Carrizo Oil & Gas, Inc. Announces Second Quarter Results and Increases 2016 Production Guidance

HOUSTON, Aug. 04, 2016 (GLOBE NEWSWIRE) --  Carrizo Oil & Gas, Inc. (Nasdaq:CRZO) today announced the Company’s financial results for the second quarter of 2016 and provided an operational update, which includes the following highlights:

•  Oil Production of 23,942 Bbls/d, 7% above the second quarter of 2015

• Total Production of 41,533 Boe/d, 15% above the second quarter of 2015

• Loss From Continuing Operations of $262.1 million, or $4.46 per diluted share, and Adjusted Net Income of $17.1 million, or $0.29 per diluted share

• Adjusted EBITDA of $97.6 million

• Increasing de-risked Eagle Ford Shale drilling inventory to more than 1,000 net locations

• Increasing 2016 crude oil production growth target to 10%

Carrizo reported a second quarter of 2016 loss from continuing operations of $262.1 million, or $4.46 per basic and diluted share compared to a loss from continuing operations of $47.0 million, or $0.92 per basic and diluted share in the second quarter of 2015. The loss from continuing operations for the second quarter of 2016 includes certain items typically excluded from published estimates by the investment community, including the impairment of proved oil and gas properties recognized this quarter. Adjusted net income, which excludes the impact of these items as described in the non-GAAP reconciliation tables included below, for the second quarter of 2016 was $17.1 million, or $0.29 per basic and diluted share compared to $20.4 million, or $0.40 and $0.39 per basic and diluted share, respectively, in the second quarter of 2015.

For the second quarter of 2016, Adjusted EBITDA was $97.6 million, a decrease of 23% from the prior year quarter as the impact of lower commodity prices more than offset the impact of higher production volumes. The definition of Adjusted EBITDA and the reconciliation to loss from continuing operations are presented in the non-GAAP reconciliation tables included below.

Production volumes during the second quarter of 2016 were 3,780 MBoe, or 41,533 Boe/d, an increase of 15% versus the second quarter of 2015. The year-over-year production growth was driven by strong results from the Company’s Eagle Ford Shale assets. Oil production during the second quarter of 2016 averaged 23,942 Bbls/d, an increase of 7% versus the second quarter of 2015; natural gas and NGL production averaged 74,248 Mcf/d and 5,217 Bbls/d, respectively, during the second quarter of 2016. Second quarter of 2016 production exceeded the high end of Company guidance due primarily to stronger-than-expected gas and NGL production from the Company’s Eagle Ford Shale assets and a lower-than-planned level of voluntary production curtailments at the Company's Marcellus Shale assets.

Drilling and completion capital expenditures for the second quarter of 2016 were $103.3 million. Approximately 80% of the second quarter drilling and completion spending was in the Eagle Ford Shale, with the balance weighted towards the Delaware Basin. Land and seismic expenditures during the quarter were $6.4 million. Given the improvement in the commodity price outlook since the beginning of the year, Carrizo has elected to eliminate the drilling and completion holidays it had originally scheduled for a portion of the fourth quarter of 2016. Additionally, the Company has elected to temporarily add a second frac crew in the Eagle Ford Shale during the third quarter in order to simultaneously frac pads located in close proximity of each other, which should result in a more efficient development of the area. Primarily as a result of these changes plus an increase in forecast non-operated activity, Carrizo is increasing its 2016 drilling and completion capital expenditure guidance to $370-$380 million from $270-$290 million. The majority of the incremental activity is expected to occur in the fourth quarter, and is not expected to have a material impact on 2016 production. The Company is maintaining its land and seismic capital expenditure guidance of $20 million for the year.

Carrizo is increasing its 2016 oil production guidance to 25,150-25,400 Bbls/d from 24,800-25,300 Bbls/d previously. Using the midpoint of this range, the Company’s 2016 oil production growth guidance is 10%. For natural gas and NGLs, Carrizo is increasing its 2016 guidance to 64-66 MMcf/d and 4,600-4,700 Bbls/d, respectively, from 54-60 MMcf/d and 4,000-4,200 Bbls/d. For the third quarter of 2016, Carrizo expects oil production to be 24,000-24,400 Bbls/d, and natural gas and NGL production to be 56-60 MMcf/d and 4,100-4,300 Bbls/d, respectively. A full summary of Carrizo’s guidance is provided in the attached tables.

S.P. “Chip” Johnson, IV, Carrizo’s President and CEO, commented on the results, “We delivered another strong quarter operationally, with production again exceeding our forecast and operating expenses coming in below our forecast. Financially, we remain in a strong position as we have an excellent hedge book through the middle of next year and ample liquidity available on our revolver.

“Despite the recent decline in crude oil prices, we remain cautiously optimistic on the outlook for crude oil in 2017 given the improving supply/demand fundamentals. And with the strong economics we generate on our world-class Eagle Ford Shale asset even at current strip prices, we have elected to remove the drilling and completion holidays we had originally planned to take in the fourth quarter. While this does not have a material impact on 2016 production, it positions the Company to be able to deliver double-digit crude oil production growth in 2017 while spending within cash flow in a $55/Bbl WTI environment.

“Throughout the commodity price downturn, we have sought to maintain both our financial as well as our operational flexibility in order to be able to respond quickly to changing commodity prices. The decision to increase our activity level this year does not reduce this flexibility as we have not entered into any additional long-term contracts as a result of the planned activity increase. Thus, if commodity prices decline materially from current levels, we could easily remove most of the added capital from the 2016 plan.

“Our inventory of de-risked drilling locations in the Eagle Ford Shale continues to expand as a result of our downspacing initiatives. Based on results to date, we are increasing our estimate of future de-risked drilling locations in the play to more than 1,000 net locations excluding stagger-stack potential, or more than 15 years of inventory at our current drilling pace. Over time we expect to continue to expand our drilling inventory on this world-class asset, which should fuel strong production growth for years to come.

“We continued to test our Delaware Basin acreage during the quarter and remain pleased with our recent results. We elected to gather additional production history on the Liberator State 1H well, which achieved a 30-day rate of approximately 1,400 Boe/d on a restricted choke after being brought back online. And in late July, we brought online our most recent well in the play, the Corsair State 3H. The well is still cleaning up, but the early results are encouraging.”

Operational Update

In the Eagle Ford Shale, Carrizo drilled 19 gross (18.3 net) operated wells during the second quarter and completed 19 gross (18.0 net) wells. Crude oil production from the play was approximately 21,200 Bbls/d for the quarter, down from the prior quarter as production was impacted by significant downtime associated with planned shut-ins for offsetting completion activity. The majority of the planned downtime occurred at Brown Trust and RPG, two of the Company's oilier areas within its Eagle Ford Shale position. At the end of the quarter, Carrizo had 33 gross (32.1 net) operated Eagle Ford wells waiting on completion, equating to net crude oil production potential of more than 12,000 Bbls/d. The Company is operating two rigs in the Eagle Ford and currently expects to drill approximately 67 gross (63 net) operated wells and complete 73 gross (68 net) operated wells in the play during 2016.

In the Lower Eagle Ford, Carrizo has been developing its acreage on 330 ft. spacing for more than two years, and has now tested a significant portion of its position. Based on the results to date, the Company believes that the majority of the acreage tested warrants development at this spacing.

The Company currently has three stagger stack pilots with more than six months of production history. The pilots are testing effective lateral spacing ranging from 165 ft. to 280 ft. On average, the pilot wells recorded a 30-day oil rate of approximately 500 Bbls/d on a restricted choke. Average cumulative production after 180 days was approximately 90 MBo and 70 MBo for the pilots at Brown Trust and Irvin Ranch, respectively, which is in line with the non-staggered wells drilled on the pilot pads. The Company currently has three additional stagger-stack pilots with less than six months of production history, and plans to test more stagger-stack pilots on its core acreage position later this year.

As a result of the inventory expansion initiatives to date, Carrizo is increasing its de-risked drilling inventory in the Lower Eagle Ford Shale by approximately 85 net locations to more than 1,000 net locations, equating to more than 15 years of inventory at its current drilling pace. This figure still does not include any potential from stagger-stack development given the limited data set the Company has at this time. Carrizo plans to continue testing multiple spacing initiatives across its acreage position in order to further expand its inventory of highly economical, de-risked drilling locations, and expects to provide updates once sufficient production history is available.

In the Delaware Basin, Carrizo completed its Corsair State 3H well in late July. The well was drilled with an approximate 8,400 ft. lateral and completed with 37 frac stages. The well was recently brought online, and the Company expects to provide an update once the well has cleaned-up. Carrizo operates the Corsair State 3H with a 100% working interest. The Company currently expects to spud one additional Delaware Basin well during 2016. As a result, Carrizo now plans to drill three operated wells and complete three operated wells in the Delaware Basin during 2016.

Additionally, the Company elected to further test its Liberator State 1H well during the quarter. Upon being brought back online, the well achieved a 30-day rate of approximately 1,400 Boe/d (35% oil, 40% NGL, 25% gas) on a restricted choke. Carrizo currently expects the well to be flowing to sales later this quarter once infrastructure has been completed. Carrizo operates the Liberator State 1H with a 100% working interest.

In the Niobrara Formation, Carrizo did not drill or complete any operated wells during the second quarter. Crude oil production from the Niobrara was approximately 2,000 Bbls/d for the quarter, down from the prior quarter due to the lack of activity. For 2016, Carrizo has allocated a small amount of capital to the Niobrara for the completion of 9 gross (5.2 net) drilled-but-uncompleted wells in addition to continued non-operated activity.

In Appalachia, which encompasses the Company's Utica Shale and Marcellus Shale positions, Carrizo did not drill or complete any operated wells during the second quarter. Oil and condensate production from the Utica during the quarter was approximately 520 Bbls/d, up from approximately 465 Bbls/d in the prior quarter. In the dry gas window of the Marcellus, the Company's production was 39.1 MMcf/d, up from 36.2 MMcf/d in the prior quarter as the Company decreased its voluntary production curtailments due to stronger-than-expected local market prices. Carrizo expects to continue to vary its Marcellus production for the balance of 2016 based on local market pricing. If pricing deteriorates materially from current levels, the Company would expect to increase its level of voluntary curtailments. However, if regional pricing were to materially improve, the Company could significantly ramp up its Marcellus production. Carrizo does not currently plan to drill or complete any operated wells in Appalachia during 2016.

Financial Position and Liquidity

As of June 30, 2016, Carrizo had total debt outstanding of $1,315.4 million and cash and cash equivalents of $2.2 million. Total Secured Debt to Adjusted EBITDA, calculated in accordance with the covenants on the Company's revolving credit facility, was 0.2x for the second quarter while Net Debt to Adjusted EBITDA, calculated using the same methodology, was 3.2x. As of July 29, 2016, Carrizo had $60.0 million drawn on the facility.

Hedging Activity

Carrizo currently has hedges in place for approximately 55% of estimated crude oil production for the balance of 2016 (based on the midpoint of guidance). For the remainder of the year, the Company has hedges covering 13,750 Bbls/d of crude oil (comprised of 9,750 Bbls/d of swaps at an average price of $60.03/Bbl and 4,000 Bbls/d of collars at a weighted average floor price of $50.00/Bbl and a weighted average ceiling price of $76.50/Bbl). Additionally, Carrizo will receive $14.4 million of cash flows for the remainder of 2016 relating to prior commodity derivative transactions.

For the first half of 2017, Carrizo has swaps covering 12,000 Bbls/d of crude oil at an average fixed price of $50.13/Bbl. Additionally, Carrizo will receive $1.8 million of cash flows during the first half of 2017 relating to prior commodity derivative transactions. (Please refer to the attached tables for a detailed summary of the Company’s derivative contracts.)

Conference Call Details

The Company will hold a conference call to discuss 2016 second quarter financial results on Thursday, August 4, 2016 at 10:00 AM Central Daylight Time. To participate in the call, please dial (800) 931-1360 (U.S. & Canada) or +1 (212) 231-2935 (Intl.) ten minutes before the call is scheduled to begin. A replay of the call will be available through Thursday, August 11, 2016 at 12:00 PM Central Daylight Time at (800) 633-8284 (U.S. & Canada) or +1 (402) 977-9140 (Intl.). The reservation number for the replay is 21815292 for U.S., Canadian, and International callers.

A simultaneous webcast of the call may be accessed over the internet by visiting our website at http://www.carrizo.com, clicking on “Upcoming Events”, and then clicking on the “Second Quarter 2016 Earnings Call” link. To listen, please go to the website in time to register and install any necessary software. The webcast will be archived for replay on the Carrizo website for 7 days.

Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, and production of oil and gas from resource plays located in the United States. Our current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale in South Texas, the Delaware Basin in West Texas, the Niobrara Formation in Colorado, the Utica Shale in Ohio, and the Marcellus Shale in Pennsylvania.

Statements in this release that are not historical facts, including but not limited to those related to capital requirements, capital expenditure and other spending plans, economical basis of wells or inventory, rig program, effect of transactions offsetting hedge positions, production, average well returns, acquisitions, effects of transactions, targeted ratios and other metrics, the ability to acquire additional acreage, midstream infrastructure availability and capacity, timing, levels of and potential production, downspacing, crude oil production potential and growth, oil and gas prices, drilling and completion activities, drilling inventory, including timing thereof, resource potential, well costs, breakeven prices, production mix, development plans, growth, midstream matters, use of proceeds, hedging activity, the ability to maintain a sound financial position, 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, expected income tax rates 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 assumptions regarding well costs, estimated recoveries, pricing and other factors affecting average well returns, results of wells and testing, failure of actual production to meet expectations, performance of rig operators, spacing test results, availability of gathering systems, costs of oilfield services, actions by governmental authorities, joint venture partners, industry partners, lenders and other third parties, actions by purchasers or sellers of properties, satisfaction of closing conditions, integration and effects of acquisitions, market and other conditions, availability of well connects, capital needs and uses, commodity price changes, effects of the global economy on exploration activity, results of and dependence on exploratory drilling activities, operating risks, right-of-way and other land issues, availability of capital and equipment, weather, and other risks described in the Company’s Form 10-K for the year ended December 31, 2015 and its other filings with the U.S. Securities and Exchange Commission. There can be no assurance any transaction described in this press release will occur on the terms or timing described, or at all.

(Financial Highlights to Follow)

Source: Carrizo Oil & Gas, Inc

Contact:        
Jeffrey P. Hayden, CFA, VP - Investor Relations
(713) 328-1044              
Kim Pinyopusarerk, Manager - Investor Relations
(713) 358-6430