As of year-end 2006, Carrizo had increased its lease position in the Barnett Shale to approximately 87,000 net acres. Approximately half of this acreage is in the “Core” and “Tier 1” areas of the Barnett Shale play which are the areas with significant proven production and reserves and the best defined geologic characteristics. The Company has acquired 3D seismic data over all of its large acreage blocks in this area. Outside of Tier 1, industry activity has confirmed that the Barnett Shale is gas productive and highly prospective. We have acquired 3D seismic data across a significant portion of the leasehold in these areas and drilled our first well in late 2006.

In 2006, Carrizo continued to shift its Barnett drilling to a primarily Carrizo operated horizontal drilling program with 32 of 46 gross wells and 31 of 34 net wells being company operated horizontals. As of year-end, the Company had participated in 122 gross wells, 54 of those being Carrizo operated. During most of the year, the Company operated three horizontal well drilling rigs and was in the process of adding a fourth rig at year-end. Carrizo’s Barnett Shale drilling success allowed the Company to increase proved reserves in the Barnett Shale by 79% to 146.6 Bcfe at year-end 2006 versus 82.1 Bcfe at year-end 2005.

Carrizo and industry has successfully tested reduced well spacing in the Barnett. As a result of reduced spacing and the Company’s increased acreage position, Carrizo has identified 680 additional potential horizontal locations on its acreage.