Exhibit 99.1
Contango Reports Second Quarter Earnings and Updates Operations
HOUSTON--(BUSINESS WIRE)--Feb. 8, 2007--Contango Oil & Gas Company
(AMEX:MCF) reported a net loss attributable to common stock for the
three months ended December 31, 2006 of approximately $2.5 million, or
$0.16 per basic and diluted share, which included a loss on the sale
of Contango Operators, Inc.'s ("COI's") 25% working interest in the
Grand Isle 72 well ("Liberty"). COI is a wholly-owned subsidiary of
the Company. This compares to 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.
The net loss attributable to Contango common stock for the six
months ended December 31, 2006 was $2.9 million, or $0.19 per basic
and diluted share, which included a loss on the sale of COI's 25%
working interest in the Grand Isle 72 well, compared to a net loss
attributable to common stock for the six months ended December 31,
2005 of $0.3 million, or $0.02 per basic and diluted share.
Cash Inflow. During the six months ended December 31, 2006, we had
approximately $35.4 million of cash inflow consisting of $7.0 million
from the sale of COI's interest in Grand Isle 72, $10.0 million from
borrowings under our credit facility with The Royal Bank of Scotland
and $18.4 million from the sale of short term investments.
Cash Outflow. During the six months ended December 31, 2006, we
used a total of approximately $39.4 million of cash consisting of $5.5
million for operations, $31.9 million in exploration and development
activities, $1.5 million in investments in affiliates and $0.5 million
in financing activities.
Capital Budget. For the final six months of fiscal year 2007, our
capital expenditure budget calls for us to invest a total of $ 25.8
million ($4.4 million of this was invested in January 2007), as we
continue to invest in our Arkansas Fayetteville Shale play, bring the
Grand Isle 72 ("Liberty") discovery to production and spud a second
exploration well at our Dutch prospect in February 2007.
Of the $25.8 million in capital expenditures budgeted for the
remaining six months of fiscal year 2007, $6.0 million is anticipated
to be invested in offshore activities. Our budget calls for us to
invest approximately $1.1 million for production and pipeline
facilities for developing Grand Isle 72, approximately $3.9 million
for drilling, completion, production and pipeline facilities for our
second well at Eugene Island 10 ($0.2 million was invested in January
2007) and $1.0 million in projected future exploration costs, seismic
and delay rentals.
Of the $25.8 million in capital expenditures budgeted for the
remaining six months of fiscal year 2007, $19.8 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 117 wells in this play as of February 4, 2007. We have an
average working interest of 15% and a net revenue interest of 12% in
these 117 wells. Of these, 25 are to be operated by Alta and 92 are to
be operated by a third party independent oil and gas exploration
company (these 92 wells are referred to as "Integrated Wells").
Of the 25 Alta operated wells, seven have been drilled as of
December 31, 2006, four will be drilled in fiscal year 2007, and 14
will be drilled later. We estimate an additional $4.7 million, net to
Contango, will be required for remaining drilling, frac, completion
and hook-up costs of these seven wells ($2.0 million of this was
invested in January 2007). We are budgeting to drill, complete and
frac an additional four new Alta wells during fiscal year 2007 at a
cost of $5.4 million, net to us. Additionally, we expect to invest
$0.7 million in pipeline infrastructure and additional leasehold costs
for the Arkansas Fayetteville Shale ($0.4 million of this was invested
in January 2007). We estimate we will have an average working interest
of 54% and a net revenue interest of 43% in these 11 Alta wells.
Of the 92 Integrated Wells for which we have received AFEs, 35
wells are producing, 23 wells have already been spud, and 34 wells
have yet to be drilled. In addition to these 92 Integrated Wells, we
estimate we will receive an additional seven AFEs per month for
Integrated Wells during the final five months of fiscal year 2007 for
a total of 127 Integrated Wells. We anticipate having approximately 67
producing Integrated Wells by the end of June 2007. Our capital budget
for Integrated Wells assumes we will invest $8.2 million in Integrated
Wells during the remainder of fiscal year 2007 ($1.8 million of this
was invested in January 2007). We estimate we will have an average
working interest of 6% and a net revenue interest of 5% in these 127
Integrated Wells.
As of February 7, 2007, we have approximately $7.5 million in
cash, cash equivalents, and short term investments and $30.0 million
in long-term debt outstanding. The Company had estimated production of
approximately 11.9 MMcfe/d.
Kenneth R. Peak, Contango's Chairman and Chief Executive Officer,
said, "Our Dutch #1 well at Eugene Island 10 is now flowing at 28.3
million cubic feet equivalent per day, and our Dutch #2 well was spud
on February 7, 2007."
Mr. Peak continued, "Our proved reserves, as estimated by our
independent reserve engineers as of December 31, 2006, were 34.2
billion cubic feet equivalent. The SEC PV-10 pre-tax net present value
of these reserves, using quarter end prices of $5.63 per MMbtu and
$61.05 per barrel was $121.5 million."
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ ------------------------
2006 2005 2006 2005
------------ ----------- ------------ -----------
REVENUES:
Natural gas and oil
sales $850,407 $44,298 $2,042,713 $192,078
------------ ----------- ------------ -----------
Total revenues 850,407 44,298 2,042,713 192,078
------------ ----------- ------------ -----------
EXPENSES:
Operating expenses 144,702 125,896 277,651 131,646
Exploration
expenses 496,123 377,708 897,470 717,146
Depreciation,
depletion and
amortization 292,192 31,763 504,383 87,123
Impairment of
natural gas and
oil properties 192,109 - 192,109 -
General and
administrative
expenses 1,425,599 1,099,711 2,528,941 2,021,974
------------ ----------- ------------ -----------
Total expenses 2,550,725 1,635,078 4,400,554 2,957,889
------------ ----------- ------------ -----------
LOSS FROM CONTINUING
OPERATIONS BEFORE
OTHER INCOME AND
INCOME TAXES (1,700,318) (1,590,780) (2,357,841) (2,765,811)
OTHER INCOME
(EXPENSE):
Interest expense
(net of interest
capitalized) (390,434) (96) (557,905) (192)
Interest income 155,483 190,315 407,142 399,368
Gain (loss) on sale
of assets and
other (1,401,076) 32,164 (1,316,685) 241,686
------------ ----------- ------------ -----------
LOSS FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES (3,336,345) (1,368,397) (3,825,289) (2,124,949)
Benefit for income
taxes 1,019,484 535,585 1,252,572 814,995
------------ ----------- ------------ -----------
LOSS FROM CONTINUING
OPERATIONS (2,316,861) (832,812) (2,572,717) (1,309,954)
DISCONTINUED
OPERATIONS
Discontinued
operations, net of
income taxes - 614,425 - 1,302,868
------------ ----------- ------------ -----------
NET LOSS (2,316,861) (218,387) (2,572,717) (7,086)
Preferred stock
dividends 142,500 150,000 292,500 301,000
------------ ----------- ------------ -----------
NET LOSS ATTRIBUTABLE
TO COMMON STOCK $(2,459,361) $(368,387) $(2,865,217) $(308,086)
============ =========== ============ ===========
NET INCOME (LOSS) PER
SHARE:
Basic
Continuing
operations $(0.16) $(0.07) $(0.19) $(0.11)
Discontinued
operations - 0.04 - 0.09
------------ ----------- ------------ -----------
Total $(0.16) $(0.03) $(0.19) $(0.02)
============ =========== ============ ===========
Diluted
Continuing
operations $(0.16) $(0.07) $(0.19) $(0.11)
Discontinued
operations - 0.04 - 0.09
------------ ----------- ------------ -----------
Total $(0.16) $(0.03) $(0.19) $(0.02)
============ =========== ============ ===========
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 15,031,697 14,717,570 15,018,305 14,586,862
============ =========== ============ ===========
Diluted 15,031,697 14,717,570 15,018,305 14,586,862
============ =========== ============ ===========
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,
---------------------- ----------------------
2006 2005 2006 2005
---------- ----------- ---------- -----------
Revenues $- $1,779,111 $- $2,821,882
Operating (expenses)
credits - 733,833 (a) - 948,332 (a)
Exploration expenses - (1,202,665) - (1,202,665)
Depreciation,
depletion and
amortization - (365,010) - (586,734)
Gain on sale of
discontinued
operations - - - 23,598
---------- ----------- ---------- -----------
Gain before income
taxes $- $945,269 $- $2,004,413
Provision for
income taxes - (330,844) - (701,545)
---------- ----------- ---------- -----------
Gain from
discontinued
operations, net
of income taxes $- $614,425 $- $1,302,868
========== =========== ========== ===========
(a) credit due to severance tax refunds
Production, Prices, Operating Expenses, and Other
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
(Dollar amounts in (Dollar amounts in
000's, except per 000's, except per
Mcfe amounts) Mcfe amounts)
Production Data:
Natural gas (million cubic
feet) 105 135 248 226
Oil and condensate (thousand
barrels) 1 9 5 15
Total (million cubic feet
equivalent) 111 189 278 316
Natural gas (million cubic
feet per day) 1.1 1.5 1.3 1.2
Oil and condensate (thousand
barrels per day) 0.1 0.1 0.1 0.1
Total (million cubic feet
equivalent per day) 1.7 2.1 1.9 1.8
Average sales price:
Natural gas (per thousand
cubic feet) $7.45 $10.30 $6.76 $9.72
Oil and condensate (per
barrel) $58.33 $50.18 $67.56 $55.77
Selected data per Mcfe:
Production and severance
taxes $0.76 $(3.21) $0.47 $(2.89)
Lease operating expenses $0.53 $(0.05) $0.52 $0.29
General and administrative
expenses $12.74 $5.89 $9.01 $6.44
Depreciation, depletion and
amortization of natural gas
and oil properties $2.15 $1.96 $1.46 $2.00
EBITDAX (1) $(2,121) $1,364 $(2,082) $2,098
(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 Six Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
($000) ($000)
Loss from continuing
operations $(1,700) $(1,591) $(2,358) $(2,766)
Exploration expenses 496 378 897 717
Depreciation, depletion and
amortization 292 32 504 87
Impairment on natural gas and
oil properties 192 - 192 -
Gain (loss) on sale of assets
and other (1,401) 32 (1,317) 242
--------- --------- --------- ---------
EBITDAX from continuing
operations (2,121) (1,149) (2,082) (1,720)
Gain from discontinued
operations, before taxes - 945 - 2,004
Exploration expenses - 1,203 - 1,203
Depreciation, depletion and
amortization - 365 - 587
Gain on sale of assets and
other - - - 24
--------- --------- --------- ---------
EBITDAX $(2,121) $1,364 $(2,082) $2,098
========= ========= ========= =========
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. 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