CRZO Carrizo Oil and Gas Inc

HOUSTON, March 20 /PRNewswire-FirstCall/ -- Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) today reported the Company's financial results for the fourth quarter of 2006, which included the following highlights: Results for the Fourth Quarter 2006 -- * Record Production of 3.66 Bcfe, or 39,740 Mcfe/d. * Revenue of $24.2 million. * Net Income of $4.3 million. * EBITDA, as defined below, of $19.5 million. (Logo: http://www.newscom.com/cgi-bin/prnh/20030523/CRZOLOGO ) Production volumes during the three months ended December 31, 2006 were 3.66 Bcfe, 34 percent higher compared to 2.73 Bcfe during the fourth quarter of 2005. The increase was largely due to new production contributions from the Galloway Gas Unit II, well #1 and increased production from the Barnett Shale play. Revenues for the three months ended December 31, 2006 were $24.2 million, as compared to $28.1 million during the quarter ended December 31, 2005. The decrease in revenues was primarily driven by lower realized natural gas prices partially offset by higher production. Carrizo's average oil sales price increased five percent to $59.09 per barrel compared to $56.43 per barrel during the fourth quarter of 2005, while the average natural gas sales price decreased 41 percent to $6.17 per Mcf compared to $10.40 per Mcf in the fourth quarter of 2005. The above prices exclude the cash effect of hedging activities. Prices that include the cash effect of hedges are presented in the table below. The Company reported net income of $4.3 million, or $0.17 and $0.16 per basic and diluted share, respectively, for the three months ended December 31, 2006, as compared to $13.5 million, or $0.56 and $0.54 per basic and diluted share for the same quarter during 2005. Excluding $0.5 million of non-cash, after-tax expenses, comprised of the mark-to-market unrealized gain of $1.0 million on derivatives, the stock compensation expense of $0.6 million and the bad debt expense of $0.9 million, net income for the quarter ended December 31, 2006 was $4.8 million, or $0.19 and $0.18 per basic and diluted share, respectively. EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the fourth quarter of 2006 was $19.5 million, or $0.76 and $0.74 per basic and diluted share, respectively, as compared to $20.4 million, or $0.84 and $0.82 per basic and diluted share, respectively, during the fourth quarter of 2005. Lease operating expenses (excluding production taxes) increased to $4.8 million during the three months ended December 31, 2006 as compared to $2.2 million for the fourth quarter of 2005, largely due to the increased well count of Barnett Shale wells, increased production from other wells drilled in 2006, higher workover expense, increased ad valorem taxes and the rising costs of oilfield services. Depreciation, depletion and amortization expenses ("DD&A") were $9.5 million during the three months ended December 31, 2006 ($2.60 per Mcfe) as compared to $7.0 million ($2.55 per Mcfe) during the fourth quarter of 2005. The increase in DD&A expense was due primarily to increased production. General and administrative expenses ("G&A") decreased to $2.1 million during the three months ended December 31, 2006 from $2.6 million during the same quarter of 2005 due largely to the decrease in contract labor costs that were associated with our integrated software migration project which is now largely complete. During the fourth quarter of 2006, the Company recorded $1.4 million in bad debt expense largely attributable to an outside operator who filed for Chapter 11 bankruptcy in fourth quarter 2006. Accordingly, the Company has reserved a majority of its receivable due from the operator for October production and for certain cash advances on near-term drilling projects. Non-cash stock-based compensation expense was $0.9 million ($0.6 million after tax) for the three months ended December 31, 2006. The net gain on derivatives was $4.4 million during the three months ended December 31, 2006, comprised of (1) $1.5 million ($1.0 million after tax) for the unrealized mark-to-market, non-cash gain on derivatives ($2.4 million gain on oil and gas derivatives and $0.9 million loss on interest rate swaps) and (2) $2.9 million gain for cash settled derivatives ($2.0 million gain on oil and gas derivatives, $0.3 million gain on interest rate swaps and $0.6 million gain on the sell down of the interest rate swaps as a result of the amendment to the Company's second lien credit facility in December 2006). Interest expense, net of amounts capitalized, was $2.6 million for the three months ended December 31, 2006 compared to $2.2 million for the three months ended December 31, 2005. The increase is primarily attributable to the borrowings under the Company's senior secured credit facility beginning in May 2006. Results for the Year Ended 2006 -- * Record production of 11.7 Bcfe. * Record revenue of $82.9 million. * Record Net Income of $18.2 million. * EBITDA, as defined below, of $63.4 million. Production volumes for the year ended December 31, 2006 were a record 11.7 Bcfe, 22 percent higher compared to 9.6 Bcfe during the same period of 2005. Revenues for the year ended December 31, 2006 were $82.9 million, an increase of 6.1 percent from 2005 revenues of $78.2 million. The increase in revenues was primarily driven by higher production. Carrizo's average natural gas sales price for 2006 decreased 17 percent to $6.56 compared to $7.91 per Mcf in 2005, and the average oil sales price for 2006 increased 13 percent to $63.62 per barrel from $56.36 per barrel in 2005. The above prices exclude the cash effect of hedging activities. Prices that include cash effect of hedges are presented in the table below. The Company reported net income of $18.2 million, or $0.74 and $0.71 per basic and diluted share, respectively, for the year ended December 31, 2006, as compared to $10.6 million, or $0.45 and $0.44 per basic and diluted share for the same period during 2005. Excluding a $3 million non-cash, after-tax benefit, comprised of the mark-to-market unrealized gain of $6.0 million on derivatives, the stock compensation expense of $1.9 million, the loss on early extinguishment of debt of $0.2 million, and the bad debt expense of $0.9 million, net income for the year ended December 31, 2006 was $15.2 million, or $0.61 and $0.60, respectively, per basic and diluted share. EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) for 2006 was $63.4 million, or $2.55 and $2.48 per basic and diluted share, respectively, as compared to $56.2 million, or $2.39 and $2.31 per basic and diluted share, respectively, during 2005. Lease operating expenses (excluding production taxes) increased to $13.0 million during the year ended 2006 as compared to $6.3 million for the same period of 2005 largely due to the increased well count of Barnett Shale wells, increased production, higher workover expenses, rising costs of oilfield services and higher ad valorem taxes. Depreciation, depletion and amortization expenses ("DD&A") were $31.1 million for 2006 ($2.66 per Mcfe) as compared to $21.4 million ($2.22 per Mcfe) during the same period of 2005. The increase in DD&A expense was due to increased production and an increase in the DD&A rate primarily due to additions to the proved property cost base. General and administrative expenses ("G&A") increased to $10.6 million during 2006 from $8.8 million during 2005. The increase in G&A was due primarily to higher incentive compensation and base salary costs of $0.1 million; increased contract labor costs of $1.1 million to cover certain accounting staff vacancies and to support the continued phase-in of our new integrated software system; and $0.2 million in higher audit fees primarily related to the Company's 2005 financial restatement for mark-to-market accounting of derivatives. Non-cash stock-based compensation expense was $2.9 million ($1.9 million after tax) for the year ended December 31, 2006 compared to $2.5 million for the prior year. The net gain on derivatives was $16.5 million for the year ended December 31, 2006, comprised of (1) $9.3 million ($6.0 million after tax) for the unrealized mark-to-market, non-cash gain on derivatives ($9.9 million gain on oil and gas derivatives and $0.6 million loss on interest rate swaps) and (2) $7.2 million for realized derivative gains ($5.6 million gain for oil and gas derivatives, $1.0 million gain on interest rate swaps and $0.6 million gain on the sell down of the interest rate swaps as a result of the amendment to the Company's second lien credit facility in December 2006). Loss on the early extinguishment of debt was $0.3 million ($0.2 million after tax) in connection with the Company's refinancing of its first lien credit facility in May 2006. The Company's borrowing base availability under its senior secured credit facility was $65.0 million with $41.0 million drawn and outstanding at December 31, 2006. Interest expense, net of amounts capitalized, was $9.1 million for the year ended December 31, 2006 compared to $5.2 million for the same period in 2005. The increase was attributable to the higher debt level following the Company's July 2005 refinancing and to borrowings under the Company's senior secured credit facility beginning in May 2006. S.P. Johnson IV, Carrizo's President and Chief Executive Officer, commented, "Carrizo completed one of its best operational quarters on record, including record production of 39.7 MMcfe/d. We also continue to grow our Barnett Shale production which is currently about 21 MMcfe/d with several expected high rate wells waiting on pipeline hook-up." "We continue to define the Company's upside potential with Barnett Shale downspacing. We have successfully completed the frac and have begun flow testing a horizontal Barnett Shale well drilled in 'Tier 2' Erath County, Texas. Two of our high potential 'core' wells in southeast Tarrant County, Texas tested with initial flowback rates of 4.2 MMcf/d and 6 MMcf/d which were still increasing when shut-in to run tubing. First production from these wells is expected in April." "We remain focused on expanding our acreage position in our other Shale plays, in which we now have over 240,000 net acres. In the Floyd Shale in Mississippi, where we have leased over 134,000 net acres, we have completed processing the data on our 3-D survey and recently spudded our first Floyd Shale well." "In the Gulf Coast, we successfully drilled our Doberman prospect in Liberty County, Texas, where we retained a 71 percent working interest, encountering 57 feet of pay. First production is expected in May 2007. In Harris County, the Baby Ruth discovery well went online to sales March 16th. The production rate is currently up to 6.5 MMcfe/d, and we expect it to be up to 10 MMcfe/d within three days. In Matagorda County, our company-operated Mega-Mata well has been logged and an initial flow test is scheduled later in March 2007." Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, exploitation and production of oil and natural gas primarily in proven onshore trends along the Texas and Louisiana Gulf Coast regions and the Barnett Shale area in North Texas. Carrizo controls significant prospective acreage blocks and utilizes advanced 3-D seismic techniques to identify potential oil and gas reserves and drilling opportunities. Statements in this news release, including but not limited to those relating to the Company's or management's intentions, beliefs, expectations, hopes, projections, assessment of risks, estimations, plans or predictions for the future, including high potential wells, production rate of Barnett Shale wells awaiting hook-up, timing of production from the wells in the "Tier 2" Erath County, Texas and in the Doberman prospect, production rate of the Baby Ruth discovery well, potential effects or timing, cash flow, the expected timing of drilling of additional wells, and other statements that are not historical facts are forward looking statements that are based on current expectations. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward looking statements include the results and dependence on exploratory drilling activities, operating risks, oil and gas price levels, land issues, availability of equipment, weather and other risks described in the Company's Form 10-K/A for the year ended December 31, 2005 and its other filings with the Securities and Exchange Commission. Contact: Carrizo Oil & Gas, Inc. B. Allen Connell, Director of Investor Relations Paul F. Boling, Chief Financial Officer (713) 328-1000 CARRIZO OIL & GAS, INC. STATEMENTS OF OPERATIONS (unaudited) THREE MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2006 2005 2006 2005 Oil and natural gas revenues $24,218,311 $28,113,229 $82,945,234 $78,155,286 Costs and expenses: Lease operating expenses 4,762,486 2,183,394 12,956,496 6,337,168 Production tax 684,792 1,184,865 3,470,338 4,100,067 Depreciation, depletion and amortization 9,498,613 6,983,562 31,128,925 21,374,051 General and administrative expenses 2,124,393 2,556,567 10,594,460 8,789,003 Bad debt expense 1,385,911 - 1,385,911 - Accretion expense related to asset retirement obligations 259,605 17,531 496,774 70,121 Stock-based compensation expense 930,755 (491,506) 2,929,620 2,453,598 Total costs and expenses 19,646,555 12,434,413 62,962,524 43,124,008 Operating income 4,571,756 15,678,816 19,982,710 35,031,278 Mark-to-market gain (loss) on derivatives, net 1,523,184 7,883,849 9,257,035 (3,610,346) Realized gain (loss) on derivatives, net 2,847,342 (1,583,660) 7,200,577 (2,272,579) Gain on asset retirement obligation 196,476 - 196,476 - Equity in income (loss) on Pinnacle Gas Resources, Inc. - 631,496 34,914 (2,541,935) Loss on extinguishment of debt - - (294,094) (3,721,021) Other income and expenses, net 29,203 (165,126) 231,517 (457,169) Interest income 126,211 383,743 969,176 904,407 Interest expense, net of amounts capitalized (2,577,496) (2,249,393) (9,095,923) (5,198,852) Income before income taxes 6,716,676 20,579,725 28,482,388 18,133,783 Income tax expense (benefit) 2,440,675 7,047,839 10,233,752 7,500,332 Net income available to common shares $4,276,001 $13,531,886 $18,248,636 $10,633,451 EBITDA (see table below) $19,523,185 $20,439,617 $63,356,034 $56,199,299 Basic net income per common share $0.17 $0.56 $0.74 $0.45 Diluted net income per common share $0.16 $0.54 $0.71 $0.44 Basic weighted average common shares outstanding 25,650,503 24,251,430 24,826,673 23,491,976 Diluted weighted average common shares outstanding 26,433,762 25,047,409 25,564,502 24,361,453 (A) Interest expense, net of amounts capitalized, consists of the following: Gross interest expense $(5,318,540) $(4,198,011) $(19,070,792) $(11,043,498) Capitalized interest 2,741,044 1,948,618 9,974,869 5,844,646 CARRIZO OIL & GAS, INC. CONDENSED BALANCE SHEETS 12/31/06 12/31/05 (unaudited) ASSETS: Cash and cash equivalents $5,407,502 $28,724,993 Fair value of derivative financial instruments 5,737,056 - Other current assets 29,912,455 31,459,236 Property and equipment, net 445,447,054 314,074,507 Other assets 5,519,325 6,156,559 Investment in Pinnacle Gas Resources, Inc. 2,771,266 2,687,199 TOTAL ASSETS $494,794,658 $383,102,494 LIABILITIES AND EQUITY: Accounts payable and accrued liabilities $54,554,607 $46,778,992 Fair value of derivative financial instruments - 1,563,059 Current maturities of long-term debt 1,507,931 1,534,989 Long-term notes payable 187,250,744 147,759,355 Deferred income taxes 33,832,471 24,550,569 Other liabilities 4,462,001 5,530,801 Equity 213,186,904 155,384,729 TOTAL LIABILITIES AND EQUITY $494,794,658 $383,102,494 Income tax expense for the year ended December 31, 2006 and 2005 includes a $9,828,973 and $7,236,502, respectively, provision for deferred income taxes and a $404,779 and $263,830, respectively, provision for currently payable franchise taxes. CARRIZO OIL & GAS, INC. NON-GAAP DISCLOSURES (unaudited) Reconciliation of Net THREE MONTHS ENDED YEAR ENDED Income to EBITDA DECEMBER 31, DECEMBER 31, 2006 2005 2006 2005 Net Income $4,276,001 $13,531,886 $18,248,636 $10,633,451 Adjustments: Depreciation, depletion and amortization 9,498,613 6,983,562 31,128,925 21,374,051 Unrealized mark-to- market (gain) loss on derivatives (1,523,184) (7,883,849) (9,257,035) 3,610,346 Gain on asset retirement obligation (196,476) - (196,476) - Loss on extinguishment of debt - - 294,094 3,721,021 Interest expense, net of amounts capitalized and interest income 2,451,285 1,865,650 8,126,747 4,294,445 Income tax expense 2,440,675 7,047,839 10,233,752 7,500,332 Equity in Pinnacle Gas Resources, Inc. - (631,496) (34,914) 2,541,935 Stock based compensation expense 930,755 (491,506) 2,929,620 2,453,598 Bad debt expense 1,385,911 - 1,385,911 - Accretion expense related to asset retirement obligations 259,605 17,531 496,774 70,121 EBITDA, as defined $19,523,185 $20,439,617 $63,356,034 $56,199,299 EBITDA per basic common share $0.76 $0.84 $2.55 $2.39 EBITDA per diluted common share $0.74 $0.82 $2.48 $2.31 CARRIZO OIL & GAS, INC. PRODUCTION VOLUMES AND PRICES (unaudited) Production volumes - Oil and condensate (Bbls) 75,882 55,809 254,901 234,287 Natural gas (Mcf) 3,200,801 2,399,239 10,176,091 8,206,457 Natural gas equivalent (Mcfe) 3,656,093 2,734,093 11,705,497 9,612,179 Average sales prices - Oil and condensate (per Bbl) $59.09 $56.43 $63.62 $56.36 Oil and condensate (per Bbl) - with hedge impact $59.15 $56.43 $63.21 $55.94 Natural gas (per Mcf) $6.17 $10.40 $6.56 $7.91 Natural gas (per Mcf) - with hedge impact $6.76 $9.74 $7.11 $7.65 Natural gas equivalent (per Mcfe) $6.62 $10.28 $7.09 $8.13 http://www.newscom.com/cgi-bin/prnh/20030523/CRZOLOGO http://photoarchive.ap.org/ DATASOURCE: Carrizo Oil & Gas, Inc. CONTACT: B. Allen Connell, Director of Investor Relations, or Paul F. Boling, Chief Financial Officer, both of Carrizo Oil & Gas, Inc., +1-713-328-1000

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