HOUSTON, Dec. 20, 2019 (GLOBE NEWSWIRE) -- Contango Oil & Gas Company (NYSE American: MCF) (“Contango” or the “Company”) announced today that the Company entered into a Joint Development Agreement with Juneau Oil & Gas, LLC (“Juneau”) to develop certain exploration prospects in the offshore Gulf of Mexico shelf.
The Joint Development Agreement provides that the Company will have the right to acquire an interest in all of Juneau’s prospects located in the Gulf of Mexico for aggregate consideration of $6.0 million, consisting of $1.69 million in cash and $4.31 million in stock consideration. The first such prospect to be acquired by the Company, the Iron Flea, is located in the Grand Isle Block 45 Area, which management currently estimates could have an expected reserve potential of approximately 19 MMBoe (86% oil) net to Contango’s interest. The Company has elected to acquire approximately 85-90% of Juneau’s working interest in such prospect, and we expect the dry hole cost of the exploration well, net to Contango’s interest after project payout, to be $6.3 million. More information on the Iron Flea, which we anticipate drilling in the second quarter of 2020, can be found in our most recent corporate presentation on our website. During the term of the Joint Development Agreement, Contango will also have the right to acquire an interest in all future Juneau-generated prospects located in the Gulf of Mexico, on similar terms and conditions, subject to the execution of an Advisory Services Agreement, after the first well has been drilled. Juneau will deliver to the Company no less than an 80% net revenue interest (proportionately reduced to Juneau’s interest) on all acquired prospects, excluding the Iron Flea prospect to be acquired by the Company.
Wilkie S. Colyer, the Company’s President and Chief Executive Officer, said, “We are delighted to announce that we are partnering again with Brad and his team at Juneau Oil and Gas. They have a long history of successful prospect generation, including discovering the Dutch and Mary Rose Field which continues to be an important contributor to Contango’s reserves and cash flow even today. This will not distract or deter us from continuing to look for distressed, onshore, PDP and cash flow heavy assets to acquire, but it instead complements that strategy quite well in our opinion. Given the discount rate at which we are able to acquire these lower risk, onshore assets, we expect our returns for exploratory wells will be higher. Of course, investors should recognize that exploratory drilling is inherently risky, and the Iron Flea well could be unsuccessful. Should our initial test well prove successful and the production levels reach what we currently expect, we believe the Iron Flea economics rival any play in the onshore United States.”
Brad Juneau, the President of Juneau Oil and Gas, said, “Our entire team could not be more excited to reconnect with our original partner Contango Oil & Gas, which Ken Peak and I started back in 1999. Contango and Juneau made several notable discoveries from inception, highlighted by the discovery of the Gulf of Mexico field Dutch Mary Rose that Wilkie referenced. I’m honored to have the opportunity to work with Wilkie and his management team as they grow the Company, and as a demonstration of our faith in his team we have taken most of our upfront reimbursement in Contango stock and not cash.”
Willkie Farr & Gallagher LLP acted as legal advisor to the Company in connection with the Joint Development Agreement.
Contango Oil & Gas Company is a Houston, Texas based, independent oil and natural gas company whose business is to maximize production and cash flow from its offshore properties in the shallow waters of the Gulf of Mexico and onshore properties in Texas, Oklahoma and Wyoming and to use that cash flow to explore, develop, exploit, increase production from its existing properties, and to acquire crude oil and natural gas properties in the United States.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on Contango’s current expectations and include statements regarding the Joint Development Agreement and expected benefits from the acquired interests, estimates of expected reserves or production, exploration opportunities, including costs, revenues and expectations for exploratory wells, the Company’s growth strategy, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance. Words and phrases used to identify forward-looking statements include terms such as “expects,” “believes,” “anticipates,” “plans,” “estimates,” “potential,” “possible,” “efforts,” “goal,” or “intends,” or words and phrases stating that certain actions, events or results “may,” “will,” “should,” or “could” be taken, occur or be achieved. 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: heightened risks relating to prospective properties; increased costs and risks associated with development in the Gulf of Mexico; 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 related to reserves potential and future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices; our ability to realize expected value from acquisitions; shortages of drilling equipment, oilfield personnel and services; unavailability of gathering systems, pipelines and processing facilities; the possibility that government policies may change or governmental approvals may be delayed or withheld; market conditions, industry conditions and factors which could affect Contango’s operations or financial results, including those described in Contango’s Annual Report on Form 10-K and other filings 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 speak only as of the date they were made and 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, except as required by law. No reserves have been assigned to the Iron Flea Prospect and its development is speculative. Estimates of reserve potential and future production and other expectations regarding the prospect are estimated metrics based on Contango management’s current information, estimates and assumptions. Actual results may be materially adversely different than current expectations.
This press release is neither an offer to sell nor a solicitation of an offer to buy any securities, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. The shares of common stock issued as consideration have not been registered under the Securities Act or under any state securities laws and, unless so registered may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
Contango Oil & Gas Company
E. Joseph Grady, 713-236-7400
Senior Vice President and Chief Financial Officer
Source: Contango Oil & Gas Company
Source: Contango Oil & Gas