HOUSTON, Aug. 01, 2018 (GLOBE NEWSWIRE) — Contango Oil & Gas Company (NYSE American: MCF) (“Contango” or the “Company”) today announced that its Board of Directors has adopted a Net Operating Loss (“NOL”) Stockholder Rights Plan (the “Rights Plan”) designed to preserve its substantial tax assets, which can be utilized in certain circumstances to offset future U.S. taxable income.
The Board adopted the Rights Plan, which is intended to protect Contango’s tax benefits and to allow all of Contango’s stockholders to realize the long-term value of their investment in the Company, after considering, among other matters, the estimated value of the Company’s tax benefits, the potential for diminution upon an ownership change, and the risk of an ownership change occurring, including the impact of recently disclosed accumulations of Contango common stock. Contango’s ability to use its NOL tax benefits would be substantially limited if it were to experience an “ownership change” as defined under Section 382 of the Internal Revenue Code. An ownership change would occur if stockholders that own (or are deemed to own) at least five percent or more of Contango’s outstanding common stock increased their cumulative ownership in the Company by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The Rights Plan reduces the likelihood that changes in the Company’s investor base would limit Contango’s future use of its tax benefits, which would significantly impair the value of the benefits to all stockholders. The Company believes that no ownership change as defined in Section 382 has occurred as of the date of this press release.
To implement the Rights Plan, the Contango Board of Directors declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of its common stock. The Rights will be exercisable if a person or group acquires 4.95% or more of outstanding Contango common stock (exclusive of treasury shares). The Rights will also be exercisable if a person or group that already owns 4.95% or more of Contango common stock acquires additional shares (other than as a result of a dividend or a stock split). Contango’s existing stockholders that beneficially own in excess of 4.95% of the common stock will be “grandfathered in” at their current ownership level. If the Rights become exercisable, all holders of Rights, other than the person or group triggering the Rights, will be entitled to purchase Contango common stock at a 50% discount. Rights held by the person or group triggering the Rights will become void and will not be exercisable.
The Rights are not taxable to Contango stockholders. The Rights will trade with Contango’s common stock and will expire on the first day after the Company’s 2020 annual meeting of stockholders, unless the Contango stockholders ratify the Rights Plan at the 2020 annual meeting, in which case the term of the Rights Plan is extended to three years. The Contango Board may terminate the Rights Plan or redeem the Rights prior to the time the Rights are triggered.
Additional information with respect to the Rights Plan and the related Rights will be contained in a Current Report on Form 8-K that Contango will file with the Securities and Exchange Commission. The Rights issued in the Rights Plan are issued pursuant to a Rights Agreement dated August 1, 2018 between Contango and Continental Stock Transfer & Trust Company, as Rights Agent, a copy of which will be filed as an exhibit to the Current Report on Form 8-K.
About the Company
Contango Oil & Gas Company is a Houston, Texas based, independent energy company whose business is to maximize production from its shallow offshore Gulf of Mexico properties and onshore properties in Texas and Wyoming, and to use that cash flow to explore, develop, exploit, produce and acquire crude oil and natural gas properties in the Texas and Rocky Mountain regions of the United States. Additional information is available on the Company’s website at http://www.contango.com.