Contango Oil & Gas Company is a Houston, Texas based, independent oil and natural gas company whose underlying business has been to maximize production and cash flow from its offshore properties in the shallow waters of the Gulf of Mexico and onshore properties in Texas and Oklahoma and to use that cash flow to explore, develop, exploit, increase production from and acquire crude oil and natural gas properties across the United States. Contango has added to its corporate strategy the implementation of a consolidation strategy to pursue the acquisition of PDP-heavy opportunities that it believes will be available in the near future from stressed or distressed situations.
Our primary producing areas as of December 2018 included:
|Gulf of Mexico||Offshore Louisiana - water depths less than 300 feet|
|Southern Delaware Basin, Pecos County, Texas||Wolfcamp|
|Madison and Grimes counties, Texas||Woodbine (Upper Lewisville)|
|Other Texas Gulf Coast||Conventional and smaller unconventional formations|
|Zavala and Dimmit counties, Texas||Buda / Eagle Ford / Georgetown|
|San Augustine County, Texas||Haynesville shale, Mid Bossier shale and James Lime formations|
|Weston County, Wyoming||Muddy Sandstone|
|Sublette County, Wyoming||Jonah Field(1)|
(1) Through a 37% equity investment in Exaro Energy III LLC (“Exaro”). Production from this investment is not included in our reported production results or in our reported reserves for any periods reported herein.
Since 2016, we have been focused on the development of our Southern Delaware Basin acreage in Pecos County, Texas (“Bullseye”). As of December 31, 2018, we were producing from twelve wells over our 15,400 gross (6,500 net) acre position, prospective for the Wolfcamp A, Wolfcamp B and Second Bone Spring formations. In December 2018, we purchased an additional 4,200 gross operated (1,700 net) acres and 4,000 gross non-operated (200 net) acres to the northeast of our existing acreage (“NE Bullseye”) for approximately $7.5 million. We paid $3.2 million cash in December 2018, with the balance to be paid by the earlier of the commencement of completion operations on the third well on the acreage acquired or October 1, 2019. We currently expect that Bullseye and NE Bullseye will be the primary focus of our drilling program for 2019. During this period, we will continue to identify opportunities for cost reductions and operating efficiencies in all areas of our operations, while also searching for new resource acquisition opportunities.
As we continue to expand our presence in the Southern Delaware Basin, we have begun to sell non-core assets to allow us to focus on West Texas. These asset sales provide some immediate liquidity and improve our balance sheet by removing potential asset retirement obligations. Beginning in 2016, we sold all of our Colorado assets for approximately $5.0 million. During the year ended 2018, we sold certain Eagle Ford Shale assets in Karnes County, Texas for $21.0 million; Gulf Coast conventional assets in Southeast Texas for $6.0 million, and Gulf Coast conventional and unconventional assets in South Texas for $0.9 million. In December 2018, we also sold our offshore Vermilion 170 property in exchange for a retained overriding royalty interest (“ORRI”) in the well, the buyer’s assumption of the plugging and abandonment obligation and an ORRI in any future wells drilled by the buyer on two nearby prospects that would produce through this platform.
Our production for the year ended December 31, 2018 was approximately 16.0 Bcfe (or 43.9 Mmcfe/d) and was comprised of 62% from our offshore properties and 61% natural gas. Our production for the three months ended December 31, 2018 was approximately 3.7 Bcfe (or 39.8 Mmcfe/d), with 63% from our offshore properties and 58% natural gas. As of December 31, 2018, our proved reserves were approximately 60% proved developed, were 38% offshore, were 41% natural gas and were 99% attributed to wells and properties operated by us.
As of December 31, 2018, our proved reserves, as estimated by Netherland, Sewell & Associates, Inc. (“NSAI”) and William M. Cobb and Associates (“Cobb”), our independent petroleum engineering firms, in accordance with reserve reporting guidelines required by the Securities and Exchange Commission (“SEC”), were approximately 131.9 Bcfe, consisting of 54.2 Bcf of natural gas, 9.4 MMBbl of crude oil and condensate and 3.5 MMBbl of natural gas liquids (“NGLs”), with a Standardized Measure of Discounted Future Net Cash Flows (“Standardized Measure”) of $218.9 million and a present value, discounted at a 10% rate based on year-end SEC pricing guidelines (PV‑10), of $220.5 million. PV-10 as of December 31, 2018 was based on adjusted prices of $3.02 per MMbtu of natural gas, $62.90 per barrel of oil, and $27.89 per barrel of NGLs.
Our mission is to create value for our shareholders through the acquisition, exploitation, exploration and development of oil and gas properties and by investing in a balanced portfolio of longer life reserves and high impact opportunities.
Vision and Values
Our vision is to be recognized as a leading profitable producer of oil and natural gas in the Gulf Coast region and the Gulf of Mexico. We will distinguish ourselves from our competitors by employing strong technical leadership and creative commercial solutions, along with the desire to successfully explore for oil and gas as the low cost producer.
At Contango Oil & Gas Company, we adhere to a defined set of values that promote and sustain relationships based on high ethical standards and personal integrity. Our goal is to maintain a talented, cohesive team committed to those values and standards in promoting Contango as a respected industry leader built on win/win relationships among all employees, shareholders, customers and vendors.
At Contango Oil & Gas Company, every prospect is thoroughly screened to ensure it meets our criteria for performance. Among our key performance indicators are:
- Return on capital employed
- Finding and development costs
- Reserve growth
- EBITDA growth
- Production growth
- Cash margin/unit
- Lease operating costs
- General and administrative cost/unit