FORM 10-K CONTANGO OIL & GAS COMPANY

Natural Gas, Oil and NGL Production and Average Sales Prices. Our net natural gas production for
the year ended June 30, 2009 was approximately 56.3 Mmcfd, up from approximately 24.8 Mmcfd for the year
ended June 30, 2008. Net oil production for the period was up from 505 bopd to 1,411 bopd, and NGL
production was up from 13,574 gallons per day to 67,953 gallons per day for the same period. The increase in
natural gas, oil and NGL production was principally attributable to our Mary Rose #4 discovery which began
producing in July 2008, our Eloise North discovery which began producing in December 2008, and our Dutch
#4 discovery which began producing in January 2009. This increase was partially offset by reduced production
from our Dutch #1 - #3 wells which were shut-in during all of September, October and the majority of
November 2008 due to Hurricane Ike. The increase in production was also attributable to the additional
interest we purchased in our Dutch and Mary Rose discoveries, effective January 1, 2008. For the year ended
June 30, 2009, the price of natural gas was $6.34 per Mcf while the price for oil and NGLs was $67.72 per
barrel and $1.03 per gallon, respectively. For the year ended June 30, 2008, the price of natural gas was $9.77
per Mcf while the price for oil and NGLs was $108.36 per barrel and $1.55 per gallon, respectively.
Our net natural gas production for the year ended June 30, 2008 was approximately 24.8 Mmcfd, up
from approximately 4.9 Mmcfd for the year ended June 30, 2007. Net oil production for the period was up
from 93 bopd to 505 bopd, and NGL production was up from 512 gallons per day to 13,574 gallons per day for
the same period. The increase in natural gas, oil and NGL production was the result of our Dutch #2 discovery
which began producing in July 2007, our Dutch #3 discovery which began producing in November 2007, our
Mary Rose #1 and #3 discoveries which began producing in April 2008, and our Mary Rose #2 discovery
which began producing in June 2008. Another reason for the increase was the additional interest we purchased
in our Dutch and Mary Rose discoveries, effective January 1, 2008. For the year ended June 30, 2008, the
price of natural gas was $9.77 per Mcf while the price for oil and NGLs was $108.36 per barrel and $1.55 per
gallon, respectively. For the year ended June 30, 2007, the price of natural gas was $6.62 per Mcf while the
price for oil and NGLs was $59.60 per barrel and $0.94 per gallon, respectively.
Operating Expenses. Operating expenses for the year ended June 30, 2009 were approximately $23.7
million which included approximately $10.7 million for workover costs. The remaining costs related mainly to
continuing operations from our four Dutch wells, four Mary Rose wells and Eloise North well, compared to
operating expenses for the year ended June 30, 2008 of approximately $6.8 million which related to continuing
operations from three Dutch wells and three Mary Rose wells. Operating expenses for the year ended June 30,
2007 were approximately $0.9 million which related mainly to only one Dutch well.
Exploration Expense. We reported approximately $20.6 million of exploration expenses for the year
ended June 30, 2009. Of this amount, approximately $7.1 million related to the dry hole the Company drilled
at West Delta 77, $12.5 million related to the dry hole the Company drilled at Eugene Island 56, and the
remaining $1.0 million related to various geological and geophysical activities, seismic data and delay rentals.
We reported approximately $5.7 million of exploration expenses for the year ended June 30, 2008.
Of this amount, approximately $4.2 million was related to the dry hole the Company drilled at High Island
A198, approximately $0.6 million was attributable to the cost to acquire and reprocess 3-D seismic data
offshore in the Gulf of Mexico, and approximately $0.9 million was attributable to the payment of delay
rentals.
We reported approximately $2.4 million of exploration expenses for the year ended June 30, 2007. Of
this amount, approximately $1.4 million was attributable to the cost to acquire and reprocess 3-D seismic data
in the Gulf of Mexico, and approximately $1.0 million was attributable to the payment of delay rentals.
Depreciation, Depletion and Amortization. Depreciation, depletion and amortization for the year
ended June 30, 2009 was approximately $32.7 million. For the year ended June 30, 2008, we recorded
approximately $11.9 million of depreciation, depletion and amortization. The increase in depreciation,
depletion and amortization was primarily attributable to added production from newly added reserves from our
Mary Rose #4, Eloise North and Dutch #4 discoveries, as well as from the additional interest we purchased in
our Dutch and Mary Rose discoveries, effective January 1, 2008.
30