Pinnacle
Gas Resources, Inc. Carrizo contributed the
majority of its interest in the Powder River Basin into Pinnacle Gas Resources,
Inc. (PGR) in June 2003 for an approximate 17% fully diluted equity interest in
the new entity at year-end 2005. PGR has recently completed a private placement
of its common stock. Proceeds were used to complete an acquisition in the Green
River Basin, redeem Pinnacle's preferred stock and provide development capital.
Carrizo effected a cashless exercise of its options and now owns an equity interest
of approximately 10% of PGR. PGR has drilled
or acquired over 600 gross wells (~400 producing) from inception through 12/3
1/05, making it one of the Basin's most active developers. Plans call for continued
low-risk growth through ongoing development and operation in 2006. In
March 2005, PGR acquired certain leasehold interests totaling some 200,000 net
acres, bringing its total to approximately 272,000 net acres of leasehold. Only
3% of Pinnacle's acreage is developed, placing it among top tier companies in
the Basin in terms of growth potential. Carrizo will begin using the cost method
of accounting for its Pinnacle interest. U.K North
Sea Region Carrizo was awarded seven acreage blocks
totaling over 209,000 acres in the UKCS 21st License Round in June 2003. Another
contiguous block was added in the 23rd License Round in June 2005. Upon technical
evaluation, two of the eight blocks were relinquished during 2005, leaving over
124,000 acres under lease. These retained blocks are
located within the mature producing areas of the Central and Southern North Sea
and consist of two "Traditional" and one "Promote" licenses. Our blocks are located
in proven hydrocarbon trends with established infrastructure, available reprocessed
3-D seismic data sets and significant exploration potential, thus ensuring this
play area as a natural extension to our business plan, technical capabilities
and ongoing portfolio management. At year-end 2005,
industry partners had been signed for the blocks to allow for early exploitation.
The interests were promoted to other parties with regional drilling and operating
experience, and two exploration/appraisal wells are planned for 2006. Based on
these arrangements, Carrizo will have no cost-bearing share in the risk capital
for the drilling of these two wells, and a 25% working interest thereafter. |