CRZO Carrizo Oil and Gas Inc

HOUSTON, Nov. 8 /PRNewswire-FirstCall/ -- Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) today reported the Company's financial results for the third quarter of 2007, which included the following highlights: Results for the Third Quarter 2007 -- -- Record production of 4.4 Bcfe, or 48,210 Mcfe/d. -- Revenue of $30.3 million. -- Net income of $5.4 million, or net income of $5.5 million before the non-cash net charges noted below. -- EBITDA, as defined below, of $22.9 million. Revenues for the three months ended September 30, 2007 were $30.3 million, 49 percent higher than the $20.3 million during the quarter ended September 30, 2006. The increase in revenue was driven primarily by higher production. Production volumes during the three months ended September 30, 2007 were 4.4 Bcfe (48.2 MMcfe/d), 55 percent higher compared to 2.9 Bcfe (31.0 MMcfe/d) during the third quarter of 2006. The increase over the third quarter 2006 production was primarily due to the successful drilling of additional Barnett Shale area wells, production from the Baby Ruth and Doberman #1 wells in the Gulf Coast region and increased production from the recompleted Galloway Gas Unit 1 well #1 and the LL&E #1 in the Gulf Coast area. Carrizo's average natural gas sales price decreased to $6.33 per Mcf compared to $6.39 per Mcf in the third quarter of 2006 while the average oil sales price increased ten percent to $75.40 per barrel compared to $68.46 per barrel during the third quarter of 2006. The above prices exclude the cash effect of hedging activities -- prices, including the cash effect of hedges, are presented in the table below. (Logo: http://www.newscom.com/cgi-bin/prnh/20030523/CRZOLOGO) The Company reported net income of $5.4 million, or $0.21 and $0.20 per basic and diluted share, respectively, for the three months ended September 30, 2007, as compared to $4.8 million, or $0.19 and $0.18 per basic and diluted share, respectively, for the same quarter during 2006. Excluding the $0.1 million non-cash, after-tax expense, comprised of the mark-to-market unrealized gain of $0.5 million on derivatives and the stock compensation expense of $0.6 million, the net income for the quarter ended September 30, 2007 was $5.5 million, or $0.21 per basic and diluted share. EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the third quarter of 2007 was $22.9 million, or $0.88 and $0.85 per basic and diluted share, respectively, as compared to $15.7 million, or $0.62 and $0.60 per basic and diluted share, respectively, during the third quarter of 2006. Lease operating expenses (excluding production taxes) increased to $5.8 million during the three months ended September 30, 2007 as compared to $2.9 million for the third quarter of 2006, primarily attributable to increased production, increased workover expense, increased ad valorem taxes and increased transportation and other product costs mainly attributable to the Barnett Shale area. Depreciation, depletion and amortization expenses ("DD&A") were $10.2 million during the three months ended September 30, 2007 ($2.30 per Mcfe) as compared to $7.6 million ($2.66 per Mcfe) during the third quarter of 2006. The increase in DD&A expense was due primarily to an increase in production volumes partially offset by a decrease in the DD&A rate attributable to the increase in the reserve base. General and administrative expenses ("G&A") increased to $3.3 million during the three months ended September 30, 2007 from $2.3 million during the same quarter of 2006. The increase in G&A was due primarily to the increase in staff and related costs, increased legal and consulting fees and higher rent expense as a result of office expansion. Non-cash stock-based compensation expense was $1.1 million ($0.6 million after tax) for the three months ended September 30, 2007 compared to $0.8 million ($0.5 million after tax) for the same period in 2006. The net gain on derivatives was $3.7 million during the three months ended September 30, 2007, comprised of (1) $0.9 million ($0.5 million after tax) for the unrealized mark-to-market, non-cash gain on derivatives and (2) the $2.8 million gain for cash settled derivatives. Interest expense, net of amounts capitalized, was $4.1 million for the three months ended September 30, 2007 compared to $2.1 million for the three months ended September 30, 2006. The increases in 2007 were largely attributable to the $75.0 million increase under our Second Lien Credit Facility in January 2007, borrowings under our Senior Secured Credit Facility and higher effective interest rates. Results for the Nine Months Ended September 30, 2007 -- -- Record production of 11.8 Bcfe, or 43,391 Mcfe/d. -- Record revenue of $85.8 million. -- Net Income of $11.0 million, or net income of $15.1 million before the non-cash net charges noted below. -- Record EBITDA, as defined below, of $63.7 million. Revenues for the nine months ended September 30, 2007 were $85.8 million, 46 percent higher than the $58.7 million during the nine months ended September 30, 2006. The increase in revenues was primarily driven by higher production. Production volumes during the nine months ended September 30, 2007 were 11.8 Bcfe (43.4 MMcfe/d), 47 percent higher compared to 8.0 Bcfe (29.5 MMcfe/d) during the nine months ended 2006. Production increased due to the addition of new Barnett Shale wells and new production from the Baby Ruth and Doberman wells in the Gulf Coast area and increased production from the recently recompleted Galloway Gas Unit 1 well #1 in the Gulf Coast. Carrizo's average natural gas sales price increased two percent to $6.88 compared to $6.74 per Mcf in the same period of 2006, and the average oil sales price decreased one percent to $65.22 per barrel from $65.54 per barrel during the same period in 2006. The Company reported net income of $11.0 million, or $0.42 and $0.41 per basic and diluted share, respectively, for the nine months ended September 30, 2007, as compared to $14.0 million, or $0.57 and $0.55 per basic and diluted share, respectively, for the same period during 2006. Excluding the $4.1 million non-cash, after-tax expense, comprised of the mark-to-market unrealized loss of $2.3 million on derivatives, the stock compensation expense of $2.0 million and the $0.2 million decrease in bad debt expense, net income for the nine months ended September 30, 2007 was $15.1 million, or $0.58 and $0.57, per basic and diluted share, respectively. EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) for the nine months ended September 30, 2007 was $63.7 million, or $2.47 and $2.39 per basic and diluted share, respectively, as compared to $43.8 million, or $1.79 and $1.73 per basic and diluted share, respectively, for the same period in 2006. Lease operating expenses (excluding production taxes) increased to $14.3 million during the nine months ended September 30, 2007 as compared to $8.2 million for the same period of 2006, largely due to increased production, the increased number of producing wells and the rising costs of oilfield services, higher workover expenses, increased ad valorem taxes and increased transportation and other product costs mainly attributable to the Barnett Shale area. Depreciation, depletion and amortization expenses ("DD&A") were $29.0 million during the nine months ended September 30, 2007 ($2.45 per Mcfe) as compared to $21.6 million ($2.69 per Mcfe) during the same period of 2006. The increase in DD&A expense was due primarily to an increase in production volumes partially offset by a decrease in the DD&A rate attributable to the increase in the reserve base. General and administrative expenses ("G&A") increased to $10.8 million during the nine months ended September 30, 2007 from $8.5 million during the same period of 2006. The increase in G&A was primarily due to an increase in staff and related costs, higher rent and office expense due to office expansion and increased legal and consulting fees. Non-cash stock-based compensation expense was $3.1 million ($2.0 million after tax) for the nine months ended September 30, 2007 compared to $2.0 million ($1.3 million after tax) for the same period in 2006. The net gain on derivatives was $2.1 million during the nine months ended September 30, 2007, comprised of (1) $5.6 million for cash settled gains on derivatives, partially offset by (2) $3.5 million ($2.3 million after tax) for the unrealized mark-to-market, non-cash loss on derivatives. Interest expense, net of amounts capitalized, was $11.4 million for the nine months ended September 30, 2007 compared to $6.5 million for the same period in 2006. The increase was largely attributable to the $75.0 million increase under our Second Lien Credit Facility in January 2007, borrowings under our Senior Secured Credit Facility beginning in mid-2006, and higher effective interest rates. "We had an excellent quarter operationally," commented S.P. Johnson IV, Carrizo's President and Chief Executive Officer, "adding significant wells in the Barnett Shale, both in Denton County and southeast Tarrant County. Although pipeline logistics delayed some production startups into the fourth quarter, we still had record production in the quarter. The current Barnett Shale and total Company rates are approximately 41 MMcfe/d and 62 MMcfe/d, respectively. Another estimated 31 MMcfe/d has been drilled and is waiting on completion and/or pipeline in the Barnett Shale. We anticipate that about 27 MMcfe/d of the total will come online from two SE Tarrant drilling pads, half in late December and half in late January. New wells in these areas, where we have about 110 potential drillsites, are averaging initial rates of 4 MMcfe/d gross (3 MMcfe/d net). In addition, our urban leasing and drilling is proceeding as planned in the Arlington, TX area where we have started building our first drilling location on the University of Texas Arlington campus." "In the Floyd Shale in Mississippi we fracture stimulated the first stage in our horizontal well and are swabbing back frac fluid. It is still too early to determine whether our frac technique on that stage is commercial. We have started planning our next well which will test the northwest end of the play where we have about 60,000 net acres and is near a competitor's well with a reported commercial flow rate." "In the North Sea we began appraisal drilling on our Huntington Paleocene Forties discovery on August 30th and should finish about December 1st. At that point we will have drilled and logged seven lateral wellbores from one top hole in an effort to delineate the reservoir and formulate a development plan for submittal to the government." "After completion of the Paleocene laterals we expect to drill an appraisal well to the deeper Jurassic Fulmar in a structural position which should determine the depth of the oil water contact. Further appraisal drilling in the Fulmar can then be planned. The 13,000 feet Fulmar test well will take about 60 days." "A second rig will be brought in later this month to initiate exploration in the adjacent Block 22/13b in which we hold a 27.27 percent working interest. Carrizo has farmed-out its cost-bearing position in the first two Paleocene prospects, retaining half it's equity interest (13.6 percent) in exchange for getting its share of drilling and testing costs carried by its JV partner, Oilexco. Our working interest in the rest of the block is unaffected by the election in this small carve-out area." 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 potential effects or timing, cash flow, the expected timing of drilling of additional wells, timing and results of appraisal wells, development plan, timing of production, timing of testing 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, timing of production, availability of equipment, appraisal results, weather and other risks described in the Company's Form 10-K for the year ended December 31, 2006 and its other filings with the Securities and Exchange Commission. (Financial Highlights to Follow) CARRIZO OIL & GAS, INC. STATEMENTS OF OPERATIONS (unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 Oil and natural gas revenues $30,304,514 $20,333,656 $85,807,603 $58,726,923 Costs and expenses: Lease operating expenses 5,848,545 2,939,950 14,289,237 8,194,010 Production tax 1,090,634 952,104 2,913,315 2,785,546 Depreciation, depletion and amortization 10,190,819 7,594,315 29,033,382 21,630,312 General and administrative expenses 3,269,318 2,307,884 10,770,377 8,470,067 Accretion expense related to asset retirement obligations 88,210 79,056 264,631 237,169 Bad debt expense 32,808 - (243,138) - Stock-based compensation expense 1,058,276 809,949 3,050,259 1,998,865 Total costs and expenses 21,578,610 14,683,258 60,078,063 43,315,969 Operating income 8,725,904 5,650,398 25,729,540 15,410,954 Mark-to-market gain (loss) on derivatives, net 830,701 2,164,423 (3,552,373) 7,733,851 Realized gain on derivatives, net 2,845,010 1,519,624 5,597,674 4,353,235 Equity in income of Pinnacle Gas Resources, Inc. - - - 34,914 Loss on early extinguishment of debt - (12,114) - (294,094) Other income and expenses, net 5,776 28,530 261,559 202,314 Interest income 130,877 198,527 585,540 842,965 Interest expense, net of amounts capitalized (1) (4,095,995) (2,143,163) (11,374,794) (6,518,427) Income before income taxes 8,442,273 7,406,225 17,247,146 21,765,712 Income tax expense 3,066,269 2,655,540 6,279,066 7,793,080 Net income available to common shares $5,376,004 $4,750,685 $10,968,080 $13,972,632 ADJUSTED net income available to common shares (2) $5,545,253 $3,878,151 $15,101,751 $10,436,052 EBITDA (see table below) $22,946,803 $15,681,872 $63,693,907 $43,832,849 Basic net income per common share $0.21 $0.19 $0.42 $0.57 Diluted net income per common share $0.20 $0.18 $0.41 $0.55 ADJUSTED basic net income per common share (2) $0.21 $0.15 $0.58 $0.43 ADJUSTED diluted net income per common share (2) $0.21 $0.15 $0.57 $0.41 Basic weighted average common shares outstanding 26,141,667 25,254,054 25,835,631 24,549,045 Diluted weighted average common shares outstanding 26,982,316 25,987,388 26,667,938 25,271,731 (1) Interest expense, net of amounts capitalized, consists of the following: Gross interest expense $(7,016,651) $(4,883,554) (19,700,560) (13,752,252) Capitalized interest 2,920,656 2,740,391 8,325,766 7,233,825 (2) Excludes the impact of the non-cash mark-to-market gain (loss) on derivatives, non-cash stock-based compensation, non-cash bad debt expense and non-cash loss on early extinguishment of debt CARRIZO OIL & GAS, INC. CONDENSED BALANCE SHEETS 9/30/2007 12/31/06 (unaudited) ASSETS: Cash and cash equivalents $4,576,295 $5,407,502 Fair value of derivative financial instruments 2,848,158 5,737,056 Other current assets 36,610,791 29,912,455 Property and equipment, net 567,151,512 445,447,054 Other assets 6,883,756 5,519,325 Investment in Pinnacle Gas Resources, Inc. 11,941,008 2,771,266 TOTAL ASSETS $630,011,520 $494,794,658 LIABILITIES AND EQUITY: Accounts payable and accrued liabilities $53,596,299 $54,554,607 Current maturities of long-term debt 2,252,999 1,507,931 Other current liabilities 1,026,395 2,007,969 Long-term debt, net of current maturities 218,812,500 187,250,744 Deferred income taxes 43,004,139 32,737,530 Other liabilities 6,418,180 4,462,001 Equity 304,901,008 212,273,876 TOTAL LIABILITIES AND EQUITY $630,011,520 $494,794,658 Income tax expense for the three-month periods ended September 30, 2007 and 2006 included $2,894,772 and $2,558,061, respectively, provision for deferred income taxes and a $171,497 and $97,479, respectively, provision for currently payable franchise taxes. CARRIZO OIL & GAS, INC. NON-GAAP DISCLOSURES (unaudited) Reconciliation of Net Income to THREE MONTHS ENDED NINE MONTHS ENDED EBITDA SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 Net Income $5,376,004 $4,750,685 $10,968,080 $13,972,632 Adjustments: Depreciation, depletion and amortization 10,190,819 7,594,315 29,033,382 21,630,312 Unrealized mark- to-market (gain) loss on derivatives (830,701) (2,164,423) 3,552,373 (7,733,851) Loss on extinguishment of debt - 12,114 - 294,094 Interest expense, net of amounts capitalized and interest income 3,965,118 1,944,636 10,789,254 5,675,462 Income tax expense 3,066,269 2,655,540 6,279,066 7,793,080 Equity in Pinnacle Gas Resources, Inc. - - - (34,914) Stock based compensation expense 1,058,276 809,949 3,050,259 1,998,865 Bad debt expense 32,808 - (243,138) - Accretion expense related to asset retirement obligations 88,210 79,056 264,631 237,169 EBITDA, as defined $22,946,803 $15,681,872 $63,693,907 $43,832,849 EBITDA per basic common share $0.88 $0.62 $2.47 $1.79 EBITDA per diluted common share $0.85 $0.60 $2.39 $1.73 CARRIZO OIL & GAS, INC. PRODUCTION VOLUMES AND PRICES (unaudited) Production volumes- Oil and condensate (Bbls) 59,114 68,887 182,169 179,019 Natural gas (Mcf) 4,080,631 2,442,549 10,752,683 6,975,290 Natural gas equivalent (Mcfe) 4,435,315 2,855,871 11,845,697 8,049,404 92 92 273 273 48,210 31,042 43,391 29,485 Average sales prices- Oil and condensate (per Bbl) $75.40 $68.46 $65.22 $65.54 Oil and condensate (per Bbl) - with hedge impact $74.83 $67.27 $65.04 $64.93 Natural gas (per Mcf) $6.33 $6.39 $6.88 $6.74 Natural gas (per Mcf) - with hedge impact $7.02 $6.88 $7.38 $7.28 Natural gas equivalent (per Mcfe) $6.83 $7.12 $7.24 $7.30 Contact: Carrizo Oil & Gas, Inc. B. Allen Connell, Director of Investor Relations Paul F. Boling, Chief Financial Officer (713) 328-1000 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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