Contango Oil & Gas Company (ticker: MCF) posted a net income of $0.9 million, or $0.04 per share for Q1 2018. Production for the first quarter of 2018 was approximately 4.5 Bcfe, or 50.0 MMcfe/d.
President and CEO Allan D. Keel said, “We now have eight wells on production, with two more to come on in early July from the Sidewinder/Gunner pad we are currently drilling, one well in the Wolfcamp A and one in the Wolfcamp B.”
Drilling
Capital costs incurred for Q1 were approximately $19.5 million, including $17.4 million for the drilling and completion of wells in the Southern Delaware Basin in Pecos County, Texas and $1.7 million in leasehold acquisition and other costs.
According to Contango, capital expenditures for 2018 are approximately $57 million, with $52 million towards drilling and/or completing eight to nine wells in the company’s Southern Delaware Basin position.
Production guidance for the second quarter of 2018 is expected to be between 41-46 MMcfe/d.
Updates
- The River Rattler #1H (44% WI, 33% NRI), Contango’s first Wolfcamp B test, began production in March 2018 at an IP-30 rate of 1,225 BOEPD (74% oil)
- Contango’s second Wolfcamp B test, Ragin Bull #2H (49% WI, 37% NRI), began production in April and had an initial 24-hour max IP rate of 805 BOEPD (68% oil). Contango said that this is the company’s fastest spud to total depth at 26.5 days
The Sidewinder #1H (49% WI, 37% NRI), the first of two wells to be drilled from a common pad, was spud in March 2018. The Sidewinder was drilled into the Wolfcamp A horizon just south of the Rude Ram #1H Wolfcamp A completion, which produced 155 MBOE in nine months.
The Gunner #3H well (47% WI, 35% NRI) was spud in April 2018 and was drilled to a total measured depth of 20,167 feet, including a 10,067-foot lateral. This well will be a Wolfcamp B test in the same unit as the Gunner #2H Wolfcamp A completion.
For the remainder of the year, Contango’s capital expenditure budget allows it to drill five to six more wells, with the next one being the Fighting Ace #2H. This well will target the Wolfcamp B formation and is expected to be spud in May 2018, the company said.
Conference call Q&A excerpts
Q: On the takeaway front, can you just talk through what sort of well head discounts you guys are seeing for oil and gas right now? And if we continue to see these double-digit midland spread, is there any desire to differ completions and wait for better spreads or anything along those lines?
President and CEO Allan D. Keel: Well, just from a corporate standpoint, in our first quarter our average differential companywide for oils right at WTI, and just a tad under Henry Hub on gas like 1%.
April, it’s spread a little bit. Oil is still consistent with WTI. Gas is a little higher at 6% of Henry Hub. Obviously for West Texas, we’re subject to that mid-cush differential. It’s blown out in the last few days for sure on average for April, it was probably about a $1.25 for us.
Where it will settle out still remains to be seen same, but that’s kind of where we are today.
Q (continued): No physical constraints in terms of getting the oil out or anything along those lines yet?
Keel (continued): No.
Q (continued): And then I guess on the zipper frac topic, are you guys pursuing that just for efficiency reasons or do you see a need to sort of co-develop the A and B?
SVP and CFO E. Joseph Grady: Cost savings primarily. You could save quite a bit – just about $0.5 million per well. So it’s meaningful.
