Drilling & Completions | Quarterly / Earnings Reports | Second Quarter (2Q) Update | Capital Markets | Drilled Uncomplete (DUC) | Capex Increase | Capital Expenditure - 2018

Carrizo Sees Monster Production Growth; Switches Capital from Permian to Eagle Ford

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   |    Wednesday,August 08,2018

Carrizo reported a monster quarter, where we saw Delaware production growth +820% year over year, where the company went from 2 Mboe/d to a whopping 19 Mboe/d.

Total company production was 57 Mboe/d (66% oil) up 12% vs last year 51mboe/d (66% oil) and up 11% sequentially from Q1 2018.

See chart below:

Budget Increase

Amid this backdrop, Carrizo said it is increasing its capital budget to $812.5 million (mid-point of guidance) a $37.5 million increase and shifting capital away from the Permian back to the Eagle ford.

"Given the relative outlook for crude oil prices in the Eagle Ford Shale and Delaware Basin over the next 18 months, Carrizo has elected to shift capital to the Eagle Ford Shale in order to take advantage of the superior returns offered from the play in the current environment. At the end of the first quarter, Carrizo was running four rigs in the Delaware Basin and two rigs in the Eagle Ford Shale. The Company moved one of its rigs to the Eagle Ford Shale during the second quarter and recently added a fourth rig to the play."

For the balance of the year, Carrizo currently plans to run an average of six rigs, with four located in the Eagle Ford Shale and two located in the Delaware Basin, and two to three completion crews. Given the faster cycle times in the Eagle Ford Shale, as well as the Company’s decision to maintain a six-rig program for the remainder of the year, Carrizo now expects to drill 123-132 gross (112-121 net) operated wells and complete 108-117 gross (93-102 net) operated wells during the year.

This compares to the Company’s estimate of 93-103 gross (82-91 net) operated wells drilled and 113-123 gross (96-105 net) operated wells completed under the prior plan. As a result of the increased drilling activity, Carrizo is increasing its 2018 drilling, completion, and infrastructure capital expenditure guidance to $800-$825 million from $750-$800 million."

This change will allow the company to increase its DUC count from previously planned 14 to 40.

Midstream

The company also said it recently signed an agreement.

"On the oil side, we recently signed a deal with a major crude purchaser who agreed to buy all of our crude oil production with no minimum volume commitments from us from September 2018 through July 2020 at Midland-based prices. This deal provides us with 100% certainty of flow for our crude oil production, while also maintaining our flexibility to shift capital between plays in order to maximize our returns."