Houston-based Contango Oil & Gas Co. (Amex: MCF) found gas at Mary Rose #1 in 11 feet of water in the Gulf of Mexico, chairman and chief executive Ken Peak announced during the IPAA's OGIS-West investor conference in San Francisco.

The offshore Louisiana well, on State Lease No. 18640, will add 154 billion cubic feet equivalent to Contango's proved reserves, a 68% increase.

The $589-million-market-cap company's Dutch #1 and #2 wells, in the same area, are currently producing 65 million cubic feet quivalent per day, and this will increase to 110 million cubic feet in November when Dutch #3 comes online, he said.

"Our current plans are to complete and production-test our Mary Rose #1 well by the end of October," Peak said. About 45 days later "we will spud our Mary Rose #2 well and immediately thereafter spud our Mary Rose #3 well. We'll have five straws in it."

Unlike other independents, Peak has no plans to hedge production, he added. "If you buy Contango stock, you are in for the ride," he said. "I'm in for the upside, in for the down."

The stock is held by 30 investors, including Peak (18%) and various hedge funds (21%). Contango also has assets in the Fayetteville shale in Arkansas and has a 10% interest in the Freeport LNG regasification terminal in Freeport, Texas.

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