Contango Oil & Gas Company has announced an exploration discovery at its Dutch prospect (“Eugene Island 10”), located offshore Louisiana and operated by Contango Operators, Inc. (“COI”), a wholly-owned subsidiary of the Company.
A production liner has been set, electric logs run, and the Company is continuing to drill further. Contango’s independent third party engineer estimates this well to have proved reserves net to Contango of 25 billion cubic feet equivalent (“Bcfe”). Completion and testing operations have not yet begun, but first production is estimated to commence by the end of the year. Estimated costs net to Contango to bring this well to full production status are $2.7 million.
COI has an 18.3% working interest and Republic Exploration LLC (“REX”), a subsidiary in which the Company owns a 43% interest, has a 65% working interest in Dutch. The net revenue interests to COI and REX are estimated to be approximately 13% and 47%, respectively. The net revenue interest before payout to Contango, as a whole, is approximately 33%.
Kenneth R. Peak, Contango’s Chairman and Chief Executive Officer, said, “This discovery is a superb complement to our LNG and Fayetteville Shale business. We will need more capital but our bank borrowing base will be significantly enhanced by this discovery. Since we started operating via COI in June 2005, we are now three for five in our offshore exploration efforts”.
