Contango Oil & Gas has revealed a successful well at its Nautilus prospect located at Offshore Gulf of Mexico block Ship Shoal 263. The company has a working interest of approximately 94% and a net revenue interest of approximately 74% in this well, inclusive of its investment in Contango Offshore Exploration.
The production is expected to begin by mid-summer 2010 at an estimated rate of 20 million cubic feet equivalent per day (Mmcfed), net to Contango. The costs net to Contango to lease, drill, complete, and bring this well to full production status are expected to be approximately $29m.
The company’s said that its drilling program with its joint venture partner, Patara Oil & Gas, is proceeding as planned. The company has spud the first two wells. The first well was fraked with flow-back rates and pressure in line with average curves and is now on-line and flowing at an 8/8ths rate of 1.2 Mmcfed.
The company added that it has reached a total depth on the second well and the logs indicate very good Cotton Valley pays. It expects to begin production by the end of January 2010 at a similar 8/8ths production rate. Contango’s current production is 81 Mmcfed.
For the calendar year 2010, the company has increased its capital expenditure budget to approximately $112m. Out of this, the company will invest approximately $74m to drill up to six wildcat exploration wells in the Gulf of Mexico. Three of these six wells are the previously described Dude series of exploration wells (Dude, His Dudeness and El Duderino).
The company has a 100% dry-hole cost working interest and a 72% net revenue interest in these Dude wells. The remaining three offshore wells are possible farm-ins with terms under negotiation. If successful in farming in these three prospects, the company will attempt to spud all three prior to its fiscal year-end of June 30 and prior to drilling its Dude wells.
The company plans to invest approximately $14m to complete, build a platform, lay a pipeline, build facilities and hook up its Nautilus discovery. It will invest approximately $21m to drill 13 additional on-shore wells in Panola County, Texas under our joint venture with Patara Oil & Gas and wil invest approximately $3m to drill up to two conventional on-shore Texas prospects that are currently under farm-in negotiations.
Kenneth Peak, chairman and CEO of Contango, said: “We are pleased with the log on our Nautilus discovery which has over 70 net feet of pay with excellent porosity and have elected to move directly to platform construction and laying a pipeline to complete and begin production of this well.”