Contango Oil & Gas Company reported a successful well at its Mary Rose prospect located in Louisiana state waters at State Lease No. 19266. This is the second well the Company has drilled on its Mary Rose prospect ("Mary Rose #3"). The well is located approximately six miles off the coast of Louisiana and was drilled by Contango Operators, Inc. ("COI"), a wholly-owned subsidiary of the Company.
On an 8/8ths basis, proved reserves from our Dutch and Mary Rose discoveries increased from 435 billion cubic feet equivalent ("Bcfe") as of December 31, 2007 to 620 Bcfe, a 43% increase, as estimated by the Company's independent third party engineer. Probable reserves from our Dutch and Mary Rose discoveries decreased from 137 Bcfe as of December 31, 2007 to 130 Bcfe, a 5% decrease. Total proved reserves plus probable reserves increased from 572 Bcfe as of December 31, 2007 to 750 Bcfe, a 31% increase.
Net to Contango, proved reserves from our Dutch and Mary Rose discoveries increased from 126 Bcfe as of December 31, 2007 to 217 Bcfe, a 72% increase. This larger percentage increase is attributable to the Company having purchased additional working interests and net revenue interests in the Dutch and Mary Rose discoveries in January 2008. Probable reserves from our Dutch and Mary Rose discoveries decreased from 34 Bcfe as of December 31, 2007 to 31 Bcfe, a 9% decrease. Total proved reserves plus probable reserves increased from 160 Bcfe at December 31, 2007 to 248 Bcfe, a 55% increase.
The Company has spud a wildcat exploration well at High Island A198. The Company is paying 100% of the costs until casing point. Republic Exploration LLC ("REX"), a partially-owned subsidiary of the Company, is being carried "through the tanks" for 10%. Once casing is set, REX can elect to take an additional 25% working interest. Once production begins, assuming a successful well, Contango will have a 65% working interest and REX will have a 35% working interest in this well.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We are planning to spud our third Mary Rose well ("Mary Rose #2") by the end of March 2008. We have now completed nearly $400 million in asset sales over the last two months and $200 million in like-kind exchange purchases of reserves at our Dutch and Mary Rose discoveries. We recently completed a $9 million like-kind exchange purchase of a 0.3% overriding royalty interest in Dutch and Mary Rose, and expect to conclude another $100 million of like-kind reserve purchases within the next 60 days."
"We are making progress on our platform and pipeline construction being built to process and transport our Mary Rose production. We now estimate we will have our Mary Rose #1 and Mary Rose #3 wells on production in the May-June time frame. Our 8/8ths production from our three Dutch wells is currently approximately 85 million cubic feet equivalent per day and is constrained due to on-shore processing plant repairs."
Mr. Peak continued, "Our assets and exploration activities are now 100% focused on the Gulf of Mexico as we continue to study our strategic options and alternatives."
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