Contango Announces Signing of Agreement to Acquire Assets of White Star Petroleum LLC

HOUSTON, Sept. 27, 2019 (GLOBE NEWSWIRE) -- Contango Oil & Gas Company (NYSE American: MCF) (“Contango” or the “Company”) announced today that it has entered into an asset purchase agreement to acquire the assets of White Star Petroleum LLC and certain affiliates (“White Star”) as a part of the White Star Chapter 11 bankruptcy, 363 sales process. 

The asset purchase agreement provides that Contango will acquire approximately 15 Mboe/d of production, approximately 20 Mmboe of PDP reserves as of the July 1 effective date, and 315,000 net acres in Oklahoma split into the three operating districts noted below, from White Star for a total purchase price of $132.5 million.

White Star’s production is liquids weighted at 63% oil and NGLs, and the acreage is 80% held-by-production.  Approximately 65% of the wells are operated by White Star and are mature fields with strong cash flow and significant development potential from PDNP and PUD opportunities. The White Star assets also include integrated gathering and saltwater disposal systems, which reduces lease operating expenses and adds third party cash flow.  

The transaction is expected to close in the fourth quarter of 2019, and the effective date of the transaction will be July 1, 2019. After adjustment for normal operations during the period between the effective date and the closing date, and other normal and customary closing adjustments, the total consideration to be paid in cash at closing is estimated to be less than $100 million.

The closing of the transaction is subject to customary conditions, due diligence, confirmation of title, finalization of documentation, and entry of the bankruptcy court order approving the sale; however, closing is not conditioned upon satisfaction of any financing contingency.

Haynes and Boone, LLP is representing Contango in its acquisition of the White Star assets.

Management Commentary

Wilkie S. Colyer, Contango’s President and Chief Executive Officer, said “This opportunity became actionable as a result of our recent successful recapitalization of the company, and it is exactly the type of acquisition we said we’d be looking for when we last spoke to the investment community.  We expect White Star to add approximately $60 million in asset level cash flow over the next twelve months. It increases the Company’s production by a factor of almost four times and more than doubles our PDP reserves, all at a very attractive purchase price that is substantially below PDP PV-10.  It fits well from a geographic perspective with our recently announced pending acquisition of the Will Energy oil and gas assets.  White Star’s assets, operations and technical teams will enhance our platform.  We expect continued consolidation in the E&P industry, and Contango intends to be a consolidator.  We will continue to look for acquisitions with an overarching goal of maximizing value for our shareholders.  Our management and directors’ significant equity position in Contango further aligns our incentives with our fellow shareholders.”

Approximately 35% of Contango’s equity is owned by John C. Goff and affiliates, including the recent investment of approximately $25 million in the Company’s most recent equity offering.

About Contango Oil & Gas Company

Contango Oil & Gas Company is a Houston, Texas based, independent oil and natural gas company whose business is to maximize production and cash flow from its offshore properties in the shallow waters of the Gulf of Mexico and onshore properties in Texas and Wyoming and to use that cash flow to explore, develop, exploit, increase production from and acquire crude oil and natural gas properties in West Texas, the Texas Gulf Coast and the Rocky Mountain regions of the United States. Additional information is available on the Company's website at http://contango.com.  Information on our website is not part of this release.

Forward-Looking Statements and Cautionary Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on Contango’s current expectations and includes statements regarding the timing and completion of the closing of the acquisition, the benefits of the pending acquisition, the development potential of the White Star assets, expected production, cash flows and reserves from the White Star assets, the total consideration to be paid at the closing of the acquisition, the Company’s drilling program and capital expenditures, future results of operations, strategic initiatives, the quality and nature of the White Star properties, acquisition efforts and results, and other expectations, beliefs, plans, objectives, assumptions, strategies, future events or performance. Words and phrases used to identify our forward-looking statements include terms such as "expects", "anticipates", “believes”, "plans", "estimates", "potential", "intends", or words and phrases stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved. Statements concerning oil and gas reserves also may be deemed to be forward looking statements in that they reflect estimates based on certain assumptions that the resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those, reflected in the statements. These risks include, but are not limited to: risks associated with a pending acquisition (for example, obtaining acceptable financing, satisfaction of conditions to closing, inability to realize the expected benefits, reliance on information provided by seller, verification or revision of such information regarding the assets, results of diligence, changes in ownership of the target assets, relationships with customers and serve providers, and obtaining required judicial, government and regulatory approvals); the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; ability of our management team to execute its plans or to meet its goals; and the other factors discussed under the “Risk Factors” heading in our annual report on Form 10-K for the year ended December 31, 2018 and our quarterly reports on Form 10-Q filed with or furnished to the SEC. Additional information on these and other factors which could affect Contango’s operations or financial results are included in Contango’s reports on file with the SEC. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements speak only as of the date they were made and are based on the estimates and opinions of management at the time the statements are made. Contango does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change.