Exhibit 99.1
Contango Oil & Gas Affiliates Apparent High Bidders on
16 Gulf of Mexico Lease Blocks
HOUSTON--(BUSINESS WIRE)--March 17, 2006--Contango Oil & Gas Company
(AMEX:MCF) announced today that two affiliated companies, Republic Exploration
LLC ("REX") and Contango Offshore Exploration, LLC ("COE"), bid on 22 lease
blocks offered at the Central Gulf of Mexico Lease Sale #198 held on March 15,
2006 in New Orleans, and were the apparent high bidders on 12 and 4 lease
blocks, respectively. The sale covered areas in the central part of the Outer
Continental Shelf, offshore from the Louisiana coastline. An apparent high bid
("AHB") gives the bidding party priority in award of offered tracts,
notwithstanding the fact that the Minerals Management Service ("MMS") may reject
all bids for a given tract. The MMS review process can take up to 90 days on
some bids. Upon completion of that process, final results for all AHBs will be
known.
In exchange for Contango Operators, Inc. ("COI") and a third party paying
100% of the lease bid and rentals, REX will assign a portion of its record title
interest in the lease blocks it is awarded to COI and a third party. Republic
had the AHB on the following lease blocks:
REX's COI's 100% Amt. paid
REX Ownership % Ownership % Bid Amount by COI
- ---------------------- ----------- ----------- ----------- -----------
Vermilion 190 50% 37.5% $157,000 $117,750
Vermilion 193 50% 37.5% $157,000 $117,750
Vermilion 194 50% 37.5% $157,000 $117,750
South Marsh Island 9 50% 37.5% $257,000 $192,750
South Marsh Island 57 50% 37.5% $157,000 $117,750
South Marsh Island 59 50% 37.5% $157,000 $117,750
South Marsh Island,
South 75 50% 37.5% $157,000 $117,750
South Marsh Island,
North 282 50% 37.5% $100,270 $75,203
South Marsh Island,
North 287 50% 37.5% $257,000 $192,750
Ship Shoal 14 50% 37.5% $101,670 $76,253
Ship Shoal 25 50% 37.5% $99,670 $74,753
West Delta 77 50% 25.0% $1,557,000 $778,500
----------- -----------
$3,314,610 $2,096,708
=========== ===========
In exchange for a third party paying 50% of the lease bid and rentals on
the Ship Shoal 263 and Grand Isle 70 blocks, COE will assign 25% of its record
title interest in the lease blocks it is awarded to the third party. COE had the
AHB on the following lease blocks:
COE's 100% Amt. paid
COE Ownership % Bid Amount by COE
- ------------------------- -------------- -------------- --------------
Ship Shoal, South 263 75% $857,000 $428,500
Grand Isle 70 75% $527,000 $263,500
Viosca Knoll 119 50% $153,700 $76,850
Viosca Knoll 383 100% $257,000 $257,000
-------------- --------------
$1,794,700 $1,025,850
============== ==============
Contango owns approximately 43% and 76% of REX and COE, respectively, and
100% of COI. If these blocks are awarded, Contango will own interests, both
directly and indirectly vis-a-vis its affiliates, in 68 federal lease blocks in
the Gulf of Mexico.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We
are pleased with our growing inventory of offshore prospects and leads. We
recently logged an offshore discovery on our Grand Isle 72 block. Our farm-out
prospect, Main Pass 221, is currently being drilled, and we expect to begin
drilling our Eugene Island 10 prospect in April 2006. We expect to begin
drilling our High Island A-279 and West Delta 43 prospects before calendar
year-end.
"In our Arkansas Fayetteville Shale Play, we have secured a drilling rig,
prepared three drill locations, and expect to drill our first Alta operated
well, the Alta-Beck #1-32H, in April 2006. The Arkansas Oil & Gas Commission has
now approved seven 640-acre drilling units, which we estimate will allow our
partnership to drill and operate up to 63 horizontal wells. After we drill our
first well, we expect to drill one additional well per month through the
remaining calendar year 2006. In addition, we have been integrated into 21 wells
that are being operated by a third party oil and gas exploration company, four
of which are producing. The remaining 17 horizontal wells are either being
drilled or are expected to be drilled over the next three to six months."
Contango is a Houston-based, independent natural gas and oil company. The
Company explores, develops, produces and acquires natural gas and oil properties
primarily onshore in the Gulf Coast and offshore in the Gulf of Mexico. Contango
also owns a 10% partnership interest in Freeport LNG Development L.P., and a 32%
interest in Contango Capital Partnership Management, LLC, which was formed to
invest in the alternative energy venture capital market with a focus on
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