The most straightforward such example is Contango Oil & Gas Co. (MCF
), which we own in our traditional mid-cap, small-to-mid cap, and small-cap portfolios, as well as in our deep value small cap portfolios. When we first purchased it in 2011, it focused exclusively on shallow-water Gulf of Mexico exploration and production, had an amazingly low-cost operation, virtually no debt, and thus very high cash flow. It was also quite disciplined in drilling only high opportunity locations. Since then the company has unfortunately seen its CEO and Founder, Ken Peak, depart for health reasons and later die. Moreover, it undertook a transformational acquisition, purchasing Crimson Exploration, which had become financially distressed. Its opportunities have now multiplied. And while its leverage has increased somewhat, the company continues to boast relatively low costs, minimal debt, and disciplined exploration. Across our domestic equity portfolios, we own several other companies whose profiles fit this mold.
From John Rogers
' November 2013 commentary