Contango adds new shale play to portfolio

Acreage: Contango adds in Wyoming

US independent Contango Oil & Gas has added acreage to its portfolio prospective for a shale formation in Wyoming that has produced conventional hydrocarbon for years but is largely untested for unconventional potential.

The company said in a quarterly operations update that it had acquired the right to earn, through the drilling of wells, up to around 119,500 gross acres in Natrona County in central Wyoming, targeting multiple formations.

One of those formations is the Mowry shale, a tight silaceous dark grey, brittle and fractured rock.

The seller was "an unnamed private party". Financial details were not disclosed, nor were details of Contango's drilling obligations.

The first horizontal Mowry well on the Natrona acreage will spud in the fourth quarter of this year. Contango will then "evaluate the results of that well and determine whether to proceed with future tests". There could be as many as 1200 drilling locations in Natrona County "if this play proves economical", it added.

Earlier this year, Upstream reported that Norwegian giant Statoil was backing out of its position in the Mowry shale after drilling just one well, the Educated Guess 11-1H, which was drilled to more than 10,500 feet with a 6000-foot lateral. It apparently produced oil.

Sources said at the time that Statoil’s exit likely had less to do with the prospectivity of the formations as it did with the company’s new focus on funding a few of its largest global projects with the highest rate of return.

Contango said it also added in the second quarter about 18,000 net acres in Fayette and Gonzalez counties, Texas, that are also prospective for multiple formations.

The company expects to spud the first of three wells later this month and could add 200 potential drilling locations in the area.

Contango's main focus onshore is in the Woodbine play in Madison and Grimes counties Texas, and the Buda play in Dimmitt County.

Of the recent acquisitions, chief executive Allan Keel said: "We are excited about testing these new plays in the next few months, while continuing to delineate our existing positions in Madison, Grimes and Dimmitt counties."

Contango posted net income of $4.6 million for the three months ending in June, down from $11.4 million a year earlier.

Production for the quarter was about 116 million cubic feet equivalent per day, up 87% from a year ago.

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