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Contango Oil & Gas Company and Mid-Con Energy Partners, LP Announce Strategic Merger Continuing
Contangos Consolidation Strategy; Contango Announces Related Increase in Borrowing Base
FORT WORTH, TX, and TULSA, OK, October 26, 2020 Contango Oil & Gas Company (Contango) (NYSE American: MCF) andMid-Con Energy Partners, LP (Mid-Con) (NASDAQ: MCEP) today announced they have entered into an agreement to combine in an all-stock merger transaction. The combination continues Contangos consolidation strategy, increases its exposure to oil reserves at an attractive price, increases corporate margins via scale and further cost rationalization, and amplifies Contangos ability to play offense amid the dislocation in the sector, while providing Mid-Cons unitholders with greater liquidity, financial stability and opportunities for growth on a larger platform.
Acquisition of PDP heavy reserves by Contango at an attractive unlevered return
Accretive to Contangos reserve base
Mid-Cons assets oil weighted with low production decline profile, complementing Contangos higher production and cash flow profile
Leverages Contangos familiarity with Mid-Cons assets and operations via Mid-Cons Management Services Agreement
Offers Mid-Cons unitholders enhanced liquidity, financial stability and opportunities for growth through a larger platform
Further cost rationalization expected to be realized via consolidation of the entities
Immediate free cash flow accretion(1)
Enhanced liquidity for the combined entity
Maintains strong balance sheet and low leverage profile of Contango
Maintains simple capital structure comprised of bank debt and common equity
Adds PUD inventory with low CAPEX requirement with opportunity for near term conversion to PDP
Under the terms of the merger agreement, Mid-Con unitholders will receive 1.75 shares of Contango common stock for each Mid-Con common unit owned, representing a 5 percent premium based on a 15-day volume weighted average price. This exchange ratio implies an enterprise value for the combined entity in excess of $400 million based on Fridays closing price. Upon completion of the merger and closing of the concurrently announced private placement of Contango common stock, Contango shareholders will own approximately 87 percent of the combined company and Mid-Con unitholders will own approximately 13 percent of the combined company on a fully diluted basis.
The transaction, which is expected to close in late 2020 or early 2021, has been unanimously approved by the conflicts committee of the board of directors of Mid-Con and by the full board of directors of Mid-Con, and by the disinterested directors of the board of directors of Contango. Voting agreements have been signed by over 50% of holders on both sides of the transaction, including Goff Capital. The closing is subject to customary shareholder and unitholder approvals and other customary conditions to closing. Contangos senior management team will run the combined company, and Contangos board of directors will remain intact. The combined company will be headquartered in Fort Worth, TX but will continue to maintain a presence in both the Houston and Oklahoma markets.
The following information was filed by Contango Oil Gas Co (MCF) on Monday, October 26, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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