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over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Material weaknesses have been identified and are included in management’s assessment of internal control over financial reporting. Management has identified and included within their assessment the following internal control deficiencies that are considered material weaknesses in the design and operating effectiveness of internal controls over financial reporting:

Vacancies in accounting staff for a financial reporting manager, controller, manager of accounting and director of financial planning and analysis during the year end close process were partially remedied by the reliance upon independent financial accounting and reporting consultants for the review of critical accounting areas and disclosures and material non-standard transactions.
Management concluded that derivatives entered into during 2004 and 2005 lacked sufficient documentation to be accounted for as cash flow hedges. Furthermore these hedges were not properly fair valued during these periods due to the failure to use the appropriate market index.
Controls in place relating to the capital expenditures accrual, evaluation of unproved property, and evaluation of the asset retirement obligation were not properly designed and/or operating effectively to provide reasonable assurance that amounts would be properly recorded and disclosed in the consolidated financial statements.

These material weaknesses manifested themselves through several accounting adjustments certain of which impacted the consolidated financial statements and disclosures for the years ended December 31, 2004 and 2005 as well as each quarterly period during 2004 and the first three quarterly periods of 2005 resulting in restatements to the financial statements previously filed with the Securities and Exchange Commission. Turnover in key accounting positions during the fourth quarter and during the year-end 2005 financial close process was a notable contributing factor in the failure of certain key control activities to operate effectively. Furthermore, due to reasons described above, the Company was not able to file its Annual Report on Form 10-K for the year ended December 31, 2005 with the Securities and Exchange Commission in the time required.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2005, of the Company and this report does not affect our report dated April 10, 2006 on such financial statements.

In our opinion, management’s assessment that Carrizo Oil & Gas, Inc. did not maintain effective internal control over financial reporting as of December 31, 2005 is fairly stated, in all material respects, based on criteria established in Internal Control— Integrated Framework issued by COSO. Also, in our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Carrizo Oil & Gas, Inc. has not maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We do not express an opinion or any other form of assurance on management’s statement referring to the effectiveness of the processes instituted to remediate the material weaknesses.