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Contango Apparent High Bidder At Central Gulf Of Mexico Lease Sale 216/222 And Updates Operations

If we risk our probability of success assuming one in two prospects work, a 50% success rate, we project we will find approximately 225 Bcfee, net to Contango, for a projected F&D cost in the range of $1.00 to $1.50 per Mcfee.

Kenneth R. Peak, Contango’s Chairman and Chief Executive Officer, said “I caution everyone to keep in mind that these assumptions may be completely wrong. We may spend $167 million of our funds and find no reserves. Furthermore, our cost estimates could be substantially higher if we encounter hurricanes, drilling problems or mechanical problems. Drilling oil and gas wells in the Gulf of Mexico involves a high degree of risk. Please review our “Risk Factors” on Form 10-Q for the nine months ended March 31, 2012 filed with the Securities and Exchange Commission (“SEC”).”

We anticipate the Hercules 205 rig to be on location by the first week in July 2012 to spud our Ship Shoal 134 (“Eagle”) prospect and the Spartan 303 rig to be on location by mid-July 2012 to spud our South Timbalier 75 (“Fang”) prospect. We should know the results of both wells in the November time frame.

In addition to our planned activities in the Gulf of Mexico, we have invested approximately $5 million to lease approximately 14,000 acres in the Tuscaloosa Marine Shale (“TMS”), a shale play in Louisiana and Mississippi, with an option to purchase approximately 10,000 additional acres. The TMS is an oil focused play and we intend to watch the play develop before we commit to drilling any exploratory wells.

Our current production is approximately 83 million cubic feet equivalent per day (“MMcfed”). In addition, we have approximately $11.6 million invested with Alta in the liquids rich Kaybob area of the Duvernay Shale in Alberta, Canada, and $41.3 million invested with Exaro Energy III, LLC to further develop the Jonah Field in Wyoming. We remain debt-free and have approximately $115 million of cash on hand after having already paid approximately $50 million in Federal and State of Louisiana income taxes during our fiscal year that ends June 30. We have $40.0 million of unused borrowing capacity.

Stock quotes in this article: MCF 

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