Houston-based Contango Oil & Gas Co. has purchased working interest in a pair of discoveries in the Gulf of Mexico (GOM), which have estimated proved reserves of 21 Bcfe and estimated proved plus probable reserves of 24 Bcfe, from two undisclosed sellers for a total of $100 million. The company also is ready to sell all of its interests in those discoveries, it said Tuesday.

Contango said it purchased an additional 4.17% working interest and 3.33% net revenue interest in the Eugene Island 10 (Dutch) discovery and an additional average 4.56% working interest and approximately 3.33% net revenue interest in the five State of Louisiana leases (collectively, Mary Rose).

The deal increases Contango’s working interest in Dutch to 47.05% with a net revenue interest of 38.12% and increases its average working interest in Mary Rose to 53.21% with an average net revenue interest of 39.00%. Contango said it now owns an estimated 254 Bcfe of proved reserves and 280 Bcfe of estimated proved plus probable reserves in Dutch and Mary Rose.

The effective date of the transaction is Jan. 1, 2008.

Simultaneous with the announcement of the acquisition, Contango said it is seeking proposals for the sale of its Dutch and Mary Rose discoveries.

“If Contango obtains an acceptable proposal to acquire its Dutch and Mary Rose discoveries, we would likely structure the disposition through the sale of Contango by its shareholders with the simultaneous spin-off of the remaining Contango assets to our shareholders in a new company, Contango Energy Co.,” said Contango CEO Kenneth R. Peak. “This structure would allow Contango shareholders to have an interest in any future exploration efforts at our other Gulf of Mexico leases.”

Earlier this year Contango 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 (see Daily GPI, Feb. 6). At that time Peak said the company had more than $150 million of cash on hand and planned to invest $109 million in a like-kind exchange for producing oil and gas assets.

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