Exploration & Production | Quarterly / Earnings Reports | First Quarter (1Q) Update

Carrizo Touts Record Oil Revenue, Strong Eagle Ford Performance in 1Q

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   |    Tuesday,May 06,2014

Carrizo Oil & Gas, Inc. has reported financial results for the first quarter of 2014 and provided an operational update.

Highlights:

• Record Oil Production of 15,022 Bbls/d, 61% above the first quarter of 2013
• Record Oil Revenue of $130.4 million, representing 83% of total revenue, and 49% above the first quarter of 2013
• Record Revenue of $157.2 million, 40% above the first quarter of 2013
• Income from continuing operations of $6.6 million, or $0.14 per diluted share, and Adjusted Net Income (as defined below) of $23.4 million, or $0.51 per diluted share
• Adjusted EBITDA (as defined below) of $114.3 million, 23% above the first quarter of 2013
• Confirms 60-acre downspacing in the Niobrara
• Borrowing base increased to $570 million from $470 million
• Raising 2014 crude oil production growth target to 54%

Due primarily to the continued strong performance from the Company's Eagle Ford Shale assets, Carrizo is increasing its 2014 oil production guidance to a range of 17,500-18,200 Bbls/d from 17,000-17,800 Bbls/d. Using the midpoints of these ranges, the Company's 2014 oil production growth guidance increases to 54% from 50%. For natural gas and NGLs, Carrizo is maintaining its 2014 guidance of 67-75 MMcfe/d. For the second quarter of 2014, Carrizo expects oil production to be 17,100-17,500 Bbls/d and natural gas and NGL production to be 71-77 MMcfe/d. A summary of Carrizo's production and cost guidance is provided in the attached tables.

S.P. "Chip" Johnson, IV, Carrizo's President and CEO, commented on the results, "This was another outstanding quarter for Carrizo as we once again delivered crude oil production growth that exceeded our forecast despite continued challenging winter weather. Our operating personnel did an outstanding job maintaining drilling and fracking activities as well as production during abnormally cold weather in Colorado, Pennsylvania, and Ohio."

"We continue to expand our deep inventory of oily drilling locations through a combination of lease acquisitions and downspacing. Since year-end, we've added approximately 5,500 net acres in the Eagle Ford Shale and 4,200 net acres in the Utica Shale. We've also confirmed downspacing to at least 60 acres in the Niobrara. This more than offsets the locations we plan to drill this year. And we continue to test further downspacing in the Niobrara and Eagle Ford Shale with results expected later this year, which has the potential to materially increase our inventory."

"Thanks to our oily production growth, our financial position continues to improve. At quarter-end, our net-debt-to-adjusted EBITDA ratio remained below 2.0x, and our borrowing base was recently increased by $100 million to $570 million. Our revolver was still undrawn at the end of April, providing us with ample liquidity to fund our development plan."

"We continue to be very pleased with the performance of our initial Utica Shale well in Guernsey County, Ohio, which ranks as one of the best condensate wells in the play. The well flowed to sales on an extended test for 113 days, and produced more than 57 MBbls of condensate, well above what our type curve predicted over the period. We plan to spud our next Utica well later this quarter."

Operational Update

Carrizo has updated its first quarter operations, which can be accessed here:

Carrizo Wrapping Up Eagle Ford Downspacing; Adds 15 Wells in 1Q

Carrizo Evaluating Midstream Solutions for Utica Production

Carrizo Testing Downspacing Concepts in the Niobrara

Carrizo Talks Midstream Issues, Infill Tests at Marcellus Acreage

Earnings and Spending Activities

Carrizo reported first quarter of 2014 income from continuing operations of $6.6 million, or $0.15 and $0.14 per basic and diluted share, respectively, as compared to income from continuing operations of $2.5 million, or $0.06 per basic and diluted share in the first quarter of 2013. The income from continuing operations for the first quarter of 2014 includes certain items typically excluded from published estimates by the investment community. Adjusted net income, which excludes the impact of these items as described in the statements of income included below, for the first quarter of 2014 was $23.4 million, or $0.52 and $0.51 per basic and diluted share, respectively, compared to $20.6 million, or $0.52 and $0.51 per basic and diluted share, respectively, in the first quarter of 2013.

For the first quarter of 2014, adjusted earnings before interest, income taxes, depreciation, and depletion and amortization, as described in the statements of income included below, was $114.3 million, an increase of 23% from the prior year quarter.

Production volumes during the first quarter of 2014 were 2,388 MBoe, or 26,533 Boe/d, roughly flat with the first quarter of 2013. The flat year-over-year production during the quarter was due to the sale of the Company's remaining oil and gas properties in the Barnett Shale on October 31, 2013. Adjusting for the sale of the Barnett Shale, production increased 48% versus the prior year quarter. Oil production during the quarter averaged 15,022 Bbls/d, while natural gas and NGL production averaged 69,044 Mcfe/d. First quarter of 2014 production exceeded the high end of Company guidance due to strong performance from the Company's Eagle Ford Shale, Utica Shale, and Marcellus Shale assets, which more than offset the impact of weather-related downtime in the Niobrara.

Drilling and completion capital expenditures for the first quarter of 2014 were $170.7 million. Approximately 75% of the first quarter drilling and completion spending was in the Eagle Ford Shale. Land and seismic expenditures during the quarter were $27.3 million. Carrizo is increasing its full-year 2014 drilling and completion capital expenditure guidance by $15.0 million to $665.0-$685.0 million. The additional capital is expected to fund increased drilling and completion activity, as well as increased spending on facilities, in the Eagle Ford Shale. Carrizo is revising its 2014 land and seismic capital expenditure guidance to $90.0 million from $75.0 million as it has been more successful than expected in acquiring additional Eagle Ford Shale and Utica Shale leasehold. Carrizo expects to allocate the majority of the land and seismic capital to acreage acquisitions in the Eagle Ford and Utica shales.

Financial Position and Liquidity

As of March 31, 2014, Carrizo had total debt outstanding of $904.4 million and cash and cash equivalents of $62.4 million. Net Debt-to-Adjusted EBITDA (based on the trailing four quarters) remained less than 2.0x for the first quarter.

Effective April 10, 2014, Carrizo's banking syndicate, led by Wells Fargo as administrative agent, agreed to increase the borrowing base under its senior credit facility to $570 million from $470 million, representing an increase of $100 million. This occurred as part of the Company's regularly scheduled borrowing base review. As of April 30, 2014, Carrizo had nothing drawn on its revolver.

Hedging Activity

Carrizo currently has hedges in place for over 70% of estimated crude oil production for the remainder of 2014 (based on the midpoint of guidance). For the balance of the year, the Company has hedged approximately 13,330 Bbls/d of crude oil at a weighted average floor price of $91.38/Bbl (comprised of 9,830 Bbls/d of swaps at an average price of $92.63/Bbl and 3,500 Bbls/d of collars at an average floor price of $87.85/Bbl).

Carrizo also has hedges in place for over 75% of estimated natural gas and NGL production for the remainder of 2014 (based on the midpoint of guidance). For the balance of the year, the Company has swaps on approximately 57,200 MMBtu/d at a weighted average price of $4.19/MMBtu and also has sold a call option on 10,000 MMBtu/d at $5.50/MMBtu. (Please refer to the attached tables for a detailed summary of the Company's derivative contracts.)