2010-01-07-2009-12-15-2009-12-31

Acquired interests in TX, NM, gaining 124 Bcfe proved, 29 MMcfe/d.

Further expanding its position onshore, Gulf of Mexico E&P Mariner Energy Inc., Houston, (NYSE: ME) has emerged as the winning bidder in a bankruptcy auction to acquire virtually all of the assets of Edge Petroleum Corp., Houston, (Pink Sheets: EPEX) for approximately $260 million, establishing a footprint in South Texas. Mariner's bid was for $260 million, less a fixed gas price downward adjustment of approximately $23.9 million, trumping a bid by PGP Gas Supply Pool No. 3 of $243 million, with a maximum downward floating gas price adjustment of approximately $23.9 million. The base purchase price in the PGP purchase agreement, established as the stalking horse bid, was $191 million, with the same floating gas price downward adjustment cap. The assets include year-end 2008 estimated proved reserves of 124 billion cubic feet of gas equivalent. Mariner estimates that at year-end 2009, the properties include approximately 106 billion cubic feet equivalent in estimated proved reserves (70% developed, 72% gas). Third-quarter 2009 daily production from the assets averaged approximately 29 million cubic feet of gas equivalent. More than 80% of the reserves are in South Texas, establishing a new core area for Mariner. Approximately 45% of the reserves are based in Flores/Bloomberg Field in Starr County. The assets also include some 70,000 net undeveloped acres, primarily in Texas and New Mexico. The assets comprise all of Edge's ownership interest in its direct and indirect subsidiaries, including Edge Petroleum Exploration Co., Miller Exploration Co., Edge Petroleum Operating Co. Inc., Edge Petroleum Production Co. and Miller Oil Corp. Mariner structured the transaction to preserve tax attributes of the Edge subsidiaries, including the tax basis of the assets acquired and net operating losses, with estimated tax attributes totaling approximately $95 million. Edge announced in February it was seeking strategic alternatives including the sale of the company or assets following a failed merger with Oklahoma-based Chaparral Energy Inc. in December 2008. It filed for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, in early October. Mariner chairman, chief executive and president Scott D. Josey says, "Consistent with our stated strategy of expanding our onshore presence, the Edge transaction establishes a new core area for the company. Based on year-end 2008 results, the combination results in more than half of Mariner's proved reserves being onshore. The economic metrics of the transaction are compelling, potentially further enhanced by the preservation of the tax attributes. We expect the assets to generate excess cash flow while self-funding future development costs. We look forward to welcoming the Edge personnel to our company." Edge will use the proceeds to reduce its debt, which totals approximately $226.5 million and which exceeds proceeds from the sale. As a result, unsecured creditors and stockholders will not receive any payment. The company plans to continue to manage its properties and operate its businesses in the ordinary course following the sale. Public Gas Partners Inc. (PGP) will receive $6 million as a break-up fee. The consortium is a joint-action agency of municipally-owned gas and electric utilities whose purpose is to secure gas supplies through acquisition and development of natural gas and oil reserves for its members. The effective date is June 30, 2009. Closing is expected by Dec. 31. Mariner will fund the acquisition using its revolving credit facility. Parkman Whaling LLC is financial advisor to Edge. Akin Gump Strauss Hauer and Feld is legal counsel. Mariner holds interests in the Gulf of Mexico deepwater and shelf and in the Permian Basin.