Carrizo Oil & Gas Update - Feb 6

[dan_s]

Carrizo Oil & Gas Announces 2019 Capital Program and Provides an Update on Fourth Quarter Operations

HOUSTON--(BUSINESS WIRE)-- Carrizo Oil & Gas, Inc. (Nasdaq: CRZO) today announced its initial 2019 capital program and production guidance. The 2019 plan is designed to facilitate long-term, disciplined growth within cash flow in a mid-$50s NYMEX oil price environment. Highlights of the 2019 plan include:

Targeting 2019 DC&I capital spending of $525-$575 million, a reduction of approximately 35% vs. 2018
Reducing operated activity to one rig in the Eagle Ford Shale and two to three rigs in the Delaware Basin
Continuing to test additional zones and multi-layer, cube development in the Delaware Basin
Forecasting 2019 production of 66,800-67,800 Boe/d, equivalent to annual growth of approximately 11%
Achieving positive free cash flow in the third quarter of the year
Providing longer-term momentum by delivering production growth from the fourth quarter of 2018 to the fourth quarter of 2019
S.P. “Chip” Johnson, IV, Carrizo’s President and CEO, commented, “Our 2019 capital plan provides us with a prudent path forward in a $50 to $60 per barrel world. It allows us to continue delivering profitable, double-digit production growth while also achieving a free-cash-flow-positive inflection point in the third quarter of the year and maintaining momentum into 2020. Additionally, our 2019 plan allows us to balance these objectives with the continued testing of additional layers and development concepts in the Delaware Basin, where we have only scratched the surface of our resource potential.

“Our dual-basin portfolio continues to provide us with significant flexibility. Our pivot to the Eagle Ford Shale during 2018 paid off as its exposure to premium, seaborne crude oil markets insulated us from the regional price differential blowouts seen in the Permian Basin. This allowed us to maintain some of the strongest margins in the industry. With price differentials currently improving in the Permian Basin due to the imminent addition of pipeline capacity out of the region, we are planning to begin shifting capital back to the Delaware Basin this year.”

2019 Capital Program and Guidance

For 2019, Carrizo is providing initial drilling, completion, and infrastructure (DC&I) capital expenditure guidance of $525-$575 million. Carrizo currently plans to reduce its rig count in the Eagle Ford Shale from four to one by the end of the first quarter. The Company currently expects to maintain two rigs in the Delaware Basin during the first half of the year, and add a third rig to the play in the second half of the year. Based on this level of activity, the Company expects to drill 75-85 gross (65-75 net) operated wells and complete 95-105 gross (85-95 net) operated wells during the year. Carrizo also expects to participate in several net non-operated wells during the year.

Based on this program, Carrizo is providing initial 2019 production guidance of 66,800-67,800 Boe/d. Crude oil production is expected to account for approximately 63% of the Company's production for the year, while total liquids are expected to account for approximately 80%. This 2019 production guidance range equates to annual growth of approximately 11% at the midpoint.

During the fourth quarter of 2018, the Company took an extended frac holiday while it drilled large multipad projects in both the Eagle Ford Shale (36 total wells) and Permian Basin (6 total wells). While this is expected to result in a sequential decline in the Company’s production during the first quarter of 2019, Carrizo expects to see a material increase in its production as these wells are completed and turned to sales over the first and second quarters of the year. The Company currently expects its 2019 activity plan to maintain this momentum in the second half of the year, resulting in production in the fourth quarter of 2019 exceeding production in the fourth quarter of 2018.

Fourth Quarter 2018 Update

Preliminary production volumes during the fourth quarter of 2018 were 68,328 Boe/d, an increase of 6% versus the prior quarter. Crude oil production during the fourth quarter of 2018 averaged 43,040 Bbls/d, while natural gas and NGL production were 83,067 Mcf/d and 11,443 Bbls/d, respectively.

Preliminary drilling, completion, and infrastructure capital expenditures for the fourth quarter of 2018 were $175.4 million, above the Company’s initial expectations as it elected to complete an additional pad in the Eagle Ford Shale late in the quarter. This allowed Carrizo to take advantage of the attractive discounts offered by service providers resulting from the industry-wide slowdown in activity. Due to timing, the additional pad did not add any material production to the fourth quarter.

[bobs]

Does this impact the CF and EPS estimates for Q4 and 2019 if oil prices stay in the mid 50s??

[dan_s]

Q4 results should be approximately $0.70 Adjusted Earnings per share and $1.90 operating cash flow per share.

2019 EPS should be approximately $2.50 per share with operating cash flow around $7.00, assuming a realized oil price of $54.00/bbl. < "Realize" commodity price include regional differentials and settlements on hedges.

My valuation of CRZO will go up because they are now going to generate free cash flow from operations in 2019.