Contango Oil & Gas Acquires Multi-Basin Asset Package
NYSE-listed Contango Oil & Gas Co. has entered into an asset purchase agreement to acquire a multi-basin package of assets in Wyoming, Montana, Texas and New Mexico, for a total cash consideration of US$58 million. The assets were acquired from a distressed seller pursuant to a bank-owned liquidation.
The assets acquired cover approximately 182,000 net acres located across the Big Horn, Permian, and Powder River basins. The package contains the Elk basin field in the Big Horn basin, a conventional asset which has been producing from multiple horizons for over 100 years. The Elk basin field has produced in excess of 500 million barrels of oil (MMbbls) since discovery, with low single-digit decline rates for several decades. The second-largest asset in the portfolio, located on the Central basin platform and Northwest shelf areas of the Permian basin, currently produces 3,800 barrels of oil equivalent per day (boe/d), of which 40% is oil.
The Proved Developed Producing (PDP) reserves associated with the assets amount to 18.3 million barrels of oil equivalent (MMboe) as of September 30th, 2020, and the production from the entire package averaged approximately 7,500 barrels of oil equivalent per day (boe/d), of which 55% was oil/liquids. Production from the Elk basin field currently averages 2,000 boe/d, 100% of which is liquids.
“Contango has existing operations in the Big Horn, Permian, and Powder River Basins, and we believe we have the expertise to maximize the value of these mature conventional assets via our technical staff formerly at Mid-Con Energy. This is another step for us in consolidating upstream assets in a difficult environment for the industry as a whole,” said Wilkie S. Colyer, Contango’s CEO.
Houston-based Contango Oil & Gas is engaged in exploration, development, and production from its shallow offshore Gulf of Mexico properties and onshore properties in Texas, Oklahoma, and Wyoming. In October this year, the company entered into an agreement to merge with NASDAQ-listed Mid-Con Energy Partners LP. That transaction is expected to close by early 2021.
The completion of the asset acquisition is subject to customary closing conditions, due diligence, confirmation of title, and finalization of documentation, and is expected to by year-end 2020, with an effective date of August 1st, 2020.