Filed pursuant to Rule 424(b)(5)
Registration Statement No. 333-198459
CALCULATION OF REGISTRATION FEE
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Title of securities to be registered
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Amount to be
registered
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Maximum offering
price per share
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Maximum Aggregate
Offering Price
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Amount of
Registration
Fee
(1)
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Common Stock
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15,600,000
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$14.60
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$227,760,000
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$26,397.38
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(1)
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Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as amended.
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PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 28, 2014)
15,600,000 Shares
Carrizo Oil & Gas, Inc.
Common Stock
We are offering
15,600,000 shares of our common stock.
Our common stock is listed on the NASDAQ Global Select Market under the symbol CRZO. On
June 28, 2017, the last reported sale price of our common stock on the NASDAQ Global Select Market was $15.61 per share.
Investing in our
common stock involves risks. Please see
Risk Factors
on page
S-13
of this prospectus supplement and on page 2 of the accompanying prospectus.
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Per Share
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Total
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Price to public
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$
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14.60
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$
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227,760,000
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Underwriting discount(1)
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$
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0.32
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$
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4,992,000
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Proceeds, before expenses, to us
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$
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14.28
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$
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222,768,000
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(1)
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See Underwriting (Conflicts of Interest) for a description of the compensation payable to the underwriters.
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Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock are expected to be ready for delivery in New York, New York on or about July 3, 2017.
Joint Book-Running Managers
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Goldman Sachs & Co. LLC
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Wells Fargo Securities
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Citigroup
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Senior Co-Managers
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Capital One Securities
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BofA Merrill Lynch
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Scotia Howard Weil
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BMO Capital Markets
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IBERIA Capital Partners L.L.C.
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SunTrust Robinson Humphrey
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Johnson Rice & Company L.L.C.
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Stephens Inc.
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Co-Managers
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RBC Capital Markets
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J.P. Morgan
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Baird
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Raymond James
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KeyBanc Capital Markets
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Jefferies
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Northland Capital Markets
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June 28, 2017
TABLE OF CONTENTS
Prospectus Supplement
Prospectus
This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering
of our common stock. The second part is the accompanying prospectus, which gives more general information, some of which may not apply to this offering of common stock. We sometimes refer to the prospectus supplement and the accompanying prospectus,
taken together, as the prospectus. If the information varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.
This document is not a prospectus for the purposes of the European Unions Directive 2003/71 (and any amendments thereto) as implemented in member
states of the European Economic Area (the Prospectus Directive). This document has been prepared on the basis that all offers of shares offered hereby made to persons in the European Economic Area will be made pursuant to an exemption
under the Prospectus Directive from the requirement to produce a prospectus in connection with offers of such shares.
The communication of this
document and any other document or materials relating to the issue of any shares offered hereby is not being made, and none of such documents or materials have been
S-i
approved, by an authorised person for the purposes of section 21 of the United Kingdoms Financial Services and Markets Act 2000. Accordingly, such documents and materials are not being
distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of such documents and materials as a financial promotion is only being made to those persons in the United Kingdom falling within the
definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Financial Promotion Order), or within Article 49(2)(a) to (d) of the Financial
Promotion Order, or to any other persons to whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together being referred to as relevant persons). In the United Kingdom, the shares offered hereby
are only available to, and any investment or investment activity to which this document relates will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or
any of its contents.
Neither we nor the underwriters have authorized anyone to provide you with any information or to make any representations
other than those contained or incorporated by reference in this prospectus supplement or the accompanying prospectus or in any free writing prospectus made available by us. We and the underwriters take no responsibility for, and can provide no
assurance as to the reliability of, any other information that others may give you. Neither we nor the underwriters are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume the
information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of the date on the cover of this prospectus supplement and the accompanying prospectus and that any information we have incorporated by reference
is accurate only as of the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects may have changed since that date.
S-ii
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including the documents incorporated by reference in this prospectus supplement and the
accompanying prospectus, contain statements concerning our intentions, expectations, projections, assessments of risks, estimations, beliefs, plans or predictions for the future, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements that are not historical facts. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements
include, among others, statements regarding:
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our ability to explore for and develop oil and gas resources successfully and economically;
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our estimates and forecasts of the timing, number, profitability and other results of wells we expect to drill and other exploration activities;
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our estimates, guidance and forecasts, including those regarding timing and levels of production;
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changes in working capital requirements, reserves, and acreage;
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commodity price risk management activities and the impact on our average realized prices;
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anticipated trends in our business;
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availability of pipeline connections and water disposal on economic terms;
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effects of competition on us;
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our future results of operations;
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profitability of drilling locations;
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our liquidity and our ability to finance our exploration and development activities, including accessibility of borrowings under our revolving credit facility, our borrowing base, modification to financial covenants,
and the result of any borrowing base redetermination;
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our planned expenditures, prospects and capital expenditure plan;
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future market conditions in the oil and gas industry;
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our ability to make, integrate and develop acquisitions including the Pending Acquisition (as described below) and realize any expected benefits or effects of any acquisitions or the timing, final purchase price,
financing or consummation of any acquisitions including the Pending Acquisition;
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our ability to consummate and finance the Pending Acquisition;
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results of the ExL Properties (as defined herein);
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the preferred stock and warrants issuance (as defined herein);
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our senior notes offering (as defined herein);
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possible future sales or other disposition transactions and the proceeds, results or benefits of any such transactions, including the timing thereof;
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the benefits, effects, availability of and results of new and existing joint ventures and sales transactions;
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our ability to maintain a sound financial position;
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receipt of receivables and proceeds from sales;
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S-iii
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our ability to complete planned transactions on desirable terms;
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the impact of governmental regulation, taxes, market changes and world events; and
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our use of proceeds and any benefits or effects thereof.
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You generally can identify our forward-looking
statements by the words anticipate, believe, budgeted, continue, could, estimate, expect, forecast, goal, intend, may,
objective, plan, potential, predict, projection, possible, scheduled, should, guidance or other similar words. Such statements rely on
assumptions and involve risks and uncertainties, many of which are beyond our control, including, but not limited to, those relating to a worldwide economic downturn, availability of financing, our dependence on our exploratory drilling activities,
the volatility of and changes in oil and gas prices, the need to replace reserves depleted by production, impairments of proved oil and gas properties, operating risks of oil and gas operations, our dependence on our key personnel, factors that
affect our ability to manage our growth and achieve our business strategy, results, delays and uncertainties that may be encountered in drilling, development or production, interpretations and impact of oil and gas reserve estimation and disclosure
requirements, activities and approvals of our partners and parties with whom we have alliances, technological changes, capital requirements, the timing and amount of borrowing base determinations (including determinations by lenders) and
availability under our revolving credit facility, evaluations of us by lenders under our revolving credit facility, waivers or amendments under our revolving credit facility in connection with acquisitions, including the Pending Acquisition, other
actions by lenders and holders of our capital stock, the potential impact of government regulations, including current and proposed legislation and regulations related to hydraulic fracturing, oil and natural gas drilling, air emissions and climate
change, regulatory determinations, litigation, competition, the uncertainty of reserve information and future net revenue estimates, failure of the Pending Acquisition to close, market conditions and other factors affecting our ability to complete
our senior notes offering and the preferred stock and warrants issuance, integration and other acquisition risks, other factors affecting our ability to reach agreements or complete acquisitions or dispositions, actions by sellers and buyers,
effects of purchase price adjustments, availability of equipment and crews, actions by midstream and other industry participants, weather, our ability to obtain permits and licenses, the results of audits and assessments, the failure to obtain
certain bank and lease consents, the existence and resolution of title defects, new taxes and impact fees, delays, costs and difficulties relating to our joint ventures, actions by joint venture parties, results of exploration activities, the
availability, market conditions and completion of land acquisitions and dispositions, costs of oilfield services, completion and connection of wells and other factors detailed in this prospectus and in our filings with the Securities and Exchange
Commission (SEC).
We have based our forward-looking statements on our managements beliefs and assumptions based on information
available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure
you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
Some of the factors that
could cause actual results to differ from those expressed or implied in forward-looking statements are described under Risk Factors and in other sections of this prospectus and described under Risk Factors and elsewhere in
the documents that we incorporate by reference into this prospectus, including our Annual Report on Form
10-K
for the year ended December 31, 2016, Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017, and in our other reports filed with the SEC, and all other documents incorporated by reference into this prospectus. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on our forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and,
except as required by law, we undertake no duty to update or revise any forward-looking statement.
S-iv
SUMMARY
This summary highlights selected information about us but does not contain all the information that may be important to you. This prospectus
supplement includes specific terms of the offering and information about our business and financial data. You should read carefully this prospectus supplement and the accompanying prospectus, including the matters set forth under the caption
Risk Factors, and the information incorporated by reference in this prospectus supplement and the accompanying prospectus before making an investment decision.
In this prospectus supplement, unless the context indicates otherwise, references to Carrizo, the Company, we and
us refer to Carrizo Oil & Gas, Inc. and its subsidiaries. For more information about the industry terms used in this prospectus supplement, please read Glossary of Certain Industry Terms in our Annual Report on Form
10-K
for the year ended December 31, 2016.
Our Company
Carrizo Oil & Gas, Inc. is a Houston-based energy company which, together with its subsidiaries, is actively engaged in the exploration,
development, and production of oil, NGLs, and gas primarily from resource plays located in the United States. Our current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale in South Texas, the
Delaware Basin in West Texas, the Niobrara Formation in Colorado, the Utica Shale in Ohio, and the Marcellus Shale in Pennsylvania.
Our Business
Strategy
Our objective is to increase value through the execution of a business strategy focused on growth through the
drill-bit
complemented by opportunistic acquisitions of oil and gas properties, while maintaining a sound financial position. Key elements of our business strategy include:
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Utilize our experience as a technical advantage
. We believe we have developed a technical advantage from our extensive experience drilling nearly 900 horizontal wells in various resource
plays, including the Eagle Ford, Delaware Basin, Utica, Niobrara, Marcellus, and previously, the Barnett, which has allowed our management, technical staff and field operations teams to gain significant experience in resource plays and create highly
efficient drilling and completion operations. We now leverage this advantage in our existing, as well as any prospective, shale trends.
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Pursue opportunities to expand core positions
. We pursue a growth strategy in crude oil plays primarily driven by the attractive relative economics associated with our core positions.
Nearly 100% of our 2017 drilling and completion capital expenditure plan is directed towards opportunities that we believe are predominantly prospective for crude oil development prior to taking into account the Pending Acquisition described below.
We continue to focus our capital program on resource plays where individual wells tend to have lower risk, such as our operations in the Eagle Ford and, more recently, the Delaware Basin. Additionally, we continue to take advantage of opportunities
to expand our core positions through leasehold acquisitions.
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Control operating and capital costs
. We emphasize efficiencies to lower our costs to find,
develop and produce our oil and gas reserves. This includes concentrating on our core areas, which allows us to optimize drilling and completion techniques as well as benefit from economies of scale. In addition, as we operate a significant
percentage of our properties as
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S-1
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well as maintain a minimal level of drilling commitments in order to hold acreage, the majority of our capital expenditure plan is discretionary, allowing us the ability to reallocate or adjust
the level of our spending in response to changes in market conditions.
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Maintain our financial flexibility
. We are committed to preserving our financial flexibility. We have historically funded our capital program with a combination of cash generated from
operations, proceeds from the sale of assets, proceeds from sales of securities, borrowings under our revolving credit facility and proceeds, payments or carried interest from our joint ventures.
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Manage risk exposure
. We seek to limit our financial risks, in part by seeking well-funded partners to ensure that we are able to move forward on projects in a timely manner. We also
attempt to limit our exposure to volatility in commodity prices by actively hedging our crude oil and natural gas production. Our current long-term strategy is to manage exposure to commodity price volatility for a portion of our forecasted crude
oil and natural gas production to achieve a more predictable level of cash flows to support current and future capital expenditure plans.
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Our Competitive Strengths
We believe we have
the following competitive strengths that will support our efforts to successfully execute our business strategy:
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Large inventory of
oil-focused
drilling locations
. We have developed a significant inventory of future
oil-focused
drilling locations, primarily in our well-established positions in the Eagle Ford, Delaware Basin, Niobrara, and Utica. As of December 31, 2016, we owned leases covering approximately 309,200
gross (179,179 net) acres in these areas. Approximately 54% of our estimated proved reserves at December 31, 2016 were undeveloped.
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Operational control
. As of December 31, 2016, we operated approximately 94% of the wells in Eagle Ford in which we held an interest. We held an average working interest of
approximately 85% in these operated wells. Our significant operational control, as well as our manageable leasehold obligations, provides us with the flexibility to align capital expenditures with cash flow and control our costs as we transition to
an advanced development mode in key plays. As a further result of our operational control, we are generally able to adjust drilling plans in response to changes in commodity prices.
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Successful drilling history
. We follow a disciplined approach to drilling wells by applying proven horizontal drilling and hydraulic fracturing technology. Additionally, we rely on advanced
technologies, such as
3-D
seismic and micro-seismic analysis, to better define geologic risk and enhance the results of our drilling efforts. Our successful drilling program has significantly
de-risked
our acreage positions in key resource plays.
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Experienced management and professional workforce
. Our management has transitioned our focus to oil by entering new plays and completed
non-core
asset sales. We have an experienced staff, both employees and contractors, of oil and gas professionals, including geophysicists, petrophysicists, geologists, petroleum engineers, production and reservoir engineers and technical support staff. We
believe our experience and expertise, particularly as they relate to successfully identifying and developing resource plays, is a competitive advantage.
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S-2
Recent Developments
Pending Acquisition
On June 28, 2017, we and our
wholly-owned subsidiary Carrizo (Permian) LLC entered into a purchase and sale agreement (the ExL Purchase Agreement) with ExL Petroleum Management, LLC and ExL Petroleum Operating Inc. (together, ExL) to acquire
approximately 16,488 net acres located in the Delaware Basin in Reeves and Ward Counties, Texas (the ExL Properties), for aggregate consideration of approximately $648.0 million in cash, subject to title adjustments and other customary
purchase price adjustments (the Pending Acquisition). We currently expect the Pending Acquisition to close in
mid-August
2017, subject to satisfaction of specified closing conditions. The effective
date for the Pending Acquisition is May 1, 2017, and the purchase price will be subject to customary adjustments, including adjustments for certain net revenue retained by and expenses paid by ExL that are attributable to the ExL Properties on
or after such effective date. We currently expect that these adjustments will increase the purchase price that will be paid at closing. Upon execution of the ExL Purchase Agreement, we paid $75.0 million as a performance deposit for our obligations
under that agreement and a balance of $573.0 million remains payable, subject to adjustments discussed above. The ExL Purchase Agreement contains customary representations, warranties and covenants and also includes indemnification provisions
under which the parties have agreed to indemnify each other against certain liabilities.
We currently estimate that the ExL Properties may contain
over 350 drilling locations in the Wolfcamp A and the Wolfcamp B zones of the Wolfcamp formation and upside development potential in other zones in the Wolfcamp Formation, the Bone Springs Formation and the Avalon Formation. A significant portion of
the acreage is contiguous. Based on information provided by the seller, we estimate that net production from the ExL Properties was approximately 4,460 Boe/d (42% oil and 70% liquids) from 8 gross (4.8 net) wells for the month ended
March 31, 2017, but has risen to approximately 8,000 Boe/d (48% oil and 67% liquids) from 11 gross (6.5 net) wells as of June 23, 2017. ExL is the operator with respect to 95% of the acreage associated with the ExL Properties. Following the
closing of the Pending Acquisition, ExL will retain a portion of its current working interest in the leases that make up the ExL Properties. Pursuant to the ExL Purchase Agreement, we and ExL would enter into an industry standard joint operating
agreement appointing us as operator of the ExL Properties, and under the joint operating agreement, we and ExL would establish an area of mutual interest with respect to the ExL Properties and the immediately surrounding area.
We have also agreed to pay an additional $50.0 million per year if the average daily closing spot price of a barrel of West Texas Intermediate crude oil
as measured by the U.S. Energy Information Administration (the EIA WTI average price) is above $50.00 for any the years of 2018, 2019, 2020 and 2021, with such payments due on January 29, 2019, January 28, 2020, January 28, 2021 and
January 28, 2022, respectively. This payment (the Contingent ExL Payment) will be zero for the respective year if such EIA WTI average price of a barrel of oil is below $50.00 for any of such years, and the Contingent ExL Payment is
capped at and will not exceed $125.0 million.
We intend to finance the purchase price for the Pending Acquisition that is due at closing, subject
to market conditions and other factors, with net proceeds from this offering, net proceeds from our senior notes offering, net proceeds from the preferred stock and warrants issuance and borrowings under our revolving credit facility. There can be
no assurance that we will acquire the ExL Properties on the terms described herein or at all. The closing of this offering is not conditioned on the consummation of the Pending Acquisition, and the consummation of the Pending Acquisition is not
conditioned upon the successful completion of this offering and other financing transactions. Please see Risk FactorsRisks Related to the Pending Acquisition.
S-3
Senior Notes Offering
We intend to finance a portion of the purchase price for the Pending Acquisition with the net proceeds of an offering of $250.0 million aggregate
principal amount of 8.25% senior notes due 2025 pursuant to a registration statement filed with the SEC. We refer to that offering of our senior notes as the senior notes offering. The senior notes will be our unsecured obligations
and will be guaranteed by substantially all of our subsidiaries. The terms of the senior notes are subject to market conditions and may change, and we cannot give any assurances that our senior notes offering will be completed on the terms described
herein or at all. The senior notes offering is expected to close on or about July 14, 2017. This offering and the senior notes offering are not contingent upon each other. If the Pending Acquisition is not consummated by October 28, 2017 (the
date that is 122 days after the date of execution of the ExL Purchase Agreement) or if the ExL Purchase Agreement is terminated at any time prior to the consummation of the Pending Acquisition, we will be required to redeem the senior notes. The
foregoing description and any other information regarding the senior notes offering are included herein solely for informational purposes. This prospectus supplement and any related communication shall not be deemed an offer to sell or a
solicitation to buy any securities that may be offered in any other offering.
Preferred Stock and Warrants Issuance
On June 28, 2017, we entered into a purchase agreement with certain funds managed or
sub-advised
by GSO Capital
Partners LP and its affiliates (collectively, the GSO Funds) to issue and sell in a private placement (the preferred stock and warrants issuance) (i) 250,000 shares of 8.875% redeemable preferred stock, par value $0.01 per
share (the preferred stock) and (ii) warrants (the warrants) for 2,750,000 shares of our common stock, with an exercise price of $16.08 per share, exercisable only on a net share settlement basis for a cash purchase
price equal to $970 per share of preferred stock purchased. We expect to receive net proceeds of approximately $242.5 million from the preferred stock and warrants issuance (prior to payment of commitment fees and expenses of the issuance) at
the preferred stock closing, subject to certain closing conditions. The net proceeds from the preferred stock and warrants issuance are expected to be used to finance a portion of the purchase price for the Pending Acquisition that is due at
closing. This offering is not contingent on the preferred stock and warrants issuance although that issuance is contingent upon the completion of this offering, the senior notes offering and the Pending Acquisition. The foregoing description and any
other information regarding the preferred stock and warrants issuance are included herein solely for informational purposes. This prospectus supplement and any related communication shall not be deemed an offer to sell or a solicitation to buy any
securities that may be offered in the preferred stock and warrants issuance. Please see Preferred Stock and Warrants Issuance for additional information regarding the preferred stock and warrants issuance.
Tenth Amendment to Credit Agreement
On June 28, 2017,
we entered into a tenth amendment to the credit agreement governing our revolving credit facility to, among other things, (i) amend the calculation of certain financial covenants to provide that EBITDA will be calculated on an annualized basis
commencing with the fiscal quarter ending September 30, 2017, (ii) amend the restricted payments covenant to, among other things, provide for additional capacity to pay dividends with respect to, and make redemptions of, our equity interests,
including the ability, subject to certain conditions, to pay dividends on or make redemptions of the preferred stock using proceeds of certain equity issuances or asset sales, (iii) amend the definition of Disqualified Capital Stock
to provide, among other things, that the preferred stock does not constitute Disqualified Capital Stock for purposes of the revolving credit facility, (iv) provide that any Additional Consideration (as defined in the revolving
credit facility) payable pursuant to the ExL
S-4
Purchase Agreement does not constitute Debt (as defined in the revolving credit facility) for purposes of the revolving credit facility until such time as the amount of such obligation is
determined, and (v) amend certain other covenants, in each case as set forth therein.
Updated Guidance
Based primarily on continued strong performance from our Eagle Ford Shale assets, we expect second quarter production to exceed the
high-end
of our previously-provided guidance range. As a result, we are increasing our crude oil production guidance for the second quarter of 2017 to
33,600-33,700
Bbls/d
from
31,800-32,200
Bbls/d previously. For natural gas and NGLs, we are adjusting our second quarter guidance range to
71-73
MMcf/d and
4,700-4,800
Bbls/d.
We currently expect the Pending Acquisition to close in
mid-August
2017. Based on the level of activity required to manage the near-term leasehold obligations on the ExL Properties, we currently plan to move one of our Eagle Ford Shale rigs to the Delaware Basin
following the closing of the Pending Acquisition. Based on this timing and development plan, we are increasing our 2017 crude oil production guidance to
35,700-36,000
Bbls/d from
32,400-32,700
Bbls/d. Using the midpoint of the range, our new crude oil production growth guidance increases to 39%. We are also increasing our 2017 total production guidance to 54,933-56,100 Boe/d from
49,533-50,700
Boe/d previously. The following table highlights our updated 2017 development plan based on a
mid-August
closing date for the Pending Acquisition, and excludes
any impact from our planned divestiture program.
Updated 2017 Development Plan and Guidance Summary
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Previous Guidance
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Guidance
(Pro Forma
for Pending
Acquisition)
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Operated Drilling Activity
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Eagle Ford Shale
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91 net wells
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75 net wells
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Delaware Basin
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6 net wells
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17 net wells
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Operated Completion Activity
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Eagle Ford Shale
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85 net wells
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84 net wells
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Delaware Basin
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5 net wells
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17 net wells
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Daily Production Volumes
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Crude oil (Bbls/d)
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32,400 - 32,700
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35,700 - 36,000
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NGLs (Bbls/d)
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5,300 - 5,500
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5,900 - 6,100
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Natural gas (Mcf/d)
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71,000 - 75,000
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80,000 - 84,000
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Total (Boe/d)
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49,533 - 50,700
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54,933 - 56,100
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Capitalized Items
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Drilling and Completion Capital Expenditure Plan (millions)
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$530.0 - $550.0
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$620.0 - $640.0
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The guidance above supersedes our prior guidance for Carrizo on a stand-alone basis, and such prior guidance should no
longer be relied upon.
We have prepared these estimates in good faith based upon our internal reporting. Such estimated volumes are preliminary and
are thus inherently uncertain and subject to change. There can be no assurance that our final results will not differ from these estimates. Our production estimates are
S-5
based on, among other things, historical results, estimated second quarter production, expected operations for the remainder of 2017 and expected market conditions. There can be no assurance that
our production, drilling and completion activity and expenditure plan will not differ materially from these estimates. Important factors that could cause actual results to differ materially from our preliminary estimates are set forth under the
captions Risk Factors and Forward-Looking Statements.
Consideration of Asset Sales
We have recently begun efforts to sell our assets in the Marcellus and the Utica and also expect to begin efforts in the near term for the sale of other
non-core assets in our portfolio. These sales could take place as early as the third and fourth quarter of this year. The Company has targeted aggregate gross proceeds of $300.0 million from its non-core divestiture program. We believe that such
sales would help preserve future financial flexibility that would benefit us in light of the debt and preferred stock obligations expected to be incurred for the Pending Acquisition. There can be no assurance that we will be able to sell any of
these assets in such time frame on acceptable terms or at all or receive the targeted aggregate gross proceeds.
Corporate Information
Our principal executive offices are located at 500 Dallas Street, Suite 2300, Houston, Texas 77002, and our telephone number at that location is
(713) 328-1000.
Information contained on our website, http://www.carrizo.com, is not part of this prospectus.
S-6
The Offering
|
|
|
|
|
Issuer
|
|
Carrizo Oil & Gas, Inc.
|
|
|
Common Stock Offered by Us
|
|
15,600,000 shares.
|
|
|
Common Stock Outstanding After the Offering
|
|
81,435,820 shares(a).
|
|
|
Use of Proceeds
|
|
We intend to use the net proceeds from this offering to fund a portion of the purchase price for the Pending Acquisition and for general corporate purposes. Pending the closing of the Pending Acquisition, we intend to use the net
proceeds from this offering to reduce borrowings under our revolving credit facility, including to repay the borrowings used for the $75.0 million deposit on the purchase price for the Pending Acquisition. We intend to use net proceeds not used to
pay the purchase price for the Pending Acquisition, including in the event we do not consummate the Pending Acquisition, for general corporate purposes, including to fund future potential acquisitions or a portion of our 2017 and 2018 capital
expenditure plans. Please see SummaryRecent DevelopmentsPending Acquisition and Risk FactorsRisks Related to the Pending Acquisition.
|
|
|
NASDAQ Global Select Market Symbol
|
|
CRZO
|
|
|
Conflicts of Interest
|
|
We intend to use a portion of the net proceeds of this offering to repay indebtedness owed by us under our revolving credit facility. See Use of Proceeds. Affiliates of the underwriters are lenders under our revolving
credit facility and, as a result, may receive a portion of the net proceeds of this offering. Because affiliates of certain of the underwriters may receive more than 5% of the net proceeds in this offering, such underwriters are deemed to have a
conflict of interest under Rule 5121 of the Financial Industry Regulatory Authority, Inc., or FINRA. Accordingly, this offering is being conducted in accordance with FINRA Rule 5121. For more information, see Underwriting
(Conflicts of Interest)Conflicts of Interest.
|
|
|
Risk Factors
|
|
You should consider carefully the Risk Factors on page
S-13
of this prospectus supplement and page 2 of the accompanying prospectus and in our other filings with the SEC before
making an investment in our common stock.
|
(a)
|
The number of shares of our common stock that will be outstanding after this offering set forth above is based on the actual number of shares outstanding as of June 28, 2017, which was 65,835,820 shares, and the
sale of shares of common stock in this offering.
|
Except as otherwise noted, we have presented the information in this prospectus
supplement assuming no vesting of restricted stock units, no exercise of warrants (including those to be issued in the preferred stock and warrants issuance) and no issuance of shares of our common stock that we may use to pay dividends on the
preferred stock to be issued in such preferred stock and warrants issuance or may, at our election, use to make specified redemption payments with respect to such preferred stock.
S-7
Summary Historical Consolidated Financial Data
The summary historical consolidated financial data set forth below as of and for each of the three years ended December 31, 2016, 2015 and 2014
have been derived from our audited consolidated financial statements incorporated by reference herein. The summary historical consolidated financial data set forth below as of and for each of the three month periods ended March 31, 2017 and
2016 have been derived from our unaudited consolidated financial statements incorporated by reference herein. The summary consolidated financial data are qualified in their entirety by and should be read in conjunction with our consolidated
financial statements and related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on
Form 10-K
for the year
ended December 31, 2016 and our Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017, each of which is incorporated by reference into this prospectus supplement. Historical results are
not necessarily indicative of results that may be expected for any future period.
For the unaudited pro forma condensed combined balance sheet and
statements of operations, giving effect to the Pending Acquisition, please read Unaudited Pro Forma Condensed Combined Financial Information on page
S-21
of this prospectus supplement. The pro
forma combined financial information is unaudited and presented for illustrative purposes only and does not purport to represent what the statements of operations would have been had the Pending Acquisition occurred on January 1, 2016, nor is
it indicative of our future operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands, except per share amounts)
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil
|
|
$
|
378,073
|
|
|
$
|
376,094
|
|
|
$
|
610,483
|
|
|
$
|
128,092
|
|
|
$
|
67,996
|
|
Natural gas liquids
|
|
|
22,428
|
|
|
|
15,608
|
|
|
|
25,050
|
|
|
|
7,425
|
|
|
|
3,440
|
|
Natural gas
|
|
|
43,093
|
|
|
|
37,501
|
|
|
|
74,654
|
|
|
|
15,838
|
|
|
|
9,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
443,594
|
|
|
|
429,203
|
|
|
|
710,187
|
|
|
|
151,355
|
|
|
|
81,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
98,717
|
|
|
|
90,052
|
|
|
|
74,157
|
|
|
|
29,845
|
|
|
|
23,675
|
|
Production taxes
|
|
|
19,046
|
|
|
|
17,683
|
|
|
|
29,544
|
|
|
|
6,208
|
|
|
|
3,431
|
|
Ad valorem taxes
|
|
|
5,559
|
|
|
|
9,255
|
|
|
|
8,450
|
|
|
|
2,967
|
|
|
|
2,070
|
|
Depreciation, depletion and amortization
|
|
|
213,962
|
|
|
|
300,035
|
|
|
|
317,383
|
|
|
|
54,382
|
|
|
|
59,577
|
|
General and administrative, net
|
|
|
74,972
|
|
|
|
67,224
|
|
|
|
77,029
|
|
|
|
21,703
|
|
|
|
21,303
|
|
(Gain) loss on derivatives, net
|
|
|
49,073
|
|
|
|
(99,261
|
)
|
|
|
(201,907
|
)
|
|
|
(25,316
|
)
|
|
|
(10,553
|
)
|
Interest expense, net
|
|
|
79,403
|
|
|
|
69,195
|
|
|
|
53,171
|
|
|
|
20,571
|
|
|
|
18,713
|
|
Impairment of proved oil and gas properties
|
|
|
576,540
|
|
|
|
1,224,367
|
|
|
|
|
|
|
|
|
|
|
|
274,413
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
38,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
1,796
|
|
|
|
11,276
|
|
|
|
2,150
|
|
|
|
974
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
1,119,068
|
|
|
|
1,727,963
|
|
|
|
359,977
|
|
|
|
111,334
|
|
|
|
392,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) From Continuing Operations Before Income Taxes
|
|
|
(675,474
|
)
|
|
|
(1,298,760
|
)
|
|
|
350,210
|
|
|
|
40,021
|
|
|
|
(311,274
|
)
|
Income tax (expense) benefit
|
|
|
|
|
|
|
140,875
|
|
|
|
(127,927
|
)
|
|
|
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) From Continuing Operations
|
|
($
|
675,474
|
)
|
|
($
|
1,157,885
|
)
|
|
$
|
222,283
|
|
|
$
|
40,021
|
|
|
($
|
311,395
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per common shareBasic
|
|
($
|
11.27
|
)
|
|
($
|
22.50
|
)
|
|
$
|
4.90
|
|
|
$
|
0.61
|
|
|
($
|
5.34
|
)
|
Income (loss) from continuing operations per common shareDiluted
|
|
($
|
11.27
|
)
|
|
($
|
22.50
|
)
|
|
$
|
4.81
|
|
|
$
|
0.61
|
|
|
($
|
5.34
|
)
|
Weighted average common shares outstandingBasic
|
|
|
59,932
|
|
|
|
51,457
|
|
|
|
45,372
|
|
|
|
65,188
|
|
|
|
58,360
|
|
Weighted average common shares outstandingDiluted
|
|
|
59,932
|
|
|
|
51,457
|
|
|
|
46,194
|
|
|
|
65,778
|
|
|
|
58,360
|
|
S-8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Statements of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities from continuing operations
|
|
$
|
272,768
|
|
|
$
|
378,735
|
|
|
$
|
502,275
|
|
|
$
|
76,408
|
|
|
$
|
53,868
|
|
Net cash used in investing activities from continuing operations
|
|
|
(619,832
|
)
|
|
|
(673,376
|
)
|
|
|
(940,676
|
)
|
|
|
(113,826
|
)
|
|
|
(124,821
|
)
|
Net cash provided by financing activities from continuing operations
|
|
|
308,340
|
|
|
|
330,767
|
|
|
|
300,290
|
|
|
|
35,615
|
|
|
|
30,193
|
|
Capital expendituresoil and gas properties
|
|
|
(480,929
|
)
|
|
|
(675,952
|
)
|
|
|
(861,354
|
)
|
|
|
(123,749
|
)
|
|
|
(125,989
|
)
|
Acquisitions of oil and gas properties
|
|
|
(153,521
|
)
|
|
|
(1,817
|
)
|
|
|
(92,961
|
)
|
|
|
(7,032
|
)
|
|
|
|
|
Proceeds from sales of oil and gas properties, net
|
|
|
15,564
|
|
|
|
8,047
|
|
|
|
12,576
|
|
|
|
17,372
|
|
|
|
1,785
|
|
Proceeds from borrowings and issuances
|
|
|
770,291
|
|
|
|
1,776,860
|
|
|
|
1,287,541
|
|
|
|
280,504
|
|
|
|
73,647
|
|
Repayments of debt
|
|
|
(683,291
|
)
|
|
|
(1,903,541
|
)
|
|
|
(986,041
|
)
|
|
|
(244,504
|
)
|
|
|
(43,097
|
)
|
Sale of common stock, net of offering costs
|
|
|
223,739
|
|
|
|
470,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1)
|
|
|
399,500
|
|
|
|
455,079
|
|
|
|
533,356
|
|
|
|
94,165
|
|
|
|
92,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (deficit)
|
|
($
|
138,971
|
)
|
|
($
|
50,636
|
)
|
|
($
|
141,278
|
)
|
|
($
|
154,802
|
)
|
|
($
|
33,071
|
)
|
Total property and equipment, net
|
|
|
1,545,760
|
|
|
|
1,716,861
|
|
|
|
2,629,253
|
|
|
|
1,634,204
|
|
|
|
1,483,588
|
|
Total assets(2)
|
|
|
1,626,327
|
|
|
|
2,007,246
|
|
|
|
2,962,305
|
|
|
|
1,714,440
|
|
|
|
1,650,932
|
|
Total debt, net of debt discount, premium, and debt issuance costs of senior notes(2)
|
|
|
1,325,418
|
|
|
|
1,236,017
|
|
|
|
1,332,175
|
|
|
|
1,362,046
|
|
|
|
1,267,151
|
|
Total shareholders equity
|
|
|
23,458
|
|
|
|
444,054
|
|
|
|
1,103,441
|
|
|
|
69,927
|
|
|
|
144,904
|
|
(1)
|
Adjusted EBITDA is a
non-GAAP
financial measure that is defined and reconciled to its most directly comparable GAAP measure, income (loss) from continuing operations under
Non-GAAP
Financial Measure below.
|
(2)
|
Effective January 1, 2016, we adopted Accounting Standards Updates
2015-03
and
2015-15
requiring debt issuance costs associated with
our senior notes to be presented as a direct deduction from the related debt rather than an asset. As a result, prior period amounts have been reclassified to conform to the current presentation.
|
Non-GAAP
Financial Measure
Adjusted EBITDA is a
non-GAAP
financial measure that excludes certain items that are included in income (loss)
from continuing operations, the most directly comparable GAAP financial measure. Items excluded are interest expense, depreciation, depletion and amortization and items that we believe affect the comparability of operating results such as items
whose timing and/or amount cannot be reasonably estimated or are
non-recurring.
Adjusted EBITDA is
presented because management believes it provides useful additional information to investors and analysts, for analysis of our financial and operating performance on a recurring basis and our ability to internally generate funds for exploration and
development, and to service debt. In addition, management believes that adjusted EBITDA is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas
exploration and production industry.
Adjusted EBITDA should not be considered in isolation or as a substitute for income (loss) from continuing
operations, net cash provided by operating activities from continuing operations, or any
S-9
other measure of a companys profitability or liquidity presented in accordance with GAAP. A reconciliation of income (loss) from continuing operations to adjusted EBITDA to net cash
provided by operating activities from continuing operations is presented below. Because adjusted EBITDA excludes some, but not all, items that affect income (loss) from continuing operations, our calculations of adjusted EBITDA may not be comparable
to similarly titled measures of other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Income (Loss) From Continuing Operations (GAAP)
|
|
($
|
675,474
|
)
|
|
($
|
1,157,885
|
)
|
|
$
|
222,283
|
|
|
$
|
40,021
|
|
|
($
|
311,395
|
)
|
Income tax (expense) benefit
|
|
|
|
|
|
|
140,875
|
|
|
|
(127,927
|
)
|
|
|
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) From Continuing Operations Before Income Taxes
|
|
|
(675,474
|
)
|
|
|
(1,298,760
|
)
|
|
|
350,210
|
|
|
|
40,021
|
|
|
|
(311,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
213,962
|
|
|
|
300,035
|
|
|
|
317,383
|
|
|
|
54,382
|
|
|
|
59,577
|
|
Interest expense, net
|
|
|
79,403
|
|
|
|
69,195
|
|
|
|
53,171
|
|
|
|
20,571
|
|
|
|
18,713
|
|
(Gain) loss on derivatives, net
|
|
|
49,073
|
|
|
|
(99,261
|
)
|
|
|
(201,907
|
)
|
|
|
(25,316
|
)
|
|
|
(10,553
|
)
|
Cash received (paid) for derivative settlements, net
|
|
|
119,369
|
|
|
|
194,296
|
|
|
|
(13,529
|
)
|
|
|
1,519
|
|
|
|
51,163
|
|
Non-cash
general and administrative expense, net
|
|
|
36,009
|
|
|
|
15,794
|
|
|
|
25,878
|
|
|
|
2,014
|
|
|
|
11,758
|
|
Impairment of proved oil and gas properties
|
|
|
576,540
|
|
|
|
1,224,367
|
|
|
|
|
|
|
|
|
|
|
|
274,413
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
38,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
618
|
|
|
|
11,276
|
|
|
|
2,150
|
|
|
|
974
|
|
|
|
(1,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(Non-GAAP)
|
|
$
|
399,500
|
|
|
$
|
455,079
|
|
|
$
|
533,356
|
|
|
$
|
94,165
|
|
|
$
|
92,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(79,403
|
)
|
|
|
(69,195
|
)
|
|
|
(53,171
|
)
|
|
|
(20,571
|
)
|
|
|
(18,713
|
)
|
Non-cash
interest expense, net
|
|
|
4,172
|
|
|
|
4,289
|
|
|
|
4,272
|
|
|
|
1,091
|
|
|
|
1,160
|
|
Changes in components of working capital and other
|
|
|
(51,501
|
)
|
|
|
(11,438
|
)
|
|
|
17,818
|
|
|
|
1,723
|
|
|
|
(21,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities From Continuing Operations (GAAP)
|
|
$
|
272,768
|
|
|
$
|
378,735
|
|
|
$
|
502,275
|
|
|
$
|
76,408
|
|
|
$
|
53,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-10
Summary Unaudited Pro Forma Condensed Combined Financial Data
The following summary unaudited pro forma condensed combined financial data is presented to illustrate the effect of the Pending Acquisition on our
historical financial position and results of operations. The summary unaudited pro forma condensed combined balance sheet as of March 31, 2017 is based on the historical consolidated balance sheet as of March 31, 2017 adjusted to give
effect as if the Pending Acquisition occurred on March 31, 2017. The summary unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2017 and the year ended December 31, 2016 are based on
the historical consolidated statements of operations for such periods adjusted to give effect to the Pending Acquisition as if it had occurred on January 1, 2016. The summary unaudited pro forma condensed combined financial data should be read
in conjunction with the unaudited pro forma condensed combined financial statements and related notes included in this prospectus supplement, our consolidated financial statements and related notes included in our Annual Report on Form
10-K
for the year ended December 31, 2016 and our Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017, each of which is incorporated by reference into
this prospectus supplement, and the audited combined statements of revenues and direct operating expenses of ExL included in this prospectus supplement.
The summary pro forma condensed combined financial data is unaudited and presented for illustrative purposes only and does not purport to represent what
the statements of operations would have been had the Pending Acquisition occurred on January 1, 2016, nor is it indicative of our future operating results.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2016
|
|
|
Three Months Ended
March 31, 2017
|
|
|
|
(In thousands, except per share amounts)
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Crude oil
|
|
$
|
385,012
|
|
|
$
|
134,336
|
|
Natural gas liquids
|
|
|
23,574
|
|
|
|
8,927
|
|
Natural gas
|
|
|
46,327
|
|
|
|
17,931
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
454,913
|
|
|
|
161,194
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
100,899
|
|
|
|
31,501
|
|
Production taxes
|
|
|
19,579
|
|
|
|
6,716
|
|
Ad valorem taxes
|
|
|
5,559
|
|
|
|
3,055
|
|
Depreciation, depletion and amortization
|
|
|
221,044
|
|
|
|
55,099
|
|
General and administrative, net
|
|
|
74,972
|
|
|
|
21,703
|
|
(Gain) loss on derivatives, net
|
|
|
49,073
|
|
|
|
(25,316
|
)
|
Interest expense, net
|
|
|
63,299
|
|
|
|
15,463
|
|
Impairment of proved oil and gas properties
|
|
|
576,540
|
|
|
|
|
|
Other expense, net
|
|
|
1,796
|
|
|
|
974
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
1,112,761
|
|
|
|
109,195
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
(657,848
|
)
|
|
|
51,999
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
($
|
657,848
|
)
|
|
$
|
51,999
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Dividends on preferred stock
|
|
|
(22,188
|
)
|
|
|
(5,547
|
)
|
Amortization of discount on preferred stock
|
|
|
(16,949
|
)
|
|
|
(4,400
|
)
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Attributable to Common Shareholders
|
|
($
|
696,985
|
)
|
|
$
|
42,052
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common shareBasic
|
|
($
|
9.23
|
)
|
|
$
|
0.52
|
|
Net income (loss) per common shareDiluted
|
|
($
|
9.23
|
)
|
|
$
|
0.52
|
|
Weighted average common shares outstandingBasic
|
|
|
75,532
|
|
|
|
80,788
|
|
Weighted average common shares outstandingDiluted
|
|
|
75,532
|
|
|
|
81,378
|
|
S-11
|
|
|
|
|
|
|
Three Months Ended
March 31, 2017
|
|
|
|
(In thousands)
|
|
Balance Sheet Data:
|
|
|
|
|
Working capital (deficit)
|
|
($
|
156,406
|
)
|
Total property and equipment, net
|
|
|
2,352,678
|
|
Total assets
|
|
|
2,433,048
|
|
Long-term debt
|
|
|
1,549,778
|
|
Total shareholders equity
|
|
|
322,634
|
|
S-12
RISK FACTORS
Before making a decision whether to invest in our common stock, you should consider carefully the risks discussed below as well as those described
under Risk Factors and elsewhere in our Annual Report on Form
10-K
for the year ended December 31, 2016, as they may be amended, supplemented or superseded from time to time by other reports
that we subsequently file with the SEC and in our other filings with the SEC which are incorporated by reference in this prospectus supplement and the accompanying prospectus, as well as the risks described in the accompanying prospectus. The risks
described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial individually or in the aggregate as well as the additional risks and uncertainties described elsewhere in this
prospectus supplement or in the documents incorporated by reference in this prospectus supplement may also adversely affect our business, operating results, financial condition and prospects, as well as the value of an investment in our common
stock.
If any of the following risks actually were to occur, our business, financial condition, results of operations or cash flow could be
affected materially and adversely. In that case, you could lose all or part of your investment in our common stock.
Risks Related to the
Pending Acquisition
We may not consummate the Pending Acquisition, and the closing of this offering is not conditioned on its consummation.
We intend to use the net proceeds from this offering to fund a portion of the purchase price of the Pending Acquisition described above under
SummaryRecent DevelopmentsPending Acquisition. However, the closing of this offering is not conditioned on the consummation of the Pending Acquisition. There can be no assurances that the Pending Acquisition will be
consummated on the terms described herein or at all, or that the consummation of the Pending Acquisition will not be delayed beyond the expected closing date. If we do not complete the Pending Acquisition, we will not have the opportunity to attempt
to realize the benefits we believe the acquisition will afford us.
We have performed only a limited investigation of the ExL Properties. The
completion of the Pending Acquisition is subject to specified closing conditions and to the right of one or both of the parties to terminate the transaction including in the event that more than specified adjustments to the purchase price are
required. If one or more of the closing conditions are not satisfied, or if the transaction is otherwise terminated, the Pending Acquisition may not be completed. Some of these conditions are beyond our control, and we may elect not to take actions
necessary to satisfy these conditions or to ensure that the transaction is not otherwise terminated.
Because the closing of this offering is not
conditioned on the consummation the Pending Acquisition, if you decide to purchase shares in this offering, you should be willing to do so whether or not we complete the Pending Acquisition. If the Pending Acquisition is not consummated, our
management will have broad discretion in the application of the net proceeds of this offering and could apply the proceeds in ways that you or other shareholders may not approve, which could also adversely affect the market price of our common
stock. In addition, such application may not be as beneficial to us as the Pending Acquisition may have been. If the Pending Acquisition is delayed, not consummated or consummated on terms different from those described herein, the market price of
our common stock may decline. Further, a failed transaction may result in negative publicity or a negative impression of us in the investment community and may affect our relationships with our business partners. In addition, pending the potential
use of the proceeds of this offering to fund a portion of the purchase price for the Pending Acquisition, we intend to use the proceeds of this offering to repay
S-13
borrowings under our revolving credit facility. Our management will have broad discretion with respect to the use of future drawdowns on our revolving credit facility and may use these funds in
ways that you or other shareholders may not support, which could adversely affect the market price of our common stock. Please see Use of Proceeds.
The Pending Acquisition is not conditioned upon our receipt of any financing, and there can be no assurance that we will obtain the funds necessary to
complete the Pending Acquisition on acceptable terms or at all. This offering is not conditioned upon the completion of any other financing to complete the Pending Acquisition, and completion of this offering will not provide us with all of the
financing necessary to complete the Pending Acquisition. Failure to complete the Pending Acquisition could cause us to be in breach of the ExL Purchase Agreement, could result in our loss of our performance deposit paid upon execution of such
agreement, litigation and other losses to us, and a decline in the market price of our common stock.
We may not be able to achieve the expected benefits of
the Pending Acquisition and may have difficulty integrating with the Pending Acquisition.
Even if we consummate the Pending Acquisition, we
may not be able to achieve the expected benefits of the Pending Acquisition. There can be no assurance that the Pending Acquisition will be beneficial to us. We may not be able to integrate and develop the ExL Properties without increases in costs,
losses in revenues or other difficulties. Any unexpected costs or delays incurred in connection with the integration and development of the ExL Properties could have an adverse effect on our business, results of operations, financial condition and
prospects, as well as the market price of our common stock.
Our assessment of ExL Properties to date has been limited and, even by the time of
closing, it will not reveal all existing or potential problems, nor will it permit us to become familiar enough with the properties to assess fully their capabilities and deficiencies. In the course of our assessment, we will not receive an
independent reserve engineer report related to the ExL Properties. We may incur costs or experience problems related to the ExL Properties in the Pending Acquisition, and we may not have adequate recourse against ExL. Although we will inspect the
properties being sold to us, inspections may not reveal all title, structural or environmental problems. We may be required to assume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in
accordance with our expectations. Our ability to make specified claims against ExL in the Pending Acquisition generally expires over time and we may be left with no recourse for liabilities and other problems associated with the Pending Acquisition
that we do not discover prior to the expiration date related to such matters under the ExL Purchase Agreement.
The market price of our common stock
may decline as a result of the Pending Acquisition if, among other things, the integration and development of the ExL Properties is unsuccessful or if the liabilities, expenses, title, environmental and other defects, or transaction costs related to
the Pending Acquisition are greater than expected or the ExL Properties do not yield the anticipated returns. The market price of our common stock may decline if we do not achieve the perceived benefits of the Pending Acquisition as rapidly or to
the extent anticipated by us or by securities market participants or if the effect of the Pending Acquisition, including the obligations incurred to finance the Pending Acquisition, on our business results of operations or financial condition or
prospects is not consistent with our expectations or those of securities market participants.
Upon consummation of the Pending Acquisition, our overall level
of debt and preferred stock obligations will increase, which could adversely affect us.
Upon consummation of the Pending Acquisition, our
overall debt level will increase from approximately $1.4 billion at March 31, 2017 to approximately $1.6 billion at such date on a pro forma
S-14
basis after giving effect to such Pending Acquisition and our senior notes offering. In connection with the Pending Acquisition, we will issue preferred stock with an aggregate initial
liquidation preference of $250.0 million that requires us, upon request of holders of a majority of the then-outstanding shares of preferred stock, to redeem the preferred stock, in whole or in part, on or after the seventh anniversary of its
issuance and upon certain defaults and changes of control. After the completion of the Pending Acquisition, our level of debt and other obligations could have significant adverse consequences on our business and future prospects, including the
following:
|
|
|
we may not be able to obtain financing in the future on acceptable terms or at all for working capital, capital expenditures, acquisitions, debt service requirements or other purposes;
|
|
|
|
less-levered competitors could have a competitive advantage because they have lower debt service requirements;
|
|
|
|
credit rating agencies could downgrade our credit ratings following the Pending Acquisition below currently expected levels; and
|
|
|
|
we may be less able to take advantage of significant business opportunities and to react to changes in market or industry conditions than our competitors.
|
Risk Related to Our Sale of Assets
We may not complete
or recognize the anticipated benefits from the sale of our non-core assets.
We have recently begun efforts to sell our assets in the
Marcellus and the Utica and also expect to begin efforts in the near term for the sale of other non-core assets in our portfolio. There can be no assurance that we will be able to sell any of these assets on our desired time frame on acceptable
terms, including our desired price, or at all. Our sales processes for some of these assets are in their beginning stages, and we have no agreements in place to sell any of these assets. Our targeted gross proceeds are subject to numerous
uncertainties inherent in the sale of oil and gas properties, most of which are beyond our control including oil prices and buyers expectations regarding future oil prices, reserve estimates and costs to produce such reserves. The timing of
any sale is inherently uncertain and beyond our control. Any divestiture or disposition could expose us to significant risks, including, without limitation, costly fees for legal and transaction-related services, diversion of management resources,
loss of key personnel and reduction in revenue. Further, we may be required to retain or indemnify the buyer against certain liabilities and obligations in connection with any such divestiture or disposition, and we may also become subject to
third-party claims arising out of such divestiture or disposition. We may not be successful in overcoming these risks or any other problems encountered in connection with these divestures that may adversely affect our business, financial position
and operating results.
Risks Related to the Common Stock
Our issuance of common stock, preferred stock and warrants could trigger a limitation on our ability to utilize net operating loss carryforwards.
Our ability to utilize U.S. net operating loss carryforwards to reduce future taxable income is subject to various limitations under the Internal Revenue
Code of 1986, as amended (the Code). The utilization of such carryforwards may be limited under Section 382 of the Code upon the occurrence of certain ownership changes resulting from the sale or exchange of our stock by
shareholders and our offering of stock (including certain preferred stock, such as the preferred stock to be issued in connection with the Pending Acquisition, and including warrants) if during any three-year period there is an aggregate change of
more than 50% in the beneficial ownership of our stock. In the event of such
S-15
an ownership change, Section 382 of the Code imposes an annual limitation on the amount of our taxable income that can be offset by these loss carryforwards. The limitation is generally
equal to the product of (a) the fair market value of our equity multiplied by (b) a percentage approximately equivalent to the yield on long-term tax exempt bonds during the month in which an ownership change occurs. In addition, the
limitation is increased if there are recognized
built-in
gains during any post-change year, but only to the extent of any net unrealized
built-in
gains inherent in the
assets sold. Our issuance of common stock pursuant to this offering and our issuance of preferred stock and warrants could, taken together with other transactions with respect to our stock, trigger an ownership change under Section 382 of the
Code and therefore a limitation on our ability to utilize our U.S. loss carryforwards. Any such limitation could cause some of our loss carryforwards to expire before we would be able to utilize them to reduce taxable income in future periods,
possibly resulting in a substantial income tax expense or write down of our tax assets or both.
If the preferred stock and warrants issuance is consummated,
a substantial number of shares of our common stock may be issued upon the redemption of the preferred stock with common stock, the payment of common stock as dividends or exercise of the warrants, which issuances may dilute the ownership interests
of existing shareholders, or may otherwise reduce the value of our common stock.
If we complete the preferred stock and warrants issuance,
the issuance of common stock in respect of such instruments will dilute the ownership interests and voting power of existing shareholders. We may choose to, or be required to, deliver shares of our common stock in satisfaction of the quarterly
dividend, and at our election we may issue common stock upon certain redemptions of any such preferred stock. All of those issuances will value the common stock at a discount to a market price valuation during a measurement period near the time of
issuance. Additionally, at the closing of the preferred stock and warrants issuance, we will issue 2,750,000 warrants. The warrants are required to be exercised on a cashless net exercise basis. Any sales, or expectation of sales, in the
public market of shares of our common stock issuable in respect of the preferred stock or warrants could adversely affect prevailing market prices of our common stock.
Holders of the preferred stock have rights that may restrict the ability of the Company to operate its business or be adverse to holders of common stock.
If we complete the preferred stock issuance, the Statement of Resolutions under which the preferred stock would be issued will contain
covenants that, among other things, so long as the certain funds managed or
sub-advised
by GSO Capital Partners LP and its affiliates beneficially own more than 50% of the outstanding preferred stock, limit
the Companys ability to, without the written consent of a designated representative of the preferred stock: (i) issue stock senior to or on parity with the preferred stock, (ii) incur indebtedness that would cause us to exceed a
specified leverage ratio, (iii) amend, modify, alter or supplement our articles of incorporation or the Statement of Resolutions in a manner that would adversely affect the rights, preferences or privileges of the preferred stock,
(iv) enter into or amend certain debt agreements that would be more restrictive on the payment of dividends on, or redemption of, the preferred stock than those existing on the preferred stock closing and (v) pay distributions on, purchase
or redeem our common stock or other stock junior to the preferred stock that would cause us to exceed a specified leverage ratio. We can be required to redeem the preferred stock (i) after the seventh anniversary of its initial issuance or
(ii) at any time we fail to pay a dividend, subject to limited cure rights.
Holders of the preferred stock will have additional rights in the
event the Company fails to timely pay dividends, fails to redeem the preferred stock upon a change of control if required or fails to redeem the preferred stock upon request of the holders of preferred stock following the seventh anniversary of the
date of issuing the preferred stock. These rights include (i) that holders of a majority
S-16
of the then-outstanding preferred stock will have the exclusive right, voting separately as a class, to appoint and elect up to two directors to the Companys board of directors;
(ii) that approval of the holders of a majority of the then-outstanding preferred stock will be required prior to incurring indebtedness subject to a leverage ratio, declaring or paying prohibited distributions or issuing equity of subsidiaries
to third parties; and (iii) that holders of a majority of the then-outstanding preferred stock will have the right to increase dividend payments and the ability to require us to pay dividends in common stock.
Holders of the preferred stock will also have limited voting rights with respect to potential amendments to the Companys articles of incorporation
or the Statement of Resolutions that have an adverse effect on the existing terms of the preferred stock and in certain other limited circumstances or as required by law. See Preferred Stock and Warrants Issuance for additional
information regarding our preferred stock.
S-17
USE OF PROCEEDS
We expect to receive net proceeds from this offering of 15,600,000 shares of common stock offered by this prospectus, before paying offering expenses,
of approximately $222.8 million. We intend to use the net proceeds from this offering to fund a portion of the purchase price for the Pending Acquisition and for general corporate purposes. Pending the closing of the Pending Acquisition, we intend
to use the net proceeds from this offering to reduce borrowings under our revolving credit facility, including to repay the borrowings used for the $75.0 million deposit on the purchase price for the Pending Acquisition. We intend to use net
proceeds not used to pay the purchase price for the Pending Acquisition, including in the event we do not consummate the Pending Acquisition, for general corporate purposes, including to fund future potential acquisitions or a portion of our 2017
and 2018 capital expenditure plans. Please see SummaryRecent DevelopmentsPending Acquisition and Risk FactorsRisks Related to the Pending Acquisition.
As of March 31, 2017, we had $123.0 million of borrowings outstanding under our revolving credit facility and $0.4 million in letters of
credit, which reduce the amounts available under our revolving credit facility. Our revolving credit facility matures on May 4, 2022 as a result of the ninth amendment to the revolving credit agreement that was entered into on May 4, 2017.
As of June 22, 2017, we had $196.5 million of borrowings outstanding under our revolving credit facility with a weighted average interest rate of 3.20% and $0.4 million in letters of credit outstanding. The borrowings reflected do not
include subsequent borrowings to fund the purchase price deposit for the Pending Acquisition or pay a financing commitment fee for the issuance of preferred stock. Borrowings under our revolving credit facility were used to fund our capital
expenditure program and to pay the purchase price deposit for the Pending Acquisition. Affiliates of the underwriters are lenders under our revolving credit facility and, as a result, may receive a portion of the net proceeds of this offering.
Because affiliates of certain of the underwriters may receive more than 5% of the net proceeds in this offering, such underwriters are deemed to have a conflict of interest under FINRA Rule 5121. Accordingly, this offering is being
conducted in accordance with FINRA Rule 5121. For more information, see Underwriting (Conflicts of Interest)Conflicts of Interest.
Neither the completion of this offering, our senior notes offering or the Pending Acquisition is contingent upon the completion of the other. This
offering is not contingent upon the senior notes offering, and those senior notes are required to be redeemed in the event the Pending Acquisition does not occur by a specified date. This offering is not contingent upon the preferred stock and
warrants issuance although that issuance is contingent upon the completion of this offering, the senior notes offering and the Pending Acquisition. As a result, it is possible that this offering occurs and some or all of the other transactions do
not occur.
S-18
CAPITALIZATION
The following table sets forth our unaudited cash and capitalization as of March 31, 2017:
|
|
|
on an
as-adjusted
basis to reflect (i) the consummation of this offering and the net proceeds therefrom being used to repay $58.5 million of the borrowings under our
revolving credit facility and the remaining net proceeds being held as cash on our balance sheet, after deducting the underwriting discounts and commissions, (ii) the issuance and sale of our senior notes offered pursuant to the senior notes
offering and the net proceeds therefrom being held as cash on our balance sheet, after deducting the underwriting discounts and commissions, and (iii) the issuance and sale of our preferred stock and warrants offered pursuant to the preferred
stock and warrants issuance and the net proceeds therefrom being held as cash on our balance sheet, after discount and applicable commitment fee; and
|
|
|
|
on an
as-further-adjusted
basis to give effect to the Pending Acquisition, assuming the purchase price is financed with the net proceeds of this offering, our senior notes
offering and the preferred stock and warrants issuance.
|
You should read this table in conjunction with our consolidated financial
statements and related notes and the sections entitled Managements Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form
10-K
for the
year ended December 31, 2016 and our Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017, each of which is incorporated by reference in this prospectus supplement, as well as the
sections of this prospectus supplement entitled SummaryRecent Developments and Unaudited Pro Forma Condensed Combined Financial Information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
Actual
|
|
|
As
Adjusted(3)
|
|
|
As Further
Adjusted(3)(4)
|
|
|
|
(In thousands, except share and per share
amounts)
|
|
Cash and cash equivalents
|
|
$
|
2,391
|
|
|
$
|
650,391
|
|
|
$
|
2,391
|
|
|
|
|
|
Long-term debt(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured revolving credit facility due 2018(2)
|
|
$
|
123,000
|
|
|
$
|
64,482
|
|
|
$
|
64,482
|
|
7.50% senior notes due 2020
|
|
|
600,000
|
|
|
|
600,000
|
|
|
|
600,000
|
|
6.25% senior notes due 2023
|
|
|
650,000
|
|
|
|
650,000
|
|
|
|
650,000
|
|
8.25% senior notes due 2025
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
4.375% convertible senior notes due 2028
|
|
|
4,425
|
|
|
|
4,425
|
|
|
|
4,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
1,377,425
|
|
|
$
|
1,568,907
|
|
|
$
|
1,568,907
|
|
|
|
|
|
Preferred stock, $0.01 par value (10,000,000 shares authorized (historical and as adjusted), none issued and
outstanding (historical), 250,000 issued and outstanding (as adjusted,
as-further-adjusted
and pro forma))
|
|
|
|
|
|
|
207,561
|
(6)
|
|
|
207,561
|
(6)
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value (90,000,000 shares authorized, 65,796,342 issued and outstanding (historical),
81,396,342 issued and outstanding (as adjusted,
as-further-adjusted
and pro forma))(5)
|
|
|
658
|
|
|
|
814
|
|
|
|
814
|
|
Additional
paid-in
capital
|
|
|
1,672,332
|
|
|
|
1,924,883
|
(7)
|
|
|
1,924,883
|
(7)
|
Accumulated deficit
|
|
|
(1,603,063
|
)
|
|
|
(1,603,063
|
)
|
|
|
(1,603,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
69,927
|
|
|
|
322,634
|
|
|
|
322,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
1,447,352
|
|
|
$
|
2,099,102
|
|
|
$
|
2,099,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-19
(1)
|
Excludes debt premium and debt issuance costs of senior notes.
|
(2)
|
As of June 22, 2017, we had approximately $196.5 million of borrowings outstanding under our revolving credit facility, which does not include subsequent borrowings to fund the purchase price deposit for the
Pending Acquisition or pay a financing commitment fee for the issuance of the preferred stock.
|
(3)
|
There is no assurance that the senior notes offering or the preferred stock and warrants issuance will occur on the terms described or at all.
|
(4)
|
The Pending Acquisition is expected to close in
mid-August
2017, subject to customary closing conditions.
|
(5)
|
The Company currently has 180.0 million shares of common stock authorized.
|
(6)
|
Reflects the preliminary allocation of the net proceeds from the issuance of preferred stock and warrants to the preferred stock based on its relative fair value.
|
(7)
|
Reflects the preliminary allocation of the net proceeds from the issuance of preferred stock and warrants to the warrants based on their relative fair value.
|
S-20
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On June 28, 2017, we and our wholly-owned subsidiary Carrizo (Permian) LLC entered into the ExL Purchase Agreement with ExL to acquire the ExL
Properties.
The following unaudited pro forma condensed combined financial information is presented to illustrate the effect of the Pending
Acquisition on our historical financial position and results of operations. The unaudited pro forma condensed combined balance sheet as of March 31, 2017 is based on the historical consolidated balance sheet as of March 31, 2017 adjusted
to give effect as if the Pending Acquisition occurred on March 31, 2017. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2017 and the year ended December 31, 2016 are based on
the historical consolidated statements of operations for such periods adjusted to give effect to the Pending Acquisition as if it had occurred on January 1, 2016. The unaudited pro forma condensed combined financial information should be read
in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form
10-K
for the year ended December 31, 2016 and our Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017, each of which is incorporated by reference into this prospectus supplement, and the audited combined statements of revenues and direct operating expenses of ExL
included in this prospectus supplement.
The pro forma condensed combined financial information is unaudited and presented for illustrative purposes
only and does not purport to represent what the statements of operations would have been had the Pending Acquisition occurred on January 1, 2016, nor is it indicative of our future operating results.
S-21
CARRIZO OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
Historical
|
|
|
Pro Forma
Adjustments
|
|
|
|
|
|
Pro Forma
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
73,226
|
|
|
$
|
134
|
|
|
|
(1
|
)
|
|
$
|
73,360
|
|
Property and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas properties, net, full cost method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved properties, net
|
|
|
1,371,335
|
|
|
|
143,695
|
|
|
|
(1
|
)
|
|
|
1,515,030
|
|
Unproved properties, not being amortized
|
|
|
253,270
|
|
|
|
574,779
|
|
|
|
(1
|
)
|
|
|
828,049
|
|
Other property and equipment, net
|
|
|
9,599
|
|
|
|
|
|
|
|
|
|
|
|
9,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
|
1,634,204
|
|
|
|
718,474
|
|
|
|
|
|
|
|
2,352,678
|
|
Other assets
|
|
|
7,010
|
|
|
|
|
|
|
|
|
|
|
|
7,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,714,440
|
|
|
$
|
718,608
|
|
|
|
|
|
|
$
|
2,433,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, Preferred Stock and Shareholders
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
228,028
|
|
|
$
|
1,738
|
|
|
|
(1
|
)
|
|
$
|
229,766
|
|
Long-term debt
|
|
|
1,362,046
|
|
|
|
187,732
|
|
|
|
(2
|
)(3)
|
|
|
1,549,778
|
|
Contingent consideration
|
|
|
|
|
|
|
68,750
|
|
|
|
(4
|
)
|
|
|
68,750
|
|
Other liabilities
|
|
|
54,439
|
|
|
|
120
|
|
|
|
(1
|
)
|
|
|
54,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,644,513
|
|
|
|
258,340
|
|
|
|
|
|
|
|
1,902,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value
|
|
|
|
|
|
|
207,561
|
|
|
|
(5
|
)
|
|
|
207,561
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value
|
|
|
658
|
|
|
|
156
|
|
|
|
(6
|
)
|
|
|
814
|
|
Additional
paid-in
capital
|
|
|
1,672,332
|
|
|
|
252,551
|
|
|
|
(6
|
)(7)
|
|
|
1,924,883
|
|
Accumulated deficit
|
|
|
(1,603,063
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,603,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
69,927
|
|
|
|
252,707
|
|
|
|
|
|
|
|
322,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Preferred Stock and Shareholders
Equity
|
|
$
|
1,714,440
|
|
|
$
|
718,608
|
|
|
|
|
|
|
$
|
2,433,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited pro forma condensed combined financial statements.
S-22
CARRIZO OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017
|
|
|
|
Historical
|
|
|
Acquired
Properties
|
|
|
|
|
|
Pro Forma
Adjustments
|
|
|
|
|
|
Pro Forma
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil
|
|
$
|
128,092
|
|
|
$
|
6,244
|
|
|
|
(1
|
)
|
|
$
|
|
|
|
|
|
|
|
$
|
134,336
|
|
Natural gas liquids
|
|
|
7,425
|
|
|
|
1,502
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
8,927
|
|
Natural gas
|
|
|
15,838
|
|
|
|
2,093
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
17,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
151,355
|
|
|
|
9,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161,194
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
29,845
|
|
|
|
1,656
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
31,501
|
|
Production taxes
|
|
|
6,208
|
|
|
|
508
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
6,716
|
|
Ad valorem taxes
|
|
|
2,967
|
|
|
|
88
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
3,055
|
|
Depreciation, depletion and amortization
|
|
|
54,382
|
|
|
|
|
|
|
|
|
|
|
|
717
|
|
|
|
(2
|
)
|
|
|
55,099
|
|
General and administrative, net
|
|
|
21,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,703
|
|
(Gain) loss on derivatives, net
|
|
|
(25,316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,316
|
)
|
Interest expense, net
|
|
|
20,571
|
|
|
|
|
|
|
|
|
|
|
|
(5,108
|
)
|
|
|
(3
|
)
|
|
|
15,463
|
|
Other expense, net
|
|
|
974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
111,334
|
|
|
|
2,252
|
|
|
|
|
|
|
|
(4,391
|
)
|
|
|
|
|
|
|
109,195
|
|
Income Before Income Taxes
|
|
|
40,021
|
|
|
|
7,587
|
|
|
|
|
|
|
|
4,391
|
|
|
|
|
|
|
|
51,999
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
40,021
|
|
|
$
|
7,587
|
|
|
|
|
|
|
$
|
4,391
|
|
|
|
|
|
|
$
|
51,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,547
|
)
|
|
|
(5
|
)
|
|
|
(5,547
|
)
|
Amortization of discount on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,400
|
)
|
|
|
(6
|
)
|
|
|
(4,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Common Shareholders
|
|
$
|
40,021
|
|
|
$
|
7,587
|
|
|
|
|
|
|
($
|
5,556
|
)
|
|
|
|
|
|
$
|
42,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
65,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,788
|
|
Diluted
|
|
|
65,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,378
|
|
See the accompanying notes to the unaudited pro forma condensed combined financial statements.
S-23
CARRIZO OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
Historical
|
|
|
Acquired
Properties
|
|
|
|
|
|
Pro Forma
Adjustments
|
|
|
|
|
|
Pro Forma
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil
|
|
$
|
378,073
|
|
|
$
|
6,939
|
|
|
|
(1
|
)
|
|
$
|
|
|
|
|
|
|
|
$
|
385,012
|
|
Natural gas liquids
|
|
|
22,428
|
|
|
|
1,146
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
23,574
|
|
Natural gas
|
|
|
43,093
|
|
|
|
3,234
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
46,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
443,594
|
|
|
|
11,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
454,913
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating
|
|
|
98,717
|
|
|
|
2,182
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
100,899
|
|
Production taxes
|
|
|
19,046
|
|
|
|
533
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
19,579
|
|
Ad valorem taxes
|
|
|
5,559
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
5,559
|
|
Depreciation, depletion and amortization
|
|
|
213,962
|
|
|
|
|
|
|
|
|
|
|
|
7,082
|
|
|
|
(2
|
)
|
|
|
221,044
|
|
General and administrative, net
|
|
|
74,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,972
|
|
(Gain) loss on derivatives, net
|
|
|
49,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,073
|
|
Interest expense, net
|
|
|
79,403
|
|
|
|
|
|
|
|
|
|
|
|
(16,104
|
)
|
|
|
(3
|
)
|
|
|
63,299
|
|
Impairment of proved oil and gas properties
|
|
|
576,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
576,540
|
|
Other expense, net
|
|
|
1,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
1,119,068
|
|
|
|
2,715
|
|
|
|
|
|
|
|
(9,022
|
)
|
|
|
|
|
|
|
1,112,761
|
|
Income (Loss) Before Income Taxes
|
|
|
(675,474
|
)
|
|
|
8,604
|
|
|
|
|
|
|
|
9,022
|
|
|
|
|
|
|
|
(657,848
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
($
|
675,474
|
)
|
|
$
|
8,604
|
|
|
|
|
|
|
$
|
9,022
|
|
|
|
|
|
|
($
|
657,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,188
|
)
|
|
|
(5
|
)
|
|
|
(22,188
|
)
|
Amortization of discount on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,949
|
)
|
|
|
(6
|
)
|
|
|
(16,949
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Common Shareholders
|
|
($
|
675,474
|
)
|
|
$
|
8,604
|
|
|
|
|
|
|
($
|
30,115
|
)
|
|
|
|
|
|
($
|
696,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
($
|
11.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
|
9.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
($
|
11.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
|
9.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
59,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,532
|
|
Diluted
|
|
|
59,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,532
|
|
See the accompanying notes to the unaudited pro forma condensed combined financial statements.
S-24
CARRIZO OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On June 28, 2017, Carrizo
Oil & Gas, Inc. and its wholly-owned subsidiary, Carrizo (Permian) LLC (the Company) entered into a purchase and sale agreement (the ExL Purchase Agreement) with ExL Petroleum Management, LLC and ExL Petroleum
Operating Inc. (together, ExL) to acquire approximately 16,488 net acres located in the Delaware Basin in Reeves and Ward Counties, Texas (the ExL Properties) for a purchase price of $648.0 million, subject to customary
purchase price adjustments (the ExL Acquisition). In addition, the Company has agreed to make a contingent payment of $50.0 million per year if the average daily closing spot price of a barrel of West Texas Intermediate crude oil as
measured by the U.S. Energy Information Administration (WTI Average Price) is above $50.00/Bbl for any of the years of 2018, 2019, 2020 and 2021 (the Contingent Payment). The Contingent Payment will be zero for the respective
year if the WTI Average Price of a barrel of oil is below $50.00/Bbl for any of such years, and the Contingent Payment is capped at and will not exceed $125.0 million. Upon execution of the ExL Purchase Agreement, we paid $75.0 million as a
performance deposit for our obligations under that agreement with the remaining purchase price due at closing. The Company currently expects the ExL Acquisition to close in mid-August 2017, subject to satisfaction of specified closing conditions.
The ExL Acquisition has an effective date of May 1, 2017. The ExL Acquisition will be funded with net proceeds from the financing transactions described below.
The following unaudited pro forma condensed combined financial information is presented to illustrate the effect of the ExL Acquisition on the
Companys historical financial position and results of operations. The unaudited pro forma condensed combined balance sheet as of March 31, 2017 is based on the historical consolidated balance sheet as of March 31, 2017 adjusted to
give effect as if the ExL Acquisition occurred on March 31, 2017. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2017 and the year ended December 31, 2016 are based on the
historical consolidated statements of operations for such periods adjusted to give effect to the ExL Acquisition as if it had occurred on January 1, 2016. The unaudited pro forma condensed combined financial information should be read in
conjunction with the Companys historical consolidated financial statements and notes thereto contained in the Companys 2016 Annual Report on Form
10-K,
filed on February 27, 2017, and its
quarterly report on Form
10-Q
filed on May 9, 2017, and the audited combined statements of revenues and direct operating expenses of ExL filed herewith.
The unaudited pro forma condensed combined financial statements give effect to the transactions described below. Each of the financing transactions
includes any discounts, commissions and commitment fees.
|
|
|
ExL Acquisition for a purchase price of $648.0 million
|
|
|
|
issuance of $250.0 million aggregate principal amount of 8.25% Senior Notes due 2025 issued at par for net proceeds of approximately $246.3 million, excluding offering expenses (the Senior Notes due
2025)
|
|
|
|
net proceeds of approximately $237.5 million, after commitment fees excluding offering expenses, from the (i) issuance of 250,000 shares of preferred stock, with a par value of $0.01 per share and a cumulative
8.875% fixed annual dividend payable quarterly (the preferred stock) and the (ii) issuance of warrants to purchase 2,750,000 shares of the Companys common stock at an exercise price of $16.08 per share (the closing price of
our common stock on the NASDAQ Global Select Market on June 27, 2017) (the warrants)
|
|
|
|
issuance of 15,600,000 shares of the Companys common stock for net proceeds of approximately $222.8 million, based on a per share price to the Company of $14.28, excluding offering expenses (the common
stock)
|
S-25
CARRIZO OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTSContinued
The unaudited pro forma condensed combined balance sheet is based on the preliminary allocation of the
purchase price before purchase price adjustments which will relate to the revenues, operating expenses and capital expenditures from the effective date to the closing date. As a result, the final purchase price may be different than the preliminary
purchase price.
The unaudited pro forma condensed combined financial information does not purport to represent what the statements of operations
would have been had the ExL Acquisition occurred on January 1, 2016, nor is it indicative of the Companys future operating results. The Companys management believes the assumptions used provide a reasonable basis for presenting the
significant effects directly attributable to the ExL Acquisition.
2. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The unaudited pro forma condensed combined balance sheet as of March 31, 2017 reflects the following pro forma adjustments:
(1)
|
The ExL Acquisition will be accounted for under the acquisition method of accounting whereby the purchase price is allocated to assets acquired and liabilities assumed based on their estimated acquisition date fair
values based on information that is available at that time. While the Company has not yet performed the valuation procedures, it intends to use a combination of a discounted cash flow model and market data in determining the fair value of the oil
and gas properties. Significant inputs into the calculation will include future commodity prices, estimated volumes of oil and gas reserves, expectations for timing and amount of future development and operating costs, future plugging and
abandonment costs and a risk adjusted discount rate.
|
S-26
CARRIZO OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTSContinued
The current preliminary purchase price allocation is based on a preliminary discounted cash flow
analysis. The purchase price allocation for the ExL Acquisition is subject to change based on future commodity prices on the closing date as well as purchase price adjustments, which will primarily relate to the revenues, operating expenses and
capital expenditures from the May 1, 2017 effective date to the closing date. The preliminary allocation of the purchase price is presented below:
|
|
|
|
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
Current assets
|
|
$
|
134
|
|
Oil and gas properties
|
|
|
|
|
Proved properties
|
|
|
143,695
|
|
Unproved properties
|
|
|
574,779
|
|
|
|
|
|
|
Total oil and gas properties
|
|
|
718,474
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
718,608
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Revenues and royalties payable
|
|
|
1,738
|
|
Contingent consideration
|
|
|
68,750
|
|
Asset retirement obligations
|
|
|
120
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
70,608
|
|
|
|
|
|
|
Net Assets Acquired
|
|
$
|
648,000
|
|
|
|
|
|
|
(2)
|
Reflect the issuance of the Senior Notes due 2025.
|
(3)
|
Reflect a portion of the excess of the net proceeds of approximately $58.5 million from the issuance of the Senior Notes due 2025, the Companys common stock and the preferred stock and warrants described above
over the purchase price of the ExL Acquisition, which is expected to be used to reduce borrowings under our revolving credit facility.
|
(4)
|
Reflect the Contingent Payment associated with the ExL Acquisition at an estimated acquisition date fair value.
|
(5)
|
Reflect the preliminary allocation of the net proceeds from the issuance of preferred stock and warrants to the preferred stock based on its relative fair value.
|
(6)
|
Reflect the issuance of common stock.
|
(7)
|
Reflect the preliminary allocation of the net proceeds from the issuance of preferred stock and warrants to the warrants based on their relative fair value.
|
3. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2017 and the year ended December 31,
2016 reflect the following pro forma adjustments:
(1)
|
Record the revenues and direct operating expenses of the ExL Properties.
|
(2)
|
Adjust depreciation, depletion and amortization to give effect to the acquisition of the ExL Properties.
|
(3)
|
Decrease interest expense, net resulting from an increase in capitalized interest due to higher average balances of unproved properties as a result of the ExL Acquisition partially offset by increased interest expense
due to the issuance of Senior Notes due 2025.
|
S-27
CARRIZO OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTSContinued
(4)
|
Income tax effect of the revenues and direct operating expenses of the ExL Properties as well as pro forma adjustments is zero as the Company has concluded that it was more likely than not that the deferred tax assets
will not be realized and recorded a valuation allowance against its net deferred tax assets, reducing the net deferred tax assets to zero. The ExL Acquisition does not change the Companys prior conclusion.
|
(5)
|
Record dividends paid in cash associated with the issuance of preferred stock. The Company has the option to pay the dividends in decreasing percentages of common stock of the Company for up to twelve fiscal quarters
following the issuance.
|
(6)
|
Record amortization of the discount on the issuance of preferred stock, created by the relative fair value allocation of net proceeds, using the effective interest method.
|
S-28
PREFERRED STOCK AND WARRANTS ISSUANCE
On June 28, 2017, we entered into a purchase agreement with the GSO Funds to issue and sell in a private placement (i) 250,000 shares of the preferred
stock and (ii) warrants for 2,750,000 shares of our common stock, with an exercise price of $16.08 per share, exercisable only on a net share settlement basis for a cash purchase price equal to $970 per share of preferred stock purchased.
The preferred stock will initially have a liquidation preference of $1,000 (the liquidation preference). The holders of preferred stock will
be entitled to receive in cash quarterly cumulative dividends at an annual rate of 8.875% of the liquidation preference per share. We may, however, at our election, pay all or a portion of the preferred stock dividends by delivering a number of
shares of our common stock equal to the dividend amount divided by 97% of the trailing
five-trading-day
volume weighted average price (VWAP) per common stock share as follows: (i) with respect
to any dividend declared in respect of a quarter ending on December 15, 2017 and on or prior to September 15, 2018, up to 100% of the dividend; (ii) with respect to any dividend declared in respect of a quarter ending on
December 15, 2018 and on or prior to September 15, 2019, up to 75% of the dividend; or (iii) with respect to any dividend declared in respect of a quarter ending on December 15, 2019 and on or prior to September 15, 2020, up
to 50% of the dividend. If we fail to satisfy the preferred stock dividend on the applicable dividend payment date, then the unpaid dividend will be added to the liquidation preference until paid. If we fail to pay the quarterly dividend on the
applicable dividend payment date and such failure continues for three months past the applicable payment date, then the holders of the preferred stock will be entitled to additional rights, as described below.
On or prior to the third anniversary of the closing date for the preferred stock and warrants issuance (the preferred stock closing), we may
redeem all or a portion of the outstanding shares of preferred stock at 104.4375% of the original $1,000 liquidation preference plus a make-whole premium of the preferred stock dividends (other than currently accrued and unpaid dividends) payable
from the date of redemption through the third anniversary of the preferred stock closing, plus accrued and unpaid dividends. After the third anniversary of the preferred stock closing, we may redeem all or a portion of the outstanding shares of
preferred stock at redemption prices decreasing from 104.4375% of the original $1,000 liquidation preference to the original $1,000 liquidation preference after the fifth anniversary of the preferred stock closing, plus accrued and unpaid dividends.
We refer to the redemption prices in the prior two sentences as the company redemption price. We may at any time on or before the first anniversary of the preferred stock closing, subject to certain conditions, redeem up to 50,000 shares
of preferred stock at a redemption price equal to the liquidation preference, which includes accrued and unpaid dividends, with the proceeds of sales of certain oil and gas properties, the sale or issuance of our common stock and the sale of any of
our wholly owned subsidiaries after the closing date.
On or after the seventh anniversary of the preferred stock closing, or at any time if we fail
to pay a quarterly dividend and such failure is not cured within three months, a designated representative of the preferred stock (the holder representative), on behalf of the holders of preferred stock, may elect to have us redeem all
or a portion of the preferred stock at the then-applicable company redemption price. We may elect to satisfy any such redemption elected by the preferred stock holders by delivering cash, shares of common stock or a combination thereof. The number
of shares of common stock to be delivered in the redemption, if applicable, will be determined using a price per share equal to 90% of the trailing
10-trading-day
VWAP
per common stock share. In the event we elect to settle the redemption called by the holder representative in common stock, the holder representative, in its sole discretion on behalf of the holders of preferred stock, may elect to revoke its
redemption notice or reduce the number of shares to be redeemed.
If a change of control (as defined in the Statement of Resolutions governing the
preferred stock) occurs, we may be required by the holders of the preferred stock to redeem the preferred stock for cash at the company redemption price if we do not afford the holders of the preferred stock an election to be
S-29
redeemed in cash at a price equal to $1,010 per share plus accrued and unpaid dividends or to retain the preferred stock, which may be in the form of a substantially equivalent security in the
surviving or successor entity. We may also make alternative arrangements with the preferred stock holders. However, any such redemption in cash will be tolled until a date that will not result in the preferred stock being characterized as
disqualified stock or similar concepts under our debt instruments.
So long as the GSO Funds and their affiliates beneficially own more
than 50% of the outstanding shares of preferred stock, the preferred stock will be subject to certain restrictions that limit our ability to (i) issue stock senior to or on a parity with the preferred stock, (ii) incur indebtedness that
would cause us to exceed a specified leverage ratio, (iii) amend, modify, alter or supplement our articles of incorporation or the Statement of Resolutions in a manner that would adversely affect the rights, preferences or privileges of the
preferred stock, (iv) enter into or amend certain debt agreements that would be more restrictive on the payment of dividends on, or redemption of, the preferred stock than those existing on the preferred stock closing and (v) pay
distributions on, purchase or redeem our common stock or other stock junior to the preferred stock that would cause us to exceed a specified leverage ratio. In addition, in certain circumstances, if we fail to redeem the preferred stock or pay
dividends, the holders will be entitled to additional rights, including an increased dividend rate, the right to require us to pay preferred stock dividends in common stock at a price per share of 95% of the trailing
five-trading-day
VWAP per common stock share, the right to appoint up to two directors to our board of directors and the right to approve incurring indebtedness subject to a leverage ratio, declaring or paying
certain prohibited distributions or issuing equity of subsidiaries to third parties.
In connection with the preferred stock closing, we will issue
to the GSO Funds warrants to purchase 2,750,000 shares of common stock at an exercise price of $16.08, subject to adjustment. The warrants will be exercisable for a
ten-year
period. The warrants may only be
exercised on a cashless net exercise basis and are subject to customary anti-dilution adjustments.
We also agreed to enter into a registration
rights agreement with the GSO Funds on the preferred stock closing, pursuant to which we will agree to provide certain registration and other rights for the benefit of the GSO Funds. In addition, we also agreed to enter into a standstill and voting
agreement with the GSO Funds, pursuant to which the GSO Funds will agree to refrain from taking certain corporate actions regarding us and agree to vote their common stock at the GSO Funds election either pro rata with other shareholders or as
recommended by our board.
We expect to receive net proceeds of approximately $242.5 million from the preferred stock and warrants issuance (prior
to payment of commitment fees and expenses of the issuance) at the preferred stock closing, subject to certain closing conditions, including completion of the Pending Acquisition. The net proceeds from the preferred stock and warrants issuance are
expected to be used to finance a portion of the purchase price for the Pending Acquisition that is due at closing. This offering is not contingent on the preferred stock and warrants issuance although that issuance is contingent upon the completion
of this offering, the senior notes offering and the Pending Acquisition. The foregoing description and any other information regarding the preferred stock and warrants issuance are included herein solely for informational purposes. This prospectus
supplement and any related communication shall not be deemed an offer to sell or a solicitation to buy any securities that may be offered in the preferred stock and warrants issuance.
The foregoing description of the preferred stock and warrants issuance and the related documentation does not purport to be complete and is qualified in
its entirety by reference to the full text of the purchase agreement, which has been filed as an exhibit to our Current Report on Form
8-K
filed on June 28, 2017 and incorporated by reference herein, and the
Form of Statement of Resolutions, the Form of Registration Rights Agreement, the Form of Warrant Agreement and the Form of Standstill and Voting Agreement attached to the purchase agreement, which are exhibits to the purchase agreement.
S-30
PRICE RANGE OF COMMON STOCK
On June 28, 2017, we had 65,835,820 shares of common stock outstanding, held of record by approximately 85 record holders. Our common stock, par value
$0.01 per share, trades on the NASDAQ Global Select Market under the symbol CRZO.
The closing price of our common stock on June 28,
2017 as reported on the NASDAQ Global Select Market was $15.61 per share. The following table shows the high and low sales prices per share of our common stock on the NASDAQ Global Select Market for the periods indicated.
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High
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Low
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Fiscal Year 2017
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April 1, 2017 through June 28, 2017
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$
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30.19
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$
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15.40
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First Quarter
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39.48
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26.08
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Fiscal Year 2016
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Fourth Quarter
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$
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43.96
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$
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32.00
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Third Quarter
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41.17
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29.52
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Second Quarter
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42.49
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28.51
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First Quarter
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32.45
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16.10
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Fiscal Year 2015
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Fourth Quarter
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$
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43.97
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$
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28.16
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Third Quarter
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49.28
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27.79
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Second Quarter
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56.77
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48.51
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First Quarter
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53.65
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38.44
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S-31
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR
NON-U.S.
HOLDERS
The following is a discussion of certain U.S. federal income tax considerations and,
to a limited extent, U.S. federal estate tax considerations applicable to
Non-U.S.
Holders (as defined below) arising from the acquisition, ownership and disposition of shares of our common stock. This
discussion is based upon the Code, Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the IRS) and other applicable authorities, all as in effect on the date of this
prospectus supplement and all of which are subject to change or differing interpretations, possibly with retroactive effect. The president has proposed significant changes to U.S. federal income tax laws, and Congress is currently considering these
and other tax reform proposals. As a result, there may be future changes in U.S. federal income tax laws that may have adverse tax consequences on the acquisition, ownership and disposition of our common stock and the value of our tax assets and may
result in materially different tax consequences than as described herein.
This summary does not address the U.S. federal income tax considerations
of the acquisition, ownership and disposition of shares of our common stock by
Non-U.S.
Holders that are subject to special provisions under the Code, including
Non-U.S.
Holders that:
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are
tax-exempt
organizations, qualified retirement plans, or other
tax-deferred
accounts;
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are financial institutions or insurance companies or that are broker-dealers, dealers, or traders in securities or currencies that elect to apply a
mark-to-market
accounting method;
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own shares of our common stock as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position;
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acquire shares of our common stock in connection with the exercise of employee stock options or otherwise as compensation for services;
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hold shares of our common stock other than as a capital asset within the meaning of Section 1221 of the Code; or
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are U.S. expatriates or former long term residents of the United States.
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Moreover, this discussion does
not address any aspect of
non-income
taxation (except to a limited extent under the heading U.S. Federal Estate Tax below), any state, local or
non-U.S.
taxation or the effect of any tax treaty. No ruling has or will be obtained from the IRS regarding any U.S. federal tax consequences relating to the purchase, ownership or disposition of shares of our common stock. As a result, no assurance can be
given that the IRS will not assert, or that a court will not sustain, a position contrary to the conclusions set forth below.
If a partnership
(including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of our common stock, the tax treatment of a partner in that partnership will generally depend on the status of the
partner and the activities of the partnership. If you are an organization that is a partnership for U.S. federal income tax purposes or a partner in such organization, you are urged to consult with your own tax advisor as to the U.S. federal tax
considerations that are applicable to you.
THIS DISCUSSION IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX CONSEQUENCES RELATING TO AN
INVESTMENT IN SHARES OF OUR COMMON STOCK. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO YOU IN LIGHT OF YOUR PARTICULAR FACTS AND CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCAL,
NON-U.S.
OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
S-32
Non-U.S.
Holder
For purposes of this summary, a
Non-U.S.
Holder
is a beneficial owner of shares of our common
stock that is not a partnership or other entity classified as a partnership for U.S. federal income tax purposes and that is not:
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an individual who is a citizen or resident of the United States;
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a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the United States or any state in the United States, including the
District of Columbia;
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an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income; or
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a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such
trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.
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Distributions
If distributions with respect to shares of our common stock are made, such distributions will be treated as dividends to the extent of our current and
accumulated earnings and profits as determined under the Code. Any portion of a distribution that exceeds our current and accumulated earnings and profits will first be applied to reduce the
Non-U.S.
Holders basis in shares of our common stock, and, to the extent such portion exceeds the
Non-U.S.
Holders basis, the excess will be treated as gain from the disposition of shares of our common
stock, the tax treatment of which is discussed below under the heading Gain on Sale or Other Disposition.
Except as described in the
discussion below under the headings Foreign Account Tax Compliance Act and Information Reporting and Backup Withholding, dividends paid in respect of shares of our common stock to a
Non-U.S.
Holder generally will be subject to U.S. withholding tax at a 30% rate (or such lower rate as specified by an applicable tax treaty) unless such dividends are effectively connected with the
Non-U.S.
Holders conduct of a trade or business in the United States (and, if required by an applicable tax treaty, the income is attributable to a permanent establishment maintained by the
Non-U.S.
Holder in the United States), in which case such dividends generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons. Such effectively connected dividends will not
be subject to U.S. federal withholding tax if the
Non-U.S.
holder satisfies certain certification requirements by providing the applicable withholding agent a properly executed IRS Form
W-8ECI
certifying eligibility for exemption. If the
Non-U.S.
holder is taxable as a corporation for U.S. federal income tax purposes, it may also be subject to a branch
profits tax at a 30% rate (or such lower rate as specified by an applicable tax treaty) on its effectively connected earnings and profits (after adjustments for certain items), which will include effectively connected dividends.
Gain on Sale or Other Disposition
Except as
described in the discussion below under the headings Foreign Account Tax Compliance Act and Information Reporting and Backup Withholding, a
Non-U.S.
Holder generally will not be subject
to U.S. federal income tax on any gain realized upon the sale, exchange, or other taxable disposition of shares of our common stock unless:
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the gain is effectively connected with the
Non-U.S.
Holders conduct of a
trade or business in the United States (and, if required by an applicable tax treaty, the income is attributable to a
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S-33
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permanent establishment maintained by the
Non-U.S.
Holder in the United States), in which case such gain generally will be subject to U.S. federal income
tax at rates generally applicable to U.S. persons, and, if the
Non-U.S.
Holder is taxable as a corporation for U.S. federal income tax purposes, such gain will be included in effectively connected earnings and
profits, which (after adjustment for certain items) may be subject to a branch profits tax at a 30% rate (or such lower rate as specified by an applicable tax treaty);
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the
Non-U.S.
Holder is an individual present in the United States for 183 days or more in the year of such sale, exchange or other taxable disposition and certain other conditions
are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable tax treaty); or
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we are or have been a U.S. real property holding corporation (USRPHC) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition
and the
Non-U.S.
Holders holding period for its shares of our common stock and, if shares of our common stock are regularly traded on an established securities market, the
Non-U.S.
Holder held, directly or indirectly, at any time during such period, more than 5% of our issued and outstanding common stock.
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Shares of our common stock currently qualify as regularly traded on an established securities market, and it is also likely that we are a
USRPHC. As a result, as long as our common stock is regularly traded on an established securities market, our status as a USRPHC will not cause any gain recognized on the sale, exchange, or other taxable disposition of our common stock by a
Non-U.S.
Holder to be subject to U.S. federal income tax unless such
non-U.S.
holder held, directly or indirectly, more than 5% of our issued and outstanding common stock at
any time during the five-year period ending on the date of such disposition, in which case such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons.
Information Reporting and Backup Withholding
Generally, we must report to the IRS and to the
Non-U.S.
Holder the amount of any dividends paid to such
Non-U.S.
Holder and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such dividends and any withholding may also be made available to the tax
authorities in the country in which the
Non-U.S.
Holder resides under the provisions of an applicable tax treaty.
In general, a
Non-U.S.
Holder will not be subject to backup withholding with respect to dividend payments that
we make to such
Non-U.S.
Holder provided that we do not have actual knowledge or reason to know that such
Non-U.S.
Holder is a U.S. person, as defined under the Code,
and we have received from such
Non-U.S.
Holder a properly completed IRS Form
W-8BEN,
W-8BEN-E
or
W-8ECI,
as applicable, or appropriate substitute form, or such
Non-U.S.
Holder otherwise establishes an exemption.
Generally, no information reporting or backup withholding will be required regarding the proceeds of the
sale of shares of our common stock made outside the United States and conducted through the foreign office of a financial intermediary that is not a U.S. payor or U.S. middleman within the meaning of the applicable Treasury Regulations. In addition,
no information reporting or backup withholding will be required regarding the proceeds of the sale of shares of our common stock made within the United States or conducted through a financial intermediary that is a U.S. payor or U.S. middleman, if
the payor receives a properly completed IRS Form
W-8BEN
or
W-8BEN-E,
as applicable, or appropriate substitute form and does not
have actual knowledge or reason to know that such
Non-U.S.
Holder is a U.S. person, as defined under the Code, or such
Non-U.S.
Holder otherwise establishes an
exemption.
S-34
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will
be allowed as a refund or a credit against the
Non-U.S.
Holders U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
Foreign Account Tax Compliance Act
Section 1471 through 1474 of the Code and the Treasury Regulations thereunder (commonly referred to collectively as FATCA) generally
impose a U.S. federal withholding tax of 30% on (i) U.S.-source dividends and (ii) payments of gross proceeds from the sale, exchange, redemption, retirement or other taxable disposition occurring after December 31, 2018, of certain
financial instruments that produce U.S.-source dividends, in each case, if paid to a foreign financial institution (FFI) or a
non-financial
foreign entity (NFFE) (each as defined in the
Code) (including, in some cases, when such FFI or NFFE is acting as an intermediary), unless those entities comply with a complicated U.S. information reporting, disclosure, and certification regime.
Non-U.S.
Holders may be affected by FATCA and you are urged to consult your own tax advisor regarding its
potential application. We intend to comply with FATCA and will not pay any additional amounts with respect to any withholding under FATCA.
U.S.
Federal Estate Tax
An individual
Non-U.S.
Holder who is treated as the owner of, or has made certain
lifetime transfers of, an interest in our common stock may be required to include the value of the stock in his or her gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax unless an applicable tax treaty
provides otherwise.
S-35
UNDERWRITING (CONFLICTS OF INTEREST)
Under the terms and subject to the conditions contained in an underwriting agreement dated June 28, 2017, we have agreed to sell to the
underwriters, named below, the following respective numbers of shares of common stock.
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Underwriter
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Number of Shares
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Goldman Sachs & Co. LLC
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4,875,000
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Wells Fargo Securities, LLC
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4,875,000
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Citigroup Global Markets Inc.
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386,100
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Capital One Securities, Inc.
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386,100
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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386,100
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Scotia Capital (USA) Inc.
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386,100
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BMO Capital Markets Corp.
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386,100
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IBERIA Capital Partners L.L.C.
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386,100
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SunTrust Robinson Humphrey, Inc.
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386,100
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Johnson Rice & Company, L.L.C.
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386,100
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Stephens Inc.
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386,100
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RBC Capital Markets, LLC
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339,300
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J.P. Morgan Securities LLC
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339,300
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Robert W. Baird & Co. Incorporated
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339,300
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Raymond James & Associates, Inc.
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339,300
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KeyBanc Capital Markets Inc.
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339,300
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Jefferies LLC
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339,300
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Northland Securities, Inc.
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339,300
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Total
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15,600,000
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Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and
not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
The underwriters are offering the shares, subject to prior sale, when, as and if
issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers
certificates and legal opinions. The underwriters will sell the shares to the public when and if the underwriters buy the shares from us. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the
underwriters right to reject any order in whole or in part.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by the Company in connection with the offering of the shares.
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Per share
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$
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0.32
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Total
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$
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4,992,000
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Shares sold by the underwriters to the public will initially be offered at the public offering price set forth on the
cover of this prospectus supplement. Any shares sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price of up to $0.10 per share from the public offering price. If all of the shares are
not sold at the initial offering price, the underwriters may change the offering price and other selling terms.
S-36
The expenses of the offering, excluding underwriting discounts, are estimated at $500,000 and are payable
by us.
Lock-Up
Agreements
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a
registration statement or amendment to a registration statement under the Securities Act of 1933 (the Securities Act), relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any
shares of our common stock, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC for a period of 45 days
after the date of this prospectus supplement, except (i) issuances pursuant to the exercise of options outstanding on the date hereof, (ii) grants of employee stock options, restricted stock, restricted stock units, stock-settled stock
appreciation rights and other securities issuances pursuant to the terms of a plan in effect on the date hereof, (iii) issuances pursuant to the exercise or vesting of such options, restricted stock units, stock appreciation rights or other
securities, (iv) issuances to our employees under the terms of the employee stock purchase plan in effect on the date hereof, (v) issuances pursuant to our 401(k) plan, (vi) issuances to directors pursuant to the incentive plan in
effect on the date hereof, (vii) the filing of registration statements on Form
S-8
and amendments thereto in connection with those securities and plans, (viii) the filing of amendments to our
currently effective shelf registration statement, a new universal shelf registration statement and a resale shelf registration statement required by our preferred stock and warrants issuance, (ix) issuances pursuant to the exercise or
conversion of our convertible notes, (x) entering into Rule
10b5-1
trading plans prior to the expiration of the
lock-up
agreements but having an effective date for
the first sales under such plans after the expiration of the
lock-up
period, (xi) the issuances contemplated by our preferred stock and warrants issuance, including any common stock as dividends for the
preferred stock or in redemption of the preferred stock, or upon exercise of the warrants, and (xii) the taking of any of the foregoing actions in connection with the issuance of shares or other securities as consideration for acquisitions or
the issuance of securities in private placements by us.
Our executive officers and directors that we have determined are subject to Section 16
of the Securities Exchange Act of 1934, as amended (the Exchange Act), have agreed that they will not offer, sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose
of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise,
or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Goldman Sachs & Co. LLC and
Wells Fargo Securities, LLC for a period of 45 days after the date of this prospectus supplement;
provided
,
however
, that the foregoing shall not apply to (a) bona fide gifts, charitable contributions or estate planning
transactions,
provided
the recipient thereof agrees in writing to be bound by the terms of the
lock-up,
(b) dispositions to (X) a directors or officers spouse, children (including
legally adopted children and stepchildren), spouses of children or grandchildren or spouses of grandchildren; (Y) a trust for the direct or indirect benefit of a director or officer or any of the persons described in clause (X); or (Z) a
limited partnership or limited liability company whose sole partners or members, as the case may be, are a director of officer or any of the persons described in clause (X) or clause (Y),
provided
that in any of clauses (X), (Y) or (Z),
the recipient agrees in writing with you to be bound by the terms of this
lock-up,
(c) shares of common stock subject to bona fide pledges of securities either existing on the date of this prospectus
S-37
supplement or subsequently entered into, if in the latter case the pledgee of such securities agrees in writing to be bound by the transfer restrictions contained in the
lock-up
with respect to such securities, (d) any sales or option exercises pursuant to Rule
10b5-1
trading plans, (e) a number of shares of common stock equal to 50%
of the number of shares of restricted stock and restricted stock units granted to the director or officer that vest during the
lock-up
period, (f) sales of shares of common stock under any Rule
10b5-1
trading plan to provide funds for the satisfaction of anticipated tax liabilities in contemplation of the vesting of restricted stock and restricted stock units during the 70 days following the date of this
prospectus, or (g) the execution and delivery of a Rule
10b5-1
plan or amendment to an existing plan provided that the effective date for the first sales under such plan does not occur during the
lock-up
period.
Listing
Our common stock is listed on the NASDAQ Global Select Market under the symbol CRZO.
Price Stabilizations, Short Positions
Until
the distribution of the shares is completed, SEC rules may limit the underwriters and selling group members from bidding for and purchasing our common stock. However, the underwriters may engage in transactions that stabilize the price of the common
stock, such as bids or purchases to peg, fix or maintain that price.
In connection with the offering, the underwriters may purchase and sell our
common stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of
shares than it is required to purchase in the offering. Naked short sales are sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing
transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering.
Similar to other purchase transactions, any purchases by the underwriters in the open market to cover the syndicate short sales may have the effect of
raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open
market. The underwriters may conduct these transactions on the NASDAQ Global Select Market, in the
over-the-counter
market or otherwise.
Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described
above may have on the price of our common stock. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that these transactions, once commenced, will not be discontinued
without notice.
S-38
Conflicts of Interest
Affiliates of the underwriters are lenders under our revolving credit facility and, as a result, may receive a portion of the net proceeds of this
offering. Because affiliates of certain of the underwriters may receive more than 5% of the net proceeds in this offering, such underwriters are deemed to have a conflict of interest under FINRA Rule 5121. Accordingly, this offering is
being conducted in accordance with FINRA Rule 5121. The appointment of a qualified independent underwriter is not required in connection with this offering as a bona fide public market, as defined in Rule 5121, exists for our
common stock. In accordance with Rule 5121, the underwriters will not confirm sales to any account over which it exercises discretionary authority without the specific written approval of the transaction from the account holder. Please read
Use of Proceeds.
Wells Fargo Bank, N.A., an affiliate of Wells Fargo Securities, LLC, is expected to serve as transfer agent with
respect to the preferred stock and warrant agent with respect to the warrants purchased by the GSO Funds in connection with the preferred stock and warrants issuance. Additionally, Citigroup Global Markets Inc. served as our financial advisor for
the Pending Acquisition and as the capital markets advisor to GSO Funds in connection with the preferred stock and warrants issuance.
Other
Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may
include securities sales and trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, market making, financing, brokerage activities and other financial and
non-financial
activities and services.
Certain of the underwriters and their respective affiliates have from time
to time performed, and may in the future perform, various financial advisory, commercial banking and investment banking services for us and for our affiliates, including the services referred to in the paragraph above under Conflicts of
Interest and as underwriters of our senior notes offering, in the ordinary course of business for which they have received and would receive customary compensation. In the ordinary course of their various business activities, the underwriters
and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities or instruments (directly, as collateral securing other obligations or otherwise) or
persons and entities with relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or express independent research views in respect
of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire long, short, or both positions in such assets, securities and instruments.
Electronic Distribution
This prospectus
supplement and the accompanying prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The underwriters may agree to allocate a number of shares for sale to their online brokerage account
holders. The shares will be allocated to the underwriters that may make internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage
account holders.
Other than this prospectus supplement and the accompanying prospectus in electronic format, information contained in any website
maintained by an underwriter is not part of this prospectus supplement or the accompanying prospectus or registration statement of which the accompanying
S-39
prospectus forms a part, has not been endorsed by us and should not be relied on by investors in deciding whether to purchase shares. The underwriters are not responsible for information
contained in websites that they do not maintain.
Indemnification
We have agreed to indemnify the underwriters against liabilities under the Securities Act or contribute to payments that the underwriters may be
required to make in that respect.
Notice to Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member
state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state, no offer of the shares which are the subject of the offering contemplated in this prospectus supplement may be made
to the public in that relevant member state other than:
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to any legal entity which is a qualified investor as defined in the Prospectus Directive; or
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to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the underwriters for any such offer; or
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in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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provided, that no such offer of the
shares shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.
Each purchaser of the shares described in this prospectus supplement located in a relevant member state who receives any communication in respect of, or
who acquires any shares under, the offer contemplated in this prospectus supplement will be deemed to have represented, warranted and agreed to with each underwriter and the company that (a) it is a qualified investor within the
meaning of Article 2(1)(e) of the Prospectus Directive and (b) in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the shares acquired by it in the
offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any relevant member state, other than qualified investors, as that term is defined in the Prospectus Directive, or in
circumstances in which the prior consent of the underwriters have been given to the offer or resale; or (ii) where the shares have been acquired by it on behalf of persons in any relevant member state other than qualified investors, the offer
of such shares to it is not treated under the Prospectus Directive as having been made to such persons.
For the purposes of this provision, the
expression an offer to the public in relation to any shares in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to
enable an investor to decide to purchase or subscribe for the notes, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression Prospectus Directive
means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in each relevant member state.
S-40
Notice to Prospective Investors in the United Kingdom
Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000
(the FSMA)) in connection with the issue or sale of any shares may only be communicated or cause to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to us or to any subsidiary guarantor.
All applicable provisions of the FSMA must be complied with in respect to anything done by any person in relation to the shares in, from or otherwise
involving the United Kingdom.
Notice to Canadian Residents
Resale Restrictions
The distribution of the
securities in Canada is being made only in the provinces of Ontario, Quebec, Alberta and British Columbia on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in
each province where trades of these securities are made. Any resale of the securities in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made under
available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the securities.
Representations of Canadian Purchasers
By purchasing
the securities in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:
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the purchaser is entitled under applicable provincial securities laws to purchase the securities without the benefit of a prospectus qualified under those securities laws as it is an accredited investor as
defined under National Instrument
45-106
Prospectus Exemptions
;
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the purchaser is a permitted client as defined in National Instrument
31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations
;
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where required by law, the purchaser is purchasing as principal and not as agent; and
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the purchaser has reviewed the text above under Resale Restrictions.
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Conflicts of Interest
Canadian purchasers are hereby notified that the underwriters are relying on the exemption set out in section 3A.3 or 3A.4, if applicable, of National
Instrument
33-105
Underwriting Conflicts
from having to provide certain conflict of interest disclosure in this document.
Statutory Rights of Action
Securities legislation in
certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the offering memorandum (including any amendment thereto) such as this document contains a misrepresentation, provided that the remedies
for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser of these securities in Canada should refer to any applicable
provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
S-41
Enforcement of Legal Rights
All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for
Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy
a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.
Taxation
and Eligibility for Investment
Canadian purchasers of the securities should consult their own legal and tax advisors with respect to the tax
consequences of an investment in the securities in their particular circumstances and about the eligibility of the for investment by the purchaser under relevant Canadian legislation.
Notice to Prospective Investors in France
Neither this prospectus supplement nor any other offering material relating to the shares described in this prospectus supplement has been submitted to
the clearance procedures of the
Autorité des Marchés Financiers
or of the competent authority of another member state of the European Economic Area and notified to the
Autorité des Marchés Financiers
. The
shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus supplement nor any other offering material relating to the shares has been or will be:
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released, issued, distributed or caused to be released, issued or distributed to the public in France; or
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used in connection with any offer for subscription or sale of the shares to the public in France.
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Such offers, sales and distributions will be made in France only:
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to qualified investors (
investisseurs qualifiés
), to a restricted circle of investors (
cercle restreint dinvestisseurs
), or both, in each case investing for their own account, all as defined
in, and in accordance with articles
L.411-2,
D.411-1,
D.411-2,
D.734-1,
D.744-1,
D.754-1
and
D.764-1
of the French
Code monétaire et financier
;
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to investment services providers authorized to engage in portfolio management on behalf of third parties; or
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in a transaction that, in accordance with article
L.411-2-II-1°-or-2°-or
3° of the French
Code monétaire et financier
and article
211-2
of the General Regulations
(
Règlement Général
) of the
Autorité des Marchés Financiers
, does not constitute a public offer (
appel public à lépargne
).
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The shares may be resold directly or indirectly, only in compliance with articles
L.411-1,
L.411-2,
L.412-1
and
L.621-8
through
L.621-8-3
of the
French
Code monétaire et financier
.
Notice to Prospective Investors in Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the
public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to
the shares may be issued or may be in the possession of any person for the
S-42
purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and
Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The shares offered in this prospectus supplement have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The
shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except
(i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.
Notice to Prospective Investors in Singapore
This prospectus supplement has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus supplement and
any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a
relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of,
any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where the shares are subscribed
or purchased under Section 275 of the SFA by a relevant person which is:
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a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or
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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
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each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest (howsoever
described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
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to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such
shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether
such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
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where no consideration is or will be given for the transfer; or
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where the transfer is by operation of law.
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S-43
Notice to Prospective Investors in Australia
No prospectus or other disclosure document (as defined in the Corporations Act 2001 (Cth) of Australia (Corporations Act)) in relation to
the common stock has been or will be lodged with the Australian Securities & Investments Commission (ASIC). This document has not been lodged with ASIC and is only directed to certain categories of exempt persons. Accordingly,
if you receive this document in Australia:
(a) you confirm and warrant that you are either:
(i) a sophisticated investor under section 708(8)(a) or (b) of the Corporations Act;
(ii) a sophisticated investor under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountants
certificate to us which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;
(iii) a person associated with the company under section 708(12) of the Corporations Act; or
(iv) a professional investor within the meaning of section 708(11)(a) or (b) of the Corporations Act, and to the extent that you are
unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this document is void and incapable of acceptance; and
(b) you warrant and agree that you will not offer any of the common stock for resale in Australia within 12 months of that common stock being issued
unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.
Notice to
Prospective Investors in Chile
The shares are not registered in the Securities Registry (Registro de Valores) or subject to the control of the
Chilean Securities and Exchange Commission (Superintendencia de Valores y Seguros de Chile). This prospectus supplement and other offering materials relating to the offer of the shares do not constitute a public offer of, or an invitation to
subscribe for or purchase, the shares in the Republic of Chile, other than to individually identified purchasers pursuant to a private offering within the meaning of Article 4 of the Chilean Securities Market Act (Ley de Mercado de Valores) (an
offer that is not addressed to the public at large or to a certain sector or specific group of the public).
S-44
LEGAL MATTERS
The validity of the issuance of the common stock and certain other legal matters in connection with the issuance of the common stock will be passed upon
for us by Baker Botts L.L.P., Houston, Texas, and Gerald A. Morton, our General Counsel and Vice PresidentBusiness Development. Certain legal matters with respect to the common stock will be passed upon for the underwriters by Gibson,
Dunn & Crutcher LLP, Houston, Texas.
EXPERTS
The consolidated financial statements of Carrizo Oil & Gas, Inc. and subsidiaries as of December 31, 2016 and 2015, and for each of the
years in the three-year period ended December 31, 2016, and managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2016 have been incorporated by reference herein and in the
accompanying prospectus in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering
the December 31, 2016 financial statements refers to a change in method of accounting for deferred tax assets and liabilities.
The combined
statements of revenues and direct operating expenses of oil and gas property interests to be acquired by Carrizo Oil & Gas, Inc. for the year ended December 31, 2016 and the three months ended March 31, 2017 (unaudited) are
included in Exhibit 99.2 of Carrizo Oil & Gas, Inc.s Current Report on Form
8-K
filed on June 28, 2017 and have been incorporated by reference herein in reliance upon the report of Johnson,
Miller & Co., CPAs PC, independent public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The letter report of Ryder Scott Company, independent consulting petroleum engineers, and information with respect to our oil and gas reserves derived
from such report, have been incorporated by reference into this prospectus supplement and the accompanying prospectus upon the authority of each such firm as experts with respect to such matters covered in such report and in giving such report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any documents we file with the
SEC at the SECs Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. Our SEC filings are also available to the public at the
SECs Internet site at http://www.sec.gov and our website at http://www.carrizo.com. In addition, copies of these reports, proxy statements and other information concerning us can also be inspected at the offices of the NASDAQ Stock Market LLC,
which are located at 1735 K Street N.W., Washington, D.C. 20006. Information on our website or any other website is not incorporated by reference in this prospectus and does not constitute part of this prospectus.
This prospectus supplement is part of a registration statement and, as permitted by SEC rules, does not contain all of the information included in the
registration statement. Whenever a reference is made in this prospectus supplement to any of our contracts or other documents, the reference may not be complete and, for a copy of the contract or document, you should refer to the exhibits that are
part of or incorporated by reference into the registration statement.
S-45
The SEC allows us to incorporate by reference into this prospectus supplement the information
we file with it, which means that we can disclose important information to you by referring you to the documents containing such information. Information incorporated by reference is considered to be part of this prospectus. Any statement contained
in this prospectus or a document incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any other document subsequently
filed with the SEC that is incorporated by reference in this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
You should not assume that the information in this prospectus is current as of any date other than the date on the front page of this prospectus supplement.
We incorporate by reference the documents listed below and future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus supplement and until the offering described in this prospectus supplement is completed or is otherwise terminated, in each case excluding any information furnished but not filed,
unless we specifically provide that such furnished information is to be incorporated by reference:
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our annual report on Form
10-K
for the year ended December 31, 2016;
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our quarterly report on Form
10-Q
for the period ended March 31, 2017; and
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our current reports on Form
8-K
filed on May 16, 2017 and June 28, 2017.
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We will provide a copy of any and all of the information that is incorporated by reference in this prospectus to any person, including a beneficial
owner, to whom a prospectus is delivered, without charge, upon written or oral request. You may obtain a copy of these filings by writing or telephoning:
Carrizo
Oil & Gas, Inc.
Attention: Investor Relations
500 Dallas Street, Suite
2300
Houston, Texas 77002
(713) 328-1000
S-46
I
NDEX TO FINANCIAL STATEMENTS
F-1
Independent Auditors Report
The Members of ExL Petroleum Management, LLC
Midland, Texas
We have audited the accompanying combined statement of revenues and direct operating expenses of oil and gas property interests to be acquired by
Carrizo Oil & Gas, Inc. (the Statement) for the year ended December 31, 2016, and the related notes to the Statement.
Managements Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of the Statement in accordance with accounting principles generally accepted in the
United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of Statement that is free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to
express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the Statement. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk
assessments, the auditors consider internal control relevant to the entitys preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the Statement.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Statement referred to above presents fairly in all material respects, the revenues and direct operating expenses of oil and gas
property interests to be acquired by Carrizo Oil & Gas, Inc. for the year ended December 31, 2016, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 1, the accompanying
Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the operations of the properties. Our opinion is not modified with
respect to this matter.
/s/ JOHNSON, MILLER & CO., CPAs PC
Midland,
Texas
June 28, 2017
F-2
COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTY INTERESTS TO BE ACQUIRED BY
CARRIZO OIL & GAS, INC.
(In
thousands)
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Three Months
Ended
March 31, 2017
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Year Ended
December 31, 2016
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(Unaudited)
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Revenues
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$
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9,839
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11,319
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Direct operating expenses
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(2,252
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)
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(2,715
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Revenues in excess of direct operating expenses
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$
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7,587
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8,604
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The accompanying notes are an integral part of the statement.
F-3
NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTY INTERESTS TO BE ACQUIRED BY
CARRIZO OIL & GAS, INC.
1. BASIS OF PRESENTATION
On June 28, 2017, Carrizo Oil & Gas, Inc., Carrizo (Permian) LLC, a subsidiary of Carrizo Oil & Gas, Inc. (Carrizo),
ExL Petroleum Management, LLC and ExL Petroleum Operating Inc. (together with ExL Petroleum Management, LLC, ExL) entered into a Purchase and Sale Agreement (PSA), providing for Carrizos purchase of approximately 16,488
net acres located in the Delaware Basin in Reeves and Ward Counties, Texas (the Properties) (the Delaware Basin Transaction). The Delaware Basin Transaction will have an effective date of May 1, 2017, with an agreed upon
purchase price of approximately $648 million, subject to certain post-closing adjustments.
The accompanying combined statements of revenues
and direct operating expenses of the oil and gas property interests to be acquired by Carrizo Oil & Gas, Inc. (the Statements) represent 80% of ExLs revenues from the sale of crude oil, natural gas liquids and natural gas
production and direct operating expenses associated with the Properties to be acquired by Carrizo for the year ended December 31, 2016 and for the three months ended March 31, 2017. There were no revenues or direct operating expenses
during the year ended December 31, 2015 and during the three months ended March 31, 2016. The Statements are presented on the accrual basis of accounting. For the periods presented, the Properties were not accounted for or operated as a
separate division or entity by ExL, therefore, certain expenses such as depreciation, depletion and amortization, general and administrative, interest and income taxes were not allocated to the Properties. Accordingly, complete separate financial
statements reflecting the financial position, results of operations and cash flows of the Properties prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) are not presented because
the information necessary to prepare such statements are neither readily available nor practicable to obtain in these circumstances. Accordingly, the accompanying Statements are presented in lieu of the GAAP financial statements required under Item
3-05
of Securities and Exchange Commission (SEC) Regulation
S-X.
As such, the accompanying statements are not intended to be a complete presentation of the
revenues and expenses of the Properties and are not indicative of the results of the operation of the Properties going forward.
Revenue Recognition
Crude oil, natural gas liquids and natural gas revenues are recognized when production is sold to a purchaser at a fixed or determinable
price, delivery has occurred, title has transferred and collectability is reasonably assured. Crude oil, natural gas liquids and natural gas revenues are recognized based on the sales method of accounting whereby revenues from the production of
natural gas from properties are recognized for production sold to purchasers, regardless of whether the sales are proportionate to the ownership interest in the property. Sales volumes are not significantly different from the ownership interest
share of production. Crude oil, natural gas liquids and natural gas revenues are reported net of royalties and the revenue interests of third parties.
Direct
Operating Expenses
Direct operating expenses are recognized when incurred and include (a) lease operating expenses which consist of
salt water disposal, direct labor, contract services, equipment rental, and other direct operating expenses (b) production taxes and (c) ad valorem taxes.
F-4
NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTY INTERESTS TO BE ACQUIRED BY
CARRIZO OIL & GAS, INC.Continued
Use of Estimates
The preparation of these Statements requires management to make estimates and assumptions that affect the reported amounts of revenues and direct
operating expenses during the reporting period. Estimated amounts will differ from actual results.
Subsequent Events
Management evaluated subsequent events through June 28, 2017, which was the date the Statements were issued.
2. COMMITMENTS AND CONTINGENCIES
Pursuant to the terms of
the PSA, certain liabilities arising in connection with ownership of the Properties prior to the effective date are retained by ExL. Management is not aware of any legal, environmental or other commitments or contingencies that would have a material
effect on the statements of revenues and direct operating expenses.
3. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
The following tables summarize the net ownership interest in the estimated proved crude oil, natural gas liquids and natural gas reserves, the
standardized measure and changes in the standardized measure of discounted future net cash flows related to the proved reserves of the Properties to be acquired by Carrizo. The standardized measure and changes in the standardized measure presented
herein exclude income taxes as the tax basis of the Properties is not applicable on a going forward basis. The proved crude oil, natural gas liquids and natural gas reserve estimates and other components of the standardized measure as of
December 31, 2016 presented in the tables below were prepared by ExLs reserve engineers, in accordance with the authoritative guidance of the Financial Accounting Standards Board and the SEC.
Proved Oil and Gas Reserve Quantities
Proved reserves
are generally those quantities of crude oil, natural gas liquids and natural gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible in future years from known reservoirs
under existing economic conditions, operating methods, and government regulations. Proved developed reserves include proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in
which the cost of the required equipment is relatively minor compared to the cost of a new well. Proved undeveloped reserves are generally proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells
where a relatively major expenditure is required for recompletion.
F-5
NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTY INTERESTS TO BE ACQUIRED BY
CARRIZO OIL & GAS, INC.Continued
Net proved crude oil, natural gas liquids and natural gas reserves and changes in net proved crude oil,
natural gas liquids and natural gas reserves attributable to the Properties to be acquired by Carrizo, all of which are located in the state of Texas, as of and for the year ended December 31, 2016, are summarized below:
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Crude Oil
(MBbls)
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Natural
Gas Liquids
(MBbls)
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Natural
Gas
(MMcf)
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Total
(MBoe)
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Proved Reserves:
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January 1, 2016(a)
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Extensions and discoveries
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12,260
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7,121
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77,843
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32,355
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Revisions of previous estimates
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Production
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(154
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)
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(75
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)
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|
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(1,069
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)
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|
(407
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)
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|
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|
|
|
|
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|
|
|
|
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|
December 31, 2016
|
|
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12,106
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|
|
|
7,046
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|
|
|
76,774
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|
|
|
31,948
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Proved Developed Reserves
|
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|
|
|
|
|
|
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December 31, 2016
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1,602
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|
|
|
1,236
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|
|
|
13,478
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|
|
|
5,084
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Proved Undeveloped Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
10,504
|
|
|
|
5,810
|
|
|
|
63,296
|
|
|
|
26,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
There were no crude oil, natural gas liquids and natural gas reserve estimates prepared prior to January 1, 2016.
|
Standardized Measure
The standardized measure of
discounted future net cash flows, excluding income taxes, related to the proved crude oil, natural gas liquids and natural gas reserves of the Properties to be acquired by Carrizo as of December 31, 2016 is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
Future cash inflows
|
|
$
|
740,680
|
|
Future production costs
|
|
|
(126,932
|
)
|
Future development costs
|
|
|
(169,892
|
)
|
|
|
|
|
|
Future net cash flows
|
|
|
443,856
|
|
Less 10% annual discount to reflect timing of cash flows
|
|
|
(299,046
|
)
|
|
|
|
|
|
Standard measure of discounted future net cash flows
|
|
$
|
144,810
|
|
|
|
|
|
|
Reserve estimates and future cash flows are based on the average realized prices for sales of crude oil, natural gas
liquids and natural gas on the first calendar day of each month (FOM) during the year. For the year ended December 31, 2016, the average realized FOM price used was $39.36 per barrel for crude oil, $16.88 per barrel for natural gas
liquids, and $1.89 per mcf of natural gas. Future operating expenses and development costs are computed by estimating the expenditures to be incurred in developing and producing the proved crude oil, natural gas liquids and natural gas reserves at
the end of the period, based on period end costs and assuming continuation of existing economic conditions. As mentioned above, the standardized measure presented herein excludes the effects of income taxes as the tax basis for the Properties is not
applicable on a going forward basis. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of
F-6
NOTES TO COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF
OIL AND GAS PROPERTY INTERESTS TO BE ACQUIRED BY
CARRIZO OIL & GAS, INC.Continued
discounted future net cash flows is not intended to represent the replacement cost or fair value of the Properties. An estimate of fair value would also take into account, among other things, the
recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in crude oil, natural gas liquids and natural gas
reserve estimates.
Changes in Standardized Measure
Changes in the standardized measure of discounted future net cash flows, excluding income taxes, related to the proved crude oil, natural gas liquids and
natural gas reserves of the Properties to be acquired by Carrizo for the year ended December 31, 2016 are as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
Standardized measurebeginning of period(a)
|
|
$
|
|
|
Revisions to reserves proved in prior periods:
|
|
|
|
|
Net change in sales prices and production costs related to future production
|
|
|
|
|
Net change in estimated future development costs
|
|
|
|
|
Net change due to revisions in quantity estimates
|
|
|
|
|
Accretion of discount
|
|
|
|
|
Changes in production rates (timing) and other
|
|
|
|
|
|
|
|
|
|
Total revisions to reserves proved in prior periods
|
|
|
|
|
Discoveries, net of estimated future development and production costs
|
|
|
153,414
|
|
Sales of crude oil, natural gas liquids and natural gas produced, net of production costs
|
|
|
(8,604
|
)
|
Previously estimated development costs incurred
|
|
|
|
|
Net change in standardized measure of discounted future net cash flows
|
|
|
|
|
|
|
|
|
|
Standardized measureend of period
|
|
$
|
144,810
|
|
|
|
|
|
|
(a)
|
There were no crude oil, natural gas liquids and natural gas reserve estimates prepared prior to January 1, 2016.
|
F-7
Prospectus
Carrizo Oil & Gas, Inc.
Senior Debt Securities
Subordinated Debt Securities
Common Stock
Preferred
Stock
Warrants
We may offer
from time to time senior debt securities, subordinated debt securities, common stock, preferred stock or warrants. We may offer the securities separately or together, in separate series or classes and in amounts, at prices and on terms described in
one or more offerings. We will provide the specific terms of the securities in supplements to this prospectus. In addition, selling shareholders to be named in a prospectus supplement may offer and sell from time to time shares of our common stock
in such amounts as set forth in a prospectus supplement. Unless otherwise set forth in a prospectus supplement, we will not receive any proceeds from the sale of shares of our common stock by any selling shareholders. You should read this prospectus
and any prospectus supplement carefully before you invest.
Our common stock is listed on the NASDAQ Global Select Market under the symbol
CRZO.
You should consider carefully the
risk factors
beginning on page 2 of this prospectus, in any applicable
prospectus supplement and in any document we incorporate by reference before purchasing any of our securities.
Neither the
Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is August 28, 2014.
Table of Contents
About This Prospectus
This prospectus is part of a registration statement that we have filed with the U.S. Securities and Exchange Commission (SEC)
using a shelf registration process. Using this process, we may offer any combination of the securities described in this prospectus, and the selling shareholders may offer common stock, in one or more offerings. This prospectus provides
you with a general description of the securities that may be offered. Each time securities are offered pursuant to this prospectus, we will provide a prospectus supplement that will describe the specific terms of the offering. The prospectus
supplement may also add to, update or change the information contained in this prospectus. If there is any inconsistency between the information in this prospectus and the prospectus supplement, you should rely on the information in the prospectus
supplement. Please carefully read this prospectus and the prospectus supplement, in addition to the information contained in the documents we refer to under the heading Where You Can Find More Information.
You should rely only on the information contained in or incorporated by reference into this prospectus and the prospectus supplement.
Neither we nor the selling shareholders have authorized anyone to provide you with different information. You should assume that the information appearing in or incorporated by reference into this prospectus and the prospectus supplement is accurate
only as of the date on its cover page and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects may
have changed since such dates.
i
Carrizo Oil & Gas, Inc.
In this prospectus and any prospectus supplement, unless indicated otherwise, references to Carrizo, the Company,
we and us refer to Carrizo Oil & Gas, Inc. and its subsidiaries.
Our Company
Carrizo Oil & Gas, Inc. is a Houston-based energy company which, together with its subsidiaries, is actively engaged in the
exploration, development, and production of oil and gas primarily from resource plays located in the United States. Our current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale in South
Texas, the Utica Shale in Ohio, the Niobrara Formation in Colorado, and the Marcellus Shale in Pennsylvania.
Corporate Information
Our principal executive offices are located at 500 Dallas Street, Suite 2300, Houston, Texas 77002, and our telephone number at that location
is (713) 328-1000. Information contained on our website, http://www.carrizo.com, is not part of this prospectus.
1
Risk Factors
An investment in our securities involves risks. You should carefully consider all of the information contained in or incorporated by
reference in this prospectus or any prospectus supplement and other information which may be incorporated by reference in this prospectus or any prospectus supplement as provided under Where You Can Find More Information, including our
most recent Annual Report on Form 10-K, any subsequent Quarterly Reports on Form 10-Q or current reports on Form 8-K, and all other documents incorporated by reference into this prospectus or any prospectus supplement, as updated by our subsequent
filings under the Securities Exchange Act of 1934, as amended (the Exchange Act). This prospectus and the documents incorporated by reference also contain forward-looking statements that involve risks and uncertainties. Please read
Forward-Looking Statements. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including the risks described elsewhere in this prospectus or any prospectus
supplement and in the documents incorporated by reference into this prospectus or any prospectus supplement. If any of these risks occur, our business, financial condition, results of operations or cash flows could be materially and adversely
affected. In that case, the trading price or our securities could decline and you could lose all or part of you investment. Additional risks not currently known to us or that we currently deem immaterial may also have a material adverse effect on
us.
Risks Related to Our Common Stock
The market price of our common stock is volatile.
The trading price of our common stock and the price at which we may sell common stock in the future are subject to large fluctuations in
response to any of the following:
|
|
|
limited trading volume in our common stock;
|
|
|
|
variations in operating results;
|
|
|
|
our involvement in litigation;
|
|
|
|
general U.S. or worldwide financial market conditions;
|
|
|
|
conditions impacting the prices of oil and gas;
|
|
|
|
announcements by us and our competitors;
|
|
|
|
our liquidity and access to capital;
|
|
|
|
our ability to raise additional funds;
|
|
|
|
events impacting the energy industry;
|
|
|
|
changes in government regulations; and
|
|
|
|
other events, including those described in the documents incorporated by reference herein.
|
We do not
anticipate paying dividends on our common stock in the near future.
We have not paid any dividends on our common stock in the past and
do not intend to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain any earnings for the future operation and development of our business, including exploration, development and acquisition activities.
Any future dividend payments will be restricted by the terms of our revolving credit facility.
Certain anti-takeover provisions may affect your rights
as a shareholder.
Our articles of incorporation authorize our board of directors to set the terms of and issue preferred stock without
shareholder approval. Our board of directors could use the preferred stock as a means to delay, defer or prevent a takeover attempt that a shareholder might consider to be in our best interest. In addition, our revolving credit facility contains
terms that may restrict our ability to enter into change of control transactions, including requirements to repay borrowings under our revolving credit facility on a change in control. These provisions,
2
along with specified provisions of the Texas Business Organizations Code and our articles of incorporation and bylaws, may discourage or impede transactions involving actual or potential changes
in our control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of our common stock.
Sales of substantial amounts of shares of our common stock could cause the price of our common stock to decrease.
This prospectus covers the issuance and sale by us and by selling shareholders of a substantial number of shares of our common stock. Our stock
price may decrease due to the additional amount of shares available in the market as a result of sales under this prospectus.
Risks Related to Our
Debt Securities
A holders right to receive payments on the debt securities is effectively subordinate to the rights of our existing and
future secured creditors. Further, the guarantees of senior debt securities by the subsidiary guarantors are effectively subordinated to the subsidiary guarantors existing and future secured indebtedness.
Holders of our secured indebtedness and the secured indebtedness of the subsidiary guarantors will have claims that are prior to the claims of
holders of senior debt securities to the extent of the value of the assets securing that other indebtedness. Notably, we are party to a revolving credit facility, which is secured by liens on substantially all of our assets and guaranteed by all of
our Material Domestic Subsidiaries (as defined in the credit agreement governing our revolving credit facility). The senior debt securities will be effectively subordinated to that secured indebtedness. In the event of any distribution or payment of
our assets in any foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, holders of secured indebtedness will have prior claim to our assets that constitute their collateral. Holders of the senior debt
securities will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the senior debt securities, and potentially with all of our other general creditors, based upon the respective amounts owed
to each holder or creditor, in our remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the senior debt securities. As a result, holders of senior debt securities may
receive less, ratably, than holders of secured indebtedness.
Holders of debt securities may be structurally subordinated to the creditors of our
subsidiaries.
Most of our interests are held through our wholly-owned subsidiaries. Contractual provisions or laws, as well as our
subsidiaries financial condition and operating requirements, may limit our ability to obtain cash from our subsidiaries that we use to pay our debt service obligations, including payments on the debt securities. In addition, holders of the
debt securities will have a junior position to the claims of creditors, including trade creditors and tort claimants, of our subsidiaries to the extent that our subsidiaries do not guarantee such debt securities. The debt securities will be
obligations exclusively of the Company and not of its subsidiaries, except to the extent such debt securities are guaranteed by one or more of our subsidiaries. Not all of our wholly-owned subsidiaries are, or are required to be, subsidiary
guarantors.
A holders right to receive payments on the debt securities could be adversely affected if any of our subsidiaries is not a guarantor
of the debt securities and declares bankruptcy, liquidates or reorganizes.
If any of our subsidiaries is not a guarantor of the debt
securities and declares bankruptcy, liquidates or reorganizes, holders of such subsidiarys indebtedness and its trade creditors will generally be entitled to payment of their claims from the assets of the subsidiary before any assets are made
available for distribution to us.
3
Changes in our credit ratings or the debt markets may adversely affect the market price of our debt
securities.
The market price for our debt securities will depend on a number of factors, including:
|
|
|
our credit ratings with major credit rating agencies;
|
|
|
|
the prevailing interest rates being paid by other companies similar to us;
|
|
|
|
the market price of our common stock;
|
|
|
|
our financial condition, operating performance and future prospects; and
|
|
|
|
the overall condition of the financial markets and global and domestic economies.
|
The
condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. Such fluctuations could have an adverse effect on the market price of our debt securities. In addition, credit
rating agencies continually review their ratings for the companies that they follow, including us. The credit rating agencies also evaluate the industries in which we operate as a whole and may change their credit rating for us based on their
overall view of such industries. A negative change in our rating could have an adverse effect on the market price of our debt securities.
A subsidiary
guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar state law, which would prevent the holders of our debt securities from relying on that subsidiary to satisfy claims.
Under U.S. bankruptcy law and comparable provisions of state fraudulent transfer laws, our subsidiary guarantees can be voided, or claims under
the subsidiary guarantees may be subordinated to all other debts of that subsidiary guarantor if, among other things, the subsidiary guarantor, at the time it incurred the indebtedness evidenced by its guarantee or, in some states, when payments
become due under the guarantee, received less than reasonably equivalent value or fair consideration for the incurrence of the guarantee and:
|
|
|
was insolvent or rendered insolvent by reason of such incurrence;
|
|
|
|
was engaged in a business or transaction for which the guarantors remaining assets constituted unreasonably small capital; or
|
|
|
|
intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.
|
Our subsidiary guarantees may also be voided, without regard to the above factors, if a court finds that the subsidiary guarantor entered into
the guarantee with the actual intent to hinder, delay or defraud its creditors.
A court would likely find that a subsidiary guarantor did
not receive reasonably equivalent value or fair consideration for its guarantee if the subsidiary guarantor did not substantially benefit directly or indirectly from the issuance of the guarantees. If a court were to void a subsidiary guarantee, you
would no longer have a claim against the subsidiary guarantor. Sufficient funds to repay our debt securities may not be available from other sources, including the remaining subsidiary guarantors, if any. In addition, the court might direct you to
repay any amounts that you already received from the subsidiary guarantor.
The measures of insolvency for purposes of fraudulent transfer
laws vary depending upon the governing law. Generally, a subsidiary guarantor would be considered insolvent if:
|
|
|
the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all its assets;
|
|
|
|
the present fair saleable value of its assets is less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
|
|
|
|
it could not pay its debts as they become due.
|
4
Each subsidiary guarantee contains a provision intended to limit the subsidiary guarantors
liability to the maximum amount that it could incur without causing the incurrence of obligations under its subsidiary guarantee to be a fraudulent transfer. Such provision may not be effective to protect the subsidiary guarantees from being voided
under fraudulent transfer law.
Our ability to obtain cash from our subsidiaries to make payments on our debt securities may be limited.
Most of our interests are conducted through our wholly-owned subsidiaries. Contractual provisions or laws, as well as our subsidiaries
financial condition and operating requirements, may limit our ability to obtain cash from our subsidiaries that we use to pay our debt service obligations. If we cannot meet our payment obligations on the debt securities, we may be in default.
We may incur additional debt ranking equal to the debt securities.
If we incur additional debt that ranks equally with the debt securities, the holders of that debt will be entitled to share ratably with the
holders of the debt securities in any proceeds distributed in connection with any insolvency liquidation, reorganization, dissolution and other winding-up of us. This may have the effect of reducing the amount of proceeds paid to holders of debt
securities.
5
Forward-Looking Statements
This prospectus, including the documents incorporated by reference in this prospectus, contains statements concerning our expectations,
beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding:
|
|
|
our ability to explore for and develop natural gas and oil resources successfully and economically;
|
|
|
|
our estimates and forecasts of the timing and number of wells we expect to drill and other exploration activities;
|
|
|
|
our estimates regarding timing and levels of production;
|
|
|
|
anticipated trends in our business;
|
|
|
|
the effects of competition on us;
|
|
|
|
our future results of operations;
|
|
|
|
our liquidity and our ability to finance our exploration and development activities;
|
|
|
|
our capital expenditure plan;
|
|
|
|
future market conditions in the oil and gas industry;
|
|
|
|
our ability to make, integrate and develop acquisitions; and
|
|
|
|
the impact of governmental regulation, taxes, market changes and world events.
|
You generally
can identify our forward-looking statements by the words anticipate, believe, budgeted, continue, could, estimate, expect, forecast, goal,
intend, may, objective, plan, potential, predict, projection, scheduled, should, or other similar words. Such statements involve risks and
uncertainties, including, but not limited to, those relating to the worldwide economic downturn, availability of financing, our dependence on our exploratory drilling activities, the volatility of and changes in oil and gas prices, the need to
replace reserves depleted by production, operating risks of oil and gas operations, our dependence on our key personnel, factors that affect our ability to manage our growth and achieve our business strategy, results, delays and uncertainties that
may be encountered in drilling, development or production, interpretations and impact of new oil and gas reserve estimation and disclosure requirements, activities and approvals of our partners and parties with whom we have alliances, technological
changes, capital requirements, borrowing base determinations and availability under our revolving credit facility, evaluations of the Company by lenders under our revolving credit facility, the potential impact of government regulations, including
current and proposed legislation and regulations related to hydraulic fracturing, air emissions and climate change, regulatory determinations, litigation, competition, the uncertainty of reserve information and future net revenue estimates, property
acquisition risks, availability of equipment, actions by our midstream and other industry partners, weather, availability of financing, actions by lenders, our ability to obtain permits and licenses, the results of audits and assessments, the
failure to obtain certain bank and lease consents, the existence of title defects, delays, costs and difficulties relating to our joint ventures, actions by joint venture partners, results of exploration activities and other factors detailed in this
prospectus and our other filings with the SEC.
We have based our forward-looking statements on our managements beliefs and
assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual
results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements.
6
Some of the factors that could cause actual results to differ from those expressed or implied in
forward-looking statements are described under Risk Factors and in other sections of this prospectus or any prospectus supplement and described under Risk Factors and elsewhere in the documents that we incorporate by
reference into this prospectus, including our most recent Annual Report on Form 10-K, any subsequent Quarterly Reports on Form 10-Q or current reports on Form 8-K, and all other documents incorporated by reference into this prospectus, as updated by
our subsequent filings under the Exchange Act. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and
oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on our forward-looking statements. Each
forward-looking statement speaks only as of the date of the particular statement, and, except as required by law, we undertake no duty to update any forward-looking statement.
7
Use of Proceeds
Unless we inform you otherwise in the prospectus supplement, the net proceeds from the sale of the securities will be used for general
corporate purposes, including:
|
|
|
repayment or refinancing of debt,
|
|
|
|
capital expenditures, and
|
|
|
|
repurchases and redemptions of securities.
|
Pending any specific application, we may initially
invest funds in short-term marketable securities or apply them to the reduction of other short-term indebtedness.
Ratio of Earnings to Fixed Charges
The following table presents our historical ratio of earnings to fixed charges for each of the
years in the five-year period ended December 31, 2013 and for the six months ended June 30, 2014.
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
Year Ended December 31,
|
|
Six Months Ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
2009
|
|
2014
|
|
Ratio of Earnings to Fixed Charges
|
|
|
1.06x
|
|
|
|
1.77x
|
|
|
|
1.66x
|
|
|
(1)
|
|
(2)
|
|
|
|
(3)
|
For purposes of this table, earnings consist of income or loss from continuing operations before
income taxes, plus fixed charges, less interest capitalized. Fixed charges consist of interest expensed and capitalized, amortized discounts and capitalized expenses related to indebtedness and an estimate of the interest within rental
expense.
(1) For the year ended December 31, 2010, earnings were insufficient to cover fixed charges by $2.3 million primarily due
to a loss on the extinguishment of debt of $31.0 million.
(2) For the year ended December 31, 2009, earnings were insufficient to
cover fixed charges by $337.8 million primarily due to impairments of oil and gas properties of $338.9 million.
(3) For the six months
ended June 30, 2014, earnings were insufficient to cover fixed charges by $0.4 million primarily due to losses on derivatives of $60.6 million.
We had no preferred stock outstanding for any period presented, and accordingly, the ratio of earnings to combined fixed charges and preferred
stock dividends is the same as the ratio of earnings to fixed charges.
8
Description of Debt Securities
Our debt securities covered by this prospectus will be our general unsecured obligations. We will issue senior debt securities on a senior
unsecured basis under an indenture dated as of May 28, 2008, as amended or supplemented from time to time, among us, our subsidiaries Bandelier Pipeline Holding, LLC, Carrizo (Eagle Ford) LLC, Carrizo (Marcellus) LLC, Carrizo (Marcellus) WV
LLC, Carrizo (Niobrara) LLC, Carrizo (Utica) LLC, Carrizo Marcellus Holding Inc., CLLR, Inc., Hondo Pipeline, Inc., and Mescalero Pipeline, LLC (the Subsidiary Guarantors), and Wells Fargo Bank, National Association, as trustee. We refer
to this indenture as the senior indenture. We will issue subordinated debt securities under one or more separate indentures between us, the Subsidiary Guarantors, if applicable, and a trustee that we will name in the prospectus supplement. We refer
to any such indenture as a subordinated indenture. We refer to the senior indenture and the subordinated indentures collectively as the indentures. The senior indenture and the subordinated indentures will be substantially identical, except for
provisions relating to subordination. The senior debt securities will constitute senior debt and will rank equally with all of our unsecured and unsubordinated debt. The subordinated debt securities will be subordinated to, and thus have a junior
position to, our senior debt (as defined with respect to the series of subordinated debt securities) and may rank equally with or senior or junior to our other subordinated debt that may be outstanding from time to time.
We have summarized material provisions of the indentures, the debt securities and the guarantees below. This summary is not complete. We have
filed the senior indenture and the form of subordinated indenture with the SEC as exhibits to the registration statement of which this prospectus is a part, and you should read the indentures for provisions that may be important to you. Please read
Where You Can Find More Information.
In this summary description of the debt securities, unless we state otherwise or the
context clearly indicates otherwise, all references to us or we mean Carrizo Oil & Gas, Inc. only.
Provisions
Applicable to Each Indenture
General
. The indentures do not limit the amount of debt securities that may be issued under
each indenture, and do not limit the amount of other unsecured debt or securities that we may issue. We may issue debt securities under the indentures from time to time in one or more series, each in an amount authorized prior to issuance. The
indentures also give us the ability to reopen a previous issue of a series of debt securities and issue additional debt securities of that series.
As of June 30, 2014, we had approximately $121.0 million of secured indebtedness, consisting of borrowings outstanding under our
revolving credit facility, and $904.4 million of senior unsecured debt securities outstanding under the senior indenture, comprised of our 4.375% convertible senior notes due 2028, 8.625% senior notes due 2018, and 7.50% senior notes due 2020. The
Subsidiary Guarantors guaranteed our revolving credit facility, our 8.625% senior notes and our 7.50% senior notes.
The indentures do not
contain any covenants or other provisions designed to protect holders of the debt securities in the event we participate in a highly leveraged transaction or upon a change of control. The indentures also do not contain provisions that give holders
the right to require us to repurchase their securities in the event of a decline in our credit ratings for any reason, including as a result of a takeover, recapitalization or similar restructuring or otherwise.
Terms
. The prospectus supplement relating to any series of debt securities being offered will include specific terms relating to
the offering. These terms will include some or all of the following:
|
|
|
whether the debt securities will be senior or subordinated debt securities;
|
|
|
|
the title of the debt securities;
|
|
|
|
the total principal amount of the debt securities;
|
9
|
|
|
whether the debt securities will be issued in individual certificates to each holder or in the form of temporary or permanent global debt securities held by a depositary on behalf of holders;
|
|
|
|
the date or dates on which the principal of, and any premium on, the debt securities will be payable;
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|
|
|
any interest rate, the date from which interest will accrue, interest payment dates and record dates for interest payments;
|
|
|
|
any right to extend or defer the interest payment periods and the duration of the extension;
|
|
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|
whether and under what circumstances any additional amounts with respect to the debt securities will be payable;
|
|
|
|
whether debt securities are entitled to a guarantee of any Subsidiary Guarantors;
|
|
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|
the place or places where payments on the debt securities will be payable;
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any provisions for optional redemption or early repayment;
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any sinking fund or other provisions that would require the redemption, purchase or repayment of debt securities;
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the denominations in which the debt securities will be issued, if other than denominations of $1,000 and integral multiples thereof;
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whether payments on the debt securities will be payable in foreign currency or currency units or another form and whether payments will be payable by reference to any index or formula;
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the portion of the principal amount of debt securities that will be payable if the maturity is accelerated, if other than the entire principal amount;
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any additional means of defeasance of the debt securities, any additional conditions or limitations to defeasance of the debt securities or any changes to those conditions or limitations;
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any changes or additions to the events of default or covenants described in this prospectus;
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any restrictions or other provisions relating to the transfer or exchange of debt securities;
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any terms for the conversion or exchange of the debt securities for other securities of ours or any other entity;
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with respect to any subordinated indenture, any changes to the subordination provisions for the subordinated debt securities; and
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any other terms of the debt securities not prohibited by the applicable indenture.
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We may
sell the debt securities at a discount, which may be substantial, below their stated principal amount. These debt securities may bear no interest or interest at a rate that at the time of issuance is below market rates. If we sell these debt
securities, we will describe in the prospectus supplement any material United States federal income tax consequences and other special considerations.
If we sell any of the debt securities for any foreign currency or currency unit or if payments on the debt securities are payable in any
foreign currency or currency unit, we will describe in the prospectus supplement the restrictions, elections, tax consequences, specific terms and other information relating to those debt securities and the foreign currency or currency unit.
Consolidation, Merger and Sale of Assets.
We and the Subsidiary Guarantors may not consolidate with or merge into any entity or
sell, lease, convey, transfer or otherwise dispose of all or substantially all of our assets to any entity unless:
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immediately after giving effect to the transaction, no default or event of default would occur and be continuing or would result from the transaction; and
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if we or the Subsidiary Guarantor, as the case may be, are not the continuing entity, the resulting entity or transferee assumes the due and punctual payments on the debt securities and the performance of our covenants
and obligations under the indenture and the debt securities.
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Upon any such consolidation or merger in which we are not the
continuing entity or any such asset sale, lease, conveyance, transfer or disposition involving us, the resulting entity or transferee will be substituted for us under the applicable indenture and debt securities. In the case of an asset sale,
conveyance, transfer or disposition other than a lease, we will be released from the applicable indenture.
Events of
Default.
Unless we inform you otherwise in the prospectus supplement, the following are events of default with respect to a series of debt securities:
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failure to pay interest when due on that series of debt securities for 30 days;
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failure to pay principal of or any premium on that series of debt securities when due;
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failure to make any sinking fund payment when required for that series for 30 days;
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failure to comply with any covenant or agreement in that series of debt securities or the applicable indenture (other than an agreement or covenant that has been included in the indenture solely for the benefit of one
or more other series of debt securities) for 90 days after written notice by the trustee or by the holders of at least 25% in principal amount of each series of debt securities issued under that indenture that are affected by that failure;
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specified events involving bankruptcy, insolvency or reorganization of Carrizo Oil & Gas, Inc. or any Subsidiary Guarantor, if it is a guarantor with respect to that series of debt securities and it is a
significant subsidiary as defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act;
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specified events involving the guarantees; and
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any other event of default provided for in that series of debt securities.
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A default under
one series of debt securities will not necessarily be a default under another series. The indentures provide that the trustee generally must mail notice of a default or event of default of which it has actual knowledge to the registered holders of
the applicable debt securities within 90 days of occurrence. However, the trustee may withhold notice to the holders of the debt securities of any default or event of default (except in any payment on the debt securities) if the trustee considers it
in the interest of the holders of the debt securities to do so.
If an event of default relating to certain events of bankruptcy,
insolvency or reorganization occurs, the principal of and interest on all the debt securities issued under the applicable indenture will become immediately due and payable without any action on the part of the trustee or any holder. If any other
event of default for any series of debt securities occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the outstanding debt securities of the series affected by the default may declare the principal of and all
accrued and unpaid interest on those debt securities immediately due and payable. The holders of a majority in principal amount of the outstanding debt securities of the series affected by the event of default may in some cases rescind this
accelerated payment requirement.
A holder of a debt security of any series issued under an indenture may pursue any remedy under that
indenture only if:
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the holder gives the trustee written notice of a continuing event of default for that series;
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the holders of at least 25% in principal amount of the outstanding debt securities of that series make a written request to the trustee to pursue the remedy;
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the holders offer to the trustee indemnity satisfactory to the trustee;
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the trustee fails to act for a period of 60 days after receipt of the request and offer of indemnity; and
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during that 60-day period, the holders of a majority in principal amount of the debt securities of that series do not give the trustee a direction inconsistent with the request.
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This provision does not, however, affect the right of a holder of a debt security to sue for enforcement of any overdue payment.
In most cases, holders of a majority in principal amount of the outstanding debt securities of a series may direct the time, method and place
of:
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with respect to debt securities of a series, the conducting of any proceeding for any remedy available to the trustee and exercising any trust or power conferred on the trustee relating to or arising as a result of
specified events of default; or
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with respect to all debt securities issued under the applicable indenture that are affected, the conducting of any proceeding for any remedy available to the trustee and exercising any trust or power conferred on the
trustee relating to or arising other than as a result of such specified events of default.
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The trustee, however, may refuse
to follow any such direction that conflicts with law or the indentures, is unduly prejudicial to the rights of other holders of the debt securities, or would involve the trustee in personal liability. In addition, prior to acting at the direction of
holders, the trustee will be entitled to be indemnified by those holders against any loss and expenses caused thereby.
The indentures
require us to file each year with the trustee a written statement as to our compliance with the covenants contained in the applicable indenture.
Modification and Waiver.
Each indenture may be amended or supplemented if the holders of a majority in principal amount of the
outstanding debt securities of each series issued under that indenture that are affected by the amendment or supplement consent to it. Without the consent of the holder of each debt security issued under the indenture and affected, however, no
modification to that indenture may:
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reduce the amount of debt securities whose holders must consent to an amendment, supplement or waiver;
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reduce the rate of or change the time for payment of interest on the debt security;
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reduce the principal of, any premium on or any mandatory sinking bond payment with respect to, or change the stated maturity of, the debt security, or reduce the amount of the principal of an original issue discount
security that would be due and payable upon a declaration of acceleration of the maturity of such debt security;
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reduce any premium payable on the redemption of the debt security or change the time at which the debt security may or must be redeemed;
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change any obligation to pay additional amounts on the debt security;
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make payments on the debt security payable in currency other than as originally stated in the debt security;
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impair the holders right to institute suit for the enforcement of any payment on the debt security;
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make any change in the percentage of principal amount of debt securities necessary to waive compliance with certain provisions of the indenture or to make any change in the provision related to modification;
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with respect to the subordinated indenture, modify the provisions relating to the subordination of any subordinated debt security in a manner adverse to the holder of that security; or
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waive a continuing default or event of default regarding any payment on the debt securities.
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Each indenture may be amended or supplemented or any provision of that indenture may be waived
without the consent of any holders of debt securities issued under that indenture in certain circumstances, including:
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to cure any ambiguity, omission, defect or inconsistency;
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to provide for the assumption of our obligations under the indenture by a successor upon any merger or consolidation or asset sale, lease, conveyance, transfer or other disposition of all or substantially all of our
assets, in each case as permitted under the indenture;
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to provide for uncertificated debt securities in addition to or in place of certificated debt securities or to provide for bearer debt securities;
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to provide any security for, any guarantees of or any additional obligors on any series of debt securities;
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to comply with any requirement to effect or maintain the qualification of that indenture under the Trust Indenture Act of 1939, as amended (the Trust Indenture Act);
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to add covenants that would benefit the holders of any debt securities or to surrender any rights we have under the indenture;
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to add events of default with respect to any debt securities;
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to make any change that does not adversely affect any outstanding debt securities of any series issued under that indenture in any material respect; provided, that any change made solely to conform the provisions of the
indenture to a description of debt securities in a prospectus supplement will not be deemed to adversely affect any outstanding debt securities of that series issued in any material respect; and
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to supplement the provisions of an indenture to permit or facilitate defeasance or discharge of securities that does not adversely affect any outstanding debt securities of any series issued under that indenture in any
material respect.
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The holders of a majority in principal amount of the outstanding debt securities of any series may waive
any existing or past default or event of default with respect to those debt securities. Those holders may not, however, waive any default or event of default in any payment on any debt security or compliance with a provision that cannot be amended
or supplemented without the consent of each holder affected.
Defeasance.
When we use the term defeasance, we mean discharge
from some or all of our obligations under an indenture. If any combination of funds or government securities are deposited with the trustee under an indenture sufficient to make payments on the debt securities of a series issued under that indenture
on the dates those payments are due and payable, then, at our option, either of the following will occur:
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we and any Subsidiary Guarantors will be discharged from our obligations with respect to the debt securities of that series (legal defeasance); or
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we and any Subsidiary Guarantors will no longer have any obligation to comply with the consolidation, merger and sale of assets covenant and other specified covenants relating to the debt securities of that series, and
the related events of default will no longer apply (covenant defeasance).
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If a series of debt securities is
defeased, the holders of the debt securities of the series affected will not be entitled to the benefits of the applicable indenture, except for obligations to register the transfer or exchange of debt securities, replace stolen, lost or mutilated
debt securities or maintain paying agencies and hold moneys for payment in trust. In the case of covenant defeasance, our obligation to pay principal, premium and interest on the debt securities and, if applicable, a Subsidiary Guarantors
guarantee of the payments, will also survive.
Unless we inform you otherwise in the prospectus supplement, we will be required to deliver
to the trustee an opinion of counsel that the deposit and related defeasance would not cause the holders of the debt securities to recognize income, gain or loss for U.S. federal income tax purposes. If we elect legal defeasance, that opinion of
counsel must be based upon a ruling from the U.S. Internal Revenue Service or a change in law to that effect.
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Governing Law
. New York law will govern the indentures, the debt securities and the
guarantees.
Trustee.
Wells Fargo Bank, National Association, acts as trustee under the senior indenture. Unless we inform
you otherwise in a prospectus supplement, Wells Fargo Bank, National Association, will act as trustee with respect to the senior debt securities described in such prospectus supplement. We will name the trustee under a subordinated indenture in the
prospectus supplement.
If an event of default occurs under an indenture and is continuing, the trustee under that indenture
will be required to use the degree of care and skill of a prudent person in the conduct of that persons own affairs. The trustee will become obligated to exercise any of its powers under that indenture at the request of any of the holders of
any debt securities issued under that indenture only after those holders have offered the trustee indemnity satisfactory to it.
Each
indenture contains limitations on the right of the trustee, if it becomes our creditor or, if applicable, a creditor of any Subsidiary Guarantor, to obtain payment of claims or to realize on certain property received for any such claim, as security
or otherwise. The trustee is permitted to engage in other transactions with us or, if applicable, any Subsidiary Guarantor. If, however, it acquires any conflicting interest, it must eliminate that conflict or resign within 90 days after
ascertaining that it has a conflicting interest and after the occurrence of a default under the applicable indenture, unless the default has been cured, waived or otherwise eliminated within the 90-day period.
Form, Exchange, Registration and Transfer.
The debt securities will be issued in registered form, without interest coupons.
There will be no service charge for any registration of transfer or exchange of the debt securities. However, payment of any transfer tax or similar governmental charge payable for that registration may be required.
Debt securities of any series will be exchangeable for other debt securities of the same series, the same total principal amount and the same
terms but in different authorized denominations in accordance with the applicable indenture. Holders may present debt securities for registration of transfer at the office of the security registrar or any transfer agent we designate. The security
registrar or transfer agent will effect the transfer or exchange if its requirements and the requirements of the applicable indenture are met.
The trustee will be appointed as security registrar for the debt securities. If a prospectus supplement refers to any transfer agents we
initially designate, we may at any time rescind that designation or approve a change in the location through which any transfer agent acts. We are required to maintain an office or agency for transfers and exchanges in each place of payment. We may
at any time designate additional transfer agents for any series of debt securities.
In the case of any redemption, we will not be
required to register the transfer or exchange of:
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any debt security during a period beginning 15 business days prior to the mailing of any notice of redemption or mandatory offer to repurchase and ending on the close of business on the day of mailing of such notice; or
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any debt security that has been called for redemption in whole or in part, except the unredeemed portion of any debt security being redeemed in part.
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Payment and Paying Agent.
Unless we inform you otherwise in the prospectus supplement, payments on the debt securities will be
made in U.S. dollars at the office of the trustee and any paying agent. At our option, however, payments may be made by wire transfer for global debt securities or by check mailed to the address of the person entitled to the payment as it appears in
the security register. Unless we inform you otherwise in the prospectus supplement, interest payments will be made to the person in whose name the debt security is registered at the close of business on the record date for the interest
payment.
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Unless we inform you otherwise in the prospectus supplement, the trustee under the applicable
indenture will be designated as the paying agent for payments on debt securities issued under that indenture. We may at any time designate additional paying agents or rescind the designation of any paying agent or approve a change in the office
through which any paying agent acts.
If the principal of or any premium or interest on debt securities of a series is payable on a day
that is not a business day, the payment will be made on the next succeeding business day as if made on the date that the payment was due and no interest will accrue on that payment for the period from and after the due date to the date of that
payment on the next succeeding business date. For these purposes, unless we inform you otherwise in the prospectus supplement, a business day is any day that is not a Saturday, a Sunday or a day on which banking institutions in any of
New York, New York or Houston, Texas or a place of payment on the debt securities of that series is authorized or obligated by law, regulation or executive order to remain closed.
Subject to the requirements of any applicable abandoned property laws, the trustee and paying agent will pay to us upon written request any
money held by them for payments on the debt securities that remains unclaimed for two years after the date upon which that payment has become due. After payment to us, holders entitled to the money must look to us for payment. In that case, all
liability of the trustee or paying agent with respect to that money will cease.
Notices.
Any notice required by the
indentures to be provided to holders of the debt securities will be given by mail to the registered holders at the addresses as they appear in the security register.
Replacement of Debt Securities.
We will replace any debt securities that become mutilated, destroyed, stolen or lost at the
expense of the holder upon delivery to the trustee of the mutilated debt securities or evidence of the loss, theft or destruction satisfactory to us and the trustee. In the case of a lost, stolen or destroyed debt security, indemnity satisfactory to
the trustee and us may be required at the expense of the holder of the debt securities before a replacement debt security will be issued.
Book-Entry Debt Securities.
The debt securities of a series may be issued in the form of one or more global debt securities that
would be deposited with a depositary or its nominee identified in the prospectus supplement. Global debt securities may be issued in either temporary or permanent form. We will describe in the prospectus supplement the terms of any depositary
arrangement and the rights and limitations of owners of beneficial interests in any global debt security.
Provisions Applicable Solely
to Subordinated Debt Securities
Subordination.
Under the subordinated indenture, payment of the principal of and any
premium and interest on the subordinated debt securities will generally be subordinated and junior in right of payment to the prior payment in full of all Senior Debt, as defined below. Unless we inform you otherwise in the prospectus supplement, we
may not make any payment of principal of, or any premium or interest on, the subordinated debt securities if we fail to pay the principal, interest, premium or any other amounts on any Senior Debt when due.
The subordination does not affect our obligation, which is absolute and unconditional, to pay, when due, the principal of and any premium and
interest on the subordinated debt securities. In addition, the subordination does not prevent the occurrence of any default under the subordinated indenture.
The subordinated indenture does not limit the amount of Senior Debt that we may incur. As a result of the subordination of the subordinated
debt securities, if we become insolvent, holders of subordinated debt securities may receive less on a proportionate basis than other creditors.
Unless we inform you otherwise in the prospectus supplement, Senior Debt will mean all debt, including guarantees, of ours, unless
the debt states that it is not senior to the subordinated debt securities or our other junior debt. Senior Debt with respect to a series of subordinated debt securities could include other series of debt securities issued under a subordinated
indenture.
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Guarantee
The Subsidiary Guarantors may fully and unconditionally guarantee on an unsecured basis the full and prompt payment of the principal of and any
premium and interest on the debt securities issued by us when and as the payment becomes due and payable, whether at maturity or otherwise. The guarantee provides that in the event of a default in the payment of principal of or any premium or
interest on a debt security, the holder of that debt security may institute legal proceedings directly against the applicable Subsidiary Guarantor to enforce the guarantee without first proceeding against us. If senior debt securities are so
guaranteed, the guarantee will rank equally with all of the Subsidiary Guarantors other unsecured and unsubordinated debt from time to time outstanding and senior to any subordinated debt of the Subsidiary Guarantor. If subordinated debt
securities are so guaranteed, the guarantee will be subordinated to all of the Subsidiary Guarantors other unsecured and unsubordinated debt from time to time outstanding.
The obligations of any Subsidiary Guarantor under the guarantee will be limited to the maximum amount that will not result in the obligations
of the Subsidiary Guarantor under the guarantee constituting a fraudulent conveyance or fraudulent transfer under federal or state law, after giving effect to any other contingent and fixed liabilities of the Subsidiary Guarantor.
The guarantee may be released under certain circumstances. If we exercise our legal or covenant defeasance option with respect to debt
securities of a particular series as described above in Defeasance, then any Subsidiary Guarantor will be released with respect to that series. Further, if no default has occurred and is continuing under the indentures, and to the
extent not otherwise prohibited by the indentures, any Subsidiary Guarantor will be unconditionally released and discharged from the guarantee:
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automatically upon any sale, exchange or transfer, whether by way of merger or otherwise, to any person that is not our affiliate, of all of our equity interests in the Subsidiary Guarantor;
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automatically upon the merger of the Subsidiary Guarantor into us or any other Subsidiary Guarantor or the liquidation and dissolution of the Subsidiary Guarantor; or
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following delivery of a written notice by us to the trustee, upon the release of all guarantees by the Subsidiary Guarantor of any debt of ours for borrowed money, except for any series of debt securities.
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Description of Capital Stock
The description of our capital stock contained herein is a summary and is not intended to be complete. For a complete description of our
capital stock, please read our amended and restated articles of incorporation and our amended and restated bylaws, which have been filed with the SEC.
General
Our authorized capital stock
consists of (1) 90,000,000 shares of common stock, par value $0.01 per share, and (2) 10,000,000 shares of preferred stock, par value $0.01 per share. As of July 31, 2014, 46,028,577 shares of our common stock and no shares of
preferred stock were outstanding.
Common Stock
The holders of our common stock are entitled to one vote per share on all matters on which such shareholders are permitted to vote. The holders
of our common stock have no preemptive rights to purchase or subscribe for our securities, and our common stock is not convertible or subject to redemption by us.
Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of
our common stock are entitled to dividends in such amounts as may be declared by our board of directors from time to time out of funds legally available for such payments and, if we are liquidated, dissolved or wound up, to a ratable share of any
distribution to shareholders, after satisfaction of all our liabilities and the prior rights of any outstanding class of our preferred stock.
Wells Fargo Shareholder Services is the registrar and transfer agent for our common stock. Our common stock is listed on the NASDAQ Global
Select Market under the symbol CRZO.
Preferred Stock
Our board of directors has the authority, without shareholder approval, to issue shares of preferred stock in one or more series, and to fix
the number of shares and terms of each such series. We have no present plan to issue shares of preferred stock.
The prospectus supplement
relating to any series of preferred stock we are offering will include specific terms relating to the offering and the name of any transfer agent for that series. We will file the form of the preferred stock with the SEC before we issue any of it,
and you should read it for provisions that may be important to you. The prospectus supplement will include some or all of the following terms:
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the title of the preferred stock;
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the maximum number of shares of the series;
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the dividend rate or the method of calculating the dividend, the date from which dividends will accrue and whether dividends will be cumulative;
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any liquidation preference;
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any optional redemption provisions;
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any sinking fund or other provisions that would obligate us to redeem or purchase the preferred stock;
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any terms for the conversion or exchange of the preferred stock for other securities of ours or any other entity;
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any other preferences and relative, participating, optional or other special rights or any qualifications, limitations or restrictions on the rights of the shares.
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The issuance of shares of preferred stock could adversely affect the voting power of holders of
our common stock, discourage an unsolicited acquisition proposal or make it more difficult for a third party to gain control of the Company. For instance, the issuance of a series of preferred stock might impede a business combination by including
class voting rights that would enable the holder to block such a transaction or facilitate a business combination by including voting rights that would provide a required percentage vote of the shareholders. Although our board of directors is
required to make any determination to issue preferred stock based on its judgment as to the best interests of our shareholders, the board could act in a manner that would discourage an acquisition attempt or other transaction that some of the
shareholders might believe to be in their best interests or in which shareholders might receive a premium for their stock over the then market price of the stock. Our board of directors does not presently intend to seek shareholder approval prior to
any issuance of currently authorized stock unless otherwise required by law or the rules of the NASDAQ Stock Market.
Special Meetings
Our articles of incorporation provide that special meetings of our shareholders may be called only by the chairman of our board of directors,
our president, a majority of our board of directors or by shareholders holding not less than 50% of our outstanding voting stock.
Voting
Our common stock does not have cumulative voting rights. Accordingly, holders of a majority of the total votes entitled to vote in an election
of directors will be able to elect all of the directors, subject to any voting rights of a specific class or series of stock.
Our
articles of incorporation or Texas law requires the affirmative vote of holders of:
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66
2
⁄
3
% of the outstanding shares entitled to vote on the matter to approve mergers, consolidations, share exchanges,
liquidations, terminations or dispositions of all or substantially all of our assets to the extent, for each of the foregoing transactions, that a shareholder vote is required under Texas law; and
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a majority of the outstanding shares entitled to vote on the matter to approve any amendment to our articles of incorporation for which a shareholder vote is required.
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The foregoing vote requirements are subject to the rights any class or series may have to separately vote on such matters as a class or
series.
Our bylaws provide that shareholders who wish to nominate directors or to bring business before a shareholders meeting must
notify us and provide pertinent information at least 80 days before the meeting date, or within 10 days after public announcement pursuant to our bylaws of the meeting date, if the meeting date has not been publicly announced at least 90 days in
advance.
Our articles of incorporation and bylaws provide that no director may be removed from office except for cause and upon the
affirmative vote of the holders of a majority of the votes entitled to be cast in the election of our directors. The following events constitute cause:
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the director has been convicted, or is granted immunity to testify where another has been convicted, of a felony;
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the director has been found by a court or by the affirmative vote of a majority of the total number of authorized directors (whether or not any vacancies exist) to be grossly negligent or guilty of willful misconduct in
the performance of duties to us;
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the director is adjudicated mentally incompetent; or
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the director has been found by a court or by the affirmative vote of a majority of the total number of authorized directors (whether or not any vacancies exist) to have breached his duty of loyalty to us or our
shareholders or to have engaged in a transaction with us from which the director derived an improper personal benefit.
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Texas
Anti-Takeover Law
We are subject to Subchapter M (the Business Combination Law) of the Texas Business Organizations Code.
In general, the Business Combination Law prevents an affiliated shareholder or its affiliates or associates from entering into or engaging in a business combination with an issuing public corporation during the
three-year period immediately following the affiliated shareholders acquisition of shares unless:
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before the date the person became an affiliated shareholder, the board of directors of the issuing public corporation approved the business combination or the acquisition of shares made by the affiliated shareholder; or
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not less than six months after the date the person became an affiliated shareholder, the business combination is approved by the affirmative vote of holders of at least two-thirds of the issuing public
corporations outstanding voting shares not beneficially owned by the affiliated shareholder or its affiliates or associates.
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For the purposes of the Business Combination Law, an affiliated shareholder is defined generally as a person who is or was within
the preceding three-year period the beneficial owner of 20% or more of a corporations outstanding voting shares. A business combination is defined generally to include:
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mergers or share exchanges;
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dispositions of assets having an aggregate value equal to 10% or more of the market value of the assets or of the outstanding common stock representing 10% or more of the earning power or net income of the corporation;
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certain issuances or transactions by the corporation that would increase the affiliated shareholders number of shares of the corporation;
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certain liquidations or dissolutions; and
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the receipt of tax, guarantee, loan or other financial benefits by an affiliated shareholder of the corporation.
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An issuing public corporation is defined generally as a Texas corporation with 100 or more shareholders, any voting shares
registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, or any voting shares qualified for trading in a national market system.
The Business Combination Law does not apply to a business combination of an issuing public corporation that elects not to be governed thereby
through either its original articles of incorporation or bylaws or by an amendment thereof. Our articles of incorporation and bylaws do not so provide, nor do we currently intend to make any such amendments.
The Business Combination Law may deter any potential unfriendly offers or other efforts to obtain control of us that are not approved by our
board. This may deprive our shareholders of opportunities to sell shares of our common stock at a premium to the prevailing market price.
In discharging the duties of a director under Texas law, a director, in considering the best interests of the Company, may consider the
long-term as well as the short-term interests of the Company and our shareholders, including the possibility that those interests may be best served by our continued independence.
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Limitation of Director Liability and Indemnification Arrangements
Our articles of incorporation contain a provision that limits the liability of our directors as permitted by the Texas Business Organizations
Code. The provision eliminates the personal liability of a director to us and our shareholders for monetary damages for an act or omission in the directors capacity as a director. The provision does not change the liability of a director for
breach of his duty of loyalty to us or to our shareholders, for an act or omission not in good faith that involves intentional misconduct or a knowing violation of law, for an act or omission for which the liability of a director is expressly
provided for by an applicable statute, or in respect of any transaction from which a director received an improper personal benefit. Pursuant to our articles of incorporation, the liability of directors will be further limited or eliminated without
action by shareholders if Texas law is amended to further limit or eliminate the personal liability of directors.
Our bylaws provide for
the indemnification of our officers and directors, and the advancement to them of expenses in connection with proceedings and claims, to the fullest extent permitted by the Texas Business Organizations Code. We have also entered into indemnification
agreements with each of our directors and some of our officers that contractually provide for indemnification and expense advancement and include related provisions meant to facilitate the indemnitees receipt of such benefits. In addition, we
have purchased directors and officers liability insurance policies for our directors and officers in the future. Our bylaws and these agreements with directors and officers provide for indemnification for amounts:
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in respect of the deductibles for these insurance policies;
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that exceed the liability limits of our insurance policies; and
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that are available, were available or become available to us or are generally available to companies comparable to us but which our officers or directors determine is inadvisable for us to purchase, given the cost.
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Such indemnification may be made even though our directors and officers would not otherwise be entitled to indemnification
under other provisions of our bylaws or these agreements.
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Description of Warrants
We may issue warrants to purchase debt securities, common stock, preferred stock, rights or other securities of the Company or any other
entity or any combination of the foregoing. We may issue warrants independently or together with other securities. Warrants sold with other securities may be attached to or separate from the other securities. We will issue warrants under one or more
warrant agreements between us and a warrant agent that we will name in the prospectus supplement.
The prospectus supplement relating to
any warrants we are offering will include specific terms relating to the offering. We will file the form of any warrant agreement with the SEC, and you should read the warrant agreement for provisions that may be important to you. The prospectus
supplement will include some or all of the following terms:
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the title of the warrants;
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the aggregate number of warrants offered;
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the designation, number and terms of the debt securities, common stock, preferred stock, rights or other securities purchasable upon exercise of the warrants, and procedures by which the number of securities purchasable
may be adjusted;
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the exercise price of the warrants;
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the dates or periods during which the warrants are exercisable;
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the designation and terms of any securities with which the warrants are issued;
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if the warrants are issued as a unit with another security, the date, if any, on and after which the warrants and the other security will be separately transferable;
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if the exercise price is not payable in U.S. dollars, the foreign currency, currency unit or composite currency in which the exercise price is denominated;
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any minimum or maximum amount of warrants that may be exercised at any one time; and
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any terms, procedures and limitations relating to the transferability, exchange or exercise of the warrants.
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Selling Shareholders
We may register shares of common stock covered by this prospectus for re-offers and resales by selling shareholders to be named in a
prospectus supplement. We may register these shares to permit selling shareholders to resell their shares when they deem appropriate. A selling shareholder may resell all, a portion or none of such shareholders shares at any time and from time
to time. Selling shareholders may also sell, transfer or otherwise dispose of some or all of their shares of our common stock in transactions exempt from the registration requirements of the Securities Act. We do not know when or in what amounts the
selling shareholders may offer shares for sale under this prospectus and any prospectus supplement. We will not receive any proceeds from any sale of shares by a selling shareholder under this prospectus and any prospectus supplement. We may pay
some or all expenses incurred with respect to the registration of the shares of common stock owned by the selling shareholders, other than underwriting fees, discounts or commissions, which will be borne by the selling shareholders. We will provide
you with a prospectus supplement naming the selling shareholder(s), the amount of shares to be registered and sold and any other terms of the shares of common stock being sold by the selling shareholder(s).
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Plan of Distribution
We and the selling shareholders may sell the securities in and outside the United States through underwriters or dealers, directly to
purchasers or through agents. The prospectus supplement will include the following information, to the extent applicable to the offering covered by the prospectus supplement:
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the terms of the offering;
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the names of any underwriters or agents, and the respective amounts of securities underwritten or purchased by each of them;
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the name or names of any managing underwriter or underwriters;
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the name or names of any selling shareholder(s);
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the purchase price of the securities from us or the selling shareholders and, if the purchase price is not payable in U.S. dollars, the currency or composite currency in which the purchase price is payable;
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the net proceeds to us or the selling shareholders from the sale of the securities;
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any delayed delivery arrangements;
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any underwriting discounts, commissions and other items constituting underwriters compensation;
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any initial public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any commissions paid to agents.
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Sale Through Underwriters or Dealers
If we or the selling shareholders use underwriters in the sale of securities, the underwriters will acquire the securities for their own
account. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Underwriters may offer
securities to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. Unless we inform you otherwise in the prospectus supplement, the obligations of
the underwriters to purchase the securities will be subject to conditions, and the underwriters will be obligated to purchase all the securities if they purchase any of them. The underwriters may change from time to time any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers.
During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open market. These transactions may include overallotment and stabilizing transactions and purchases to cover syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers for the offered securities sold for their account may be reclaimed by the syndicate if such offered securities are
repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the offered securities, which may be higher than the price that might otherwise prevail in the
open market. If commenced, these activities may be discontinued at any time.
If we or the selling shareholders use dealers in the sale of
securities, we or the selling shareholders will sell the securities to them as principals. They may then resell those securities to the public at varying prices determined by the dealers at the time of resale. The dealers participating in any sale
of the securities may be deemed to be underwriters within the meaning of the Securities Act with respect to any sale of those securities. We will include in the prospectus supplement the names of the dealers and the terms of the transaction.
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Direct Sales and Sales Through Agents
We or the selling shareholders may sell the securities directly. In that event, no underwriters or agents would be involved. We or the selling
shareholders may also sell the securities through agents we designate from time to time. In the prospectus supplement, we will name any agent involved in the offer or sale of the securities, and we will describe any commissions or fees payable by us
or the selling shareholders to the agent. Unless we inform you otherwise in the prospectus supplement, any agent will agree to use its reasonable best efforts to solicit purchases for the period of its appointment.
We or the selling shareholders may sell the securities directly to institutional investors or others who may be deemed to be underwriters
within the meaning of the Securities Act with respect to any sale of those securities. We or the selling shareholders will describe the terms of any such sales in the prospectus supplement.
Delayed Delivery Contracts
If we so
indicate in the prospectus supplement, we or the selling shareholders may authorize agents, underwriters or dealers to solicit offers from certain types of institutions to purchase securities from us at the public offering price under delayed
delivery contracts. These contracts would provide for payment and delivery on a specified date in the future. The contracts would be subject only to those conditions described in the prospectus supplement. The prospectus supplement will describe the
commission payable for solicitation of those contracts.
Remarketing
We may offer and sell any of the securities in connection with a remarketing upon their purchase, in accordance with a redemption or repayment
by their terms or otherwise, by one or more remarketing firms acting as principals for their own accounts or as our agents. We will identify any remarketing firm, the terms of any remarketing agreement and the compensation to be paid to the
remarketing firm in the prospectus supplement. Remarketing firms may be deemed underwriters under the Securities Act.
Derivative Transactions
We or the selling shareholders may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to
third parties in privately negotiated transactions. If the prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the prospectus supplement, including in short sale
transactions. If so, the third parties may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those
derivatives to close out any related open borrowings of stock.
We, the selling shareholders or one of our affiliates may loan or pledge
securities to a financial institution or other third party that in turn may sell the securities using this prospectus. Such financial institution or third party may transfer its short position to investors in our securities or in connection with a
simultaneous offering of other securities offered by this prospectus or otherwise.
The third parties in any of the sale transactions
described above will be underwriters and will be identified in the prospectus supplement or in a post-effective amendment to the registration statement of which this prospectus forms a part.
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General Information
We or the selling shareholders may have agreements with the agents, dealers and underwriters to indemnify them against civil liabilities,
including liabilities under the Securities Act, or to contribute with respect to payments that the agents, dealers or underwriters may be required to make. Agents, dealers and underwriters may engage in transactions with us or the selling
shareholders or perform services for us or the selling shareholders in the ordinary course of their businesses.
The securities may or may
not be listed on a national securities exchange. We cannot assure you that there will be a market for the securities.
We cannot assure
you that the selling shareholders will sell all or any part of the securities to be listed under Selling Shareholders in the applicable prospectus supplement.
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Legal Matters
The validity of the offered securities and other matters in connection with any offering of the securities will be passed upon for us by Baker
Botts L.L.P., Houston, Texas, our outside counsel. Any underwriters will be advised about legal matters relating to any offering by their own legal counsel, which will be named in the prospectus supplement.
Experts
The consolidated financial statements of the Company as of December 31, 2013 and 2012 and for each of years in the three-year period
ended December 31, 2013, and managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2013 have been incorporated by reference herein in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The letter report of Ryder Scott Company, L.P., as independent consulting petroleum engineers, and information with respect to our oil and gas
reserves derived from such report, has been incorporated by reference into this prospectus upon the authority of such firm as experts with respect to such matters covered in such report and in giving such report.
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy this registration
statement and any other documents we file at the SECs Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings
are also available to the public at the SECs Internet site at http://www.sec.gov and our website at http://www.carrizo.com. Copies of these reports, proxy statements and other information concerning us can also be inspected at the offices of
the NASDAQ Stock Market LLC, which are located at 1735 K Street N.W., Washington, D.C. 20006. Information on our website or any other website is not incorporated by reference in this prospectus and does not constitute part of this prospectus.
This prospectus is part of a registration statement and, as permitted by SEC rules, does not contain all of the information included in the
registration statement. Whenever a reference is made in this prospectus or the prospectus supplement to any of our contracts or other documents, the reference may not be complete and, for a copy of the contract or document, you should refer to the
exhibits that are part of or incorporated by reference into the registration statement.
The SEC allows us to incorporate by
reference into this prospectus the information we file with it, which means that we can disclose important information to you by referring you to those documents. Information incorporated by reference is considered to be part of this
prospectus. Any statement contained in this prospectus or a document incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this
prospectus, the prospectus supplement or any other subsequently filed document that is incorporated by reference in this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this prospectus. You should not assume the information in this prospectus is current as of any date other than the date on the front page of this prospectus.
We incorporate by reference the documents listed below and future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the effectiveness of this registration statement and
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until the termination of offerings under this prospectus, in each case excluding any information furnished but not filed, unless we specifically provide that such
furnished information is to be incorporated by reference:
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our annual report on Form 10-K for the year ended December 31, 2013;
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our quarterly reports on Form 10-Q for the periods ended March 31, 2014 and June 30, 2014;
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our current reports on Form 8-K filed on May 16, 2014 and August 12, 2014; and
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the description of our common stock in Exhibit 99.1 to our Current Report on Form 8-K filed on December 9, 2010, as we may update that description from time to time.
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We will provide a copy of any and all of the information that is incorporated by reference in this prospectus to any person, including a
beneficial owner, to whom a prospectus is delivered, without charge, upon written or oral request. You may obtain a copy of these filings by writing or telephoning:
Carrizo Oil & Gas, Inc.
Attention: Investor Relations
500 Dallas Street, Suite 2300
Houston, Texas 77002
(713) 328-1000
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Joint Book-Running
Managers
Goldman Sachs & Co. LLC
Wells Fargo Securities
Citigroup
Senior Co-Managers
Capital One Securities
BofA Merrill Lynch
Scotia Howard Weil
BMO Capital
Markets
IBERIA Capital Partners L.L.C.
SunTrust Robinson Humphrey
Johnson Rice
& Company L.L.C.
Stephens Inc.
Co-Managers
RBC Capital Markets
J.P. Morgan
Baird
Raymond James
KeyBanc Capital Markets
Jefferies
Northland Capital Markets
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