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Contango Oil & Gas Company (NYSE Amex: MCF) announced today that Brad Juneau has joined the Company’s Board of Directors and the Company has entered into an Advisory Agreement with Juneau Exploration, L.P. (“JEX”), whereby JEX will advise Contango’s staff on operational matters including drilling, completions, production and accounting. JEX and its seven employees, including Mr. Juneau, will continue to generate offshore and onshore prospects for the Company.
The Advisory Agreement also changes the variable overhead reimbursement to a fixed amount per month. Instead of a prospect generation fee of $250,000 per prospect generated, Contango will now pay a monthly fee of approximately $167,000.
Kenneth R. Peak, Contango’s Chairman and Chief Executive Officer, said, “Our decision to restructure our arrangement with JEX was driven by several 'new realities' in our industry:
Sub $3.00 natural gas has opened up a wide array of both onshore and offshore interesting opportunities.
Hands-on operations expertise will play a more prominent role in our ability to capture value.
Our 'turn-key exploration model' for the offshore is changing.
“The soaring increases in natural gas reserves and production as a result of shale plays are having profound effects on our industry, and indeed our nation. Our strong balance sheet and profitability are presenting us with opportunities that require immediate evaluation and understanding across a variety of basins and operating environments. Simultaneously, and paradoxically, the industry-wide move to onshore shale plays has opened up more acreage and less competition in the offshore Gulf of Mexico than at any time in my career.
“We believe the offshore Gulf of Mexico is one of the lowest cost exploration basins in the world and it will continue to be the core of our exploration model. The regulatory 'after effects' of the Macondo Spill, however, have altered our ability to outsource, and as a result we will need to grow our operations and accounting staff over the next year. Speaking as Contango’s largest shareholder, I am ecstatic that Brad Juneau will lead the Company through the 'new realities.'”