##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission file number 001-16317
 CONTANGO OIL & GAS COMPANY
  DELAWARE
    
    95-4079863(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 3700 BUFFALO SPEEDWAY, SUITE 960
HOUSTON, TEXAS 77098
 (713) 960-1901
 þ o
 Yes o
No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
    
    Smaller reporting company o
 Yes o No þ




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##### 



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE NINE MONTHS ENDED MARCH 31, 2009
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets as of March 31, 2009 and June 30, 2008
    
    
    3Consolidated Statements of Operations for the three and nine months ended
March 31, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the nine months ended
March 31, 2009 and 2008
    
    
    6Consolidated Statement of Shareholders Equity for the nine months ended
March 31, 2009
    
    
    7Notes to the Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    38Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    40Exhibit 10.1Exhibit 23.1Exhibit 31.1Exhibit 32.1
 All references in this Form 10-Q to the Company, Contango, we, us or our are to
Contango Oil & Gas Company and its wholly-owned Subsidiaries. Unless otherwise noted, all
information in this Form 10-Q relating to natural gas and oil reserves and the estimated future net
cash flows attributable to those reserves are based on estimates prepared by independent engineers
and are net to our interest.
  2




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##### Table of Contents



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 ASSETS
 March 31,
    
    
    June 30,2009
    
    
    2008(Unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    41,457,487
    
    
    $
    59,884,574Inventory tubulars
    
    
    334,797
    
    
    
    334,797Accounts receivable:Trade receivables
    
    
    13,164,553
    
    
    
    72,343,761Advances to affiliates
    
    
    5,359,342
    
    
    
    5,754,516Joint interest billings receivable
    
    
    7,131,917
    
    
    
    18,019,847Prepaid capital costs
    
    
    1,264,278
    
    
    
    1,264,278Other
    
    
    3,418,353
    
    
    
    1,147,345Total current assets
    
    
    72,130,727
    
    
    
    158,749,118PROPERTY AND EQUIPMENT:Natural gas and oil properties, successful efforts method of accounting:Proved properties
    
    
    461,960,239
    
    
    
    442,630,193Unproved properties
    
    
    4,055,829
    
    
    
    7,591,447Furniture and equipment
    
    
    272,231
    
    
    
    278,737Accumulated depreciation, depletion and amortization
    
    
    (34,569,064
    )
    
    
    (13,134,511
    )Total property and equipment, net
    
    
    431,719,235
    
    
    
    437,365,866OTHER ASSETS:Cash and other assets held by affiliates
    
    
    1,056,884
    
    
    
    3,299,002Other
    
    
    356,236
    
    
    
    559,764Total other assets
    
    
    1,413,120
    
    
    
    3,858,766TOTAL ASSETS
    
    $
    505,263,082
    
    
    $
    599,973,750
   3




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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 LIABILITIES AND SHAREHOLDERS EQUITY
 March 31,
    
    
    June 30,2009
    
    
    2008(Unaudited)CURRENT LIABILITIES:Accounts payable
    
    $
    6,087,080
    
    
    $
    22,990,887Royalties and working interests payable
    
    
    16,315,528
    
    
    
    66,606,414Accrued liabilities
    
    
    2,838,277
    
    
    
    10,334,008Joint interest advances
    
    
    3,508,360
    
    
    
    15,666,389Accrued exploration and development
    
    
    11,754,698
    
    
    
    3,082,399Advances from affiliates
    
    
    
    
    
    
    2,965,022Debt of affiliates
    
    
    3,515,739
    
    
    
    3,261,177Income tax payable
    
    
    
    
    
    
    3,463,176Other current liabilities
    
    
    31,416
    
    
    
    466,232Total current liabilities
    
    
    44,051,098
    
    
    
    128,835,704LONG-TERM DEBT
    
    
    
    
    
    
    15,000,000DEFERRED TAX LIABILITY
    
    
    114,665,464
    
    
    
    112,189,684ASSET RETIREMENT OBLIGATIONS
    
    
    2,644,185
    
    
    
    1,949,881SHAREHOLDERS EQUITY:Common stock, $0.04 par value, 50,000,000 shares authorized,
19,638,334 shares issued and 15,828,980 outstanding at March 31, 2009,
19,404,746 shares issued and 16,819,746 outstanding at June 30, 2008
    
    
    785,533
    
    
    
    776,189Additional paid-in capital
    
    
    76,036,607
    
    
    
    73,030,926Treasury stock at cost (3,809,354 shares at March 31, 2009;
2,585,000 shares at June 30, 2008)
    
    
    (58,639,644
    )
    
    
    (6,843,900
    )Retained earnings
    
    
    325,719,839
    
    
    
    275,035,266Total shareholders equity
    
    
    343,902,335
    
    
    
    341,998,481TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    505,263,082
    
    
    $
    599,973,750
   4




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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Natural gas, oil and liquids sales
    
    $
    36,133,376
    
    
    $
    20,779,574
    
    
    $
    154,370,771
    
    
    $
    47,256,798Total revenues
    
    
    36,133,376
    
    
    
    20,779,574
    
    
    
    154,370,771
    
    
    
    47,256,798EXPENSES:Operating expenses
    
    
    4,553,421
    
    
    
    1,482,578
    
    
    
    14,505,666
    
    
    
    3,159,695Exploration expenses
    
    
    12,756,737
    
    
    
    4,261,686
    
    
    
    20,387,619
    
    
    
    5,171,795Depreciation, depletion and amortization
    
    
    8,919,740
    
    
    
    4,077,017
    
    
    
    22,167,167
    
    
    
    6,002,997Lease expirations and relinquishments
    
    
    3,678,708
    
    
    
    245,361
    
    
    
    4,125,125
    
    
    
    245,361Impairment of natural gas and oil properties
    
    
    2,709,239
    
    
    
    591,737
    
    
    
    2,709,239
    
    
    
    591,737General and administrative expenses
    
    
    1,490,401
    
    
    
    2,209,844
    
    
    
    5,993,640
    
    
    
    5,307,486Total expenses
    
    
    34,108,246
    
    
    
    12,868,223
    
    
    
    69,888,456
    
    
    
    20,479,071NET INCOME FROM CONTINUING OPERATIONS
BEFORE OTHER INCOME AND INCOME TAXES
    
    
    2,025,130
    
    
    
    7,911,351
    
    
    
    84,482,315
    
    
    
    26,777,727OTHER INCOME (EXPENSE):Interest expense  net of interest capitalized
    
    
    (147,392
    )
    
    
    (1,425,715
    )
    
    
    (589,812
    )
    
    
    (3,585,074
    )Interest income
    
    
    154,058
    
    
    
    914,826
    
    
    
    757,571
    
    
    
    1,763,335Gain on sale of assets and other
    
    
    
    
    
    
    59,919,478
    
    
    
    
    
    
    
    62,034,996NET INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    2,031,796
    
    
    
    67,319,940
    
    
    
    84,650,074
    
    
    
    86,990,984Provision for income taxes
    
    
    (1,184,182
    )
    
    
    (23,557,442
    )
    
    
    (33,965,501
    )
    
    
    (30,431,664
    )NET INCOME FROM CONTINUING OPERATIONS
    
    
    847,614
    
    
    
    43,762,498
    
    
    
    50,684,573
    
    
    
    56,559,320DISCONTINUED OPERATIONS (NOTE 8)Discontinued operations, net of income taxes
    
    
    
    
    
    
    68,981,433
    
    
    
    
    
    
    
    174,079,822NET INCOME
    
    
    847,614
    
    
    
    112,743,931
    
    
    
    50,684,573
    
    
    
    230,639,142Preferred stock dividends
    
    
    
    
    
    
    345,000
    
    
    
    
    
    
    
    1,245,000NET INCOME ATTRIBUTABLE TO COMMON STOCK
    
    $
    847,614
    
    
    $
    112,398,931
    
    
    $
    50,684,573
    
    
    $
    229,394,142NET INCOME PER SHARE:BasicContinuing operations
    
    $
    0.05
    
    
    $
    2.69
    
    
    $
    3.06
    
    
    $
    3.45Discontinued operations
    
    
    
    
    
    
    4.28
    
    
    
    
    
    
    
    10.85Total
    
    $
    0.05
    
    
    $
    6.97
    
    
    $
    3.06
    
    
    $
    14.30DilutedContinuing operations
    
    $
    0.05
    
    
    $
    2.56
    
    
    $
    3.01
    
    
    $
    3.30Discontinued operations
    
    
    
    
    
    
    4.03
    
    
    
    
    
    
    
    10.15Total
    
    $
    0.05
    
    
    $
    6.59
    
    
    $
    3.01
    
    
    $
    13.45WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    16,162,928
    
    
    
    16,122,707
    
    
    
    16,543,485
    
    
    
    16,045,785Diluted
    
    
    16,466,988
    
    
    
    17,127,187
    
    
    
    16,857,136
    
    
    
    17,155,007
   5




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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedMarch 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income from continuing operations
    
    $
    50,684,573
    
    
    $
    56,559,320Plus income from discontinued operations, net of income taxes
    
    
    
    
    
    
    174,079,822Net income
    
    
    50,684,573
    
    
    
    230,639,142Adjustments to reconcile net income to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    22,167,167
    
    
    
    8,788,796Lease expirations and relinquishments
    
    
    4,125,125
    
    
    
    Impairment of natural gas and oil properties
    
    
    2,709,239
    
    
    
    837,098Exploration expenditures
    
    
    19,361,419
    
    
    
    4,543,776Deferred income taxes
    
    
    2,475,780
    
    
    
    98,655,429Tax benefit from exercise/cancellation of stock options
    
    
    (264,187
    )
    
    
    (694,555
    )Stock-based compensation
    
    
    1,096,443
    
    
    
    1,170,850Gain on sale of assets and other
    
    
    
    
    
    
    (322,798,205
    )Changes in operating assets and liabilities:Decrease (increase) in accounts receivable and other
    
    
    58,358,818
    
    
    
    (2,107,291
    )Increase in notes receivable
    
    
    
    
    
    
    (250,000
    )Increase in prepaid insurance
    
    
    (225,134
    )
    
    
    (608,923
    )Decrease (increase) in interest receivable
    
    
    1,079,107
    
    
    
    (563,681
    )Increase (decrease) in accounts payable and advances from joint owners
    
    
    (29,030,422
    )
    
    
    20,830,169Increase (decrease) in other accrued liabilities
    
    
    (57,786,616
    )
    
    
    2,426,436Increase (decrease) in income taxes payable
    
    
    (4,942,928
    )
    
    
    25,501,052Net cash provided by operating activities
    
    
    69,808,384
    
    
    
    66,370,093CASH FLOWS FROM INVESTING ACTIVITIES:Natural gas and oil exploration and development expenditures
    
    
    (23,103,005
    )
    
    
    (98,146,425
    )Increase in restricted cash
    
    
    
    
    
    
    (113,342,115
    )Sale of short-term investments
    
    
    
    
    
    
    2,200,576Additions to furniture and equipment
    
    
    (5,378
    )
    
    
    (43,078
    )Proceeds from the sale of assets
    
    
    
    
    
    
    395,672,421Sale/acquisition costs
    
    
    
    
    
    
    (7,847,613
    )Purchase of assets
    
    
    
    
    
    
    (209,000,000
    )Investment in Contango Venture Capital Corporation
    
    
    
    
    
    
    (1,166,624
    )Net cash used in investing activities
    
    
    (23,108,383
    )
    
    
    (31,672,858
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under credit facility
    
    
    
    
    
    
    20,000,000Repayments under credit facility
    
    
    (15,000,000
    )
    
    
    (40,000,000
    )Borrowings by affiliates
    
    
    
    
    
    
    11,213,104Preferred stock dividends
    
    
    
    
    
    
    (1,245,000
    )Repurchase/cancellation of stock options and warrants
    
    
    
    
    
    
    (5,922,532
    )Tax benefit from exercise/cancellation of stock options
    
    
    264,187
    
    
    
    694,555Purchase of common stock
    
    
    (51,795,744
    )
    
    
    (663,900
    )Debt issuance costs
    
    
    (250,000
    )
    
    
    (113,510
    )Proceeds from exercised options, warrants and others
    
    
    1,654,469
    
    
    
    580,760Net cash used in financing activities
    
    
    (65,127,088
    )
    
    
    (15,456,523
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (18,427,087
    )
    
    
    19,240,712CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    59,884,574
    
    
    
    6,177,618CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    41,457,487
    
    
    $
    25,418,330SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for taxes
    
    $
    36,432,652
    
    
    $
    2,542,034Cash paid for interest
    
    $
    335,250
    
    
    $
    4,120,259
   6




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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited)
 TotalCommon Stock
    
    
    Paid-in
    
    
    Treasury
    
    
    Retained
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Earnings
    
    
    EquityBalance at June 30, 2008
    
    
    16,819,746
    
    
    $
    776,189
    
    
    $
    73,030,926
    
    
    $
    (6,843,900
    )
    
    $
    275,035,266
    
    
    $
    341,998,481Exercise of stock options
    
    
    204,500
    
    
    
    8,180
    
    
    
    1,413,615
    
    
    
    
    
    
    
    
    
    
    $
    1,421,795Tax benefit of exercising stock options
    
    
    
    
    
    
    
    
    
    
    120,540
    
    
    
    
    
    
    
    
    
    
    $
    120,540Issuance of restricted common stock
    
    
    
    
    
    
    
    
    
    
    78,375
    
    
    
    
    
    
    
    
    
    
    $
    78,375Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,920,372
    
    
    $
    30,920,372Treasury shares at cost
    
    
    (143,454
    )
    
    
    
    
    
    
    
    
    
    
    (7,906,442
    )
    
    
    
    
    
    $
    (7,906,442
    )Expense of stock options
    
    
    
    
    
    
    
    
    
    
    285,304
    
    
    
    
    
    
    
    
    
    
    $
    285,304Balance at September 30, 2008
    
    
    16,880,792
    
    
    $
    784,369
    
    
    $
    74,928,760
    
    
    $
    (14,750,342
    )
    
    $
    305,955,638
    
    
    $
    366,918,425Exercise of stock options
    
    
    8,000
    
    
    
    320
    
    
    
    100,340
    
    
    
    
    
    
    
    
    
    
    $
    100,660Tax benefit of exercising stock options
    
    
    
    
    
    
    
    
    
    
    109,221
    
    
    
    
    
    
    
    
    
    
    $
    109,221Issuance of restricted common stock
    
    
    3,088
    
    
    
    124
    
    
    
    162,082
    
    
    
    
    
    
    
    
    
    
    $
    162,206Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,916,587
    
    
    $
    18,916,587Treasury shares at cost
    
    
    (574,200
    )
    
    
    
    
    
    
    
    
    
    
    (25,735,318
    )
    
    
    
    
    
    $
    (25,735,318
    )Expense of stock options
    
    
    
    
    
    
    
    
    
    
    285,304
    
    
    
    
    
    
    
    
    
    
    $
    285,304Balance at December 31, 2008
    
    
    16,317,680
    
    
    $
    784,813
    
    
    $
    75,585,707
    
    
    $
    (40,485,660
    )
    
    $
    324,872,225
    
    
    $
    360,757,085Exercise of stock options
    
    
    18,000
    
    
    
    720
    
    
    
    131,170
    
    
    
    
    
    
    
    
    
    
    $
    131,890Tax benefit of exercising stock options
    
    
    
    
    
    
    
    
    
    
    34,426
    
    
    
    
    
    
    
    
    
    
    $
    34,426Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847,614
    
    
    $
    847,614Treasury shares at cost
    
    
    (506,700
    )
    
    
    
    
    
    
    
    
    
    
    (18,153,984
    )
    
    
    
    
    
    $
    (18,153,984
    )Expense of stock options
    
    
    
    
    
    
    
    
    
    
    285,304
    
    
    
    
    
    
    
    
    
    
    $
    285,304Balance at March 31, 2009
    
    
    15,828,980
    
    
    $
    785,533
    
    
    $
    76,036,607
    
    
    $
    (58,639,644
    )
    
    $
    325,719,839
    
    
    $
    343,902,335
   7




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##### Table of Contents



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
 1. Basis of Presentation
  2. Summary of Significant Accounting Policies
  Successful Efforts Method of Accounting.
   Cash Equivalents.
  8




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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 Principles of Consolidation.
  Recent Accounting Pronouncements.
 Present Fairly in Conformity With Generally Accepted Accounting
Principles. .
    9




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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 Recent SEC Rule-Making Activity.
 
    
    Commodity Prices  Economic
producibility of
reserves and
discounted cash
flows will be based
on a 12-month
average commodity
price unless
contractual
arrangements
designate the price
to be used.
    
    Disclosure of Unproved Reserves
  Probable and
possible reserves
may be disclosed
separately on a
voluntary basis.
    
    Proved Undeveloped Reserve Guidelines
  Reserves may be
classified as
proved undeveloped
if there is a high
degree of
confidence that the
quantities will be
recovered.
    
    Reserve Estimation Using New
Technologies 
Reserves may be
estimated through
the use of reliable
technology in
addition to flow
tests and
production history.
    
    Reserve Personnel
and Estimation
Process 
Additional
disclosure is
required regarding
the qualifications
of the chief
technical person
who oversees our
reserves estimation
process. We will
also be required to
provide a general
discussion of our
internal controls
used to assure the
objectivity of the
reserves estimate.
    
    Non-Traditional
Resources The
definition of oil
and gas producing
activities will
expand and focus on
the marketable
product rather than
the method of
extraction.
  Stock-Based Compensation.
  10




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##### Table of Contents



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
   3. Natural Gas and Oil Exploration and Production Risk
   4. Customer Concentration Credit Risk
   11




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##### Table of Contents



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 5. Net Income per Common Share
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Per
    
    
    
    
    
    
    Average
    
    
    PerIncome
    
    
    Shares
    
    
    Share
    
    
    Income
    
    
    Shares
    
    
    ShareIncome from continuing operations, including preferred dividends
    
    $
    847,614
    
    
    
    16,162,928
    
    
    $
    0.05
    
    
    $
    43,417,498
    
    
    
    16,122,707
    
    
    $
    2.69Discontinued operations, net of income taxes
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    68,981,433
    
    
    
    16,122,707
    
    
    $
    4.28Basic Earnings per Share:Net income attributable to common stock
    
    $
    847,614
    
    
    
    16,162,928
    
    
    $
    0.05
    
    
    $
    112,398,931
    
    
    
    16,122,707
    
    
    $
    6.97Effect of Potential Dilutive Securities:Stock options
    
    
    
    
    
    
    640,167
    
    
    
    
    
    
    
    
    
    
    
    305,003
    
    
    
    Shares assumed purchased
    
    
    
    
    
    
    (337,651
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Series E preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    345,000
    
    
    
    699,477
    
    
    $
    0.49Restricted shares
    
    
    
    
    
    
    1,544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from continuing operations
    
    $
    847,614
    
    
    
    16,466,988
    
    
    $
    0.05
    
    
    $
    43,762,498
    
    
    
    17,127,187
    
    
    $
    2.56Discontinued operations, net of income taxes
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    68,981,433
    
    
    
    17,127,187
    
    
    $
    4.03Diluted Earnings per Share:Net income, attributable to common stock
    
    $
    847,614
    
    
    
    16,466,988
    
    
    $
    0.05
    
    
    $
    112,743,931
    
    
    
    17,127,187
    
    
    $
    6.59
 Nine Months Ended
    
    
    Nine Months EndedMarch 31, 2009
    
    
    March 31, 2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Per
    
    
    
    
    
    
    Average
    
    
    PerIncome
    
    
    Shares
    
    
    Share
    
    
    Income
    
    
    Shares
    
    
    ShareIncome from continuing operations, including preferred dividends
    
    $
    50,684,573
    
    
    
    16,543,485
    
    
    $
    3.06
    
    
    $
    55,314,320
    
    
    
    16,045,785
    
    
    $
    3.45Discontinued operations, net of income taxes
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    174,079,822
    
    
    
    16,045,785
    
    
    $
    10.85Basic Earnings per Share:Net income attributable to common stock
    
    $
    50,684,573
    
    
    
    16,543,485
    
    
    $
    3.06
    
    
    $
    229,394,142
    
    
    
    16,045,785
    
    
    $
    14.30Effect of Potential Dilutive Securities:Stock options
    
    
    
    
    
    
    685,167
    
    
    
    
    
    
    
    
    
    
    
    349,747
    
    
    
    Shares assumed purchased
    
    
    
    
    
    
    (373,060
    )
    
    
    
    
    
    
    
    
    
    
    Series E preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,245,000
    
    
    
    759,475
    
    
    $
    1.64Restricted shares
    
    
    
    
    
    
    1,544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from continuing operations
    
    $
    50,684,573
    
    
    
    16,857,136
    
    
    $
    3.01
    
    
    $
    56,559,320
    
    
    
    17,155,007
    
    
    $
    3.30Discontinued operations, net of income taxes
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    174,079,822
    
    
    
    17,155,007
    
    
    $
    10.15Diluted Earnings per Share:Net income, attributable to common stock
    
    $
    50,684,573
    
    
    $
    16,857,136
    
    
    $
    3.01
    
    
    $
    230,639,142
    
    
    
    17,155,007
    
    
    $
    13.45
  12




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##### Table of Contents



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 6. Long-Term Debt
   7. Gain on Sale of Asset
  8. Sale of Properties  Discontinued Operations
    Operating Results:
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2008Revenues
    
    $
    (255,486
    )
    
    $
    8,641,857Operating expenses
    
    
    (12,143
    )
    
    
    (968,903
    )Depletion expenses
    
    
    
    
    
    
    (2,785,799
    )Exploration expenses
    
    
    
    
    
    
    47,280Gain on sale of discontinued operations
    
    
    106,392,910
    
    
    
    262,880,675Gain before income taxes
    
    
    106,125,281
    
    
    
    267,815,110Provision for income taxes
    
    
    (37,143,848
    )
    
    
    (93,735,288
    )Gain from discontinued operations, net of income taxes
    
    $
    68,981,433
    
    
    $
    174,079,822
  13




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##### Table of Contents



CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (continued)
 9. Related Party Transactions
   10. Share Repurchase Program
   14




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##### Table of Contents



Available Information
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary Statement about Forward-Looking Statements
  
    
    Our financial position
    
    Business strategy, including outsourcing
    
    Meeting our forecasts and budgets
    
    Anticipated capital expenditures
    
    Drilling of wells
    
    Natural gas and oil production and reserves
    
    Timing and amount of future discoveries (if any) and production of
natural gas and oil
    
    Operating costs and other expenses
    
    Cash flow and anticipated liquidity
    
    Prospect development
    
    Property acquisitions and sales
  
    
    Low and/or declining prices for natural gas and oil
    
    Natural gas and oil price volatility
    
    Operational constraints, start-up delays and production shut-ins at
both operated and non-operated production platforms, pipelines and gas processing
facilities
    
    The risks associated with acting as the operator in drilling deep high
pressure wells in the Gulf of Mexico
    
    The risks associated with exploration, including cost overruns and the
drilling of non-economic wells or dry holes, especially in prospects in which the
Company has made a large capital commitment relative to the size of the Companys
capitalization structure
    
    The timing and successful drilling and completion of natural gas and
oil wells
    
    Availability of capital and the ability to repay indebtedness when due
    
    Availability of rigs and other operating equipment
    
    Ability to raise capital to fund capital expenditures
    
    Timely and full receipt of sale proceeds from the sale of our
production
    
    The ability to find, acquire, market, develop and produce new natural
gas and oil properties
    
    Interest rate volatility
  15




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##### Table of Contents




    
    Uncertainties in the estimation of proved reserves and in the
projection of future rates of production and timing of development expenditures
    
    Operating hazards attendant to the natural gas and oil business
    
    Downhole drilling and completion risks that are generally not
recoverable from third parties or insurance
    
    Potential mechanical failure or under-performance of significant wells,
production facilities, processing plants or pipeline mishaps
    
    Weather
    
    Availability and cost of material and equipment
    
    Delays in anticipated start-up dates
    
    Actions or inactions of third-party operators of our properties
    
    Actions or inactions of third-party operators of pipelines or
processing facilities
    
    The ability to find and retain skilled personnel
    
    Strength and financial resources of competitors
    
    Federal and state regulatory developments and approvals
    
    Environmental risks
    
    Worldwide economic conditions
    
    The ability to construct and operate offshore infrastructure, including
pipeline and production facilities
    
    The continued compliance by the Company with various pipeline and gas
processing plant specifications for the gas and condensate produced by the Company
    
    Drilling and operating costs, production rates and ultimate reserve
recoveries in our Eugene Island 10 (Dutch) and State of Louisiana (Mary Rose)
acreage.
  Overview
  Our Strategy
  Funding exploration prospects generated by Juneau Exploration, L.P., our alliance partner
 Using our limited capital availability to increase our reward/risk potential on selective
prospects.
  16




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##### Table of Contents



Operating in the Gulf of Mexico.
 Sale of proved properties.
 Controlling general and administrative and geological and geophysical costs
 Structuring transactions to share risk
 Structuring incentives to drive behavior
 Exploration Alliance with JEX
  Offshore Gulf of Mexico Exploration Joint Ventures
   Impact of Hurricanes Gustav and Ike
   17




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##### Table of Contents



Republic Exploration LLC
     Contango Offshore Exploration LLC
   18




---



##### Table of Contents



Contango Resources Company and Contango Operators, Inc
   Eugene Island 11 Platform
   Eugene Island 24 Platform
  Other Activities
   19




---



##### Table of Contents



Offshore Properties
 Producing Properties.
 Area/Block
    
    WI
    
    
    NRI
    
    
    StatusContango Operators, Inc.:Eugene Island 10 #D-1 (Dutch #1)
    
    
    47.05
    %
    
    
    38.1
    %
    
    ProducingEugene Island 10 #E-1 (Dutch #2)
    
    
    47.05
    %
    
    
    38.1
    %
    
    ProducingEugene Island 10 #F-1 (Dutch #3)
    
    
    47.05
    %
    
    
    38.1
    %
    
    ProducingEugene Island 10 #G-1 (Dutch #4)
    
    
    47.05
    %
    
    
    38.1
    %
    
    ProducingS-L 18640 #1 (Mary Rose #1)
    
    
    53.21
    %
    
    
    40.5
    %
    
    ProducingS-L 19266 #1 (Mary Rose #2)
    
    
    53.21
    %
    
    
    38.7
    %
    
    Being worked overS-L 19266 #2 (Mary Rose #3)
    
    
    53.21
    %
    
    
    38.7
    %
    
    ProducingS-L 18860 #1 (Mary Rose #4)
    
    
    34.58
    %
    
    
    25.5
    %
    
    ProducingS-L 19266 #3 (Eloise North #1)
    
    
    36.90
    %
    
    
    26.9
    %
    
    ProducingRepublic Exploration LLCEugene Island 113B
    
    
    0.0
    %
    
    
    3.3
    %
    
    ProducingWest Delta 36
    
    
    25.0
    %
    
    
    20.0
    %
    
    ProducingContango Offshore Exploration LLC:Grand Isle 72
    
    
    50.0
    %
    
    
    40.0
    %
    
    ProducingShip Shoal 358, A-3 well
    
    
    10.0
    %
    
    
    7.7
    %
    
    Producing
 Leases.
 Area/Block
    
    WI
    
    
    Lease Date
    
    Expiration DateContango Operators, Inc.:S-L 19261
    
    
    53.21
    %
    
    Feb 07
    
    Feb 12S-L 19396
    
    
    53.21
    %
    
    Jun 07
    
    Jun 12Eugene Island 11
    
    
    53.21
    %
    
    Dec 07
    
    Dec-12Ship Shoal 14
    
    
    50.00
    %
    
    May-06
    
    May-11South Marsh Island 57
    
    
    50.00
    %
    
    May-06
    
    May-11South Marsh Island 59
    
    
    50.00
    %
    
    May-06
    
    May-11South Marsh Island 75
    
    
    50.00
    %
    
    May-06
    
    May-11Ship Shoal 263
    
    
    25.00
    %
    
    Jan-06
    
    Jan-11Eugene Island 56
    
    
    100.00
    %
    
    Jul-08
    
    Jul-13Republic Exploration LLCSouth Marsh Island 57
    
    
    50.00
    %
    
    May-06
    
    May-11South Marsh Island 59
    
    
    50.00
    %
    
    May-06
    
    May-11South Marsh Island 75
    
    
    50.00
    %
    
    May-06
    
    May-11Ship Shoal 14
    
    
    50.00
    %
    
    May-06
    
    May-11Contango Offshore Exploration
LLC:East Breaks 369
    
    
    (1
    )
    
    Dec-03
    
    Dec-13East Breaks 370
    
    
    100.00
    %
    
    Dec-03
    
    Dec-13East Breaks 366
    
    
    100.00
    %
    
    Nov-05
    
    Nov-15East Breaks 410
    
    
    100.00
    %
    
    Nov-05
    
    Nov-15Ship Shoal 263
    
    
    75.00
    %
    
    Jan-06
    
    Jan-11Viosca Knoll 383
    
    
    100.00
    %
    
    Jan-06
    
    Jan-11Viosca Knoll 119
    
    
    50.00
    %
    
    Jun-06
    
    Jun-11
 (1)
    
    COE will receive a 3.67% ORRI before project payout and a 6.67% ORRI after project payout.  20




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##### Table of Contents



Application of Critical Accounting Policies and Managements Estimates
  Successful Efforts Method of Accounting.
 Reserve Estimates.
  21




---



##### Table of Contents



Impairment of Natural Gas and Oil Properties.
 Stock-Based Compensation.
  22




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##### Table of Contents



MD&A Summary Data
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change($000)
    
    
    ($000)Revenues:Natural gas, oil and liquids sales
    
    $
    36,133
    
    
    $
    20,780
    
    
    
    74
    %
    
    $
    154,371
    
    
    $
    47,257
    
    
    
    227
    %Total revenues
    
    $
    36,133
    
    
    $
    20,780
    
    
    
    74
    %
    
    $
    154,371
    
    
    $
    47,257
    
    
    
    227
    %Production:Natural gas (million cubic feet)
    
    
    5,583
    
    
    
    1,555
    
    
    
    259
    %
    
    
    15,458
    
    
    
    4,651
    
    
    
    232
    %Oil and condensate (thousand barrels)
    
    
    148
    
    
    
    38
    
    
    
    289
    %
    
    
    363
    
    
    
    95
    
    
    
    282
    %Natural gas liquids (thousand gallons)
    
    
    3,534
    
    
    
    1,403
    
    
    
    152
    %
    
    
    4,573
    
    
    
    2,218
    
    
    
    106
    %Total (million cubic feet equivalent)
    
    
    6,976
    
    
    
    1,983
    
    
    
    252
    %
    
    
    18,289
    
    
    
    5,538
    
    
    
    230
    %Natural gas (million cubic feet per day)
    
    
    62.0
    
    
    
    17.1
    
    
    
    263
    %
    
    
    56.4
    
    
    
    16.9
    
    
    
    234
    %Oil and condensate (thousand barrels per day)
    
    
    1.6
    
    
    
    0.4
    
    
    
    300
    %
    
    
    1.3
    
    
    
    0.3
    
    
    
    333
    %Natural gas liquids (thousand gallons per day)
    
    
    39.3
    
    
    
    15.4
    
    
    
    155
    %
    
    
    16.7
    
    
    
    8.1
    
    
    
    106
    %Total (million cubic feet equivalent per day)
    
    
    77.2
    
    
    
    21.7
    
    
    
    256
    %
    
    
    66.6
    
    
    
    19.9
    
    
    
    235
    %Average Sales Price:Natural gas (per thousand cubic feet)
    
    $
    4.93
    
    
    $
    7.35
    
    
    
    -33
    %
    
    $
    7.99
    
    
    $
    7.69
    
    
    
    4
    %Oil and condensate (per barrel)
    
    $
    41.53
    
    
    $
    102.48
    
    
    
    -59
    %
    
    $
    73.02
    
    
    $
    87.22
    
    
    
    -16
    %Natural gas liquids (per gallon)
    
    $
    0.70
    
    
    $
    1.56
    
    
    
    -55
    %
    
    $
    0.96
    
    
    $
    1.45
    
    
    
    -34
    %Operating expenses
    
    $
    4,553
    
    
    $
    1,483
    
    
    
    207
    %
    
    $
    14,506
    
    
    $
    3,160
    
    
    
    359
    %Exploration expenses
    
    $
    12,757
    
    
    $
    4,262
    
    
    
    199
    %
    
    $
    20,388
    
    
    $
    5,172
    
    
    
    294
    %Depreciation, depletion and amortization
    
    $
    8,920
    
    
    $
    4,077
    
    
    
    119
    %
    
    $
    22,167
    
    
    $
    6,003
    
    
    
    269
    %Lease expiration and relinquishments
    
    $
    3,679
    
    
    $
    245
    
    
    
    1402
    %
    
    $
    4,125
    
    
    $
    245
    
    
    
    1584
    %Impairment of natural gas and oil properties
    
    $
    2,709
    
    
    $
    592
    
    
    
    358
    %
    
    $
    2,709
    
    
    $
    592
    
    
    
    358
    %General and administrative expenses
    
    $
    1,490
    
    
    $
    2,210
    
    
    
    -33
    %
    
    $
    5,994
    
    
    $
    5,307
    
    
    
    13
    %Interest expense, net of interest capitalized
    
    $
    147
    
    
    $
    1,426
    
    
    
    -90
    %
    
    $
    590
    
    
    $
    3,585
    
    
    
    -84
    %Interest income
    
    $
    154
    
    
    $
    915
    
    
    
    -83
    %
    
    $
    758
    
    
    $
    1,763
    
    
    
    -57
    %Gain on sale of asset and other
    
    $
    
    
    
    $
    59,919
    
    
    
    -100
    %
    
    $
    
    
    
    $
    62,035
    
    
    
    -100
    %
 Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
 Natural Gas, Oil and Natural Gas Liquids (NGL) Sales.
  23




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##### Table of Contents



Natural Gas, Oil and NGL Production and Average Sales Prices.
 Operating Expenses.
 Exploration Expense.
 Depreciation, Depletion and Amortization.
 Lease Expiration and Relinquishment Expense.
 Impairment Expense.
 General and Administrative Expenses.
  24




---



##### Table of Contents



Interest Expense.
 Interest Income.
 Gain (Loss) on Sale of Assets and Other.
 Nine Months Ended March 31, 2009 Compared to Nine Months Ended March 31, 2008
 Natural Gas, Oil and NGL Sales.
  Natural Gas, Oil and NGL Production and Average Sales Prices.
  25




---



##### Table of Contents



Operating Expenses.
 Exploration Expense.
 Depreciation, Depletion and Amortization.
 Lease Expiration and Relinquishment Expense.
 Impairment Expense.
 General and Administrative Expenses.
    26




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##### Table of Contents



Interest Expense.
 Interest Income.
 Gain (Loss) on Sale of Assets and Other.
 Production, Prices, Operating Expenses, and Other
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollar amounts in 000s,
    
    
    (Dollar amounts in 000s,except per Mcfe amounts)
    
    
    except per Mcfe amounts)Production Data:Natural gas (million cubic feet)
    
    
    5,583
    
    
    
    1,555
    
    
    
    15,458
    
    
    
    4,651Oil and condensate (thousand barrels)
    
    
    148
    
    
    
    38
    
    
    
    363
    
    
    
    95Natural gas liquids (thousand gallons)
    
    
    3,534
    
    
    
    1,403
    
    
    
    4,573
    
    
    
    2,218Total (million cubic feet equivalent)
    
    
    6,976
    
    
    
    1,983
    
    
    
    18,289
    
    
    
    5,538Natural gas (million cubic feet per day)
    
    
    62.0
    
    
    
    17.1
    
    
    
    56.4
    
    
    
    16.9Oil and condensate (thousand barrels per day)
    
    
    1.6
    
    
    
    0.4
    
    
    
    1.3
    
    
    
    0.3Natural gas liquids (thousand gallons per day)
    
    
    39.3
    
    
    
    15.4
    
    
    
    16.7
    
    
    
    8.1Total (million cubic feet equivalent per day)
    
    
    77.2
    
    
    
    21.7
    
    
    
    66.6
    
    
    
    19.9Average Sales Price:Natural gas (per thousand cubic feet)
    
    $
    4.93
    
    
    $
    7.35
    
    
    $
    7.99
    
    
    $
    7.69Oil and condensate (per barrel)
    
    $
    41.53
    
    
    $
    102.48
    
    
    $
    73.02
    
    
    $
    87.22Natural gas liquids (per gallon)
    
    $
    0.70
    
    
    $
    1.56
    
    
    $
    0.96
    
    
    $
    1.45Selected data per Mcfe:Lease operating expenses (including property and severence taxes)
    
    $
    0.65
    
    
    $
    0.75
    
    
    $
    0.79
    
    
    $
    0.57General and administrative expenses
    
    $
    0.21
    
    
    $
    1.12
    
    
    $
    0.33
    
    
    $
    0.96Depreciation, depletion and amortization of
natural gas and oil properties
    
    $
    1.26
    
    
    $
    2.00
    
    
    $
    1.17
    
    
    $
    1.01
   27




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Capital Resources and Liquidity
 Cash From Operating Activities.
 Cash From Investing Activities.
 Cash From Financing Activities.
 Capital Budget.
    28




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Natural Gas and Oil Reserves
  ProvedReserves as ofMarch 31, 2009Natural Gas (MMcf)
    
    
    281,742Oil, Condensate and Natural Gas Liquids (MBbls)
    
    
    12,419Total proved reserves (Mmcfe)
    
    
    356,256
  Share Repurchase Program
   Credit Facility
   29




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Risk Factors
 In addition to the other information set forth elsewhere in this Form 10-Q and in our annual
report on Form 10-K , you should carefully consider the following factors when evaluating the
Company. An investment in the Company is subject to risks inherent in our business. The trading
price of the shares of the Company is affected by the performance of our business relative to,
among other things, competition, market conditions and general economic and industry conditions.
The value of an investment in the Company may decrease, resulting in a loss.
 We have no ability to control the prices that we receive for natural gas and oil. Natural gas and
oil prices fluctuate widely, and a substantial or extended decline in natural gas and oil prices
would adversely affect our revenues, profitability and growth and could have a material adverse
effect on the business, the results of operations and financial condition of the Company.
  
    
    The domestic and foreign supply of natural gas and oil.
    
    Overall economic conditions.
    
    The level of consumer product demand.
    
    Adverse weather conditions and natural disasters.
    
    The price and availability of competitive fuels such as LNG, heating
oil and coal.
    
    Political conditions in the Middle East and other natural gas and oil
producing regions.
    
    The level of LNG imports.
    
    Domestic and foreign governmental regulations.
    
    Potential price controls and increased taxes.
    
    Access to pipelines and gas processing plants.
  We depend on the services of our chairman, chief executive officer and chief financial
officer, and implementation of our business plan could be seriously harmed if we lost his services.
  We are highly dependent on the technical services provided by JEX and could be seriously harmed if
JEX terminated its services with us or became otherwise unavailable.
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Our ability to successfully execute our business plan is dependent on our ability to obtain
adequate financing.
   
    
    Our financial condition.
    
    The prevailing market price of natural gas and oil.
    
    The type of projects in which we are engaging.
    
    The lead time required to bring any discoveries to production.
 We frequently obtain capital through the sale of our producing properties.
  We assume additional risk as Operator in drilling high pressure wells in the Gulf of Mexico.
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We rely on third-party operators to operate and maintain some of our production pipelines and
processing facilities and, as a result, we have limited control over the operations of such
facilities. The interests of an operator may differ from our interests.
  Repeated production shut-ins can possibly damage our well bores.
  Concentrating our capital investment in the Gulf of Mexico increases our exposure to risk.
  Natural gas and oil reserves are depleting assets and the failure to replace our reserves would
adversely affect our production and cash flows.
  Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material
inaccuracies in these reserve estimates or underlying assumptions could materially affect the
quantities and present values of our reserves.
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The Companys revenue activities are significantly concentrated in one field.
  We rely on the accuracy of the estimates in the reservoir engineering reports provided to us by our
outside engineers.
  Exploration is a high risk activity, and our participation in drilling activities may not be
successful.
  
    
    Unexpected drilling conditions.
    
    Blowouts, fires or explosions with resultant injury, death or
environmental damage.
    
    Pressure or irregularities in formations.
    
    Equipment failures or accidents.
    
    Tropical storms, hurricanes and other adverse weather conditions.
    
    Compliance with governmental requirements and laws, present and future.
    
    Shortages or delays in the availability of drilling rigs and the
delivery of equipment.
    
    Our turnkey drilling contracts reverting to a day rate contract which
would significantly increase the cost and risk to the Company.
    
    Problems at third-party operated platforms, pipelines and gas
processing facilities over which we have no control.
  33




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The natural gas and oil business involves many operating risks that can cause substantial losses.
  
    
    Blowouts, fires and explosions.
    
    Surface cratering.
    
    Uncontrollable flows of underground natural gas, oil or formation
water.
    
    Natural disasters.
    
    Pipe and cement failures.
    
    Casing collapses.
    
    Stuck drilling and service tools.
    
    Abnormal pressure formations.
    
    Environmental hazards such as natural gas leaks, oil spills, pipeline
ruptures or discharges of toxic gases.
    
    Capacity constraints, equipment malfunctions and other problems at
third-party operated platforms, pipelines and gas processing plants over which we
have no control.
    
    Repeated shut-ins of our well bores could significantly damage our well
bores.
    
    Required workovers of existing wells that may not be successful.
  
    
    Injury or loss of life.
    
    Reservoir damage.
    
    Severe damage to and destruction of property or equipment.
    
    Pollution and other environmental damage.
    
    Clean-up responsibilities.
    
    Regulatory investigations and penalties.
    
    Suspension of our operations or repairs necessary to resume operations.
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Not hedging our production may result in losses.
  Our ability to market our natural gas and oil may be impaired by capacity constraints and equipment
malfunctions on the platforms, gathering systems, pipelines and gas plants that transport and
process our natural gas and oil.
  We may not have title to our leased interests and if any lease is later rendered invalid, we may
not be able to proceed with our exploration and development of the lease site.
  Competition in the natural gas and oil industry is intense, and we are smaller and have a more
limited operating history than many of our competitors.
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We are subject to complex laws and regulations, including environmental regulations that can
adversely affect the cost, manner or feasibility of doing business.
  
    
    Require that we obtain permits before commencing drilling.
    
    Restrict the substances that can be released into the environment in
connection with drilling and production activities.
    
    Limit or prohibit drilling activities on protected areas, such as
wetlands or wilderness areas.
    
    Require remedial measures to mitigate pollution from former operations,
such as plugging abandoned wells.
  We cannot control the activities on properties we do not operate.
  
    
    Timing and amount of capital expenditures.
    
    The operators expertise and financial resources.
    
    Approval of other participants in drilling wells.
    
    Selection of technology.
 We are highly dependent on our management team, JEX, exploration partners and third-party
consultants and any failure to retain the services of such parties could adversely affect our
ability to effectively manage our overall operations or successfully execute current or future
business strategies.
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Acquisition prospects are difficult to assess and may pose additional risks to our operations.
  
    
    Recoverable reserves.
    
    Exploration potential.
    
    Future natural gas and oil prices.
    
    Operating costs.
    
    Potential environmental and other liabilities and other factors.
    
    Permitting and other environmental authorizations required for our
operations.
   
    
    Problems integrating the purchased operations, personnel or
technologies.
    
    Unanticipated costs.
    
    Diversion of resources and management attention from our exploration
business.
    
    Entry into regions or markets in which we have limited or no prior
experience.
    
    Potential loss of key employees, particularly those of the acquired
organization.
 Anti-takeover provisions of our certificate of incorporation, bylaws and Delaware law could
adversely effect a potential acquisition by third-parties that may ultimately be in the financial
interests of our stockholders.
  
    
    Designate the terms of and issue new series of preferred stock.
    
    Limit the personal liability of directors.
    
    Limit the persons who may call special meetings of stockholders.
    
    Prohibit stockholder action by written consent.
    
    Establish advance notice requirements for nominations for election of
the board of directors and for proposing matters to be acted on by stockholders at
stockholder meetings.
    
    Require us to indemnify directors and officers to the fullest extent
permitted by applicable law.
    
    Impose restrictions on business combinations with some interested
parties.
 Our common stock is thinly traded.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate and Credit Rating Risks.
  Commodity Risk
 
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors
   38




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Item 5. Other Information
       39




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Item 6. Exhibits
 (a) Exhibits:
  ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Contango Oil & Gas Company. (1)3.2
    
    Bylaws of Contango Oil & Gas Company. (1)3.3
    
    Agreement of Plan of Merger of Contango Oil & Gas Company, a Delaware corporation, and
Contango Oil & Gas Company, a Nevada corporation. (1)3.4
    
    Amendment to the Certificate of Incorporation of Contango Oil & Gas Company. (2)4.1
    
    Facsimile of common stock certificate of Contango Oil & Gas Company. (3)4.2
    
    Certificate of Designation of Series F Junior Preferred Stock of Contango Oil & Gas Company
dated September 30, 2008. (4)4.3
    
    Rights Agreement, dated as of September 30, 2008, between Contango Oil & Gas Company and
Computershare Trust Company, N.A., as Rights Agent. (4)10.1
    
    $50,000,000 Amended and Restated Credit Agreement dated as of March 31, 2009 among Contango
Oil & Gas Company, Contango Energy Company, and Contango Operators Inc. as Borrowers, Guaranty
Bank, as administrative agent and as issuing lender, and the lenders party thereto from time
to time. 23.1
    
    Consent of William M. Cobb & Associates, Inc. 31.1
    
    Certification required by Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934. 32.1
    
    Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 
 
 
    
    Filed herewith.1.
    
    Filed as an exhibit to the Companys report on Form 8-K, dated December 1, 2000, as
filed with the Securities and Exchange Commission on December 15, 2000.2.
    
    Filed as an exhibit to the Companys report on Form 10-QSB for the quarter ended
December 31, 2002, dated November 14, 2002, as filed with the Securities and Exchange
Commission.3.
    
    Filed as an exhibit to the Companys Form 10-SB Registration Statement, as filed with
the Securities and Exchange Commission on October 16, 1998.4.
    
    Filed as an exhibit to the Companys report on Form 8-K, dated September 30, 2008, as
filed with the Securities and Exchange Commission on October 1, 2008.  40




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SIGNATURES
  CONTANGO OIL & GAS COMPANYDate:  May 11, 2009
    By:
    /s/  KENNETH R. PEAKKenneth R. PeakChairman, Chief Executive Officer and
Chief Financial Officer

(Principal Executive and Financial Officer)Date:  May 11, 2009
    By:
    /s/  LESIA BAUTINALesia BautinaSenior Vice President and Controller
(Principal Accounting Officer)  41




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EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Contango Oil & Gas Company. (1)3.2
    
    Bylaws of Contango Oil & Gas Company. (1)3.3
    
    Agreement of Plan of Merger of Contango Oil & Gas Company, a Delaware corporation, and
Contango Oil & Gas Company, a Nevada corporation. (1)3.4
    
    Amendment to the Certificate of Incorporation of Contango Oil & Gas Company. (2)4.1
    
    Facsimile of common stock certificate of Contango Oil & Gas Company. (3)4.2
    
    Certificate of Designation of Series F Junior Preferred Stock of Contango Oil & Gas Company
dated September 30, 2008. (4)4.3
    
    Rights Agreement, dated as of September 30, 2008, between Contango Oil & Gas Company and
Computershare Trust Company, N.A., as Rights Agent. (4)10.1
    
    $50,000,000 Amended and Restated Credit Agreement dated as of March 31, 2009 among Contango
Oil & Gas Company, Contango Energy Company, and Contango Operators Inc. as Borrowers, Guaranty
Bank, as administrative agent and as issuing lender, and the lenders party thereto from time
to time. 23.1
    
    Consent of William M. Cobb & Associates, Inc. 31.1
    
    Certification required by Rules 13a-14 and 15d-14 under the
Securities Exchange Act of 1934. 32.1
    
    Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 
 
 
    
    Filed herewith.1.
    
    Filed as an exhibit to the Companys report on Form 8-K, dated December 1, 2000, as
filed with the Securities and Exchange Commission on December 15, 2000.2.
    
    Filed as an exhibit to the Companys report on Form 10-QSB for the quarter ended
December 31, 2002, dated November 14, 2002, as filed with the Securities and Exchange
Commission.3.
    
    Filed as an exhibit to the Companys Form 10-SB Registration Statement, as filed with
the Securities and Exchange Commission on October 16, 1998.4.
    
    Filed as an exhibit to the Companys report on Form 8-K, dated September 30, 2008, as
filed with the Securities and Exchange Commission on October 1, 2008.  42