Contango's Dutch and Mary Rose fields are currently producing at an 8/8ths rate of approximately 227 million cubic feet equivalent per day (“Mmcfed”) or, approximately 84 Mmcfed net to Contango.
The workover on our Mary Rose #1 well is now complete and we are in the process of installing line heaters at our Eugene Island 11 H platform, which we believe will allow us to further increase our production rate in the March/April time frame. We expect to spud our Eugene Island 56 prospect, High Country West, around March 10 -12.
The Company also announced today that under our $100 million share repurchase program, we have thus far purchased 923,854 shares of common stock, at an average price of $44.60 per share, for a total expenditure of approximately $41.2 million. Using our December 31, 2008 reserve report of 364 Bcfe, and today’s fully diluted shares of approximately 16.8 million, we have thus “purchased” 19.7 Bcfe at an average cost of $2.12 per Mcfe. At today’s approximate $35.00 per share stock price, we are purchasing proved developed Mcfe’s for approximately $1.67/Mcfe.
We currently have approximately $38.0 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, "At June 2001, after we listed on the American Stock Exchange, we had no debt, 11.4 Bcfe in reserves, and 16.0 million fully diluted shares. Today, some 8 ½ years later, we still have no debt, have grown reserves by 350 Bcfe, yet we have only increased our fully diluted share count by some 815,000 shares."
Mr. Peak continued, "The reward/risk ratio now strongly favors our aggressively continuing our share repurchase program and we have thus decided to delay indefinitely the drilling of our two other planned wildcat exploration wells, Eugene Island 56 #2 ("High Country East") and Ship Shoal 263 ("Nautilus"). With our all in LOE costs, including severance taxes, of less than $1.00/Mcfe, $0 interest costs, and a $6.0 million budgeted G&A cost, our capex capital will be focused on our share repurchase program."
Mr. Peak continued, "Natural gas prices may well continue to be under pressure through the summer/fall, but the foundation for a sustained rebound in prices is now on the horizon. According to recently published EIA data, on shore U.S. gas production fell in December 2008 vs. November 2008. Further, a number of analysts are calling for the U.S. rig count to bottom at around 800 to 1,000 rigs, or a 50% to 60% peak to trough decline. In addition, non-vertical rigs are declining in tandem with vertical rigs which means shale play production, which declines at 60% to 80% per annum the first year, will help accelerate the fall in U.S. supply. With a gas rig count of perhaps 600 rigs and a recent average of 22 gas well completions per rig per year, U.S. gas completions could fall to less than half of the average of 30,000 gas well completions of the last three years. Demand, though down, will come back and natural gas -- the most competitive hydrocarbon under any cap and trade greenhouse gas program -- is the clear winner."
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