Contango Oil & Gas Company (NYSE:MCF) has spud a wildcat exploration well in the Gulf of Mexico. Our Galveston Area 277L prospect (His Dudeness) was spud in late-September 2010. The Company will pay 100% of drilling costs, estimated to be approximately $10.0 million.
Also, Contango has production tested its on-shore wildcat exploration well (Rexer #1) in south Texas. The well tested natural gas at a rate of 3.6 million cubic feet per day and 15 barrels of condensate per day. The Company has a 100% working interest (72.5% net revenue interest) in this well before payout, and a 75% working interest (54.4% net revenue interest) after payout. Production is expected to begin by the end of October 2010.
Our offshore production is currently approximately 102 million cubic feet equivalent per day (“Mmcfed”), net to Contango. The Company’s on-shore drilling program with its joint venture partner, Patara Oil & Gas LLC, is currently producing at a rate of approximately 5.5 Mmcfed, net to Contango, from 11 wells. As of September 30, 2010, we had no debt, approximately $50 million in net cash and cash equivalents and $50 million of unused borrowing capacity.
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.