Carrizo Oil & Gas, Inc. is a Houston-based independent energy company engaged in the exploration, development and production of natural gas and oil. Our current operations are focused in the Barnett Shale area in North Texas and in proven, producing natural gas and oil geologic trends along the onshore Gulf Coast in Texas and Louisiana, primarily in the Miocene, Wilcox, Frio, and Vicksburg trends.

We have grown our production through our 3-D seismic-driven exploratory drilling program. From our inception through December 31, 2006, we participated in the drilling of 508 wells (200.3 net) with a success rate of approximately 71 percent in our onshore Gulf Coast area and 100 percent in the Barnett Shale area. Exploratory wells accounted for 81 percent of the total wells drilled.

As a main component of our business strategy, we have acquired licenses for over 11,800 square miles of 3-D seismic data for processing and evaluation. One of our primary strengths is the experience of our management and technical staff in the development, processing and analysis of this 3-D seismic data to generate and drill natural gas and oil prospects. Our technical and operating employees have an average of over 20 years industry experience, in many cases with major and large independent oil and gas companies. Using our 3-D seismic database, our highly qualified technical staff is continually adding to and refining our substantial inventory of drilling locations.

We believe that our utilization of large-scale 3-D seismic surveys and related technology allows us to create and maintain a multiyear inventory of high-quality exploration prospects. As of December 31, 2006 we had 194,719 net acres in Texas and Louisiana under lease or lease option, including 37,644 net acres in our onshore Gulf Coast area, almost all of which is covered by 3-D seismic data, and 86,752 net acres in our Barnett Shale area. On this leased acreage, we have identified over 106 potential exploratory drilling locations in our onshore Gulf Coast area, including 55 additional extension opportunities, depending on the success of our initial drilling activities on those locations. In the Barnett Shale area, where we rely heavily on 3-D seismic to plan our development, we have identified over 675 potential exploratory and development horizontal drilling locations.

In 2006, our capital expenditures were $188.3 million, used primarily to drill 70 wells (45 net). In 2007, we expect capital expenditures to be approximately $165 to $175 million. We expect to drill 15 gross wells in the onshore Gulf Coast area, 53 gross wells in our Barnett Shale area, 27 gross wells in our East Texas area and five wells in other areas.

Our other interests include a rapidly growing position of 240,000 net acres in four additional shale resource plays and a coalbed methane investment in the Rocky Mountains. Additionally, in 2003 we obtained licenses to explore in the U.K. North Sea where we expect our working interest partners to drill one prospect in the second quarter of 2007, with no risk capital required from Carrizo.


Carrizo 2006 Annual Report