Contango Reports Third Quarter Results and Updates Operations

Wed May 9, 2012 8:00am EDT

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Contango Reports Third Quarter Results and Updates Operations

Contango Oil & Gas Company (NYSE Amex: MCF) reported revenues from sales of natural gas, oil and natural gas liquids for the three months ended March 31, 2012 of approximately $41.3 million, compared to $51.8 million for the same period last year. The Company reported net income for the three months ended March 31, 2012 of approximately $14.7 million, or $0.96 per basic and diluted share. This compares to net income for the three months ended March 31, 2011 of approximately $16.8 million, or $1.07 per basic and diluted share, which included a gain of approximately $0.2 million, or $0.01 per basic and diluted share, attributable to discontinued operations from the sale of our Joint Venture Assets and Rexer Assets.

For the nine months ended March 31, 2012, the Company reported revenues from sales of natural gas, oil and natural gas liquids of approximately $139.4 million, compared to $153.1 million for the same period last year. The Company reported net income for the nine months ended March 31, 2012 of approximately $49.1 million, or $3.18 per basic and diluted share, which included a loss of approximately $0.8 million, or $0.05 per basic and diluted share, attributable to discontinued operations from the sale of our Joint Venture Assets and Rexer Assets. This compares to net income for the nine months ended March 31, 2011 of approximately $47.5 million, or $3.03 per basic share and $3.02 per diluted share, which includes a gain of approximately $1.1 million, or $0.07 per basic and diluted share, attributable to discontinued operations from the sale of our Joint Venture Assets, Rexer Assets and the distribution of Contango ORE, Inc. stock.

Despite the 43% decrease in the price of natural gas for this quarter compared to the same quarter in 2011, our revenues decreased by only 20% due to the high liquids content and condensate associated with our natural gas production. The following table shows the relationship between our produced volumes of liquids and natural gas and the revenues they derive.

   
Three Months Ended
March 31,
2012     2011
(thousands, except percentage)
   
Natural gas volumes (Mcf) 5,547 73.62 % 5,821 74.67 %
Condensate and NGL volumes (Mcfe)   1,988 26.38 %   1,975 25.33 %
Total volumes 7,535 7,796
 
Natural gas revenues $ 14,246 34.46 % $ 26,168 50.51 %
Condensate and NGL revenues   27,093 65.54 %   25,637 49.49 %
Total revenues $ 41,339 $ 51,805
 
Nine Months Ended
March 31,
2012 2011
(thousands, except percentage)
 
Natural gas volumes (Mcf) 17,276 75.04 % 19,022 75.33 %
Condensate and NGL volumes (Mcfe)   5,745 24.96 %   6,229 24.67 %
Total volumes 23,021 25,251
 
Natural gas revenues $ 58,669 42.07 % $ 82,795 54.07 %
Condensate and NGL revenues   80,780 57.93 %   70,343 45.93 %
Total revenues $ 139,449 $ 153,138
 

Kenneth R. Peak, the Company’s Chairman and Chief Executive Officer, said, “We are still waiting on the Hercules 205 rig which we have contracted to drill our Eagle and Fang prospects. The rig is currently under contract with another exploration and production company and we expect the rig will become available sometime over the next three months. We currently have more opportunities on our plate than at any time in the Company’s history. This is the silver lining to today’s natural gas prices.”

As of April 30, 2012, we were producing approximately 94.5 million cubic feet equivalent per day, net to Contango, had no debt, and had approximately $110 million in net available cash, after investing approximately $46 million in onshore capital expenditures over the past month. We have $40.0 million of unused borrowing capacity available.

     
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended Nine Months Ended
March 31, March 31,
2012   2011 2012   2011
(thousands, except per share amounts)
REVENUES:
Natural gas, oil and liquids sales $ 41,339   $ 51,805   $ 139,449   $ 153,138  
Total revenues   41,339     51,805     139,449     153,138  
 
EXPENSES:
Operating expenses 5,727 5,652 18,626 15,926
Exploration expenses 76 14 133 9,848
Depreciation, depletion and amortization 11,710 13,007 36,203 40,709
Impairment of natural gas and oil properties - 1,675 - 1,786
General and administrative expenses   1,226     5,661     5,778     11,940  
Total expenses   18,739     26,009     60,740     80,209  
 
OTHER INCOME (EXPENSE)   42     (37 )   (86 )   (122 )
 
NET INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 22,642 25,759 78,623 72,807
Provision for income taxes   (7,942 )   (9,118 )   (28,748 )   (26,441 )
NET INCOME FROM CONTINUING OPERATIONS 14,700 16,641 49,875 46,366
 
DISCONTINUED OPERATIONS
Discontinued operations, net of income taxes   (26 )   156     (821 )   1,139  
NET INCOME ATTRIBUTABLE TO COMMON STOCK $ 14,674   $ 16,797   $ 49,054   $ 47,505  
 
NET INCOME PER SHARE:
Basic
Continuing operations $ 0.96 $ 1.06 $ 3.23 $ 2.96
Discontinued operations   (0.00 )   0.01     (0.05 )   0.07  
Total $ 0.96 $ 1.07 $ 3.18 $ 3.03
Diluted
Continuing operations $ 0.96 $ 1.06 $ 3.23 $ 2.95
Discontinued operations   (0.00 )   0.01     (0.05 )   0.07  
Total $ 0.96 $ 1.07 $ 3.18 $ 3.02
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic   15,357     15,665     15,453     15,665  
Diluted   15,360     15,667     15,456     15,729  
 

The table below sets forth revenue, expense and production data for the three and nine months ended March 31, 2012 and 2011.

     
Three Months Ended Nine Months Ended
March 31, March 31,
2012   2011   Change 2012   2011   Change
(thousands, except percent change, average sales price and selected data per Mcfe) (thousands, except percent change, average sales price and selected data per Mcfe)
Revenues:
Natural gas and oil sales $ 41,339 $ 51,805   -20 % $ 139,449   $ 153,138   -9 %
Total revenues $ 41,339 $ 51,805   -20 % $ 139,449   $ 153,138   -9 %
 
Production:
Natural gas (million cubic feet) 5,547 5,821 -5 % 17,276 19,022 -9 %
Oil and condensate (thousand barrels) 157 180 -13 % 464 535 -13 %
Natural gas liquids (thousand gallons)   7,321   6,263   17 %   20,725     21,132   -2 %
Total (million cubic feet equivalent) 7,535 7,796 -3 % 23,021 25,251 -9 %
 
Natural gas (million cubic feet per day) 61.0 64.7 -6 % 62.8 69.4 -10 %
Oil and condensate (thousand barrels per day) 1.7 2.0 -15 % 1.7 2.0 -15 %
Natural gas liquids (thousand gallons per day)   80.5   69.6   16 %   75.4     77.1   -2 %
Total (million cubic feet equivalent per day) 82.7 86.6 -5 % 83.8 92.4 -9 %
 
Average Sales Price:
Natural gas (per thousand cubic feet) $ 2.57 $ 4.50 -43 % $ 3.40 $ 4.35 -22 %
Oil and condensate (per barrel) $ 113.41 $ 96.30 18 % $ 112.53 $ 85.80 31 %
Natural gas liquids (per gallon) $ 1.28 $ 1.33   -4 % $ 1.38   $ 1.16   19 %
Total (per thousand cubic feet equivalent) $ 5.49 $ 6.65 -17 % $ 6.06 $ 6.06 0 %
 
Summary of Financial Information:
Operating expenses $ 5,727 $ 5,652 1 % $ 18,626 $ 15,926 17 %
Exploration expenses $ 76 $ 14 443 % $ 133 $ 9,848 -99 %
Depreciation, depletion and amortization $ 11,710 $ 13,007 -10 % $ 36,203 $ 40,709 -11 %
Impairment of natural gas and oil properties $ - $ 1,675 -100 % $ - $ 1,786 -100 %
General and administrative expenses $ 1,226 $ 5,661 -78 % $ 5,778 $ 11,940 -52 %
Other income (expense) $ 42 $ (37 ) -214 % $ (86 ) $ (122 ) -30 %
 
Selected data per Mcfe:
Lease operating expenses $ 0.76 $ 0.73 4 % $ 0.81 $ 0.63 29 %
General and administrative expenses $ 0.16 $ 0.73 -78 % $ 0.25 $ 0.47 -47 %

Depreciation, depletion and amortization of natural gas and oil properties

$ 1.53 $ 1.65 -7 % $ 1.55 $ 1.60 -3 %
 

Contango is a Houston-based, independent natural gas and oil company. The Company’s business is to explore, develop, produce and acquire natural gas and oil properties onshore and offshore in the Gulf of Mexico. Additional information can be found on our web page at www.contango.com.

This press release contains forward-looking statements regarding Contango that are intended to be covered by the safe harbor "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995, based on Contango’s current expectations and includes statements regarding acquisitions and divestitures, estimates of future production, future results of operations, quality and nature of the asset base, the assumptions upon which estimates are based and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as "expects", “projects”, "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Statements concerning oil and gas reserves also may be deemed to be forward looking statements in that they reflect estimates based on certain assumptions that the resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those, reflected in the statements. These risks include, but are not limited to: the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; risks associated with derivative positions; inability to realize expected value from acquisitions, inability of our management team to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that government policies may change or governmental approvals may be delayed or withheld. Additional information on these and other factors which could affect Contango’s operations or financial results are included in Contango’s other reports on file with the Securities and Exchange Commission. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Contango does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

Contango Oil & Gas Company
Kenneth R. Peak, 713-960-1901
www.contango.com