Noel Augustus Parks - Coker & Palmer Investment Securities, Inc., Research DivisionSenior
Analyst Exploration, Production and MLPs
Great. And to the degree you have a sense of what potential sellers are thinking, do you think this is a
pretty realistic environment for sellers as far as pricing, hurdling the bid-ask spread? Or do you see signs that theres still a good bit of distance there?
Wilkie Schell Colyer - Contango Oil & Gas CompanyCEO & Director
I would say the bid-ask market has certainly narrowed from, say, Q1, Q2 and I think you tend to see that when
volatility really increases in oil prices, you tend to see bid-ask spreads blow out. And then as the volatility subsides, it kind of narrows.
But most of the sellers, Noel, I would say, that were focused on in most of our pipeline is forced sellers. We like transacting with forced sellers
because we like not having to compete against the hold case. So I would say, in a lot of cases, were negotiating with members of a capital structure other than equity. And so that makes it a little bit easier, we think, to get deals done.
But to answer your question, we do think that, that bid-ask spread has narrowed. And whether youre talking to
equity bondholders or senior secured lenders, we do think that, that has become an area that its easier to transact than it was, say, 6 months ago.
Noel Augustus Parks - Coker & Palmer Investment Securities, Inc., Research DivisionSenior Analyst Exploration, Production and
MLPs
Great, thanks. And I just wanted to check on so the status of the Management Services Agreement, that remains essentially intact until the
closing? Or has that already been essentially unwound at this point?
Wilkie Schell Colyer - Contango
Oil & Gas CompanyCEO & Director
Yes. Noel, thats correct. It will stay intact through the closing of the transaction, at which point well bring those assets into our portfolio and
that Management Services Agreement will go away.
Noel Augustus Parks - Coker & Palmer Investment Securities, Inc., Research
DivisionSenior Analyst Exploration, Production and MLPs
Okay. Great. And you did make the comment a little earlier that you foresee more upside
to the oil price deck than the gas price deck. I just wondered if you could talk a little bit more about it. Were in maybe one of the more bullish gas environments weve had in a while. So but any thoughts on that would be helpful.
Wilkie Schell Colyer - Contango Oil & Gas CompanyCEO & Director
Yes. Look, I think we are in a, I guess, a relatively bullish gas environment, although its all relative. I think we just we see the oil supply
picture as being, supply has certainly responded because of basically lack of capital in the sector. And all the bankruptcies, I mean, I think were seeing supply respond in, in a very material way.
On the demand side, we feel very good about long-term demand growth. And Im not talking about 100 years, but 10 or 20. We feel very good about demand
growth over that period of time. The wildcard in there is just demand during COVID, and thats, as I said, a big wildcard. So I think thats a lot of whats priced into the oil price curve here.
And on the gas side, theres a little bit of a substitution effect there, whereby with oil dropping pretty considerably in terms of supply, you do see
more support for the gas curve because of that associated demand but associated supply falling. So we are in a pretty bullish environment for gas, relatively speaking, and that tends to be when we prefer to shift towards oil. So maybe those 2 will
flip-flop, and well see a change in our views.