Steven Wood of GreenWood Investors, InvestPitch presentation produced by sumzero and Institutional Investor on the long case for Contango Oil & Gas Company (NYSEMKT:MCF).
Contango Oil & Gas (MCF): From Runoff to Run Up
Contango Oil & Gas Company (NYSEMKT:MCF) has always been an entrepreneurial company based on two core beliefs: that the only competitve advantage in the commodity-?based natural gas and oil business is to be among the lowest cost producers and that virtually all the exploration and production industry’s value creation occurs through the drilling of successful exploratory wells.
The company has never confined itself to exploration in the Gulf of Mexico, yet became known for it ever since it hit a huge natural gas field in 2007. After the regreIable death of its incredibly colorful and wise co-?founder and chairman earlier this year, the other co-?founder has assumed the role of Chairman and acquired very attractive onshore assets where the company can repeatably drill high-?return wells in order to grow its per share net asset value (NAV). The company will continue to drill high-?impact exploration wells with a quarter to a third of its budget, yet after the BP plc (ADR) (NYSE:BP) (LON:BP) Macondo disaster, approvals to drill prospects have been slowed down, putting legacy Contango Oil & Gas Company (NYSEMKT:MCF) in a position to watch its reservoirs deplete without many opportunities to counter this run-?off. Through the recently-?completed merger, the addition of Crimson Exploration Inc. (NASDAQ:CXPO)’s Eagle Ford and Woodbine acreage in South and Southeast Texas will allow Contango to drill more predictable and high-?return wells while it awaits approvals to drill its next eight prospects in the Gulf of Mexico.
The biggest investment disasters in the commodity space have been companies whose management teams misunderstood how to effectively allocate capital. With Contango Oil & Gas Company (NYSEMKT:MCF), we have the opposite situation: a company that has produced outsized returns historically,and has been an avid buyer of its own stock over the last several years.
H/T Curry Goat