Contango: Three in a Row at Dutch Prospect
Contango Oil & Gas has made its third successful discovery at its Dutch prospect located offshore Gulf of Mexico at Eugene Island block 10. The Dutch #3 well is located approximately 2,200 feet southeast of the Dutch #1 well, and approximately one mile southwest of the Dutch #2 well. All three Dutch wells are operated by Contango Operators, Inc. ("COI"), a wholly-owned subsidiary of the Company.
The Dutch #1, #2 and #3 wells are expected to produce at a combined rate of 90 to 110 million cubic feet equivalent per day ("Mmcfe/d") through the Eugene Island 24 production platform. The Dutch #2 well is expected to begin producing by August 2007, and the Dutch #3 well is expected to begin producing by October 2007. The Dutch #1 well is currently producing at a rate of 38 Mmcfe/d. Contango's independent third party engineer estimates that proved reserves from its Dutch prospect as at June 30, 2007 are 226 billion cubic feet equivalent ("Bcfe") (66 Bcfe net to Contango) and estimates that probable reserves are 205 Bcfe (59 Bcfe net to Contango). Total proved reserves plus probable reserves are 431 Bcfe (125 Bcfe net to Contango).
Upon completion and testing of the Dutch #3 well, the Company expects to begin drilling the Mary Rose #1 well, located in Louisiana state waters, in late July 2007. A production platform and pipeline, at an estimated cost of $35 million, with a capacity of 300 Mmcfe/d is being built by the Company to process and transport anticipated production from the Mary Rose #1 well and from an expected additional three to five wells.
COI has an approximate 16% working interest and Republic Exploration LLC ("REX"), a subsidiary in which the Company owns a 42.7% interest, has an approximate 56.5% working interest in our Dutch discovery or a combined working interest net to Contango of approximately 40%. The net revenue interests to COI and REX are approximately 12% and 42%, respectively, or a combined net revenue interest net to Contango of approximately 29%.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "In addition to our continued success at our Dutch prospect, our Alta-Jones #1-29H well in the Fayetteville Shale has been producing to sales for three weeks, and is currently producing at a rate of 5.3 million cubic feet of gas per day ("Mmcf/d"). Overall, gross production to sales from wells operated by our Fayetteville partner, Alta Resources L.L.C., has increased from approximately 0.6 Mmcf/d to over 9 Mmcf/d in June. We believe we have opportunities to continue to add value at both our Dutch and Fayetteville Shale plays."
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