1071993--9/13/2007--CONTANGO_OIL_&_GAS

related topics

{gas, price, oil}

{personnel, key, retain}

{cost, regulation, environmental}

{acquisition, growth, future}

{loss, insurance, financial}

{customer, product, revenue}

{debt, indebtedness, cash}

{financial, litigation, operation}

{provision, law, control}

{stock, price, share}

{loan, real, estate}

{investment, property, distribution}

We have no ability to control the prices that we receive for natural gas and oil. Natural gas and oil prices fluctuate widely, and low prices would have a material adverse effect on our revenues, profitability and growth. 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 our alliance partners and could be seriously harmed if our alliance agreements were terminated. Our ability to successfully execute our business plan is dependent on our ability to obtain adequate financing. 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. Most of our revenues and production are from our Dutch wells and we depend upon outside third parties to operate and maintain our production, pipelines and processing facilities. Repeated production shut-ins can possibly damage our well bores. We have significant resources committed to our Arkansas Fayetteville Shale play. We are highly dependent on the lending availability of a single company. REX s $50 million note is payable upon demand by the lender. We have outsourced the marketing of our production and the vast majority of our revenues are from one purchaser, Cokinos Energy Corporation. Our capital exploration is focused on two highly capital intensive prospect areas which increases our risk of incurring significant losses. The construction of our LNG receiving terminal in Freeport, Texas is subject to various development and completion risks. If we are not able to fund or finance our 10% ownership in the LNG receiving terminal in Freeport, Texas, including any expansion of the terminal, we may lose our 10% investment in the project. If we default on our loan from the Royal Bank of Scotland plc we could lose our 10% investment in the LNG receiving terminal in Freeport, Texas. 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. 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. The natural gas and oil business involves many operating risks that can cause substantial losses. 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 have no assurance of title to our leased interests. Competition in the natural gas and oil industry is intense, and we are smaller and have a more limited operating history than most of our competitors. We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business. We cannot control the activities on properties we do not operate. Acquisition prospects are difficult to assess and may pose additional risks to our operations. 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. Our common stock is thinly traded.

Full 10-K form ▸

1071993--9/13/2007--CONTANGO_OIL_&_GAS_CO