HOUSTON--(BUSINESS WIRE)--Contango Oil & Gas Company (NYSE Amex: MCF) announced today that its
wholly-owned subsidiary, Contango ORE Company (“CORE”), has agreed to
invest up to $3.0 million to conduct mineral exploration activities on
approximately 580,000 acres of Alaska Native and State of Alaska lands
located in interior Alaska (“Mineral Exploration Lands”). CORE purchased
a 50% ownership from a private company for $1.0 million, together with
our commitment to invest the next $2.0 million of capex to fund the
expenses associated with the initial mineral exploration phase on this
acreage. CORE and its partner will share expenses on a 50/50 basis
thereafter and each will own a 50% working interest burdened by an
approximate 5% overriding royalty interest.
Field exploration began in June 2009 and CORE has thus far invested a
total of $1.3 million. In our 2009 exploration program, a total of 1,076
rock, soil, pan concentrate and stream silt samples were collected. Of
this total, 567 rock and soil samples were taken over a 40-acre area of
exploration interest, with 348 samples showing measurable amounts of
gold and 30 samples with measured gold of 0.5 grams per tonne or higher.
The Mineral Exploration Lands have not been extensively explored for
gold and cover several geologic terranes which are prospective for
mineral deposits with gold, base metal and platinum group element
prospects that are on trend to our Mineral Exploration Lands. Should
this summer’s planned trenching, soil samples and mineralization studies
indicate that additional exploration is warranted, CORE will have the
opportunity to invest significantly more capital in this project.
Kenneth R. Peak, Contango’s Chairman and Chief Executive Officer, said,
“This investment does not signal, foreshadow or represent a change in
our natural gas and oil exploration business model. We recognize that
the risks and challenges inherent in gold exploration are quite
different from our natural gas and oil exploration business and were
attracted to invest in this project solely by what we perceive to be its
reward/risk ratio, where a relatively small amount of initial
exploration risk capital ($3 to $5 million is envisioned) could
potentially lead to a more extensive gold exploration/development
project. Our 2009 exploration program found relatively few samples of
commercial grade gold ore – generally considered to be 0.5 grams per
tonne or more – but we believe our results merit an expanded exploration
program for the summer of 2010.”
Mr. Peak continued, “Our planned 2010 exploration program will be
directed toward additional rock sampling, trenching and drilling core
holes. Shareholders are reminded that at this early exploration stage
our investment should be considered as nothing more than an 'interesting
speculation' and that the odds of our ultimately being successful in
finding gold in a volume sufficient to support a commercial gold mining
operation are quite low. To put it in oil and gas parlance, this 'play'
is the rankest of 'wildcats' that is currently only at the 'idea' stage
and we are hoping, based on our 2010 work program, to learn if we can
mature it to the 'prospect' stage in order to justify committing
additional risk exploration capital. After we have taken our core, rock
and pan samples, they will be assayed in an independent lab and then
evaluated for prospectivity and commercial development potential. This
process will likely take until December 2010.”
Contango is a Houston-based, independent natural gas and oil company.
The Company’s core business is to explore, develop, produce and acquire
natural gas and oil properties primarily offshore in the Gulf of Mexico.
Additional information can be found on our web page at www.contango.com.
This press release contains forward-looking statements regarding
Contango that are intended to be covered by the safe harbor
"forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995, based on Contango’s current expectations
and includes statements regarding acquisitions and divestitures,
estimates of future production, future results of operations, quality
and nature of the asset base, the assumptions upon which estimates are
based and other expectations, beliefs, plans, objectives, assumptions,
strategies or statements about future events or performance (often, but
not always, using words such as "expects", “projects”, "anticipates",
"plans", "estimates", "potential", "possible", "probable", or "intends",
or 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: 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 such as hurricanes and other natural disasters);
uncertainties as to the availability and cost of financing; fluctuations
in oil and gas prices; risks associated with derivative positions;
inability to realize expected value from acquisitions, inability of our
management team to execute its plans to meet its goals, shortages of
drilling equipment, oil field personnel and services, unavailability of
gathering systems, pipelines and processing facilities and the
possibility that government policies may change or governmental
approvals may be delayed or withheld. Additional information on these
and other factors which could affect Contango’s operations or financial
results are included in Contango’s other reports on file with the
Securities and Exchange Commission. 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 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.