Contango Oil and Gas Company (MCF) said Monday it has entered into a Limited Liability Company Agreement, or LLC Agreement, to form Exaro Energy III LLC.
According to the agreement, Contango will invest up to $82.5 million in Exaro over the next five years together with other parties for an aggregate commitment of $182.5 million. It expects to fund almost $41.3 million in April.
Contango holds about 45 percent stake in Exaro. This is subject to terms allowing another party to acquire up to $15 million of the company's commitment which may decrease the company's stake in Exaro to about 34 percent.
The other prominent members of Exaro include Sageview Capital LP and Exaro II Jonah, a wholly owned subsidiary of Exaro Energy II LLC and an affliate of Jeffries Capital Partners.
Exaro has entered into an Earning and Development Agreement with Encana Oil & Gas Inc. to provide funding of up to $380 million, including the $182.5 million investment, to continue the development drilling program in a defined area of Encana's Jonah field asset.
Upon the total investment, Exaro will earn 32.5 percent of Encana's working interest in a defined joint venture area that comprises about 5,760 gross acres.
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