In March of 2000, the FASB
issued Interpretation No. 44 "Accounting for Certain Transactions
involving Stock Compensation - an interpretation of APB No. 25"
("the Interpretation") which was effective July 1, 2000 and clarifies
the application of APB No. 25 for certain issues associated with
the issuance or subsequent modifications of stock compensation.
For certain modifications, including stock option repricings made
subsequent to December 15, 1998, the Interpretation requires that
variable plan accounting be applied to those modified awards prospectively
from July 1, 2000. This requires that the change in the intrinsic
value of the modified awards be recognized as compensation expense.
On February 17, 2000, Carrizo repriced certain employee and director
stock options covering 348,500 shares of stock with a weighted
average exercise price of $9.13 to a new exercise price of $2.25
through the cancellation of existing options and issuance of new
options at current market prices. Subsequent to the adoption of
the Interpretation, the Company is required to record the effects
of any changes in its stock price over the remaining vesting period
through February 2010 on the corresponding intrinsic value of
the repriced options in its results of operations as compensation
expense until the repriced options either are exercised or expire.
Stock option compensation expense (benefit) relating to the repriced
options for the years ended December 31, 2001 and 2002 amounted
to $(0.6 million) and $(0.1 million), respectively.
11. RELATED-PARTY TRANSACTIONS
During the years ended December
31, 2001 and 2002, the Company incurred drilling costs in the
amount of $6.3 million and $2.9 million, respectively, with Grey
Wolf Drilling. Mr. Webster is the Chairman of the Board of Carrizo
and a member of the Board of Directors of Grey Wolf Drilling.
It is management's opinion that these transactions with Grey Wolf
were performed at prevailing market rates.
At December 31, 2002, the
Company had outstanding related party accounts receivable, payable
and advances for joint operations balances of $1.2 million, $1.2
million and $0.3 million, respectively.
During the years ended December
31, 2001 and 2002, the Company participated in the drilling of
two wells and one well, respectively, that were operated by a
subsidiary of Brigham Exploration Company. During the year ended
December 31, 2002,
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