Steven Wood of GreenWood Investors: Long Contango Oil & Gas – ValueWalk Premium

Steven Wood of GreenWood Investors: Long Contango Oil & Gas

Steven Wood of GreenWood Investors, InvestPitch presentation produced by sumzero and Institutional Investor on the long case for Contango Oil & Gas Company (NYSEMKT:MCF).

Also see: Mike Winston of Winston Capital Partners: Long MGM Holdings

Steven Wood of GreenWood Investors: Long Contango Oil & Gas

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

Steven Wood of GreenWood Investors: Long Contango Oil & Gas


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