Contango Oil & Gas Co. on Friday announced that the Southern Ute Indian Tribe Growth Fund has invested $2.5 million in Contango, purchasing 2.5 million shares of the company's common stock at $1.00/share. Houston-based Contango also has granted to the Southern Ute Indian Tribe Growth Fund a 90-day option to purchase an additional 2.5 million shares of common stock for $2.5 million. In addition, the fund agreed to purchase nearly 20% of Contango's oil and gas projects and proved properties.
Contango intends to use the $2.5 million already invested to continue its exploration program and for general corporate purposes. As part of these transactions, the company's board of directors has appointed Robert J. Zahradnik, director of operations for the growth fund, as a director of the company.
The Southern Ute Indian Tribe Growth Fund is an investment arm of the Southern Ute Indian Tribe in Colorado. The tribe is a major producer and transporter of coalbed methane.
Contango and the Southern Ute Indian Tribe Growth Fund have also entered into a 2-year participation agreement, permitting the fund to acquire an 18.75% interest in all of Contango's oil and natural gas exploration and development projects and proved property acquisitions. Simultaneously with the equity purchase, the fund invested $480,000 in the company's exploration program.
Kenneth R. Peak, chairman and CEO of Contango, said the deal marks the tribe's first energy investment outside of Colorado.