Houston-based Contango Oil & Gas Co. is selling its 10% limited partnership interest in Freeport LNG Development LP to an unnamed “major Asian utility company” for approximately $68 million, the company said Tuesday. The sale is subject to the purchaser’s board approval and customary closing conditions.
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).
The sale is part of Contango’s previously announced review of strategic alternatives to enhance shareholder value. CEO Kenneth R. Peak said the company will use the proceeds to prepay an outstanding $20 million term loan from the Royal Bank of Scotland, with any remaining funds available for working capital.
In November Contango, Alta Resources LLC and other parties sold 24,000 net acres in the Fayetteville Shale for $343 million in cash to independent producer Petrohawk Energy Corp. (see Daily GPI, Nov. 28, 2007). Contango said it would use the $199.2 million it received from its portion of that sale to finance the purchase of producing properties utilizing a 1031 like-kind exchange structure.
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