HOUSTON, TX--(Marketwire -02/21/12)- Carrizo Oil & Gas, Inc. (NASDAQ: CRZO - News) today announced 2011 key operating results including production and estimated year-end reserves, and provided guidance for anticipated full year 2012 capital expenditures and production expectations.
Year-end 2011 estimated proved reserves, as determined by the Company's third-party engineers, grew by 11% year-on-year to a record 936 Bcfe despite the effect of 144 Bcfe of property sales. The proved reserves consist of 728 Bcf of natural gas, a 9% increase over 2010 levels, 30.5 MMbbls of oil and condensate, a 92% increase over 2010, and 4.1 MMbbls of NGLs, a 67% decrease from 2010 levels. Adjusting for the sale of properties with 144 Bcfe of proved reserves during 2011, the estimated reserve growth was 28%.
- Eagle Ford Shale reserves increased 90% from 15 MMboe at year-end 2010 to 28.5 MMboe at year-end 2011
- 49% of total estimated reserves are proved developed
At year-end 2011, the estimated total pre-tax proved value of these reserves, using a present value discount rate of 10% and SEC price assumptions, was $1.45 billion, a 44% increase over Carrizo's reserve value at the end of 2010. Oil and condensate represented 53% of the total reserve value compared to 11% at the end of 2010.
The following table provides details about the distribution of the Company's proved reserves.
Proved Reserves Total Oil NGLs Natural Gas
(Bcfe) (Mbbls) (Mbbls) (MMcf)
Barnett Shale 658.4 18 736 653,924
Eagle Ford Shale 170.9 21,378 3,049 24,380
North Sea 37.5 5,437 - 4,838
Marcellus Shale 37.0 - - 37,005
Gulf Coast/Camp Hill 25.8 2,974 183 6,842
Niobrara Formation 6 731 153 696
Total 935.6 30,538 4,121 727,685
The estimation of these proved reserves was based on a twelve-month realized average oil price of $95.28 per barrel, $44.90 per barrel for NGLs, and a natural gas price of $3.24 per thousand cubic feet. These prices were 28.1% higher, 27.6% higher, and 7.4% lower than the prices used at the end of 2010 for oil, NGLs, and natural gas, respectively.
Production and Reserve Replacement
Carrizo successfully replaced 311% (the "Reserve Replacement Ratio") of its estimated 2011 record production of 45.1 Bcfe. Adjusted for asset sales of 144 Bcfe during the year, Carrizo's reserve replacement was 631%. Estimated full year 2011 production included:
- 35.7 Bcfe from the Barnett Shale, 12% above 2010
- 643,703 Boe (or 3.9 Bcfe) from the Eagle Ford Shale, 1,525% above 2010
Estimated fourth quarter 2011 production of 11.9 Bcfe, 12% above Q4 2010, consisted of
- 10.2 Bcfe of natural gas and NGLs or 111.1 MMcfe/day, unchanged from Q4 2010
- 286,527 Bbls of oil and condensate or 3,114 Bbls/day, 300% above Q4 2010 and 28% above Q3 2011.
The Company's year-end 2011 production exit rate is estimated to have been 171.7 MMcfe/day, consisting of:
- 129.8 MMcf/day of natural gas and NGLs, 3.8% above the year-end 2010 gas exit rate
- 6,344 Bbls/day of oil, 322.4% above the year-end 2010 oil exit rate
2012 Capital Spending Program and Production Guidance
Carrizo expects to spend approximately $440 million in 2012 for domestic drilling and completion activities. The 2012 operations expenditures plan is expected to be allocated as follows (in $ millions):
Asset Location 2012 Capital Allocation
Eagle Ford Shale $320
Marcellus Shale $62
Niobrara Formation $43
Barnett Shale $15
At this level of spending and based on well performance encountered to date, Carrizo expects domestic 2012 production to range from 57 Bcfe to 60 Bcfe, an increase of 30% from the year 2011 at the midpoint of the range. This forecast includes an estimate of oil production ranging from 2.7 to 3.0 million barrels, an increase of 256% over 2011 at the midpoint of the range. Based on average 2012 crude oil NYMEX futures prices, we expect this range of oil production to generate revenues ranging from $290 million to $320 million, an increase of 280%-320% from the prior year annual crude oil revenues of $75.5 million. These revenue estimates were generated using a NYMEX strip price average for March through December 2012 of $104 per barrel and the actual settlement prices for January and February 2012. A positive $5 per barrel differential to NYMEX for Eagle Ford production and a negative $7 per barrel differential to NYMEX for Niobrara production were applied.
Carrizo owns a 15% non-operated interest in the U.K. North Sea Huntington Development Project, from which first oil production is currently estimated by the project joint venture to occur in October 2012. Due to Carrizo's lack of operations control, the production contribution from the Huntington Field project, anticipated to be approximately 4,500 Boe/day net to Carrizo's interest, has been excluded from 2012 guidance. We believe that the available credit line under the Company's dedicated U.K. bank facility will be sufficient to fund the remaining capital required from Carrizo to bring the Huntington Field project on production.
"Our 2012 spending will focus heavily on oil with 83% of our capital directed toward oil drilling," commented Carrizo CEO S.P. "Chip" Johnson IV. "We anticipate our investment spending will be funded through cash flow, planned asset sales, a potential JV in the Niobrara, and borrowing on our revolving credit facility. We expect to build on our 2011 exit rate throughout the year and believe we may reach a net oil production rate higher than 9,000 Bbls/day before the end of the year, before any contribution from the Huntington Field project. Production from the fourth quarter of 2011 was negatively impacted by delays in bringing multi-well drilling pads on production in the Eagle Ford. These delays were associated with availability of coiled-tubing drilling services and mechanical issues affecting ancillary well site equipment. The conditions causing these delays have been resolved and performance of our new wells in both the Eagle Ford and Niobrara continue to meet or exceed our expectations. We expect our first quarter oil production to average from 5,500 Bbls/day to 5,900 Bbls/day and for natural gas production to average from 108 MMcf/day to 112 MMcf/day. This would be a sequential quarterly increase of approximately 83% for oil production at the midpoint of the range. We are protected from much of the impact of current low natural gas prices by the 18.9 Bcf of gas we have hedged for 2012. This includes 11.4 Bcf of fixed price gas swaps with a weighted average floor price of $5.43 and 7.6 Bcf of gas collars at prices well above the current strip. Our 2012 capital plan is flexible and may be adjusted to correspond with significant changes in commodity prices. We are very excited by our overall production growth outlook and our even faster expected growth in revenues from oil sales.
"After an internal review of our likely avenue to the full development of our current asset portfolio, we believe the Company is at the cusp of achieving equilibrium between the cash flow generated from production and the capital required to pursue an efficient drilling program that results in long-term organic production growth. We believe the first evidence of this balance between cash flow and investment will be apparent as early as the first quarter of 2013."
During 2011 Carrizo brought 20 gross (15.5 net) wells on production in the Eagle Ford and 8 gross (6.0 net) wells on production in the Niobrara. The Company is temporarily operating four gross rigs in the Eagle Ford and plans to return the rig count to three in April. Ten wells are drilled waiting on completion in the Eagle Ford with a 2 well pad being completed. In the Niobrara, the Company plans to run one gross rig for the entire year. Ten gross wells (7.5 net) are currently producing. The next two wells to be completed in the Niobrara will test the feasibility of reducing development spacing to 160 acres from the current 320 acre spacing. If successful, the tighter well spacing will have a material effect on the resource potential of the Company's Niobrara leasehold which currently stands at over 58,000 acres. Slightly over 7 net wells in the Company's Barnett Shale backlog of previously drilled wells remain to be completed in 2012. It is expected that these wells will be completed and brought on production in the first quarter of this year. The pace of development drilling activity in the Marcellus Shale is planned to slow in response to low gas prices to a level sufficient to hold the Company's leases. The Company expects to drill in northeast PA with the two current rigs until April when one rig will be released. In addition to the northeast PA development drilling, the Company expects to drill and complete 4 gross evaluation wells in central PA in the first half of the year. In Susquehanna County, the Company currently has 2 gross wells producing, 3 gross wells that are shut in to allow the completion of an adjacent pad, and 8 gross wells (located on 2 pads) that are undergoing completion. All 13 wells are expected to be on production in March.
Conference Call Reminder
Carrizo will release is financial results for the fourth quarter and full year 2011 before the opening of the market on February 28, 2011. Following the release, the Company will host an earnings review conference call at 10:00 a.m. CST on the 28th. The conference call details are as follows:
Date & Time: Tuesday, February 28 at 10:00 a.m. CST
Dial-In Number: (800) 707 - 9231 (U.S. & Canada)
+1 (303) 223 - 2683 (Intl./Local)
Telephone Replay Number: (800) 633 - 8284 (U.S. & Canada)
+1 (402) 977 - 9140 (Intl./Local)
Enter Replay Reservation #: 21579534 for U.S., Canadian and International callers.
The replay will be available through Tuesday, March 6, 2012 at 11:59 AM CST.
A simultaneous webcast of the call may be accessed over the internet at http://www.investorcalendar.com/IC/CEPage.asp?ID=167442 or by visiting our website at http://www.crzo.net clicking on "Investor Relations" and then clicking on "2011 Fourth Quarter Conference Call Webcast." To listen, please go to either website in time to register and install any necessary software. The webcast will be archived for replay on the Carrizo website for 15 days.
About the Company
Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, and production of oil and natural gas in the United States and United Kingdom. Our current operations are principally focused in proven producing oil and gas plays primarily in the Eagle Ford Shale in South Texas, the Niobrara Formation in Colorado, the Barnett Shale in North Texas, the Marcellus Shale in Pennsylvania, New York and West Virginia, the Utica Shale in Ohio and Pennsylvania, and the U.K. North Sea where our Huntington Field project is currently under development.
Statements in this news release, including but not limited to those relating to reserves, timing and levels of production, reserve replacement, development and capital spending plans, guidance, funding sources, 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, timing of completion and drilling of wells, location and manner of drilling, 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, regulatory changes, permitting, commodity price changes, effects of the global financial crisis on exploration activity, dependence on exploratory drilling activities, operating risks, land issues, availability of capital and equipment, actions by governmental authorities, industry partners and other third parties, weather and other risks described in the Company's Form 10-K for the year ended December 31, 2010 and the Company's most recent Form 10-Qs, and its other filings with the Securities and Exchange Commission.
Note Regarding the Reserve Replacement Ratio
Carrizo uses the reserve replacement ratio as an indicator of its 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. The ratio does not distinguish between changes in reserve quantities that are producing and those that will require additional time and capital to begin producing. 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 production replacement ratio for 2010, 2009 and 2008 was 752%, 400%, and 705% respectively.
- Barnett Shale
Carrizo Oil & Gas, Inc.
Vice President of Investor Relations
Paul F. Boling
Chief Financial Officer