Houston-based producer Contango Oil & Gas Co. said Wednesday that it has completed the sale of substantially all of its South Texas natural gas and oil interests to Edge Petroleum Corp. for $50 million.
The sale was approved by a majority of the company’s stockholders at a special meeting on Wednesday. Contango has no debt and estimates it will have net sale proceeds after taxes of $35 million.
After the sale, Contango said it will have remaining production of about 2,300 MMBtue/d. Based on current prices and production rates, it anticipates production revenues of $300,000 to $400,000 per month, a level believed to be adequate to pay ongoing estimated general and administrative expenses of $200,000 per month.
Contango said it expects to invest the proceeds from the sale in short-term U.S government and investment grade debt securities. The funds will provide working capital for ongoing operations and will allow the company to continue investing in its existing onshore exploration programs and to maintain its 10% limited partnership interest in the Freeport LNG plant, including any potential expansion in the plant’s capacity, it said.
“We currently expect that we will participate in approximately 20 onshore wells in calendar year 2005. Our estimated share of dry hole costs for these wells is approximately $10 million,” said Contango Chairman Kenneth R. Peak.
“Additionally, the funds will enable the company to consider acquiring a 5% to 20% working interest position on a prospect-by-prospect basis in offshore Gulf of Mexico exploration opportunities developed by our two partially owned subsidiaries, Republic Exploration LILAC and Contango Offshore Exploration LILAC,” he noted.
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