HOUSTON, Sept. 05, 2017 (GLOBE NEWSWIRE) -- Carrizo Oil & Gas, Inc. (Nasdaq:CRZO) today provided an update on its operations following Hurricane Harvey as well as announced an agreement to sell its assets in the Utica Shale.
Operational Update Following Hurricane Harvey
Carrizo's producing assets and facilities in the Eagle Ford Shale sustained no damage as a result of Hurricane Harvey. In preparation for the storm, the Company suspended its drilling and completions operations in the play, but crews were able to return to the field last week, and all of the Company's operated Eagle Ford rigs and frac crews have resumed operations. As a result of downtime at third party midstream facilities and Gulf Coast refineries, sales volumes were temporarily reduced. The Company was able to secure some storage capacity, which has partially mitigated the impact on its production. Many of the third party facilities have restarted and resumed taking crude oil and natural gas, and Carrizo expects to be able to ramp back to nearly full sales capacity in the play this week. The Company plans to update its production guidance once more detailed information is available
Carrizo Oil & Gas: Update on impact of Harvey
Carrizo Oil & Gas: Update on impact of Harvey
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Carrizo Oil & Gas: Update on impact of Harvey
Utica Shale Divestiture
On August 31, 2017, Carrizo entered into an agreement to sell substantially all of its assets in the Utica Shale, located primarily in Guernsey County, OH, for $62 million in cash, subject to customary closing conditions. Additionally, Carrizo could receive contingent payments of up to $15 million in aggregate based on average annual WTI prices exceeding certain thresholds over the next three years. The effective date of the transaction is April 1, 2017, and the transaction is currently expected to close by October 31, 2017.
S.P. "Chip" Johnson, IV, Carrizo's President and CEO, commented, "While we cannot yet fully quantify the impact of Hurricane Harvey given potential damage to third party midstream and refining assets along the Gulf Coast, we are pleased to report that our employees are safe and our assets were not damaged. I'd like to commend our staff for their effort and dedication leading up to the storm as well as in the days following it. As a result, our team was able to return to drilling and completion operations with limited downtime as well as finalize the sale of our Utica Shale package while also dealing with the personal aftermath of this historic storm. As a Houston-based company, our thoughts continue to be with our employees as well as our neighbors and the many other Texans who were impacted by Hurricane Harvey and are dealing with very difficult conditions."
Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, and production of oil and gas from resource plays located in the United States. Our current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale in South Texas, the Delaware Basin in West Texas, the DJ Basin in Colorado, and the Marcellus Shale in Pennsylvania.
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Note that the "Closing Date" is when oil & gas sales revenues transfer to the Buyer. So, this sale will not impact my forecast sales volumes or revenues for Q3.
On August 31, 2017, Carrizo entered into an agreement to sell substantially all of its assets in the Utica Shale, located primarily in Guernsey County, OH, for $62 million in cash, subject to customary closing conditions. Additionally, Carrizo could receive contingent payments of up to $15 million in aggregate based on average annual WTI prices exceeding certain thresholds over the next three years. The effective date of the transaction is April 1, 2017, and the transaction is currently expected to close by October 31, 2017.
S.P. "Chip" Johnson, IV, Carrizo's President and CEO, commented, "While we cannot yet fully quantify the impact of Hurricane Harvey given potential damage to third party midstream and refining assets along the Gulf Coast, we are pleased to report that our employees are safe and our assets were not damaged. I'd like to commend our staff for their effort and dedication leading up to the storm as well as in the days following it. As a result, our team was able to return to drilling and completion operations with limited downtime as well as finalize the sale of our Utica Shale package while also dealing with the personal aftermath of this historic storm. As a Houston-based company, our thoughts continue to be with our employees as well as our neighbors and the many other Texans who were impacted by Hurricane Harvey and are dealing with very difficult conditions."
Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, and production of oil and gas from resource plays located in the United States. Our current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale in South Texas, the Delaware Basin in West Texas, the DJ Basin in Colorado, and the Marcellus Shale in Pennsylvania.
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Note that the "Closing Date" is when oil & gas sales revenues transfer to the Buyer. So, this sale will not impact my forecast sales volumes or revenues for Q3.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Carrizo Oil & Gas: Update on impact of Harvey
I have updated the forecast model for Carrizo and it will be posted to the EPG website later today.
My valuation stays at $45.00/share, primarily because I had a big cushion built into my forecast model in anticipation of the Utica sale. If the sale closes on 10-31-2017 it will put much needed cash on the balance sheet and reduce interest expense and overhead going forward. Carrizo is a "Full Cost" company, so the sales proceeds will reduce the Full Cost Pool and DD&A expense going forward.
Although the Utica sale lowers the company's Q4 and 2018 production, it improves their production mix; raising the percentage of crude oil.
First Call's price target is $29.59, which is a nice gain from where the stock is trading today and a reasonable price target until oil prices move over $50.
What will move the stock higher?
1. Solid earnings and cash flow from operations for Q3, which are already locked in. Hurricane Harvey will have minimal impact on Q3 results.
2. Revised production guidance. I think Carrizo was "low balling" their production guidance because they knew the sale would close this year. If the Utica sale closes on 10/31/2017 they will still have production growth from Q3 to Q4.
3. Strong well results in the Permian Basin.
4. Last but not least, higher oil prices. Assuming $50/Bbl WTI oil price and $3.00/Mcf Henry Hub gas prices, CRZO should report $1.80 EPS and $6.35 operating CFPS in 2018.
NOTE: Carrizo is also trying to sell their assets in the DJ Basin (Niobrara).
My valuation stays at $45.00/share, primarily because I had a big cushion built into my forecast model in anticipation of the Utica sale. If the sale closes on 10-31-2017 it will put much needed cash on the balance sheet and reduce interest expense and overhead going forward. Carrizo is a "Full Cost" company, so the sales proceeds will reduce the Full Cost Pool and DD&A expense going forward.
Although the Utica sale lowers the company's Q4 and 2018 production, it improves their production mix; raising the percentage of crude oil.
First Call's price target is $29.59, which is a nice gain from where the stock is trading today and a reasonable price target until oil prices move over $50.
What will move the stock higher?
1. Solid earnings and cash flow from operations for Q3, which are already locked in. Hurricane Harvey will have minimal impact on Q3 results.
2. Revised production guidance. I think Carrizo was "low balling" their production guidance because they knew the sale would close this year. If the Utica sale closes on 10/31/2017 they will still have production growth from Q3 to Q4.
3. Strong well results in the Permian Basin.
4. Last but not least, higher oil prices. Assuming $50/Bbl WTI oil price and $3.00/Mcf Henry Hub gas prices, CRZO should report $1.80 EPS and $6.35 operating CFPS in 2018.
NOTE: Carrizo is also trying to sell their assets in the DJ Basin (Niobrara).
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group