1022345--3/31/2006--MARINER_ENERGY

related topics

{gas, price, oil}

{cost, regulation, environmental}

{loss, insurance, financial}

{acquisition, growth, future}

{regulation, change, law}

{tax, income, asset}

{loan, real, estate}

{cost, operation, labor}

In estimating future net revenues from proved reserves, we assume that future prices and costs are fixed and apply a fixed discount factor. If these assumptions or discount factor are materially inaccurate, our revenues, profitability and cash flow could be materially less than our estimates. If oil and natural gas prices decrease, we may be required to write-down the carrying value and/or the estimates of total reserves of our oil and natural gas properties. We need to replace our reserves at a faster rate than companies whose reserves have longer production periods. Our failure to replace our reserves would result in decreasing reserves and production over time. Approximately 65% of our total estimated proved reserves are developed non-producing or undeveloped (71% on a pro forma basis), and those reserves may not ultimately be produced or developed. Any production problems related to our Gulf of Mexico properties could reduce our revenue, profitability and cash flow materially. Our exploration and development activities may not be commercially successful. Our exploratory drilling projects are based in part on seismic data, which is costly and cannot ensure the commercial success of the project. Oil and gas drilling and production involve many business and operating risks, any one of which could reduce our levels of production, cause substantial losses or prevent us from realizing profits. Our offshore operations involve special risks that could increase our cost of operations and adversely affect our ability to produce oil and gas. Our hedging transactions may not protect us adequately from fluctuations in oil and natural gas prices and may limit future potential gains from increases in commodity prices or result in losses. We will require additional capital to fund our future activities. If we fail to obtain additional capital, we may not be able to implement fully our business plan, which could lead to a decline in reserves. Properties we acquire (including the Forest Gulf of Mexico properties) may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties or obtain protection from sellers against such liabilities. Market conditions or transportation impediments may hinder our access to oil and natural gas markets or delay our production. The unavailability or high cost of drilling rigs, equipment, supplies or personnel could affect adversely our ability to execute on a timely basis our exploration and development plans within budget, which could have a material adverse effect on our financial condition and results of operations. Competition in the oil and natural gas industry is intense, and many of our competitors have resources that are greater than ours giving them an advantage in evaluating and obtaining properties and prospects. Financial difficulties encountered by our farm-out partners or third-party operators could adversely affect our ability to timely complete the exploration and development of certain prospects. We cannot control the timing or scope of drilling and development activities on properties we do not operate, and therefore we may not be in a position to control the associated costs or the rate of production of the reserves. Compliance with environmental and other government regulations could be costly and could affect production negatively. Compliance with MMS regulations could significantly delay or curtail our operations or require us to make material expenditures, all of which could have a material adverse effect on our financial condition or results of operations. Our insurance may not protect us against our business and operating risks. Risks Relating to Our Merger with Forest Energy Resources The integration of the Forest Gulf of Mexico operations will be difficult, and will divert our management s attention away from our normal operations. If we fail to realize the anticipated benefits of the merger, our results of operations may be lower than we expect.

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1022345--3/31/2006--MARINER_ENERGY_INC