Contango Acquires Addtl Working Interest In Dutch, Mary Rose
Contango Oil & Gas Company has purchased an additional 4.17% working interest and 3.33% net revenue interest in the Eugene Island 10 discovery and an additional average 4.56% working interest and approximately 3.33% net revenue interest in the five State of Louisiana leases discovery from two different companies for $100 million.
The estimated proved reserves purchased were 21 billion cubic feet equivalent and the estimated proved plus probable reserves purchased were 24 Bcfe. The effective date of the transaction is January 1, 2008. This purchase increases the Company's working interest in Dutch to 47.05% (with a net revenue interest of 38.12%) and increases the Company's average working interest in Mary Rose to 53.21% (with an average net revenue interest of 39.00%). All working interests and net revenue interests are now held directly by the Company. A portion was previously held by Republic Exploration LLC, a partially-owned subsidiary of the Company. The estimated proved reserves now owned by the Company in Dutch and Mary Rose at April 1, 2008, as estimated by our independent third party engineer, are 254 Bcfe, and the estimated proved plus probable reserves now owned are 280 Bcfe.
In total, the Company has now completed $309 million of like-kind exchange purchases. Since January 1, 2008, the Company has purchased an additional 10.33% net revenue interest in Dutch and Mary Rose, or approximately 65 Bcfe of proved reserves and 75 Bcfe of proved and probable reserves. The pre-tax PV 10 of our proved reserves as of April 1, 2008, as estimated by our independent third party engineer, assuming constant prices of $9.00/Mcf and $90.00/Bbl of oil, is $1.78 billion.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We are drilling our Mary Rose #2 well and expect to be at logging point by late April to mid-May 2008. A second rig has arrived on location and we have spudded our Mary Rose #4 well. Upon completion of the Mary Rose #4, our plans are to drill a wildcat exploration well ("Eloise") to a deeper horizon on our Mary Rose acreage. We are currently on schedule to begin producing at our Mary Rose #1 and Mary Rose #3 wells before the end of May 2008."
Mr. Peak continued, "Our wholly-owned subsidiary, Contango Venture Capital Corporation, recently sold four of its alternative energy investments for $3.4 million. Our only remaining alternative energy investment is in Moblize Inc., in which we have invested $1.2 million and own approximately 33%."
Contango Oil & Gas announced that its Board of Directors has authorized its financial advisor, Merrill Lynch & Co., to obtain proposals for the purchase of the Company's Dutch and Mary Rose discoveries in the Gulf of Mexico. Any possible sale or restructuring is subject to mutually acceptable terms and conditions, mutually satisfactory documentation, the consent and approval of third parties and governmental authorities, the approval of the Contango Board of Directors and, if necessary, Contango shareholders.
Mr. Peak said, "If Contango obtains an acceptable proposal to acquire its Dutch and Mary Rose discoveries, we would likely structure the disposition through the sale of Contango by its shareholders with the simultaneous spin-off of the remaining Contango assets to our shareholders in a new company, Contango Energy Company. This structure would allow Contango shareholders to have an interest in any future exploration efforts at our other Gulf of Mexico leases."
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