Exhibit 99.1
Contango Reports Second Quarter Earnings and Updates Operations
HOUSTON--(BUSINESS WIRE)--Feb. 13, 2006--Contango Oil & Gas
Company (AMEX:MCF) reported a net loss attributable to common stock
for the three months ended December 31, 2005 of $0.4 million, or $0.03
per basic and diluted share, compared to net income attributable to
common stock for the three months ended December 31, 2004 of $13.2
million, or $1.01 per basic and diluted share, which included a gain
from discontinued operations of $14.1 million, net of income taxes,
from the sale of our south Texas natural gas and oil interests that
was completed in December 2004.
The net loss attributable to Contango common stock for the six
months ended December 31, 2005 was $0.3 million, or $0.02 per basic
and diluted share, compared to net income attributable to common stock
for the six months ended December 31, 2004 of $14.5 million, or $1.12
per basic and diluted share, which included a gain from discontinued
operations of $16.5 million, net of income taxes, from the sale of our
south Texas natural gas and oil interests that was completed in
December 2004.
EBITDAX for the three months ended December 31, 2005 was $1.4
million compared to $21.8 million for the three months ended December
31, 2004. EBITDAX for the six months ended December 31, 2005 was $2.1
million compared to $26.8 million for the three months ended December
31, 2004.
Natural gas and oil sales from continuing operations for the three
and six month periods ended December 31, 2005 were $1.8 million and
$3.0 million, respectively, up from $1.4 million and $2.0 million for
the three and six month periods ended December 31, 2004. The increase
in revenue resulted from both increased natural gas and oil prices and
increased production due to new reserves discovered after the sale of
our south Texas interests in December 2004.
EBITDAX from continuing operations for the three and six month
periods ended December 31, 2005 were $0.6 million and $1.0 million,
respectively, up from $0.1 million and a loss of $0.2 million for the
three and six month periods ended December 31, 2004, respectively.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer,
said, "In the offshore, our Grand Isle 72 prospect and our farm-out
prospect, Main Pass 221, are being drilled, and we expect to begin
drilling our Eugene Island 10 prospect in March 2006. We also plan to
begin drilling our High Island A-279 and our West Delta 43 prospects
before calendar year-end.
"In our Arkansas Fayetteville Shale Play, we are now preparing
well locations on our first two well sites. Recently, the Arkansas Oil
& Gas Commission approved two additional 640-acre drilling units,
bringing our total number of drilling units to five. We estimate that
these five units will allow our partnership to drill and operate up to
45 horizontal wells. In addition, we have now been integrated into 15
wells that are being operated by a third party oil and gas exploration
company, four of which are producing. The remaining 11 horizontal
wells are either being drilled or are expected to be drilled over the
next three months.
"As of February 13, 2006 we have approximately $19.7 million in
cash, cash equivalents, and short term investments and no debt. The
Company currently has production of approximately 2.2 million cubic
feet equivalent per day ("MMcfe/d") of natural gas. Once our two
onshore wells, Alta-Blackstone 10-4 and Alta-Blackstone 31-14, are
both producing, we anticipate that our production will increase to
approximately 4.0 MMcfe/d by the end of March 2006."
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ ------------------------
2005 2004 2005 2004
----------- ------------ ----------- ------------
REVENUES:
Natural gas and
oil sales $1,823,409 $1,425,983 $3,010,274 $2,005,596
----------- ------------ ----------- ------------
Total revenues 1,823,409 1,425,983 3,010,274 2,005,596
----------- ------------ ----------- ------------
EXPENSES:
Operating expenses 115,109 209,123 279,489 252,973
Exploration
expenses 1,579,973 944,273 1,919,411 1,732,339
Depreciation,
depletion and
amortization 396,773 459,338 673,857 619,622
Impairment of
natural gas and
oil properties - - - 112,000
General and
administrative
expense 1,099,711 1,087,051 2,021,974 1,899,524
----------- ------------ ----------- ------------
Total expenses 3,191,566 2,699,785 4,894,731 4,616,458
----------- ------------ ----------- ------------
LOSS FROM
CONTINUING
OPERATIONS BEFORE
OTHER INCOME AND
INCOME TAXES (1,368,157) (1,273,802) (1,884,457) (2,610,862)
OTHER INCOME
(EXPENSE):
Interest expense (96) (22,341) (192) (71,317)
Interest income 190,315 15,503 399,368 33,356
Gain (loss) on sale
of assets and
other 32,164 (46,313) 241,686 (86,820)
----------- ------------ ----------- ------------
LOSS FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES (1,145,774) (1,326,953) (1,243,595) (2,735,643)
Benefit for income
taxes 457,667 465,790 506,521 957,476
----------- ------------ ----------- ------------
LOSS FROM
CONTINUING
OPERATIONS (688,107) (861,163) (737,074) (1,778,167)
----------- ------------ ----------- ------------
DISCONTINUED
OPERATIONS
Discontinued
operations, net
of income taxes 469,720 14,116,542 729,988 16,516,445
----------- ------------ ----------- ------------
NET INCOME (LOSS) (218,387) 13,255,379 (7,086) 14,738,278
Preferred stock
dividends 150,000 105,000 301,000 210,000
----------- ------------ ----------- ------------
NET INCOME (LOSS)
ATTRIBUTABLE TO
COMMON STOCK $(368,387) $13,150,379 $(308,086) $14,528,278
=========== ============ =========== ============
NET INCOME (LOSS)
PER SHARE:
Basic
Continuing
operations $(0.06) $(0.07) $(0.07) $(0.15)
Discontinued
operations 0.03 1.08 0.05 1.27
----------- ------------ ----------- ------------
Total $(0.03) $1.01 $(0.02) $1.12
=========== ============ =========== ============
Diluted
Continuing
operations $(0.06) $(0.07) $(0.07) $(0.15)
Discontinued
operations 0.03 1.08 0.05 1.27
----------- ------------ ----------- ------------
Total $(0.03) $1.01 $(0.02) $1.12
=========== ============ =========== ============
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 14,717,570 13,049,641 14,586,862 12,960,450
=========== ============ =========== ============
Diluted 14,717,570 13,049,641 14,586,862 12,960,450
=========== ============ =========== ============
The summarized financial results for discontinued operations for
each of the periods ended December 31, are as follows:
Operating Results: Three Months Ended Six Months Ended
December 31, December 31,
----------------------- --------------------------
2005 2004 2005 2004
---------- ------------ ------------- ------------
Revenues $- $5,858,649 $3,685 $11,951,278
Operating
(expenses)
credits 723,046(a) (382,016) 1,096,175(a)(1,190,029)
Depreciation
expenses - (13,739) - (1,583,358)
Exploration
expenses (400) (4,073) (400) (26,911)
Gain on sale of
discontinued
operations - 16,258,936 23,598 16,258,936
---------- ------------ ------------- ------------
Gain before
income taxes $722,646 $21,717,757 $1,123,058 $25,409,916
Provision for
income taxes (252,926) (7,601,215) (393,070) (8,893,471)
---------- ------------ ------------- ------------
Gain from
discontinued
operations, net
of income taxes $469,720 $14,116,542 $729,988 $16,516,445
========== ============ ============= ============
(a) credit due to severance tax refunds
Production, Prices, Operating Expenses, and Other
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(Dollar amounts in (Dollar amounts in
Production Data: 000s, except per 000s, except per
Mcfe amounts) Mcfe amounts)
Natural gas (million cubic
feet) 135 931 226 1,910
Oil and condensate (thousand
barrels) 9 19 15 39
Total (million cubic feet
equivalent) 189 1,045 316 2,144
Natural gas (thousand cubic
feet per day) 1,471 10,120 1,227 10,438
Oil and condensate (barrels
per day) 93 209 80 213
Total (thousand cubic feet
equivalent per day) 2,029 11,374 1,707 11,717
Average sales price:
Natural gas (per thousand
cubic feet) $10.30 $6.85 $9.72 $6.41
Oil and condensate (per
barrel) $50.18 $46.95 $55.77 $44.61
Selected data per Mcfe:
Production and severance
taxes $(3.21) $(0.19) $(2.89) $(0.11)
Lease operating expenses $(0.05) $0.76 $0.29 $0.78
General and administrative
expenses $5.89 $1.04 $6.44 $0.89
Depreciation, depletion and
amortization of natural gas
and oil properties $1.96 $0.43 $2.00 $1.00
EBITDAX (1) $1,364 $21,819 $2,098 $26,786
(1) EBITDAX represents earnings before interest, income taxes,
depreciation, depletion and amortization, impairment expenses,
exploration expenses, including gain (loss) from hedging
activities, and sale of assets and other. We have reported EBITDAX
because we believe EBITDAX is a measure commonly reported and
widely used by investors as an indicator of a company's operating
performance and ability to incur and service debt. We believe
EBITDAX assists investors in comparing a company's performance on
a consistent basis without regard to depreciation, depletion and
amortization, impairment of natural gas and oil properties and
exploration expenses, which can vary significantly depending upon
accounting methods. EBITDAX is not a calculation based on U.S.
generally accepted accounting principles and should not be
considered an alternative to net income (loss) in measuring our
performance or used as an exclusive measure of cash flow because
it does not consider the impact of working capital growth, capital
expenditures, debt principal reductions and other sources and uses
of cash, which are disclosed in our statements of cash flows.
Investors should carefully consider the specific items included in
our computation of EBITDAX. While we have disclosed our EBITDAX to
permit a more complete comparative analysis of our operating
performance and debt servicing ability relative to other
companies, investors should be cautioned that EBITDAX as reported
by us may not be comparable in all instances to EBITDAX as
reported by other companies. EBITDAX amounts may not be fully
available for management's discretionary use, due to requirements
to conserve funds for capital expenditures, debt service,
preferred stock dividends and other commitments.
A reconciliation of EBITDAX to loss from operations and operating
results for discontinued operations for the periods indicated is
presented below.
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -------------------
Reconciliation of EBITDAX: 2005 2004 2005 2004
--------- --------- --------- ---------
(Dollar amounts (Dollar amounts
in 000s) in 000s)
(Loss) from continuing
operations before other
income and income taxes $(1,368) $(1,274) $(1,884) $(2,611)
Exploration expenses 1,580 944 1,919 1,732
Depreciation, depletion and
amortization 397 459 674 620
Impairment of natural gas and
oil properties - - - 112
Gain (loss) on sale of assets
and other 32 (46) 242 (87)
--------- --------- --------- ---------
EBITDAX from continuing
operations 641 83 951 (234)
Gain from discontinued
operations before taxes 723 21,718 1,123 25,410
Exploration expenses - 4 - 27
Depreciation, depletion and
amortization - 14 - 1,583
Gain on sale of assets and
other - - 24 -
--------- --------- --------- ---------
EBITDAX $1,364 $21,819 $2,098 $26,786
========= ========= ========= =========
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 along the Gulf Coast, and in the Arkansas
Fayetteville Shale. As a recent addition to our business, we now
operate certain offshore prospects through our wholly-owned
subsidiary, Contango Operators, Inc. ("COI"). 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. Additional information can be found on our web page at
www.contango.com.
This press release contains forward-looking statements that
involve risks and uncertainties, and actual events or results may
differ materially from Contango's expectations. The statements reflect
Contango's current views with respect to future events that involve
risks and uncertainties, including those related to successful
negotiations with other parties, oil and gas exploration risks, price
volatility, production levels, closing of transactions, capital
availability, operational and other risks, uncertainties and factors
described from time to time in Contango's publicly available reports
filed with the Securities and Exchange Commission.
CONTACT: Contango Oil & Gas Company, Houston
Kenneth R. Peak, 713-960-1901
www.contango.com