Contango Enters into Agreement to Purchase Southern Delaware Basin Acreage
The purchase price is comprised of
Located in western
Pecos County, Texas.
Primary focus is three benches (Wolfcamp A, Wolfcamp B and emerging
Bone Springsformations), all of which have proven to be productive in the area by offset operators, thereby providing us with the equivalent of 36,000 "effective" gross acres over the three formations.
Average Wolfcamp interval of approximately 400 feet and
Bone Springsinterval of approximately 2,000 feet.
- Acquiring operated average working interests of approximately 41% (32% net revenue interest).
- 157 gross potential locations spread over the three potential formations that are estimated to generate average individual well returns of 54%, at current strip prices and current estimated drilling and completion costs using internally estimated average production type curves based on offset operations data and assuming drilling of 10,000 foot laterals.
Additional upside exists in future downspacing and additional zones
being delineated within the thick
Bone Springssection and/or Middle and Lower Wolfcamp intervals.
- Acreage is adjacent to and surrounded by current horizontal Wolfcamp activity.
Active offset operators included Samson Oil & Gas,
J. Cleo Thompson, Brigham Exploration, and Concho Resources, among others.
- Existing infrastructure in place to service development of asset.
- No significant near term expirations.
- Drilling of initial wells is expected to commence as soon as practical after closing.
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
We calculate our "effective acreage" as our total gross surface acreage of leaseholds we may acquire pursuant to the exploration agreement multiplied by the three prospective target zones we may encounter on our acquired leasehold interests. We cannot assure you that (i) all 36,000 gross effective acres will be ultimately acquired by us, (ii) the acreage we do acquire will be prospective in all or any of the targeted zones, or (iii) such acquired acreage will ultimately be drilled or included in drilling units. For purposes of estimates in this press release, we have assumed 85% of the 36,000 gross effective acreage is prospective and capable of being included in drilling units of sufficient size to drill wells with 10,000 foot laterals.
For purposes of our internal rate of return and related estimates of
ultimate hydrocarbon recovery included in this press release, we have
used an internally developed preliminary estimate of average drilling
and completion costs of
Senior Vice President and Chief Financial Officer
Vice President and Treasurer
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