Contango Reports Fiscal Second Quarter Results

  Contango Reports Fiscal Second Quarter Results

Business Wire

HOUSTON -- February 13, 2013

Contango Oil & Gas Company (NYSE MKT: MCF) reported net income for the quarter
ended December 31, 2012 of approximately $2.6 million, or $.17 per basic and
diluted share, compared to net income for the same period last year of
approximately $19.5 million, or $1.27 per basic and diluted share.

Joseph J. Romano, the Company’s President and Chief Executive Officer, said,
“Our earnings this quarter are still being impacted by the two dry holes at
Eagle and Fang we drilled the preceding quarter. We incurred $6.3 million in
exploration expenses for the quarter related to these two wells, along with
$5.7 million of impairment charges related to writing down our reserves at
Ship Shoal 263. Lower sales prices as well as production downtime for
maintenance also contributed to the decrease in earnings. We received
$5.23/Mcfe for the quarter ended December 31, 2012 as compared to $6.18/Mcfe
for the quarter ended December 31, 2011.

“Our significant Dutch and Mary Rose fields continue to produce consistent
with our forecast. The Company’s balance sheet continues to be very strong. We
have no debt, $100 million of working capital, and $7.0 million per month of
anticipated cash flow available for exploration. We are presently looking to
balance our inventory of offshore prospects with the opportunity to
participate further in predictable, high quality, onshore resource plays. We
plan to drill our next offshore well in mid-2013 when permits on our Ship
Shoal 255 prospect are anticipated to be approved.”

Our offshore reserves as of December 31, 2012 were approximately 221.1 billion
cubic feet equivalent (“Bcfe”). These reserves are approximately 27.0 Bcfe
less than our proved reserves as of September 30, 2012. The major contributors
to this decrease include normal production of 6.7 Bcfe during the quarter, a
5.1 Bcfe decrease in our Ship Shoal 263 reserves estimates, and a 14.0 Bcfe
decrease in our Vermilion 170 reserves estimates, as determined by our
reservoir engineer.

Our proved developed producing onshore reserves as of December 31, 2012 were
approximately 12.0 Bcfe, net to Contango, attributable to our 37% equity
investment in Exaro Energy III LLC (“Exaro”). As of December 31, 2012, the
Company had invested approximately $33.8 million in Exaro. Of this amount,
approximately $18 million had been spent on drilling and development to earn
these reserves, while the majority of the remaining funds remain unused. Exaro
continues to actively drill and as of December 31, 2012, had 20 new drill
wells on production plus an additional 12 wells that are either in the
completion or fracture stimulation phase. Exaro continues to have three
drilling rigs running on this project.

We are also involved in the Tuscaloosa Marine Shale (“TMS”), an oil focused
shale play in central Louisiana and Mississippi. We have a 25% non-operating
working interest in the Crosby 12H-1 well in Wilkinson County, Mississippi,
operated by Goodrich Petroleum Company LLC ("Goodrich"). As of December 31,
2012, we had invested approximately $4.3 million to acquire acreage, drill a
pilot hole, obtain a conventional core, drill the lateral and stimulate the
well. The Crosby 12H-1 well was recently completed and as of February 6, 2013
was producing at a rate of 1,250 barrels of oil equivalent ("BOE") per day and
a 24 hour average rate of 1,130 BOE per day comprised of 1,050 barrels of oil
and 469 Mcf of gas, on a 15/64" choke with 2,700 psi. The well, which has
approximately 6,700 feet of usable lateral and was fracked with 25 stages, is
in the early stage of flowback, with approximately 1% of the frac fluid
recovered to date.

We have also invested approximately $9.0 million to lease 24,000 acres in the
TMS. The data we obtain from the Crosby 12H-1 well will help us evaluate our
TMS acreage and develop a plan for drilling and operating future wells.

As of February 1, 2013, we had invested approximately $14.1 million in Alta
Energy Canada Partnership G.P. (“Alta Energy”) to purchase over 60,000 acres
in the Kaybob Duvernay, a liquids rich shale play in Alberta, Canada. Alta
Energy has built one of the largest acreage blocks in the core of the play and
to date has drilled four vertical test wells and taken whole cores on two of
those. Alta Energy has also successfully drilled two horizontal wells and
anticipates completion by the end of March 2013. We own a 5.0% interest in the
Kaybob Duvernay project.

Below are the Company’s results of operations for the three and six months
ended December 31, 2012 and 2011:

                                               
                       Three Months Ended            Six Months Ended
                       December 31,                  December 31,
                       2012         2011           2012          2011
                       (thousands, except per share amounts)
REVENUES:
Natural gas, oil
and liquids            $ 34,940      $ 53,907      $ 64,705       $ 98,109 
sales
Total revenues         34,940        53,907        64,705         98,109   
EXPENSES:
Operating              4,973          7,010          11,435          12,899
expenses
Exploration            6,629          33             51,614          56
expenses
Depreciation,
depletion and          10,770         13,536         20,336          24,493
amortization
Impairment of
natural gas and        5,668          —              14,078          —
oil properties
General and
administrative         2,818         2,304         5,398          4,552    
expenses
Total expenses         30,858        22,883        102,861        42,000   
                                                                     
Gain from
investments in         344            —              508             —
affiliates, net
of taxes
Other                  (173     )     (51      )     (185      )     (128     )
income/(expense)
                                                                     
NET INCOME
(LOSS) FROM
CONTINUING             4,253          30,973         (37,833   )     55,981
OPERATIONS
BEFORE INCOME
TAXES
Income tax
benefit                (1,649   )     (11,383  )     12,888         (20,806  )
(provision)
NET INCOME
(LOSS) FROM            2,604          19,590         (24,945   )     35,175
CONTINUING
OPERATIONS
DISCONTINUED
OPERATIONS
Discontinued
operations, net        —             (114     )     —              (795     )
of income taxes
NET INCOME
(LOSS)                 $ 2,604       $ 19,476      $ (24,945 )     $ 34,380 
ATTRIBUTABLE TO
COMMON STOCK
NET INCOME
(LOSS) PER
SHARE:
Basic
Continuing             $ 0.17         $ 1.28         $ (1.64   )     $ 2.27
operations
Discontinued           —             (0.01    )     —              (0.05    )
operations
Total                  $ 0.17         $ 1.27         $ (1.64   )     $ 2.22
Diluted
Continuing             $ 0.17         $ 1.28         $ (1.64   )     $ 2.27
operations
Discontinued           —             (0.01    )     —              (0.05    )
operations
Total                  $ 0.17         $ 1.27         $ (1.64   )     $ 2.22
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic                  15,198        15,362        15,246         15,501   
Diluted                15,198        15,365        15,246         15,504   
                                                                              

Below is a summary of the Company’s production data, average sales price
received, and selected data per thousand cubic feet equivalent, for the three
and six months ended December 31, 2012 and 2011:

                                                        
                     Three Months Ended                       Six Months Ended
                     December 31,                             December 31,
                     2012         2011         Change     2012         2011         Change
                     (thousands, except percent change, average sales price and selected data per
                     Mcfe)
                                                                                            
Production:
Natural gas
(million cubic       5,096          6,552          (22 )%     9,863          11,729         (16 )%
feet)
Oil and
condensate           97             179            (46 )%     199            307            (35 )%
(thousand
barrels)
Natural gas
liquids              7,057         7,694         (8  )%     13,344        13,404        *
(thousand
gallons)
Total (million
cubic feet           6,686          8,725          (23 )%     12,963         15,486         (16 )%
equivalent)
                                                                                            
Natural gas
(million cubic       55.4           71.2           (22 )%     53.6           63.7           (16 )%
feet per day)
Oil and
condensate
(thousand            1.1            1.9            (46 )%     1.1            1.7            (35 )%
barrels per
day)
Natural gas
liquids
(thousand            76.7          83.6          (8  )%     72.5          72.8          *
gallons per
day)
Total (million
cubic feet           72.7           94.5           (23 )%     70.5           84.3           (16 )%
equivalent per
day)
                                                                                            
Average Sales
Price:
Natural gas
(per thousand        $ 3.53         $ 3.38         4   %      $ 3.25         $ 3.79         (14 )%
cubic feet)
Oil and
condensate           $ 107.20       $ 115.46       (7  )%     $ 106.24       $ 112.08       (5  )%
(per barrel)
Natural gas
liquids (per         $ 0.93        $ 1.44        (35 )%     $ 0.87        $ 1.44        (40 )%
gallon)
Total (per
thousand cubic       $ 5.23         $ 6.18         (15 )%     $ 4.99         $ 6.34         (21 )%
feet
equivalent)
                                                                                            
Selected Data
per Mcfe:
Lease
operating            $ 0.87         $ 0.80         9   %      $ 0.88         $ 0.83         6   %
expenses
General and
administrative       $ 0.42         $ 0.26         62  %      $ 0.42         $ 0.29         45  %
expenses
Depreciation,
depletion and
amortization         $ 1.60         $ 1.53         5   %      $ 1.55         $ 1.56         (1  )%
of natural gas
and oil
properties
                                                                                            
* Less than 1%
                                                                                            

Contango is a Houston-based, independent natural gas and oil company. The
Company’s business is to explore, develop, produce and acquire natural gas and
oil properties onshore and offshore in the Gulf of Mexico. Additional
information can be found on our web page at www.contango.com.

This press release contains forward-looking statements regarding Contango that
are intended to be covered by the safe harbor "forward-looking statements"
provided by the Private Securities Litigation Reform Act of 1995, based on
Contango’s current expectations and includes statements regarding acquisitions
and divestitures, estimates of future production, future results of
operations, quality and nature of the asset base, the assumptions upon which
estimates are based and other expectations, beliefs, plans, objectives,
assumptions, strategies or statements about future events or performance
(often, but not always, using words such as "expects", “projects”,
"anticipates", "plans", "estimates", "potential", "possible", "probable", or
"intends", or stating that certain actions, events or results "may", "will",
"should", or "could" be taken, occur or be achieved). Statements concerning
oil and gas reserves also may be deemed to be forward-looking statements in
that they reflect estimates based on certain assumptions that the resources
involved can be economically exploited. Forward-looking statements are based
on current expectations, estimates and projections that involve a number of
risks and uncertainties, which could cause actual results to differ materially
from those, reflected in the statements. These risks include, but are not
limited to: the risks of the oil and gas industry (for example, operational
risks in exploring for, developing and producing crude oil and natural gas;
risks and uncertainties involving geology of oil and gas deposits; the
uncertainty of reserve estimates; the uncertainty of estimates and projections
relating to future production, costs and expenses; potential delays or changes
in plans with respect to exploration or development projects or capital
expenditures; health, safety and environmental risks and risks related to
weather such as hurricanes and other natural disasters); uncertainties as to
the availability and cost of financing; fluctuations in oil and gas prices;
risks associated with derivative positions; inability to realize expected
value from acquisitions, inability of our management team to execute its plans
to meet its goals, shortages of drilling equipment, oil field personnel and
services, unavailability of gathering systems, pipelines and processing
facilities and the possibility that government policies may change or
governmental approvals may be delayed or withheld. Additional information on
these and other factors which could affect Contango’s operations or financial
results are included in Contango’s other reports on file with the Securities
and Exchange Commission. Investors are cautioned that any forward-looking
statements are not guarantees of future performance and actual results or
developments may differ materially from the projections in the forward-looking
statements. Forward-looking statements are based on the estimates and opinions
of management at the time the statements are made. Contango does not assume
any obligation to update forward-looking statements should circumstances or
management's estimates or opinions change.

Contact:

Contango Oil & Gas Company
Joseph J. Romano, 713-960-1901
www.contango.com
 
Press spacebar to pause and continue. Press esc to stop.