The Meridian Resource Corporation Announces 150% Increase in Earnings Per Share For Second Quarter 2004

Business Wire, July 28, 2004

HOUSTON -- The Meridian Resource Corporation (NYSE:TMR) today announced net income applicable to common shareholders of $7.7 million, or $0.10 per diluted common share, for the second quarter of 2004, compared to net income applicable to common shareholders of $1.9 million, or $0.04 per diluted common share for the second quarter of 2003. For the six months ended June 30, 2004, the Company reported net income applicable to common shareholders of $13.0 million, or $0.18 per diluted common share, compared to net income applicable to common shareholders of $3.6 million, or $0.07 per diluted common share, for the corresponding period of 2003.

Discretionary cash flow totaled $39.4 million for the three months ended June 30, 2004, compared to $19.9 million for the corresponding period of 2003, representing a 98% increase between the corresponding periods. For the six months ended June 30, 2004, discretionary cash flow increased 85% to $75.0 million, compared to $40.4 million for the six month period ended June 30, 2003.

Average daily production volumes increased by 51% to 98.9 million cubic feet of gas equivalent ("Mmcfe") for the second quarter of 2004 from 65.4 Mmcfe for the second quarter of 2003. Oil and natural gas volumes for the second quarter of 2004 totaled 9,002 Mmcfe compared to 5,951 for the comparable quarter of 2003. For the six months ended June 30, 2004, oil and natural gas production totaled 17,598 Mmcfe, or 96.7 Mmcfe per day, compared to 11,597 Mmcfe, or 64.1 Mmcfe per day, for the corresponding period of 2003.

For the three months ended June 30, 2004 oil and gas revenues totaled $50.1 million, or $5.56 per thousand cubic feet of gas equivalent ("Mcfe"), an increase of 69% compared to oil and gas revenues of $29.6 million, or $4.97 per Mcfe, for the corresponding period of 2003. Oil and gas revenues totaled $96.2 million, or $5.47 per Mcfe, for the six months ended June 30, 2004, an increase of 64%, compared to $58.6 million, or $5.05 per Mcfe, for the corresponding period of 2003. The increase in production, revenues, earnings and discretionary cash flow between the three month and six month periods ended June 30, 2004 and 2003 were a result of the Company's drilling successes in the Biloxi Marshlands ("BML") project area and the Weeks Island field, coupled with successful workover operations in the Company's Ramos and Weeks Island fields.

Lease operating expenses were reduced on a Mcfe basis by 34%, from $0.47 per Mcfe for the quarter ended June 30, 2003 to $0.31 per Mcfe for the quarter ended June 30, 2004. For the six months ended June 30, 2004 lease operating expenses totaled $5.8 million compared to $5.3 million for the comparable period of 2003. The marginal increase in lease operating expenses reflects the addition of new wells in the Company's BML project area and the Weeks Island field. In total, production taxes increased by $1.5 million, or 43%, between the comparable six month periods because of production increases. However, on a per unit basis, production taxes declined by 7%, from $0.29 per Mcfe for the six months ending June 30, 2004 to $0.27 for the corresponding period of 2003, reflecting a shift in the mix between oil and gas production.

General and administrative expenses decreased on a per Mcfe basis by 24% to $0.38 per Mcfe for the six months ending June 30, 2004, compared to $0.50 per Mcfe for the comparable 2003 period. The total for the quarter increased marginally by $0.5 million to $3.5 million, compared to $3.0 million for the same period of 2003.

Interest expense decreased by $1.7 million, or 48%, to $1.8 million for the quarter ended June 30, 2004, from $3.5 million for the quarter ended June 30, 2003, due to lower outstanding borrowings. Specifically, during the second quarter ended June 30, 2004, the Company has paid an aggregate of $3 million toward its senior secured credit agreement and $5 million on its subordinated debt, bringing the principal balance due under each to $114 million and $5 million, respectively, as of June 30, 2004. As of June 30, 2004, the Company's debt to total capitalization ratio was 30%, compared to 49% and 38% as of June 30, 2003 and December 31, 2003, respectively.

Meridian continues to focus on its exploration and exploitation of the BML project area in addition to the development of its Weeks Island field and its other properties which comprise an asset base consisting of approximately 8,000 square miles of 3-D seismic data. The Company plans to begin utilizing a third drilling rig in the BML project area as early as the fourth quarter of 2004 and plans to increase its capital expenditures budget for 2004 by approximately 15% from $95 million to as much as $110 million over the balance of the year.

NON-GAAP FINANCIAL MEASURE

In this press release, we refer to a non-GAAP financial measure we call "discretionary cash flow." Management believes this measure is a financial indicator of our company's ability to internally fund capital expenditures and service outstanding debt. Management also believes this non-GAAP financial measure of cash flow is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income, as defined by GAAP. The accompanying table reconciles discretionary cash flow to its nearest GAAP measure of Net Cash Provided By (Used In) Operating Activities.