UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): March 10, 2021

CONTANGO OIL & GAS COMPANY

(Exact name of registrant as specified in its charter)

Texas

001-16317

95-4079863

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

111 E. 5th Street, Suite 300

Fort Worth, Texas

(Address of principal executive offices)

76102

(Zip code)

(817) 529-0059

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities Registered pursuant to Section 12(b) of the Act:

Title of each class

Ticker symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.04 Per Share

MCF

NYSE American

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


Item 2.02

Results of Operations and Financial Condition

On March 10, 2021, Contango Oil & Gas Company (the “Company”) issued a press release providing its financial results for the three and twelve months ended December 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1.

The information furnished pursuant to Item 2.02 in this report on Form 8-K (including the press release attached as Exhibit 99.1 incorporated by reference in this report) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 7.01

Regulation FD Disclosure

As of March 10, 2021, the Company has posted on its website an updated investor presentation entitled “Company Overview – March 2021”.  The presentation may be accessed by going to www.contango.com, and selecting Events & Presentations under the Investors tab. The information on the Company’s website is not incorporated by reference into this report on Form 8-K and does not constitute a part of this Form 8-K.

The information furnished pursuant to Item 7.01 in this report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01

Financial Statements and Exhibits

(d)Exhibits

99.1Press release dated March 10, 2021.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CONTANGO OIL & GAS COMPANY

Dated:

March 10, 2021

By:

/s/Charles L. McLawhorn, III

Charles L. McLawhorn, III

Senior Vice President, General Counsel & Corporate Secretary


EXHIBIT 99.1

Contango oil & gas COMPANY

NEWS RELEASE

Contango Announces Fourth Quarter and Full Year 2020 Financial Results

March 10, 2021 – FORT WORTH, TEXAS – Contango Oil & Gas Company (NYSE American: MCF) (“Contango” or the “Company”) announced today its financial results for the fourth quarter and twelve months ended December 31, 2020.

Fourth Quarter 2020 Highlights and Recent Developments

Production sales of 1,321 MBoe for the quarter, or 14.4 MBoe per day, within guidance for the quarter. Assuming we had owned MCEP and Silvertip during the fourth quarter, our pro forma production sales would have been 24.5 MBoe per day.

Total operating expenses of $17.1 million for the quarter, and operating expenses exclusive of production and ad valorem taxes of $15.5 million, at the lower end of the guidance range for the quarter.

Net loss of $25.2 million (including $22.8 million in pre-tax impairments) compared to a net loss of $138.4 million (including $124.7 million in pre-tax impairments) in the prior year quarter.

Recurring Adjusted EBITDAX (a non-GAAP measure, as defined and presented herein) of $12.2 million, compared to $17.2 million in the prior year quarter.

On October 25, 2020, the Company entered into an Agreement and Plan of Merger with Mid-Con Energy Partners, LP (“Mid-Con”) (NASDAQ:MCEP) and Mid-Con Energy GP, LLC, the general partner of Mid-Con, pursuant to which Mid-Con merged with and into a wholly-owned, direct subsidiary of the Company (the “Mid-Con Acquisition”). The Mid-Con Acquisition closed on January 21, 2021, at which time the MSA terminated.

On October 27, 2020, the Company completed a private placement with a select group of institutional and accredited investors for the sale of 26,451,988 shares of the Company’s common stock for net proceeds of approximately $38.8 million.

On October 30, 2020, the Company entered into an amendment to its revolving credit agreement with JPMorgan Chase Bank N.A., as administrative agent, and the lenders party thereto (the “Credit Agreement”) under which, among other things, the Company’s borrowing base increased from $75 million to $130 million upon the closing of the Mid-Con Acquisition.

On November 27, 2020, the Company entered into a purchase and sale agreement with an undisclosed seller to acquire certain oil and natural gas properties located in the Big Horn Basin in Wyoming and Montana, in the Powder River Basin in Wyoming, and in the Permian Basin in Texas and New Mexico (the “Silvertip Acquisition”). The Silvertip Acquisition closed on February 1, 2021.

On December 1, 2020, the Company completed another private placement of 14,193,903 shares of the Company’s common stock for net proceeds of approximately $21.7 million.  


Pro forma for MCEP and Silvertip acquisitions, the Company as of January 1, 2021 has increased strip1 PDP PV-10 by a factor of 2.2x to $572 million compared to the Company’s reserves as of January 1, 2020.

Pro forma for MCEP and Silvertip acquisitions, the Company’s 5 year PDP oil decline forecasted at a peer leading < 10%, creating substantial cash flow to reinvest in additional inorganic and organic opportunities.

Debt outstanding as of March 1, 2021 was approximately $114 million, with $4 million cash on hand. While we anticipate future inorganic growth, assuming strip1 pricing, no new acquisitions, and our current capital spending budget, we anticipate the Company exiting 2021 at less than 0.5x Debt/TTM EBITDA and anticipate being in a net cash position by the end of Q3 next year.

In the acquired Silvertip and MCEP assets, we have identified a highly efficient capital budget for 2021 of approximately $4 million expected to create $46 million in proved developed PV-10 at strip1 (a 9.2x PV/I) and is not inclusive of potentially significant additional value from a well reactivation initiative underway given the higher commodity price environment.

(1)Strip prices run at March 3,2021.

Management Commentary  

Wilkie S. Colyer, the Company’s Chief Executive Officer, said, “As noted in this release, and our related SEC filings, we had a very busy fourth quarter that has continued into a good start to 2021. We signed two acquisition agreements in the fourth quarter that we closed in the first quarter. Through these long lived, lower decline acquisitions, we have increased our current production to sales 24.5 MBoe/d based on  fourth quarter 2020 sales, when compared to our fourth quarter average of 14.4 MBoe/d and have increased our reserves, cash flow, financial strength, and flexibility. We believe this positions us well to continue our consolidation strategy while the window of opportunity to acquire PDP-heavy assets, with associated development potential and at a discount to PDP PV-10 value, still exists. Our technical team’s focus on operational efficiencies and cost improvements has resulted in a 7.5 MMBoe addition to proved reserves in the form of performance revisions at SEC pricing. We believe that we will be equally successful in increasing the value of the reserves acquired in the Mid-Con and Silvertip acquisitions, and we believe this process to be repeatable on future acquisitions based on our existing track record. Our diversified portfolio provides us an inventory of very high return capital projects to execute on in 2021 and beyond.

“Maintaining a strong financial profile is also a priority for us as we look to potentially take advantage of more acquisition opportunities. We strive to maintain maximum flexibility in our capital structure financing acquisitions, and we protect our liquidity and cash flow through our aggressive hedging program. For 2021, and pro forma for the MCEP and Silvertip acquisitions, we have price protected approximately 67% of our forecasted PDP oil production (from April through December) at an average floor price of $54.87 per barrel and approximately 60% of our forecasted 2021 PDP gas production (from April through December) at an average floor price of $2.62 per MMBtu. For 2022, we have price protected approximately 47% of our forecasted PDP oil production at an average floor price of $50.24 per barrel and approximately 57% of our forecasted PDP gas production at an average floor price of $2.60 per MMBtu. We also have approximately 50% of forecasted PDP oil production for the first two months of 2023 hedged at an average floor price of $49.70 per barrel and approximately 60% of forecasted PDP gas production for the first two months of 2023 hedged at an average floor price $2.72. Lastly, I’d like to thank our shareholders and lenders, led by JPMorgan, for their continued support, along with our dedicated employees.”

Impact of the COVID-19 Pandemic


The COVID-19 pandemic has resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil throughout the world, and has created significant volatility, uncertainty and turmoil in the oil and natural gas industry. This led to a significant global oversupply of oil and a subsequent substantial decrease in oil prices. While global oil producers, including the Organization of Petroleum Exporting Countries (“OPEC”) and other oil producing nations recently have shown a willingness to exercise more restraint on production levels, and there has been a decline in U.S. production due to a reduction in drilling activity, general downward pressure on, and volatility in, commodity prices has remained and could continue for the foreseeable future. We have commodity derivative instruments in place to mitigate the effects of such price declines; however, derivatives will not entirely mitigate lower oil and natural gas prices. While there has been modest recovery in oil prices, the length of this demand disruption is still unknown, and there is significant uncertainty regarding the long-term impact to global oil demand, which will ultimately depend on various factors and consequences beyond the Company’s control, such as the duration and scope of the pandemic, the length and severity of the worldwide economic downturn, additional actions by businesses and governments in response to both the pandemic and the decrease in oil prices, the speed and effectiveness of responses to combat the virus, and the time necessary to equalize oil supply and demand to restore oil pricing. In response to these developments, we have continued to implement measures to mitigate the impact of the COVID-19 pandemic on our employees, operations and financial position. These measures include, but are not limited to, the following:

work from home initiatives for all but critical staff and the implementation of social distancing measures;
a company-wide effort to cut costs throughout our operations;
utilization of our available storage capacity to temporarily store a portion of our production for later sale at higher prices when advantageous to do so (such as the approximate 50,000 barrels of second quarter 2020 oil production we stored and sold during the third quarter of 2020 at higher oil prices);
suspension of any further plans for operated onshore and offshore drilling in 2020;
pursuit of additional “fee for service” opportunities similar to the Management Services Agreement entered into in June 2020 with Mid-Con (the “MSA”), which was terminated at the closing of the Mid-Con Acquisition on January 21, 2021; and
potential acquisitions of PDP-heavy assets, with attractive, discounted valuations, in stressed/distressed scenarios or from non-industry owners, such as our Silvertip Acquisition.

Summary of Fourth Quarter Financial Results

Net loss for the three months ended December 31, 2020 was $24.8 million, or $(0.16) per basic and diluted share, compared to a net loss of $138.4 million, or $(1.32) per basic and diluted share, for the prior year quarter. Pre-tax net loss for the three months ended December 31, 2020 was $25.9 million, compared to a pre-tax net loss of $138.6 million for the prior year quarter.

Average weighted shares outstanding were approximately 155.5 million and 105.2 million for the current and prior year quarters, respectively.  

The Company reported Adjusted EBITDAX, a non-GAAP measure defined below, of approximately $11.3 million for the three months ended December 31, 2020, compared to $12.2 million for the same period last year, a decrease attributable primarily to lower commodity prices. Recurring Adjusted EBITDAX (defined below as Adjusted EBITDAX exclusive of non-recurring business combination expenses, strategic advisory fees and legal judgments) was $12.2 million for the current quarter, compared to $17.2 million for the prior year quarter.

Revenues for the current quarter were approximately $29.2 million compared to $37.2 million for the prior year quarter, a decrease primarily attributable to a 17% decrease in the weighted average equivalent sales price in production period over period primarily as a result of a 32% decline in oil prices period over period.


Current quarter revenues also included $1.0 million related to our since-terminated fee for service agreement with Mid-Con.

Production sales for the fourth quarter were approximately 1,321 MBoe, or 14.4 MBoe per day, compared to 1,444 MBoe, or 15.7 MBoe per day for the fourth quarter of 2019. The decrease in the current year quarter was primarily attributable to a 0.7 MBoe/d decline from our Gulf of Mexico properties due to the year over year natural decline in production and to downtime related to Hurricane Delta in October 2020.

The weighted average equivalent sales price during the three months ended December 31, 2020 was $21.32 per Boe, compared to $25.75 per Boe for the same period last year, a decline primarily attributable to the decrease in oil prices in the current year quarter as a result of the decrease in demand for commodity products due to the COVID-19 pandemic and the ongoing disruptions to the global energy markets. In comparison to the fourth quarter of 2019, we experienced a 32% decline in oil prices, a 7% increase in natural gas prices and a 16% increase in natural gas liquids prices in the fourth quarter of 2020.

Operating expenses for the three months ended December 31, 2020 were approximately $17.1 million, compared to $16.9 million for the same period last year, a minimal increase considering the 2019 fourth quarter included expenses related to the White Star and Will Energy properties for only the months of November and December. Although lease operating expenses increased quarter over quarter, we were able to reduce 2020 expenses related to utilities and generators by approximately $3.9 million compared to the prior year, due to cost-saving initiatives implemented in 2020. Included in operating expenses are direct lease operating expenses, transportation and processing costs, workover expenses and production and ad valorem taxes. Operating expenses (exclusive of production and ad valorem taxes of $1.6 million and $1.9 million, respectively) were approximately $15.5 million for the current quarter, at the low end of guidance, compared to approximately $15.0 million for the prior year quarter.

DD&A expense for the three months ended December 31, 2020 was $5.9 million, or $4.47 per Boe, compared to $16.2 million, or $11.22 per Boe, for the prior year quarter. The lower depletion expense and rate in the current quarter was related to lower depletable property cost as a result of the proved property impairment recorded during the fourth quarter of 2019 and first quarter of 2020.

Impairment and abandonment expense was $22.9 million for the current quarter, of which $22.8 million related to non-cash impairment. We recorded $21.1 million for proved property impairment in the current quarter, of which $15.6 million related to our offshore properties as a result of performance revisions in reserves and the decline in gas prices and production yield. We recorded $1.7 million for unproved property impairment due to leases expiring in 2021, which we have no plan to extend or develop as a result of the current commodity price environment and our continued focus on cost saving and production enhancing initiatives. The prior year quarter included $125.1 million of impairment and abandonment expense, of which $124.7 million related to non-cash impairment.

Total G&A expenses were $7.7 million, or $5.81 per Boe, for the three months ended December 31, 2020, compared to $9.6 million, or $6.61 per Boe, for the prior year quarter. Recurring G&A expenses (Non-GAAP, defined as G&A expenses exclusive of business combination expenses and non-recurring strategic advisory fees of $1.8 million and legal judgments of ($0.8) million) for the current quarter were $6.7 million, or $5.09 per Boe. Recurring G&A expenses (Non-GAAP, defined as G&A expenses exclusive of business combination expenses and non-recurring strategic advisory fees of $2.1 million and legal judgments of $2.8 million) for the prior year quarter were $4.6 million, or $3.20 per Boe. The increase from the prior year is primarily due to the costs of additional personnel, systems costs and other administrative expenses added in conjunction with the properties we acquired from Will Energy and White Star, which more than tripled our production base. Recurring Cash G&A expenses (defined as Recurring G&A expenses exclusive of non-cash stock-based compensation of $1.9 million and $0.2 million for the respective current and prior-year quarters) were $4.8 million for the current quarter, compared to $4.5 million for the prior year quarter.   


Gain from our investment in affiliates (i.e., Exaro Energy III (“Exaro”)) for the three months ended December 31, 2020 was approximately $40,000, compared to $0.9 million for the three months ended December 31, 2019.

Loss on derivatives for the three months ended December 31, 2020 was approximately $2.9 million. Of this amount, $5.8 million was non-cash, unrealized mark-to-market losses attributable to improvement in benchmark commodity prices at the end of the current quarter compared to the benchmark prices at the end of the third quarter of 2020, offset in part by $2.9 million in realized gains on derivative settlements during the current quarter. Loss on derivatives for the three months ended December 31, 2019 was approximately $4.4 million, of which $4.9 million was non-cash, unrealized mark-to-market losses, while the remaining $0.5 million were realized gains.  

2020/2021 Capital Program & Capital Resources

Capital costs for the three months ended December 31, 2020 were approximately $0.4 million, of which $0.3 million was related to costs and evaluations of potential offshore exploratory prospects.

Our 2021 capital expenditure budget is currently planned to be between $13 - $16 million for capital workovers, facility upgrades, waterflood development and selected new well drills; however, due to our ongoing evaluation of future development for our recently acquired properties from the Mid-Con Acquisition and the Silvertip Acquisition, and the regulatory and operational factors being considered in developing a timeline for our next well in our GOM program, our capital expenditure program will continue to be evaluated for revision during the year. We believe that we will have the financial resources to increase the currently planned 2021 capital expenditure budget, when and if deemed appropriate, including as a result of changes in commodity prices, economic conditions or operational factors.

As of December 31, 2020, we had approximately $9.0 million outstanding under the Company’s Credit Agreement, $1.9 million in an outstanding letter of credit and $1.4 million in cash. The borrowing base was $75 million as of December 31, 2020, with a borrowing availability of $64.1 million.

On October 25, 2020, the Company and Mid-Con entered into the Agreement and Plan of Merger for the Mid-Con Acquisition providing for the Company’s acquisition of Mid-Con in an all-stock merger transaction in which Mid-Con became a direct, wholly owned subsidiary of Contango. The Mid-Con Acquisition closed on January 21, 2021 at which time the MSA with Mid-Con was terminated. A total of 25,409,164 shares of Contango common stock were issued at the closing of the Mid-Con acquisition. Concurrently with the announcement of the Mid-Con Acquisition, we announced the execution of an agreement with a select group of institutional and accredited investors to sell 26,451,988 shares of the Company’s common stock. On October 27, 2020, we completed the private placement offering for net proceeds of approximately $38.8 million. The proceeds were used for the Mid-Con Acquisition and for general corporate purposes, including the repayment of debt outstanding under our Credit Agreement. See Note 1 – “Organization and Business” and Note 4 – “Acquisitions and Dispositions” in our recently filed Form 10-K for the year ended December 31, 2020 for further information.

On October 30, 2020, we entered into the Third Amendment to the Credit Agreement (the “Third Amendment”) under which the Company’s borrowing base was increased from $75 million to $130 million, effective upon the closing of the Mid-Con Acquisition. The Third Amendment provides for, among other things, a $10 million automatic reduction in the borrowing base on March 31, 2021. The next regularly scheduled borrowing base redetermination is on or before May 1, 2021. The borrowing base may also be adjusted by certain events, including the incurrence of any senior unsecured debt, material asset dispositions or liquidation of hedges in excess of certain thresholds. The Credit Agreement matures on September 17,


2024. See Note 13 – “Long-Term Debt” in our recently filed Form 10-K for the year ended December 31, 2020 for further information.

On November 27, 2020, we entered into a Purchase and Sale Agreement with an undisclosed seller for the Silvertip Acquisition providing for the acquisition of certain oil and natural gas properties located in the Big Horn Basin in Wyoming and Montana, on the Powder River Basin in Wyoming, and in the Permian Basin in Texas and New Mexico.  The acquisition closed on February 1, 2021. See Note 4 – “Acquisitions and Dispositions” in our recently filed Form 10-K for the year ended December 31, 2020 for further information.

On December 1, 2020, we completed another private placement of 14,193,903 shares of the Company’s common stock for net proceeds of approximately $21.7 million.  The net proceeds were used to fund the Silvertip Acquisition and for general corporate purposes, including the repayment of debt outstanding under our Credit Agreement. See Note 1 – “Organization and Business” in our recently filed Form 10-K for the year ended December 31, 2020 for further information.

2020 Year End Reserves

As of December 31, 2020, the Standardized Measure of Discounted Future Net Cash Flows (“Standardized Measure”) of our proved reserves was approximately $115.6 million, and the PV-10 value (Non-GAAP) of our proved reserves was approximately $126.4 million, compared to the Standardized Measure value of $257.8 million and PV-10 value of $286.6 million as of December 31, 2019, a decrease primarily attributable to lower commodity prices and the sales of non-core producing assets The Securities and Exchange Commission (“SEC”) mandated prices used in determining our December 31, 2020 proved reserves and PV-10 value were $39.57 per Bbl of oil and condensate and $2.14 per MMBtu for natural gas, compared with SEC prices of $55.69 per Bbl for oil and condensate and $2.52 per MMMbtu for natural gas used in estimating proved reserves as of December 31, 2019.

As of December 31, 2020, our independent third-party engineering firms estimated our proved oil and natural gas reserves to be approximately 34.2 MMBoe compared with 52.7 MMBoe of proved reserves as of December 31, 2019. The decrease in proved reserves is primarily due to a 21.1 MMBoe decrease related to negative revisions related to lower commodity prices, a 1.0 MMBoe decrease related to property sales in our Central Oklahoma and Western Anadarko regions and 2020 production of 6.1 MMBoe, partially offset by a 7.5 MMBoe increase related to positive performance revisions primarily in our Central Oklahoma and West Texas regions and a 2.3 MMBoe increase attributable to new PUD locations in our West Texas area.

At the end of 2020, the composition of our proved reserves, volumetrically, was 38% oil and condensate, 41% natural gas and 21% natural gas liquids, compared to 36% oil and condensate, 42% natural gas and 22% natural gas liquids at December 31, 2019. These estimates were prepared in accordance with reserve reporting guidelines mandated by the SEC.  

Our proved developed reserves for the year ended December 31, 2020 were estimated at 27.6 MMBoe, compared to 40.8 MMBoe in the prior year. The decrease in proved developed reserves is primarily attributable to negative revisions related to lower commodity prices of 9.8 MMBoe and 2020 production of 6.1 MMBoe, partially offset by positive performance-related revisions related in our Central Oklahoma properties.

Our proved undeveloped reserves (“PUD”) for the year ended December 31, 2020 were 6.7 MMBoe, compared to 12.0 MMBoe at December 31, 2019. The decrease in PUD reserves was primarily attributable to 11.4 MMBoe in negative price-related revisions, partially offset by a 4.3 MMBoe positive performance revision and 2.3 MMBoe of new additions, both of which relate to properties in our West Texas region.


The following table summarizes Contango’s total proved reserves as of December 31, 2020 (1):

Present Value

Oil

Gas

NGL

Total

Discounted

Category

(MBbl)

(MMcf)

(MBbl)

(MBoe)

at 10% ($000) (2)

Developed

7,166

82,788

6,595

27,558

$

112,103

Undeveloped

5,838

1,694

559

6,680

14,273

Total Proved

13,004

84,482

7,154

34,238

$

126,376

(2)The above estimates do not include net proved reserves of approximately 2.6 MMBoe attributable to our 37% equity ownership investment in Exaro as of December 31, 2020.
(3)PV-10 is a non-GAAP measure. Please see below for a definition and reconciliation to Standardized Measure.

Derivative Instruments

As of December 31, 2020, we had the following financial derivative contracts in place with members of our bank group or third-party counterparties under an unsecured line of credit with no margin call provisions.

Commodity

    

Period

    

Derivative

    

Volume/Month

    

Price/Unit

 

Oil

Jan 2021 - March 2021

Swap

19,000

Bbls

$

50.00

(1)

Oil

April 2021 - July 2021

Swap

12,000

Bbls

$

50.00

(1)

Oil

Aug 2021 - Sept 2021

Swap

10,000

Bbls

$

50.00

(1)

Oil

Jan 2021 - July 2021

Swap

62,000

Bbls

$

52.00

(1)

Oil

Aug 2021 - Sept 2021

Swap

55,000

Bbls

$

52.00

(1)

Oil

Oct 2021 - Dec 2021

Swap

64,000

Bbls

$

52.00

(1)

Oil

April 2022 - Oct 2022

Swap

25,000

Bbls

$

42.04

(1)

Natural Gas

Jan 2021 - March 2021

Swap

185,000

MMBtus

$

2.505

(2)

Natural Gas

April 2021 - July 2021

Swap

120,000

MMBtus

$

2.505

(2)

Natural Gas

Aug 2021 - Sept 2021

Swap

10,000

MMBtus

$

2.505

(2)

Natural Gas

Jan 2021 - March 2021

Swap

185,000

MMBtus

$

2.508

(2)

Natural Gas

April 2021 - July 2021

Swap

120,000

MMBtus

$

2.508

(2)

Natural Gas

Aug 2021 - Sept 2021

Swap

10,000

MMBtus

$

2.508

(2)

Natural Gas

Jan 2021 - March 2021

Swap

650,000

MMBtus

$

2.508

(2)

Natural Gas

April 2021 - Oct 2021

Swap

400,000

MMBtus

$

2.508

(2)

Natural Gas

Nov 2021 - Dec 2021

Swap

580,000

MMBtus

$

2.508

(2)

Natural Gas

April 2021 - Nov 2021

Swap

70,000

MMBtus

$

2.36

(2)

Natural Gas

Dec 2021

Swap

350,000

MMBtus

$

2.36

(2)

Natural Gas

Jan 2022 - March 2022

Swap

780,000

MMBtus

$

2.542

(2)

Natural Gas

April 2022 - July 2022

Swap

650,000

MMBtus

$

2.515

(2)

Natural Gas

Aug 2022 - Oct 2022

Swap

350,000

MMBtus

$

2.515

(2)

Natural Gas

Jan 2022 - March 2022

Swap

250,000

MMBtus

$

3.149

(2)


(1)Based on West Texas Intermediate crude oil prices.
(2)Based on Henry Hub NYMEX natural gas prices.


In conjunction with the closing of the Mid-Con Acquisition in January 2021, we acquired the following additional derivative contracts via novation from Mid-Con:

Commodity

    

Period

    

Derivative

    

Volume/Month

    

Price/Unit

Oil

Jan 2021

Swap

20,883

Bbls

$

55.78

(1)

Oil

Feb 2021

Swap

20,804

Bbls

$

55.78

(1)

Oil

March 2021

Swap

20,725

Bbls

$

55.78

(1)

Oil

April 2021

Swap

20,647

Bbls

$

55.78

(1)

Oil

May 2021

Swap

20,563

Bbls

$

55.78

(1)

Oil

June 2021

Swap

20,487

Bbls

$

55.78

(1)

Oil

July 2021

Swap

20,412

Bbls

$

55.78

(1)

Oil

Aug 2021

Swap

20,301

Bbls

$

55.78

(1)

Oil

Sept 2021

Swap

20,228

Bbls

$

55.78

(1)

Oil

Oct 2021

Swap

20,155

Bbls

$

55.78

(1)

Oil

Nov 2021

Swap

20,084

Bbls

$

55.78

(1)

Oil

Dec 2021

Swap

20,012

Bbls

$

55.78

(1)

Oil

Jan 2021

Collar

20,883

Bbls

$

52.00

-

58.80

(1)

Oil

Feb 2021

Collar

20,804

Bbls

$

52.00

-

58.80

(1)

Oil

March 2021

Collar

20,725

Bbls

$

52.00

-

58.80

(1)

Oil

April 2021

Collar

20,647

Bbls

$

52.00

-

58.80

(1)

Oil

May 2021

Collar

20,563

Bbls

$

52.00

-

58.80

(1)

Oil

June 2021

Collar

20,487

Bbls

$

52.00

-

58.80

(1)

Oil

July 2021

Collar

20,412

Bbls

$

52.00

-

58.80

(1)

Oil

Aug 2021

Collar

20,301

Bbls

$

52.00

-

58.80

(1)

Oil

Sept 2021

Collar

20,228

Bbls

$

52.00

-

58.80

(1)

Oil

Oct 2021

Collar

20,155

Bbls

$

52.00

-

58.80

(1)

Oil

Nov 2021

Collar

20,084

Bbls

$

52.00

-

58.80

(1)

Oil

Dec 2021

Collar

20,012

Bbls

$

52.00

-

58.80

(1)


(1)Based on West Texas Intermediate crude oil prices.

In the first quarter of 2021, we entered into the following additional derivative contracts:

Commodity

    

Period

    

Derivative

    

Volume/Month

    

Price/Unit

 

Oil

March 2021 - Oct 2021

Swap

25,000

Bbls

$

54.77

(1)

Oil

Nov 2021 - Dec 2021

Swap

15,000

Bbls

$

54.77

(1)

Oil

March 2021

Swap

50,000

Bbls

$

63.31

(1)

Oil

April 2021

Swap

50,000

Bbls

$

63.13

(1)

Oil

May 2021

Swap

50,000

Bbls

$

62.71

(1)

Oil

June 2021

Swap

50,000

Bbls

$

62.17

(1)

Oil

July 2021

Swap

50,000

Bbls

$

61.50

(1)

Oil

Aug 2021

Swap

50,000

Bbls

$

60.94

(1)

Oil

Sep 2021

Swap

50,000

Bbls

$

60.38

(1)

Oil

Oct 2021

Swap

50,000

Bbls

$

59.89

(1)

Oil

Nov 2021

Swap

50,000

Bbls

$

59.46

(1)

Oil

Dec 2021

Swap

50,000

Bbls

$

59.01

(1)

Oil

Jan 2022

Swap

60,000

Bbls

$

52.94

(1)

Oil

Feb 2022

Swap

60,000

Bbls

$

52.65

(1)

Oil

March 2022

Swap

60,000

Bbls

$

52.29

(1)

Oil

April 2022

Swap

47,500

Bbls

$

51.98

(1)

Oil

May 2022

Swap

45,000

Bbls

$

51.71

(1)

Oil

June 2022

Swap

45,000

Bbls

$

51.41

(1)


Oil

July 2022

Swap

45,000

Bbls

$

51.13

(1)

Oil

Aug 2022

Swap

45,000

Bbls

$

50.89

(1)

Oil

Sep 2022

Swap

45,000

Bbls

$

50.65

(1)

Oil

Oct 2022

Swap

45,000

Bbls

$

50.45

(1)

Oil

Nov 2022

Swap

55,000

Bbls

$

50.26

(1)

Oil

Dec 2022

Swap

55,000

Bbls

$

50.22

(1)

Oil

Jan 2023

Swap

57,500

Bbls

$

49.81

(1)

Oil

Feb 2023

Swap

57,500

Bbls

$

49.63

(1)

Oil

Jan 2022

Swap

60,000

Bbls

$

52.96

(1)

Oil

Feb 2022

Swap

60,000

Bbls

$

52.66

(1)

Oil

March 2022

Swap

60,000

Bbls

$

52.27

(1)

Oil

April 2022

Swap

47,500

Bbls

$

51.96

(1)

Oil

May 2022

Swap

45,000

Bbls

$

51.72

(1)

Oil

June 2022

Swap

45,000

Bbls

$

51.42

(1)

Oil

July 2022

Swap

45,000

Bbls

$

51.13

(1)

Oil

Aug 2022

Swap

45,000

Bbls

$

50.90

(1)

Oil

Sep 2022

Swap

45,000

Bbls

$

50.66

(1)

Oil

Oct 2022

Swap

45,000

Bbls

$

50.47

(1)

Oil

Nov 2022

Swap

55,000

Bbls

$

50.26

(1)

Oil

Dec 2022

Swap

55,000

Bbls

$

50.01

(1)

Oil

Jan 2023

Swap

57,500

Bbls

$

49.79

(1)

Oil

Feb 2023

Swap

57,500

Bbls

$

49.62

(1)

Natural Gas

March 2021

Swap

100,000

MMBtus

$

2.96

(2)

Natural Gas

April 2021 - July 2021

Swap

350,000

MMBtus

$

2.96

(2)

Natural Gas

Aug 2021 - Oct 2021

Swap

500,000

MMBtus

$

2.96

(2)

Natural Gas

Nov 2021

Swap

450,000

MMBtus

$

2.96

(2)

Natural Gas

April 2022

Swap

175,000

MMBtus

$

2.51

(2)

Natural Gas

May 2022 - July 2022

Swap

150,000

MMBtus

$

2.51

(2)

Natural Gas

Aug 2022 - Oct 2022

Swap

400,000

MMBtus

$

2.51

(2)

Natural Gas

Nov 2022 - Feb 2023

Swap

750,000

MMBtus

$

2.72

(2)


(1)Based on West Texas Intermediate crude oil prices.
(2)Based on Henry Hub NYMEX natural gas prices.

Selected Financial and Operating Data

The following table reflects certain comparative financial and operating data for the three and twelve months ended December 31, 2020 and 2019:  

Three Months Ended

Year ended

December 31, 

December 31, 

2020

2019

%

2020

2019

%

Offshore Volumes Sold:

    

    

    

    

    

Oil and condensate (MBbls)

7

11

(36)%

32

43

(26)%

Natural gas (MMcf)

1,113

1,402

(21)%

4,962

5,908

(16)%

Natural gas liquids (MBbls)

39

46

(15)%

127

210

(40)%

Thousand barrels of oil equivalent (MBoe)

232

290

(20)%

986

1,237

(20)%

Onshore Volumes Sold:

Oil and condensate (MBbls)

358

396

(10)%

1,642

748

120%

Natural gas (MMcf)

2,786

2,741

2%

14,005

3,615

287%

Natural gas liquids (MBbls)

267

301

(11)%

1,135

402

182%

Thousand barrels of oil equivalent (MBoe)

1,089

1,154

(6)%

5,111

1,753

192%

Total Volumes Sold:

Oil and condensate (MBbls)

365

407

(10)%

1,674

791

112%

Natural gas (MMcf)

3,899

4,143

(6)%

18,967

9,523

99%

Natural gas liquids (MBbls)

306

347

(12)%

1,262

612

106%

Thousand barrels of oil equivalent (MBoe)

1,321

1,444

(9)%

6,097

2,990

104%

Daily Sales Volumes:

Oil and condensate (MBbls)

4.0

4.4

(5)%

4.6

2.2

113%

Natural gas (MMcf)

42.4

45.0

(7)%

51.8

26.1

99%

Natural gas liquids (MBbls)

3.3

3.8

8%

3.4

1.7

98%

Thousand barrels of oil equivalent (MBoe)

14.4

15.7

(9)%

16.7

8.2

100%

Average sales prices:

Oil and condensate (per Bbl)

$

39.30

$

57.93

(32)%

$

37.31

$

56.55

(34)%

Natural gas (per Mcf)

$

2.22

$

2.07

7%

$

1.65

$

2.35

(30)%

Natural gas liquids (per Bbl)

$

16.86

$

14.50

16%

$

13.54

$

15.39

(12)%

Total (per Boe)

$

21.32

$

25.75

(17)%

$

18.19

$

25.59

(29)%


Three Months Ended

Year Ended

December 31, 

December 31, 

2020

2019

%

2020

2019

%

Offshore Selected Costs ($ per Boe)

    

    

    

    

    

Operating expenses (1)

$

4.50

$

5.22

(14)%

$

5.68

$

5.13

11%

Production and ad valorem taxes

$

0.47

$

0.36

31%

$

0.38

$

0.43

(12)%

Onshore Selected Costs ($ per Boe)

Operating expenses (1)

$

13.24

$

11.67

13%

$

12.04

$

13.26

(9)%

Production and ad valorem taxes

$

1.37

$

1.56

(12)%

$

1.04

$

1.75

(41)%

Average Selected Costs ($ per Boe)

Operating expenses (1)

$

11.72

$

10.38

13%

$

11.01

$

9.91

11%

Production and ad valorem taxes

$

1.22

$

1.32

(8)%

$

0.94

$

1.21

(22)%

General and administrative expense (cash)

$

4.38

$

6.54

(33)%

$

3.39

$

7.55

(55)%

Interest expense

$

0.45

$

3.76

(88)%

$

0.82

$

2.87

(71)%

Net Loss (thousands)

$

(25,248)

$

(138,379)

$

(165,342)

$

(159,796)

Adjusted EBITDAX (2) (thousands)

$

11,270

$

12,270

$

48,206

$

23,859

Weighted Average Shares Outstanding (thousands)

Basic

155,480

105,215

137,522

54,136

Diluted

155,480

105,215

137,522

54,136


(1)Operating expense includes direct lease operating expenses, transportation and workover expenses.
(2)Adjusted EBITDAX is a non-GAAP financial measure. See below for reconciliation to net loss.


CONTANGO OIL & GAS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31, 

December 31, 

    

2020

    

2019

ASSETS

Cash and cash equivalents

$

1,383

$

1,624

Accounts receivable, net

37,862

39,567

Current derivative asset

2,996

3,819

Other current assets

4,565

1,377

Net property and equipment

101,903

291,120

Non-current assets

21,558

16,319

TOTAL ASSETS

$

170,267

$

353,826

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable and accrued liabilities

83,970

104,593

Other current liabilities

5,566

5,954

Long-term debt

12,369

72,768

Asset retirement obligations

2,624

49,662

Other non-current liabilities

50,171

4,809

Total shareholders’ equity

15,567

116,040

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY

$

170,267

$

353,826


CONTANGO OIL & GAS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

Three Months Ended

Year Ended

December 31, 

December 31, 

    

2020

    

2019

    

2020

    

2019

(unaudited)

REVENUES

Oil and condensate sales

$

14,334

$

23,579

$

62,461

$

44,705

Natural gas sales

8,663

8,588

31,381

22,380

Natural gas liquids sales

5,160

5,025

17,078

9,427

Fee for service revenues

1,000

2,000

Total revenues

29,157

37,192

112,920

76,512

EXPENSES

Operating expenses

17,071

16,884

72,847

33,205

Exploration expenses

250

312

11,594

1,003

Depreciation, depletion and amortization

5,901

16,204

30,032

39,807

Impairment and abandonment of oil and gas properties

22,877

125,120

168,802

128,290

General and administrative expenses

7,672

9,598

24,940

24,938

Total expenses

53,771

168,118

308,215

227,243

OTHER INCOME (EXPENSE)

Gain from investment in affiliates, net of income taxes

40

893

27

742

Gain (loss) from sale of assets

30

(83)

4,501

518

Interest expense

(601)

(5,428)

(5,022)

(8,596)

Gain (loss) on derivatives, net

(2,941)

(4,425)

27,585

(3,357)

Other income

2,154

1,326

3,609

1,848

Total other income (expense)

(1,318)

(7,717)

30,700

(8,845)

NET LOSS BEFORE INCOME TAXES

(25,932)

(138,643)

(164,595)

(159,576)

Income tax provision (benefit)

684

264

(747)

(220)

NET LOSS

$

(25,248)

$

(138,379)

$

(165,342)

$

(159,796)


Non-GAAP Financial Measures

This news release includes certain non-GAAP financial information as defined by SEC rules. Pursuant to SEC requirements, reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP) are included in this press release.

Adjusted EBITDAX represents net income (loss) before interest expense, taxes, depreciation, depletion and amortization, and oil and gas exploration expenses (“EBITDAX”) as further adjusted to reflect the items set forth in the table below and is a measure required to be used in determining our compliance with financial covenants under our credit facility. Recurring Adjusted EBITDAX represents Adjusted EBITDAX exclusive of non-recurring business combination and strategic advisory fees and legal judgments.

We have included Adjusted EBITDAX in this release to provide investors with a supplemental measure of our operating performance and information about the calculation of some of the financial covenants that are contained in our credit agreement. We believe Adjusted EBITDAX is an important supplemental measure of operating performance because it eliminates items that have less bearing on our operating performance and therefore highlights trends in our core business that may not otherwise be apparent when relying solely on GAAP financial measures. We also believe that securities analysts, investors and other interested parties frequently use Adjusted EBITDAX in the evaluation of companies, many of which present Adjusted EBITDAX when reporting their results. Adjusted EBITDAX is a material component of the covenants that are imposed on us by our credit agreement. We are subject to financial covenant ratios that are calculated by reference to Adjusted EBITDAX. Non-compliance with the financial covenants contained in our credit agreement could result in a default, an acceleration in the repayment of amounts outstanding and a termination of lending commitments. Our management and external users of our financial statements, such as investors, commercial banks, research analysts and others, also use Adjusted EBITDAX to assess:

the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;

our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure; and

the feasibility of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.


The following table reconciles net loss to EBITDAX and Adjusted EBITDAX and Recurring Adjusted EBITDAX for the periods presented:

Three Months Ended

Year Ended

December 31, 

December 31, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Net loss

$

(25,248)

$

(138,379)

$

(165,342)

$

(159,796)

Interest expense

601

5,428

5,022

8,596

Income tax provision (benefit)

(684)

(264)

747

220

Depreciation, depletion and amortization

5,901

16,204

30,032

39,807

Impairment of oil and gas properties

22,794

124,718

168,732

126,964

Exploration expense

250

312

11,594

1,003

EBITDAX

$

3,614

$

8,019

$

50,785

$

16,794

Unrealized loss (gain) on derivative instruments

$

5,834

$

4,905

$

(2,321)

$

5,973

Non-cash stock-based compensation charges

1,892

158

4,270

2,352

Loss (gain) on sale of assets and investment in affiliates

(70)

(812)

(4,528)

(1,260)

Adjusted EBITDAX

$

11,270

$

12,270

$

48,206

$

23,859

Non-recurring business combination expenses and strategic fees

$

1,752

$

2,347

$

4,380

$

4,177

Non-recurring legal judgments

(806)

2,839

(560)

4,973

Recurring Adjusted EBITDAX

$

12,216

$

17,456

$

52,026

$

33,009

In addition to Adjusted EBITDAX and Recurring Adjusted EBITDAX, we may provide additional non-GAAP financial measures, including Operating expenses exclusive of production and ad valorem taxes, Recurring G&A expenses and Recurring Cash G&A expenses, because our management believes providing investors with this information gives additional insights into our profitability, cash flows and expenses.

Adjusted EBITDAX, Recurring Adjusted EBITDAX and other non-GAAP measures in this release are not presentations made in accordance with generally accepted accounting principles, or GAAP. As discussed above, we believe that the presentation of non-GAAP financial measures in this release is appropriate. However, when evaluating our results, you should not consider the non-GAAP financial measures in isolation of, or as a substitute for, measures of our financial performance as determined in accordance with GAAP, such as net loss. For example, Adjusted EBITDAX has material limitations as a performance measure because it excludes items that are necessary elements of our costs and operations. Because other companies may calculate Adjusted EBITDAX differently than we do, Adjusted EBITDAX as presented in this release is not, comparable to similarly-titled measures reported by other companies.

PV 10

PV-10 at year-end is a non-GAAP financial measure and represents the present value, discounted at 10% per year, of estimated future cash inflows from proved oil and natural gas reserves, less future development and production costs using pricing assumptions in effect at the end of the period. PV-10 differs from Standardized Measure of Discounted Net Cash Flows because it does not include the effects of income taxes on future net revenues. Neither PV-10 nor Standardized Measure of Discounted Net Cash Flows represents an estimate of fair market value of our oil and natural gas properties. PV-10 is used by the industry and by our management as an arbitrary reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities that are not dependent on the taxpaying status of the entity.


The following table provides a reconciliation of our Standardized Measure to PV-10 (in thousands):

December 31,