Contango Oil & Gas Company has reported revenues from sales of natural gas, oil and natural gas liquids for the three months ended September 30, 2008 of approximately $72.7 million, compared to $9.1 million for the same period last year.
The Company reported net income attributable to common stock for the three months ended September 30, 2008 of approximately $30.9 million, or $1.83 per basic share and $1.80 per diluted share. This compares to net income attributable to common stock for the three months ended September 30, 2007 of $5.7 million or $0.36 per basic share and $0.35 per diluted share.
The Company also announced today that its recently drilled West Delta 77 well was determined to be a dry hole. COI has a 100% WI and will pay 100% of the estimated drilling costs of $6.4 million. These costs together with associated leasehold costs of approximately $1.6 million are reflected as exploration expenses in the Company's Consolidated Statements of Operations for the three months ended September 30, 2008.
The Company's four Mary Rose wells are currently producing at a constrained combined 8/8ths rate of approximately 174 million cubic feet equivalent per day (approximately 65 Mmcfed net to Contango). We expect our 3rd party pipeline company will allow us to raise production rates to pre-Hurricane Ike levels of approximately 200 Mmcfed 8/8ths or approximately 75 Mmcfed net to Contango in the November/December 2008 time frame.
The Company's three Dutch wells remain shut-in as the third-party downstream gas plant that processes our gas is undergoing repairs as a result of damage incurred from Hurricane Ike. Our Dutch production has been shut-in since August 30, 2008, when we first evacuated personnel due to Hurricane Gustav. It is expected the repairs to the plant will be completed and we will be able to resume our Dutch production in the November/December 2008 time frame.
Before Hurricanes Gustav and Ike, we were flowing our Dutch wells at approximately 110 Mmcfed (42 Mmcfed net to Contango) and anticipate returning to that level of production. We are currently laying a pipeline and completing production facilities for the Company's recent discovery at Eloise #1. The Company has invested approximately $16.3 million to drill and complete this well and estimates it will invest an additional $2.2 million in pipeline and facility costs to bring this well to production. Production from Eloise #1 is estimated to commence before year-end, at a rate of approximately 5 to 10 Mmcfed (1 to 3 Mmcfed net to Contango). The well will flow to the Company's EI-11H platform.
We have logged our first rate acceleration well, the Dutch #4. We expect to complete and test this well before the end of November 2008, with first production of about 35 Mmcfed expected in February 2009. The Company expects to invest approximately $4.8 million in completion costs and $3.2 million in pipeline and facility costs. We have a 38.12% NRI in this well and it will flow to the Company’s EI-11H platform.
The Company plans to invest approximately $32.0 million to drill two wildcat exploration wells this fiscal year: Ship Shoal 263 ($20.0 million dry hole cost) and Eugene Island 56 - West ($12.0 million dry hole cost). If successful, the Company will invest an additional $9.0 million in completion costs for these two wells, and will have a 72.8% and 59.5% net revenue interest, respectively. If the Eugene Island 56 - West well is successful, we will drill a second exploratory prospect on that block (Eugene Island 56 – East) with an estimated $12.0 million dry hole cost.
As of November 7, 2008, we have purchased 322,954 shares of our common stock for approximately $15.6 million, or approximately 1.8% of our previously 17.7 million fully diluted shares, at an average price of $48.17 per share. Each share of our common stock "owns" approximately 21 proved developed Mcfe's, using our September 30, 2008 reserve report of 365.8 Bcfe’s and fully diluted shares at November 7, 2008 of approximately 17.4 million. We thus purchased approximately 7.1 Bcfe of reserves at a cost of approximately $2.29 per Mcfe. Our production in the first quarter was approximately 5.7 Bcfe. We currently have $53.0 million of cash invested in U.S. Treasury obligations, no debt, and $50.0 million of unused borrowing capacity.
Kenneth R. Peak, the Company's Chairman and Chief Executive Officer, said, "Given the weakening economy and its anticipated dampening effect on natural gas demand, in combination with projected continued growth in domestic natural gas production, we anticipate, absent a severely cold winter, increasingly weak natural gas prices for 2008 and 2009. We expect 8/8ths production at our Dutch and Mary Rose fields to be restored to the pre-hurricane level of approximately 300 Mmcfed (113 Mmcfed net to Contango) in the November/December 2008 time frame. This level of production at assumed NYMEX prices of $5.00 per Mmbtu for natural gas and $50.00 for crude oil, would result in approximately $15.0 million of pre-tax monthly cash flow, or approximately $10.0 million in after-tax monthly cash flow. We intend to use this cash flow to preserve our liquidity, stay debt-free, continue to purchase our shares, and drill our exploration prospects."
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