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Contango Completes $40.0 Million Property Sale

Contango Oil & Gas Company (NYSE Amex: MCF) announced today that it has completed the sale of substantially all of its onshore Texas assets to an independent oil and gas company for an aggregate purchase price of $40.0 million. The properties were sold effective April 1, 2011 and include: (i) the Company’s 90% working interest (72% net revenue interest) and subsequent 5% overriding royalty interest in the 21 wells drilled in Panola County, Texas under our joint venture with Patara Oil & Gas LLC; (ii) the Company’s 100% working interest (72.5% net revenue interest) in Rexer #1, drilled in south Texas; and (iii) a 75% working interest (54.4 % net revenue interest) in Rexer #2, which was spud on May 11, 2011.

The sold properties had proved reserves of approximately 17.2 billion cubic feet equivalent (“Bcfe”), net to Contango. The Company expects to record an estimated $0.3 million pre-tax loss as a result of this sale. The Company will use the proceeds to, among other things, continue to fund its 2011 capital expenditure program.

Kenneth R. Peak, Contango’s Chairman and Chief Executive Officer, said, “We began investing in our Conterra joint venture about 18 months ago, and with this sale we will have received an 8% cash-on-cash rate of return on our Conterra investment.

“Adjusted for this sale, Contango’s reserves at March 31, 2011 were approximately 307 Bcfe, or about 20 Mcfe’s per fully diluted share. These reserves have a pre-tax PV-10 of approximately $950 million, or a value of approximately $3.10 per Mcfe, which compares to our average realized price for the quarter ended March 31, 2011, again adjusted for this sale, of $5.88 per Mcfe. Both of these values are calculated after subtracting projected or actual lease operating expenses, but are before general and administrative expenses and taxes.

“Our current production after this sale is now 75 Mmcfed, net to Contango. Our net available cash position is approximately $120 million, or about $7.60 per fully diluted share. We have no debt.”

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