Contango Oil & Gas Affiliates Apparent High Bidders on Five Gulf of Mexico Lease Blocks.

Energy Editors/Business Editors

HOUSTON--(BUSINESS WIRE)--Aug. 20, 2003

Contango Oil & Gas Company (AMEX:MCF) announced today that two affiliated companies were the apparent high bidders on five blocks offered at the Western Gulf of Mexico Lease Sale #187 held Aug. 20, 2003 in New Orleans. An apparent high bid ("AHB") gives the bidding party propriety in award of offered tracts, notwithstanding the fact that the Minerals Management Service ("MMS") may reject all bids for a given tract. The MMS review process can take up to 90 days on some bids. Upon completion of that process, final results for all AHBs will be known.

Contango's 67% owned affiliate, Contango Offshore Exploration LLC ("COE"), had the AHB on four lease blocks with bids totaling $1,314,200 as follows:

           Block                        COE's WI        Total Bid
      ---------------                   --------        ---------
      High Island A16                     100%           $279,500
      East Breaks 283                     100%           $295,900
      East Breaks 369                     100%           $231,700
      East Breaks 370                     100%           $507,100
                                                       ----------
                                                       $1,314,200
                                                       ==========

Contango's 33% owned affiliate, Republic Exploration LLC ("Republic"), had the AHB on the following lease block:

           Block                      Republic's WI     Total Bid
      ---------------                 -------------     ---------
      High Island 113                     100%           $212,900
                                                        =========

If these blocks are awarded, Contango will own interests, both directly and indirectly vis-a-vis its affiliates, in 21 federal and state lease blocks in the Gulf of Mexico.

Kenneth R. Peak, chairman and chief executive officer, said, "Contango was the apparent high bidder on five of the six blocks we bid on. The three bids in the East Breaks area are in deep water (1,600 to 2,500 feet) and represent a new exploration region for Contango. Our business plan for deep water exploration is the same as for our deep shelf exploration. We intend to farmout these prospects and retain only a reversionary working interest or an overriding royalty interest. In our deep shelf exploration program, we expect three of our prospects to begin drilling between now and year end."

Mr. Peak continued, "Our current onshore production is approximately 20,000 MMbtue per day, or approximately $3.0 million in monthly revenues assuming $5.00 per MMbtue. At this level of revenues, our EBITDAX is approximately $2.0 to $2.5 million per month."

EBITDAX represents earnings before interest, income taxes, depreciation, depletion and amortization, exploration expenditures, including gain (loss) from hedging activities. We have reported EBITDAX because we believe EBITDAX is a measure commonly reported and widely used by investors as an indicator of a company's operating performance and ability to incur and service debt. We believe EBITDAX assists investors in comparing a company's performance on a consistent basis without regard to depreciation, depletion and amortization, impairment of natural gas and oil properties and exploration expenses, which can vary significantly depending upon accounting methods. EBITDAX is not a calculation based on the U.S. generally accepted accounting principles and should not be considered an alternative to net income (loss) in measuring our performance or used as an exclusive measure of cash flow because it does not consider the impact of working capital growth, capital expenditures, debt principal reductions and other sources and uses of cash, which are disclosed in our statements of cash flows. Investors should carefully consider the specific items included in our computation of EBITDAX. While we have disclosed our EBITDAX to permit a more complete comparative analysis of our operating performance and debt servicing ability relative to other companies, investors should be cautioned that EBITDAX as reported by us may not be comparable in all instances to EBITDAX as reported by other companies. EBITDAX amounts may not be fully available for management's discretionary use, due to requirements to conserve funds for capital expenditures, debt service, preferred stock dividends and other commitments.

Contango is a Houston-based, independent natural gas and oil company. The Company explores, develops, produces and acquires natural gas and oil properties primarily onshore in the Gulf Coast and offshore in the Gulf of Mexico. Contango also own a 10% partnership interest in a proposed LNG terminal in Freeport, Texas. Additional information can be found on our Web page at www.mcfx.biz.

This news release contains forward-looking statements within the meaning of the Securities Litigation Reform Act. The statements reflect the Company's current views with respect to future events that involve risks and uncertainties including uncertainties related to successful negotiations with other parties, oil and gas exploration risks, price volatility, production levels, closing of transactions, capital availability, operational and other risks, uncertainties and factors described from time to time in the Company's publicly available SEC reports. In light of these risks and uncertainties, the forward-looking events described in this release might not occur.