Contango

Oil & Gas Company

Lawyer Stuff
The 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
insurance but it may not be enough. You could lose your
entire investment. Dont be lazy read our 10-Qs, 10-Ks
and press releases, and if you lose money - please no tears.
Dont forget about risk-free T-bills in your portfolioAfter
inflation and taxes youll likely only lose 5-10% of your
investment.
- Contango V.P. Investor Relations

Contangos Core Beliefs

From Inception
The only competitive advantage in the natural gas and oil business is to be
among the LOWEST COST producers
Virtually all the exploration and production industrys VALUE
CREATION occurs through the drilling of successful exploration wells
The whole point of a business is only and always to increase
SHAREHOLDER WEALTH PER SHAREwith conditions

Beliefs are optional, Results are mandatory and the only result that
matters is long term 3-5-10 year return to shareholder
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Contango is Low Cost

But Apples to Oranges Problem

Contango is among the lowest cost producers in

the industry

Most independents use full cost accounting

CONTANGO
Fiscal Year Ended
6/30/11
DD & A $1.68

LOE

$0.80

G&A

$0.38

Interest $0.00
TOTAL $2.86 / Mcfe

Massive Full Cost Pool write-downs =

Lower DD & A
Capitalize portion G & A = Lower G & A
Capitalize portion interest = Lower interest

Successful efforts companies benefit DD & A

rate by immediately expensing dry holes and
seismic

By definition low cost producers should be profitable. Hedging gains

are the icing, not the cake.

Contango Quarterly Costs ($/Mcfe) vs 41

Independents

* Total Cost Structure includes Operating Costs (including Production Taxes) Interest and G&A Plus DD&A
Source: ISI Group Inc. * 41 Independent Oil & Gas Companies

Its only when the tide goes out that you will learn whos been swimming naked
Warren Buffet

Contango Quarterly Sales Price and Margin

Rise in Liquids Prices Supporting Margins

Condensate & NGLs as Percentage of

Production & Revenue

Our condensate is priced similarly to Brent

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

There is only one way to kill capitalism: by taxes, taxes and even more taxes.
Karl Marx
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Return on Capital
Incentives Drive Behavior

Our first priority is to always put the safety of our employees, partners and contractors first.

Our second priority is to protect the environment where we work and live.

Our third priority is to maximize Shareholder earnings which we define as retained earnings
plus dividends and share purchases. Since inception we have repurchased $114.8 million worth
of our shares.

Peak Ratio Defined:

Contangos Peak Ratio Calculated as at 9/30/11: = $453.2 + 5.4 + 105.3 = 7.14X

($ millions)
$79.0

Share purchases that offset option dilution are not a return on capital

Shareholder Earnings = R/E + Dividends + Share Purchases

Invested Capital
(Common and Preferred Stock Raised)

Investing is only and always about return on capital

Negative Dilution
Share Repurchases's

*The shareholders that didnt sell now

own 15.5% more of Contango than

they did in June 2007
Average price under our $100 mm
program is $46.35/share

If Contango only had one share and I owned it that would be great.

Contango Owners
September 30, 2011
Institution

Shares Held

% S/O

Cumulative %

International Value Advisers, LLC

1,422,938

9.23%

9.23%

T. Rowe Price Associates, Inc.

1,329,490

8.62%

17.85%

BlackRock Institutional Trust Company, N.A.

922,608

5.98%

23.83%

Vanguard Group, Inc.

741,596

4.81%

28.64%

Ariel Investments, LLC

637,416

4.13%

32.77%

Keeley Asset Management Corp.

604,600

3.92%

36.69%

State Street Global Advisors (US)

446,358

2.89%

39.59%

TAMRO Capital Partners, LLC

417,115

2.70%

42.29%

Dreman Value Management, L.L.C.

384,990

2.50%

44.79%

Deutsche Investment Management Americas, Inc.

308,134

2.00%

46.79%

Dimensional Fund Advisors, LP

296,149

1.92%

48.71%

GWL Investment Management Ltd.

246,001

1.60%

50.30%

Opus Capital Management, Inc.

231,212

1.50%

51.80%

Thomson Horstmann & Bryant, Inc.

210,500

1.37%

53.17%

Conestoga Capital Advisors, LLC

166,022

1.08%

54.25%

TIAA-CREF

162,330

1.05%

55.30%

Numeric Investors LLC

150,937

0.98%

56.28%

Palo Alto Investors, LLC

135,000

0.88%

57.15%

Northern Trust Investments, N.A.

125,338

0.81%

57.96%

Invesco PowerShares Capital Management LLC

118,731

0.77%

58.73%

River Road Asset Management, LLC

111,317

0.72%

59.46%

Norges Bank Investment Management (NBIM)

101,650

0.66%

60.12%

2,603,236

16.88%

77.00%

Contango Management and BOD

23 investors own 77% of our stock

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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

Our objective is not to do more with less,

its in fact just to do less.

11

Wildcat Exploration Budget through

December 31, 2013

I dont want to swim in a roped off sea

Cowboy in the Jungle Jimmy Buffet

12

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

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Source: ISI

The Shale revolution is great for America, and thus great for
our industry
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NatGas at $3.00/Mcf in Mid Winter 2012

I felt the earth move under my feet - Carole King

15

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

16

In Just Five Shale Plays 4.5

Bcfd has grown to
18 Bcfd in 4 years

A picture is worth a thousand words

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Shelf or Shale?
Economics

Acreage, G & G and seismic costs last 4 years combined:

NRI to Contango AFTER landowner ORRI and
AFTER G & G Promote:
Severance Tax(1):
Ad Valorem Tax(1):
Sales & Use Tax(1):
State Income Tax(1):
If NAT GAS @ $4.39/Mcf Contango Receives(2)
If Contango produces 67.8 Mmcfd Contango Sells (2)
Contango is a Taxpayer: We have no NOL Carry Forwards

$16 million
65%
0%
0%
0%
0%
$6.24/Mcfe
89.1 Mmcfed
40% Risk Partner

Intangibles

(1)
(2)

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

Less competition, lower costs, better margins, premium markets,

one landowner/regulator whats not to like?

18

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
19

In Golf its NOT HOW - Its HOW MANY?

N.B. Debt adjusted Mcfes/

share have grown at a 6%
p.a. rate over last 3 years
N.B. 90% of our reserves are
proved developed as of
12/31/11

In Investing its NOT HOW MANY

but HOW MANY DO I OWN?
Note: Dutch and Mary Rose reserves for 6/30/2008 and 6/30/2009 adjusted downward by 48.5 Bcfe due to reserves revision.

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Americas Energy Company

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