Contango Oil & Gas Company (NYSE Amex: MCF) announced today that the Company’s wholly-owned subsidiary, Contango Operators, Inc., was the apparent high bidder on six lease blocks at the Central Gulf of Mexico Lease Sale 216/222 held on June 20, 2012. The Company bid a total of approximately $11 million on the following blocks:
East Cameron 124
Eugene Island 31
Eugene Island 260
Ship Shoal 83
Ship Shoal 255
South Timbalier 110
An apparent high bid (“AHB”) is subject to Outer Continental Shelf (“OCS”) Bid Adequacy Review, notwithstanding the fact that the Bureau of Ocean Energy Management (“BOEM”) may reject all bids for a given tract. The BOEM review process can take up to 90 days. Upon approval from the BOEM, our plan is to move immediately to get these prospects permitted and to drill them in 2013 and 2014. Assuming all six of our high bids are awarded, we will have a total of eight offshore prospects to drill. These eight Gulf of Mexico prospects will cost approximately $17 million in leasehold acquisition costs and we project they will require another $150 million in dry hole costs. If we assume we are successful on four of our eight prospects, we project another $125 million in completion and platform costs might be required for a total capital outlay of approximately $292 million. The range of potential reserves from these prospects varies widely but for planning purposes we have assumed these eight prospects have an unrisked reserve potential of approximately 185 billion cubic feet equivalent (“Bcfe”), net to Contango, using 6 Mcf equal to one barrel of oil/condensate. We have also assumed these reservoirs to be typical Gulf of Mexico reservoirs with high BTU gas with significant natural gas liquids and high quality condensate. We have prepared our estimated drilling economics and finding and development (“F&D”) costs for these eight prospects assuming one barrel of oil/condensate is the “economic equivalent” of 30 Mcf (“Mcfee”). Based on our projected gas/condensate ratios, the “economic equivalent” of these eight prospects is approximately 450 Bcfee.
In trading on Monday, shares of Contango Oil & Gas Co. crossed below their last reported book value — defined as common shareholder equity per share — of $30.68, changing hands as low as $30.63 per share.