Exhibit 99.1
Contango Reports Third Quarter Earnings and Updates Operations
HOUSTON--(BUSINESS WIRE)--May 15, 2006--Contango Oil & Gas Company
(AMEX:MCF) reported net income attributable to common stock for the
three months ended March 31, 2006 of $0.7 million, or $0.05 per basic
and diluted share, compared to a net loss attributable to common stock
for the three months ended March 31, 2005 of $1.2 million, or $0.09
per basic and diluted share. The increase was attributable to an
increase in crude oil and natural gas prices and an increase in our
oil production.
Net income attributable to common stock for the nine months ended
March 31, 2006 was $0.4 million, or $0.03 per basic and diluted share,
compared to net income attributable to common stock for the nine
months ended March 31, 2005 of $13.4 million, or $1.02 per basic and
diluted share, which included a gain on the sale of discontinued
operations of $16.3 million, from the sale of our south Texas natural
gas and oil interests that was completed in December 2004.
EBITDAX for the three months ended March 31, 2006 was $2.1 million
compared to $0.6 million for the three months ended March 31, 2005.
EBITDAX for the nine months ended March 31, 2006 was $4.2 million
compared to $27.4 million for the nine months ended March 31, 2005.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer,
said, "We expect to begin drilling our High Island A-279 ("Juice") and
our West Delta 43 ("Skip Jack") prospects in June, and our Eugene
Island 10 ("Dutch") prospect in July.
"In our Arkansas Fayetteville Shale Play, we and our operating
group have acquired or received commitments on approximately 42,000
net mineral acres. The Arkansas Oil & Gas Commission has now approved
eleven of our 640-acre drilling units, which we estimate will allow
our operating group to drill and operate approximately 100 horizontal
wells. In addition, we have now been integrated into 35 wells that are
being operated by a third party oil and gas exploration company, seven
of which are producing. The remaining 28 horizontal wells are either
being drilled or are expected to be drilled over the next three
months. We recently logged 240 feet of net Fayetteville Shale in our
first Alta operated well, the Alta Beck #1-32H, and are currently
drilling this well horizontally.
"On March 15, 2006, two affiliated companies were the apparent
high bidders on a total of 16 lease blocks at the Central Gulf of
Mexico Lease Sale #198. We were recently awarded our 11th lease block
from this sale, West Delta 77, bringing the total number of lease
blocks Contango and its affiliates have to 62 offshore leases.
"As of May 11, 2006, we have approximately $33 million in cash,
cash equivalents, and short term investments. In addition, the Company
has $10.0 million of unutilized borrowing capacity. Our principal
focus will continue to be our deep shelf Gulf of Mexico and
Fayetteville Shale exploration programs."
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
2006 2005 2006 2005
----------- ------------ ----------- ------------
REVENUES:
Natural gas and
oil sales $123,199 $256,632 $315,274 $630,720
----------- ------------ ----------- ------------
Total revenues 123,199 256,632 315,274 630,720
----------- ------------ ----------- ------------
EXPENSES:
Operating expenses
(credits) 5,512 5,890 (11,216) 43,610
Exploration
expenses 152,011 1,741,322 978,682 3,014,786
Depreciation,
depletion and
amortization 11,909 98,884 99,032 266,205
Impairment of
natural gas and
oil properties 419,918 124,537 419,918 236,537
General and
administrative
expense 1,061,518 620,738 3,083,492 2,520,262
----------- ------------ ----------- ------------
Total expenses 1,650,868 2,591,371 4,569,908 6,081,400
----------- ------------ ----------- ------------
LOSS FROM CONTINUING
OPERATIONS BEFORE
OTHER INCOME AND
INCOME TAXES (1,527,669) (2,334,739) (4,254,634) (5,450,680)
OTHER INCOME
(EXPENSE):
Interest expense (93) (93) (285) (71,410)
Interest income 165,946 168,466 565,314 201,822
Gain (loss) on sale
of assets and other (18,519) (12,346) 223,167 (99,166)
----------- ------------ ----------- ------------
LOSS FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES (1,380,335) (2,178,712) (3,466,438) (5,419,434)
Benefit for income
taxes 524,792 762,549 1,326,191 1,896,802
----------- ------------ ----------- ------------
LOSS FROM CONTINUING
OPERATIONS (855,543) (1,416,163) (2,140,247) (3,522,632)
----------- ------------ ----------- ------------
DISCONTINUED
OPERATIONS
Discontinued
operations, net
of income taxes 1,754,965 344,119 3,032,583 17,188,866
----------- ------------ ----------- ------------
NET INCOME (LOSS) 899,422 (1,072,044) 892,336 13,666,234
Preferred stock
dividends 150,000 105,000 451,000 315,000
----------- ------------ ----------- ------------
NET INCOME (LOSS)
ATTRIBUTABLE
TO COMMON STOCK $749,422 $(1,177,044) $441,336 $13,351,234
=========== ============ =========== ============
NET INCOME (LOSS) PER SHARE:
Basic
Continuing
operations $(0.07) $(0.12) $(0.18) $(0.30)
Discontinued
operations 0.12 0.03 0.21 1.32
----------- ------------ ----------- ------------
Total $0.05 $(0.09) $0.03 $1.02
=========== ============ =========== ============
Diluted
Continuing
operations $(0.07) $(0.12) $(0.18) $(0.30)
Discontinued
operations 0.12 0.03 0.21 1.32
----------- ------------ ----------- ------------
Total $0.05 $(0.09) $0.03 $1.02
=========== ============ =========== ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 14,865,965 13,108,196 14,675,586 13,030,251
=========== ============ =========== ============
Diluted 14,865,965 13,108,196 14,675,586 13,030,251
=========== ============ =========== ============
The summarized financial results for discontinued operations for
each of the periods ended March 31, are as follows:
Operating Results: Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues $1,555,134 $774,449 $4,377,017 $14,357,236
Operating
(expenses) credits
(a) 466,362 178,392 1,266,320 (1,226,890)
Depreciation
expense (380,000) (223,666) (966,734) (2,259,325)
Exploration expense - (229,119) (1,093,139) (714,906)
Gain on sale of
discontinued
operations 1,058,450 29,358 1,082,048 16,288,294
------------ ------------ ------------ ------------
Gain before
income taxes 2,699,946 529,414 4,665,512 26,444,409
Provision for
income taxes (944,981) (185,295) (1,632,929) (9,255,543)
------------ ------------ ------------ ------------
Gain from
discontinued
operations, net of
income taxes $1,754,965 $344,119 $3,032,583 $17,188,866
============ ============ ============ ============
(a) credit due to severance tax refunds
Production, Prices, Operating Expenses, and Other
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(Dollar amounts in (Dollar amounts in
000s, except average 000s, except average
Production Data: sales price and per sales price and per
Mcfe amounts) Mcfe amounts)
Natural gas (million cubic
feet) 116 120 342 2,030
Oil and condensate
(thousand barrels) 13 5 28 44
Total (million cubic feet
equivalent) 194 150 510 2,294
Natural gas (thousand
cubic feet per day) 1,289 1,333 1,248 7,409
Oil and condensate
(barrels per day) 144 56 102 161
Total (thousand cubic feet
equivalent per day) 2,153 1,669 1,860 8,375
Average sales price:
Natural gas (per
thousand cubic feet) $8.00 $6.32 $9.14 $6.40
Oil and condensate (per
barrel) $58.17 $50.68 $56.89 $45.35
Selected data per Mcfe:
Severance taxes $(2.89) $(1.28) $(2.89) $(0.18)
Lease operating expenses $0.51 $0.15 $0.37 $0.74
General and
administrative expenses $5.49 $4.08 $6.08 $1.10
Depreciation, depletion
and amortization of
natural gas and oil
properties $1.96 $2.06 $1.99 $1.07
EBITDAX (1) $2,117 $600 $4,192 $27,386
(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 continuing operations and
operating results for discontinued operations for the periods
indicated is presented below.
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- -------------------
Reconciliation of EBITDAX: 2006 2005 2006 2005
--------- --------- --------- ---------
(Dollar amounts (Dollar amounts
in 000s) in 000s)
(Loss) from continuing
operations before other
income and income taxes $(1,528) $(2,335) $(4,255) $(5,451)
Exploration expenses 152 1,741 979 3,015
Depreciation, depletion and
amortization 12 99 99 266
Impairment of natural gas and
oil properties 420 125 420 237
Gain (loss) on sale of assets
and other (19) (12) 223 (99)
--------- --------- --------- ---------
EBITDAX from continuing
operations (963) (382) (2,534) (2,032)
Gain from discontinued
operations before taxes 2,700 529 4,666 26,444
Exploration expenses - 229 1,093 715
Depreciation, depletion and
amortization 380 224 967 2,259
--------- --------- --------- ---------
EBITDAX $2,117 $600 $4,192 $27,386
========= ========= ========= =========
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 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