Carrizo Oil & Gas, Inc. (Nasdaq: CRZO) today
announced the Company’s financial results for the second quarter of
2019 and provided an operational update. Highlights include:
Second Quarter 2019 Highlights
- Total production of 65,643 Boe/d, 15% above the second quarter
of 2018 and 6% above the prior quarter
- Crude oil production of 44,413 Bbls/d, 17% above the second
quarter of 2018 and 9% above the prior quarter
- Net income attributable to common shareholders of $102.2
million, or $1.10 per diluted share, and Net cash provided by
operating activities of $176.7 million
- Adjusted net income attributable to common shareholders of
$65.9 million, or $0.71 per diluted share, and Adjusted EBITDA of
$188.4 million
Operational Highlights
- Production from new multipads in the Eagle Ford Shale deliver
strong results
- Delaware Basin well costs averaged less than $7.5 million
during the second quarter, below guidance of $7.8-$8.2 million
- Reducing 2019 DC&I capital expenditure guidance by
approximately 5% while reiterating 2019 production guidance
- Entered into a definitive merger agreement pursuant to which
Callon Petroleum Company (NYSE: CPE) (“Callon”) will acquire
Carrizo in an all-stock transaction valued at approximately $3.2
billion as of the date of public announcement of the merger
agreement, inclusive of Carrizo’s net debt
Carrizo reported second quarter of 2019 net income attributable
to common shareholders of $102.2 million, or $1.10 per basic and
diluted share, compared to net income attributable to common
shareholders of $30.1 million, or $0.37 and $0.36 per basic and
diluted share, respectively, in the second quarter of 2018. The net
income attributable to common shareholders for the second quarter
of 2019 and the second quarter of 2018 include certain items
typically excluded from published estimates by the investment
community. Adjusted net income attributable to common shareholders,
which excludes the impact of these items as described in the
non-GAAP reconciliation tables below, for the second quarter of
2019 was $65.9 million, or $0.71 per diluted share, compared to
$66.6 million, or $0.79 per diluted share, in the second quarter of
2018.
For the second quarter of 2019, Adjusted EBITDA was $188.4
million. Adjusted EBITDA and the reconciliation to net income
attributable to common shareholders and net cash provided by
operating activities are presented in the non-GAAP reconciliation
tables below.
Production volumes during the second quarter of 2019 were 5,974
MBoe, or 65,643 Boe/d, 15% higher than the second quarter of 2018
and 6% above the prior quarter. As previously disclosed in the
“Second Quarter Update” portion of the Company’s July 15, 2019
press release, total production was slightly below the Company’s
original guidance range of 66,500-67,500 Boe/d due to unexpected
downtime at third-party midstream facilities, which negatively
impacted second quarter production by more than 4,000 Boe/d.
Adjusting for this impact, total production for the quarter would
have exceeded the high end of the Company’s guidance range. The
year-over-year growth was driven by strong production from both of
the Company’s core plays. Crude oil production during the second
quarter of 2019 averaged 44,413 Bbls/d, 17% higher than the second
quarter of 2018 and 3% above the high end of the Company’s guidance
range; natural gas and NGL production were 64,805 Mcf/d and 10,429
Bbls/d, respectively, during the second quarter of 2019.
Drilling, completion, and infrastructure (DC&I) capital
expenditures for the second quarter of 2019 were $131.1 million, at
the low end of the Company’s original guidance range of $130-$150
million. Approximately 66% of the second quarter DC&I spending
was in the Eagle Ford Shale, with the balance in the Delaware
Basin. Land and seismic capital expenditures during the quarter
were $3.6 million, and were primarily focused in the Delaware
Basin.
Based on efficiencies achieved year to date, Carrizo is reducing
its 2019 DC&I capital expenditure guidance to $500-$550 million
from $525-$575 million. The Company’s 2019 development plan
continues to call for it to run an average of 3-4 rigs during the
year between its assets in the Eagle Ford Shale and Delaware Basin.
Based on this level of activity, Carrizo is reiterating its 2019
production guidance. In light of the pending merger with Callon,
Carrizo does not, in general, plan to provide or update guidance on
commodity price realizations or expenses during the pendency of the
merger. In addition, investors are cautioned not to rely on any
prior forward-looking statements regarding these items, as they
spoke only as of the date provided and were subject to the specific
risks and uncertainties that accompanied such statements.
S.P. “Chip” Johnson, IV, Carrizo’s President and CEO, commented
on the results, “The second quarter was another strong quarter for
Carrizo. Despite the impact of a material amount of weather-related
downtime at a third-party midstream facility in June, we still
delivered crude oil production that exceeded the high end of our
guidance range. Our shift to large-scale multipad developments
continues to pay dividends as these projects have delivered strong
production and further efficiency gains. This can be seen in our
capital spending so far this year, which has come in below our
budgeted expectations. As a result, we are reducing our 2019 capex
guidance range by approximately 5% while maintaining our production
guidance for the year.
“We are excited about our pending merger with Callon, which
should create a premier, oily mid-cap E&P company, with strong
positions in the Permian Basin and Eagle Ford Shale. The added
scale of the combined company should allow us to take the
efficiencies we have already generated through large-scale multipad
developments to the next level. I want to thank our management team
and employees for all of their hard work and dedication over the
years. We have accomplished a great deal at Carrizo, and it
wouldn’t have been possible without you.”
Proposed Merger with Callon Petroleum
As previously announced on July 15, 2019, Carrizo and Callon
entered into a definitive merger agreement, pursuant to which
Callon will acquire Carrizo in an all-stock transaction valued at
approximately $3.2 billion inclusive of Carrizo’s net debt (based
on Callon’s stock price at the time of announcement). Shareholders
of Carrizo will receive 2.05 shares of Callon common stock in
exchange for each share of Carrizo common stock, and will own
approximately 46% of the combined company, on a fully-diluted
basis, immediately following the close of the merger. The
transaction is expected to close in the fourth quarter of 2019,
subject to the approval of both Carrizo and Callon shareholders,
the satisfaction of certain regulatory approvals, and other
customary closing conditions.
Operational Update
In the Eagle Ford Shale, where the Company holds approximately
77,000 net acres, Carrizo drilled 11 gross (10 net) operated wells
during the second quarter and completed 30 gross (27 net) operated
wells. Production from the play was more than 41,300 Boe/d for the
quarter, up 5% versus the prior quarter as production from the
Company’s multipads continued to drive strong growth; crude oil
accounted for 81% of the Company’s production from the play. At the
end of the quarter, Carrizo had 23 gross (21 net) operated Eagle
Ford Shale wells in progress or waiting on completion. The Company
is currently operating one rig in the Eagle Ford Shale.
Carrizo continues to be pleased with the performance of its
large-scale multipads in the Eagle Ford Shale. During June, the
Company brought on production from a 13-well multipad in its Brown
Trust project area; to date, the project has achieved a peak 30-day
rate of approximately 11,100 Boe/d (85% oil) from restricted
chokes. During July, the Company brought on production from a
14-well multipad in its Irvin project area; to date, the project
has achieved a peak 7-day rate of more than 8,000 Boe/d (93% oil)
from restricted chokes. The average lateral length of the wells was
approximately 6,100 ft. and 6,700 ft. for Brown Trust and Irvin,
respectively.
In the Delaware Basin, where it holds approximately 45,000 net
acres, Carrizo drilled 6 gross (5 net) operated wells during the
second quarter and completed 3 gross (3 net) wells. Production from
the play was approximately 24,300 Boe/d for the quarter, up 8%
versus the prior quarter due to the strong performance of the
Company’s initial multilayer cube test in the play. Production
during the quarter was negatively impacted by an extended period of
downtime at a third-party gas processing plant due to significant
damage associated with heavy thunderstorms; while Carrizo was able
to lessen the impact by offloading production to a separate
facility, this still caused the Company to materially curtail
volumes during June. The impact of the plant downtime reduced
Carrizo’s second quarter production by more than 3,000 Boe/d (40%
oil). The plant issues were remedied in early July and the
Company’s production has returned to normal. Crude oil production
during the second quarter was approximately 10,900 Bbls/d,
accounting for 45% of the Company’s production from the play. At
the end of the quarter, Carrizo had 10 gross (9 net) operated
Delaware Basin wells in progress or waiting on completion. The
Company is currently operating two rigs in the Delaware Basin.
Following up on the strong results from The Six, Carrizo’s
initial large-scale, co-development test of the Wolfcamp A, B, and
C, the Company began drilling its next large-scale, co-development,
or cube, test, the Dorothy-Sansom project. This project is a
7-well, 5-layer co-development test of the Wolfcamp A, B, and C, as
well as the 3rd Bone Spring. Carrizo is currently drilling its
fourth well in the project.
As Carrizo continues to prosecute on its full-scale, multi-well
pad development program, the Company has been able to deliver
continued efficiency gains and cost reductions. Since the beginning
of the year, when Carrizo shifted to full-scale, multi-well pad
development, it has drilled wells in approximately 20-25 days, well
below the 30-35 days it targeted when setting the 2019 budget. The
Company’s shift to larger pads has also allowed it to achieve
further completion efficiencies. During the second quarter,
Carrizo’s D&C cost for its operated Delaware Basin wells
equated to less than $7.5 million for a 7,000-ft. effective lateral
well, below its guidance range of $7.8-$8.2 million.
Hedging Activity
Hedging continues to be an important element of Carrizo’s
strategy to protect its balance sheet and provide predictable cash
flows. As part of this strategy, the Company maintains an active
hedging program while retaining the flexibility to benefit from
commodity price increases. Carrizo currently has hedges in place
covering 32,000 Bbls/d of crude oil production for the remainder of
2019, consisting of swaps covering 5,000 Bbls/d of crude oil at an
average fixed price of $64.80 and three-way collars covering 27,000
Bbls/d of crude oil with an average floor price of $50.96/Bbl,
ceiling price of $74.23/Bbl, and sub-floor price of $41.67/Bbl.
For 2020, the Company currently has swaps covering 3,000 Bbls/d
of crude oil at an average fixed price of $55.06/Bbl and three-way
collars covering 12,000 Bbls/d with an average floor price of
$55.63/Bbl, ceiling price of $66.04/Bbl, and sub-floor price of
$45.63/Bbl.
Please refer to the attached tables for full details of the
Company’s commodity derivative contracts.
About Carrizo
Carrizo Oil & Gas, Inc. is a Houston-based energy company
actively engaged in the exploration, development, and production of
oil and gas 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 and
the Permian Basin in West Texas.
Additional Information and Where to Find It
In connection with the proposed transaction, Carrizo and Callon
intend to file materials with the Securities and Exchange
Commission (the “SEC”), including a Registration Statement on Form
S-4 of Callon (the “Registration Statement”) that will include a
joint proxy statement of Carrizo and Callon that also constitutes a
prospectus of Callon. After the Registration Statement is declared
effective by the SEC, Carrizo and Callon intend to mail a
definitive proxy statement/prospectus to shareholders of Carrizo
and shareholders of Callon. This news release is not a substitute
for the joint proxy statement/prospectus or the Registration
Statement or for any other document that Carrizo and Callon may
file with the SEC and send to Carrizo’s shareholders and/or
Callon’s shareholders in connection with the proposed transaction.
INVESTORS AND SECURITY HOLDERS OF CARRIZO AND CALLON ARE URGED TO
READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM
TIME TO TIME, AND OTHER RELEVANT DOCUMENTS FILED BY CARRIZO AND
CALLON WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CARRIZO, CALLON AND
THE PROPOSED TRANSACTION.
Investors will be able to obtain free copies of the Registration
Statement and joint proxy statement/prospectus, as each may be
amended from time to time, and other relevant documents filed by
Carrizo and Callon with the SEC (when they become available)
through the website maintained by the SEC at www.sec.gov. Copies of
documents filed with the SEC by Carrizo will be available free of
charge from Carrizo’s website at https://www.carrizo.com or by
contacting Carrizo’s Investor Relations Department at 713-328-1055.
Copies of documents filed with the SEC by Callon will be available
free of charge from Callon’s website at https://www.callon.com or
by contacting Callon’s Investor Relations Department at
281-589-5200.
Participants in the Proxy Solicitation
Carrizo, Callon and their respective directors and certain of
their executive officers and other members of management and
employees may be deemed, under SEC rules, to be participants in the
solicitation of proxies from Carrizo’s and Callon’s shareholders in
connection with the proposed transaction. Information regarding the
executive officers and directors of Carrizo is included in its
definitive proxy statement for its 2019 annual meeting filed with
the SEC on April 2, 2019. Information regarding the executive
officers and directors of Callon is included in its definitive
proxy statement for its 2019 annual meeting filed with the SEC on
March 27, 2019. Additional information regarding the persons who
may be deemed participants and their direct and indirect interests,
by security holdings or otherwise, will be set forth in the
Registration Statement and joint proxy statement/prospectus and
other materials when they are filed with the SEC in connection with
the proposed transaction. Free copies of these documents may be
obtained as described in the paragraphs above.
Cautionary Statement Regarding Forward-Looking
Information
Certain statements in this communication concerning the proposed
business combination between Carrizo and Callon, including any
statements regarding the expected timetable for completing the
proposed transaction, the results, effects, benefits and synergies
of the proposed transaction, future opportunities for the combined
company, future financial performance and condition, capital
expenditure, production and other guidance, anticipated production
and production growth, enhancements to shareholder value, returns
on capital, future project development, free cash flow growth and
improved free cash flow break-even levels, future supply costs,
opportunity to capitalize on technical advances, improved capital
efficiency, future capital allocation and capital expenditures,
balanced cash conversion cycles, improved well uptime and
incremental well reduction costs, reduction in operating cost
structure, benefits from a larger production base, monetization of
water assets and any other statements regarding Carrizo’s or
Callon’s future expectations, beliefs, plans, objectives, financial
conditions, assumptions or future events or performance, and
statements related to capital requirements, expectations or
projections, cost reductions, drilling, fracking and capital
efficiencies, cycle times, growth within cash flow and goal of free
cash flow generation, activity among basins, goals, leverage
metrics, capital expenditure, infrastructure program, resource
potential, guidance, results of tests, rig program, production,
average well returns, estimated production results and financial
performance, effects of transactions, targeted ratios and other
metrics, timing, levels of and potential production, expectations
regarding growth, oil and gas prices, drilling and completion
activities and optimization, benefits of certain well completion
designs, well spacing, landing zone optimization, drilling
techniques, including multi-pad and multi-zone drilling, completion
and development techniques, drilling inventory, including timing
thereof, well costs, break-even prices, production mix, development
plans, hedging activity, the Company’s or management’s intentions,
beliefs, expectations, hopes, projections, assessment of risks,
estimations, plans or predictions for the future, results of the
Company’s strategies and other statements that are not historical
facts are “forward-looking” statements based on assumptions
currently believed to be valid. Forward-looking statements are all
statements other than statements of historical facts. The words
“anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,”
“estimate,” “probable,” “project,” “forecasts,” “predict,”
“outlook,” “aim,” “will,” “could,” “should,” “would,” “potential,”
“may,” “might,” “anticipate,” “likely” “plan,” “positioned,”
“strategy,” and similar expressions or other words of similar
meaning, and the negatives thereof, are intended to identify
forward-looking statements. The forward-looking statements are
intended to be subject to the safe harbor provided by Section 27A
of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform
Act of 1995.
These forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those anticipated, including, but not limited to, failure to
obtain the required votes of Carrizo’s shareholders or Callon’s
stockholders to approve the transaction and related matters;
whether any redemption of Carrizo’s preferred stock will be
necessary or will occur prior to the closing of the transaction;
the risk that a condition to closing of the proposed transaction
may not be satisfied, that either party terminate the merger
agreement or that the closing of the proposed transaction might be
delayed or not occur at all; potential adverse reactions or changes
to business or employee relationships, including those resulting
from the announcement or completion of the transaction; the
diversion of management time on transaction-related issues; the
ultimate timing, outcome and results of integrating the operations
of Carrizo and Callon; the effects of the business combination of
Carrizo and Callon, including the combined company’s future
financial condition, results of operations, strategy and plans; the
ability of the combined company to realize anticipated synergies
and other benefits in the timeframe expected or at all; changes in
capital markets and the ability of the combined company to finance
operations in the manner expected; regulatory approval of the
transaction; the effects of commodity price changes; the risks of
oil and gas activities; assumptions regarding well costs; Delaware
Basin constraints; estimated recoveries; pricing and other factors
affecting average well returns; results of wells and testing;
failure of actual production to meet expectations; results of
infrastructure program; failure to reach significant growth;
performance of rig operators; spacing test results; availability of
gathering systems; pipeline and other transportation issues; costs
and availability of oilfield services; actions by governmental
authorities; joint venture partners; industry partners; lenders and
other third parties; actions by purchasers or sellers of
properties; risks and effects of acquisitions and dispositions;
market and other conditions; risks regarding financing; capital
needs; availability of well connects; capital needs and uses;
commodity price changes; effects of the global economy on
exploration activity; results of and dependence on exploratory
drilling activities; operating risks; right-of-way and other land
issues; availability of capital and equipment; and weather.
Expectations regarding business outlook, including changes in
revenue, pricing, capital expenditures, cash flow generation,
strategies for our operations, oil and natural gas market
conditions, legal, economic and regulatory conditions, and
environmental matters are only forecasts regarding these
matters.
Additional factors that could cause results to differ materially
from those described above can be found in Carrizo’s Annual Report
on Form 10-K for the year ended December 31, 2018 and in its
subsequent Quarterly Report on Form 10-Q for the quarter ended
March 31, 2019, each of which is on file with the SEC and available
from Carrizo’s website at https://www.carrizo.com and in other
documents Carrizo files with the SEC, and in Callon’s Annual Report
on Form 10-K for the year ended December 31, 2018 and in its
subsequent Quarterly Report on Form 10-Q for the quarter ended
March 31, 2019, each of which is on file with the SEC and available
from Callon’s website at https://www.callon.com and in other
documents Callon files with the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Neither Carrizo nor Callon assumes any obligation to update
forward-looking statements to reflect circumstances or events that
occur after the date the forward-looking statements were made or to
reflect the occurrence of unanticipated events except as required
by federal securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
(Financial Highlights to Follow)
CARRIZO OIL & GAS,
INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share amounts)
(Unaudited)
June 30, 2019
December 31, 2018
Assets
Current assets
Cash and cash equivalents
$2,282
$2,282
Accounts receivable, net
98,444
99,723
Derivative assets
13,621
39,904
Other current assets
9,472
8,460
Total current assets
123,819
150,369
Property and equipment
Oil and gas properties, full cost
method
Proved properties, net
2,587,341
2,333,470
Unproved properties, not being
amortized
656,976
673,833
Other property and equipment, net
11,188
11,221
Total property and equipment, net
3,255,505
3,018,524
Deferred income taxes
177,723
—
Operating lease right-of-use assets
64,615
—
Other long-term assets
13,666
16,207
Total Assets
$3,635,328
$3,185,100
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$102,943
$98,811
Revenues and royalties payable
54,662
49,003
Accrued capital expenditures
74,005
60,004
Accrued interest
18,700
18,377
Derivative liabilities
64,751
55,205
Operating lease liabilities
34,049
—
Other current liabilities
51,430
40,609
Total current liabilities
400,540
322,009
Long-term debt
1,731,418
1,633,591
Asset retirement obligations
22,111
18,360
Operating lease liabilities
36,526
—
Deferred income taxes
8,218
8,017
Other long-term liabilities
20,101
47,797
Total liabilities
2,218,914
2,029,774
Commitments and contingencies
Preferred stock
Preferred stock, $0.01 par value,
10,000,000 shares authorized; 200,000 issued and outstanding as of
June 30, 2019 and December 31, 2018
176,056
174,422
Shareholders’ equity
Common stock, $0.01 par value, 180,000,000
shares authorized; 92,552,930 issued and outstanding as of June 30,
2019 and 91,627,738 issued and outstanding as of December 31,
2018
926
916
Additional paid-in capital
2,132,131
2,131,535
Accumulated deficit
(892,699
)
(1,151,547
)
Total shareholders’ equity
1,240,358
980,904
Total Liabilities and Shareholders’
Equity
$3,635,328
$3,185,100
CARRIZO OIL & GAS,
INC.
CONSOLIDATED STATEMENTS OF
INCOME
(In thousands, except per
share amounts)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Revenues
Crude oil
$245,212
$229,798
$447,956
$424,717
Natural gas liquids
14,159
21,269
30,996
38,171
Natural gas
5,596
12,906
19,055
26,365
Total revenues
264,967
263,973
498,007
489,253
Costs and Expenses
Lease operating
44,514
35,151
86,545
74,424
Production and ad valorem taxes
17,793
16,127
32,687
28,675
Depreciation, depletion and
amortization
80,766
72,430
156,088
136,897
General and administrative, net
17,301
18,265
42,033
45,557
(Gain) loss on derivatives, net
(20,449
)
67,714
62,835
97,310
Interest expense, net
18,024
15,599
34,475
31,116
Loss on extinguishment of debt
—
—
—
8,676
Other (income) expense, net
(2,766
)
2,895
1,592
2,995
Total costs and expenses
155,183
228,181
416,255
425,650
Income Before Income Taxes
109,784
35,792
81,752
63,603
Income tax (expense) benefit
(2,299
)
(483
)
177,096
(802
)
Net Income
$107,485
$35,309
$258,848
$62,801
Dividends on preferred stock
(4,452
)
(4,474
)
(8,812
)
(9,337
)
Accretion on preferred stock
(833
)
(740
)
(1,634
)
(1,493
)
Loss on redemption of preferred stock
—
—
—
(7,133
)
Net Income Attributable to Common
Shareholders
$102,200
$30,095
$248,402
$44,838
Net Income Attributable to Common
Shareholders Per Common Share
Basic
$1.10
$0.37
$2.70
$0.55
Diluted
$1.10
$0.36
$2.69
$0.54
Weighted Average Common Shares
Outstanding
Basic
92,497
82,058
92,121
81,802
Diluted
92,700
83,853
92,479
83,240
CARRIZO OIL & GAS,
INC.
CONSOLIDATED STATEMENT OF
SHAREHOLDERS’ EQUITY
(In thousands, except share
amounts)
(Unaudited)
Three Months Ended June 30,
2019 and 2018
Common Stock
Additional Paid-in
Capital
Accumulated Deficit
Total Shareholders’
Equity
Shares
Amount
Balance as of March 31, 2019
92,503,562
$925
$2,130,989
($1,000,184
)
$1,131,730
Stock-based compensation expense
—
—
6,428
—
6,428
Issuance of common stock upon grants of
restricted stock awards and vestings of restricted stock units and
performance shares
49,368
1
(1
)
—
—
Dividends on preferred stock
—
—
(4,452
)
—
(4,452
)
Accretion on preferred stock
—
—
(833
)
—
(833
)
Net income
—
—
—
107,485
107,485
Balance as of June 30, 2019
92,552,930
$926
$2,132,131
($892,699
)
$1,240,358
Balance as of March 31, 2018
82,065,561
$821
$1,918,942
($1,528,482
)
$391,281
Stock-based compensation expense
—
—
5,110
—
5,110
Issuance of common stock upon grants of
restricted stock awards and vestings of restricted stock units and
performance shares
41,983
—
(18
)
—
(18
)
Dividends on preferred stock
—
—
(4,474
)
—
(4,474
)
Accretion on preferred stock
—
—
(740
)
—
(740
)
Net income
—
—
—
35,309
35,309
Balance as of June 30, 2018
82,107,544
$821
$1,918,820
($1,493,173
)
$426,468
Six Months Ended June 30, 2019
and 2018
Common Stock
Additional Paid-in
Capital
Accumulated Deficit
Total Shareholders’
Equity
Shares
Amount
Balance as of December 31, 2018
91,627,738
$916
$2,131,535
($1,151,547
)
$980,904
Stock-based compensation expense
—
—
11,052
—
11,052
Issuance of common stock upon grants of
restricted stock awards and vestings of restricted stock units and
performance shares
925,192
10
(10
)
—
—
Dividends on preferred stock
—
—
(8,812
)
—
(8,812
)
Accretion on preferred stock
—
—
(1,634
)
—
(1,634
)
Net income
—
—
—
258,848
258,848
Balance as of June 30, 2019
92,552,930
$926
$2,132,131
($892,699
)
$1,240,358
Balance as of December 31, 2017
81,454,621
$815
$1,926,056
($1,555,974
)
$370,897
Stock-based compensation expense
—
—
10,757
—
10,757
Issuance of common stock upon grants of
restricted stock awards and vestings of restricted stock units and
performance shares
652,923
6
(30
)
—
(24
)
Dividends on preferred stock
—
—
(9,337
)
—
(9,337
)
Accretion on preferred stock
—
—
(1,493
)
—
(1,493
)
Loss on redemption of preferred stock
—
—
(7,133
)
—
(7,133
)
Net income
—
—
—
62,801
62,801
Balance as of June 30, 2018
82,107,544
$821
$1,918,820
($1,493,173
)
$426,468
CARRIZO OIL & GAS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Cash Flows From Operating
Activities
Net income
$107,485
$35,309
$258,848
$62,801
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and
amortization
80,766
72,430
156,088
136,897
(Gain) loss on derivatives, net
(20,449
)
67,714
62,835
97,310
Cash paid for commodity derivative
settlements, net
(4,522
)
(24,083
)
(7,160
)
(38,448
)
Loss on extinguishment of debt
—
—
—
8,676
Stock-based compensation expense, net
3,854
7,206
7,969
10,724
Deferred income tax (benefit) expense
1,697
336
(177,521
)
529
Non-cash interest expense, net
668
600
1,271
1,262
Other, net
715
6,664
2,079
3,975
Changes in components of working capital
and other assets and liabilities-
Accounts receivable
(3,515
)
(8,301
)
(7,824
)
2,437
Accounts payable
7,841
(11,648
)
(6,544
)
3,878
Accrued liabilities
2,165
(8,566
)
12,733
(12,883
)
Other assets and liabilities, net
(12
)
(513
)
(978
)
(1,286
)
Net cash provided by operating
activities
176,693
137,148
301,796
275,872
Cash Flows From Investing
Activities
Capital expenditures
(191,436
)
(195,954
)
(362,478
)
(430,639
)
Acquisitions of oil and gas properties
—
—
8,222
—
Proceeds from divestitures of oil and gas
properties
2,927
3,430
6,034
345,789
Other, net
842
(1,009
)
(38
)
(1,096
)
Net cash used in investing activities
(187,667
)
(193,533
)
(348,260
)
(85,946
)
Cash Flows From Financing
Activities
Redemptions of senior notes
—
(4,425
)
—
(330,435
)
Redemption of preferred stock
—
—
—
(50,030
)
Borrowings under credit agreement
428,258
432,596
898,890
1,126,856
Repayments of borrowings under credit
agreement
(412,073
)
(369,296
)
(801,993
)
(933,156
)
Payments of credit facility amendment
fees
—
(477
)
(613
)
(627
)
Payments of dividends on preferred
stock
(4,452
)
(4,474
)
(8,812
)
(9,337
)
Cash paid for settlements of contingent
consideration arrangements, net
—
—
(40,000
)
—
Other, net
(650
)
(325
)
(1,008
)
(638
)
Net cash provided by (used in) financing
activities
11,083
53,599
46,464
(197,367
)
Net Increase (Decrease) in Cash and
Cash Equivalents
109
(2,786
)
—
(7,441
)
Cash and Cash Equivalents, Beginning of
Period
2,173
4,885
2,282
9,540
Cash and Cash Equivalents, End of
Period
$2,282
$2,099
$2,282
$2,099
CARRIZO OIL & GAS, INC. NON-GAAP
FINANCIAL MEASURES (Unaudited)
Reconciliation of Net Income Attributable to Common
Shareholders (GAAP) to Adjusted Net Income Attributable to Common
Shareholders (Non-GAAP)
Adjusted net income attributable to common shareholders is a
non-GAAP financial measure which excludes certain items that are
included in net income attributable to common shareholders, the
most directly comparable GAAP financial measure. Items excluded are
those which the Company believes affect the comparability of
operating results and are typically excluded from published
estimates by the investment community, including items whose timing
and/or amount cannot be reasonably estimated or are
non-recurring.
Adjusted net income attributable to common shareholders is
presented because management believes it provides useful additional
information to investors for analysis of the Company’s fundamental
business on a recurring basis. In addition, management believes
that adjusted net income attributable to common shareholders 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 net income attributable to common shareholders should
not be considered in isolation or as a substitute for net income
attributable to common shareholders or any other measure of a
company’s financial performance or profitability presented in
accordance with GAAP. A reconciliation of the differences between
net income attributable to common shareholders and adjusted net
income attributable to common shareholders is presented below.
Because adjusted net income attributable to common shareholders
excludes some, but not all, items that affect net income
attributable to common shareholders and may vary among companies,
our calculation of adjusted net income attributable to common
shareholders may not be comparable to similarly titled measures of
other companies.
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(In thousands, except per
share amounts)
Net Income Attributable to Common
Shareholders (GAAP)
$102,200
$30,095
$248,402
$44,838
Loss on redemption of preferred stock
—
—
—
7,133
Income tax expense (benefit)
2,299
483
(177,096
)
802
(Gain) loss on derivatives, net
(20,449
)
67,714
62,835
97,310
Cash paid for commodity derivative
settlements, net
(4,522
)
(24,083
)
(7,160
)
(38,448
)
Non-cash general and administrative,
net
3,854
7,206
7,969
10,724
Loss on extinguishment of debt
—
—
—
8,676
Non-recurring and other expense, net
921
4,264
5,279
5,457
Adjusted income before income taxes
84,303
85,679
140,229
136,492
Adjusted income tax expense (1)
(18,379
)
(19,106
)
(30,570
)
(30,438
)
Adjusted Net Income Attributable to
Common Shareholders (Non-GAAP)
$65,924
$66,573
$109,659
$106,054
Net Income Attributable to Common
Shareholders Per Diluted Common Share (GAAP)
$1.10
$0.36
$2.69
$0.54
Loss on redemption of preferred stock
—
—
—
0.09
Income tax expense (benefit)
0.02
0.01
(1.91
)
0.01
(Gain) loss on derivatives, net
(0.22
)
0.81
0.68
1.17
Cash paid for commodity derivative
settlements, net
(0.05
)
(0.29
)
(0.08
)
(0.46
)
Non-cash general and administrative,
net
0.05
0.08
0.09
0.13
Loss on extinguishment of debt
—
—
—
0.10
Non-recurring and other expense, net
0.01
0.05
0.05
0.06
Adjusted income before income taxes
0.91
1.02
1.52
1.64
Adjusted income tax expense
(0.20
)
(0.23
)
(0.33
)
(0.37
)
Adjusted Net Income Attributable to
Common Shareholders Per Diluted Common Share (Non-GAAP)
$0.71
$0.79
$1.19
$1.27
Diluted Weighted Average Shares
Outstanding
92,700
83,853
92,479
83,240
__________
(1)
For the three and six months ended June
30, 2019, adjusted income tax expense was calculated using a rate
of 21.8%, which approximates the Company’s statutory tax rate
adjusted for ordinary permanent differences. For the three and six
months ended June 30, 2018, adjusted income tax expense was
calculated using a rate of 22.3%, which approximates the Company’s
statutory rate adjusted for ordinary permanent differences.
CARRIZO OIL & GAS, INC. NON-GAAP
FINANCIAL MEASURES (Unaudited)
Reconciliation of Net Income Attributable to Common
Shareholders (GAAP) to Adjusted EBITDA (Non-GAAP) to Net Cash
Provided by Operating Activities (GAAP)
Adjusted EBITDA is a non-GAAP financial measure which excludes
certain items that are included in net income attributable to
common shareholders, the most directly comparable GAAP financial
measure. Items excluded are interest, income taxes, depreciation,
depletion and amortization, impairments, dividends and accretion on
preferred stock and items that the Company believes 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 the Company’s financial and operating performance
on a recurring basis and the Company’s 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 net income attributable to common shareholders, net
cash provided by operating activities, or any other measure of a
company’s profitability or liquidity presented in accordance with
GAAP. A reconciliation of net income attributable to common
shareholders to adjusted EBITDA to net cash provided by operating
activities is presented below. Because adjusted EBITDA excludes
some, but not all, items that affect net income attributable to
common shareholders, our calculations of adjusted EBITDA may not be
comparable to similarly titled measures of other companies.
Reconciliation of Net Cash Provided by Operating Activities
(GAAP) to Discretionary Cash Flows (Non-GAAP)
Discretionary cash flows are a non-GAAP financial measure which
excludes certain items that are included in net cash provided by
operating activities, the most directly comparable GAAP financial
measure. Items excluded are changes in the components of working
capital and other items that the Company believes affect the
comparability of operating cash flows such as items that are
non-recurring.
Discretionary cash flows are presented because management
believes it provides useful additional information to investors for
analysis of the Company’s ability to generate cash to fund
exploration and development, and to service debt. In addition,
management believes that discretionary cash flows 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.
Discretionary cash flows should not be considered in isolation
or as a substitute for net cash provided by operating activities or
any other measure of a company’s cash flows or liquidity presented
in accordance with GAAP. A reconciliation of net cash provided by
operating activities to discretionary cash flows is presented
below. Because discretionary cash flows excludes some, but not all,
items that affect net cash provided by operating activities and may
vary among companies, our calculation of discretionary cash flows
may not be comparable to similarly titled measures of other
companies.
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(In thousands, except per Boe
amounts)
Net Income Attributable to Common
Shareholders (GAAP)
$102,200
$30,095
$248,402
$44,838
Dividends on preferred stock
4,452
4,474
8,812
9,337
Accretion on preferred stock
833
740
1,634
1,493
Loss on redemption of preferred stock
—
—
—
7,133
Income tax expense (benefit)
2,299
483
(177,096
)
802
Depreciation, depletion and
amortization
80,766
72,430
156,088
136,897
Interest expense, net
18,024
15,599
34,475
31,116
(Gain) loss on derivatives, net
(20,449
)
67,714
62,835
97,310
Cash paid for commodity derivative
settlements, net
(4,522
)
(24,083
)
(7,160
)
(38,448
)
Non-cash general and administrative,
net
3,854
7,206
7,969
10,724
Loss on extinguishment of debt
—
—
—
8,676
Non-recurring and other expense, net
921
4,264
5,279
5,457
Adjusted EBITDA (Non-GAAP)
$188,378
$178,922
$341,238
$315,335
Cash interest expense, net
(17,356
)
(14,998
)
(33,204
)
(29,853
)
Dividends on preferred stock
(4,452
)
(4,474
)
(8,812
)
(9,337
)
Other cash and non-cash adjustments,
net
(4,086
)
218
(2,848
)
956
Discretionary Cash Flows
(Non-GAAP)
$162,484
$159,668
$296,374
$277,101
Changes in components of working capital
and other
14,209
(22,520
)
5,422
(1,229
)
Net Cash Provided By Operating
Activities (GAAP)
$176,693
$137,148
$301,796
$275,872
Adjusted EBITDA (Non-GAAP)
$188,378
$178,922
$341,238
$315,335
Total barrels of oil equivalent
5,974
5,193
11,550
9,807
Adjusted EBITDA Margin ($ per Boe)
(Non-GAAP)
$31.53
$34.45
$29.54
$32.15
CARRIZO OIL & GAS,
INC.
PRODUCTION VOLUMES AND
REALIZED PRICES
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Total production volumes -
Crude oil (MBbls)
4,042
3,445
7,707
6,517
NGLs (MBbls)
949
853
1,840
1,593
Natural gas (MMcf)
5,897
5,372
12,015
10,182
Total barrels of oil equivalent
(MBoe)
5,974
5,193
11,550
9,807
Daily production volumes by product
-
Crude oil (Bbls/d)
44,413
37,860
42,580
36,008
NGLs (Bbls/d)
10,429
9,379
10,168
8,800
Natural gas (Mcf/d)
64,805
59,029
66,382
56,252
Total barrels of oil equivalent
(Boe/d)
65,643
57,077
63,812
54,183
Daily production volumes by region
(Boe/d) -
Eagle Ford
41,370
37,039
40,456
36,335
Delaware Basin
24,273
19,783
23,356
17,522
Other
—
255
—
326
Total barrels of oil equivalent
(Boe/d)
65,643
57,077
63,812
54,183
Realized prices -
Crude oil ($ per Bbl)
$60.67
$66.70
$58.12
$65.17
NGLs ($ per Bbl)
$14.92
$24.93
$16.85
$23.96
Natural gas ($ per Mcf)
$0.95
$2.40
$1.59
$2.59
CARRIZO OIL & GAS,
INC.
COMMODITY DERIVATIVE CONTRACTS
- AS OF AUGUST 2, 2019
(Unaudited)
Fixed
Fixed
Sub-Floor
Floor
Ceiling
Price
Volumes
Price
Price
Price
Price
Differential
(Bbls
($ per
($ per
($ per
($ per
($ per
Commodity
Period
Type of Contract
Index
per day)
Bbl)
Bbl)
Bbl)
Bbl)
Bbl)
Crude oil
3Q19
Price Swaps
NYMEX WTI
5,000
$64.80
—
—
—
—
Crude oil
3Q19
Three-Way Collars
NYMEX WTI
27,000
—
$41.67
$50.96
$74.23
—
Crude oil
3Q19
Basis Swaps
LLS-WTI Cushing
6,000
—
—
—
—
$5.16
Crude oil
3Q19
Basis Swaps
WTI Midland-WTI Cushing
9,100
—
—
—
—
($4.44
)
Crude oil
3Q19
Sold Call Options
NYMEX WTI
3,875
—
—
—
$81.07
—
Crude oil
4Q19
Price Swaps
NYMEX WTI
5,000
$64.80
—
—
—
—
Crude oil
4Q19
Three-Way Collars
NYMEX WTI
27,000
—
$41.67
$50.96
$74.23
—
Crude oil
4Q19
Basis Swaps
WTI Midland-WTI Cushing
9,200
—
—
—
—
($4.64
)
Crude oil
4Q19
Sold Call Options
NYMEX WTI
3,875
—
—
—
$81.07
—
Crude oil
2020
Price Swaps
NYMEX WTI
3,000
$55.06
—
—
—
—
Crude oil
2020
Three-Way Collars
NYMEX WTI
12,000
—
$45.63
$55.63
$66.04
—
Crude oil
2020
Basis Swaps
WTI Midland-WTI Cushing
10,658
—
—
—
—
($1.68
)
Crude oil
2020
Sold Call Options
NYMEX WTI
4,575
—
—
—
$75.98
—
Crude oil
2021
Basis Swaps
WTI Midland-WTI Cushing
8,000
—
—
—
—
$0.18
Fixed
Fixed
Sub-Floor
Floor
Ceiling
Price
Volumes
Price
Price
Price
Price
Differential
(MMBtu
($ per
($ per
($ per
($ per
($ per
Commodity
Period
Type of Contract
Index
per day)
MMBtu)
MMBtu)
MMBtu)
MMBtu)
MMBtu)
Natural gas
3Q19
Basis Swaps
Waha-NYMEX Henry Hub
42,500
—
—
—
—
($1.49
)
Natural gas
3Q19
Sold Call Options
NYMEX Henry Hub
33,000
—
—
—
$3.25
—
Natural gas
4Q19
Basis Swaps
Waha-NYMEX Henry Hub
42,500
—
—
—
—
($1.30
)
Natural gas
4Q19
Sold Call Options
NYMEX Henry Hub
33,000
—
—
—
$3.25
—
Natural gas
2020
Basis Swaps
Waha-NYMEX Henry Hub
29,541
—
—
—
—
($0.77
)
Natural gas
2020
Sold Call Options
NYMEX Henry Hub
33,000
—
—
—
$3.50
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005666/en/
Carrizo Oil & Gas, Inc. Jeffrey P. Hayden, CFA VP
- Financial Planning and Analysis (713) 328-1044
or Kim Pinyopusarerk Manager - Investor
Relations (713) 358-6430
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