One of the tiniest Houston-based development stage companies,Whichonly entered the oil and gas business less than a year ago andwhich hardly had any operating funds at all in its first quarterstatement this year, got a huge boost Friday with a $2.5 millioninvestment from a Colorado Indian tribe. Along with the stockpurchase, the tribe’s fund invested another $480,000 in thecompany’s exploration program, bringing its total investment Fridayto nearly $3 million.

The Southern Ute Indian Tribe Growth Fund, an arm of theSouthern Ute tribe in Colorado, bought 2.5 million shares ofContango Oil & Gas’ common stock at $1 a share, and also wasgranted a 90-day option to purchase another 2.5 million shares atthe same price.

According to Contango Chairman Kenneth R. Peak, the company,which only has three employees, will use the new influx of funds tocontinue its infant exploration program. Peak said the company waspleased to have the Southern Ute fund as a “significant shareholderand participant in our exploration program,” calling it a “majorproducer and transporter of coal bed methane.” The Southern Utetribe has never made an energy investment outside of Colorado,according to Peak.

“I’ve known these people for eight years,” Peak told NGI. “It’slike anything else. You meet someone, you build a relationship.They have met with us and our team, and they liked what they saw.”

Along with the purchase agreement, Contango and the fund signeda two-year participation agreement whereby the fund may acquire a18.75% interest in all of Contango’s oil and gas exploration anddevelopment projects and its proved property acquisitions.

When Contango announced its first quarter results on March 31,it reported revenues of $23,223. Revenues for the nine months endedMarch 31, 2000 were $29,590. There was little to report, accordingto Contango, because it did not operate as an oil and natural gasexploration and production company before July 1999, and incurredstart-up costs from opening its corporate offices and entering theenergy business. The company explores and acquires oil and gasproperties mostly in the onshore and offshore Gulf of Mexicoregion.

“Since entering the oil and natural gas business in July 1999,we have completed two small producing property acquisitions inTexas, acquired and subsequently resold a leasehold position inEast Texas and have acquired an approximate 2.4% limitedpartnership interest in an oil and natural gas partnership thatowns and operates the Buena Vista Hills field in California,” saidPeak.

Contango holds an interest in 18 producing wells, including a28.5% working interest in a recent oil discovery on Eugene IslandBlock 28, offshore in the Gulf of Mexico, where its initial netproduction is approximately 100 barrels of oil and 300 Mcf/d ofnatural gas. Contango also has obtained the exploration rights toapproximately 65,000 acres in Jim Hogg and Brooks counties in SouthTexas. Phase one of our exploration program consists of drillingfour exploratory wells that it estimates will cost approximately$2.6 million to drill and, if successful, to complete.

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