Carrizo Oil & Gas (CRZO)

[dan_s]

When our electricity was finally restored at 12:30 on Saturday, I went to work on the last of the Sweet 16 profile updates. I finished Carrizo and Cimarex today and they will be posted to the EPG website tomorrow.

Carrizo is a classic example of what happens to small-caps during a BEAR Market. Despite solid production growth (15.2% in 2016 and over 28% in 2017) the stock price gets hammered by acquisition and sales announcements. Plus, the Eagle Ford is somewhat out of favor with Wall Street these days.

Carrizo closed a big acquisition in the Delaware Basin on August 11 and they are going to sell their assets in the DJ Basin (Niobrara) and in the Marcellus/Utica to help pay for it. After the sales close late this year or early 2018, Carrizo will be a pure play on Texas (Eagle Ford and Delaware Basin), with over 2,000 horizontal development drilling locations that are very economic at today's oil, gas and NGL prices.

CRZO closed on Friday at $13.35, which is less than 3X cash flow from operations per share. First Call's CFPS estimate for 2017 ($5.23) is actually higher than mine estimate ($5.01).

First Call's estimates for 2017:
Revenues = $716 million
Earnings per share = $2.04
Cash flow per share = $5.23

CRZO is outspending their cash flow this year, which is something Wall Street does not like these days. However, it is going to book big proven reserve additions at year-end and cash flow from operations + proceeds from non-core asset sales should more than cover their 2018 capex budget.

Carrizo's production will jump from 51,019 Boepd in Q2 to an exit rate over 70,000 Boepd.

Read the profile and let us know what you think.