Mariner Energy budgets in excess of cash flow in 2010 to accelerate onshore production

By Jennifer Lanning Drey

Portland, Ore., Dec. 16 - Mariner Energy, Inc.'s capital program is expected to exceed internally generated cash flow in 2010 in order for the company to accelerate onshore production, Scott D. Josey, chief executive officer of Mariner, said Wednesday during a company conference call held to discuss the 2010 budget.

At the same time, however, the company will maintain the flexibility to adjust spending based on its success, changes in commodity prices, industry conditions or opportunities that may arise, he said.

Mariner's 2010 capital budget is approximately $660 million and is designed to unlock the value of the franchise, which the company believes continues to be unrecognized by the market, he said.

About two-thirds of the 2010 capital budget will be allocated for development, about a quarter for exploration and about 8% for miscellaneous items, Josey said.

"We feel that our liquidity is very good and our opportunity set is rich. Our challenge is not in what projects to pursue but in choosing what not to do," he said.

Mariner's 2010 capital budget aims to achieve objectives including accelerating drilling of its long-lived, oily Permian properties, delineating the deepwater discoveries it has made in Anadarko and targeting several high-impact prospects in the deepwater.

In addition, the company will look to develop deepwater discoveries at Balboa and Wide Berth and continue to build its unconventional resource portfolio, he said.

"Overall, we're pleased with the progress of the evolution of the asset and opportunity base of the company. We're evolving to having balance between onshore and offshore and, over time, believe we'll have a balance between conventional and non-conventional," Josey said.

Mariner's unconventional team is finalizing negotiations on several opportunities that the company should be prepared to announce by its next scheduled conference call in mid-February, he said.

The company also announced on Tuesday that it has agreed to purchase the subsidiaries and operations of Edge Petroleum in a transaction valued at about $215 million after anticipated purchase price adjustments.

The transaction is consistent with Mariner's strategy of expanding its onshore presence, Josey said.

During the question-and-answer portion of the call, Josey said he was comfortable taking on the additional debt associated with the transactions and the capital program that the company is pursuing.

Josey also said he expects Mariner's borrowing base to increase as a result of the company's results in 2009 as well as the addition of the Edge assets.

Mariner Energy is a Houston-based independent oil and gas exploration, development and production company.

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