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Carrizo Oil & Gas, Inc. Announces Third Quarter 2011 Financial Results

Tuesday, November 8, 2011 6:30 AM


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HOUSTON, TX -- (Marketwire) -- 11/08/11 -- Carrizo Oil & Gas, Inc. (NASDAQ: CRZO) today announced the Company's financial results for the third quarter of 2011, which included the following highlights:

Results for the third quarter of 2011 --

  • Production of 11.3 Bcfe, or 122,305 Mcfe/d, an increase of 31% from the third quarter of 2010

  • Revenue of $51.7 million or adjusted revenue, of $58.7 million, including the impact of realized hedges

  • Net Income of $21.6 million, or Adjusted Net Income, as defined below, of $9.3 million

  • EBITDA, as defined below, of $41.6 million

Production volumes during the three months ended September 30, 2011 were 11.3 Bcfe, an increase of 2.7 Bcfe, or 31%, from third quarter 2010 production of 8.6 Bcfe and an increase of 0.1 Bcfe, or 1%, from second quarter 2011 production of 11.2 Bcfe. The increase in production from the third quarter of 2010 and the second quarter of 2011 to the third quarter of 2011 was primarily due to increased production from new wells in the Barnett Shale, Eagle Ford Shale and Niobrara Formation, partially offset by normal production decline and the sale of substantially all of our non-core area Barnett Shale properties in May 2011.

Adjusted revenues were $58.7 million for the third quarter of 2011, which includes oil and gas revenues of $51.7 million and realized hedge gains of $7.0 million, compared to $38.9 million for the third quarter of 2010, which includes oil and gas revenues of $30.5 million and realized hedge gains of $8.4 million. The increase in adjusted revenues was primarily driven by increased production and higher oil prices partially offset by lower gas prices. Including the impact of realized hedges, the Company's average realized gas price decreased 12% to $3.86 per Mcfe for the third quarter of 2011 compared to $4.37 per Mcfe for the third quarter of 2010 and the average realized oil price increased 25% to $91.38 per barrel for the third quarter of 2011 compared to $72.92 per barrel for the third quarter of 2010. Revenues excluding the impact of realized hedges are presented in the table below.

Adjusted net income, which excludes certain non-cash items described in the statements of operations included below ("Adjusted Net Income"), was $9.3 million, or $0.24 per basic and diluted share, during the third quarter of 2011, as compared to $21.0 million, or $0.61 and $0.60 per basic and diluted share, respectively, during the third quarter of 2010, including, for the third quarter of 2010, a $20.8 million benefit of cash distributions from a joint venture partner as described below. The Company reported net income of $21.6 million, or $0.56 and $0.55 per basic and diluted share, respectively, for the quarter ended September 30, 2011, as compared to net income of $12.8 million, or $0.37 per basic and diluted share, for the same quarter during 2010.

Earnings before interest, income tax, depreciation, depletion and amortization ("EBITDA"), as defined in the Company's U.S. senior secured revolving credit facility ("Credit Facility") and described in the statements of operations included below, was $41.6 million, or $1.07 and $1.06 per basic and diluted share, respectively, during the third quarter of 2011, as compared to $45.9 million, or $1.32 and $1.31 per basic and diluted share, respectively, during the third quarter of 2010. EBITDA for the third quarter of 2010 included the benefit of cash distributions totaling $20.8 million received from a joint venture partner as described below.

During the third quarter of 2010, the Company received cash distributions of $20.8 million on its B Unit investment in ACP II Marcellus, LLC ("ACP II"), a joint venture partner in the Marcellus Shale that is an affiliate of Avista Capital Partners, LP ("Avista"), a private equity fund, as a result of ACP II's distribution to Avista of proceeds from its sale of oil and gas properties to an affiliate of Reliance Industries Limited ("Reliance"). Although such cash distributions are included in EBITDA and Adjusted Net Income, such cash distributions are recognized as a reduction of oil and gas property costs under the full cost method of accounting and accordingly, are not included in net income.

Lease operating expenses (including transportation costs of $1.8 million) were $7.3 million (or $0.65 per Mcfe) for the three months ended September 30, 2011 as compared to lease operating expenses (including transportation costs of $1.3 million) of $7.1 million (or $0.83 per Mcfe) for the third quarter of 2010. Lease operating expenses increased due to increased production partially offset by a decrease in workover costs, as the prior year included the workover of a high volume gas well in the Gulf Coast area. We continue to experience a decrease in the operating cost per Mcfe of our Barnett Shale production, driven by comparatively lower salt water disposal costs in our core area of the Barnett Shale as compared to production from other areas of the Barnett Shale, including the non-core area Barnett Shale properties sold in May 2011. This decrease in operating cost per Mcfe was partially offset by increased operating cost per Mcfe associated with oil production in the Eagle Ford and Niobrara operating areas.

Production taxes were $1.3 million (or 2.6% of revenues) for the three months ended September 30, 2011 as compared to $0.7 million (or 2.3% of revenues) for the three months ended September 30, 2010. The increase in production taxes is due to increased oil and gas production. Production taxes as a percentage of revenues increased from 2.3% to 2.6% due to increased oil production, which has a higher effective production tax rate as compared to natural gas production.

Ad valorem taxes increased to $1.0 million (or $0.09 per Mcfe) for the three months ended September 30, 2011 from $0.7 million ($0.09 per Mcfe) for the same period in 2010. The increase in ad valorem taxes is due to new oil and gas wells drilled in 2010.

General and administrative expense was $7.4 million during the three months ended September 30, 2011 as compared to $5.2 million during the three months ended September 30, 2010. The increase was primarily due to increased compensation costs related to an increase in the number of employees in the third quarter of 2011 as compared to the third quarter of 2010.

Depreciation, depletion and amortization ("DD&A") expense for the three months ended September 30, 2011 increased to $20.3 million (or $1.81 per Mcfe) from $10.1 million (or $1.18 per Mcfe) for the same period in 2010. The increases in DD&A and the related per Mcfe amounts were primarily due to increased production during the third quarter of 2011 as compared to the same period in 2010 and increased future development costs associated with crude oil and natural gas liquids reserves in the Eagle Ford that were added after the third quarter of 2010 and have a higher future development cost per equivalent unit than the Company's proved gas reserves.

Cash interest expense, net of amounts capitalized, increased to $6.5 million for the third quarter of 2011 compared to $2.9 million for the third quarter of 2010. The increase was primarily attributable to interest on the $400 million aggregate principal amount of our Senior Notes issued in the fourth quarter of 2010 partially offset by decreased interest attributable to the $300 million aggregate principal amount of Convertible Senior Notes repurchased in a tender offer during the fourth quarter of 2010.

An unrealized gain on derivatives of $18.4 million was recorded for the third quarter of 2011 compared to an unrealized gain on derivatives of $12.9 million for the third quarter of 2010 due to the change in fair value of our open derivative positions during those periods.

Non-cash, stock-based compensation was a benefit of $4.1 million for the three months ended September 30, 2011 as compared to an expense of $4.4 million for the same period in 2010. The benefit from stock-based compensation expense was driven by a decrease in the fair value of cash-settled stock appreciation rights due to a decrease in stock price during the third quarter of 2011, partially offset by higher stock-based compensation expense due to a higher number of restricted stock awards granted during the period.

Non-cash interest expense, net of amounts capitalized, decreased to $0.8 million for the third quarter of 2011 compared to $1.9 million for the third quarter of 2010, primarily due to decreased amortization of the discount as a result of the $300 million aggregate principal amount of our Convertible Senior Notes repurchased in a tender offer during the fourth quarter of 2010.

During the third quarter of 2011, we contributed $1.1 million in common stock to the Child Development Center at the University of Texas at Arlington ("UTA"), where we are producing natural gas from a number of wells in the Barnett Shale play.

The estimated annual effective income tax rates (which are used for purposes of computing Adjusted Net Income) as of September 30, 2011 and 2010 were 36.4% and 35.9%, respectively. The increase in the tax rate is due primarily to higher state income taxes associated with increased activity in Pennsylvania and Colorado. We expect substantially all of our income taxes to be deferred. The effective income tax rates for net income were 38.6% and 31.1% for the three months ended September 30, 2011 and 2010, respectively. The differences between these rates and our estimated annual effective income tax rates are due to true ups of prior estimates of state income taxes in both periods.

Results for the nine months ended September 30, 2011 --

  • Record production of 33.1 Bcfe, or 121,310 Mcfe/d

  • Revenue of $146.4 million, or adjusted revenue of $165.7 million, including the impact of realized hedges

  • Net Income of $30.1 million, or Adjusted Net Income of $29.7 million

  • EBITDA of $123.3 million

Production volumes during the nine months ended September 30, 2011 were a record 33.1 Bcfe, an increase of 7.0 Bcfe, or 27%, compared to production of 26.2 Bcfe during the nine months ended September 30, 2010. The increase in production for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010 was primarily due to increased production from new wells in the Barnett Shale, Eagle Ford Shale and Niobrara Formation, partially offset by normal production decline and the sale of substantially all of our non-core area Barnett Shale properties in May 2011.

Adjusted revenues were $165.7 million for the nine months ended September 30, 2011, which includes oil and gas revenues of $146.4 million and realized hedge gains of $19.3 million, compared to $126.3 million for the same period in 2010, which includes oil and gas revenues of $102.4 million and realized hedge gains of $23.9 million. The increase in adjusted revenues was primarily driven by increased production and higher oil prices partially offset by lower gas prices and lower realized hedge gains. Including the impact of realized hedges, the Company's average realized gas price decreased 15% to $3.94 per Mcfe for the first nine months of 2011 compared to $4.62 per Mcfe for the first nine months of 2010 and the average realized oil price increased 13% to $91.74 per barrel for the first nine months of 2011 compared to $81.19 per barrel for the first nine months of 2010.


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