In June of 1997, the Company established the Incentive Plan of Carrizo Oil & Gas, Inc. (the "Incentive Plan"). In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which requires the Company to record stock-based compensation at fair value.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2001, 2002 and 2003: risk free interest rate of 4.9%, 4.8% and 4.0% respectively, expected dividend yield of 0%, expected life of 10 years and expected volatility of 80.7%, 77.7% and 72.2% respectively.

The Company may grant options ("Incentive Plan Options") to purchase up to 1,850,000 shares under the Incentive Plan and has granted options on 1,823,500 shares through December 31, 2003. Through December 31, 2003, 211,798 stock options had been exercised. A summary of the status of the Company's stock options at December 31, 2001, 2002 and 2003 is presented in the table below:

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