Contango Oil & Gas Company has entered into a definitive agreement with a major Asian utility company (the "Purchaser") to sell its ten percent (10%) limited partnership interest in Freeport LNG Development LP ("Freeport") for approximately $68 million. The sale is subject to the Purchaser's board approval and customary closing conditions and adjustments.
Freeport is engaged in developing a liquefied natural gas receiving and gasification terminal on Quintana Island, near Freeport, Texas. Contango owns the ten percent limited partnership interest in Freeport through its wholly owned subsidiary, Contango Sundance, Inc. The sale is part of Contango's previously announced review of strategic alternatives to enhance shareholder value.
Merrill Lynch & Co. acted as financial advisor to Contango in connection with the sale.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "Contango will use the proceeds from this sale to prepay the outstanding $20 million term loan from the Royal Bank of Scotland, with the remaining funds available for working capital."
Mr. Peak continued, "On December 19, 2007, production from our three Dutch wells was shut-in due to a small leak in the condensate line, which is owned by the operator of the Eugene Island 24 platform. The wells were shut-in for 16 days, with production resuming on January 4, 2008. On January 5, 2008, another leak occurred. Repair crews are currently on location, and we expect to be up and operating by January 11, 2008. Assuming repairs are completed as planned, production will have been shut-in for a total of 22 days, and the Company estimates lost cash flows of approximately $5 million. "
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