Carrizo Oil & Gas (CRZO) Q4 Results - Feb 25

[dan_s]

HOUSTON--(BUSINESS WIRE)-- Carrizo Oil & Gas, Inc. (Nasdaq: CRZO) today announced the Company’s financial results for the fourth quarter and year-end 2018 and provided an operational update. Highlights include:

Fourth Quarter 2018 Highlights

Total production of 68,328 Boe/d, 9% above the fourth quarter of 2017 and 6% above the third quarter of 2018
Crude oil production of 43,040 Bbls/d, 7% above the fourth quarter of 2017 and 5% above the third quarter of 2018
Net income attributable to common shareholders of $255.1 million, or $2.75 per diluted share, and Net cash provided by operating activities of $188.3 million
Adjusted net income attributable to common shareholders of $52.1 million, or $0.56 per diluted share, and Adjusted EBITDA of $170.7 million
Q4 Results compare to my forecasts of $64.5 million net income and $174.0 million cash flow from operations.

Year-end 2018 Highlights

Proved reserves of 329.4 MMBoe, a 26% increase over year-end 2017
Standardized measure of discounted future net cash flows of $3.6 billion, and PV-10 of $4.1 billion, a 55% increase over year-end 2017
478% reserve replacement from all sources at a finding, development, and acquisition (FD&A) cost of $10.34 per Boe
Carrizo's Net Asset Value (using PV10 of just their proven reserves) is over $24/share.

Guidance and Operational Highlights

As previously announced, 2019 DC&I capital expenditure plan of $525-$575 million, which is expected to deliver double-digit production growth while achieving positive free cash flow by the third quarter of the year
Achievement of cost reductions and efficiency gains that have driven materially-lower well costs across the asset portfolio
Encouraging results from initial two Wolfcamp C tests in the Delaware Basin

[dan_s]

CRZO closed at $11.62 today.

First Call's price target is $20/share, but I sure cannot see anything to justify that valuation.

Results by year with 2019 & 2020 based on my forecast model:
2017A: $1.07 EPS and $5.46 operating cash flow per share
2018A: $4.41 EPS and $6.93 operating cash flow per share
2019E: $2.47 EPS and $6.66 operating cash flow per share (based on an average realized oil price of $54.25/bbl. Keep in mind that Eagle Ford oil sells at a premium to WTI)
2020E: $3.77 EPS and $8.00 operating cash flow per share (based on an average realized oil price of $60.00/bbl.)

My valuation increases by $2.75 to $36.00/share, which is just 5X 2018 to 2020 CFPS.

My forecast/valuation model will be posted to the EPG website this evening.

[jb2257]

I am really scratching my head about the reaction of the stock to those great earnings. Either everyone thinks that these companies have no future or will be going under. Yesterday there was a negative story entitled "Frackers endure reckoning " in the Wall Street Journal about all the losses and the debt of the shale oil companies. Also it pointed out that they have underperformed in the last decade and they are just as indebted as they were three years ago. I guess this is why I am losing so much money trying to invest in this sector. Any comments on that report?

[bobs]

I echo your concerns and after listening to the reasonably positive CRZO cc and the stock tanking even more despite oil going up nothing of this seems to makes sense.

[dave_n]

I don't think this sentiment is going to change until M&A picks up. I personally wish some of these companies would start M&A instead of buying back stock. CRZO would make a great target.

[bobs]

As an alternative to MandA activity I guess MBOs/private equity take overs in the energy business dont happen much since in this low interest environment the returns seem outstanding unless oil prices forever tank.

[dan_s]

The oil & gas industry will remain out of favor with The Wall Street Gang until it is not. There is a "myth" that these companies are not making money. Someone started the concept that capital expenditure are an expense. Debt is only a problem if it is out of wacke with the value of there assets. Capex that increases the value of assets is not an expense.

Carrizo's actual results:
2017 EPS of $1.07
2018 EPS of $4.41
My forecast 2019 EPS is $2.47 (based on much lower oil price than we have today)

Part of the blame is on the terrible GAAP and SEC accounting rules for this industry, like mark-to-market adjustments on hedges that totally confuses non-industry investors.