Contango Oil & Gas Co. announced Thursday that the borrowing base on its existing secured revolving line of credit with Guaranty Bank FSB has been increased from $21.1 million to $27.5 million. The new borrowing base reduces by $670,000 per month beginning Jan. 1, 2003. The other terms of the credit facility remain unchanged.

“We are pleased with this expanded banking line with Guaranty Bank,” said Kenneth R. Peak, CEO of Contango. “Our current debt outstanding totals approximately $19.1 million at an average annual rate of 3.39%. After receipt in early January of our November production proceeds, we estimate that our bank debt will be reduced to approximately $17.0 million.

“Given our continuing strong monthly cash flow, we are not projecting an increase in our overall debt level,” Peak added. “This increased capital availability, however, provides us with additional financial flexibility to begin our 2003 exploration program.”

Last week, Contango announced that it had extended until mid-February its option to acquire a 10% interest in Cheniere Energy Inc.’s proposed Freeport, TX LNG receiving facility project (see Daily GPI, Dec. 20). If Contango chooses not to exercise the initial 10% option, the $750,000 up-front payment will be repaid to Contango on or prior to July 15.

“I continue to believe LNG has an important role to play in serving our country’s energy future,” Peak said. “The Freeport receiving facility would be ideally situated to support the growing natural gas and electricity generation needs of the Houston area. With crude oil prices above $30 per barrel and natural gas prices above $5.00 per MMBtu, the market is signaling the need to diversify our energy sources, and demand for natural gas, as the cleanest burning of all hydrocarbon fuels, will continue to grow.

“Contango will keep its focus on growing natural gas reserves through the drill bit,” he noted. “We have spent $8 million purchasing 3-D seismic in just the last several months and are actively prospecting for new natural gas plays for 2003.”

Houston-based Contango is an independent company that explores for, develops, produces and sells gas and crude oil. The company said its current exploration and production efforts are currently focused onshore on the Gulf Coast and offshore in the Gulf of Mexico.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.