SOURCE: Carrizo Oil & Gas, Inc.

Carrizo Oil & Gas, Inc.

March 03, 2010 07:30 ET

Carrizo Oil & Gas Announces Proved Reserves Increase 20% to a Record 602 Bcfe, Replacing 400% of 2009 Production; Quarterly and Annual Production Reach Record Levels

HOUSTON, TX--(Marketwire - March 3, 2010) -  Carrizo Oil & Gas, Inc. (NASDAQ: CRZO) today announced record year-end proved reserves and record production for the fourth quarter and full year 2009.

Reserves

Year-end proved reserves were a record 601.9 Bcfe based on reports from Carrizo's third-party reserve engineers. This is an increase of approximately 20% over the year-end 2008 proved reserves of 502.6 Bcfe. The calculation of these reserves was based on oil and natural gas prices of $56.10 per barrel and $3.30 per Mcf, respectively. These prices reflect the SEC's new pricing methodology, which requires the use of the trailing 12-month arithmetic average of the price on the first day of the month. These prices were 40% higher and 34% lower than the prices used at the end of 2008 for oil and natural gas, respectively. This reserve increase equates to the replacement of 400% of 2009 production.

Included in the 2009 reserve results is a negative revision of 32.5 Bcfe for proved undeveloped and proved non-producing reserves associated with our Camp Hill heavy oil steam-flood project. These reserves are no longer classified as proved under the new SEC rules because development is not scheduled to be initiated within five years. Excluding the negative revision at Camp Hill, the Company would have had a 498% production replacement ratio.

An additional new SEC reporting rule adopted in 2009 allows proved undeveloped (PUD) reserves to be booked beyond one offset location where reliable technology exists that establishes reasonable certainty of economic producibility. Under this rule, Carrizo recorded an additional 47.4 Bcfe of proved reserves (primarily proved undeveloped) in the Barnett Shale due to additional offset drilling locations. The Company also experienced a negative price-related revision of 36.6 Bcfe in the Barnett Shale due to the new pricing methodology, which was approximately $2.30 per Mcf below the $5.67 per Mcf year-end spot price that would have been used under the old SEC rules.

From year-end 2008 to 2009, our reported Barnett Shale reserves increased 137.6 Bcfe, or 32%, from 432.1 Bcfe to 569.7 Bcfe, and proved developed reserves increased 86.2 Bcfe, or 39%, from 223.7 Bcfe to 309.9 Bcfe. Gulf Coast reserves decreased 5.8 Bcfe, from 21.3 Bcfe to 15.5 Bcfe. Camp Hill reserves decreased 32.5 Bcfe, from 49.2 Bcfe to 16.7 Bcfe.

"We had an excellent operational year in net reserve additions despite our reduced drilling program and the impact of lower prices," commented Brad Fisher, Chief Operating Officer. "The strength of our Barnett Shale drilling program is illustrated by the 112.5 Bcfe of net proved developed reserve additions we made for less than $124 million in total Barnett Shale drilling expenditures."

Production

Production during the fourth quarter of 2009 was a record 8.68 Bcfe (94.4 MMcfe/d), or 20.4% above the 7.21 Bcfe (78.4 MMcfe/d) of production in the fourth quarter 2008 and 5.8% above third quarter 2009 production. Annual production for 2009 reached a record level of 33.0 Bcfe (90.5 MMcfe/d), or 28.9% higher than the 25.6 Bcfe (70.0 MMcfe/d) of production in 2008. Approximately 97% of fourth quarter and total 2009 production was natural gas.

At December 31, 2009, there were 32.7 net horizontal wells in the Barnett Shale already drilled but waiting on completion and/or pipeline connection, having a total estimated initial production rate of 77.6 MMcfe per day.

About the Company

Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, exploitation, and production of oil and natural gas primarily in the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, and in proven onshore trends along the Texas and Louisiana Gulf Coast regions. Carrizo controls significant prospective acreage blocks and utilizes advanced drilling and completion technology along with sophisticated 3-D seismic techniques to identify potential oil and gas drilling opportunities and to optimize reserve recovery.

Statements in this news release, including but not limited to those relating to reserves, development plans, the Company's or management's intentions, beliefs, expectations, hopes, projections, assessment of risks, estimations, plans or predictions for the future including, timing of completion and drilling of wells, completion and pipeline connections and other statements that are not historical facts are forward looking statements that are based on current expectations. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward looking statements include market and other conditions, capital needs and uses, commodity price changes, effects of the global financial crisis on exploration activity, and dependence on exploratory drilling activities, operating risks, land issues, availability of capital and equipment, weather and other risks described in the Company's Form 10-K/A for the year ended December 31, 2008, and its other filings with the Securities and Exchange Commission.

Note Regarding Reserve Replacement Ratio

Management uses the reserve replacement ratio as an indicator of the Company's ability to replenish annual production volumes and grow its reserves, thereby providing some information on the sources of future production. Management believes reserve replacement information is frequently used by analysts, investors and others in the industry to evaluate the performance of companies like Carrizo. The reserve replacement ratio is calculated by dividing the sum of reserve additions from all sources (revisions, extensions, discoveries, and other additions and acquisitions) by the actual production for the corresponding period. The Company does not use unproved reserve quantities in calculating the reserve replacement ratio. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. As an annual measure, the ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not take into consideration the cost or timing of future production of new reserves, it cannot be used as a measure of value creation. The ratio does not distinguish between changes in reserve quantities that are producing and those that will require additional time and funding to begin producing. In that regard, it might be noted that the percentage of the Company's proved developed reserves increased from approximately 52% in 2008 to approximately 56% in 2009. The production replacement ratio for 2008 was 705%.

Contact Information

  • Contact:
    Carrizo Oil & Gas, Inc.
    Richard Hunter
    Vice President of Investor Relations
    Paul F. Boling
    Chief Financial Officer
    (713) 328-1000