idea #14 contango

Contango was written up on VIC recently.  It has no debt, $54 million in cash and PV-10 pretax reserves worth $1.4 billion, or $90/share.  It's well managed by a charismatic CEO who built the company from nothing.  He appears to understand the plight of the average stock investor.  He defended the share price with personal, and substantial corporate buybacks, during the financial crisis. Actions like that warm my heart.  He seems to really understand how to build value.  He's also a self-proclaimed stock trader (which I like).  If there is one natural gas company that you must follow, I'd argue that Contango should be on the list of contenders. 

Why it's trading at this kind of discount on the heels of all their success?  I heard a rumor that the government isn't issuing anymore offshore drilling licenses.  There are pleny of macro reasons to be bearish on natural gas.  Still, it seems cheap and I love this company.  The other thing that bothers me about Contango is the off balance sheet arrangements.  He developed them before Enron blew up and spoke highly of how they contained risks.  Since Enron, he stopped talking about them. He no longer refers to them as off balance sheet arrangement to contain risk.  I don't think any of them could come back to bite shareholders but I'm not sure what they do other than to make the company look really clean.  I wonder if they somehow make his netbacks higher.  I have seen this before in Canada where producers take profits from processing gas and apply them to their own production, thus making their margins look better.  I wonder if something
like that could be happening at Contango in one of their arrangements. 

I saw so much craziness in the natural gas industry during the last leg down in the market, that I'd have to be nuts to buy anything that wasn't an obvious screaming bargain, reinforced by insider buys, in such a calm environment.  I'm just not excited about buying because (1) he's selling and (2) the company is looking squeaky clean, just too perfect.