte R. Black-Personal Portfolio
|
|
|
5,380
|
|
|
|
*
|
|
Morgan Stanley & Co.
Incorporated(4)
|
|
|
500,000
|
|
|
|
*
|
|
Muellenberg, Jerry L.(3)
|
|
|
6,802
|
|
|
|
*
|
|
Mulholland Fund, L.P.
|
|
|
13,800
|
|
|
|
*
|
|
Munder Micro-Cap Equity Fund(4)
|
|
|
144,000
|
|
|
|
*
|
|
Neal L. & Kandythe J.
Miller-Joint Personal Portfolio
|
|
|
560
|
|
|
|
*
|
|
Neal L. Miller-IRA Rollover
|
|
|
270
|
|
|
|
*
|
|
Neelam Idnani Julian
|
|
|
7,500
|
|
|
|
*
|
|
Nemeth, Denise A.(3)
|
|
|
13,604
|
|
|
|
*
|
|
Northwestern Mutual Life
Insurance(4)
|
|
|
1,775,714
|
|
|
|
2.06
|
%
|
Ospraie Portfolio Ltd
|
|
|
1,100,000
|
|
|
|
1.28
|
%
|
OZ Master Fund, Ltd.
|
|
|
527,464
|
|
|
|
*
|
|
Pam Graeser-Personal Portfolio
|
|
|
430
|
|
|
|
*
|
|
Parsons, Thomas B.
|
|
|
1,000
|
|
|
|
*
|
|
Passport Master Fund, LP
|
|
|
224,000
|
|
|
|
*
|
|
Passport Master Fund II, LP
|
|
|
176,000
|
|
|
|
*
|
|
Patricia A. Kremer Revocable Trust
-DTD 4/29/04-Donald G. Kremer, TTEE
|
|
|
1,250
|
|
|
|
*
|
|
Patricia Meyer Dorn-Personal
Portfolio
|
|
|
2,800
|
|
|
|
*
|
|
Paul R. & Dina E.
Cmkovich-Joint Personal Portfolio
|
|
|
4,750
|
|
|
|
*
|
|
Paul S. & Cynthia J.
Guthrie-Joint Personal Portfolio
|
|
|
1,530
|
|
|
|
*
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Paul S. Guthrie-IRA
|
|
|
130
|
|
|
|
*
|
|
Paul W. Nordt III-IRA Rollover
|
|
|
80
|
|
|
|
*
|
|
Paul W. Nordt III-IRA
Rollover401(k)
|
|
|
1,390
|
|
|
|
*
|
|
Peck Family Investments, Ltd.
|
|
|
1,090
|
|
|
|
*
|
|
Peter & Noreen
McInnes-Combined Portfolio
|
|
|
8,800
|
|
|
|
*
|
|
Peter D. Senkiw-Revocable Living
Trust DTD 11/02/98-Peter D. Senkiw, TTEE
|
|
|
320
|
|
|
|
*
|
|
Peter R. Newman-IRA Rollover
|
|
|
2,430
|
|
|
|
*
|
|
Philip M. Haisley-IRA Rollover
|
|
|
330
|
|
|
|
*
|
|
Plemons, Melanie O.(3)
|
|
|
6,802
|
|
|
|
*
|
|
Polasek, Dalton F.(7)
|
|
|
308,349
|
|
|
|
*
|
|
Poole, Richard A.(3)
|
|
|
9,069
|
|
|
|
*
|
|
Precept Capital Master Fund,
G.P.
|
|
|
20,000
|
|
|
|
*
|
|
Presidio Partners
|
|
|
127,500
|
|
|
|
*
|
|
Prism Partners I, L.P.
|
|
|
114,782
|
|
|
|
*
|
|
Prism Partners II Offshore Fund
|
|
|
42,857
|
|
|
|
*
|
|
Prism Partners III Leveraged
L.P.
|
|
|
137,738
|
|
|
|
*
|
|
Prism Partners IV Leveraged
Offshore Fund
|
|
|
160,694
|
|
|
|
*
|
|
Producers-Writers Guild of America
|
|
|
11,700
|
|
|
|
*
|
|
Rae, Rita-Roxanne R.(3)
|
|
|
9,069
|
|
|
|
*
|
|
Raymond W. Lane-Personal Portfolio
|
|
|
1,700
|
|
|
|
*
|
|
Raytheon Company Combined DB/DC
Master Trust
|
|
|
23,000
|
|
|
|
*
|
|
Raytheon Master Pension Trust
|
|
|
96,100
|
|
|
|
*
|
|
Rebecca A. Nelson-IRA Rollover
|
|
|
1,200
|
|
|
|
*
|
|
Reed, Sammy D.(3)
|
|
|
13,604
|
|
|
|
*
|
|
Renee D. Ciferri-IRA Rollover
|
|
|
410
|
|
|
|
*
|
|
Richard D. Smith-Combined Portfolio
|
|
|
1,300
|
|
|
|
*
|
|
Richard H. LeSourd, Jr.-IRASEP
|
|
|
1,200
|
|
|
|
*
|
|
Richard, Karen A.(3)
|
|
|
9,069
|
|
|
|
*
|
|
Robert A. Riley
Beneficiary-Inherited IRA
|
|
|
1,390
|
|
|
|
*
|
|
Robert A. Riley-Revocable Family
Trust DTD 5/8/97-Robert A. Riley TTEE
|
|
|
380
|
|
|
|
*
|
|
Robert F. Mays Trust-DTD
12/7/95-Robert F. Mays TTEE
|
|
|
1,470
|
|
|
|
*
|
|
Robert N. Sturwold-Personal
Portfolio
|
|
|
520
|
|
|
|
*
|
|
Robert W. Lowry-Personal Portfolio
|
|
|
2,020
|
|
|
|
*
|
|
Ronald Lee Devore MD &
Duneen Lynn Devore-JTWROS
|
|
|
270
|
|
|
|
*
|
|
Rosemary Winner Wood-IRA
|
|
|
650
|
|
|
|
*
|
|
Russell, Gregory D.(3)
|
|
|
1,134
|
|
|
|
*
|
|
Ruth E. Kremer Revocable Living
Trust-DTD 5/7/96-David R. Kremer & Ruth E. Kremer, TTEES
|
|
|
830
|
|
|
|
*
|
|
SAB Capital Partners,
L.P.
|
|
|
1,098,083
|
|
|
|
1.27
|
%
|
SAB Overseas Master Fund,
L.P.
|
|
|
1,157,617
|
|
|
|
1.34
|
%
|
Sandra E. Nischwitz-Personal
Portfolio
|
|
|
1,240
|
|
|
|
*
|
|
Savannah International
Longshoremens Association Employers Pension Trust
|
|
|
10,200
|
|
|
|
*
|
|
Seneca Capital International Ltd
|
|
|
446,200
|
|
|
|
*
|
|
Seneca Capital LP
|
|
|
215,400
|
|
|
|
*
|
|
Seneca Capital II LP
|
|
|
1,100
|
|
|
|
*
|
|
Settegast, Cynthia L.(3)
|
|
|
7,482
|
|
|
|
*
|
|
SF Capital Partners Ltd(4)
|
|
|
224,500
|
|
|
|
*
|
|
Sharon A. Lowry-IRA-Robert W.
Lowry, POA
|
|
|
1,560
|
|
|
|
*
|
|
Sisters of St. Joseph Carondelet
|
|
|
4,700
|
|
|
|
*
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Slovin, Bruce
|
|
|
10,000
|
|
|
|
*
|
|
Sniper Fund
|
|
|
3,300
|
|
|
|
*
|
|
Sound Energy Capital Offshore Fund,
Ltd.
|
|
|
41,900
|
|
|
|
*
|
|
Soundpost Capital, LP
|
|
|
9,000
|
|
|
|
*
|
|
Soundpost Partners, LP
|
|
|
9,000
|
|
|
|
*
|
|
Southport Energy Plus Offshore
Fund, Inc.
|
|
|
139,300
|
|
|
|
*
|
|
Southport Energy Plus Partners
L.P.
|
|
|
318,800
|
|
|
|
*
|
|
Sprain, Janet E.(3)
|
|
|
8,389
|
|
|
|
*
|
|
Spring Street Partners L.P.
|
|
|
40,000
|
|
|
|
*
|
|
SRI Fund, L.P.
|
|
|
22,856
|
|
|
|
*
|
|
Stanley J. Katz-IRA
|
|
|
350
|
|
|
|
*
|
|
State Street Research
Energy & Natural Resources Hedge Fund LLC
|
|
|
147,300
|
|
|
|
*
|
|
Steamfitters
|
|
|
1,745
|
|
|
|
*
|
|
Steven & Victoria
Conover-Joint Personal Portfolio
|
|
|
470
|
|
|
|
*
|
|
Steven M. Rebecca A.
Nelson-Combined Portfolio
|
|
|
1,200
|
|
|
|
*
|
|
Susan J. Gagnon-Revocable Living
Trust UA 8/30/95-Susan J. Gagnon TTEE
|
|
|
2,100
|
|
|
|
*
|
|
Talkot Fund, L.P.
|
|
|
40,000
|
|
|
|
*
|
|
Tanya P. Hrinyo Pavlina-Revocable
Trust DTD 11/21/95-Tanya P. Hrinyo Pavlina TTEE
|
|
|
1,200
|
|
|
|
*
|
|
Tetra Capital Partners, LP
|
|
|
8,000
|
|
|
|
*
|
|
The Anderson Family-Revocable
Trust, DTD 09/23/02-J. Kendall & Tamera L. Anderson,
TTEES
|
|
|
1,740
|
|
|
|
*
|
|
The Catalyst Fund Offshore,
Ltd.
|
|
|
3,242
|
|
|
|
*
|
|
The Charles T. Walsh Trust-DTD
12/6/2000-Charles T
|
|
|
|
|
|
|
|
|
Walsh TTEE
|
|
|
2,500
|
|
|
|
*
|
|
The Edward W. & Frances L.
Eppley-Combined Portfolio
|
|
|
600
|
|
|
|
*
|
|
The Foursquare Foundation(4)
|
|
|
4,200
|
|
|
|
*
|
|
The Johnson Irrevocable Living
Trust DTD May 1998
|
|
|
10,000
|
|
|
|
*
|
|
The Killen Family Revocable Living
Trust DTD 4/27/2004 Terry L. Killen and/or Esther H. Killen
|
|
|
1,560
|
|
|
|
*
|
|
The Louis J. Thomas-Irrevocable
Trust DTD 12/6/2000-Gregory J. Thomas, TTEE
|
|
|
530
|
|
|
|
*
|
|
Thomas L. Hausfeld-IRA
|
|
|
250
|
|
|
|
*
|
|
Thomas V. & Charlotte E.
Moon Family Trust-Joint Personal Trust
|
|
|
740
|
|
|
|
*
|
|
Timothy A. Pazyniak-IRA Rollover
|
|
|
2,830
|
|
|
|
*
|
|
Timothy J. and Karen A. Beach-JTWROS
|
|
|
460
|
|
|
|
*
|
|
Tinicum Partners, L.P.
|
|
|
1,800
|
|
|
|
*
|
|
TNM Investments LTD-Partnership
|
|
|
310
|
|
|
|
*
|
|
Touradji Global Resources Master
Fund, Ltd.
|
|
|
497,000
|
|
|
|
*
|
|
Town of Darien Employee Pension
|
|
|
3,300
|
|
|
|
*
|
|
Town of Darien Police Pension
|
|
|
2,900
|
|
|
|
*
|
|
TPG-Axon Partners (Offshore), Ltd
|
|
|
768,783
|
|
|
|
*
|
|
TPG-Axon Partners, LP
|
|
|
495,017
|
|
|
|
*
|
|
Treaty Oak Ironwood
|
|
|
74,295
|
|
|
|
*
|
|
Treaty Oak Master Fund
|
|
|
59,235
|
|
|
|
*
|
|
Tumbleston-JTWROS
|
|
|
1,890
|
|
|
|
*
|
|
Turnberry Asset Management
|
|
|
10,000
|
|
|
|
*
|
|
United Capital Management
|
|
|
17,000
|
|
|
|
*
|
|
University of Richmond Endowment
Fund
|
|
|
10,400
|
|
|
|
*
|
|
University of Southern California
Endowment Fund
|
|
|
23,000
|
|
|
|
*
|
|
Van den Bold,
Michiel C.(7)
|
|
|
226,727
|
|
|
|
*
|
|
Variable Insurance Products
Fund II: Contrafund Portfolio(2)
|
|
|
527,600
|
|
|
|
*
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares of
|
|
|
Common
|
|
|
|
Common Stock That
|
|
|
Stock
|
|
Selling Stockholder
|
|
May Be Sold
|
|
|
Outstanding
|
|
|
Verizon
|
|
|
122,700
|
|
|
|
*
|
|
Verle McGillivray-IRA Rollover
|
|
|
680
|
|
|
|
*
|
|
Victoire Finance et Aestion BV
|
|
|
35,714
|
|
|
|
*
|
|
Virginia & Edward
ONeil JTWROS
|
|
|
1,650
|
|
|
|
*
|
|
Walter A. Mauck-IRA Rollover
|
|
|
870
|
|
|
|
*
|
|
Warren Foundation
|
|
|
25,000
|
|
|
|
*
|
|
Wildlife Conservation Society
|
|
|
5,800
|
|
|
|
*
|
|
William J. Turner Revocable Living
Trust-DTD 05/20/98 Schwab Account-William J. Turner, TTEE
|
|
|
570
|
|
|
|
*
|
|
William U. Warren Fund K
|
|
|
25,000
|
|
|
|
*
|
|
Wooster Capital, LP
|
|
|
33,500
|
|
|
|
*
|
|
Wooster Offshore Fund, Ltd.
|
|
|
70,000
|
|
|
|
*
|
|
York Capital Management, L.P.
|
|
|
119,058
|
|
|
|
*
|
|
York Credit Opportunities
Fund L.P.
|
|
|
97,046
|
|
|
|
*
|
|
York Global Value Partners,
L.P.
|
|
|
122,363
|
|
|
|
*
|
|
York Investment Limited
|
|
|
528,684
|
|
|
|
*
|
|
York Select Unit Trust
|
|
|
103,376
|
|
|
|
*
|
|
York Select, L.P.
|
|
|
124,473
|
|
|
|
*
|
|
Yvette Van de Grift-Personal
Portfolio
|
|
|
220
|
|
|
|
*
|
|
Zelin, Leonard IRA
|
|
|
40,000
|
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*
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(1) |
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Following our merger in March 2004, but prior to our private
equity placement in March 2005, MEI Acquisitions Holdings, LLC,
an affiliate of ACON E&P, LLC, was our sole stockholder. At
the time of the private equity placement, MEI Acquisitions
Holdings, LLC was managed by a board of managers consisting of
four of our directors, Messrs. Ginns, Aronson, Lapeyre and
Leuschen and two of our former directors, Messrs. Beard and
Lancaster. See Certain Transactions with Affiliates and
Management. |
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(2) |
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The shares beneficially owned by ACON Investments LLC are held
by MEI Investment Holdings, LLC. See Certain Transactions
with Affiliates and Management in Mariners Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2005, incorporated
by reference herein. |
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(3) |
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Employee or former employee of Mariner. |
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(4) |
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Broker-dealer or an affiliate of a broker-dealer. |
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(5) |
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The entity is a registered investment fund (the
Fund) advised by Fidelity Management & Research
Company (FMR Co.), a registered investment adviser
under the Investment Advisers Act of 1940, as amended. FMR Co.,
82 Devonshire Street, Boston, Massachusetts 02109, a wholly
owned subsidiary of FMR Corp. and an investment adviser
registered under Section 203 of the Investment Advisers Act
of 1940, is the beneficial owner of 4,997,800 shares of the
common stock outstanding of the Company as a result of acting as
investment adviser to various investment companies registered
under Section 8 of the Investment Company Act of 1940. |
Edward C. Johnson 3d, FMR Corp., through its control of FMR Co.,
and the Fund each has sole power to dispose of the securities
owned by the Fund.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR
Corp., has the sole power to vote or direct the voting of the
shares owned directly by the Fund, which power resides with the
Funds Board of Trustees.
The Fund is an affiliate of a broker-dealer. The Fund purchased
the shares in the ordinary course of business and, at the time
of the purchase of the shares to be resold, the Fund did not
have any agreements or understandings, directly or indirectly,
with any person to distribute the shares.
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(6) |
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Shares indicated as owned by the entity are owned directly by
various private investment accounts, primarily employee benefit
plans for which Fidelity Management Trust Company
(FMTC) serves as trustee or managing agent. FMTC is
a wholly owned subsidiary of FMR Corp. and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended. FMTC is the beneficial owner of 4,400 shares of
the common stock of the Company as a result of its serving as
investment manager of the institutional account(s). |
Edward C. Johnson 3d and FMR Corp., through its control of
Fidelity Management Trust Company, each has sole
dispositive power over 4,400 shares and sole power to vote
or to direct the voting of 4,400 shares of common stock
owned by the institutional account(s) as reported above.
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(7) |
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Executive officer of Mariner except Ricky G. Lester who resigned
October 16, 2006. |
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(8) |
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Selling stockholder Caisse de depot et placement du Quebec, a
crown agency (i.e., governmental agency), is the controlling
shareholder of selling stockholder CDP Infrastructure Funds G.P. |
19
PLAN OF
DISTRIBUTION
We are registering the common stock covered by this prospectus
to permit selling stockholders to conduct public secondary
trading of these shares from time to time after the date of this
prospectus. Under the Registration Rights Agreement we entered
into with selling stockholders, we agreed to, among other
things, bear all expenses, other than brokers or
underwriters discounts and commissions, in connection with
the registration and sale of the common stock covered by this
prospectus. We will not receive any of the proceeds of the sale
of the common stock offered by this prospectus. The aggregate
proceeds to the selling stockholders from the sale of the common
stock will be the purchase price of the common stock less any
discounts and commissions. A selling stockholder reserves the
right to accept and, together with their agents, to reject, any
proposed purchases of common stock to be made directly or
through agents.
The common stock offered by this prospectus may be sold from
time to time to purchasers:
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directly by the selling stockholders and their successors, which
includes their donees, pledgees or transferees or their
successors-in-interest, or
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through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or
agents commissions from the selling stockholders or the
purchasers of the common stock. These discounts, concessions or
commissions may be in excess of those customary in the types of
transactions involved.
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The selling stockholders and any underwriters, broker-dealers or
agents who participate in the sale or distribution of the common
stock may be deemed to be underwriters within the
meaning of the Securities Act. The selling stockholders
identified as registered broker-dealers in the selling
stockholders table above (under Selling
Stockholders) are deemed to be underwriters with respect
to securities sold by them pursuant to this prospectus. As a
result, any profits on the sale of the common stock by such
selling stockholders and any discounts, commissions or
agents commissions or concessions received by any such
broker-dealer or agents may be deemed to be underwriting
discounts and commissions under the Securities Act. Selling
stockholders who are deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act
will be subject to prospectus delivery requirements of the
Securities Act. Underwriters are subject to certain statutory
liabilities, including, but not limited to, Sections 11, 12
and 17 of the Securities Act.
The common stock may be sold in one or more transactions at:
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fixed prices;
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prevailing market prices at the time of sale;
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prices related to such prevailing market prices;
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varying prices determined at the time of sale; or
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negotiated prices.
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These sales may be effected in one or more transactions:
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on any national securities exchange or quotation on which the
common stock may be listed or quoted at the time of the sale;
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in the
over-the-counter
market;
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in transactions other than on such exchanges or services or in
the
over-the-counter
market;
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through the writing of options (including the issuance by the
selling stockholders of derivative securities), whether the
options or such other derivative securities are listed on an
options exchange or otherwise;
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through the settlement of short sales; or
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through any combination of the foregoing.
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These transactions may include block transactions or crosses.
Crosses are transactions in which the same broker acts as an
agent on both sides of the trade.
In connection with the sales of the common stock, the selling
stockholders may enter into hedging transactions with
broker-dealers or other financial institutions which in turn may:
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engage in short sales of the common stock in the course of
hedging their positions;
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sell the common stock short and deliver the common stock to
close out short positions;
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loan or pledge the common stock to broker-dealers or other
financial institutions that in turn may sell the common stock;
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enter into option or other transactions with broker-dealers or
other financial institutions that require the delivery to the
broker-dealer or other financial institution of the common
stock, which the broker-dealer or other financial institution
may resell under the prospectus; or
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enter into transactions in which a broker-dealer makes purchases
as a principal for resale for its own account or through other
types of transactions.
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To our knowledge, there are currently no plans, arrangements or
understandings between any selling stockholders and any
underwriter, broker-dealer or agent regarding the sale of the
common stock by the selling stockholders. The maximum amount of
compensation to be received by any participating NASD member
will not exceed 8% of the total proceeds of the offering.
Our common stock is listed on the New York Stock Exchange under
the symbol ME. However, we can give no assurances as
to the development of liquidity or any trading market for the
common stock.
There can be no assurance that any selling stockholder will sell
any or all of the common stock under this prospectus. Further,
we cannot assure you that any such selling stockholder will not
transfer, devise or gift the common stock by other means not
described in this prospectus. In addition, any common stock
covered by this prospectus that qualifies for sale under
Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than under
this prospectus. The common stock covered by this prospectus may
also be sold to
non-U.S. persons
outside the U.S. in accordance with Regulation S under the
Securities Act rather than under this prospectus. The common
stock may be sold in some states only through registered or
licensed brokers or dealers. In addition, in some states the
common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or
qualification is available and complied with.
The selling stockholders and any other person participating in
the sale of the common stock will be subject to the Exchange
Act. The Exchange Act rules include, without limitation,
Regulation M, which may limit the timing of purchases and
sales of any of the common stock by the selling stockholders and
any other such person. In addition, Regulation M may
restrict the ability of any person engaged in the distribution
of the common stock to engage in market-making activities with
respect to the particular common stock being distributed. This
may affect the marketability of the common stock and the ability
of any person or entity to engage in market-making activities
with respect to the common stock.
We have agreed to indemnify the selling stockholders against
certain liabilities, including liabilities under the Securities
Act.
We have agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the common
stock to the public, including the payment of federal securities
law and state blue sky registration fees, except that we will
not bear any underwriting discounts or commissions or transfer
taxes relating to the sale of shares of our common stock.
21
DESCRIPTION
OF CAPITAL STOCK
The authorized capital stock of Mariner consists of
180 million shares of common stock, par value of $.0001
each, and 20 million shares of preferred stock, par value
of $.0001 each.
The following summary of the capital stock and certificate of
incorporation and bylaws of Mariner does not purport to be
complete and is qualified in its entirety by reference to the
provisions of applicable law and to our certificate of
incorporation and bylaws.
Common
Stock
As of September 30, 2006, there were a total of
86,269,563 shares of our common stock issued and
outstanding. Our board of directors has reserved
6,500,000 shares for issuance as restricted stock or upon
the exercise of stock options granted or that may be granted
under our Amended and Restated Stock Incentive Plan, as amended,
approximately 4,966,071 of which, as of September 30, 2006,
remained available for grant as restricted stock or subject to
options. In addition, our board of directors reserved 156,626
shares of common stock for issuance upon exercise of options
granted to certain former employees of Forest or Forest Energy
Resources that became employees of Mariner Energy Resources,
Inc. in connection with the Forest Energy Resources merger
(Rollover Options). These options are governed by
nonstatutory stock option agreements with Mariner Energy, Inc.
and are not covered by its Amended and Restated Stock Incentive
Plan, as amended. As a result of forfeitures due to employment
terminations, the maximum number of shares of common stock that
could be subject to Rollover Options is 108,662 as of
September 30, 2006. Holders of our common or restricted
stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have
cumulative voting rights. Holders of a majority of the shares of
our common stock entitled to vote in any election of directors
may elect all of the directors standing for election. Except as
otherwise provided in our certificate of incorporation and
bylaws or required by law, all matters to be voted on by our
stockholders must be approved by a majority of the votes
entitled to be cast by all shares of common stock. Our
certificate of incorporation requires approval of 80% of the
shares entitled to vote for the removal of a director or to
adopt, repeal or amend certain provisions in our certificate of
incorporation and bylaws. See Anti-Takeover Effects
of Provisions of Delaware Law, Our Certificate of Incorporation
and Bylaws.
Holders of our common stock are entitled to receive
proportionately any dividends if and when such dividends are
declared by our board of directors, subject to any preferential
dividend rights of outstanding preferred stock. Upon
liquidation, dissolution or winding up of our company, the
holders of our common stock are entitled to receive ratably our
net assets available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding
preferred stock. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of our common stock are
subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may
designate and issue in the future.
Liability
and Indemnification of Officers and Directors
Our certificate of incorporation provides that our directors
will not be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of a
directors duty of loyalty to us or our stockholders,
(2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(3) under Section 174 of the Delaware General
Corporation Law, or (4) for any transaction from which the
director derives an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize the further
elimination or limitation of directors liability, then the
liability of our directors will automatically be limited to the
fullest extent provided by law. Our certificate of incorporation
and bylaws also contain provisions to indemnify our directors
and officers to the fullest extent permitted by the Delaware
General Corporation Law. These provisions may have the practical
effect in certain cases of eliminating the ability of
stockholders to collect monetary damages from our directors and
officers. We believe that these contractual agreements and the
provisions in our certificate of incorporation and bylaws are
necessary to attract and retain qualified persons as directors
and officers.
22
Preferred
Stock
Our certificate of incorporation authorizes the issuance of up
to 20 million shares of preferred stock and no preferred
shares are outstanding. The preferred stock may carry such
relative rights, preferences and designations as may be
determined by our board of directors in its sole discretion upon
the issuance of any shares of preferred stock. The shares of
preferred stock could be issued from time to time by the board
of directors in its sole discretion (without further approval or
authorization by the stockholders), in one or more series, each
of which series could have any particular distinctive
designations as well as relative rights and preferences as
determined by the board of directors. The existence of
authorized but unissued shares of preferred stock could have
anti-takeover effects because we could issue preferred stock
with special dividend or voting rights that could discourage
potential bidders.
Approval by the stockholders of the authorization of the
preferred stock gave the board of directors the ability, without
stockholder approval, to issue these shares with rights and
preferences determined by the board of directors in the future.
As a result, Mariner may issue shares of preferred stock that
have dividend, voting and other rights superior to those of the
common stock, or that convert into shares of common stock,
without the approval of the holders of common stock. This could
result in the dilution of the voting rights, ownership and
liquidation value of current stockholders.
Anti-Takeover
Effects of Provisions of Delaware Law, Our Certificate of
Incorporation and Bylaws
General
Our certificate of incorporation and bylaws contain the
following additional provisions, some of which are intended to
enhance the likelihood of continuity and stability in the
composition of our board of directors and in the policies
formulated by our board of directors. In addition, some
provisions of the Delaware General Corporation Law, if
applicable to us, may hinder or delay an attempted takeover
without prior approval of our board of directors. Provisions of
the Delaware General Corporation Law and of our certificate of
incorporation and bylaws could discourage attempts to acquire us
or remove incumbent management even if some or a majority of our
stockholders believe this action is in their best interest.
These provisions could, therefore, prevent stockholders from
receiving a premium over the market price for the shares of
common stock they hold.
Classified
Board
Our certificate of incorporation provides that our board of
directors will be divided into three classes of directors, with
the classes to be as nearly equal in number as possible. As a
result, approximately one-third of our board of directors will
be elected each year. The classification of directors will have
the effect of making it more difficult for stockholders to
change the composition of our board of directors. Our
certificate of incorporation and bylaws provide that the number
of directors will be fixed from time to time exclusively
pursuant to a resolution adopted by the board of directors.
Filling
Board of Directors Vacancies; Removal
Our certificate of incorporation provides that vacancies and
newly created directorships resulting from any increase in the
authorized number of directors may be filled by the affirmative
vote of a majority of our directors then in office, though less
than a quorum. Each director will hold office until his or her
successor is elected and qualified, or until the directors
earlier death, resignation, retirement or removal from office.
Any director may resign at any time upon written notice to us.
Our certificate of incorporation provides, in accordance with
Delaware General Corporation Law, that the stockholders may
remove directors only by a super-majority vote and for cause. We
believe that the removal of directors by the stockholders only
for cause, together with the classification of the board of
directors, will promote continuity and stability in our
management and policies and that this continuity and stability
will facilitate long-range planning.
No
Stockholder Action by Written Consent
Our certificate of incorporation precludes stockholders from
initiating or effecting any action by written consent and
thereby taking actions opposed by the board of directors.
23
Call
of Special Meetings
Our bylaws provide that special meetings of our stockholders may
be called at any time only by the board of directors acting
pursuant to a resolution adopted by the board and not the
stockholders.
Advance
Notice Requirements for Stockholder Proposals and Director
Nominations
Our bylaws provide that stockholders seeking to bring business
before or to nominate candidates for election as directors at an
annual meeting of stockholders must provide timely notice of
their proposal in writing to the corporate secretary. With
respect to the nomination of directors, to be timely, a
stockholders notice must be delivered to or mailed and
received at our principal executive offices (i) with
respect to an election of directors to be held at the annual
meeting of stockholders, not later than 120 days prior to
the anniversary date of the proxy statement for the immediately
preceding annual meeting of the stockholders and (ii) with
respect to an election of directors to be held at a special
meeting of stockholders, not later than the close of business on
the 10th day following the day on which such notice of the
date of the special meeting was first mailed to Mariners
stockholders or public disclosure of the date of the special
meeting was first made, whichever first occurs. With respect to
other business to be brought before a meeting of stockholders,
to be timely, a stockholders notice must be delivered to
or mailed and received at our principal executive offices not
less than 120 days prior to the anniversary date of the
proxy statement for the immediately preceding annual meeting of
the stockholders. Our bylaws also specify requirements as to the
form and content of a stockholders notice. These
provisions may preclude stockholders from bringing matters
before an annual meeting of stockholders or from making
nominations for directors at an annual meeting of stockholders
or may discourage or defer a potential acquirer from conducting
a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of us.
No
Cumulative Voting
The Delaware General Corporation Law provides that stockholders
are not entitled to the right to cumulate votes in the election
of directors unless our certificate of incorporation provides
otherwise. Under cumulative voting, a majority stockholder
holding a sufficient percentage of a class of shares may be able
to ensure the election of one or more directors. Our certificate
of incorporation expressly precludes cumulative voting.
Authorized
but Unissued Shares
Our certificate of incorporation provides that the authorized
but unissued shares of preferred stock are available for future
issuance without stockholder approval and does not preclude the
future issuance without stockholder approval of the authorized
but unissued shares of our common stock. These additional shares
may be utilized for a variety of corporate purposes, including
future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred
stock could make it more difficult or discourage an attempt to
obtain control of Mariner by means of a proxy contest, tender
offer, merger or otherwise.
Delaware
Business Opportunity Statute
As permitted by Section 122(17) of the Delaware General
Corporation Law, our certificate of incorporation provides that
Mariner renounces any interest or expectancy in any business
opportunity or transaction in which any of our original
institutional investors or their affiliates participate or seek
to participate. Nothing contained in our certificate of
incorporation, however, is intended to change any obligation or
duty that a director may have with respect to confidential
information of Mariner or prohibit Mariner from pursuing any
corporate opportunity.
Amendments
to our Certificate of Incorporation and Bylaws
Pursuant to the Delaware General Corporation Law and our
certificate of incorporation, certain anti-takeover provisions
of our certificate of incorporation may not be repealed or
amended, in whole or in part, without the approval of at least
80% of the outstanding stock entitled to vote.
24
Our certificate of incorporation permits our board of directors
to adopt, amend and repeal our bylaws. Our certificate of
incorporation also provides that our bylaws can be amended by
the affirmative vote of the holders of at least 80% of the
voting power of the outstanding shares of our common stock.
Delaware
Anti-Takeover Statute
We are subject to Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, this section
prevents certain Delaware companies under certain circumstances,
from engaging in a business combination with
(1) a stockholder who owns 15% or more of our outstanding
voting stock (otherwise known as an interested
stockholder); (2) an affiliate of an interested
stockholder; or (3) an associate of an interested
stockholder, for three years following the date that the
stockholder became an interested stockholder. A
business combination includes a merger or sale of
10% or more of our assets.
Transfer
Agent and Registrar
Our transfer agent and registrar for our common stock is The
Continental Stock Transfer & Trust Company.
25
REGISTRATION
RIGHTS
We entered into a registration rights agreement in connection
with our private equity placement in March 2005. In the
registration rights agreement we agreed, for the benefit of FBR,
the purchasers of our common stock in the private equity
placement, MEI Acquisitions Holdings, LLC and holders of the
common stock issued under our Equity Participation Plan, as
amended, or Amended and Restated Stock Incentive Plan, as
amended, that we will, at our expense:
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file with the SEC (which occurs pursuant to the filing of the
shelf registration statement of which this prospectus is a
part), within 210 days after the closing date of the
private equity placement, a registration statement (a
shelf registration statement);
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use our commercially reasonable efforts to cause the shelf
registration statement to become effective under the Securities
Act as soon as practicable after the filing;
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continuously maintain the effectiveness of the shelf
registration statement under the Securities Act until the first
to occur of:
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the sale of all of the shares of common stock covered by the
shelf registration statement pursuant to a registration
statement;
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the sale, transfer or other disposition of all of the shares of
common stock covered by the shelf registration statement or
pursuant to Rule 144 under the Securities Act;
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such time as all of the shares of our common stock sold in this
offering and covered by the shelf registration statement and not
held by affiliates of us are, in the opinion of our counsel,
eligible for sale pursuant to Rule 144(k) (or any successor
or analogous rule) under the Securities Act;
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the shares have been sold to us or any of our
subsidiaries; or
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the second anniversary of the initial effective date of the
shelf registration statement.
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We have filed the registration statement of which this
prospectus is a part to satisfy our obligations under the
registration rights agreement with respect to common stock
issued in the private equity placement and under our Equity
Participation Plan, as amended. We have filed a
Form S-8
registration statement to cover shares of our common stock
issuable under our Amended and Restated Stock Incentive Plan, as
amended.
Notwithstanding the foregoing, we will be permitted, under
limited circumstances, to suspend the use, from time to time, of
the shelf registration statement of which this is a part (and
therefore suspend sales under the registration statement) for
certain periods, referred to as blackout periods,
if, among other things, any of the following occurs:
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the representative of the underwriters of an underwritten
offering of primary shares by us has advised us that the sale of
shares of our common stock under the shelf registration
statement would have a material adverse effect on our initial
public offering;
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a majority of our board of directors, in good faith, determines
that (1) the offer or sale of any shares of our common
stock would materially impede, delay or interfere with any
proposed financing, offer or sale of securities, acquisition,
merger, tender offer, business combination, corporate
reorganization, consolidation or other significant transaction
involving us; (2) after the advice of counsel, the sale of
the shares covered by the shelf registration statement would
require disclosure of non-public material information not
otherwise required to be disclosed under applicable law; or
(3) either (x) we have a bona fide business purpose
for preserving the confidentiality of the proposed transaction,
(y) disclosure would have a material adverse effect on us
or our ability to consummate the proposed transaction, or
(z) the proposed transaction renders us unable to comply
with SEC requirements; or
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a majority of our board of directors, in good faith, determines,
that we are required by law, rule or regulation to supplement
the shelf registration statement or file a post-effective
amendment to the shelf registration statement in order to
incorporate information into the shelf registration statement
for the purpose of (1) including in the shelf registration
statement any prospectus required under Section 10(a)(3) of
the Securities Act; (2) reflecting in the prospectus
included in the shelf registration statement any facts or events
arising after the effective date of the shelf registration
statement (or the
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most-recent post-effective amendment) that, individually or in
the aggregate, represents a fundamental change in the
information set forth in the prospectus; or (3) including
in the prospectus included in the shelf registration statement
any material information with respect to the plan of
distribution not disclosed in the shelf registration statement
or any material change to such information.
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The cumulative blackout periods in any 12 month period
commencing on the closing of the private equity placement may
not exceed an aggregate of 90 days and furthermore may not
exceed 60 days in any
90-day
period, except as a result of a review of any post-effective
amendment by the SEC prior to declaring it effective; provided
we have used all commercially reasonable efforts to cause such
post-effective amendment to be declared effective.
In addition to this limited ability to suspend use of the shelf
registration statement, until we are eligible to incorporate by
reference into the registration statement our periodic and
current reports, which will not occur until at least one year
following the end of the month in which the registration
statement of which this prospectus is a part is declared
effective, we will be required to amend or supplement the shelf
registration statement to include our quarterly and annual
financial information and other developments material to us.
Therefore, sales under the shelf registration statement will be
suspended until the amendment or supplement, as the case may be,
is filed and effective.
A holder that sells our common stock pursuant to the shelf
registration statement will be required to be named as a selling
stockholder in this prospectus, as it may be amended or
supplemented from time to time, and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the registration
rights agreement that are applicable to such holder (including
certain indemnification rights and obligations). In addition,
each holder of our common stock must deliver information to be
used in connection with the shelf registration statement in
order to have such holders shares of our common stock
included in the shelf registration statement.
Each holder will be deemed to have agreed that, upon receipt of
notice of the occurrence of any event which makes a statement in
the prospectus which is a part of the shelf registration
statement untrue in any material respect or which requires the
making of any changes in such prospectus in order to make the
statements therein not misleading, or of certain other events
specified in the registration rights agreement, such holder will
suspend the sale of our common stock pursuant to such prospectus
until we have amended or supplemented such prospectus to correct
such misstatement or omission and have furnished copies of such
amended or supplemented prospectus to such holder or we have
given notice that the sale of the common stock may be resumed.
We have agreed to use our commercially reasonable efforts to
satisfy the criteria for listing and list or include (if we meet
the criteria for listing on such exchange or market) our common
stock on the New York Stock Exchange, American Stock Exchange or
The Nasdaq National Market (as soon as practicable, including
seeking to cure in our listing or inclusion application any
deficiencies cited by the exchange or market), and thereafter
maintain the listing on such exchange.
27
EXPERTS
The financial statements of Mariner Energy, Inc. as of December
31, 2005 and 2004 and for the year ended December 31, 2005, for
the period from January 1, 2004 through March 2, 2004
(Pre-merger), for the period from March 3, 2004 through December
31, 2004 (Post-merger), and for the year ended December 31, 2003
(Pre-merger) included in this prospectus have been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report (which report
expresses an unqualified opinion and includes explanatory
paragraphs relating to a change in method of accounting for
asset retirement obligations in 2003 and the merger of Mariner
Energy, Inc.s parent company on March 2, 2004) appearing
herein and is included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The statements of revenues and direct operating expenses of the
Forest Gulf of Mexico operations for each of the years in the
three-year period ended December 31, 2005 have been incorporated
by reference herein in reliance upon the report of KPMG LLP,
independent registered public accounting firm, incorporated by
reference into this prospectus, and upon the authority of such
firm as experts in accounting and auditing.
The information included in this prospectus regarding estimated
quantities of proved reserves, the future net revenues from
those reserves and their present value is based, in part, on
estimates of the proved reserves and present values of proved
reserves of Mariner as of December 31, 2003, 2004 and 2005
and prepared by or derived from estimates prepared by Ryder
Scott Company, L.P., independent petroleum engineers. These
estimates are included in this prospectus in reliance upon the
authority of the firm as experts in these matters.
LEGAL
MATTERS
The validity of the shares of Mariner common stock offered
pursuant to this prospectus will be passed upon by Baker Botts
L.L.P.
28
GLOSSARY
OF OIL AND NATURAL GAS TERMS
The following is a description of the meanings of some of the
oil and gas industry terms used in this prospectus. The
definitions of proved developed reserves, proved reserves and
proved undeveloped reserves have been abbreviated from the
applicable definitions contained in
Rule 4-10(a)(2-4)
of
Regulation S-X.
The entire definitions of those terms can be viewed on the
website at
http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
3-D
seismic. (Three-Dimensional Seismic Data)
Geophysical data that depicts the subsurface strata in three
dimensions.
3-D seismic
data typically provides a more detailed and accurate
interpretation of the subsurface strata than two dimensional
seismic data.
Appraisal well. A well drilled several spacing
locations away from a producing well to determine the boundaries
or extent of a productive formation and to establish the
existence of additional reserves.
bbl. One stock tank barrel, or 42
U.S. gallons liquid volume, of crude oil or other liquid
hydrocarbons.
Bcf. Billion cubic feet of natural gas.
Bcfe. Billion cubic feet equivalent,
determined using the ratio of six Mcf of natural gas to one bbl
of crude oil, condensate or natural gas liquids.
Block. A block depicted on the Outer
Continental Shelf Leasing and Official Protraction Diagrams
issued by the U.S. Minerals Management Service or a similar
depiction on official protraction or similar diagrams issued by
a state bordering on the Gulf of Mexico.
Btu or British Thermal Unit. The quantity of
heat required to raise the temperature of one pound of water by
one degree Fahrenheit.
Completion. The installation of permanent
equipment for the production of oil or natural gas, or in the
case of a dry hole, the reporting of abandonment to the
appropriate agency.
Condensate. Liquid hydrocarbons associated
with the production of a primarily natural gas reserve.
Deep shelf well. A well drilled on the outer
continental shelf to subsurface depths greater than
15,000 feet.
Deepwater. Depths greater than 1,300 feet
(the approximate depth of deepwater designation for royalty
purposes by the U.S. Minerals Management Service).
Developed acreage. The number of acres that
are allocated or assignable to productive wells or wells capable
of production.
Development well. A well drilled within the
proved boundaries of an oil or natural gas reservoir with the
intention of completing the stratigraphic horizon known to be
productive.
Dry hole. A well found to be incapable of
producing hydrocarbons in sufficient quantities such that
proceeds from the sale of such production exceed production
expenses and taxes.
Dry hole costs. Costs incurred in drilling a
well, assuming a well is not successful, including plugging and
abandonment costs.
Exploitation. Ordinarily considered to be a
form of development within a known reservoir.
Exploratory well. A well drilled to find and
produce oil or gas reserves not classified as proved, to find a
new reservoir in a field previously found to be productive of
oil or gas in another reservoir or to extend a known reservoir.
Farm-in or farm-out. An agreement under which
the owner of a working interest in an oil or gas lease assigns
the working interest or a portion of the working interest to
another party who desires to drill on the leased acreage.
Generally, the assignee is required to drill one or more wells
in order to earn its interest in the
29
acreage. The assignor usually retains a royalty or reversionary
interest in the lease. The interest received by an assignee is a
farm-in while the interest transferred by the
assignor is a
farm-out.
Field. An area consisting of either a single
reservoir or multiple reservoirs, all grouped on or related to
the same individual geological structural feature and/or
stratigraphic condition.
Gross acres or gross wells. The total acres or
wells, as the case may be, in which a working interest is owned.
Lease operating expenses. The expenses of
lifting oil or gas from a producing formation to the surface,
and the transportation and marketing thereof, constituting part
of the current operating expenses of a working interest, and
also including labor, superintendence, supplies, repairs,
short-lived assets, maintenance, allocated overhead costs, ad
valorem taxes and other expenses incidental to production, but
not including lease acquisition or drilling or completion
expenses.
Mbbls. Thousand barrels of crude oil or other
liquid hydrocarbons.
Mcf. Thousand cubic feet of natural gas.
Mcfe. Thousand cubic feet equivalent,
determined using the ratio of six Mcf of natural gas to one bbl
of crude oil, condensate or natural gas liquids.
MMBls. Million barrels of crude oil or other
liquid hydrocarbons.
MMBtu. Million British Thermal Units.
MMcf. Million cubic feet of natural gas.
MMcfe. Million cubic feet equivalent,
determined using the ratio of six Mcf of natural gas to one bbl
of crude oil, condensate or natural gas liquids.
Net acres or net wells. The sum of the
fractional working interests owned in gross acres or wells, as
the case may be.
Net revenue interest. An interest in all oil
and natural gas produced and saved from, or attributable to, a
particular property, net of all royalties, overriding royalties,
net profits interests, carried interests, reversionary interests
and any other burdens to which the persons interest is
subject.
Payout. Generally refers to the recovery by
the incurring party to an agreement of its costs of drilling,
completing, equipping and operating a well before another
partys participation in the benefits of the well commences
or is increased to a new level.
PV10 or present value of estimated future net
revenues. An estimate of the present value of the
estimated future net revenues from proved oil and gas reserves
at a date indicated after deducting estimated production and ad
valorem taxes, future capital costs and operating expenses, but
before deducting any estimates of federal income taxes. The
estimated future net revenues are discounted at an annual rate
of 10%, in accordance with the Securities and Exchange
Commissions practice, to determine their present
value. The present value is shown to indicate the effect
of time on the value of the revenue stream and should not be
construed as being the fair market value of the properties.
Estimates of future net revenues are made using oil and natural
gas prices and operating costs at the date indicated and held
constant for the life of the reserves.
Productive well. A well that is found to be
capable of producing hydrocarbons in sufficient quantities such
that proceeds from the sale of such production exceed production
expenses and taxes.
Prospect. A specific geographic area which,
based on supporting geological, geophysical or other data and
also preliminary economic analysis using reasonably anticipated
prices and costs, is deemed to have potential for the discovery
of commercial hydrocarbons.
Proved developed non-producing
reserves. Proved developed reserves expected to
be recovered from zones behind casing in existing wells.
30
Proved developed producing reserves. Proved
developed reserves that are expected to be recovered from
completion intervals currently open in existing wells and
capable of production to market.
Proved developed reserves. Proved reserves
that can be expected to be recovered from existing wells with
existing equipment and operating methods. This definition of
proved developed reserves has been abbreviated from the
applicable definitions contained in Rule 4-10(a)(2-4) of
Regulation S-X.
The entire definition of this term can be viewed on the website
at
http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
Proved reserves. The estimated quantities of
crude oil, natural gas and natural gas liquids that geological
and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions. This definition of proved
reserves has been abbreviated from the applicable definitions
contained in Rule 4-10(a)(2-4) of
Regulation S-X.
The entire definition of this term can be viewed on the website
at
http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
Proved undeveloped reserves. Proved reserves
that are expected to be recovered from new wells on undrilled
acreage or from existing wells where a relatively major
expenditure is required for recompletion. This definition of
proved undeveloped reserves has been abbreviated from the
applicable definitions contained in Rule 4-10(a)(2-4) of
Regulation S-X.
The entire definition of this term can be viewed on the website
at
http://www.sec.gov/divisions/corpfin/forms/regsx.htm#gas.
Reservoir. A porous and permeable underground
formation containing a natural accumulation of producible oil
and/or gas that is confined by impermeable rock or water
barriers and is individual and separate from other reservoirs.
Shelf. Areas in the Gulf of Mexico with depths
less than 1,300 feet. Our shelf area and operations also
includes a small amount of properties and operations in the
onshore and bay areas of the Gulf Coast.
Subsea tieback. A method of completing a
productive well by connecting its wellhead equipment located on
the sea floor by means of control umbilical and flow lines to an
existing production platform located in the vicinity.
Subsea trees. Wellhead equipment installed on
the ocean floor.
Undeveloped acreage. Lease acreage on which
wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil or gas
regardless of whether or not such acreage contains proved
reserves.
Working interest. The operating interest that
gives the owner the right to drill, produce and conduct
operating activities on the property and receive a share of
production.
31
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors & Stockholders
Mariner Energy, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheets of
Mariner Energy, Inc. (the Company) as of
December 31, 2005 and 2004 and the related consolidated
statements of operations, stockholders equity and
comprehensive income and cash flows for the year ended
December 31, 2005, for the period January 1, 2004
through March 2, 2004 (Pre-merger), for the period from
March 3, 2004 through December 31, 2004 (Post merger),
and for the year ended December 31, 2003 (Pre-merger).
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Mariner Energy, Inc. as of December 31, 2005 and 2004, and
the results of its operations and cash flows for the year ended
December 31, 2005, for the period January 1, 2004
through March 2, 2004
(Pre-merger),
for the period from March 3, 2004 through December 31,
2004 (Post merger), and for the year ended December 31,
2003 (Pre-merger) in conformity with accounting principles
generally accepted in the United States of America.
The Company changed its method of accounting for asset
retirement obligations in 2003. This change is discussed in
Note 1 to the Consolidated Financial Statements.
As described in Note 1 to the Consolidated Financial
Statements, on March 2, 2004, Mariner Energy LLC, the
Companys parent company, merged with an affiliate of the
private equity funds Carlyle/Riverstone Global Energy and Power
Fund II, L.P. and ACON Investments LLC.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 30, 2006
(September 18, 2006 as to Note 13)
F-2
MARINER
ENERGY, INC.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands except share data)
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,556
|
|
|
$
|
2,541
|
|
Receivables, net of allowances of
$500 and $307 at December 31, 2005 and December 31,
2004, respectively
|
|
|
88,651
|
|
|
|
52,734
|
|
Deferred tax asset
|
|
|
26,017
|
|
|
|
|
|
Prepaid expenses and other
|
|
|
22,208
|
|
|
|
10,471
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
141,432
|
|
|
|
65,746
|
|
Property and
Equipment:
|
|
|
|
|
|
|
|
|
Oil and gas properties, full cost
method:
|
|
|
|
|
|
|
|
|
Proved
|
|
|
574,725
|
|
|
|
319,553
|
|
Unproved, not subject to
amortization
|
|
|
40,176
|
|
|
|
36,245
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
614,901
|
|
|
|
355,798
|
|
Other property and equipment
|
|
|
11,048
|
|
|
|
960
|
|
Accumulated depreciation, depletion
and amortization
|
|
|
(110,006
|
)
|
|
|
(52,985
|
)
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
|
515,943
|
|
|
|
303,773
|
|
Deferred Tax Asset
|
|
|
|
|
|
|
3,029
|
|
Other Assets, Net of
Amortization
|
|
|
8,161
|
|
|
|
3,471
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
665,536
|
|
|
$
|
376,019
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
37,530
|
|
|
$
|
2,526
|
|
Accrued liabilities
|
|
|
123,689
|
|
|
|
81,831
|
|
Accrued interest
|
|
|
614
|
|
|
|
79
|
|
Derivative liability
|
|
|
42,173
|
|
|
|
16,976
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
204,006
|
|
|
|
101,412
|
|
Long-Term Liabilities:
|
|
|
|
|
|
|
|
|
Abandonment liability
|
|
|
38,176
|
|
|
|
19,268
|
|
Deferred income tax
|
|
|
25,886
|
|
|
|
|
|
Derivative liability
|
|
|
21,632
|
|
|
|
5,432
|
|
Bank debt
|
|
|
152,000
|
|
|
|
105,000
|
|
Note payable
|
|
|
4,000
|
|
|
|
10,000
|
|
Other long-term liabilities
|
|
|
6,500
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
248,194
|
|
|
|
140,700
|
|
Commitments 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
|
|
|
|
1
|
|
Additional
paid-in-capital
|
|
|
167,318
|
|
|
|
91,917
|
|
Unearned compensation
|
|
|
(6,613
|
)
|
|
|
|
|
Accumulated other comprehensive
(loss)
|
|
|
(41,473
|
)
|
|
|
(11,630
|
)
|
Accumulated retained earnings
|
|
|
94,100
|
|
|
|
53,619
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
213,336
|
|
|
|
133,907
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
$
|
665,536
|
|
|
$
|
376,019
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements
F-3
MARINER
ENERGY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Merger
|
|
|
|
Pre-Merger
|
|
|
|
|
|
|
Period from
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
March 3,
|
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
Year Ended
|
|
|
through
|
|
|
|
through
|
|
|
Year Ended
|
|
|
|
December 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
|
|
|
$
|
37,992
|
|
Gas sales
|
|
|
122,291
|
|
|
|
110,925
|
|
|
|
|
27,055
|
|
|
|
104,551
|
|
Other revenues
|
|
|
3,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
199,710
|
|
|
|
174,423
|
|
|
|
|
39,764
|
|
|
|
142,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expense
|
|
|
29,882
|
|
|
|
21,363
|
|
|
|
|
4,121
|
|
|
|
24,719
|
|
Transportation expense
|
|
|
2,336
|
|
|
|
1,959
|
|
|
|
|
1,070
|
|
|
|
6,252
|
|
General and administrative expense
|
|
|
37,053
|
|
|
|
7,641
|
|
|
|
|
1,131
|
|
|
|
8,098
|
|
Depreciation, depletion and
amortization
|
|
|
59,426
|
|
|
|
54,281
|
|
|
|
|
10,630
|
|
|
|
48,339
|
|
Derivative settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,222
|
|
Impairment of production equipment
held for use
|
|
|
1,845
|
|
|
|
957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
130,542
|
|
|
|
86,201
|
|
|
|
|
16,952
|
|
|
|
90,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
69,168
|
|
|
|
88,222
|
|
|
|
|
22,812
|
|
|
|
51,913
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
779
|
|
|
|
225
|
|
|
|
|
91
|
|
|
|
756
|
|
Expense, net of amounts capitalized
|
|
|
(8,172
|
)
|
|
|
(6,045
|
)
|
|
|
|
(5
|
)
|
|
|
(6,981
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
61,775
|
|
|
|
82,402
|
|
|
|
|
22,898
|
|
|
|
45,688
|
|
Provision 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
|
|
|
|
36,301
|
|
Cumulative effect of change in
accounting method, net of tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
40,481
|
|
|
$
|
53,619
|
|
|
|
$
|
14,826
|
|
|
$
|
38,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of
change in accounting method, net of tax effects
|
|
$
|
1.24
|
|
|
$
|
1.80
|
|
|
|
$
|
.50
|
|
|
$
|
1.22
|
|
Cumulative effect of change in
accounting method, net of tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share
basic
|
|
$
|
1.24
|
|
|
$
|
1.80
|
|
|
|
$
|
.50
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of
change in accounting method, net of tax effects
|
|
$
|
1.20
|
|
|
$
|
1.80
|
|
|
|
$
|
.50
|
|
|
$
|
1.22
|
|
Cumulative effect of change in
accounting method, net of tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share
diluted
|
|
$
|
1.20
|
|
|
$
|
1.80
|
|
|
|
$
|
.50
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding basic
|
|
|
32,667,582
|
|
|
|
29,748,130
|
|
|
|
|
29,748,130
|
|
|
|
29,748,130
|
|
Weighted 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
F-4
MARINER
ENERGY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Retained
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Unearned
|
|
|
Comprehensive
|
|
|
Earnings
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
Income (Loss)
|
|
|
(Deficit)
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balance at December 31,
2002
|
|
|
29,748
|
|
|
$
|
1
|
|
|
$
|
227,318
|
|
|
|
|
|
|
$
|
(14,177
|
)
|
|
$
|
(43,046
|
)
|
|
$
|
170,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,244
|
|
|
|
38,244
|
|
Change in fair value of derivative
hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,280
|
|
|
|
|
|
|
|
39,280
|
|
Hedge settlements reclassified to
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,463
|
)
|
|
|
|
|
|
|
(29,463
|
)
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2003
|
|
|
29,748
|
|
|
$
|
1
|
|
|
$
|
227,318
|
|
|
|
|
|
|
$
|
(4,360
|
)
|
|
$
|
(4,802
|
)
|
|
$
|
218,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Merger Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,826
|
|
|
|
14,826
|
|
Change in fair value of derivative
hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,312
|
)
|
|
|
|
|
|
|
(7,312
|
)
|
Hedge settlements reclassified to
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(745
|
)
|
|
|
|
|
|
|
(745
|
)
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Merger Balance at March 2,
2004
|
|
|
29,748
|
|
|
$
|
1
|
|
|
$
|
227,318
|
|
|
|
|
|
|
$
|
(12,417
|
)
|
|
$
|
10,024
|
|
|
$
|
224,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Merger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(166,432
|
)
|
|
|
(166,432
|
)
|
Merger adjustments
|
|
|
|
|
|
|
|
|
|
|
(135,401
|
)
|
|
|
|
|
|
|
12,417
|
|
|
|
156,408
|
|
|
|
33,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 3,
2004
|
|
|
29,748
|
|
|
$
|
1
|
|
|
$
|
91,917
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
91,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,619
|
|
|
|
53,619
|
|
Change 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
|
|
|
|
|
|
|
|
20,541
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2004
|
|
|
29,748
|
|
|
$
|
1
|
|
|
$
|
91,917
|
|
|
|
|
|
|
$
|
(11,630
|
)
|
|
$
|
53,619
|
|
|
$
|
133,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued
private equity offering
|
|
|
3,600
|
|
|
|
2
|
|
|
|
44,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,333
|
|
Common shares issued
restricted stock
|
|
|
2,267
|
|
|
|
1
|
|
|
|
31,741
|
|
|
|
(31,742
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unearned
compensation net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,129
|
|
|
|
|
|
|
|
|
|
|
|
25,129
|
|
Stock compensation
expense stock options net of income taxes
|
|
|
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
594
|
|
Contributed capital
Mariner Energy, LLC and Mariner Holdings, Inc.
|
|
|
|
|
|
|
|
|
|
|
3,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,057
|
|
Merger adjustments
|
|
|
|
|
|
|
|
|
|
|
(4,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,322
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,481
|
|
|
|
40,481
|
|
Other 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
|
|
|
|
|
|
|
|
32,035
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance 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
F-5
MARINER
ENERGY, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Merger
|
|
|
|
Pre-Merger
|
|
|
|
|
|
|
Period from
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
March 3,
|
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
2004
|
|
|
|
|
|
|
Year Ended
|
|
|
through
|
|
|
|
through
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
March 2,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands)
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40,481
|
|
|
$
|
53,619
|
|
|
|
$
|
14,826
|
|
|
$
|
38,244
|
|
Adjustments to reconcile net income
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
|
|
|
|
48,414
|
|
Stock 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
|
)
|
|
|
1,485
|
|
Accounts payable and accrued
liabilities
|
|
|
53,759
|
|
|
|
9,697
|
|
|
|
|
(3,974
|
)
|
|
|
1,208
|
|
Taxes payable to parent company and
deferred income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
165,444
|
|
|
|
135,243
|
|
|
|
|
20,295
|
|
|
|
88,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas properties
|
|
|
(237,729
|
)
|
|
|
(133,425
|
)
|
|
|
|
(15,264
|
)
|
|
|
(83,228
|
)
|
Proceeds from property conveyances
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
121,625
|
|
Additions to other property and
equipment
|
|
|
(10,088
|
)
|
|
|
(172
|
)
|
|
|
|
(78
|
)
|
|
|
(50
|
)
|
Restricted cash
|
|
|
|
|
|
|
620
|
|
|
|
|
1
|
|
|
|
14,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities
|
|
|
(247,799
|
)
|
|
|
(132,977
|
)
|
|
|
|
(15,341
|
)
|
|
|
52,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing 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
|
|
|
|
41,830
|
|
Cash and Cash Equivalents at
Beginning of Period
|
|
|
2,541
|
|
|
|
65,128
|
|
|
|
|
60,174
|
|
|
|
18,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash 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
F-6
MARINER
ENERGY, INC.
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 Mariner Energy, Inc. (the
Company) is an independent oil and gas exploration,
development and production company with principal operations in
the Gulf of Mexico, both shelf and deepwater, and the Permian
Basin in West Texas.
Organization On March 2, 2004, Mariner
Energy LLC, the parent company of Mariner Energy, Inc. (the
Company), merged with a subsidiary of MEI
Acquisitions Holdings, LLC, an affiliate of the private equity
funds Carlyle/Riverstone Global Energy and Power Fund II,
L.P. and ACON Investments LLC (the Merger). Prior to
the Merger, Joint Energy Development Investments Limited
Partnership (JEDI), which is an indirect
wholly-owned subsidiary of Enron Corp. (Enron),
owned approximately 96% of the common stock of Mariner Energy
LLC (see Note 2). In the Merger, all the shares of common
stock in Mariner Energy LLC were converted into the right to
receive cash and certain other consideration. As a result, JEDI
no longer owns any interest in Mariner Energy LLC, and the
Company is no longer affiliated with JEDI or Enron.
Simultaneously with the Merger, the Company obtained a revolving
line of credit with initial advances of $135 million from a
group of banks. The loan proceeds and an additional
$31.2 million of Company funds distributed to Mariner
Energy LLC were used to pay a portion of the gross Merger
consideration (which included repayment of $197.6 million
of Mariner Energy LLC debt outstanding at the time of the
Merger) and estimated transaction costs and expenses associated
with the Merger and bank financing. The Company also issued a
$10 million note and assigned a fully reserved receivable
valued at $1.9 million to JEDI as part of JEDIs
Merger consideration. In addition, pursuant to the Merger
agreement, JEDI agreed to indemnify the Company from certain
liabilities and the Company agreed to pay additional Merger
consideration contingent upon the outcome of a certain five well
drilling program that was completed in the second quarter of
2004. In September 2004, the Company paid approximately $161,000
as additional Merger consideration related to the five well
drilling program, and the Company believes it has fully
discharged its obligations thereunder.
The sources and uses of funds related to the Merger were as
follows:
|
|
|
|
|
Mariner Energy, Inc. bank loan
proceeds
|
|
$
|
135.0
|
|
Note payable issued by Mariner
Energy, Inc. to former parent
|
|
|
10.0
|
|
Equity from new owners
|
|
|
100.0
|
|
Distributions from Mariner Energy,
Inc.
|
|
|
31.2
|
|
Assignment by Mariner Energy, Inc.
of receivables
|
|
|
1.9
|
|
|
|
|
|
|
Total
|
|
$
|
278.1
|
|
|
|
|
|
|
Repayment of former parent debt
obligation
|
|
$
|
197.6
|
|
Merger consideration to
stockholders and warrant holders
|
|
|
73.5
|
|
Acquisition costs and other
expenses
|
|
|
7.0
|
|
|
|
|
|
|
Total
|
|
$
|
278.1
|
|
|
|
|
|
|
As a result of the change in control, accounting principles
generally accepted in the United States requires the Merger and
the resulting acquisition of Mariner Energy LLC by MEI
Acquisitions Holdings, LLC to be accounted for as a purchase
transaction in accordance with Statement of Financial Accounting
Standards No. 141, Business Combinations. Staff
Accounting bulletin No. 54 (SAB 54)
requires the application of push down accounting in
situations where the ownership of an entity has changed, meaning
that the post-transaction financial statements of the Company
reflect the new basis of accounting. Accordingly, the financial
F-7
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
statements as of December 31, 2004 reflect the
Companys fair value basis resulting from the acquisition
that has been pushed down to the Company. The aggregate purchase
price has been allocated to the underlying assets and
liabilities based upon the respective estimated fair values at
March 2, 2004 (date of Merger). The allocation of the
purchase price has been finalized. Carryover basis accounting
applies for tax purposes. Based on subsequent tax filings during
the year ended December 31, 2005, the Company recorded a
$4.3 million adjustment to the estimated tax basis at
acquisition. All financial information presented prior to
March 2, 2004 represents the basis of accounting used by
the pre-Merger entity. The period January 1, 2004 through
March 2, 2004 is referred to as 2004 Pre-Merger and the
period March 3, 2004 through December 31, 2004 is
referred to as 2004 Post-Merger.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed at the March 2,
2004 acquisition:
ALLOCATION
OF PURCHASE PRICE TO MARINER ENERGY, INC.
|
|
|
|
|
|
|
March 2,
|
|
|
|
2004
|
|
|
|
(In millions)
|
|
|
Oil and natural gas
properties proved
|
|
$
|
203.5
|
|
Oil and natural gas
properties unproved
|
|
|
25.2
|
|
Other property and equipment and
other assets
|
|
|
0.7
|
|
Current assets
|
|
|
83.2
|
|
Deferred tax asset(1)
|
|
|
9.1
|
|
Other assets
|
|
|
4.6
|
|
Accounts 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. |
The following reflects the unaudited pro forma results of
operations as though the Merger had been consummated at
January 1, 2004.
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
Ending December 31,
|
|
|
|
2004
|
|
|
|
(In millions)
|
|
|
Revenues and other income
|
|
$
|
214.2
|
|
Income before taxes and change in
accounting method
|
|
|
103.0
|
|
Net income
|
|
|
67.0
|
|
F-8
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
On February 10, 2005, in anticipation of the Companys
private placement of 31,452,500 shares of common stock (the
Private Equity Offering), Mariner Holdings, Inc.
(the direct parent of Mariner Energy, Inc.) and Mariner Energy
LLC (the direct parent of Mariner Holdings, Inc.) were merged
into Mariner Energy, Inc. and ceased to exist. The mergers of
Mariner Holdings, Inc. and Mariner Energy LLC into the Company
had no operational or financial impact on the Company; however,
intercompany receivables of $0.2 million and
$2.9 million in cash held by the affiliates were
transferred to the Company in February 2005 and accounted for as
additional paid-in capital.
On March 2, 2006, the Company completed a merger
transaction with Forest Energy Resources, Inc. As a result of
this merger, the Company acquired the offshore Gulf of Mexico
operations of Forest Oil Corporation and amended and restated
its credit facility. See Note 9, Subsequent
Events.
Net Income Per Share Basic earnings per share
is calculated by dividing net income by the weighted average
number of shares of common stock outstanding during the period.
Fully diluted earnings per share assumes the conversion of all
potentially dilutive securities and is calculated by dividing
net income by the sum of the weighted average number of shares
of common stock outstanding plus all potentially dilutive
securities.
F-9
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-Merger
|
|
|
Pre-Merger
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
March 3,
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
Year Ended
|
|
|
through
|
|
|
through
|
|
|
Year Ended
|
|
|
|
December 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
|
|
|
$
|
36,301
|
|
Cumulative effect of change in
accounting method, net of tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,943
|
|
Net income
|
|
$
|
40,481
|
|
|
$
|
53,619
|
|
|
$
|
14,826
|
|
|
$
|
38,244
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
32,668
|
|
|
|
29,748
|
|
|
|
29,748
|
|
|
|
29,748
|
|
Add dilutive securities
|
|
|
1,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average shares
outstanding and dilutive securities
|
|
|
33,767
|
|
|
|
29,748
|
|
|
|
29,748
|
|
|
|
29,748
|
|
Earnings per share
basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of
change in accounting method, net of tax effects
|
|
$
|
1.24
|
|
|
$
|
1.80
|
|
|
$
|
0.50
|
|
|
$
|
1.22
|
|
Cumulative effect of change in
accounting method, net of tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.07
|
|
Net income per share
basic
|
|
$
|
1.24
|
|
|
$
|
1.80
|
|
|
$
|
0.50
|
|
|
$
|
1.29
|
|
Earnings per share
diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of
change in accounting method, net of tax effects
|
|
$
|
1.20
|
|
|
$
|
1.80
|
|
|
$
|
0.50
|
|
|
$
|
1.22
|
|
Cumulative effect of change in
accounting method, net of tax effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.07
|
|
Net income per share
diluted
|
|
$
|
1.20
|
|
|
$
|
1.80
|
|
|
$
|
0.50
|
|
|
$
|
1.29
|
|
Effective March 3, 2005, we effected a stock split
increasing our authorized shares from 2,000,000 to 70,000,000
and our outstanding shares from 1,380 to 29,748,130. We also
changed the stated par value of our stock from $1 to
$.0001 per share. The accompanying financial and earnings
per share information has been restated utilizing the post-split
shares. Effective with our merger on March 2, 2004, all
company stock option plans and associated outstanding stock
options were canceled.
For the periods presented prior to 2005, Mariner Energy, Inc.
had no outstanding stock options so the basic and diluted
earnings per share were the same. In March 2005, 2,267,270
restricted stock awards were granted under the Equity
Participation Plan and 787,360 stock options were granted under
the Stock Incentive Plan. During the second and third quarters
of 2005, an additional 21,640 stock options were granted under
the Stock Incentive Plan for a total of 809,000 stock options
outstanding as of December 31, 2005. Outstanding restricted
stock and unexercised stock options diluted earnings by
$0.04 per share for the year ended December 31, 2005.
F-10
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 All short-term,
highly liquid investments that have an original maturity date of
three months or less are considered cash equivalents.
Receivables Substantially all of the
Companys receivables arise from sales of oil or natural
gas, or from reimbursable expenses billed to the other
participants in oil and gas wells for which the Company serves
as operator. We routinely assess the recoverability of all
material trade and other receivables to determine their
collectibility. We accrue a reserve on a receivable when, based
on the judgment of management, it is probable that a receivable
will not be collected and the amount of the reserve may be
reasonably estimated.
Oil and Gas Properties Oil and gas properties
are accounted for using the full-cost method of accounting. All
direct costs and certain indirect costs associated with the
acquisition, exploration and development of oil and gas
properties are capitalized. Amortization of oil and gas
properties is provided using the
unit-of-production
method based on estimated proved oil and gas reserves. No gains
or losses are recognized upon the sale or disposition of oil and
gas properties unless the sale or disposition represents a
significant quantity of oil and gas reserves, which would have a
significant impact on the depreciation, depletion and
amortization rate.
Under full cost accounting rules, total capitalized costs are
limited to a ceiling equal to the present value of future net
revenues, discounted at 10% per annum, plus the lower of cost or
fair value of unproved properties less income tax effects (the
ceiling limitation). We perform a quarterly ceiling
test to evaluate whether the net book value of our full cost
pool exceeds the ceiling limitation. If capitalized costs (net
of accumulated depreciation, depletion and amortization) less
related deferred taxes are greater than the discounted future
net revenues or ceiling limitation, a write-down or impairment
of the full cost pool is required. A write-down of the carrying
value of the full cost pool is a non-cash charge that reduces
earnings and impacts stockholders equity in the period of
occurrence and typically results in lower depreciation,
depletion and amortization expense in future periods. Once
incurred, a write-down is not reversible at a later date.
The ceiling test is calculated using natural gas and oil prices
in effect as of the balance sheet date and adjusted for
basis or location differential, held constant over
the life of the reserves. We use derivative financial
instruments that qualify for cash flow hedge accounting under
SFAS 133 to hedge against the volatility of natural gas
prices and, in accordance with SEC guidelines, we include
estimated future cash flows from our hedging program in our
ceiling test calculation. In addition, subsequent to the
adoption of SFAS 143, Accounting for Asset Retirement
Obligations, the future cash outflows associated with
settling asset retirement obligations are not included in the
computation of the discounted present value of future net
revenues for the purposes of the ceiling test calculation.
Unproved Properties The costs associated with
unevaluated properties and properties under development are not
initially included in the full cost amortization base and relate
to unproved leasehold acreage, seismic data, wells and
production facilities in progress and wells pending
determination together with interest costs capitalized for these
projects. Unevaluated leasehold costs are transferred to the
amortization base once determination has been made or upon
expiration of a lease. Geological and geophysical costs,
including
3-D seismic
data costs, are included in the full cost amortization base as
incurred when such costs cannot be associated with specific
unevaluated properties for which we own a direct interest.
Seismic data costs are associated with specific unevaluated
properties if the seismic data is acquired for the purpose of
evaluating acreage or trends covered by a leasehold interest
owned by us. We make this determination based on an analysis of
leasehold and seismic maps and discussions with our Chief
Exploration Officer. Geological and geophysical costs included
in unproved properties are transferred to the full cost
amortization base along with
F-11
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
the associated leasehold costs on a specific project basis.
Costs associated with ells in progress and wells pending
determination are transferred to the amortization base once a
determination is made whether or not proved reserves can be
assigned to the property. Costs of dry holes are transferred to
the amortization base immediately upon determination that the
well is unsuccessful. All items included in our unevaluated
property balance are assessed on a quarterly basis for possible
impairment or reduction in value.
Other Property and Equipment Depreciation of
other property and equipment is provided on a straight-line
basis over their estimated useful lives, which range from three
to twenty-two years.
Prepaid Expenses and Other Prepaid expenses
and other includes $3.3 million of oil and gas lease and
well equipment held in inventory at December 31, 2005. In
2005 and 2004, we reduced the carrying cost of our inventory by
$1.8 million and $1.0 million, respectively, to
account for a reduction in the estimated value, primarily
related to subsea trees and wellhead equipment held in
inventory. Other current assets at December 31, 2005 also
include prepaid insurance and seismic costs of
$13.9 million and deferred offering costs of
$3.8 million related to the merger with Forest Energy
Resources.
Other Assets Other assets as of
December 31, 2005 were primarily comprised of
$1.4 million of amortizable bank fees, $2.3 million in
non-current receivables and $4.3 million of prepaid seismic
costs. Other assets as of December 31, 2004 were primarily
comprised of $2.5 million of amortizable bank fees and
various deposits held by third parties. Accumulated amortization
as of December 31, 2005 and 2004 was $2.1 million and
$0.9 million, respectively.
Production Costs All costs relating to
production activities, including workover costs incurred to
maintain production, are charged to expense as incurred.
General and Administrative Costs and Expenses
Under the full cost method of accounting, a portion of our
general and administrative expenses that are attributable to our
acquisition, exploration and development activities are
capitalized as part of our full cost pool. These capitalized
costs include salaries, employee benefits, costs of consulting
services and other costs directly identified with acquisition
exploration and development activities. We capitalized general
and administrative costs related to our acquisition, exploration
and development activities, during 2005, 2004 and 2003 of
$5.3 million, $6.9 million and $6.6 million,
respectively.
We receive reimbursement for administrative and overhead
expenses incurred on behalf of other working interest owners on
properties we operate. These reimbursements totaling
$6.9 million, $4.4 million and $1.8 million for
the years ended December 31, 2005, 2004 and 2003,
respectively, were allocated as reductions to general and
administrative expenses incurred. Generally, we do not receive
any reimbursements or fees in excess of the costs incurred;
however, if we did, we would credit the excess to the full cost
pool to be recognized through lower cost amortization as
production occurs.
Income Taxes The Companys taxable
income is included in a consolidated United States income tax
return with Mariner Energy LLC. In February 2005, Mariner Energy
LLC was merged into Mariner Energy, Inc. Following the effective
date of that merger through March 2006, Mariner Energy, Inc.
will file its own income tax return. After the Forest merger in
March 2006 merger, the Companys taxable income will be
included in a consolidated United States income tax return with
Forest Energy Resources and the Companys other
subsidiaries. The intercompany tax allocation policy provides
that each member of the consolidated group compute a provision
for income taxes on a separate return basis. The Company records
its income taxes using an asset and liability approach which
results in the recognition of deferred tax assets and
liabilities for the expected future tax consequences of
temporary differences between the book carrying amounts and the
tax
F-12
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
bases of assets and liabilities. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount more likely than not to be recovered.
Capitalized Interest Costs The Company
capitalizes interest based on the cost of major development
projects which are excluded from current depreciation,
depletion, and amortization calculations. Capitalized interest
costs were approximately $0.7 million for 2005, $0.4 and
$-0- million for 2004 Post-merger and 2004 Pre-merger,
respectively, and $0.7 million for 2003.
Accrual for Future Abandonment Costs
Statement of Financial Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement Obligations,
addresses accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 was
adopted on January 1, 2003. SFAS No. 143 requires
that the fair value of a liability for an assets
retirement obligation be recorded in the period in which it is
incurred and the corresponding cost capitalized by increasing
the carrying amount of the related long-lived asset. The
liability is accreted to its then present value each period, and
the capitalized cost is depreciated over the useful life of the
related asset. If the liability is settled for an amount other
than the recorded amount, a gain or loss is recognized.
The adoption of SFAS 143 resulted in a January 1, 2003
cumulative effect adjustment to record (i) an
$11.3 million increase in the carrying values of proved
properties, and (ii) a $4.5 million increase in
current abandonment liabilities. The net impact of these items
was to record a pre-tax gain of $3.0 million as a
cumulative effect adjustment of a change in accounting principle
in the Companys statements of operations upon adoption on
January 1, 2003.
The following roll forward is provided as a reconciliation of
the beginning and ending aggregate carrying amounts of the asset
retirement obligation.
|
|
|
|
|
|
|
(In millions)
|
|
|
Abandonment liability as of
January 1, 2004 (Pre-Merger)
|
|
$
|
15.0
|
|
Liabilities Incurred
|
|
|
|
|
Claims Settled
|
|
|
(1.5
|
)
|
Accretion Expense
|
|
|
0.2
|
|
|
|
|
|
|
Abandonment Liability as of
March 2, 2004 (Pre-merger)
|
|
$
|
13.7
|
|
|
|
|
|
|
Abandonment Liability as of
March 3, 2004 (Post-merger)
|
|
$
|
13.7
|
|
Liabilities Incurred
|
|
|
11.5
|
|
Claims Settled
|
|
|
(2.7
|
)
|
Accretion Expense
|
|
|
1.5
|
|
|
|
|
|
|
Abandonment Liability as of
December 31, 2004 (Post-merger)(1)
|
|
$
|
24.0
|
|
|
|
|
|
|
Liabilities Incurred
|
|
|
28.6
|
|
Claims Settled
|
|
|
(5.5
|
)
|
Accretion Expense
|
|
|
2.4
|
|
|
|
|
|
|
Abandonment 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. |
F-13
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
Hedging Program The Company utilizes
derivative instruments in the form of natural gas and crude oil
price swap agreements and costless collar arrangements in order
to manage price risk associated with future crude oil and
natural gas production and fixed-price crude oil and natural gas
purchase and sale commitments. Such agreements are accounted for
as hedges using the deferral method of accounting. Gains and
losses resulting from these transactions, recorded at market
value, are deferred and recorded in Accumulated Other
Comprehensive Income (AOCI) as appropriate, until
recognized as operating income in the Companys Statement
of Operations as the physical production hedged by the contracts
is delivered.
The net cash flows related to any recognized gains or losses
associated with these hedges are reported as oil and gas
revenues and presented in cash flows from operations. If the
hedge is terminated prior to expected maturity, gains or losses
are deferred and included in income in the same period as the
physical production hedged by the contracts is delivered.
The conditions to be met for a derivative instrument to qualify
as a cash flow hedge are the following: (i) the item to be
hedged exposes the Company to price risk; (ii) the
derivative reduces the risk exposure and is designated as a
hedge at the time the derivative contract is entered into; and
(iii) at the inception of the hedge and throughout the
hedge period there is a high correlation of changes in the
market value of the derivative instrument and the fair value of
the underlying item being hedged.
When the designated item associated with a derivative instrument
matures, is sold, extinguished or terminated, derivative gains
or losses are recognized as part of the gain or loss on sale or
settlement of the underlying item. When a derivative instrument
is associated with an anticipated transaction that is no longer
expected to occur or if correlation no longer exists, the gain
or loss on the derivative is recognized in income to the extent
the future results have not been offset by the effects of price
or interest rate changes on the hedged item since the inception
of the hedge.
Revenue Recognition We use the entitlements
method of accounting for the recognition of natural gas and oil
revenues. Under this method of accounting, income is recorded
based on our net revenue interest in production or nominated
deliveries. We incur production gas volume imbalances in the
ordinary course of business. Net deliveries in excess of
entitled amounts are recorded as liabilities, while net under
deliveries are reflected as assets. Imbalances are reduced
either by subsequent recoupment of
over-and-under
deliveries or by cash settlement, as required by applicable
contracts. Production imbalances are
marked-to-market
at the end of each month at the lowest of (i) the price in
effect at the time of production; (ii) the current market
price; or (iii) the contract price, if a contract is in
hand.
The Companys gas balancing assets and liabilities are not
material as oil and gas volumes sold are not significantly
different from the Companys share of production.
Financial Instruments The Companys
financial instruments consist of cash and cash equivalents,
receivables, payables and outstanding debt. The carrying amount
of the Companys other instruments noted above approximate
fair value due to the short-term nature of these investments.
The carrying amount of our long-term debt approximates fair
value as the interest rates are generally indexed to current
market rates.
Use of Estimates in the Preparation of Financial
Statements The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
F-14
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
Major Customers During the twelve months
ended December 31, 2005, sales of oil and gas to three
purchasers accounted for 24%, 10% and 15% of total revenues.
During the year ended December 31, 2004, sales of oil and
gas to three purchasers, including an Enron affiliate, accounted
for 27%, 18% and 12% of total revenues. During the year ended
December 31, 2003, sales of oil and gas to three
purchasers, including an Enron affiliate, accounted for 34%, 19%
and 14% of total revenues. Management believes that the loss of
any of these purchasers would not have a material impact on the
Companys financial condition, results of operations or
cash flows.
Stock Options The Company (as allowed by
SFAS No. 123 Accounting for Stock Based
Compensation as amended by SFAS No. 148
Accounting for Stock-Based Compensation
Transition and Disclosure) has historically applied APB
Opinion No. 25 Accounting for Stock Issued to
Employees for its grants made pursuant to its employee
stock option plans. The Company applies APB Opinion 25 and
related interpretations in accounting for the Stock Option Plan.
Accordingly, no compensation cost has been recognized for the
Stock Option Plan. Had compensation cost for the Stock Option
Plan been determined based on the fair value at the grant date
for awards under the Stock Option Plan consistent with the
method of SFAS No. 123, the Companys net income
for the years ended December 31, 2004 and 2003 would not
have changed.
Effective January 1, 2005, we adopted the fair value
expense recognition provisions of SFAS 123(R). Using the
modified retrospective application, the Company would be
required to give effect to the fair-value based method of
accounting for awards granted, modified, or settled in cash in
fiscal years beginning after December 15, 1994 on a basis
consistent with the pro forma disclosures required for those
periods by Statement 123, as amended by FASB Statement
No. 14 Accounting for Stock Based
Compensation Transition and Disclosure. Since
the Company had no employee stock options plans in effect at
January 1, 2005, adoption of this method is expected to
have no impact on historical information presented by the
Company.
As a result of the adoption of the above described
SFAS No. 123(R), we recorded compensation expense for
the fair value of restricted stock that was granted pursuant to
our Equity Participation Plan (see Management of
Mariner Equity Participation Plan) and for
subsequent grants of stock options or restricted stock made
pursuant to the Mariner Energy, Inc. Stock Incentive Plan (see
Management of Mariner Stock Incentive
Plan). We recorded compensation expense for the
restricted stock grants equal to their fair value at the time of
the grant, amortized pro rata over the restricted period.
General and administrative expense for the year ended
December 31, 2005 includes $25.7 million of
compensation expense related to restricted stock granted in 2005
and $0.6 million of compensation expense related to stock
options outstanding as of December 31, 2005. For the year
ended December 31, 2004, we recorded no stock compensation
expense related to either restricted stock or stock options.
Recent Accounting Pronouncements In December
2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 153,
Exchanges of Nonmonetary Assets, an Amendment of APB
Opinion No. 29, which provides that all nonmonetary
asset exchanges that have commercial substance must be measured
based on the fair value of the assets exchanged and any
resulting gain or loss recorded. An exchange is defined as
having commercial substance if it results in a significant
change in expected future cash flows. Exchanges of operating
interests by oil and gas producing companies to form a joint
venture continue to be exempted. APB Opinion No. 29
previously exempted all exchanges of similar productive assets
from fair value accounting, therefore resulting in no gain or
loss recorded for such exchanges. SFAS No. 153 became
effective for fiscal periods beginning on or after June 15,
2005. Accordingly, we adopted this statement effective
June 30, 2005
F-15
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
and it did not have a material impact on our consolidated
financial position, results of operations or cash flows.
In March 2005, the FASB issued Interpretation (FIN)
No. 47, Accounting for Conditional Asset
Retirement Obligations, which clarifies that an entity
is required to recognize a liability for the fair value of a
conditional asset retirement obligation when the obligation is
incurred generally upon acquisition, construction,
or development
and/or
through the normal operation of the asset, if the fair value of
the liability can be reasonably estimated. A conditional asset
retirement obligation is a legal obligation to perform an asset
retirement activity in which the timing
and/or
method of settlement are conditional on a future event that may
or may not be within the control of the entity. Uncertainty
about the timing
and/or
method of settlement is required to be factored into the
measurement of the liability when sufficient information exists.
We adopted FIN No. 47 on December 31, 2005 and it
did not have a material impact on our consolidated financial
position, results of operations or cash flows.
In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections a
replacement of APB Opinion No. 20 and FASB Statement
No. 3. SFAS No. 154 changes the
requirements for the accounting and reporting of a change in
accounting principle, including voluntary changes in accounting
principle and changes required by an accounting pronouncement
that does not include specific transition provisions.
SFAS No. 154 requires retrospective application to
prior period financial statements of changes in accounting
principle. If impractical to determine either the
period-specific effects or the cumulative effect of the change,
the new accounting principle would be applied as if it were
adopted prospectively from the earliest date practical. The
correction of errors in prior period financial statements should
be identified as a restatement.
SFAS No. 154 is effective for fiscal years beginning
after December 15, 2005. Accordingly, adopted this
statement effective January 1, 2006 and, upon adoption, it
did not have a material impact on our consolidated financial
position, results of operations or cash flows.
In September 2005, the Emerging Issues Task Force (EITF) reached
a consensus on Issue
No. 04-13,
Accounting for Purchases and Sales of Inventory with the
Same Counterparty. EITF
Issue 04-13
requires that purchases and sales of inventory with the same
counterparty in the same line of business should be accounted
for as a single non-monetary exchange, if entered into in
contemplation of one another. The consensus is effective for
inventory arrangements entered into, modified or renewed in
interim or annual reporting periods beginning after
March 15, 2006. We do not expect the adoption of this EITF
Issue to have a material impact on our consolidated financial
position, results of operations or cash flows.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140. SFAS No. 155 simplifies
the accounting for certain hybrid financial instruments,
eliminates the FASBs interim guidance which provides that
beneficial interests in securitized financial assets are not
subject to the provisions of SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, and eliminates the restriction on the passive
derivative instruments that a qualifying special-purpose entity
may hold. SFAS No. 155 is effective for all financial
instruments acquired or issued after the beginning of an
entitys first fiscal year that begins after
September 15, 2006. We do not expect this Statement to have
a material impact on our consolidated financial position,
results of operations or cash flows.
|
|
2.
|
Related
Party Transactions
|
Organization and Ownership of the Company
Until February 10, 2005, the Company was a wholly-owned
subsidiary of Mariner Holdings, Inc., which was a wholly-owned
subsidiary of Mariner Energy LLC.
F-16
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
From April 1, 1996, until October 1998, Mariner Holdings,
Inc. was a majority-owned subsidiary of JEDI, an affiliate of
Enron. In October 1998, JEDI and other stockholders of Mariner
Holdings, Inc. exchanged all of their common shares of Mariner
Holdings, Inc. for an equivalent ownership percentage in Mariner
Energy LLC. From October 1998 until the Merger, Mariner Energy
LLC was a majority-owned subsidiary of JEDI.
During the period of JEDIs ownership of the Company,
Mariner Energy LLC and the Company entered into various
financing and operating transactions, such as oil and gas sale
transactions, commodity price hedge transactions, and financial
transactions with affiliates of Enron. Below is a summary of key
transactions between the Company or Mariner Energy LLC and
Enron-affiliated entities.
On February 10, 2005, in anticipation of the Private Equity
Offering, Mariner Holdings, Inc. (the direct parent of Mariner
Energy, Inc.) and Mariner Energy LLC (the direct parent of
Mariner Holdings, Inc.) were merged into Mariner Energy, Inc.
and ceased to exist. The mergers of Mariner Holdings, Inc. and
Mariner Energy LLC into the Company had no operational or
financial impact on the Company.
Mariner
Energy LLC
Enron Affiliate Term Loan In March 2000,
Mariner Energy LLC established an unsecured term loan with Enron
North America Corp. (ENA), an affiliate of Enron, to
repay amounts outstanding under various affiliate credit
facilities at Mariner Energy LLC and the Company and provide
additional working capital. The loan bore interest at 15%, which
interest accrued and was added to the loan principal. In
conjunction with the loan, warrants were issued to ENA providing
the right to purchase up to 900,000 common shares of Mariner
Energy LLC for $0.01 per share. The loan and warrants were
subsequently assigned by ENA to another Enron affiliate. In
connection with the Merger, the loan balance, which was
approximately $192.8 million as of December 31, 2003,
was repaid in full, and the warrants were exercised and the
holders received their pro rata portion of the Merger
consideration.
Mariner
Energy, Inc.
As of March 2, 2004 the Company is no longer affiliated
with Enron.
Oil and Gas Production Sales to Enron
Affiliates During the years ending
December 31, 2004 and 2003, sales of oil and gas production
to Enron affiliates were $62.6 million and
$32.6 million, respectively. These sales were generally
made on one to three month contracts. At the time Enron filed
its petition for bankruptcy protection in December 2001, the
Company immediately ceased selling its physical production to
Enron Upstream Company, LLC, an Enron affiliate; however, it
continued to sell its production to Bridgeline Gas Marketing,
LLC, another Enron affiliate. No default in payment by
Bridgeline has occurred. As of December 31, 2001, after
Enron filed for bankruptcy protection, the Company had an
outstanding receivable of $3.0 million from ENA Upstream
related to sales of production. This amount was not paid as
scheduled. In 2001, we fully allowed for its uncollectability
and reduced the outstanding receivable to $-0-. The Company
submitted a proof of claim to the bankruptcy court presiding
over the Enron bankruptcy for amounts owed to it by ENA
Upstream. As part of the Merger consideration, the Company
assigned this and another receivable to JEDI at an agreed value
of approximately $1.9 million.
Price Risk Management Activities The Company
engages in price risk management activities from time to time.
These activities are intended to manage its exposure to
fluctuations in commodity prices for natural gas and crude oil.
The Company primarily utilizes price swaps as a means to manage
such risk. Prior to the Enron bankruptcy, all of the
Companys hedging contracts were with ENA. As a result of
ENAs
F-17
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
bankruptcy, the November 2001 through April 30, 2002
settlements for oil and gas were not paid when due. On
May 14, 2002, the Company elected under its ISDA Master
Agreement with ENA to terminate all open hedge contracts. The
effect of this termination was to fix the nominal value on all
remaining contracts on May 14, 2002. Subsequent to this
termination, the value of all oil and natural gas unpaid hedge
contracts was $7.7 million. In accordance with Statement of
Financial Accounting Standards (SFAS) No. 133
Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137 and
No. 138, the Company de-designated its contracts effective
December 2, 2001 and recognized all market value changes
subsequent to such de-designation in its earnings. The value
recorded up to the time of de-designation and included in
Accumulated Other Comprehensive Income (AOCI) was
reclassified out of AOCI and into earnings as the original
corresponding production, as hedged by the contracts was
produced. As of December 31, 2003, approximately
$25.8 million was reclassified to earnings.
As of March 2, 2004 the Company is no longer affiliated
with ENA. The following table sets forth the results of hedging
transactions during the periods indicated that were made with
ENA (all amounts shown are non-cash items):
|
|
|
|
|
|
|
|
|
|
|
Year Ending
|
|
|
|
December 31,
|
|
|
|
2004
|
|
|
2003
|
|
|
Natural gas quantity hedged (MMbtu)
|
|
|
|
|
|
|
3,650,000
|
|
Increase (decrease) in natural gas
sales (thousands)
|
|
|
|
|
|
$
|
2,603
|
|
Crude oil quantity hedged (MBbls)
|
|
|
|
|
|
|
|
|
Increase (decrease) in crude oil
sales (thousands)
|
|
|
|
|
|
|
|
|
Supplemental ENA Affiliate Data provided
below is supplemental balance sheet and income statement
information for affiliate entities reflecting net balances, net
of any allowances:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
(Amount in millions)
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
Related Party Receivable:
|
|
|
|
|
|
|
|
|
Derivative Asset
|
|
$
|
|
|
|
$
|
|
|
Settled Hedge Receivable
|
|
|
|
|
|
|
|
|
Oil and Gas Receivable
|
|
|
|
|
|
|
|
|
Accrued Liabilities:
|
|
|
|
|
|
|
|
|
Transportation Contract
|
|
|
|
|
|
|
0.1
|
|
Service Agreement
|
|
|
|
|
|
|
0.4
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
|
|
|
$
|
.001
|
|
Additional Paid in Capital
|
|
|
|
|
|
|
227.3
|
|
Accumulated other Comprehensive
Income
|
|
$
|
|
|
|
$
|
227.3
|
|
F-18
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
|
|
|
2003
|
|
|
Income Statement Data
|
|
|
|
|
|
|
|
|
Oil and Gas Sales
|
|
$
|
|
|
|
$
|
32.6
|
|
General and Administrative Expenses
|
|
|
|
|
|
|
0.4
|
|
Transportation Expenses
|
|
|
|
|
|
|
1.9
|
|
Unrealized gain and other non-cash
derivative instrument adjustments
|
|
|
|
|
|
|
|
|
Post-Merger
Related Party Transactions
In connection with the Merger, Mariner Energy LLC entered into
management agreements with two affiliates of MEI Acquisitions
Holdings, LLC, the Companys post-Merger parent company.
These agreements provided for the payment by Mariner Energy LLC
of an aggregate of $2.5 million to the affiliates in
connection with the provision of management services. Such
payments have been made. Mariner Energy LLC also entered into
monitoring agreements with two affiliates of MEI Acquisitions
Holdings, LLC, providing for the payment by Mariner Energy LLC
of an aggregate of one percent of its annual EBITDA to the
affiliates in connection with certain monitoring activities.
Under the terms of the monitoring agreements, the affiliates
provided financial advisory services in connection with the
ongoing operations of Mariner subsequent to the Merger.
Effective February 7, 2005, these contracts were terminated
in consideration of lump sum cash payments by Mariner totalling
$2.3 million. The Company recorded the termination payments
as general and administrative expenses for the year ended
December 31, 2005.
In March 2003, the Company sold its remaining 25% working
interest in its Falcon and Harrier discoveries and surrounding
blocks, located in East Breaks area in the western Gulf of
Mexico, for $121.6 million. The Company retained a
41/4 percent
overriding royalty interest on seven non-producing blocks. The
proceeds from the sale were used for debt reduction, capital
expenditures, and other corporate purposes. At March 31,
2003, the Falcon and Harrier projects had approximately
44 Bcfe assigned as proven oil and gas reserves to the
Companys interest. No gain or loss was recognized as a
result of this sale, as the sale did not significantly affect
the Companys depletion rate.
Bank Credit Facility On March 2, 2004,
simultaneously with the closing of the Merger, the Company
obtained a revolving line of credit with initial advances of
$135 million from a group of seven banks (since reduced to
six banks) led by Union Bank of California, N.A. and BNP
Paribas. Proceeds of these advances were used to pay a portion
of the Merger consideration (which included repayment of the
debt of Mariner Energy LLC) and transaction costs and
expenses associated with the Merger. The bank credit facility
provides up to $150 million of revolving borrowing
capacity, subject to a borrowing base, and a $25 million
term loan. The initial advance was made in two tranches: a
$110 million Tranche A and a $25 million
Tranche B.
The Tranche A revolving note matures on March 2, 2007.
The borrowing capacity under the Tranche A note is subject
to a borrowing base initially set at $110 million. The
borrowing base initially is subject to
F-19
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
redetermination by the lenders quarterly. After the
Tranche B note is repaid, provided that at least
$10 million of unused availability exists under
Tranche A, the borrowing base will be redetermined
semi-annually. The borrowing base is based upon the evaluation
by the lenders of the Companys oil and gas reserves and
other factors. Any increase in the borrowing base requires the
consent of all lenders. On August 5, 2005, the lenders
agreed to increase the borrowing base to $170 million. On
January 20, 2006, the lenders agreed to increase the
borrowing base to $185 million.
Borrowings under the Tranche A note bear interest, at the
option of the Company, at a rate of (i) LIBOR plus 2.00% to
2.75% depending upon utilization, or (ii) the greater of
(a) the Federal Funds Rate plus 0.50% or (b) the
Reference Rate (prime rate), plus 0.00% to 0.50% depending upon
utilization.
Borrowings under the Tranche B note bear interest at a rate
equal to the greater of (a) the Federal Funds Rate plus
0.50% or (b) the Reference Rate, plus 3.00%. In July 2004
(prior to its December 2, 2004 maturity date) the
outstanding Tranche B note was converted to a
Tranche A note, and all subsequent advances under the
credit facility are Tranche A advances. Once repaid, the
Tranche B advances may not be reborrowed.
Substantially all of the Companys assets, other than the
assets securing the term promissory note issued to JEDI, are
pledged to secure the bank credit facility. The Company must pay
a commitment fee of 0.25% to 0.50% per year on the unused
availability under the bank credit facility, depending upon
utilization.
The bank credit facility contains various restrictive covenants
and other usual and customary terms and conditions of a
revolving bank credit facility, including limitations on the
payment of cash dividends and other restricted payments,
limitations on the incurrence of additional debt, prohibitions
on the sale of assets, and requirements for hedging a portion of
the Companys oil and natural gas production. Financial
covenants require the Company to, among other things:
|
|
|
|
|
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.
|
The bank credit facility also contains customary events of
default, including the occurrence of a change of control or
default in the payment or performance of any other indebtedness
equal to or exceeding $2.0 million.
In connection with the merger with Forest Energy Resources on
March 2, 2006, the Company amended and restated the
existing bank credit facility to, among other things, increase
maximum credit availability to $500 million, with a
$400 million borrowing base as of that date, add an
additional dedicated $40 million letter of credit facility,
and add Mariner Energy Resources, Inc. as a co-borrower. Please
see Note 9,
F-20
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
Subsequent Events. The financial covenants
were modified under the amended and restated bank credit
facility to require the Company to, among other things:
|
|
|
|
|
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.
|
The Company is in compliance with the financial covenants under
the bank credit facility as of December 31, 2005.
As of December 31, 2005, $152.0 million was
outstanding under the bank credit facility, and the weighted
average interest rate was 7.15%. Net proceeds of approximately
$38 million generated by the private placement in March
2005 were used to repay existing bank debt.
As of December 31, 2004, $105.0 million was
outstanding under the bank credit facility, and the weighted
average interest rate was 5.20%. The borrowing base under the
bank credit facility is $135 million at December 31,
2004.
JEDI
Term Promissory Note
As part of the Merger consideration payable to JEDI, the Company
issued a term promissory note to JEDI in the amount of
$10 million. The note matured on March 2, 2006, and
bore interest, payable in kind at our option, at a rate of
10% per annum until March 2, 2005, and 12% per
annum thereafter unless paid in cash in which event the rate
remained 10% per annum. We chose to pay interest in cash
rather than in kind. The JEDI note was secured by a lien on
three of the Companys non-proven, non-producing properties
located in the Outer Continental Shelf of the Gulf of Mexico.
The Company could offset against the note the amount of certain
claims for indemnification that could be asserted against JEDI
under the terms of the merger agreement. The JEDI term
promissory note contained customary events of default, including
the occurrence of an event of default under the Companys
bank credit facility.
In March 2005, the Company repaid $6.0 million of the note
utilizing proceeds from the private placement in March 2005. The
$4.0 million balance remaining on the JEDI note at
December 31, 2005 was repaid in full on its maturity date
of March 2, 2006.
Cash
Interest Expense
Cash paid for interest was $6.1 million for 2005,
$5.4 million and -0- million for 2004 Post-Merger and 2004
Pre-Merger, respectively, and $4.0 million for 2003.
We have adopted an Equity Participation Plan that provided for
the one-time grant at the closing of our private equity
placement on March 11, 2005 of 2,267,270 restricted shares
of our common stock to certain of our employees. No further
grants will be made under the Equity Participation Plan,
although persons who receive such a grant will be eligible for
future awards of restricted stock or stock options under our
Amended and Restated Stock Incentive Plan described below. We
intended the grants of restricted stock under the Equity
Participation Plan to serve as a means of incentive compensation
for performance and not primarily as an opportunity to
participate in the equity appreciation of our common stock.
Therefore, Equity Participation Plan grantees did not pay any
consideration for the common stock they received, and we
received no remuneration
F-21
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
for the stock. Grantees are entitled to vote, and accrue
dividends on, the restricted stock prior to vesting; provided,
however 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. In connection with the merger with
Forest Energy Resources, (i) the 463,656 shares of
restricted stock held by non-executive employees vested, and
(ii) each of Mariners executive officers 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.
We adopted a Stock Incentive Plan which became effective
March 11, 2005 and was amended and restated on
March 2, 2006. Awards to participants under the Amended and
Restated Stock Incentive Plan may be made in the form of
incentive stock options, or ISOs, non-qualified stock options or
restricted stock. The participants to whom awards are granted,
the type or types of awards granted to a participant, the number
of shares covered by each award, the purchase price, conditions
and other terms of each award are determined by the Board of
Directors or a committee thereof. A total of 6.5 million
shares of Mariners common stock is subject to the Amended
and Restated Stock Incentive Plan. No more than
2.85 million shares issuable upon exercise of options or as
restricted stock can be issued to any individual. As of
March 17, 2006, approximately 5.7 million shares
remained available under the Amended and Restated Stock
Incentive Plan for future issuance to participants. Unless
sooner terminated, no award may be granted under the Amended and
Restated Stock Incentive Plan after October 12, 2015.
For the two years ended December 31, 2004 and 2003, Mainer
Energy, Inc. had no outstanding stock options. During the year
ended December 31, 2005, we granted 2,267,270 shares
of restricted stock and options to purchase 809,000 shares
of stock. We also issued 3.6 million shares of common stock
in March 2005 in connection with our private placement offering.
The fair value of the restricted shares at date of grant has
been recorded in stockholders equity as unearned
compensation and is being amortized over the vesting period as
compensation expense. We recorded compensation expense of
$25.7 million in the year ended December 31, 2005
related to the restricted stock granted in 2005 and stock
options outstanding as of December 31, 2005. The weighted
average fair value of options granted during the year ended
December 31, 2005 was $2.69. For the year ended
December 31, 2004, we recorded no stock compensation
expense related to either restricted stock or stock options.
The following table is a summary of stock option activity for
the year ended and as of December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Outstanding at beginning of year
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
809,000
|
|
|
|
14.02
|
|
Exercised
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
809,000
|
|
|
$
|
14.02
|
|
|
|
|
|
|
|
|
|
|
Outstanding exercisable at end of
year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for future grant as
options or restricted stock
|
|
|
1,191,000
|
|
|
|
|
|
F-22
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
The following table summarizes certain information about stock
options outstanding at December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
|
|
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
$14.00-$17.00
|
|
|
809,000
|
|
|
|
9.2
|
|
|
$
|
14.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes shares of restricted stock
granted for the year ended December 31, 2005:
|
|
|
|
|
|
|
Restricted
|
|
|
|
Shares
|
|
|
Outstanding at beginning of year
|
|
|
|
|
Granted
|
|
|
2,267,270
|
|
Vested
|
|
|
|
|
Forfeited
|
|
|
|
|
Outstanding at end of year
|
|
|
2,267,270
|
|
Outstanding 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 The
Company provides all full-time employees (who are at least
18 years of age) participation in the Employee Capital
Accumulation Plan (the Plan) which is comprised of a
contributory 401(k) savings plan and a discretionary profit
sharing plan. Under the 401(k) feature, the Company, at its sole
discretion, may contribute an employer-matching contribution
equal to a percentage not to exceed 50% of each eligible
participants matched salary reduction contribution as
defined by the Plan. Under the discretionary profit sharing
contribution feature of the Plan, the Companys
contribution, if any, must be determined annually and must be 4%
of the lesser of the Companys operating income or total
employee compensation and shall be allocated to each eligible
participant pro rata to his or her compensation. During the
years ended December 31, 2005, 2004 and 2003, the Company
contributed $240,650, $193,521 and $159,241, respectively, to
the Plan related to the discretionary feature. Currently there
are no plans to terminate the Plan.
Overriding Royalty Interests Pursuant to
agreements, certain employees and consultants of the Company are
entitled to receive, as incentive compensation, overriding
royalty interests (Overriding Royalty Interests) in
certain oil and gas prospects acquired by the Company. Such
Overriding Royalty Interests entitle the holder to receive a
specified percentage of the gross proceeds from the future sale
of oil and gas (less production taxes), if any, applicable to
the prospects. Cash payments made by the Company to current
employees and consultants with respect to Overriding Royalty
Interests were $2.6 million for 2005, $2.5 million and
$0.2 million for 2004 Post-Merger and 2004 Pre-Merger,
respectively, and $2.0 million for 2003.
F-23
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 The Company
leases certain office facilities and other equipment under
long-term operating lease arrangements. Minimum rental
obligations under the Companys operating leases in effect
at December 31, 2005 are as follows (in thousands):
|
|
|
|
|
2006
|
|
$
|
1,161.4
|
|
2007
|
|
|
942.7
|
|
2008
|
|
|
941.0
|
|
2009
|
|
|
941.0
|
|
2010 and thereafter
|
|
|
3,448.1
|
|
Rental expense, before capitalization, was approximately
$509,000 for 2005, $486,000 and $78,000 for 2004 Post-Merger and
2004 Pre-Merger, respectively, and $569,000 for 2003.
Hedging Program The energy markets have
historically been very volatile, and there can be no assurance
that oil and gas prices will not be subject to wide fluctuations
in the future. In an effort to reduce the effects of the
volatility of the price of oil and natural gas on the
Companys operations, management has elected to hedge oil
and natural gas prices from time to time through the use of
commodity price swap agreements and costless collars. While the
use of these hedging arrangements limits the downside risk of
adverse price movements, it also limits future gains from
favorable movements.
As of December 31, 2005, the Company had the following
fixed price swaps outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2005 Fair Value
|
|
Fixed 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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005, the Company had the following
costless collars outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Fair Value
|
|
Fixed Price Swaps
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
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
The Company has not entered into any hedge transactions
subsequent to December 31, 2005.
As of December 31, 2004, the Company had the following
fixed price swaps outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2005 Fair Value
|
|
Fixed 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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2004, the Company had the following
costless collars outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Fair Value
|
|
Fixed Price Swaps
|
|
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
|
|
|
|
0.4
|
|
January 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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has reviewed the financial strength of its
counterparties and believes the credit risk associated with
these swaps and costless collars to be minimal.
F-25
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
The following table sets forth the results of hedging
transactions during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Merger
|
|
|
Pre-Merger
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
March 3,
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
Year Ended
|
|
|
through
|
|
|
through
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 2,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands except per share data)
|
|
|
Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity hedged (MMbtu)
|
|
|
15,917,159
|
|
|
|
16,723,063
|
|
|
|
2,100,000
|
|
|
|
25,520,000
|
|
Increase (Decrease) in Natural Gas
Sales (in thousands)
|
|
$
|
(33,010
|
)
|
|
$
|
(12,223
|
)
|
|
$
|
1,431
|
|
|
$
|
(27,097
|
)
|
Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity hedged (MBbls)
|
|
|
836
|
|
|
|
1,375
|
|
|
|
179
|
|
|
|
730
|
|
Increase (Decrease) in Crude Oil
Sales (in thousands)
|
|
$
|
(20,789
|
)
|
|
$
|
(16,221
|
)
|
|
$
|
(686
|
)
|
|
$
|
(4,969
|
)
|
The Companys hedge transactions resulted in a
$53.8 million loss for 2005 and a $28.4 million loss
for 2004 Post-Merger and a $0.7 million gain for 2004
Pre-Merger. $4.5 million of the 2005 loss and
$7.9 million of the Post-Merger loss relates to the hedge
liability recorded at the merger date. In addition, in 2003 the
Company recorded $3.2 million of expense related to the
settlement of derivatives that were not accounted for as hedges.
Other Commitments In the ordinary course of
business, the Company enters into long-term commitments to
purchase seismic data. The minimum annual payments under these
contracts are $14.5 and $6.5 million in 2006 and 2007,
respectively. In 2005, the Company entered into a joint
exploration agreement granting the joint venture partner the
right to participate in prospects covered by certain seismic
data licensed by the Company in return for $6.0 million in
scheduled payments to be received by the Company over a
two-year
period. Subsequent to December 31, 2005, the Company
entered into four additional long-term commitments to purchase
seismic data in the amount of $26.9 million.
Deepwater Rig In February 2000, the Company
and Noble Drilling Corporation entered into an agreement whereby
the Company committed to using a Noble deepwater rig for a
minimum of 660 days over a five-year period. The Company
assigned to Noble working interests in seven of the
Companys deepwater exploration prospects and agreed to pay
Nobles share of certain costs of drilling the initial test
well on the prospects. As of December 31, 2003, the Company
had no further obligation under the agreement for the use of the
rig and had drilled five of the seven prospects. Subsequent to
year end 2003, the Company and Noble Drilling Corporation agreed
to exchange Nobles interest in one of the two remaining
undrilled prospects for an interest in another prospect drilled
in the first quarter of 2004 and exchange Nobles carried
working interest in the other remaining undrilled prospect for a
larger un-carried working interest in the prospect, and the
Company agreed to use one of two Noble drilling rigs for an
aggregate of 75 days. Mariner has no further obligations
under this agreement.
MMS Appeal Mariner operates numerous
properties in the Gulf of Mexico. Two of such properties were
leased from the Mineral Management Service subject to the 1996
Royalty Relief Act. This Act relieved the obligation to pay
royalties on certain leases until a designated volume is
produced. These leases contained language that limited royalty
relief if commodity prices exceeded predetermined levels. For
the years 2000,
F-26
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
2001, 2003, 2004 and 2005, commodity prices exceeded the
predetermined levels. The Company believes the MMS did not have
the authority to set pricing limits in these leases and has
filed an administrative appeal with the MMS regarding this
matter and withheld payment of royalties on the leases. The
Company has recorded a liability for 100% of the exposure on
this matter which on December 31, 2005 was
$16.0 million. In April 2005, the MMS denied the
administrative appeal. On October 3, 2005, we filed suit in
the U.S. District Court for the Southern District of Texas
seeking judicial review of the dismissal of our appeal by the
Board of Land Appeals.
Insurance Matters In September 2004, the
Company incurred damage from Hurricane Ivan that affected its
Mississippi Canyon 66 (Ochre) and Mississippi Canyon 357 fields.
Production from Mississippi Canyon 357 was shut-in until March
2005, when necessary repairs were completed and production
recommenced. Production from Ochre is currently shut-in awaiting
rerouting of umbilical and flow lines to another host platform.
Prior to Hurricane Ivan, this field was producing at a net rate
of approximately 6.5 MMcfe per day. Production from Ochre
is expected to recommence in the second quarter of 2006. In
addition, a semi-submersible rig on location at the
Companys Viosca Knoll 917 (Swordfish) field was blown off
location by the hurricane and incurred damage. Until we are able
to complete all the repair work and submit costs to the
insurance underwriters for review, the full extent of our
insurance recovery and the resulting net cost to the Company is
unknown. We expect the net cost to the Company to be at least
equal to the amount of our annual deductible of
$1.25 million plus the single occurrence deductible of
$.375 million.
In August 2005 and September 2005, Mariner incurred damage from
Hurricanes Katrina and Rita that affected several of its
offshore fields. Hurricane Katrina caused minor damage to our
owned platforms and facilities. Production that was shut-in by
the hurricane was recommenced within three weeks of the
hurricane, with the exception of two minor non-operated fields.
However, Hurricane Katrina inflicted damage to host facilities
for our Pluto, Rigel and Ochre projects that is expected to
delay
start-up of
these projects until the second quarter of 2006 for Pluto and
Ochre. Rigel production began in the first quarter of 2006.
Hurricane Rita caused minor damage to our owned platforms and
some damage to certain host facilities of our development
projects. Production shut-in as a result of Hurricane Rita fully
recommenced within three weeks of the hurricane, with the
exception of one minor field. We cannot estimate a range of loss
arising from the hurricanes until we are able to more completely
assess the impacts on our properties and the properties of our
operational partners. Until we are able to complete all the
repair work and submit costs to our insurance underwriters for
review, the full extent of our insurance recovery and the
resulting net cost to us for Hurricanes Katrina and Rita will be
unknown. For the insurance period ending September 30,
2005, we carried a $3.0 million annual deductible and a
$.375 million single occurrence deductible.
Effective March 2, 2006, Mariner has been accepted as a
member of OIL Insurance, Ltd., or OIL, an industry insurance
cooperative, through which the assets of both Mariner and the
Forest Gulf of Mexico operations are insured. The coverage
contains a $5 million annual per occurrence deductible for
the combined assets and a $250 million per occurrence loss
limit. However, if a single event causes losses to OIL insured
assets in excess of $1 billion in the aggregate (effective
June 1, 2006, such amount will be reduced to
$500 million), amounts covered for such losses will be
reduced on a pro rata basis among OIL members. Pending review of
our insurance program, we have maintained our commercially
underwritten insurance coverage for the pre-merger Mariner
assets which expires on September 30, 2006. This coverage
contains a 3 million annual deductible and a $500,000
occurrence deductible, $150 million of aggregate loss
limits, and limited business interruption coverage. While the
coverage remains in effect, it will be primary to the OIL
coverage for the pre-merger Mariner assets.
F-27
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 The Company, in the ordinary
course of business, is a claimant
and/or a
defendant in various legal proceedings, including proceedings as
to which the Company has insurance coverage. The Company does
not consider its exposure in these proceedings, individually and
in the aggregate, to be material.
The components of the federal income tax provision are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Merger
|
|
|
Pre-Merger
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
March 3,
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
Year Ended
|
|
|
through
|
|
|
through
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 2,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
(In thousands)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
21,294
|
|
|
|
28,783
|
|
|
|
8,072
|
|
|
|
10,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,294
|
|
|
|
28,783
|
|
|
|
8,072
|
|
|
|
10,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth a reconciliation of the statutory
federal income tax with the income tax provision (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Merger
|
|
|
Pre-Merger
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 3, 2004
|
|
|
January 1
|
|
|
|
|
|
|
|
|
|
Year Ending
|
|
|
through
|
|
|
through
|
|
|
Year Ending
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
March 2,
|
|
|
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
|
|
|
|
35
|
|
Change 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
|
|
Federal income taxes of $1.6 million were paid by the
Company for the 2004 Post-Merger period for alternative minimum
tax liability, and no federal income taxes were paid by the
Company in the years ended December 31, 2003 and 2005. An
income tax benefit of $1,045,000 was included as a reduction in
Change in Accounting Principle for the adoption of
SFAS No. 143 in 2003.
F-28
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
The Companys deferred tax position reflects the net tax
effects of the temporary differences between the carrying
amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting.
Significant components of the deferred tax assets and
liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ending
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
45,171
|
|
|
$
|
15,639
|
|
Alternative minimum Tax Credit
|
|
|
1,606
|
|
|
|
1,606
|
|
Differences between book and tax
basis of receivables
|
|
|
|
|
|
|
|
|
Other comprehensive
income-derivative instruments
|
|
|
22,332
|
|
|
|
6,262
|
|
Employee stock compensation
|
|
|
9,004
|
|
|
|
|
|
Valuation allowance
|
|
|
(5,909
|
)
|
|
|
(5,909
|
)
|
Other
|
|
|
671
|
|
|
|
|
|
Total net deferred tax assets
|
|
|
72,875
|
|
|
|
17,598
|
|
Deferred Tax
Liabilities:
|
|
|
|
|
|
|
|
|
Differences between book and tax
basis of properties
|
|
|
(72,744
|
)
|
|
|
(14,569
|
)
|
|
|
|
|
|
|
|
|
|
Total net deferred asset
(liability)
|
|
|
131
|
|
|
$
|
3,029
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2005, the Company had federal and state net
operating loss carryforwards of approximately $129,059 and
$7,055 respectively, which will expire in varying amounts
between 2018 and 2025 and are subject to certain limitations on
an annual basis. A valuation allowance has been established
against net operating losses where it is more likely than not
that such losses will expire before they are utilized.
On March 2, 2006, we completed a merger transaction with
Forest Energy Resources (the Forest Transaction). Prior to the
consummation of the merger, Forest transferred and contributed
the assets and certain liabilities associated with its offshore
Gulf of Mexico operations to Forest Energy Resources.
Immediately prior to the merger, Forest distributed all of the
outstanding shares of Forest Energy Resources to Forest
shareholders on a pro rata basis. Forest Energy Resources then
merged with a newly formed subsidiary of Mariner, and became a
new wholly owned subsidiary of Mariner. Immediately following
the merger, approximately 59% of the Mariner common stock was
held by shareholders of Forest and approximately 41% of Mariner
common stock was held by the pre-merger stockholders of Mariner.
In the merger Mariner issued 50,637,010 shares of common
stock to Forest shareholders.
The sources and uses of funds related to the Forest Transaction
were as follows:
|
|
|
|
|
Mariner Energy, Inc. bank loan
proceeds
|
|
$
|
180.2
|
|
Refinancing of assumed debt
|
|
$
|
176.2
|
|
Acquisition costs and other
expenses
|
|
|
4.0
|
|
Total
|
|
$
|
180.2
|
|
F-29
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 addition, approximately $3.8 million in merger-related
costs were funded from bank loan proceeds prior to the closing
of the transaction.
Mariner Energy, Inc. is the acquiring entity in accordance with
the provisions of Statement of Financial Accounting Standards
No. 141, Business Combinations
(SFAS 141). As a results, the assets and
liabilities acquired by Mariner in the Forest Transaction will
be adjusted to their estimated fair values as of the effective
date of the transaction (March 2, 2006).
The initial fair value estimate of the underlying assets and
liabilities acquired is determined by estimating the value of
the underlying proved reserves at the transaction date plus or
minus the fair value of other assets and liabilities, including
inventory, unproved oil and gas properties, gas imbalances, debt
(at face value), derivatives, and abandonment liabilities. The
final purchase price allocation will be determined after closing
based on the actual fair value of current assets, current
liabilities, indebtedness, long-term liabilities, proven and
unproved oil and gas properties and identifiable intangible
assets. We are continuing to evaluate all of these items;
accordingly, the final purchase price may differ in material
respects from that presented below. Carryover basis accounting
applies for tax purposes. The following table summarizes the
estimated fair values of the assets acquired and liabilities
assumed at the March 2, 2006 transaction date:
|
|
|
|
|
|
|
(In millions)
|
|
|
Oil and natural gas properties
|
|
$
|
1,617.0
|
|
Other assets
|
|
|
14.5
|
|
Abandonment 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. |
On March 2, 2006, Mariner and Mariner Energy Resources,
Inc. entered into a $500 million senior secured revolving
credit facility, and an additional $40 million senior
secured letter of credit facility. The revolving credit facility
will mature on March 2, 2010, and the $40 million
letter of credit facility will mature on March 2, 2009.
Mariner used borrowings under the revolving credit facility to
facilitate the merger and to retire existing debt, and we may
use borrowings in the future for general corporate purposes. The
$40 million letter of credit facility has been used to
obtain a letter of credit in favor of Forest to secure
Mariners performance of its obligations under an existing
drill-to-earn
program. The outstanding principal balance of loans under the
revolving credit facility may not exceed the borrowing base,
which initially has been set at $400 million. If the
borrowing base falls below the outstanding balance under the
revolving credit facility, Mariner will be required to prepay
the deficit, pledge additional unencumbered collateral, repay
the deficit and cash collateralize certain letters of credit, or
effect some combination of such prepayment, pledge and repayment
and collateralization.
As part of the Merger consideration payable to JEDI, the Company
issued a term promissory note to JEDI in the amount of
$10 million. The note matured on March 2, 2006, and
bore interest, payable in kind at our option, at a rate of
10% per annum until March 2, 2005, and 12% per
annum thereafter unless paid in
F-30
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 in which event the rate remained 10% per annum. In
March 2005, the Company repaid $6.0 million of the note
utilizing proceeds from the private placement in March 2005. The
$4.0 million balance remaining on the JEDI note at
December 31, 2005 was repaid in full on its maturity date
of March 2, 2006.
Effective March 2, 2006, Mariner has been accepted as a
member of OIL, an industry insurance cooperative, through which
the assets of both Mariner and the Forest Gulf of Mexico
operations are insured. The coverage contains a $5 million
annual per occurrence deductible for the combined assets and a
$250 million per occurrence loss limit. However, if a
single event causes losses to OIL insured assets in excess of
$1 billion in the aggregate (effective June 1, 2006,
such amount will be reduced to $500 million), amounts
covered for such losses will be reduced on a pro rata basis
among OIL members. Pending review of its insurance program, the
Company has maintained our commercially underwritten insurance
coverage for the pre-merger Mariner assets which expires on
September 30, 2006. This coverage contains a
$3 million annual deductible and a $500,000 occurrence
deductible, $150 million of aggregate loss limits, and
limited business interruption coverage. While the coverage
remains in effect, it will be primary to the OIL coverage for
the pre-merger Mariner assets.
The Company has adopted an Equity Participation Plan that
provided for the one-time grant at the closing of our private
equity placement on March 11, 2005 of 2,267,270 restricted
shares of our common stock to certain of our employees. In
connection with the merger with Forest Energy Resources on
March 2, 2006, (i) the 463,656 shares of
restricted stock held by non-executive employees vested, and
(ii) each of Mariners executive officers 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.
The Company adopted a Stock Incentive Plan which became
effective March 11, 2005 and was amended and restated on
March 2, 2006. A total of 6.5 million shares of
Mariners common stock is subject to the Amended and
Restated Stock Incentive Plan. No more than 2.85 million
shares issuable upon exercise of options or as restricted stock
can be issued to any individual. As of March 17, 2006,
approximately 5.7 million shares remained available under
the Amended and Restated Stock Incentive Plan for future
issuance to participants. Unless sooner terminated, no award may
be granted under the Amended and Restated Stock Incentive Plan
after October 12, 2015.
|
|
10.
|
Oil and
Gas Producing Activities and Capitalized Costs
(Unaudited)
|
The results of operations from the Companys oil and gas
producing activities were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands)
|
|
|
Oil and gas sales
|
|
$
|
196,122
|
|
|
$
|
214,187
|
|
|
$
|
142,543
|
|
Lease 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
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
The following table summarizes the Companys capitalized
costs of oil and gas properties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands)
|
|
|
Unevaluated properties, not
subject to amortization
|
|
$
|
40,176
|
|
|
$
|
36,245
|
|
|
$
|
36,619
|
|
Properties subject to amortization
|
|
|
574,725
|
|
|
|
319,553
|
|
|
|
599,762
|
|
|
|
|
|
|
|