CRZO picked a bad day to miss
Posted: Tue Mar 15, 2011 8:42 pm
Carrizo Oil & Gas (CRZO) picked a bad day to report disappointing 4th quarter results.
CRZO was moved into the Sweet 16 because I believe it will report significantly higher liquids production and revenues in 2011 and 2012. I still believe it will but they had some delays in Q4 that pushed growth out a few months. I was expecting about 500 boepd more liquids in Q4. CRZO only produced 481 bopd in 2010 (779 bopd in Q4). Now keep reading and you will see why I'm sticking with it.
I will update my Net Income and Cash Flow Forecast and get it posted to the website along with a revised Fair Value estimate.
Carrizo President and CEO S. P. "Chip" Johnson, IV commented, "We are very pleased to have been able to achieve such a quick response to our change in focus from growing natural gas production to growing liquids production, which we initiated just last April. Carrizo exited 2010 with a daily production rate of 1,502 barrels of oil per day, 320% higher than our 358 Bopd exit rate at the end of 2009. We expect this rate to grow substantially during the year as we extend and accelerate our Eagle Ford and Niobrara drilling into 2011 and beyond. We were able to grow our overall production by over 11% year over year and our proved reserves by more than 40% during a year in which we also completed the formation of a Marcellus joint venture with our partner Reliance and completed a major debt issuance.
"As noted in this release, our 2010 production growth was once again propelled by our Barnett Shale activities. In 2011, we expect that our production growth will come largely from our Eagle Ford and Niobrara plays, as we decrease our Barnett activity and reallocate drilling capital. We have begun flowback on our fifth Eagle Ford and third Niobrara wells in the last two days. We also expect our Marcellus play, where the Reliance carry will fund a large portion of our capital expenditures, to contribute to our 2011 production growth. This production growth is expected to have a higher proportion of oil and liquids than our historic mix and generate a higher margin and have a higher return on capital than our recent, more gas-weighted activities. In the North Sea, the way has been cleared for our Huntington development to move to initial production in the first quarter of 2012. We expect the first development well to spud in the second quarter of this year. Our portion of the estimated development cost is expected to be approximately $53 million for 2011, and we expect to borrow approximately $31 million under our project finance facility to pay a portion of these costs.
"The Carrizo Board of Directors has approved a preliminary 2011 capital expenditure plan of $309 million. This amount excludes $51 million of Marcellus development costs that will be carried by Reliance and $31 million of North Sea Huntington project development costs that will be funded by our limited recourse financing facility. We currently anticipate spending nearly 60% of this capital expenditure plan in our two new liquids-rich areas and we expect to see a year-over-year production growth rate well in excess of 2010's growth, with the effect of the higher margin liquids content resulting in even higher cash flow growth."
CRZO was moved into the Sweet 16 because I believe it will report significantly higher liquids production and revenues in 2011 and 2012. I still believe it will but they had some delays in Q4 that pushed growth out a few months. I was expecting about 500 boepd more liquids in Q4. CRZO only produced 481 bopd in 2010 (779 bopd in Q4). Now keep reading and you will see why I'm sticking with it.
I will update my Net Income and Cash Flow Forecast and get it posted to the website along with a revised Fair Value estimate.
Carrizo President and CEO S. P. "Chip" Johnson, IV commented, "We are very pleased to have been able to achieve such a quick response to our change in focus from growing natural gas production to growing liquids production, which we initiated just last April. Carrizo exited 2010 with a daily production rate of 1,502 barrels of oil per day, 320% higher than our 358 Bopd exit rate at the end of 2009. We expect this rate to grow substantially during the year as we extend and accelerate our Eagle Ford and Niobrara drilling into 2011 and beyond. We were able to grow our overall production by over 11% year over year and our proved reserves by more than 40% during a year in which we also completed the formation of a Marcellus joint venture with our partner Reliance and completed a major debt issuance.
"As noted in this release, our 2010 production growth was once again propelled by our Barnett Shale activities. In 2011, we expect that our production growth will come largely from our Eagle Ford and Niobrara plays, as we decrease our Barnett activity and reallocate drilling capital. We have begun flowback on our fifth Eagle Ford and third Niobrara wells in the last two days. We also expect our Marcellus play, where the Reliance carry will fund a large portion of our capital expenditures, to contribute to our 2011 production growth. This production growth is expected to have a higher proportion of oil and liquids than our historic mix and generate a higher margin and have a higher return on capital than our recent, more gas-weighted activities. In the North Sea, the way has been cleared for our Huntington development to move to initial production in the first quarter of 2012. We expect the first development well to spud in the second quarter of this year. Our portion of the estimated development cost is expected to be approximately $53 million for 2011, and we expect to borrow approximately $31 million under our project finance facility to pay a portion of these costs.
"The Carrizo Board of Directors has approved a preliminary 2011 capital expenditure plan of $309 million. This amount excludes $51 million of Marcellus development costs that will be carried by Reliance and $31 million of North Sea Huntington project development costs that will be funded by our limited recourse financing facility. We currently anticipate spending nearly 60% of this capital expenditure plan in our two new liquids-rich areas and we expect to see a year-over-year production growth rate well in excess of 2010's growth, with the effect of the higher margin liquids content resulting in even higher cash flow growth."