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PART I
Item 1. and Item 2. Business and Properties
General
Carrizo Oil & Gas, Inc.
("Carrizo" or the "Company") is an independent oil and gas company
engaged in the exploration, development, exploitation and production
of natural gas and crude oil. The Company's operations are currently
focused primarily onshore in proven oil and gas producing trends
along the Gulf Coast, in Texas and Louisiana in the Frio, Wilcox
and Vicksburg trends. The Company believes that the availability
of economic onshore 3-D seismic surveys has fundamentally changed
the risk profile of oil and gas exploration in these regions.
Recognizing this change, the Company has aggressively sought to
control significant prospective acreage blocks for targeted 3-D
seismic surveys. During the period from 1996 through December
2001 the Company assembled over 400,000 gross acres under lease
or option and acquired 52 3-D seismic surveys with over 2,700
square miles of 3-D data. In addition, the Company also has approximately
1,325 square miles of 3-D data in non-core areas in which the
Company presently does not have active projects, but which the
Company is screening for potential drilling prospects. The Company
would typically seek to acquire seismic permits from landowners
that included options to lease the acreage prior to conducting
proprietary surveys. In other circumstances, including when the
Company participates in 3-D group shoots, the Company typically
seeks to obtain leases or farm-ins rather than lease options.
After the 3-D seismic data is processed and analyzed, the Company
seeks to retain such acreage as it deems to be prospective and
usually releases such acreage as it believed is not prospective.
As of December 31, 2001, the Company had 124,390 gross acres in
Texas and Louisiana under lease or option, most of which is covered
by 3-D seismic data, and 233,875 gross acres in Wyoming and Montana
under lease or option. The Company is continually analyzing and
reprocessing 3-D seismic data in search of prospects which the
Company believes have a high probability of containing natural
gas or oil. From the 3-D data Carrizo has amassed a large drillsite
inventory, with as many as 250 gross wells that could be drilled
over the next five years, assuming sufficient capital resources.
In addition, the Company anticipates, based upon its past experience,
that as its existing as 3-D seismic data is further evaluated,
additional prospects will be generated for drilling beyond 2006.
Carrizo Oil & Gas, Inc. ("Carrizo" or the "Company") is an independent
oil and gas company engaged in the exploration, development, exploitation
and production of natural gas and crude oil. The Company's operations
are currently focused primarily onshore in proven oil and gas
producing trends along the Gulf Coast, in Texas and Louisiana
in the Frio, Wilcox and Vicksburg trends. The Company believes
that the availability of economic onshore 3-D seismic surveys
has fundamentally changed the risk profile of oil and gas exploration
in these regions. Recognizing this change, the Company has aggressively
sought to control significant prospective acreage blocks for targeted
3-D seismic surveys. During the period from 1996 through December
2001 the Company assembled over 400,000 gross acres under lease
or option and acquired 52 3-D seismic surveys with over 2,700
square miles of 3-D data. In addition, the Company also has approximately
1,325 square miles of 3-D data in non-core areas in which the
Company presently does not have active projects, but which the
Company is screening for potential drilling prospects. The Company
would typically seek to acquire seismic permits from landowners
that included options to lease the acreage prior to conducting
proprietary surveys. In other circumstances, including when the
Company participates in 3-D group shoots, the Company typically
seeks to obtain leases or farm-ins rather than lease options.
After the 3-D seismic data is processed and analyzed, the Company
seeks to retain such acreage as it deems to be prospective and
usually releases such acreage as it believed is not prospective.
As of December 31, 2001, the Company had 124,390 gross acres in
Texas and Louisiana under lease or option, most of which is covered
by 3-D seismic data, and 233,875 gross acres in Wyoming and Montana
under lease or option. The Company is continually analyzing and
reprocessing 3-D seismic data in search of prospects which the
Company believes have a high probability of containing natural
gas or oil. From the 3-D data Carrizo has amassed a large drillsite
inventory, with as many as 250 gross wells that could be drilled
over the next five years, assuming sufficient capital resources.
In addition, the Company anticipates, based upon its past experience,
that as its existing as 3-D seismic data is further evaluated,
additional prospects will be generated for drilling beyond 2006.
Most of the Company's
drilling targets in the past have been shallow (from 4,000 to
7,000 feet), normally pressured reservoirs that generally involve
moderate cost (typically $250,000 to $400,000 per completed well)
and risk. Many of the Company's current drilling prospects are
deeper, over-pressured targets which have greater economic potential
but generally involve higher cost (typically $1 million to $4
million per completed well) and risk. The Company usually seeks
to sell a portion of these deeper prospects to reduce its exploration
risk and financial exposure while still allowing the Company to
retain significant upside potential but has in recent times retained
larger percentages of and increased its exposure to higher cost,
higher potential wells. The Company operates the majority of its
projects through the exploratory phase but may relinquish operator
status to qualified partners in the production phase in order
to focus resources on the higher-value exploratory phase. As of
December 31, 2001, the Company operated 73 producing oil and gas
wells, which accounted for 41% of the wells in which the Company
had an interest.
During 2001, the Company,
through its wholly-owned subsidiary, CCBM, Inc. ("CCBM") acquired
50% of the working interests held by Rocky Mountain Gas, Inc.
("RMG") in approximately 107,000 net mineral acres prospective
for coalbed methane located in the Powder River Basin in Wyoming
and Montana. The Company participated in the drilling of 31 gross
test wells in Wyoming during 2002, all of which encountered coal
accumulations and are currently under evaluation to determine
if they are likely to result in commercial production of natural
gas. No proved reserves have been assigned to the coalbed methane
properties as of December 31, 2001.
The Company has experienced
increases in reserves and EBITDA from its inception in 1993 due
to its 3-D based drilling and development activities. From January
1, 1996 to December 31, 2001, the Company participated in the
drilling of 243 gross wells (72.2 net) with a commercial well
success rate of approximately 66%, excluding 31 gross (12 net)
wells drilled by CCBM that are currently under evaluation. This
drilling success contributed to the Company's total proved reserves
as of December 31, 2001 of 59.0 Bcfe with a PV-10 Value of $58.4
million. See "Oil and Natural Gas Properties." During 2001, the
Company added 16.2 Bcfe to proved reserves through drilling offset
by 5.4 Bcfe of production. EBITDA increased 8% from $19.6 million
for the year ended December 31, 2000 to $21.1 million for the
year ended December 31, 2001.
Certain terms used herein
relating to the oil and natural gas industry are defined in "Glossary
of Certain Industry Terms" below.
Exploration Approach
The Company's strategy
has been to rapidly accumulate large amounts of 3-D seismic data
primarily along prolific, producing trends of the onshore Gulf
Coast after obtaining options to lease areas covered by the data.
The Company then uses 3-D seismic data to identify or evaluate
prospects before drilling the prospects that fit its risk/reward
criteria. The Company typically seeks to explore in locations
within its core areas of expertise that it believes have (i) numerous
accumulations of normally pressured reserves at shallow
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