HOUSTON--(BUSINESS WIRE)--Contango Oil & Gas Company (NYSE MKT: MCF) announced today that it has reached total depth on its Ship Shoal 134 prospect (Eagle) and no commercial hydrocarbons were found. The Company will proceed to plug and abandon the well. The Company expects to incur approximately $29.5 million to drill, plug and abandon this well, including leasehold costs. We continue to drill ahead with our South Timbalier 75 prospect (Fang). We are running a drilling liner and expect to reach total depth by late-November 2012.
Brad Juneau, the Company’s President and Acting Chief Executive Officer, said, “While we are certainly disappointed with the results of Eagle, we fully intend to continue drilling our inventory of offshore prospects, which has been the foundation of our growth over the past several years. We have sufficient cash on hand and expected revenues from operations to drill our offshore acreage inventory during its primary term. After subtracting G&A costs and lease operating expenses, our net monthly revenues are approximately $7.5 million per month, net to the Company.”
Mr. Juneau continued, “The Company has a portfolio of five additional prospects plus two leases not yet awarded from the last lease sale in June 2012. From a timing perspective, we expect to begin drilling our remaining existing inventory in mid-2013, as permits are approved.”
Updating our onshore operations, in October 2012, the Company purchased approximately 336 acres in the Tuscaloosa Marine Shale (“TMS”) from Goodrich Petroleum Company LLC (“Goodrich”) and ratified an operating agreement to become a 25% non-operating working interest partner. We have invested approximately $4.3 million, net to Contango, to acquire acreage and drill our first horizontal well with Goodrich, the Crosby 12H-1. For evaluation purposes, we will drill a pilot hole, perform an open-hole evaluation and obtain a conventional core over the TMS interval. The data we obtain from this well will help us evaluate our TMS acreage and develop a plan for drilling and operating future wells. As of October 19, 2012, we have invested approximately $8.8 million to lease approximately 24,000 acres in the TMS.
In our Alta Energy Canada Partnership (“Alta Energy”) venture in the Kaybob Duvernay in Alberta, Canada, Alta Energy has drilled four vertical test wells and has taken whole cores on two of those. Alta Energy spud its first horizontal well this summer which was successfully drilled. We anticipate completion by year end. Alta Energy will soon spud its second horizontal well and plans to continue an evaluative drilling and completion program in 2013. To date, the Company has invested approximately $12.3 million of its $20.0 million commitment to Alta Energy. Contango expects an additional cash call in late-2012 of approximately $0.5 million to pay for these operations. Contango owns a 5% interest in the Kaybob Duvernay project.
In our Exaro Energy III LLC (“Exaro”) venture with Encana Oil & Gas (USA) Inc. (“Encana”) in Encana’s Jonah field asset located in Sublette County, Wyoming, the drilling project is progressing on schedule. The venture currently has three rigs drilling and has completed and achieved first production on ten wells to date. Four additional wells are being hooked up to production. Production is currently approximately 3.3 million cubic feet equivalent per day, net to Contango. We expect that the approximately $41.3 million (of our $67.5 million commitment) we invested in Exaro during the fiscal year ended June 30, 2012 will be sufficient to pay for all the planned drilling in the Jonah Field through December 31, 2012.
Our offshore production is currently approximately 78 million cubic feet equivalent per day. We remain debt-free and expect to have approximately $100 million of available cash on hand once we pay all costs associated with Eagle.
Contango is a Houston-based, independent natural gas and oil company. The Company’s 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 www.contango.com.
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.