Carrizo Oil & Gas - New Forecast

[dan_s]

After listening to this morning's conference call, I have updated my forecast model for CRZO. During the CC, the company confirmed their production guidance for Q2 and for the year, so I have a high level of confidence in the forecast. Carrizo has a solid team that has been together for many years. They provide good guidance and usually beat it. My valuation assumes that production for 2017 will be near the low end of their guidance.

My valuation is $47.00/share, compared to First Call's price target of $35.57.

On the forecast model I show First Call's estimates for EPG, CFPS and Revenue for each forecast period. Take a hard look at the RED BOX.

First Call's numbers are the average of analysts' estimates provided to Reuters. It is clear that only a few of the forecasts provided to Reuters include the impact of the big Delaware Basin acquisition. It will add 8,000 Boepd of new production when they close the deal in August. It will also add a lot more running room for the company, which justifies an even higher multiple than I am using. Some Wall Street firms will not include the impact of an acquisition until after it closes, so just keep that in mind.

My valuation model assumes WTI averages $45 for the last half of 2017 and then averages $50 in 2018. To see how commodity prices impact future earnings, cash flow and valuation of the stock, just download the spreadsheet to Excel and change the oil, gas and NGL prices at the bottom to whatever you wish. All of the forecast/valuation models on our website are macro driven and will update automatically when the assumptions at the bottom are changed.

Carrizo has ~25% of their oil production for 2H2017 hedged at $52.46/bbl.

NOTE: There is a lot of FEAR keeping investors away from the energy sector these days. Carrizo is "in transition", which increases the uncertainty. The first full quarter of results after the acquisition will be Q4 2017, so it will take awhile for the market to see the actual results of this acquisition.