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Contango Oil and Gas Co Reports Operating Results (10-Q)

February 11, 2013 | About:
10qk

10qk

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Contango Oil and Gas Co (MCF) filed Quarterly Report for the period ended 2012-12-31.

Contango Oil & Gas Company has a market cap of $652.6 million; its shares were traded at around $42.78 with a P/E ratio of 40.9 and P/S ratio of 4.

Highlight of Business Operations:

Reserve Estimates. While we are reasonably certain of recovering our reported reserves, the Company s 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 Company s 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 Company s reserves will likely vary from estimates, and such variances may be material. Holding all other factors constant, a reduction in the Company s proved reserve estimate at December 31, 2012 of 5%, 10% and 15% would affect depreciation, depletion and amortization expense for the six months ended December 31, 2012 by approximately $1.0 million, $2.2 million and $3.5 million, respectively.

Natural Gas, Oil and Natural Gas Liquids (“NGL”) Sales and Production. We reported revenues of approximately $34.9 million for the three months ended December 31, 2012, compared to revenues of approximately $53.9 million for the three months ended December 31, 2011. This decrease in revenues of $19.0 million was principally attributable to a decrease in natural gas, condensate and NGL production, further compounded by lower average equivalent sales prices.

For the three months ended December 31, 2012, natural gas accounted for approximately 76% of our production, while condensate and NGLs accounted for 9% and 15%, respectively. From a revenue perspective however, natural gas generated 51% of our revenues, while condensate and NGLs generated 30% and 19%, respectively. For the three months ended December 31, 2011, natural gas accounted for 75% of our production, while condensate and NGLs accounted for 12% and 13%, respectively. From a revenue perspective however, natural gas generated 41% of our revenues, while condensate and NGLs generated 38% and 21%, respectively.

Natural Gas, Oil and Natural Gas Liquids (“NGL”) Sales and Production. We reported revenues of approximately $64.7 million for the six months ended December 31, 2012, compared to revenues of approximately $98.1 million for the six months ended December 31, 2011. This decrease in revenues of $33.4 million was principally attributable to a decrease in natural gas, condensate and NGL production, further compounded by lower sales prices for all of our products.

For the six months ended December 31, 2012, natural gas accounted for approximately 76% of our production, while condensate and NGLs accounted for 9% and 15%, respectively. From a revenue perspective however, natural gas generated 50% of our revenues, while condensate and NGLs generated 32% and 18%, respectively. For the six months ended December 31, 2011, natural gas accounted for 76% of our production, while condensate and NGLs accounted for 12% and 12%, respectively. From a revenue perspective however, natural gas generated 45% of our revenues, while condensate and NGLs generated 35% and 20%, respectively.

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