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Contango Oil Gas Company

1. Lawyer Stuff. This presentation contains forward-looking statements regarding Contango that are intended to be covered by the safe harbor "forward-looking statements" provided by of the Private Securities Litigation Reform Act of 1995, based on Contango's current expectations and includes statem

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Contango Oil Gas Company

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    1. Contango Oil & Gas Company

    2. 1 Lawyer Stuff

    3. 2 .More Lawyer Stuff

    4. 3

    5. 4 CONTANGO a natural gas centric, non crude oil oriented never to be confused with anything remotely related to manufacturing - company with a business model focused on drilling wildcat exploration wells with a minimum of debt and shareholder dilution

    6. 5 Contangos Core Beliefs From Inception

    7. 6

    8. 7 NYMEX Natural Gas Price Required to Earn a 10 % ROACE - UBS

    9. 8 Value Creation and Risk Find, Develop & Acquire Capex (last 3 fiscal years).....$556 million Reserves added ................................................408 Bcfe F & D & A $1.36/Mcfe DD&A for 12 months ended June 30, 2009...$1.17/Mcfe A LOW DD&A IS NOT VALUE CREATION IF IT IS ACHIEVED THROUGH FULL COST POOL WRITE DOWNS Debt adjusted PV-10 per Mcfe (PV-10 - Debt)/Mcfe: June 30, 2009 (millions) ($890 - $0)/355 = $2.51 Gas Price: $4.09/Mcf September 30, 2009 (millions) ($773 - $0)/347 = $2.23 Gas Price: $3.48/ Mcf December 31, 2009 (millions) ($914 - $0)/350 = $2.61 Gas Price: $4.06/Mcf

    10. 9 What Contango Doesnt Have Lots of shares O/S Lots of shareholders Lots of options O/S Lots of paid in capital vs R/E (SEE PEAK RATIO) Lots of PUDs Lots of employees Lots of wells Lots of Landowners Lots of Regulators Near term leases expiring L-T rig contracts Debt Severance Taxes Hedges

    11. 10 Contangos Owners (As at 12/31/09)

    12. 11 Investors should examine The PAST. Does the company have a history of being profitable? Whats their track record in creating value per share? What about share price appreciation over past 5, 3, 1 year(s)? The PRESENT How do current earnings/cash flow/reserves/production all per share look? What about value per shareper Mcfeper employee? And the FUTURE What are reasonable expectations about earnings per share growth ?

    13. 12

    14. 13 The Past History of Profits? The Balance Sheet has the Answer Peak Ratio Defined: Shareholder Earnings = R/E + Dividends Net Invested Capital Equity (R/E + Dividends) Contangos Peak Ratio Calculated as at 12/31/10: R/E + Dividends = $363.4 + 5.4 = $368.8 = 27.93X Equity (R/E + Dividends) $382-(363.4 + 5.4) $13.2 Peak Market Cap Ratio: Market Cap = Shares O/S x Price = $870 = 66X Net Invested Capital Net Invested Capital $13.2 Growth in Book Value/Share ($/Share)

    15. 14 STOCK PRICE APPRECIATION ONE YEAR COMPARISON Jan. 1, 2009 Dec. 31, 2009

    16. 15 STOCK PRICE APPRECIATION THREE YEAR COMPARISON Jan. 1, 2007 Dec. 31, 2009

    17. 16

    18. 17 The Present Multiple Metrics; Per Share; Per Mcfe Produced; Per Employee *For the 12 months ended, or, as at, 12/31/09, as appropriate

    19. 18 The Future Ship Shoal 263 comes on mid-summer at 20 Mcfed Dude (MI 617) - Drilling Eloise South/Dutch #5 - Drilling Paisano (VM 155) Drilling Spud Onshore Farm-In Before June 30 Spud His Dudeness Before Year-End Lease Sale Prospects March 17 we were AHB on all three! Conterra Onshore - Ongoing CORE End of year

    20. 19 The Big Picture CHINA DRIVES CRUDE Worlds second largest economy (8.8% of global GOP) Out competing U.S. in securing worlds crude oil Keeps crude on the bid SHALE GAS IS OUR SALVATION U.S. has 100 years supply NatGas Green keeps a bid on NatGas via power generation and transportation Why subsidize people who hate us? So simple even our Congress will figure it out..Eventually UP FRONT CAPITAL NEEDS ARE ENORMOUS XOM XTO Devon GOM/INTL Sale to focus on shale Technology will drive F&D costs lower Red Queen depletion rates BUTDONT FORGET ABOUT THE ARB Service companies are for profit entities with hurdle rates too Service Cos consolidateE & Ps proliferate Landowners are increasingly sophisticated no more 1/8th royalties States/Counties/Parishes need money fees, ad valorem, income, sales and severance taxes Water In / Water Out: Regs and more Regs LOTS OF GAS, BUT THE WIND IS AT OUR BACK No Nukes nowhere near no one Carbon capture cant conflate coal consumption Production profile plumped

    21. 20

    22. 21 GOM Economics Acreage, G & G and seismic costs last 4 years combined: $10 million NRI to Contango AFTER landowner ORRI and AFTER G & G Promote: 70-72% Severance Tax: 0% Ad Valorem Tax: 0% Sales & Use Tax: 0% State Income Tax: 0% LOE(1) $.50 G & A(1) $.20 If NAT GAS @ $3.92/Mcf Contango Receives(1) $5.20/Mcfe If Contango produces 64.9 Mcfd Contango Sells (1) 85.2 Mcfed Contango is a Taxpayer: We have no NOL Carry Forwards 35% Risk Partner Contango is a Taxpayer at $2.00 Gas: Drill Baby Drill Good Rig costs are less than half of 2 year ago levels Better One Landowner MMS Excellent Lots of nearby infrastructure Wonderful No Nimbys to deal with Priceless Yes, we will drill dry holes The E in E & P stands for Exploration Reality (1) Average for 6 months ended December 31, 2009

    23. 22 In Conclusion.. Do the Math. Who has positive retained earnings? Who has lower DD & A (look to R/E) Who has lower LOE? (include W/Os; SVC Tax; Insurance) Who has lower debt? Who has lower G & A? (Include Cap G&A, non-cash option expense) Who has more PDP Mcfes/Share? Who has more exploration upside per share? Who has more commodity price upside? Who doesnt have an NOL carry-forward? Who has a 35% partner? Who has fewer shares today than 1,3,5,7,9 years ago? Which CEOs havent taken options the last 3 years? Incentives drive behavior.

    24. 23 Golden Factoids: GOLD: Most precious of metals: Atomic Number 79: Au-Aurum Shining dawn YIELD: 0% WEIGHT MEASURE: 1 Troy oz. = 31.12305 grams MINED: Only 161,000 tonnes mined in history of the world, $6 Trillion in March 2010 CONSUMPTION: - Never Consumed all gold ever found is still around All the gold on earth could be held in a couple bank vaults A worthless ore-body at $600/troy oz. can be a bonanza $1,100/troy oz. New mined gold production has been declining for a decade After two years of multitrillion spending , unemployment is 10% and the S & P 500 is where it was 12 years ago NASDAQ is down 50%. Gold since the beginning of time has been accepted as a store of value and offers wealth protection in times of deflation and inflation

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