Carrizo Oil & Gas (CRZO) Update - May 16

[dan_s]

This is interesting .... There are rumors that CRZO and SM are discussing a possible merger. Just rumors, but stuff like the note below makes it more "believable".

Activist investor Lion Point Capital has built a position in Carrizo Oil & Gas Inc. and wants the driller to explore a sale or merger with another Permian explorer to gain scale.

The New York-based hedge fund has an economic exposure to about 6% of Carrizo and believes the company is undervalued.

On May 6, 2019, Carrizo provided a statement in response to the Schedule 13D filed by Lion Point Capital. In its statement, Carrizo welcomed regular and thoughtful engagement with its shareholders and seriously considers all suggestions that may enhance shareholder value. While the Company has a history of robust shareholder communications, Carrizo does not comment on specific discussions with shareholders.

Carrizo’s Board and management team are focused on creating shareholder value by executing on the Company’s strategy of driving free cash flow by generating prudent, high-return production growth and reducing leverage. While the Company believes that its significant drilling inventory in two of the highest-return plays in North America positions it to deliver on these goals in the current pricing environment, its Board and management team will continue to evaluate any and all opportunities, including transactions with other companies, that could generate superior returns for shareholders.

[drewsgpa]

Just received new profile on Carrizo with fair value estimate of $30.00.
On May 8 you advised on forum that post Q1 earnings announcement you were raising fair value estimate to $37.50.
What has changed your mind on valuation in only nine calendar days??
Tom

[dan_s]

I just lowered the multiple that I am using to value it. Carrizo for some reason never gets the love it deserves. They need to get out more to tell their story. I have begged them to host a luncheon for us in Houston, but they at tighter than tree bark when it comes to spending money on IR. Read carefully what I they say about "The Six" project in the Delaware Basin.

Since CRZO is trading around $13/share today, I think my $30/share valuation makes it clear how bullish I am on the stock. IMO it is a "Screaming Buy" up to $20.

I do think the likelihood of a merger with SM is high.

[bobs]

My concern is that a merger of SM and CRZO wont get Wall Street excited since both appear to be not favored despite their prospects (particularly CRZO.

[dan_s]

It is difficult to figure out what gets the Wall Street Gang excited these days, but CRZO + SM will create a company with close to 200,000 Boepd and lots of running room. SM already has a lot of debt, so it will probably be a stock for stock merger if it happens. It may just be a rumor.