Contango Oil & Gas, a Houston-based independent natural gas and oil company, has spud a wildcat exploration well in the Gulf of Mexico.

The Galveston Area 277L prospect (His Dudeness) was spud in late-September 2010.

The company will pay 100% of drilling costs, estimated to be approximately $10m.

The company has also production tested its on-shore wildcat exploration well (Rexer #1) in south Texas that 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.

The company said that production is expected to begin by the end of October 2010.

The 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, is currently producing at a rate of approximately 5.5mmcfed, net to Contango, from 11 wells.