Contango Oil & Gas Company announces today that its financial advisor, Merrill Lynch & Co., has begun meeting with parties potentially interested in acquiring the Company. Select interested parties will be offered the opportunity to learn more about the Company in a data room. The data room is anticipated to open in July 2008, with anticipated receipt of potential transaction proposals by September 2008.
The primary asset in the Company is its interest in its Dutch and Mary Rose reserves. The Company’s independent third party engineer recently estimated that the Dutch and Mary Rose fields have total proved reserves of 961 billion cubic feet equivalent (“Bcfe”) (364 Bcfe net to Contango). If the Company obtains an acceptable proposal, the transaction would likely be structured as the sale of the Company by its shareholders, with the purchaser acquiring the stock of the Company and the simultaneous spin-off of the remaining Gulf of Mexico leases held by the Company to our shareholders in a new company, Contango Energy Company.
The Company also announced that it has successfully completed and production tested its Mary Rose #4 well at a rate of approximately 21.8 million cubic feet equivalent per day (“Mmcfe/d”). We expect this well to begin producing to our platform at Eugene Island 11 by the end of July 2008. We have completed our Mary Rose #2 well and expect to begin producing to our platform at Eugene Island 11 by the end June 2008. Additionally, we have spudded Eloise #1, a deeper wildcat exploration well on our Mary Rose State of Louisiana Lease No. 19266. After elections for certain carried interests, the Company has an approximate 54.17% working interest in this well, and is responsible for approximately $12.5 million of the estimated dry hole costs. The Company’s net revenue interest after certain back-in interests is approximately 25.8%.
The Company’s Mary Rose #1 and #3 wells are currently producing at a combined 8/8ths rate of approximately 113 million cubic feet equivalent per day (“Mmcfe/d”) (44.5 Mmcfe/d net to Contango), and our three Dutch wells are producing at a downstream constrained rate of approximately 80 Mmcfe/d (30.5 Mmcfe/d net to Contango), for a total of 193 Mmcfe/d (approximately 75 Mmcfe/d net to Contango). We are anticipating an initial combined 8/8ths flow rate for Dutch and Mary Rose of 300 Mmcfe/d (approximately 117 Mmcfe/d net to Contango) after hook-up of the Mary Rose #2 and Mary Rose #4 wells and the completion of downstream equipment modifications to allow increased production from our three Dutch wells. These modifications are expected to be completed in July 2008.
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