Contango Oil & Gas Company has purchased an additional 8.33% working interest and 6.667% net revenue interest in the Eugene Island 10 (Dutch) discovery and an additional average 9.11% working interest and 6.667% net revenue interest in the five State of Louisiana leases (collectively, Mary Rose) discovery from three different companies for $200 million.
The estimated proved reserves purchased were 29 billion cubic feet equivalent ("Bcfe"). The estimated proved plus probable reserves purchased were 38.2 Bcfe. The effective date of the transaction is January 1, 2008.
This purchase increases the Company's working interest in Dutch to 42.88% (with a net revenue interest of 34.30%) and increases the Company's average working interest in Mary Rose to 48.65% (with an average net revenue interest of 35.68%), inclusive of the Company's ownership interest in Republic Exploration LLC. The estimated proved reserves now owned by the Company in Dutch and Mary Rose at January 1, 2008 are 152 Bcfe, and the estimated proved plus probable reserves now owned are 200 Bcfe.
The assets purchased qualify as a like-kind exchange with the proceeds received from the Company's recently announced $200 million sale of its Western core Arkansas Fayetteville Shale properties.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We are drilling our second Mary Rose well and expect to be at logging point by late February to mid-March 2008. We have secured a second rig and plan to spud our third Mary Rose well by the end of February 2008. We are continuing work on our H platform to be set on Eugene Island 11 and the pipeline needed to begin producing the Mary Rose #1, #2, #3 and #4 wells at an expected initial production rate of approximately 250 million cubic feet equivalent per day by mid-summer. This acquisition is an excellent fit for Contango as it immediately puts our Fayetteville Shale sale proceeds to work, and gives us increased upside to our ongoing Dutch and Mary Rose development and exploration program."
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