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REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
Carrizo Oil & Gas, Inc.
We have audited the accompanying consolidated
balance sheet of Carrizo Oil & Gas, Inc. as of December 31, 2003
and 2002, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the two years in
the period ended December 31, 2003. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of Carrizo Oil
& Gas, Inc. as of December 31, 2001 and for the year then ended,
were audited by other auditors who have ceased operations and whose
report dated March 20, 2002, expressed an unqualified opinion on
those statements, before the revisions described in Note 2.
We conducted our audit in accordance with
auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of the Company at December 31, 2003
and 2002, and the consolidated results of its operations and its
cash flows for the two years then ended, in conformity with accounting
principles generally accepted in the United States.
As described in Note 2, the Company revised
the reported amount of the after-tax write-down that would have
been taken as of December 31, 2001 using prices in effect at that
date. We audited the adjustments describe in Note 2 that were applied
to revise the reported amount of the full cost ceiling test write-down
had the Company not utilized the improvements in pricing subsequent
to December 31, 2001 and/or the addition of proved oil and natural
gas reserves on existing properties subsequent to the end of the
period but prior to issuance of financial statements. Our procedures
included (a) agreeing the revised tax basis in the full cost ceiling
test computation to the Company's underlying records obtained from
management, and (b) testing the mathematical accuracy of the revisions
to the full cost ceiling computation. In our opinion such adjustments
are appropriate and have been properly applied. However, we were
not engaged to audit, review, or apply any procedures to the 2001
consolidated financial statements of the Company other than with
respect to such adjustments and accordingly, we do not express an
opinion or any other form of assurance on the 2001 consolidated
financial statements taken as a whole.
As discussed in Note 2 to the consolidated
financial statements, effective January 1, 2003, the Company changed
its method of accounting for asset retirement obligations.
ERNST & YOUNG LLP
Houston, Texas
March 25, 2004
F-2
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