Mariner Energy, Inc. has completed the sale, effective November 1, 2006, of its 20% working interest in the Cottonwood project (Garden Banks Block 244) to Petrobras America Inc., the operator of the project, for $31.8 million. The sale will result in a pre-tax gain to Mariner of approximately $22 million in the fourth quarter of 2006. As a result of the transaction, Mariner will not be required to fund approximately $21 million of development costs necessary to establish first production, currently estimated to occur in the first quarter of 2007. Correspondingly, Mariner''s capital spending for 2006, previously announced as expected to range between $525 million and $545 million (excluding hurricane repairs and acquisitions) is now expected to range between $504 million to $524 million (excluding hurricane repairs, acquisitions and dispositions).
Cottonwood is located in the Gulf of Mexico approximately 240 miles southwest of New Orleans in a water depth of 2,300 feet. Mariner acquired its interest in the project from Petrobras in April 2005 pursuant to an arrangement whereby Mariner allowed Petrobras access to the deepwater rig Noble Lorris Bouzigard which Mariner has under long-term contract. Mariner participated with Petrobras in two sidetrack wells in the project since Mariner acquired its interest in April 2005.
Commenting on the sale, Scott D. Josey, Chairman, Chief Executive Officer and President of Mariner, said, We are pleased to have had the opportunity to work with Petrobras and hope they continue to achieve positive results in this project. This transaction represents a successful example of our efforts to leverage our deepwater drilling rig contracts to create high-quality investment opportunities.