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Contango Oil Gas Company

1. Lawyer StuffThe 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 spill or explosion would be enormously expensive. We have insu

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Contango Oil Gas Company

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    1. Contango Oil & Gas Company

    2. 1

    3. 2 Contangos Core Beliefs From Inception

    4. 3 Contango is Low Cost

    5. Contango Quarterly Costs ($/Mcfe) vs 41 Independents 4

    6. 5

    7. 6

    8. 7 Taxes - Our Biggest Expense We are profitable for both GAAP and IRS Accounting Our IRS taxes can be deferred due to the immediate expensing of Intangible drilling costs (IDCs) for taxes Even though IDCs have been part of the tax code since 1919, there is talk in Congress and the Obama Administration to require these costs to be capitalized and then amortized over some time frame (3-5-7 years?) From Contangos perspective this may not be a bad thing if overall corporate tax rates are also reduced as part of a grand compromise in fact this could be a good thing Natural Gas prices would almost certainly rise because industry F&D costs would rise this is not necessarily a bad thing especially for a low cost producer

    9. 8 Investing is only and always about return on capital

    10. 9

    11. Contango Owners 10

    12. 11 Contango Doesnt Have Lots of shares: 15.4 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 Winners curse We were the sole bidder at last 4 offshore lease sales Near term leases expiring L-T rig contracts Debt: $0 Severance taxes (in Federal offshore) $0 Hedges: $0

    13. 12 Wildcat Exploration Budget through December 31, 2013

    14. Lets talk about Shales growing importance and how it has turned the growth prospects for manufacturing in the U.S. upside down and Americas ability to tell the Vens and Iranians to go Drink It 13

    15. 14

    16. NatGas at $3.00/Mcf in Mid Winter 2012 I felt the earth move under my feet - Carole King 15

    17. Stand back baby no telling how big this thing could get -Adams first words to Eve 16

    18. 17

    19. 18 Economics Acreage, G & G and seismic costs last 4 years combined: $16 million NRI to Contango AFTER landowner ORRI and AFTER G & G Promote: 65% Severance Tax(1): 0% Ad Valorem Tax(1): 0% Sales & Use Tax(1): 0% State Income Tax(1): 0% If NAT GAS @ $4.39/Mcf Contango Receives(2) $6.24/Mcfe If Contango produces 67.8 Mmcfd Contango Sells (2) 89.1 Mmcfed Contango is a Taxpayer: We have no NOL Carry Forwards 40% Risk Partner Intangibles Rig costs are less than 3 year ago levels One Landowner BOEM Lots of nearby infrastructure No Nimbys to deal with Yes, we will drill dry holes The E in E&P stands for Exploration Federal Waters FY 2011

    20. 19 Contango Investment Thesis 300 Bcfe 22 Mcfe per net debt adjusted fully diluted share $120 million cash - $7.50/share $0 Debt 12 wells 7 prospect ideas - $135 million projected wildcat dry hole risk ($85 million of after tax risk) Outstanding shares = Fully Diluted Shares = 15.4 million 8 Employees

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