South
Louisiana Area The South Louisiana area primarily
contains objectives in the Middle and Lower Miocene intervals. We have acquired
licenses for approximately 1,957 square miles of 3-D data and approximately 6,979
net acres of leasehold. The 3-D seismic data sets are concentrated in one general
area including St. Mary, Terrebonne and LaFourche Parishes. Our
South Louisiana inventory consists of 13 leased exploratory drillsites none of
which are dependent on the success of the other wells. Carrizo is currently pursuing
acreage on an additional 18 seismically defined prospects. From January 1, 2002
to December 31, 2005, we drilled and completed 5 wells (2.2 net) on ten attempts
in this area. We incurred capital expenditures of $1.8 million and drilled 1 well
(0.33 net) in the South Louisiana area in 2005 and expect to devote approximately
$11.9 million to drill 7 wells (3.4 net) in this area in 2006. LaRose
During 2002, we successfully drilled and completed
an offset well to the discovery well in this area. We operate the 2 wells with
an estimated 40% working interest. We plan to participate in 1 additional well
(0.37 net) in the general area during 2006. Barnett Shale
Trend We began active participation in the Barnett
Shale play in the Fort Worth Basin on acreage located west of the city of Fort
Worth, Texas in mid-2003. In 2003, we acquired leases on approximately 4,100 net
acres and invested $0.9 million to drill six wells (2.6 net), two of which were
completed and producing and four of which were awaiting pipeline hookup at year
end. Net production from the two online wells (0.6 net) was a combined 380 Mcfe
per day at year end in 2003. In February 2004 we purchased
specified wells and leases in the Barnett Shale trend in Denton County, Texas
from a private company for $8.2 million. These non-operated properties have an
average 39 percent working interest. The acquisition included 21 existing gross
wells (6.7 net) and interests in approximately 1,500 net acres. Production at
year end 2004 was approximately 2,800 Mcfe/d. In April
2005 we acquired 600 net acres and working interests in 14 existing wells (7.3
net) with an estimated 5.4 MMcfe of proved reserves in the Barnett Shale trend
for $2.3 million in cash and 112,697 shares of our common stock. During
2005, we drilled 37 additional wells (22.1 net) and acquired an additional 49,632
net acres, increasing our acreage at the end of 2005 to over 80,000 net acres
(primarily in Tarrant, Parker, Denton, Johnson, Hill and Erath counties). Carrizo
was operator on 18 of the gross wells drilled. At year-end, 18 of the gross wells
were producing and the remaining 19 wells were awaiting completion and/or pipeline
connection. We are continuing to expand our leasehold
acquisition in this trend. Production at the end of 2005 and at March 1, 2006
was approximately 11,000 Mcfe/d and 14,000 Mcfe/d, respectively. Net proved reserves
have grown by 259% from 31.7 Bcfe in December 31, 2004 to 82.1 Bcfe at December
31, 2005. We are drilling with three Carrizo operated rigs as of March 1, 2006.
East Texas Area The East
Texas area encompasses multiple objectives, including the Wilcox and Cotton Valley
intervals. We are focused on the Camp Hill Field, a Wilcox steam flood project
in Anderson County, and the Tortuga Grande Prospect, a Cotton Valley sand opportunity.
We have licenses for over 503 square miles of 3-D seismic data in the East Texas
area and 4,558 net acres under lease. We expect to
invest $5.1 million to drill 35 to 40 (35 to 40 net) wells in this region in 2006.
Camp Hill Project. We own interests in approximately
800 gross acres in the Camp Hill field in Anderson County, Texas. We currently
operate all of these leases. During the year ended December 31, 2005, the project
produced an average of 46.7 Bbls/d of 19 API gravity oil. The wells produce from
a depth of 500 feet and have utilized and plan to utilize a tertiary steam drive
as an enhanced oil recovery process. Although efficient at maximizing oil recovery,
the steam drive process is relatively expensive to operate because natural gas
or produced crude is burned to create the steam injectant. Lifting costs during
the year ended December 31, 2005 averaged $27.45 per barrel ($4.57 per Mcfe).
The oil produced, although viscous, commands a comparable price to West Texas
Intermediate crude (an average premium of $0.15 per Bbl to Koch WTI during the
year ended December 31, 2005) due to its suitability as a lube oil feedstock. | 
