Market Report -- In Play (MCF)
October 22, 2009 10:20 AM ET
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Contango Oil & Gas to invest in East Texas joint venture to develop Cotton Valley Reserves Co announces that its wholly-owned subsidiary, Conterra, has entered into a joint venture with Patara to develop proved undeveloped Cotton Valley gas reserves in Panola County, Texas. Under the terms of the joint venture agreement, Conterra will fund 100% of the drilling and completion costs in exchange for 90% of the net revenues. The Agreement contemplates drilling up to 15 wells, at an estimated 8/8ths cost of approximately $1.5 million per well. The average 8/8ths reserves per well are expected to be approximately 1.5 Bcfe (1.125 net Bcfe after a 25% royalty) with an estimated five year Payout (defined below), assuming a NYMEX gas price of $6.00/Mcf. Patara, as operator, will have the ability to sell-forward or hedge gas production. The 2010 strip price for NYMEX gas is currently about $6.00/Mcf.

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