FORM 10-K CONTANGO OIL & GAS COMPANY

CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES (Unaudited)
Standardized Measure. The standardized measure of discounted future net cash flows relating to the
Company’s ownership interests in proved natural gas and oil reserves as of June 30, 2009, 2008 and 2007 are shown
below:
As of June 30,
2009 2008 2007
Future cash flows………………………………...……… $ 1,750,118,803 $ 5,635,443,766 $ 575,634,244
Future operating expenses……………...………………… (248,468,246) (211,104,075) (56,151,152)
Future development costs………………………………… (16,225,612) (20,712,845) (51,478,940)
Future income tax expenses………………...…………… (447,934,853) (1,733,031,168) (114,832,834)
Future net cash flows…………………………..……… 1,037,490,092 3,670,595,678 353,171,318
10% annual discount for
estimated timing of cash flows……………...……… (399,398,648) (1,436,677,549) (100,874,043)
Standardized measure
of discounted future net cash flows……………..……… $ 638,091,444 $ 2,233,918,129 $ 252,297,275
Future cash flows represent expected revenues from production and are computed by applying fiscal yearend
prices of natural gas and oil to fiscal year-end quantities of proved natural gas and oil reserves. The prices used
in computing fiscal year end 2009, 2008 and 2007 future cash flows were $4.09, $14.16 and $6.45 per Mcf for
natural gas, respectively; $67.98, $142.58 and $65.69 per barrel of oil, respectively; and $35.66 and $98.00 per
barrel of natural gas liquids in fiscal year 2009 and 2008, respectively. The Company did not begin producing
significant amounts of natural gas liquids until 2008.
Future operating expenses and development costs are computed primarily by the Company’s petroleum
engineers by estimating the expenditures to be incurred in developing and producing the Company’s proved natural
gas and oil reserves at the end of the year, based on year-end costs and assuming continuation of existing economic
conditions. Future development costs relate to compression charges at our EI-11H platform, abandonment costs,
future development at Grand Isle 70, and recompletion costs. Grand Isle 70 has been drilled and logged, we
therefore classify this well as proved developed non producing.
Future income taxes are based on year-end statutory rates, adjusted for tax basis and applicable tax credits.
A discount factor of 10 percent was used to reflect the timing of future net cash flows. The standardized measure of
discounted future net cash flows is not intended to represent the replacement cost or fair value of the Company’s
natural gas and oil properties. An estimate of fair value would also take into account, among other things, the
recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, and a discount
factor more representative of the time value of money and the risks inherent in reserve estimates of natural gas and
oil producing operations.
DB2/21043537.7 F-27