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 current operations are primarily focused onshore in proven oil and gas producing trends along the Gulf Coast, in Texas and Louisiana in the Frio, Wilcox and Vicksburg trends ("Gulf Coast Core Areas").

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. During the period from 1996 through December 2001 the Company acquired 52 3-D seismic surveys with over 2,700 square miles of 3-D data in the Gulf Coast Core Areas. In late 2002 the Company acquired (or obtained the right to acquire) an additional 2,750 square miles of 3-D seismic data in the Gulf Coast Core Areas, including primarily either recently merged and reprocessed data sets or data newly released to industry. The Company also acquired additional 3-D seismic data during 2002 as a result of certain data licensing swaps. The 2002 data acquisitions nearly double the amount of 3-D seismic data the Company owns in the Gulf Coast Core Areas, and has led to the identification of additional drilling prospects over which the Company is currently in the process of acquiring additional lease acreage. These new data, if all are acquired, will bring the Company's 3-D seismic database in the Gulf Coast Core Areas to 6,732 square miles, which the Company believes is one of the largest such databases owned by an independent exploration company in the region. The Company also has approximately 1,840 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 continuously analyzes and reprocesses the 3-D seismic data in search of prospects which the Company believes have a high probability of containing natural gas or oil.

Historically, the Company aggressively sought to control significant prospective acreage blocks for 3-D seismic surveys. 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 participated in 3-D group shoots, the Company typically sought to obtain leases or farm-ins rather than lease options. From 1996 through 2002, the Company assembled over 400,000 gross acres under lease or option. After the 3-D seismic data was processed and analyzed, the Company sought to retain such acreage as it deemed to be prospective and released non-prospective acreage. As of December 31, 2002, the Company had 100,707 gross acres in Texas and Louisiana under lease or lease option, most of which is covered by 3-D seismic data, and 287,994 gross acres in Wyoming and Montana under lease or option.

From the analysis and interpretation of the 3-D seismic data, Carrizo has amassed a large drill-site inventory, with as many as 210 gross wells that could be drilled over the next three to five years, assuming sufficient capital resources. Most of the Company's drilling targets in prior years have been shallow (from 4,000 to 7,000 feet), normally pressured reservoirs that generally involve moderate cost (typically $0.3 million to $0.4 million 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 $1.0 million to $4.0 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. The Company has recently begun to retain 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, 2002, the Company operated 85 producing oil and gas wells, which accounted for 52% of the onshore Gulf Coast producing 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 has participated in the acquisition and/or drilling of 75 gross wells, all of which encountered coal accumulations. Of these wells, 24 wells are currently producing, 19 are in the dewatering phase and 36 wells are under evaluation to determine if they are likely to result in commercial production of natural gas. Proved reserves of 0.6 Bcfe are assigned to the Company's coalbed methane properties as of December 31, 2002.

The Company has increased its oil and gas reserves from its inception in 1993 primarily due to its 3-D based drilling and development activities. From January 1, 1996 to December 31, 2002, the Company participated in the drilling of

2