CRZO

[dan_s]

I'm now expecting a big move by CRZO during the second half of this year. Start doing your homework on this one now and buy the dips.

Carrizo is in transition from a "gasser" to a much more balanced company. In 2010, 97% of CRZO production was natural gas. By year-end they should be up to ~32% liquids. From the end of Q2 to year-end production should increase by 25% with over 75% of the increase being liquids.

I believe that their 2nd quarter results may disappoint the market on the surface giving us a great buying opportunity.
> 2nd quarter production will be flat to Q1
> However, CRZO will exit the quarter in really good shape and they should have some very good results to report on their early August conference call.
a) Six more Eagle Ford wells will be drilled, with only two on-line in June. These wells should significantly boost 3rd quarter liquids production. A second operated rig arrives in June. A third is coming in December.
b) Three more Niobrara wells will be drilled. CRZO is very high on their Niobrara acreage. With 61,000 acres, they have a lot of running room.
c) The new Lazer pipeline system (NE PA / Marcellus) will be taking production from six new wells around August 1, quickly ramping up to over 6,500 boepd (75% oil). The Marcellus should significantly drive up producton in 2012.

The Barnett Shale sale should close very soon. The Balance Sheet will be in great shape heading into Q3.

My current Fair Value estimate is $44/share. What happens over the next 90-days will be very interesting. I see a lot more upside over the next twelve months for this one, therefore the Risk / Reward is very good from my perch.

[dan_s]

All of you should download my forecast model for CRZO and study it carefully. Note the stunning increase in cash flow per share that is just ahead.

Year____ EPS____ CFPS

2010A _ $1.10 _ $3.13
2011E _ $1.42 _ $4.23
2012E _ $5.27 _ $10.54

My Fair Value estimate is now $44/share but a 12-month price target of $70 is reasonable.

BTW First Call currently has the following forecast for 2012:
EPS = $5.05
CFPS = $10.67

2nd quarter results are not going to be all that impressive but then they should ramp up sharply. I highly recommend accumulating CRZO on the dips over the next few months.