Energy Prospectus

Zachs continues to rate Carrizo Oil & Gas (CRZO) a "Strong Sell". I sure can't figure out why.

Eleven analysts have submitted 2011 earnings and cash flow forecasts on CRZO to First Call. Three have increased their EPS estimates for CRZO in the last 30 days. One in the last 7 days.

My EPS estimate for 2011 is now $2.51/share, which is just slightly above the concensus estimate shown by First Call of $2.27 and well within the range. My current CFPS estimate for 2011 is $5.24/share (slightly below the First Call estimate).

I added CRZO to the Sweet 16 because it appears to have significant upside in the liquids rich Eagle Ford and Niobrara. It also has a very nice block of acreage in the Marcellus that should be a major source of production growth in 2012 and beyond.

Current production is 96% natural gas. Maybe that is what the Zach analyst is focused on. I'm focused on their increasing liquids production.

Carrizo Oil & Gas Announces 2010 Proved Reserve Growth of 40%, Reserve Replacement of 752%, and Provides Operations Update 02/24 05:30 AM



HOUSTON, TX -- (MARKET WIRE) -- 02/24/11 -- Carrizo Oil & Gas, Inc. (CRZO:$37.09,00$0.40,001.09%) today announced estimated 2010 production and year-end proved reserves and updates its results from operations.
Proved Reserves and Production
Year-end 2010 estimated proved reserves, as determined by the Company's third-party engineers, grew by 40% year-on-year to a record 842 Bcfe, consisting of 671 Bcf of natural gas, a 31% increase over 2009 levels and 28.5 MMbbls of oil, condensate and NGLs, a 92% increase over 2009.
Eagle Ford Shale reserves increased from zero at year-end 2009 to 15 MMboe at year-end 2010
48% of reserves are proved developed
The following table provides a detail of the distribution of the Company's proved reserves.
Asset Location Proved Reserves (Bcfe)
------------------ ----------------------

Barnett Shale 681
Eagle Ford Shale 90
North Sea 36
Camp Hill 16
Gulf Coast 14
Marcellus Shale 3
Niobrara Formation 2

The estimation of these proved reserves was based on a twelve-month average oil price of $76.05 per barrel and a natural gas price of $4.38 per million British thermal units. These prices were 32% higher and 13% higher than the prices used at the end of 2009 for oil and natural gas, respectively.
Carrizo successfully replaced 752%(1) of its estimated 2010 record production of 36.8 Bcfe. Estimated full year 2010 production included:
32 Bcfe from the Barnett Shale, 23% above 2009
10.6 Bcfe from the fourth quarter or 115,830 Mcfe/day, 23% above Q4 2009
The Company's year-end 2010 production exit rate is estimated to have been 133.6 MMcfe/day, consisting of:
125 MMcf/day of natural gas, 36% above the year-end 2009 gas exit rate
1,502 Bbls/day of oil, 320% above the year-end 2009 oil exit rate
(1)This measurement is generally referred to as the "Reserve Replacement Ratio." See the comment on this measurement at the end of this release.
"The impact of our strategy to increase our oil production can already be seen in our results," commented Carrizo CEO S.P. "Chip" Johnson IV. "We have made an excellent start on our objective to exit the year 2011 with an oil production rate of over 7,000 gross barrels per day. We expect that the impact of our 2011 oil development drilling plans in both the Eagle Ford and the Niobrara will be increasingly evident during the course of the year, both through increases in overall production and to an even greater degree, through growth in our cash flow as we realize the benefit of the large price disparity between oil and natural gas. We are pleased by the significant progress our Huntington Development Partnership in the North Sea made during 2010. With the receipt of the final development approval by the British Department of Energy and Climate Change and the finalization of our financing arrangements, we were able to book five million barrels of proved North Sea oil reserves at year-end and expect to see initial production from this very significant project in the first quarter of 2012."
Operational Update
Carrizo has recently tested and brought a new well on production in both the Eagle Ford Shale and the Niobrara Formation. In the Eagle Ford Shale of La Salle County, Texas, the Mumme 20H was brought on-line on January 23, 2011 and was immediately connected to sales. Peak 24-hour production was 760 Bopd gross (570 net) and 950 Mcfpd of natural gas (713 net) flowing constrained on an 18/64 inch choke at 1,500 pounds per square inch. The well has averaged 344 net Bopd and 634 net Mcfpd for the most recent week of production while still rate constrained. An additional Eagle Ford well, the Bear Clause 10H is currently being completed. One of the Company's three rigs currently drilling in the Barnett is being prepared to move to the Eagle Ford in early March to initiate a development drilling program on our leases in La Salle County. In the Niobrara Formation in Weld County, Colorado, the Bob White #1 was production tested at 725 Bopd (595 net) and 785 Mcfpd (644 net) over 24 hours ending February 5, 2011. This well is currently producing at 316 net Bopd while flaring 550 net Mcfpd of gas pending connection to a gas sales line. The final Niobrara horizontal well drilled in late 2010, the State 36-24-9-61, is currently scheduled for completion in early to mid-March. The Company recently added a second development drilling rig in the Marcellus Shale of northeast Pennsylvania. A contracted H&P Flex 4S Plus rig initiated development drilling activities in northern Wyoming County in January, joining our Nabors rig drilling in northern Susquehanna County.
At December 31, 2010, there were 20 net horizontal wells in the Barnett Shale drilled but waiting on completion and/or pipeline connection, having a total estimated net initial production rate of 52 MMcfe per day.
About the Company
Carrizo Oil & Gas, Inc. (CRZO:$37.09,00$0.40,001.09%) is a Houston-based energy company actively engaged in the exploration, development, exploitation, and production of oil and natural gas primarily in the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, the Niobrara Formation in Colorado, the Eagle Ford Shale in South Texas, and in proven onshore trends along the Texas and Louisiana Gulf Coast regions. Carrizo controls significant prospective acreage blocks and utilizes advanced drilling and completion technology along with sophisticated 3-D seismic techniques to identify potential oil and gas drilling opportunities and to optimize reserve recovery.
Statements in this news release, including but not limited to those relating to reserves, timing and levels of production, reserve replacement, development plans, the Company's or management's intentions, beliefs, expectations, hopes, projections, assessment of risks, estimations, plans or predictions for the future, results of the Company's strategies, timing of completion and drilling of wells, completion and pipeline connections and other statements that are not historical facts are forward-looking statements that are based on current expectations. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements include market and other conditions, capital needs and uses, regulatory changes, permitting, commodity price changes, effects of the global financial crisis on exploration activity, dependence on exploratory drilling activities, operating risks, land issues, availability of capital and equipment, actions by governmental authorities, industry partners and other third parties, weather and other risks described in the Company's Form 10-K for the year ended December 31, 2009 and the Company's most recent Form 10-Qs, and its other filings with the Securities and Exchange Commission.
Note Regarding the Reserve Replacement Ratio
Carrizo uses the reserve replacement ratio as an indicator of the Company's ability to replenish annual production volumes and grow its reserves, thereby providing some information on the sources of future production. Management believes reserve replacement information is frequently used by analysts, investors and others in the industry to evaluate the performance of companies like Carrizo. The reserve replacement ratio is calculated by dividing the sum of reserve additions from all sources (revisions, extensions, discoveries, and other additions and acquisitions) by the actual production for the corresponding period. The Company does not use unproved reserve quantities in calculating the reserve replacement ratio. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. As an annual measure, the ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. The ratio does not distinguish between changes in reserve quantities that are producing and those that will require additional time and capital to begin producing. In addition, since the ratio does not take into consideration the cost or timing of future production of new reserves, it cannot be used as a measure of value creation. The production replacement ratio for 2009, 2008, and 2007 was 400%, 705%, and 887% respectively.

If you read my profile on CRZO you will see that they are committed to increasing their liquids production. That is why I put CRZO in the Sweet 16. They have HUGE upside in their large acreage position in the Niobrara.