Contango Oil & Gas Company (NYSE: MCF) reported financial results for the first quarter. The company reported net loss of USD 105.3 Million compared to a net loss of USD 8.6 Million a year ago. The coronavirus pandemic has enacted an economic fall on a worldwide scale. Diminishing the demand for oil all over the world. Global producers, including the OPEC have agreed to cut oil production in April 2020 as pressure on commodity prices increase.
Wilkie S. Colyer, the Company’s President and Chief Executive Officer, said, “The first quarter of 2020 presented numerous challenges for most people and businesses in the United States, as well as around the world. For the energy sector specifically, the adverse impact that the COVID-19 pandemic has had on global demand for oil and gas, along with the inability of OPEC and Russia to agree on production quotas in March 2020 and the resulting influx of production into the global market, have put tremendous pressure on many companies with respect to oil, natural gas and natural gas liquids prices, cash flow and balance sheets. We believe we have fared better than most of our peers as our conservative view on capital spending, our simple capital structure, our aggressive hedging program, our focus on cost reduction and our commitment to maintaining our liquidity and balance sheet flexibility have positioned us to manage through this difficult time. We continue to pursue ways to generate/maximize our cash flow at a relatively low cost of capital, such as through our occasional use of excess oil storage capacity to store unhedged production on a short term basis to capitalize on a contango price curve, and our entering into a management services agreement with Mid-Con Energy Partners, LP whereby we plan to utilize our technical operating and administrative support groups, to generate a fee for service cash flow stream that also benefits the counterparty through G&A cost reduction.
We added hedges during the fourth quarter of 2019 and March of 2020, prior to the dramatic collapse in oil prices, and currently have approximately 70% of our total forecasted PDP oil production for 2020 hedged with swaps at an average floor price of $55.13 per barrel and 68% of our total forecasted PDP gas production for 2020 hedged at an average price of $2.57 per mmbtu. In 2021, we have approximately 67% of total forecasted PDP oil production hedged at $51.71 per barrel. We anticipate that this price environment will continue to put immense pressure on our already distressed industry, and we will be on the lookout for other ways to take advantage of the dislocation. We appreciate the support of our lenders and shareholders and look forward to continuing to execute our business plan in 2020.”