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Carrizo Oil & Gas, Inc. Announces First Quarter 2006 Financial Results

Posted on: Wednesday, 10 May 2006, 06:00 CDT

HOUSTON, May 10 /PRNewswire-FirstCall/ -- Carrizo Oil & Gas, Inc. today reported the Company's financial results for the first quarter of 2006, which included the following highlights:

- Production of 2.77 Bcfe, a record 30,802 Mcfe/d - Revenue of $21.9 million. - Net Income of $6.7 million. - EBITDA, as defined below, of $16.2 million.

Revenues for the three months ended March 31, 2006 were $21.9 million, 44 percent higher than the $15.2 million during the quarter ended March 31, 2005. The increase in revenues was driven by higher prevailing oil and natural gas prices and higher natural gas production. Production volumes during the three months ended March 31, 2006 were 2.77 Bcfe (30,802 Mcfe/d), 18 percent higher compared to 2.35 Bcfe during the first quarter of 2005, and essentially flat compared to our fourth quarter 2005 production of 2.73 Bcfe, although 4 percent higher on a daily rate basis. Carrizo's average oil sales price increased 22 percent to $61.65 per barrel from $50.63 per barrel during the first quarter of 2005, while the average natural gas sales price increased 23 percent to $7.50 compared to $6.09 per Mcf in the first quarter of 2005. The above prices exclude the cash effect of hedging activities -- prices, including cash effect of hedges, are presented in the table below

(Logo: http://www.newscom.com/cgi-bin/prnh/20030523/CRZOLOGO )

The Company reported net income of $6.7 million, or $0.28 and $0.27 per basic and diluted share, respectively, for the three months ended March 31, 2006, as compared to $0.5 million, or $0.02 per basic and diluted share, for the same quarter during 2005. Excluding the $2.2 million non-cash, after-tax benefit, comprised of the market-to-market unrealized gain of $2.6 million on derivatives and the stock compensation expense of $0.4 million, net income for the quarter ended March 31, 2006 was $4.5 million, or $0.19 and $0.18 per basic and diluted share, respectively.

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the first quarter of 2006 was $16.2 million, or $0.67 and $0.65 per basic and diluted share, respectively, as compared to $10.6 million, or $0.47 and $0.45 per basic and diluted share, respectively, during the first quarter of 2005.

Oil and gas operating expenses (excluding production taxes) increased to $2.3 million during the three months ended March 31, 2006 as compared to $1.3 million for the first quarter of 2005, largely due to the increased well count of the Barnett Shale wells.

Depreciation, depletion and amortization expenses ("DD&A") were $7.4 million during the three months ended March 31, 2006 ($2.67 per Mcfe) as compared to $4.7 million ($1.99 per Mcfe) during the first quarter of 2005. The increase in DD&A expense was due to an increase in the DD&A rate primarily due to additions to the proved property cost base.

General and administrative expenses ("G&A") increased to $3.6 million during the three months ended March 31, 2006 from $2.6 million during the same quarter of 2005. The increase in G&A was due primarily to higher incentive compensation and base salary costs of $0.4 million, increased contract labor costs of $0.4 million to cover key accounting staff vacancies during the year end close and higher audit fees of $0.2 million related to the Company's financial restatement for mark-to-market accounting on derivatives.

Non-cash stock option compensation expense was $0.6 million ($0.4 million after tax) for the three months ended March 31, 2006.

Mark-to-market gain on derivatives was $5.4 million during the three months ended March 31, 2006, comprised of (1) $4.0 million ($2.6 million after tax) for the unrealized mark-to-market, non-cash gain on derivatives ($3.3 million on oil and gas derivatives and $0.7 million on interest rate swaps) and (2) the $1.4 million for cash settled gains ($1.3 million for oil and gas derivatives and $0.1 million on interest rate swaps).

Interest expense, net of amounts capitalized, was $2.2 million for the three months ended March 31, 2006 compared to $0.6 million for the three months ended March 31, 2005. The increase is attributable to the higher debt level following the Company's July 2005 refinancing and in part to the maximum interest expense that is capitalizable ("capitalizable interest") under GAAP which has typically been equal to or greater than the gross interest expense (i.e. interest expense before capitalization) in each period. Starting in the fourth quarter 2005, the gross interest expense exceeded the capitalizable interest by an amount proportionate to the outstanding debt in excess of our unproved property balance.

"Carrizo had an excellent operational quarter," commented S.P. Johnson IV, Carrizo's President and Chief Executive Officer. "This was our first quarter to average over 30 Mmcfe per day. We are also off to one of our quickest starts in drilling activity, with six wells drilled in the Gulf Coast with five successes and two important wells in progress. Five wells should spud in the next 30 days, two of which are high impact. Our Barnett Shale drilling program is running smoothly with three Carrizo operated horizontal rigs. Including partner operated rigs, we drilled 18 gross (11.6 net) wells in the region year-to-date. The completion of key pipelines to some of our leases should ensure quicker hook-up and sales on future drilling. Industry success in Tier 2 Barnett Shale, specifically Erath County, Texas has accelerated our plan to begin drilling horizontal wells on our western acreage. We expect to receive key 3-D seismic data for Erath County in the next 30 days."

"Leasing of other shale plays has reached a total of 180,000 net acres under lease or option including the Barnett/Woodford in West Texas/New Mexico, the Floyd/Neal in Mississippi/Alabama, the western New Albany in Kentucky and the Fayetteville in Arkansas. We plan to drill our first Floyd Shale well in the second half of 2006 and are pricing two small 3-D surveys."

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

Statements in this news release, including but not limited to those relating to the Company's or management's intentions, beliefs, expectations, hopes, projections, assessment of risks, estimations, plans or predictions for the future, including potential effects or timing, cash flow, the expected timing of drilling of additional wells, completion and impact of pipelines, receipt of 3-D seismic data and other statements that are not historical facts are forward looking statements that are based on current expectations. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward looking statements include the results and dependence on exploratory drilling activities, operating risks, oil and gas price levels, land issues, availability of equipment, weather and other risks described in the Company's Form 10-K/A for the year ended December 31, 2005 and its other filings with the Securities and Exchange Commission.

Contact: Carrizo Oil & Gas, Inc. B. Allen Connell, Director of Investor Relations Paul F. Boling, Chief Financial Officer (713) 328-1000 CARRIZO OIL & GAS, INC. STATEMENTS OF OPERATIONS (unaudited) THREE MONTHS ENDED MARCH 31, 2006 2005 Oil and natural gas revenues $21,916,760 $15,249,455 Costs and expenses: Oil and natural gas operating expenses 2,313,803 1,265,310 Production taxes 1,143,878 970,105 Depreciation, depletion and amortization 7,438,229 4,677,838 General and administrative expenses 3,648,347 2,600,454 Accretion expense related to asset retirement obligations 79,056 17,530 Stock based compensation expense 559,093 975,780 Total costs and expenses 15,182,406 10,507,017 Operating income 6,734,354 4,742,438 Mark-to-market gain (loss) on derivatives, net 4,016,389 (1,937,473) Realized gain on derivatives, net 1,356,592 208,731 Equity in income (loss) of Pinnacle Gas Resources, Inc. 34,914 (1,067,515) Other income and expenses, net 4,833 8,421 Interest income 365,032 44,105 Interest expense, net of amounts capitalized (2,197,178) (608,464) Income before income taxes 10,314,936 1,390,243 Income tax expense 3,663,968 908,964 Net income $6,650,968 $481,279 EBITDA (see table below) $16,172,157 $10,630,738 Basic net income per common share $0.28 $0.02 Diluted net income per common share $0.27 $0.02 Basic weighted average common shares outstanding 24,166,801 22,501,696 Diluted weighted average common shares outstanding 24,845,302 23,402,248 (A) Interest expense, net of amounts capitalized, consists of the following: Gross interest expense $(4,274,712) $(1,596,535) Capitalized interest 2,077,534 988,071 CARRIZO OIL & GAS, INC. CONDENSED BALANCE SHEETS 03/31/06 12/31/05 (unaudited) ASSETS: Cash and cash equivalents $ 25,096,098 $ 28,724,993 Other current assets 29,121,590 31,459,236 Property and equipment, net 342,831,346 314,074,507 Other assets 6,049,398 6,156,559 Investment in Pinnacle Gas Resources, Inc. 2,771,266 2,687,199 TOTAL ASSETS $405,869,698 $383,102,494 LIABILITIES AND EQUITY: Accounts payable and accrued liabilities $ 60,207,565 $46,778,992 Fair value of derivative financial instruments - 1,563,059 Current maturities of long-term debt 1,519,814 1,534,989 Long-term notes payable 147,382,256 147,759,355 Deferred income taxes 27,053,497 24,550,569 Other liabilities 4,472,299 5,530,801 Equity 165,234,267 155,384,729 TOTAL LIABILITIES AND EQUITY $405,869,698 $383,102,494 Income tax expense for the three-month periods ended March 31, 2005 and 2006 include a $860,214 and $3,598,008, respectively, provision for deferred income taxes and a $48,750 and $65,960, respectively, provision for currently payable franchise taxes. CARRIZO OIL & GAS, INC. NON-GAAP DISCLOSURES (unaudited) THREE MONTHS ENDED Reconciliation of Net Income to EBITDA MARCH 31, 2006 2005 Net income $6,650,968 $ 481,279 Adjustments: Depreciation, depletion and amortization 7,438,229 4,677,838 Unrealized mark-to-market (gain) loss on derivatives, net (4,016,389) 1,937,473 Interest expense, net of amounts capitalized and interest income 1,832,146 564,359 Income taxes 3,663,968 908,964 Equity in (income) loss of Pinnacle Gas Resources, Inc. (34,914) 1,067,515 Stock based compensation expense (benefit) 559,093 975,780 Accretion expense related to asset retirement obligations 79,056 17,530 EBITDA, as defined $16,172,157 $10,630,738 EBITDA per basic common share $0.67 $0.47 EBITDA per diluted common share $0.65 $0.45 CARRIZO OIL & GAS, INC. PRODUCTION VOLUMES AND PRICES (unaudited) Production volumes - Oil and condensate (Bbls) 67,487 64,784 Natural gas (Mcf) 2,367,246 1,965,958 Natural gas equivalent (Mcfe) 2,772,168 2,354,662 Average sales prices - Oil and condensate (per Bbl) $61.65 $50.63 Oil and condensate (per Bbl) - with hedge impact $61.65 $50.65 Natural gas (per Mcf) $7.50 $6.09 Natural gas (per Mcf) - with hedge impact $8.05 $6.19 Natural gas equivalent (per Mcfe) $7.91 $6.48

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20030523/CRZOLOGOAP Archive: http://photoarchive.ap.org/PRN Photo Desk, photodesk@prnewswire.com

Carrizo Oil & Gas, Inc.

CONTACT: B. Allen Connell, Director of Investor Relations, or Paul F.Boling, Chief Financial Officer, both of Carrizo Oil & Gas, Inc.,+1-713-328-1000

Source: PRNewswire-FirstCall

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