Contango Oil & Gas Company reported net income attributable to common stock for the three months ended September 30, 2005 of $0.1 million, or $0.01 per basic and diluted share, compared to net income attributable to common stock for the three months ended September 30, 2004 of $1.4 million, or $0.11 per basic and diluted share. Natural gas and oil sales from continuing and discontinued operations for the three months ended September 30, 2005 were $1.2 million, down from $6.7 million for the three months ended September 30, 2004. The decrease in revenue was primarily the result of the sale of our south Texas natural gas and oil interests completed in December 2004. The $1.2 million of revenue for the current quarter reflects primarily production from new reserves and production from south Texas properties not included in the sale. EBITDAX was $0.7 million for the three months ended September 30, 2005, down from EBITDAX for the three months ended September 30, 2004 of $5.0 million.
Kenneth R. Peak, Contango’s Chairman and Chief Executive Officer, said, “We are continuing to focus on developing our Fayetteville Shale play in Arkansas, as well as our two offshore prospects, Eugene Island 10 (“Dutch”) and Grand Isle 72 (“Liberty”) where we will operate through our wholly-owned subsidiary, Contango Operators, Inc (“COI”). We plan to begin drilling both of our offshore prospects before calendar year-end. Both prospects will be drilled under turn-key drilling contracts.”
Mr. Peak continued, “In the Fayetteville Shale, we and our partners have now acquired or received commitments on approximately 37,000 acres and will eventually acquire at least 40,000 acres. We have now identified a number of drillable prospects and plan to begin a program of drilling six horizontal wells by mid-year 2006.”
“We recently drilled our first Smackover exploratory well in Alabama, the Alta Blackstone 10-4. The well is in the process of being completed and we expect the well to begin production by late November at a rate of 500 barrels of oil per day. We have identified and plan to drill two additional exploratory Smackover wells by the end of the first calendar quarter of 2006.”
“Our production platform at Ship Shoal 358 and the pipeline to shore at Eugene Island-113B sustained damage during Hurricane Rita and are in the process of being repaired. We are not responsible for the capital costs required to repair the platforms, pipelines, or other facilities related to these wells and are not materially impacted by the temporary loss of production from these two wells. Both of these wells, together with an earlier discovery at Eugene Island 76, are expected to begin production in the first calendar quarter of 2006.”
As of November 11, 2005 we have approximately $25 million in cash, cash equivalents, and short term investments and no debt. The Company currently has production of approximately 1.8 million cubic feet equivalent per day (“MMcfe/d”) of natural gas. Once the repairs to our non-operated offshore facilities are completed and our Eugene Island 76 and Alta Blackstone 10-4 wells begin producing, we anticipate that our first calendar quarter production will increase to approximately 3.5 to 4.0 MMcfe/d.”
