Lawyer Stuff The future is unknowable. We have good intentions but all of our projections and estimates will be wrong, and could be materially wrong. Wildcat exploration is expensive, speculative and potentially dangerous. An offshore…
Contangos Core Beliefs From Inception The only competitive advantage in the natural gas and oil business is to be among the LOWEST COST producers Virtually all the exploration and production industrys VALUE CREATION occurs…
Contango is Low Cost But Apples to Oranges Problem I will just assert that Contango is among the CONTANGO lowest cost producers in the industry Unaudited Fiscal Year Most independents use full cost accounting Ended 6/30/11 DD & A…
What Gets Measured Gets Managed Our first priority is to always put the safety of our employees, partners and contractors first. Our second priority is to protect the environment where we work and live. Our third priority is to…
Negative Dilution 19,000,000 Series E * Share Repurchases's 17.8 MM 18,000,000 17,000,000 16.7 MM Series D F u lly D ilu ted Sh ares O u tstan d in g 16,000,000 Series C 15.7 MM 15,000,000 Preferred Series Capital Raised…
Contangos Owners March 31, 2011 Institution Shares Held % S/O Cumulative % International Value Advisors, LLC 1,338,348 8.54% 8.54% BlackRock Fund Advisors 1,017,233 6.49% 15.04% Memo: S & P T. Rowe Price Associates 713,917 4.56%…
Contango Doesnt Have Lots of shares: 15.7 million outstanding and fully diluted Lots of options: 45,000 and shrinking Lots of PUDs Lots of employees: 8 Lots of wells 12 offshore Lots of landowners - 2 Lots of regulators 4…
Wildcat Exploration Budget through December 31, 2012 8/8ths Dry Hole Cost Contango WI% Expected Well Spud Date Ship Shoal 121/134 (Eagle) 25,000,000 100% Sept/Oct 2011 South Timbalier 75 (Fang)* 25,000,000 100% Early 2012 Ship Shoal…
Why I Prefer the Conventional…
Incentives Drive Behavior Full Stop If you believe that ordinary people arent rational, first try to outthink them. It may not be as easy as you expected Tim Hartford The Logic of Life 10
Incentives Drive Behavior Lets Talk Compensation Preliminary G & A for FY 2011 of 12.3 million - 9.6 in salaries, benefits and board compensation. Options awards were 1.3 million of this total we retired most of our outstanding…
Incentives Drive Behavior KRP Bonus Targets FY 2011 and 2012 Absolute Measures Comment Bonus Earned If Achieved Comment Net Debt = w/k - debt - P & A liability. The value of an Mcfe is Reserves shall be reduced by the equal to: PV10…
Incentives Drive Behavior Bonus Earned Absolute Measures Comment If Achieved Comment Net Debt = w/k - debt - P & A Reserves shall be liability. The value of an Mcfe is reduced by the equal to: PV10 reserves. Reserves reserves…
Incentives Drive Behavior Bonus Earned Absolute Measures Comment If Achieved Comment Shareholder Return S/H Return (Stock price + Pay for performance 0% - 0.5 million dividends) Use This return measures doesn't get anymore 5.0% -…
Incentives Drive Behavior Bonus Earned Absolute Measures Comment If Achieved Comment Contango's industry peers - by and large - do not pay current income taxes. Contango does. Cap Ex is tax Tax Effected F &…
Incentives Drive Behavior Bonus Earned Absolute Measures Comment If Achieved Comment This is a value creation test vs the overall market. Even if MCF Performance stock price rises due to NatGas Must beat the against the S&P 600…
Contango Investment Thesis 300 Bcfe 20 Mcfe per net debt adjusted fully diluted share 120 million cash - 7.50/share 0 Debt 12 wells 5 prospect ideas - 100 million projected wildcat dry hole risk (60 million of after tax…
Market Cap/Employee (000): MCF 110,000 XOM - 3,835 AAPL - 6,038 MSFT- 2,362 WMT - 88 Does this mean anything 18
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