Contango Oil & Gas Company (NYSE Amex: MCF) announced today that its Galveston Area 277L prospect (His Dudeness) was a dry hole. Total expenditures, including plugging and abandonment costs are expected to be approximately $9.5 million, net to Contango.

Mr. Peak, the Company’s Chairman and Chief Executive Officer, said “Drilling dry holes comes with the territory of wildcat exploration. That doesn’t make dry holes any more palatable, but it does mean they are never a surprise. We now turn our focus to getting our next three Gulf of Mexico prospects permitted and drilled. The permit for our Vermillion 170 (Swimmy) prospect was submitted to the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) on September 29, 2010 and we are hopeful approval will be received prior to year-end. We are in the process of preparing our permits for two additional prospects. We hope to be able to spud all three prospects prior to June 30, 2011. We are also preparing to drill an exploration step-out at our south Texas Rexer #1 well which thus far has performed beyond our expectations.

“Receiving permits to drill and the timely spudding of our prospects is critically important for us to not only grow our Company and create jobs for offshore workers, but also because we are very profitable and can immediately use the associated intangible drilling cost tax deferrals. For example, even at today’s level of natural gas prices we are projecting a tax payment of $18 million due to the IRS on December 15 th of this year. We have no intention of diluting the quality of our prospects to garner tax benefits, but we have excellent prospects, ample liquidity and are ready to get back to work in the Gulf of Mexico.”

Contango is a Houston-based, independent natural gas and oil company. The Company’s core business is to explore, develop, produce and acquire natural gas and oil properties primarily offshore in the Gulf of Mexico. Additional information can be found on our web page at .

This press release contains forward-looking statements regarding Contango that are intended to be covered by the safe harbor "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995, based on Contango’s current expectations and includes statements regarding acquisitions and divestitures, estimates of future production, future results of operations, quality and nature of the asset base, the assumptions upon which estimates are based and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as "expects", “projects”, "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Statements concerning oil and gas reserves also may be deemed to be forward looking statements in that they reflect estimates based on certain assumptions that the resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those, reflected in the statements. These risks include, but are not limited to: the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; risks associated with derivative positions; inability to realize expected value from acquisitions, inability of our management team to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that government policies may change or governmental approvals may be delayed or withheld. Additional information on these and other factors which could affect Contango’s operations or financial results are included in Contango’s other reports on file with the Securities and Exchange Commission. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Contango does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

Copyright Business Wire 2010