Subsequent to December 31, 2003, the Company entered into costless collar arrangements covering 1,641,000 MMBtu of natural gas for April 2004 through March 2005 production with an average floor price of $4.75 and an average ceiling price of $7.04. The Company also entered into swap arrangements covering 18,300 Bbls of crude oil for June 2004 through July 2004 production at an average fixed price of $33.63.

In addition to the hedge positions above, during the second quarter of 2003, the Company acquired options to sell 6,000 MMBtu of natural gas per day for the period July 2003 through August 2003 (552,000 MMBtu) at $8.00 per MMBtu for approximately $119,000. The Company acquired these options to protect its cash position against potential margin calls on certain natural gas derivatives due to large increases in the price of natural gas. These options were classified as derivatives. As of December 31, 2003, these options have expired and a charge of $119,000 has been included in other income and expenses for the year ended December 31, 2003.

14. SUBSEQUENT EVENTS

SECONDARY COMMON STOCK OFFERING

In the first quarter of 2004, the Company completed the public offering of 6,485,000 shares of our common stock at $7.00 per share. The offering included 3,655,500 newly issued shares offered by Carrizo and 2,829,500 shares offered by certain existing stockholders. The Company expects to use the net proceeds from this offering to accelerate its drilling program and to retain larger interests in portions of its drilling prospects that Carrizo otherwise would sell down or for which Carrizo would seek joint partners and for general corporate purposes. In the meantime, Carrizo used a portion of the net proceeds to repay the $7 million outstanding principal amount under our revolving credit facility. Carrizo did not receive any proceeds from the shares offered by the selling stockholders.

BARNETT SHALE ACQUISITION

On February 27, 2004, the Company closed a transaction with a private company to acquire working interests and acreage in certain oil and natural gas wells located in Denton County, Texas in the Newark East Field in the Barnett Shale trend. This acquisition, with a purchase price of $8.2 million, includes non-operated working interests in properties ranging from 12.5% to 45%, or an average working interest of 39 percent. The effective date of the purchase was March 1, 2004.

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