Contango Posts Production Update, Plans to Spud Eugene Island Wildcat Well
Contango Oil & Gas has provided an operational update for its US assets located in the Gulf of Mexico.
Contango announced that three of the Company's four Mary Rose wells are currently producing at a constrained 8/8ths rate of approximately 94.0 million cubic feet equivalent per day ("Mmcfed") (approximately 34.6 Mmcfed net to Contango). The Company's recently completed Eloise North well is currently producing at an 8/8ths rate of approximately 6.0 Mmcfed (approximately 1.6 Mmcfed net to Contango). These wells flow to the Company's production platform at Eugene Island 11 ("EI-11H"). The Mary Rose #1 well is temporarily shut-in for a workover. We have experienced water production from a water bearing sand above our production reservoir. The Mary Rose #1 is the only well of the nine wells we have drilled that did not get a good cement bond log in the production casing. Assuming a successful workover, we expect the Mary Rose #1 well to be back on-line in February 2009. Due to the Company's outlook for lower gas prices in 2009, we have decided not to drill the previously announced Mary Rose #5 rate acceleration well.
Hurricane Ike related repairs were completed in late November on the downstream third-party gas plant that processes gas from our three Dutch wells, and they are currently producing at a combined 8/8ths rate of approximately 110 Mmcfed (approximately 42 Mmcfed net to Contango). The Company's recently drilled Dutch #4 well is expected to begin producing in February 2009 at an 8/8ths rate of approximately 35 Mmcfed. This well will flow to the Company's production platform at EI-11H. Once Mary Rose #1 and Dutch #4 both begin producing, we expect to be flowing at approximately 100 Mmcfed, net to Contango.
For the three months ended December 31, 2008, the Company produced approximately 5.6 Bcfe from its three Dutch and four Mary Rose wells, or approximately the same as the 5.7 Bcfe we produced for the three months ended September 30, 2008. Production for both quarters has been curtailed due to the after-effects of Hurricane Ike on the third-party pipelines and gas plants that transport and process our gas.
The Company plans to spud its next wildcat exploration well, Eugene Island 56 -- West ("High Country West") in February 2009, with an estimated dry hole cost, net to Contango, of approximately $12.0 million. If successful, the Company will invest an additional $4.1 million to complete the well, and will drill a second, geologically unrelated, exploratory prospect on that block, Eugene Island 56 -- East, ("High Country East") with an estimated $12.0 million dry hole cost and $4.1 million completion cost. We also plan to spud our Ship Shoal 263 ("Nautilus") wildcat exploration well prior to the end of our fiscal year, June 30, 2009. The estimated dry hole cost on this well is $20.0 million, net to Contango, with an additional $4.9 million in completion costs if successful.
As of January 9, 2009, we have purchased 717,654 shares of our common stock for approximately $33.6 million, at an average price of $46.88 per share. Each share of our common stock represents approximately 21 proved developed Mcfe, using our December 31, 2008 reserve report of 364.1 proved Bcfe and fully diluted shares at December 31, 2008 of approximately 17.0 million shares. So far this fiscal year, we have thus “purchased” approximately 15.4 Bcfe of our reserves at a cost of approximately $2.23 per Mcfe. For the first six months of our fiscal year, we produced approximately 11.3 Bcfe.
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