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Contango's Credit Line Extended 108% by Lender to $250MM

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   |    Wednesday,May 05,2021

Contango Oil & Gas Co. reported the expansion of its Senior Credit Facility led by JPMorgan Chase Bank under which the borrowing base has been increased from $120 million to $250 million (up 108%).

Liquidity Update

As of April 30, 2021, Contango had $2.9 million in cash and $86.7 million of long-term debt outstanding under the Credit Facility. Adjusted for the borrowing base increase to $250 million in this amendment and $2.9 million in letters of credit outstanding, the company had $160.4 million in undrawn capacity on its line and $163.3 million in total liquidity.

Amendment Details

The Amendment provides for, among other things, an increase in the borrowing base to $250 million, the reinstatement of the current ratio test of a minimum of 1.0:1.0 beginning with the quarter ending June 30, 2021, a slight reduction in the maximum Debt/Adj. EBITDAX from no greater than 3.5:1 to no greater than 3.25:1, and a reduction in our rolling hedge requirements as a % of hedgeable oil and natural gas production on an equivalent barrel basis, and other minor changes which are more administrative in nature.

Wilkie S. Colyer, the Company's Chief Executive Officer, said "This borrowing base increase is a testament to the continued support of our lending group led by JPMorgan Chase and RBC Capital Markets. It is also a testament to our track record of acquiring PDP-heavy reserves on very favorable terms, our proven ability to reduce costs in the field on both legacy and acquired assets, and our ability to generate substantial cash flow to maintain a strong balance sheet. Based on previously announced capital budget guidance and assuming no further acquisitions, we expect to be sub .5x Debt/Adj. EBITDAX by year end and in a net cash position by Q3 of 2022. We now find ourselves in the enviable position of having low leverage, scale, low decline production, and the liquidity to continue consolidating assets held by non-natural owners. We look forward to updating you as we continue to find value via inorganic growth in what is still a buyer's market."

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