At December 31, 2000, the Company had outstanding hedge positions covering 1,710,000 MMBtu and 18,000 Bbls. These consisted of 1,080,000 MMBtu with a floor of $4.00 and a ceiling of $5.19 for January through December 2001 production and 630,000 MMBtu at an average fixed price of $6.60 for January through March 2001 production. The 18,000 Bbls of oil hedges had a floor of $30.00 and a ceiling of $32.28 for January through March 2001 production. These instruments had a fair market value of ($3,025,000) at December 31, 2000. At December 31, 2001, the Company had no derivative instruments outstanding designated as hedge positions.

13. SUBSEQUENT EVENTS

     In February 2002, the Company consummated the sale of $6 million of Convertible Participating Series B Preferred Stock and warrants to purchase Carrizo common stock to an investor group led by Mellon Ventures, Inc. which included Steven A. Webster, the Company's Chairman of the Board of Directors. The Series B Preferred Stock is convertible into common stock by the investors at a conversion price of $5.70 per share, subject to adjustments, and is initially convertible into 1,052,632 shares of common stock. Dividends on the Series B Preferred Stock will be payable in either cash at a rate of eight percent per annum or, at the Company's option, by payment in kind of additional shares of the same series of preferred stock at a rate of ten percent per annum. The Series B Preferred Stock is redeemable at varying prices in whole or in part at the holders' option
after three years or at the Company's option at any time. The Series B Preferred Stock will also participate in any dividends declared on the common stock. Holders of the Preferred Stock will receive a liquidation preference upon the liquidation of, or certain mergers or sales of substantially all assets involving, the Company. Such holders will also have the option of receiving a change of control repayment price upon certain deemed change of control transactions. The warrants have a five-year term and entitle the holders to purchase up to 252,632 shares of Carrizo's common stock at a price of $5.94 per share, subject to adjustments, and are exercisable at any time after issuance. The warrants may be exercised on a cashless exercise basis.

     The approximately $5,800,000 proceeds of this financing are expected to be used primarily to fund the Company's ongoing exploration and development program.

     Event (unaudited) subsequent to the date of the auditor's report. On March 24, 2002, a subsidiary of the Brigham Exploration Company, the operator of the "Burkhart #1" well in the Company's Matagorda Project Area in Matagorda County, Texas reported a loss of surface control while drilling the well, and as of March 28, 2002, operations were underway to bring the well under control. The Company owns a 35% working interest in the well. The Company has liability and well control insurance that it believes will be sufficient to cover any liabilities to third parties and the cost to bring the well under control, including, if necessary, the drilling of a replacement well.

14. SUPPLEMENTARY FINANCIAL INFORMATION ON OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION ACTIVITIES (UNAUDITED)

     The following disclosures provide unaudited information required by SFAS No. 69, "Disclosures About Oil and Gas Producing Activities."

COSTS INCURRED

     Costs incurred in oil and natural gas property acquisition, exploration and development activities are summarized below:

(1) Excludes capitalized interest on unproved properties of $1,547,879, $3,563,555 and $3,170,754 for the years ended December 31, 1999, 2000 and 2001, respectively.