Contango Oil & Gas Co. has a market cap of $972.2 million; its shares were traded at around $63.85 with a P/E ratio of 16.8 and P/S ratio of 4.8.
Highlight of Business Operations:On December 21, 2011, the Company purchased an additional 3.66% working interest (2.67% net revenue interest) in Mary Rose #5 (previously Eloise North) for approximately $203,000, from an existing partner. As of December 31, 2011, the Companys working interest and net revenue interest in Mary Rose #5 was 37.80% and 27.58%, respectively.
Reserve Estimates. While we are reasonably certain of recovering our reported reserves, the Companys estimates of natural gas and oil reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation and judgment. Estimates of economically recoverable natural gas and oil reserves and future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effect of regulations by governmental agencies, and assumptions governing natural gas and oil prices, operating costs, severance taxes, development costs and workover costs, all of which may in fact vary considerably from actual results. The future drilling costs associated with reserves assigned to proved undeveloped locations may ultimately increase to the extent that these reserves are later determined to be uneconomic. For these reasons, estimates of the economically recoverable quantities of expected natural gas and oil attributable to any particular group of properties, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions could materially affect the estimated quantity and value of the reserves, which could affect the carrying value of the Companys natural gas and oil properties and/or the rate of depletion of such natural gas and oil properties. Actual production, revenues and expenditures with respect to the Companys reserves will likely vary from estimates, and such variances may be material. Holding all other factors constant, a reduction in the Companys proved reserve estimate at December 31, 2011 of 5%, 10% and 15% would affect depreciation, depletion and amortization expense by approximately $1.2 million, $2.7 million and $4.2 million, respectively.
For the three months ended December 31, 2011, natural gas accounted for approximately 41% of our revenues and 75% of our production. Liquid products accounted for 59% of our revenues and 25% of our production. For the three months ended December 31, 2010, natural gas accounted for approximately 54% of our revenues and 77% of our production. Liquid products accounted for 46% of our revenues and 23% of our production.
Natural Gas, Oil and Natural Gas Liquids (NGL) Sales and Production. We reported revenues of approximately $98.1 million for the six months ended December 31, 2011, compared to revenues of approximately $101.3 million for the six months ended December 31, 2010. This decrease of $3.2 million was principally attributable to our Eloise South well which stopped producing in October 2010 and our Eloise North well which stopped producing in February 2011, partially offset by our Vermilion 170 well which began producing on September 13, 2011, as well as an increase in the average equivalent sales price received.
For the six months ended December 31, 2011, natural gas accounted for approximately 45% of our revenues and 76% of our production. Liquid products accounted for 55% of our revenues and 24% of our production. For the six months ended December 31, 2010, natural gas accounted for approximately 56% of our revenues and 76% of our production. Liquid products accounted for 44% of our revenues and 24% of our production.
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