Carrizo
uses the equity method of accounting to record its minority ownership in the operations
of Pinnacle, formed in June 2003. Accordingly, the proved reserve tables, above,
do not include the Company’s interest ownership, 15.8% on a fully diluted basis,
in the proved reserves of Pinnacle at the end of 2005, or an estimated 4.2 Bcfe
of proved reserves. Standardized Measure The
standardized measure of discounted future net cash flows relating to the Company's
ownership interests in proved oil and natural gas reserves as of year-end is shown
below: 
Future
cash flows are computed by applying year-end prices of oil and natural gas to
year-end quantities of proved oil and natural gas reserves. Average prices used
in computing year end 2003, 2004 and 2005 future cash flows were $30.29, $41.18
and $57.17 for oil, respectively and $6.19, $5.68 and $8.04 for natural gas, respectively.
Future operating expenses and development costs are computed primarily by the
Company's petroleum engineers by estimating the expenditures to be incurred in
developing and producing the Company's proved oil and natural gas reserves at
the end of the year, based on year end costs and assuming continuation of existing
economic conditions. Future income taxes are based
on year-end statutory rates, adjusted for tax basis and availability of applicable
tax assets. A discount factor of 10% was used to reflect the timing of future
net cash flows. The standardized measure of discounted future net cash flows is
not intended to represent the replacement cost or fair market value of the Company's
oil and natural gas properties. An estimate of fair value would also take into
account, among other things, the recovery of reserves not presently classified
as proved, anticipated future changes in prices and costs, and a discount factor
more representative of the time value of money and the risks inherent in reserve
estimates. Change in Standardized Measure Changes
in the standardized measure of future net cash flows relating to proved oil and
natural gas reserves are summarized below: | 
