Contango Oil & Gas Co. may be small — it only had threeemployees two months ago — but no one can say the Houston companydoesn’t have big plans.

Yesterday, the company announced it had purchased a 10% interestin Republic Exploration LLC for $4 million with an option topurchase another 23.33% more for $2.5 million by Dec. 29. Republichas the license rights to existing and newly reprocessed 3-Dseismic covering more than 8,600 square miles of the shallow watersof the Gulf of Mexico continental shelf, and was formed toevaluate, generate, acquire and explore prospects using seismicdata.

“Our net production is currently running at approximately 3.5MMcf/d and 200 barrels of oil per day, and our investment inRepublic Exploration will greatly enhance our ability to grow thisproduction base,” said CEO Kenneth Peak.

In June, Contango got a huge boost after operating with almost nocapital funds, when it received a $2.5 million investment from theSouthern Ute Indian Tribe Growth fund, an arm of the Southern Utetribe in Colorado (see Daily GPI, June12). Along with the stock purchase, the tribe’s fund investedanother $480,000 in the company’s exploration program, bringing itstotal investment to nearly $3 million.

Contango also announced yesterday that Trust Company of the Westhas become its investment manager, and TCW has purchased $2.5million of Contango’s 8% Series A convertible preferred stockconvertible at $1.25 a share. TCW also has a five-year warrant topurchase 500,000 shares of common stock at $1 per share. InDecember 1999, TCW invested $2.5 million in Contango to purchasenearly 3.7 million common shares, and was then granted a five-yearwarrant to purchase another 370,270 shares for $1 a share. Peaksaid this investment would also help with its 3-D exploration ofthe shallow waters of the Gulf.

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