Filed by Contango Oil & Gas Company
Pursuant to Rule 425 under the Securities Act of 1933, as amended
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934, as amended
Subject Company: Crimson Exploration Inc.
Commission File No.: 001-12108
The following presentation was given and posted to the Contango Oil & Gas Company (the “Company”) website on April 30, 2013.
Forward-Looking Statements
This filing contains forward-looking statements, which may be identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “should,” “seeks,” “future,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors that could cause actual results to differ materially include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (2) the outcome of any legal proceedings that may be instituted against the Company and others following announcement of the Merger Agreement; (3) the inability to complete the Merger due to the failure to satisfy the conditions to the Merger, including obtaining the affirmative vote of at least a majority of the votes cast by the holders of the Company’s outstanding shares of common stock entitled to vote on the approval of issuance of shares of Company common stock; (4) risks that the proposed transaction disrupts current plans and operations and potential difficulties in employee and customer retention as a result of the Merger; (5) the ability to recognize the benefits of the Merger; (6) legislative, regulatory and economic developments; and (7) other factors described in the Company’s filings with the Securities and Exchange Commission (“SEC”). Many of the factors that will determine the outcome of the subject matter of this filing are beyond the Company’s ability to control or predict. The Company can give no assurance that the conditions to the Merger will be satisfied. Except as required by law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. The Company is not responsible for updating the information contained in this filing beyond the published date, or for changes made to this filing by wire services or Internet service providers.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The proposed merger transaction between the Company and Crimson Exploration Inc. (“Crimson”) will be submitted to the stockholders of both companies for their consideration. The Company expects to file with the SEC a registration statement on Form S-4 that will include a prospectus of the Company and will also comprise a proxy statement for each of the Company and Crimson. INVESTORS AND SECURITY HOLDERS OF THE COMPANY, CRIMSON AND OTHER INVESTORS ARE ADVISED TO READ THE PROSPECTUS AND PROXY STATEMENTS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The definitive joint proxy statements and prospectus will be
mailed to stockholders of the Company and of Crimson. Investors and security holders may obtain a free copy of the joint proxy statement and prospectus when it becomes available, and other documents filed by the Company with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it becomes available, and the Company’s other filings with the SEC may also be obtained from the Company by directing a request to the Company, Attention: Investor Relations department, or by calling (713) 960-1901.
Participants in Solicitation
The Company and its directors, executive officers and other members of its management and employees may be deemed to be soliciting proxies from the Company’s stockholders in favor of the proposed Merger. Information regarding the Company’s directors and executive officers is available in its Annual Report on Form 10-K for the fiscal year ended June 30, 2012 filed with the SEC on August 29, 2012, and definitive proxy statement relating to its 2012 Annual Meeting of Stockholders filed with the SEC on October 12, 2012. Stockholders may obtain additional information regarding the interests of the Company and its directors and executive officers in the proposed Merger, which may be different than those of the Company’s stockholders generally, by reading the joint proxy statement and prospectus and other relevant documents filed with the SEC when they become available.
Contango / Crimson Merger Overview “Enhancing the Value, Expanding the Opportunity”
Joe Romano – Chairman, President & CEO, Contango
Allan Keel – President & CEO, Crimson Exploration
Joe Grady—SVP & CFO, Crimson Exploration
Disclaimer
This press release contains forward-looking statements concerning the proposed transaction between Contango and Crimson, the expected timetable for completing the proposed transaction, its financial and business impact, management’s beliefs and objectives with respect thereto, and management’s current expectations for future operating and financial performance. Forward-looking statements are all statements other than statements of historical facts, which may be identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “should,” “seeks,” “future,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors that could cause actual results to differ materially include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (2) the outcome of any legal proceedings that may be instituted against Contango or Crimson and others following announcement of the merger agreement; (3) the inability to complete the merger due to the failure to satisfy the conditions to the merger, including obtaining the affirmative vote of at least a majority of the votes cast by the holders of Contango’s outstanding shares of common stock entitled to vote on the approval of issuance of shares of Company common stock and at least a majority of the votes cast by the holders of Crimson’s outstanding shares of common stock entitled to vote on the adoption of the merger agreement; (4) risks that the proposed transaction disrupts current plans and operations and potential difficulties in employee and customer retention as a result of the merger; (5) the ability to recognize the benefits of the merger; (6) legislative, regulatory and economic developments; and (7) other factors described in Contango’s and Crimson’s filings with the Securities and Exchange Commission. Many of the factors that will determine the outcome of the subject matter of this filing are beyond the ability of Contango or Crimson to control or predict. Except as required by law, neither Contango nor Crimson undertakes any obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Each of Contango and Crimson disclaim any responsibility for updating the information contained in this filing beyond the published date, or for changes made to this filing by wire services or Internet service providers. 1
Transaction Summary
Transaction Overview
Stock merger whereby Crimson becomes wholly-owned subsidiary of Contango
~$390 MM Transaction Value including $244 MM of Crimson debt
~$900 MM pro forma Enterprise Value
Consideration
Each Crimson share to be exchanged for 0.08288 shares of Contango Equivalent to $3.19 per Crimson share based on Contango closing price of $38.50 on April 29, 2013
Premium
8% to Crimson’s Monday April 29, 2013 closing price 11% to Crimson’s 5-day prior average 5% to Crimson’s 90-day prior average
Ownership / Board
Crimson stockholders to own 20.3% of pro forma shares
Contango Board increased to 8, including 5 Contango, 3 Crimson Joe Romano – Chairman, Allan Keel – President & CEO
Key Conditions
/ Timing
Approval of both Contango and Crimson stockholders required Customary regulatory approvals Closing expected in 3Q13
2
Combined Senior Management
Name / Title
Joseph J. Romano
Chairman
Allan D. Keel
President and CEO
E. Joseph Grady
SVP—CFO
Experience
Over 35 years of industry experience
Former Senior Vice President and CFO of Zilkha Energy and CFO of Texas
International and currently serves as President and CEO of Olympic Energy, which owns working interest in Contango’s Dutch and Mary Rose field
Former Vice President of Westport Resources and Vice President of Energen Resources, interim President of Woodside Energy USA and President/COO of Mariner Energy
Over 35 years of financial and operational experience
Former CFO of Texas Petrochemicals Holdings, CFO and Treasurer of Forcenergy Inc. and CFO of Pelto Oil Company
Continued prospect generation and BoD relationship With Brad Juneau and Juneau Exploration team
3
A Win-Win Combination
Objectives
Grow reserves and value per share
Diversify geographic base, reserves and hydrocarbon mix
Deliver predictable, impactful production and reserve growth Optimize capital structure
Strategic Combination Achieves Many of These Objectives
Transaction strongly accretive to Contango cash flow and reserves per share Over 1 Tcfe of identified prospects / resource potential Enhanced liquidity allows for accelerated development of Crimson resource plays Exposure to multiple unconventional resource positions in the prolific Woodbine, Buda, Eagle Ford, James Lime and Niobrara plays High cash flow generating GoM properties fund opportunity-rich resource inventory Liquids-focused upside portfolio Expand drilling-focused growth in both GoM and onshore focus areas Ability to allocate capital across the combined portfolio and benefit from the diversification of multiple rigs operating in several basins Enhanced size and scale will create a step-change in credit profile and allow for an opportunistic refinancing and significant reduction in debt service costs $250—300 MM capital program over next two years funded entirely through cash flow without incurring additional debt
4
Strategic Rationale
Strategic Fit
Matches Contango’s liquidity with Crimson’s low-risk, operated resource upside Provides critical mass Optimizes capital structure / financial strength to accelerate development Strong combined Management and Board
Complementary Asset Base
Over James 1 Lime Tcfe and of resource Niobrara potential plays in the prolific Woodbine, Eagle Ford, Buda, Strong results to-date from Crimson and offset operators in Woodbine and Buda 8 Exploration existing offshore prospects and continuation of relationship with Juneau
Geographic
Diversification
Diversifies Contango’s proved asset base from ~90% GoM focus to ~60% GoM, ~40% Onshore Contango’s Crimson’s lower higher -risk -potential unconventional offshore development prospects portfolio complements
Liquids-Focused
Doubles Contango’s oil production and proved oil reserves
Over 50% liquids upside portfolio, with existing acreage position to support
5
Substantial Increase in Proved Reserves and Production
Proved Reserves at 3/31/13 (Bcfe) (1) 1Q13 Production (MMcfepd) (2)
(Bcfe)
Gas NGL Oil
+59% Increase
196
154
28 13
116
62
18 36
131%
Increase
Contango Crimson PF Contango
(MMcfepd)
+56% Increase
36
21
6 10
98% Increase
Contango Crimson PF Contango
Contango statistics do not reflect any contribution from Exaro Jonah JV or Alta Duvernay
(1) Contango reserves based on William M. Cobb & Associates proved reserve report as of March 31, 2013 at SEC pricing. Crimson reserves based on Company-engineered proved reserve report as of March 31, 2013 at SEC pricing.
(2) Contango and Crimson current production is average for the quarter ended March 31, 2013. Contango net production includes only 23 days of quarterly production from the Vermilion 170 well due to mechanical issues. Workover operations are underway and production is expected to resume at its pre-shut-in rate of net 12.4 MMcfepd in mid-May 2013.
6
Accelerated Drilling Program
Development Strategy
Fund exploration and development with cash flow
Focus on oily areas
Advance high-return opportunities with meaningful scale
Utilize industry best practices and offset activity to de-risk undeveloped potential
Advantage of being substantially held by production; able to scale up / down as required
Estimated Capital Expenditures 2013 2014
Woodbine
51%
GoM
35%
~$130 MM
Buda
11% James
Lime
3%
Woodbine
GoM 53%
26%
$150 –
$200 MM
Buda
11%
James
Lime
10%
Source: Contango and Crimson internal estimates.
(1) Based on management guidance and current budget, subject to transaction closing date and other adjustments.
Capital Outlook (1)
2013 2014
Woodbine
Estimated Capex
GoM Buda James Lime
2 Operated Rigs
1
$65 MM ~$100 MM
1 1
~$45 MM ~$50 MM
1 1
$15 MM ~$20 MM
11
~$5 MM ~$20 MM
Total Rigs 4 5
Total Capex ~$130 MM $150—$200 M
7
Combined Company Areas of Operations
Proved Reserves at 3/31/13 (Bcfe) (1)
Proved Reserves at 3/31/13 (Bcfe) (1)
CO Oil
2% E. TX 16%
1% NGL 15%
SE. TX Gas 16% 69%
312 Bcfe
Proved S. TX GoM Reserves 18%
63%
1Q13 Production (MMcfepd) (2)
CO
E. TX Oil <1%
2% 16%
SE. TX NGL 20% 15%
101 Gas
69%
MMcfepd Current Production S. TX
GoM 14% 64%
(1) Contango reserves based on William M. Cobb & Associates proved reserve report as of March 31, 2013 at SEC pricing. Crimson reserves based on Company-engineered proved reserve report as of March 31, 2013 at SEC pricing.
(2) Contango and Crimson current production is average for the quarter ended March 31, 2013. Contango net production includes only 23 days of quarterly production from the Vermilion 170 well due to mechanical issues. Workover operations are underway and production is expected to resume at its pre-shut-in rate of net 12.4 MMcfepd in mid-May 2013.
Jonah Field
Exaro Energy III JV (minority interest)
Duvernay Shale
Alta Energy JV (minority interest)
Colorado
Niobrara (10,000 net acres)
East Texas
Haynesville / James Lime (4,800 net acres)
Southeast Texas
Woodbine, Eagle Ford, Liberty County (26,600 net acres)
South Texas
Buda, Eagle Ford, Conventional (51,000 net acres)
Tuscaloosa Marine Shale
(24,000 net acres)
Dutch / Mary Rose
Shallow Water GoM
Vermilion 170
Shallow Water GoM
Prospect Inventory
(8 Prospects)
Contango Crimson
8
Contango Asset Overview
Proved Reserves at 3/31/13 (1)
FCF PV10% Category Bcfe ($MM) ($MM)
PDP 115 $506 $387 PNP 81 306 185
Total 196 $813 $572
Reserves by Category (Bcfe) (1)
Oil
7% NGL 14%
Gas 79%
PNP 196
41% Bcfe Proved
PDP
Reserves 59%
Dutch and Mary Rose – A World Class Discovery
- 2007 Discovery
- 1 Tcf OGIP
- 150 MMcfpd Gross Prod
CIB Op Net Isopach
Other Assets
8 drill-ready GoM prospects
37% working interest in select EnCana-operated Jonah Field acreage through Exaro Energy (2)
~5% minority interest in Duvernay Shale through Alta Energy (2)
100% working interest in 24,000 net undeveloped Tuscaloosa Marine Shale (TMS) acres (LA / MS)
(1) Contango reserves based on William M. Cobb & Associates proved reserve report as of March 31, 2013 at SEC pricing. (2) Reserves not included in Contango proved reserve report data.
9
Crimson Asset Overview
Proved Reserves at 3/31/13 (Bcfe) (1)
ColoradoEast
6% Texas 3%
116
South Bcfe
Texas Proved
49%
Reserves
Oil
Southeast 31% Texas Gas 42%
53% NGL 16%
1Q13 Production (MMcfepd) (2)
Colorado
2% East Texas 9% South 36 Texas
40% MMcfepd 1Q13 Production
Oil
Southeast 28% Texas
Gas NGL
49% 57%
15%
Colorado & Other
6.3 Bcfe Proved Reserves
0.6 MMcfepd Avg. Daily Production
Upside: Niobrara
CO
TX
East Texas
3.9 Bcfe Proved Reserves
1.7 MMcfepd Avg. Daily Production
Upside: James Lime, Haynesville / Mid-Bossier
Southeast Texas
48.6 Bcfe Proved Reserves
19.9 MMcfepd Avg. Daily Production
Upside: Woodbine, Eagle Ford, Georgetown
South Texas
57.4 Bcfe Proved Reserves
14.0 MMcfepd Avg. Daily Production
Upside: Eagle Ford, Buda
(1) Crimson reserves based on Company-engineered proved reserve report as of March 31, 2013 at SEC pricing. (2) Crimson average 1Q13 production.
10
Complementary Asset Bases
Asset Comparison
Contango Crimson Offshore Onshore Parameter Conventional Unconventional
Geologic Risk Yes Limited
Time to First Years Months Production
Payback Years Months Flexibility Limited Significant Expandability Limited Substantial Impact High / Sporadic Lower / Consistent
Crimson Identified Resources (1)
Bcfe
1,200 1,000 800 600 400 200 0
Unproved PUD
1.1 Tcfe / 190 MMBoe of Potential
Conv / Other
Woodbine
Eagle Ford
Colorado
James Lime
Buda
Total
(1) Crimson reserves based on Company-engineered proved reserve report as of March 31, 2013 at SEC pricing. Crimson unproved reserves based on internal estimates, excludes unproved resource potential of approximately 272 Bcfe in the Haynesville/Mid-Bossier formations not economical in the current price environment. See appendix for “Hydrocarbon Quantities and Drilling Locations.”
11
Crimson Woodbine Area
Grace Hall #1H
IP: 1,080 Boepd
Mosley B #1H
1,143 Boepd
Mosley #1H
IP: 1,203 Boepd
Nevill-Mosley #1H
IP: 1,164 Boepd
WAC Gatlin #1H
IP: 1,370 Boepd
WAC Pavelock #1H
IP: 1,808 Boepd
Yates #1H
IP: 472 Boepd
Stuckey-UpChurch #1H
Spud June 2013
Madison County
Vick Tr #1H
IP: 383 Boepd
Payne #1H Payne B #1H
IP: 1,332 Boepd
Waiting on Completion
Grace Hall C (Allocation) Unit #1H
Drilling
Grimes County
Covington-UpChurch #1H
6,900 Mcfepd (Toe only)
CXPO Areas of Operation Houston, TX
12
Crimson Buda /Eagle Ford Area
Zavala
I. & G.N.R.R. CO. I. & G
I. BUTLER 1303
A. B37 . & M. I. & G.N.R.R. CO. A. B. & M. 310
59 -6298 -6269
J. MCAFEE 854 -6313 A. MANCHACA 522 I. & G.N.R.R. CO.
-6231 300
. I. & G.N.R.R. CO. I. & G.N.R.R. CO.
325 330 I. & G.N.
RILEY Heitz #3H
BYRD 1H
Cum: 201 MBo Last Mo. Avg: 723 Bopd
I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.
Zavala Hughes
. I. & G.N.R.R. CO. Horiz Buda I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO.
316 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
325 330 335 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
340 345 350 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
355 360 1 365 MBO+ 10 397 MMCF I. & G.N. 374 R.R. CO. I. & G.N.R.R. CO.
Heitz #3H 379
RILEY BYRD
1H Cum: 201 MBo
Last Mo. Avg: 723 Bopd -6312
. Spud -6447
I. & G.N.R.R. CO. I. & G.N.R.R. CO.
I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO.
311 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
326 329 336 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
339 346 349 I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO.
356 359 I. & G.N.R.R. CO.
11/9/12 366 ML 368 Show 373
380
Spud THOMPSON L 1012H
2/4/13
Permit -6499
I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO. ML Show -6350I. & G.N.R.R. CO. I. & G.N.R.R. CO.
310 327 328 Heitz I. & G.N.R.R. #2H CO. I. & G.N.R.R. CO.
337 338 347 348 I. & G.N. 357 R.R. CO. . . . . . C . I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R.R. CO. -6298 358 367 369 372 381
Cum: 170 MBo Oryx Last Mo. Avg: 394 Bopd Vertical Buda
-6404
-6313 3 MBO+ 16 MMCF
I. & G.N.R.R. CO. I. & G.N.R.R. CO. I. & G.N.R. . #2 I. & G.N.R.R. CO
300 301 302 #5H O.
303 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
#3H I. & G.N.R.R. CO. I. & G.N.R.R. CO.
307 I. & G.N.R.R. CO. I. & G.N.R.R. CO. 308 309 370 371 382
HUGHES HEITZ -6586
1H Spud L
THOMPSON 1023HR
I. & G.N.R.R. CO. I. & G.N.R.R. CO. -6578
I. & G.N.R.R. CO. No Show 1133 852 851 1138 G.N.R.R. CO. 9/24/12 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
850 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
844 845 I. & G.N.R.R. CO. I. & G.N.R.R. CO.
846 843 1135 1136 I. & G.N.R.R. CO.
CRIMSON 1137 BEELER 1H
I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO.
182 198 199 I.&G.N. 216 RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO.
217 243 I.&G.N. 242 RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO.
Heitz #5H 245 244 I.&G.N.RR.CO. STATE 286 -6697 289 291 TATE
Spud Cum: 100 MBo
CHESAPEAKE HATCH
2/16/13 Last Mo. Avg: 597 Bopd Royal 1H
Beeler I.&G.N. 181 RR. CO. #2H I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO.
184 197 200 215 I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G. Vertical N.RR.CO. Buda
218 240 241 246 I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO.
Drilling 1 MBO+ 10 MMCF 247 287 288 Spud TEXAS
JONES R. NIGGLI 1116
102H RILEY 12/17/12 BAGGETT 7H
Sage Mills #2H -6634
I.&G.N. 180 RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. 185 I.&G.N.RR.CO. 278 196 201 219 I.&G.N.RR.CO. I.&G.N.RR.CO.
214 239 238
889 Bopd + 650 Mcfpd I.&G.N. 248 RR.CO. S.C. CASE
Sage Mills #1H 1070
J. POITEVENT I.&G.N.RR.CO.
959 Bopd + 541 Mcfpd 646 276
I.&G.
I.&G.N.RR.CO. CHESAPEAKE I.&G.N.RR.CO. 179 I.&G.N. 186 RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. ANDERSON-STONE 1010 195 202 213 Buda Wells J. HALL CHESAPEAKE M 5H
1100 ANDERSON-STONE
C. DUNBAR M 2H
Type Log Legacy Control 1078
ANDERSON CHESAPEAKE -STONE
I 1H I.&G.N.RR.CO. -6444 J. HALL
Dimmit 1097 277 I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO. I.&G.N.RR.CO.
178 187 I.&G.N.RR.CO. I.&G.N.RR.CO.
194 203 212 221 I.&G.N. 235 RR.CO. BEATY&SEALE&FORWOOD J. POITEVENT 30
CHESAPEAKE 645 I.&G.N. 282 RR.CO.
STRAIT 1H I.&G.N.RR.CO. ANDERSON CHESAPEAKE -STONE
CHESAPEAKE CHESAPEAKE 234 F 2H G.C.&S.F.RR. VOLTZ JBGS CHESAPEAKE ZIENTEK 1320
CXPO Areas of Operation Houston, TX
13
Financial Highlights
Over 25% accretive to Contango 2013E cash flow per share
Combined company will have strong liquidity position to develop Crimson resource plays
Strong credit profile
Repay Crimson second lien at closing, with cash on hand and revolver capacity
Estimated $15 MM savings in annual debt service costs
Significant revolver availability at closing, after second lien repayment
~$190 MM LTM EBITDAX, pro forma
Combined company maintains conservative credit and leverage metrics
Net Debt to Book Capitalization ratio below 25%
Net Debt to LTM EBITDAX below 1.0x
Net Debt to pro forma proved developed reserves below $1.00 per Mcfe
Combined estimated capital program of $250-300 MM over the next two years
Funded by cash flow
14
Pro Forma Balance Sheet Strength to Grow
Pro Forma Financial Strategy
Repay revolver debt with cash
Increase borrowing base to $250 MM, or more
Refinance second lien debt with first lien
Annual interest expense reduction from $21 MM to ~$6 MM
As of December 31, 2012
$ in millions
Balance Sheet Data Cash Senior Debt (1) Second Lien Debt Total Stockholders’ Equity Total Capitalization
Credit Statistics:
Net Debt / Book Capitalization
Net Debt / Proved Reserves ($ / Mcfe) (2)
Net Debt / Proved Developed Reserves ($ / Mcfe) (2) Net Debt / Current Production ($ / Mcfepd) (3) Net Debt / LTM EBITDAX (x)
Contango Standalone
$79 —404 $404
Crimson Standalone
$ -69 175 80 $324
75% $2.09 $3.83 $6,719 3.0x
Contango Pro Forma
$ -174 -544 $718
24% $0.54 $0.65 $1,720 0.9x
(1) Principal amount excluding unamortized debt discount.
(2) Contango reserves based on William M. Cobb & Associates year-end 2012 proved reserve report at SEC pricing. Crimson reserves based on NSAI SEC year-end 2012 reserve report at SEC pricing. (3) Contango and Crimson current production is average for the quarter ended March 31, 2013.
15
Conservative Pro Forma Debt Profile
Net Debt / Proved Reserves ($ / Mcfe)
$2.00
$1.50
$1.00 $0.50
$0.00
PF Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Contango
$0.54 $0.60
$1.00 $0.82
$1.35 $1.48
$1.70 $1.52 $1.53
Net Debt / PD Reserves ($ / Mcfe)
$4.00
$3.00
$2.00 $1.00
$0.00
PF Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Contango
$1.33
$0.65
$2.33 $1.95 $1.98
$2.79 $2.90 $2.36
$3.58
Net Debt / Current Production ($ / Mcfepd)
$12,000 $9,000 $6,000 $3,000 $0
PF Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Contango
$2,260 $2,508 1,720
$4,766 $3,833 $4,176
$7,895 $6,310 $6,437
Net Debt / LTM EBITDAX (x)
4.0x 3.0x 2.0x 1.0x 0
PF Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Contango
1.3x 1.0x 0.9x
2.0x 1.7x
2.7x 2.4x
3.1x 3.1x
Note: Peers include, CRK, CRZO, EPL, EXXI, GDP, SFY, SGY and WTI. Principal debt amount excludes unamortized debt discount.
16
Conclusions
Strategic Fit
Matches Contango’s liquidity with Crimson’s low-risk, operated resource upside Provides critical mass Optimizes capital structure / financial strength to accelerate development Strong combined Management and Board
Complementary Asset Base
Over James 1 Lime Tcfe and of resource Niobrara potential in the prolific Woodbine, Eagle Ford, Buda, Strong results to-date from Crimson and offset operators in Woodbine and Buda 8 Exploration existing offshore prospects and continuation of relationship with Juneau
Geographic
Diversification
Diversifies Contango’s proved asset base from ~90% GoM focus to ~60% GoM, ~40% Onshore Contango’s Crimson’s lower higher -risk -potential unconventional offshore development prospects portfolio complements
Liquids-Focused
Doubles Contango’s oil production and proved oil reserves
Over 50% liquids upside portfolio, with existing acreage position to support
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Appendix
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Crimson Drilling Inventory
Unproved Resource Potential
Locations(MMBoe) NPV10% ($MM)% Oil Capex ($MM)
First Tier Opportunities
Force (Woodbine) 30 7.4 $203 94% $210
Iola / Grimes (Woodbine) 60 24.3 212 40% 280
Booth-Tortuga Area (Buda) 20 1.8 82 95% 34
Zavala / Dimmit (Eagle Ford) – 160 Acre Spacing 84 13.8 248 92% 294
James Lime (East Texas) 57 19.0 186 58% 228
Karnes County (Eagle Ford) – Infill 9 1.5 20 94% 61
Subtotal First Tier Opportunities 260 67.7 $952 66% $1,107
Second Tier Opportunities
Chalktown (Woodbine) 47 11.4 $133 70% 223
Madison County (Eagle Ford) 216 46.2 508 95% 1,076
Madison County (Georgetown) 112 22.1 248 95% 558
Zavala / Dimmit (Eagle Ford) – Infill to 80 Acres 87 14.3 192 92% 305
Conventional Gas / Other 141 17.4 71 14% 279
Pawnee (Eagle Ford) 33 4.1 23—56
Colorado (Niobrara / DJ Sands) 178 6.8 39 57% 126
Subtotal Second Tier Opportunities 814 122.3 $1,214 76% $2,623
Total 1,074 190 $2,166 55% $3,730
Note: Crimson unproved reserves based on internal estimates, excludes unproved resource potential of approximately 272 Bcfe in the Haynesville/Mid-Bossier formations not economical in the current price environment. See “Hydrocarbon Quantities and Drilling Locations.”
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Contango FY 2Q13 Results
Condensed Consolidated Balance Sheet
(unaudited)
Assets Dec. 31, Jun . 30,
$MM 2012 2012
Cash and Equivalents $79.5 $130.0
Other Current Assets 54.1 45.2
Net PP&E 380.0 396.3
Long Term Assets 47.6 53.1
Total Assets $561. 1 $624. 7
Liabilities & Equity
Current Liabilities $32.7 $34.3
Long Term Liabilities 124.5 126.0
Total Liabilities 157.2 160.3
Shareholders Equity 403.9 464.3
Total Liabilities and Equity $ 561 . 1 $ 624 . 7
Note: Numbers may not foot due to rounding.
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Contango FY 2Q13 Results
Consolidated Statement of Operations
(unaudited)
3 Months Ended 6 Months Ended
$ MM except per share figures Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011
Total Operating Revenues $34.9 $53.9 $64.7 $98.1
Operating Expenses
Operating Expenses $5.0 $7.0 $11.4 $12.9
Exploration Expenses 6.6 0.0 51.6 0.1
Depreciation, Depletion and Amortization 10.8 13.5 20.3 24.5
Impairment and Abandonment of Oil and Gas Properties 5.7—14.1 -
General and Administrative 2.8 2.3 5.4 4.6
Total Expenses $30.9 $22.9 $102.9 $42.0
Other Income (Expense) 0.2(0.1) 0.3(0.1)
Net Income from Continuing Operations before Income Taxes 4.3 31.0(37.8) 56.0
Provision for Income Taxes(1.6)(11.4) 12.9(20.8)
Income from Continuing Operations $2.6 $19.6($24.9) $35.2
Discontinued Operations, Net of Income Taxes -(0.1) -(0.8)
Net Income Attributable to Common Stock $2.6 $19.5($24.9) $34.4
Weighted Average Basic and Diluted Shares Outstanding (MM) 15.2 15.4 15.2 15.5
Net Gain / (Loss) per Basic and Diluted Share $0.17 $1.27($1.64) $2.22
Note: Numbers may not foot due to rounding.
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Crimson 2012 Results
Condensed Consolidated Balance Sheet
Assets December 31,
$MM 2012 2011
Cash and Equivalents —
Other Current Assets $24.8 $21.1
Net PP&E 300.8 396.8
Long Term Assets 43.0 18.5
Total Assets $368. 6 $436. 3
Liabilities & Equity
Current Liabilities $38.7 $67.1
Long Term Liabilities 250.1 199.7
Total Liabilities 288.8 266.8
Shareholders Equity 79.8 169.5
Total Liabilities and Equity $ 368 . 6 $ 436 . 3
Note: Numbers may not foot due to rounding.
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Crimson 2012 Results
Consolidated Statement of Operations
$ MM except per share figures Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010
Operating Revenues
Crude Oil Sales $78.6 $36.8 $22.0
Natural Gas Sales 26.5 56.7 59.9
Natural Gas Liquids Sales 10.9 20.2 14.0
Total Operating Revenues $115.9 $113.6 $95.9
Operating Expenses
Lease Operating Expenses $15.3 $13.3 $15.0
Production and Ad Valorem Taxes 2.5 6.7 6.1
Exploration Expenses 0.3 1.0 1.0
Depreciation, Depletion and Amortization 58.8 56.9 45.0
Impairment and Abandonment of Oil and Gas Properties 117.9 15.0 22.3
General and Administrative 19.7 18.4 19.9
(Gain) Loss on Sale of Assets — 1.1
Total Operating Expenses 214.4 111.3 110.3
Income (Loss) from Operations($98.5) $2.3($14.3)
Other Expenses(28.3)(26.3)(33.1)
Loss Before Income Taxes(126.7)(23.9)(47.5)
Income Tax Benefit 34.7 8.1 16.6
Net Loss($92.0)($15.8)($30.8)
Weighted Average Diluted Shares Outstanding (MM) 44.1 44.8 39.4
Net Loss per Diluted Share($2.08)($0.35)($0.78)
Note: Numbers may not foot due to rounding.
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Hydrocarbon Quantities and Drilling Locations
This presentation includes certain estimates of proved reserves that have not been prepared in accordance with SEC pricing guidelines. Other estimates of hydrocarbon quantities included herein may not comport with specific definitions of reserves under SEC rules and cannot be disclosed in SEC filings. The SEC requires oil and gas companies, in their filings with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysisof geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions (using unweighted average 12-month first day of the month prices), operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.
In this presentation we have used the following terms to refer to unproved hydrocarbon quantities that the SEC rules would prohibit from inclusion in SEC filings:
“Unproved reserve or resource potential” refers to internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. Unproved reserve or resource potential may not constitute reserves within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or proposed SEC rules and does not include any proved reserves. Area wide unproved reserveor resource potential has been risked using a risk factor selected by management. Actual quantities that may differ substantially. Factors affecting ultimate recovery include the scope of our ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors; and actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates of resource potential may change significantly as development of our resource plays provides additional data.
“EUR”,orEstimated Ultimate Recovery, refers to internal estimates of per well hydrocarbon quantities that may bepotentiallyrecovered from a hypothetical future well completed as a producer in the area. These quantities do not necessarily constitute or represent reserves within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or proposed SEC rules.
Oil and condensate resource potential is shown in Mcf equivalents based on a 6:1 Mcf/barrel conversion ratio. Liquid resource potential for other areas is converted to Mcf equivalent on 6:1 basis.
In this presentation, “potential drilling locations” represent the number of locations that we currently estimate could potentially be drilled in a particular area determined by (a) dividing the number of net acres in which we have an interest by the Company estimated well spacing requirements applicable to that area, and (b) reducing the resulting number by a risk factor based on our management’s internal estimates of the risks and probabilities associated with drilling inthatarea. Our actual drilling activities will depend on oil and natural gas prices, the availability of capital, drilling and production costs,
availability of drilling services and equipment, drilling results, lease expirations, gathering system and transportation constraints, regulatory approvals and other factors. We may notbeabletodrill wells on many of these locations.
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Disclaimer
In connection with the proposed transaction, Contango intends to file with the SEC a registration statement on Form S-4 that will include a joint proxy statement of Contango and Crimson that also constitutes a prospectus of Contango. Contango and Crimson also plan to file other relevant documents with the SEC regarding the proposed transaction. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. You may obtain a free copy of the joint proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by Contango and Crimson with the SEC at the SEC’s website at www.sec.gov. You may also obtain these documents by contacting Contango’s Investor Relations department at 713.960.1901, or via email on Contango’s website or contacting Crimson’s Investor Relations department at 713.236.7571 or via email on Crimson’s website.
Contango and Crimson and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about Contango’s directors and executive officers is available in Contango’s proxy statement dated October 12, 2012, for its 2012 Annual Meeting of Stockholders. Information about Crimson’s directors and executive officers is available in Crimson’s proxy statement dated April 3, 2013 for its 2013 Annual Meeting of Stockholders. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the merger when they become available. Investors should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from Contango or Crimson using the sources indicated above.
This document shall not constitute an offer to sell or the solicitation of any offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.
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