Houston-based Contango Oil & Gas Co. has closed the sale of its 10% limited partnership interest in Freeport LNG Development LP to Turbo LNG LLC, an affiliate of Japan’s Osaka Gas Co. Ltd., for approximately $68 million, the company said Tuesday.

Contango used $20.3 million of the proceeds to pay off its debt with the Royal Bank of Scotland. Another $20 million was used to pay off its debt with a private investment firm, and the remaining $27.7 million will be used for working capital, the company said.

“We have over $150 million of cash on hand and $60 million of available borrowing capacity,” said Contango CEO Kenneth R. Peak. “As stated previously, our plans are to invest $109 million of our cash in a like-kind exchange for producing oil and gas assets.”

Freeport is a Delaware limited partnership whose sole general partner is owned by individual Michael S. Smith (50%) and ConocoPhillips (50%). The limited partners are Smith (45%), Cheniere Energy Inc. (30%), Dow Chemical subsidiary Texas LNG Holdings LLC (15%) and Contango, through its subsidiary Contango Sundance Inc. (10%).

Freeport is engaged in developing a 1.75 Bcf/d LNG import and gasification terminal on Quintana Island, 70 miles south of Houston. Construction of the terminal began in early 2005. Freeport closed on $383 million of private placement note funding with nine institutional investors for the construction of the first phase of the Quintana Island LNG facility in late 2005 (see Daily GPI, Dec. 21, 2005). In 2006 Freeport received final authorization from FERC to increase the sendout capacity of the terminal to 4 Bcf/d (see Daily GPI, Sept. 25, 2006).

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