Contango and Partners Sell 20,000 Acres for $236 Million

Contango Oil & Gas Company has entered into a definitive agreement with XTO Energy Inc. to sell the remaining Eastern core of its Arkansas Fayetteville Shale properties (approximately 11,200 acres, net to Contango) for approximately $128 million, net to Contango's 56% interest. Together, in this transaction, Contango and its partners have agreed to sell approximately 20,000 acres for approximately $236 million. The sale is expected to close in January 2008 and is subject to customary closing conditions and adjustments.

The sale is part of the Company's previously announced review of strategic alternatives to enhance shareholder value. The sale will be effective December 1, 2007. Merrill Lynch & Co. acted as marketing and financial advisor to Contango and its partners in connection with the sale.

Kenneth R. Peak, the Company's Chairman and Chief Executive Officer, said, "Contango will once again seek to use the proceeds from this sale, assuming successful completion, to finance the purchase of producing properties utilizing a like-kind exchange structure. The combined sales proceeds for our Eastern and Western Fayetteville Shale assets were approximately $328 million."