Contango Announces Terms of $30M Loan Facility
Contango Oil & Gas Company has completed the arrangement of a $30 million secured term loan facility with a private investment firm. Of this $30 million, only $10 million is currently available. The availability of the remaining $20 million is contingent upon meeting certain production levels for the Eugene Island 10 #1 well, which Contango expects to meet by the end of February 2007.
The proceeds of the loan will be used to continue to fund the Company's Arkansas Fayetteville Shale play and offshore Gulf of Mexico exploration and development activities. The Company also announced that its Dutch well at Eugene Island 10 began flowing on January 28, 2007. As of February 4, 2007, the well was flowing at approximately 20 million cubic feet equivalent per day ("MMcfe/d").
The Company has borrowed the first $10 million under the secured term loan facility. Borrowings under the facility bear interest at LIBOR plus 5.0%. Accrued interest is due monthly. The principal is due December 31, 2008, and may be prepaid at any time with no prepayment penalty. An arrangement fee of 1%, or $300,000, was paid in connection with the facility.
Production levels at the company's Dutch #1 well at Eugene Island 10 are currently restricted due to onshore processing constraints. Contango expect these constraints to be remedied by the end of February 2007, at which point it expects the well to be flowing at 30 MMcfe/d. Our Dutch #2 exploration well is expected to spud February 6, 2007.
In our Fayetteville Shale play, the Alta-Thines #1-30H began producing in January 2007 and, as of February 4, is producing approximately 1.2 million cubic feet per day. The Alta-Ledbetter #1-33H was fraced in December 2006, and the company expects the well to begin producing in March 2007. Contango is fracing the Alta-Briggler #1-31H and expects the well to begin producing in March 2007. The company's drilling plans for the next four to eight months are to concentrate its efforts on developing its acreage in the northern portion of the Fayetteville Shale and to continue to frac and bring on production our previously drilled wells in its Pigeon Roost and Buck Ridge areas.
Kenneth R. Peak, the Company's Chairman and Chief Executive Officer, said, "We are extremely pleased with our enhanced capital availability and our Dutch #1 production. We expect our Grand Isle 72 well ("Liberty") to begin producing by the end of February 2007."
Contango is a Houston-based, independent natural gas and oil company. The Company's core business is to explore, develop, produce and acquire natural gas and oil properties primarily offshore in the Gulf of Mexico and onshore in the Arkansas Fayetteville Shale. The Company also owns a 10% interest in a limited partnership formed to develop an LNG receiving terminal in Freeport, Texas, and holds investments in companies focused on commercializing environmentally preferred energy technologies.
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