EXHIBIT 99.1
Contango Reports First Quarter Earnings and Updates Operations
HOUSTON--(BUSINESS WIRE)--Nov. 8, 2006--Contango Oil & Gas Company
(AMEX:MCF) reported a net loss attributable to common stock for the three months
ended September 30, 2006 of approximately $0.4 million, or $.03 per basic and
diluted share, compared to net income attributable to common stock for the three
months ended September 30, 2005 of $0.06 million, or $.01 per basic and diluted
share. EBITDAX for the three months ended September 30, 2006 was $.04 million
compared to $0.7 million for the three months ended September 30, 2005.
Cash Inflow. During the three months ended September 30, 2006, we had $16.3
million of cash inflow consisting of internally generated after-tax net cash
flow from operations of $6.8 million and $9.5 million from the sale of short
term investments.
Cash Outflow. During the three months ended September 30, 2006, we used a
total of $22.9 million of cash consisting of $22.0 million in exploration and
development activities (approximately $13.0 million offshore and $9.0 million
onshore), $0.6 million in alternative energy companies and $0.3 million in
financing activities.
Capital Budget. For the remaining nine months of fiscal year 2007, our
capital expenditure budget calls for us to invest a total of $54.4 million ($4.4
million of this was invested in October 2006), as we continue to invest in our
Arkansas Fayetteville Shale play, bring our Grand Isle 72 ("Liberty") and Eugene
Island 10 ("Dutch") discoveries to production and spud a second exploration well
at our Dutch prospect in December 2006.
Of the $54.4 million in capital expenditures budgeted for the remaining
nine months of fiscal year 2007, $13.8 million is anticipated to be invested in
offshore activities. Our budget calls for us to invest approximately $2.2
million for production and pipeline facilities for developing Grand Isle 72,
approximately $4.4 million for completion, production and pipeline facilities
for developing our first well at Eugene Island 10 ($2.2 million was invested in
October 2006), approximately $3.7 million for drilling our second well at Eugene
Island 10, $3.0 million in other exploratory wells and $0.5 million in projected
future exploration costs, seismic and delay rentals.
Of the $54.4 million in capital expenditures budgeted for the remaining
nine months of fiscal year 2007, $40.1 million is expected to be invested in
onshore activities. In the Arkansas Fayetteville Shale, our partners and we have
acquired or received commitments on approximately 44,300 net mineral acres and
we have committed to a total of 87 wells in this play as of October 31, 2006. We
have an average working interest of 15% and a net revenue interest of 12% in
these 87 wells. Of these 87 wells, 19 are operated by Alta and 68 are operated
by a third party independent oil and gas exploration company (these 68 wells are
referred to as "Integrated Wells").
Of the 19 Alta wells, two were drilled in fiscal year 2006 and five have
been drilled thus far during fiscal year 2007. We estimate an additional $6.3
million, net to Contango, will be required for remaining drilling, frac,
completion and hook-up costs of these seven wells ($1.6 million of this was
invested in October 2006). We are budgeting to drill an additional ten new Alta
wells during fiscal year 2007 at a cost of $14.4 million. This includes
drilling, frac, completion and hookup costs for the wells. Additionally, we
expect to invest $7.6 million in pipeline infrastructure, seismic and additional
leasehold costs for the Arkansas Fayetteville Shale. We estimate we will have an
average working interest of 42% and a net revenue interest of 33% in these 19
Alta wells.
Of the 68 Integrated Wells for which we have received AFEs, 22 wells are
producing, 20 wells have already been spud, and 26 wells have yet to be drilled.
In addition to these 68 Integrated Wells, we are budgeting to receive 56
additional AFEs for Integrated Wells during the remainder of fiscal year 2007
for a total of 124 Integrated Wells. We anticipate having approximately 40
producing Integrated Wells by December 2006. Our capital budget for Integrated
Wells assumes we will invest $10.8 million in Integrated Wells during the
remainder of fiscal year 2007 ($0.6 million of this was invested in October
2006). We estimate we will have an average working interest of 6% and a net
revenue interest of 5% in these 124 Integrated Wells.
As of November 7, 2006, we have approximately $12.8 million in cash, cash
equivalents, and short term investments. The Company had estimated production
during October 2006 of approximately 1.5 million cubic feet equivalent per day
("MMcfe/d").
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We
expect to test our first Alta operated Fayetteville Shale well, the Alta-Thines
1-30H, and our Dutch exploration discovery well by the end of November 2006. We
anticipate our production and cash flow will increase significantly as we begin
producing our Grand Isle 72 discovery by mid December at an estimated 8 MMcfe/d
(approximately 4 MMcfe/d net to Contango) and our Dutch well at an estimated 30
MMcfe/d (approximately 10 MMcfe/d net to Contango), in January 2007."
Mr. Peak continued, "Our proved reserves, as estimated by our independent
reserve engineers as of September 30, 2006, were 33.3 billion cubic feet
equivalent. The SEC PV-10 pre-tax net present value of these reserves, using
quarter end prices of $4.18 per MMbtu and $62.91 per barrel was $102.4 million.
We are continuing to consider a variety of financing solutions to fund our
fiscal year 2007 capital expenditure budget, but are primarily focused on
funding the majority of our capital needs with hydrocarbon borrowing base
secured debt."
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
-----------------------------
2006 2005
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REVENUES:
Natural gas and oil sales $1,192,306 $147,778
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Total revenues 1,192,306 147,778
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EXPENSES:
Operating expenses 132,949 5,749
Exploration expenses 401,347 339,438
Depreciation, depletion and
amortization 212,191 55,360
General and administrative expenses 1,103,342 922,263
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Total expenses 1,849,829 1,322,810
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LOSS FROM CONTINUING OPERATIONS BEFORE
OTHER INCOME AND INCOME TAXES (657,523) (1,175,032)
Interest expense (net of interest
capitalized) (167,471) (96)
Interest income 251,659 209,053
Other income 84,391 209,522
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LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (488,944) (756,553)
Benefit for income taxes 233,088 279,410
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LOSS FROM CONTINUING OPERATIONS (255,856) (477,143)
DISCONTINUED OPERATIONS
Discontinued operations, net of
income taxes - 688,444
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NET INCOME (LOSS) (255,856) 211,301
Preferred stock dividends 150,000 151,000
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NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCK $(405,856) $60,301
============== ==============
NET INCOME (LOSS) PER SHARE:
Basic
Continuing operations $(0.03) $(0.04)
Discontinued operations - 0.05
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Total $(0.03) $0.01
============== ==============
Diluted
Continuing operations $(0.03) $(0.04)
Discontinued operations - 0.05
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Total $(0.03) $0.01
============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 15,004,548 14,444,504
============== ==============
Diluted 15,004,548 14,444,504
============== ==============
The summarized financial results for discontinued operations for
each of the periods ended September 30, are as follows:
Operating Results : Three months ended
September 30,
-------------------------------
2006 2005
--------------- ---------------
Revenues $- $1,042,771
Operating credits - 214,499 (a)
Depletion expense - (221,724)
Gain on sale of discontinued
operations - 23,598
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Gain before income taxes $- $1,059,144
Provision for income taxes $- $(370,700)
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Gain from discontinued
operations, net of income
taxes $- $688,444
=============== ===============
(a) credit due to severance tax refunds
Production, Prices, Operating Expenses, and Other
Three Months Ended
September 30,
-----------------------------
2006 2005
-------------- --------------
(Dollar amounts in 000's,
except per Mcfe amounts)
Production Data:
Natural gas (million cubic feet) 144 91
Oil and condensate (thousand barrels) 4 6
Total (million cubic feet equivalent) 168 127
Natural gas (million cubic feet per day) 1.6 1.0
Oil and condensate (thousand barrels per
day) 0.1 0.1
Total (million cubic feet equivalent per
day) 2.2 1.6
Average sales price:
Natural gas (per thousand cubic feet) $6.25 $8.86
Oil and condensate (per barrel) $70.21 $63.61
Selected data per Mcfe:
Production and severance taxes $0.27 $(2.42)
Lease operating expenses $0.52 $0.78
General and administrative expenses $6.54 $7.25
Depreciation, depletion and
amortization of natural gas and oil
properties $1.00 $2.07
EBITDAX (1) $39 $734
(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
September 30,
-----------------------------
2006 2005
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($000)
Loss from continuing operations $(658) $(1,175)
Exploration expenses 401 339
Depreciation, depletion and amortization 212 55
Other income 84 210
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EBITDAX from continuing operations 39 (571)
Income from discontinued operations
before taxes - 1,059
Depreciation, depletion and amortization - 222
Other income - 24
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EBITDAX $39 $734
============== ==============
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