While production was delayed pending construction of a new pipeline, the well commenced production on March 25, 2002. The Company is closely monitoring the well's performance and has steadily increased the production rate since commencement to a rate of approximately 9,600 Mcf of natural gas and 1,100 barrels of condensate per day (16,200 Mcfe per day) as of March 28, 2002. Based upon the current performance of the well, the Company expects to be able to increase the production rate to 18,000 to 20,000 Mcfe per day by March 31, 2002. The Company currently holds approximately 1,240 gross acres of leases in the LaRose Prospect area. An additional follow-up well is planned for drilling during 2002.

Camp Hill Project

   The Company owns interests in eight leases totaling approximately 619 gross acres in the Camp Hill field in Anderson County, Texas. The Company currently operates seven of these leases. During the year ended December 31, 2001, the project produced 71 barrels per day of 19 API gravity oil. The project produces from a depth of 500 feet and utilizes a tertiary steam drive as an enhanced oil recovery process. Although efficient at maximizing oil recovery, the steam drive process is relatively expensive to operate because natural gas or produced crude is burned to create the steam injectant. Lifting costs during the year ended December 31, 2001 averaged $12.84 per barrel ($2.14 per Mcfe). In response to high fuel gas prices, steam injection was reduced in mid 2000. Because profitability increases when natural gas prices drop relative to oil prices, the project is a natural hedge against decreases in natural gas prices relative to oil prices. The crude oil produced, although viscous, commands a higher price (an average premium of $.75 per barrel during the year ended December 31, 2001) than West Texas intermediate crude due to its suitability as a lube oil feedstock. As of December 31, 2001, the Company had 6.21 million barrels of proved oil reserves in this project, with 771 MBbls of oil reserves currently developed. The Company anticipates that it will drill additional wells and increase steam injection to develop the proved undeveloped reserves in this project, with the timing and amount of expenditures depending on the relative prices of oil and natural gas. The Company has an average working interest of 90% in its leases in this field and an average net revenue interest of 74%.

WYOMING/MONTANA COALBED METHANE PROJECT AREA

   The Company, through CCBM, acquired interests from RMG in certain oil and gas leases covering 233,875 gross acres and 43,711 gross acres in options during 2001 in areas prospective for coalbed methane in the Powder River Basin ("PRB") in southwestern Wyoming and Montana. The Company's working interest ranges from 6.25% to 50% in the leases. As consideration for the interests, CCBM paid RMG $7.5 million in the form of a non-recourse promissory note (the "CCBM Note"), secured solely by CCBM's interest in the undeveloped acreage. In addition, the Company intends to spend up to $5 million to drill and test coalbed methane wells on this acreage over the next two to three years, 50% of which would be spent pursuant to an obligation by Carrizo to fund $2.5 million of drilling costs on behalf of RMG. During 2001, the Company participated in the drilling of 31 gross wells at a cost of $820,000, 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. Coalbed methane wells typically first produce water and then, as the water production declines, begin producing methane gas. Eight wells, located in the Clearmont area of the PRB in Wyoming in which the Company owns a 50% working interest, are currently being dewatered in an effort to establish commercial production. No proved reserves have been assigned to the project area as of December 31, 2001. In the event of default by CCBM on the CCBM Note, RMG would be entitled to foreclose on the undeveloped portion of the acreage.

Other Project Areas

   In addition to the project areas described above, the Company has 20 additional project areas in various stages of development as of December 31, 2001. These project areas are located in the onshore Texas and Louisiana Gulf Coast regions. The Company is in the process of evaluating and acquiring interests with respect to most of these project areas and as of December 31, 2001 had acquired leases and seismic options in these areas covering 69,548 gross acres and 23,667 net acres.

WORKING INTEREST AND DRILLING IN PROJECT AREAS

   The actual working interest that the Company will ultimately own in a well will vary based upon several factors, including the depth, cost and risk of each well relative to the Company's strategic goals, activity levels and budget availability. From time to time some fraction of these wells may be sold to industry partners either on a prospect by prospect basis or a program basis. In addition, the company may also contribute acreage to larger drilling units thereby reducing prospect working interest. The Company has, in the past, retained less than 100 percent working interest in its drilling prospects. References to Company property is not intended to imply that the Company has or will maintain any particular level of working interest.

   Although the Company is currently pursuing prospects within the project areas described above, there can be no assurance that these prospects will be drilled at all or within the expected time frame. In some project areas, the Company has budgeted for wells that are based upon statistical results of drilling activities in other project areas; these wells are subject to greater uncertainties than wells for which drillsites have been identified. The final determination with respect to the drilling of any identified drillsites or budgeted wells will be dependent on a number of factors, including (i) the results of exploration efforts and the acquisition, review and analysis