producing reserves in the Barnett Shale, which is now considered one of the most active natural gas plays in North America. The reserve profile from the typical productive wells we drill in the Barnett Shale area is noteably longer-lived compared to the typical reserve profile from our wells drilled in our onshore Gulf Coast area.

We are drilling primarily horizontal wells in the Barnett Shale area. Typical costs to drill and complete are approximately $2.4 million for horizontal wells. Our Barnett horizontal wells generally have target depths of 8,500 to 10,500 feet including the lateral section. During 2006, we held an average 74 percent working interest participation in the Barnett wells drilled as we shifted to a primarily Carrizo-operated program and operated a majority of the wells drilled. For wells drilled in 2007, we plan to increase our average working interests to between 80 and 90 percent.

Accordingly, we believe that continued development of producing reserves in the Barnett Shale play will have the potential to lengthen our overall average reserve life and, on balance, add a long-lived cash flow stream to help fund our future capital exploration and development program. In our Barnett Shale area through December 31, 2006, we had acquired 86,752 net acres, drilled 122 gross (71.7 net) wells and increased our total proved reserves in the Barnett Shale area to 146.6 Bcfe. As of March 20, 2007, our current net production in the Barnett Shale area was estimated at 21 MMcfe/d.

As of December 31, 2006, we operated 119 producing oil and gas wells, which accounted for 55% of the onshore Gulf Coast area producing wells and 36% of the Barnett Shale producing wells in which we had an interest.

During 2001, through our wholly-owned subsidiary, CCBM, Inc. (“CCBM”), we acquired 50% of the working interests held by Rocky Mountain Gas, Inc. (“RMG”) in approximately 107,000 net mineral acres prospective for coalbed methane located in the Powder River Basin in Wyoming and Montana. In 2003, we contributed a majority of our coalbed methane property interests into a newly formed company, Pinnacle Gas Resources, Inc. (“Pinnacle”), in return for an interest in Pinnacle. As of December 31, 2006, we owned approximately 9.5% of the common stock of Pinnacle on a fully diluted basis. For more information on this contribution and our investment in Pinnacle, please read “Pinnacle Transaction” below.

Certain terms used herein relating to the oil and natural gas industry are defined in “Glossary of Certain Industry Terms” below.

Business Strategy

Growth Through the Drillbit

Our objective is to create shareholder value through the execution of a business strategy designed to capitalize on our strengths. Key elements of our business strategy include:

	Grow Primarily Through Drilling. We are pursuing an active technology-driven exploration drilling program. We generate exploration prospects through geological and geophysical analysis of 3-D seismic and other data. Our ability to successfully define and drill exploratory prospects is demonstrated by our exploratory drilling success rate in the onshore Gulf Coast area of 83% over the last three years and a 100% drilling success rate in our Barnett Shale area since inception in 2003. During 2007, we are drilling or plan to drill approximately 15 wells (7.0 net) in the onshore Gulf Coast area and 53 wells (46.6 net) in the Barnett Shale area. We have planned approximately $165.0 million to $175.0 million for capital expenditures in 2007, $143.9 million of which we expect to use for drilling activities in the onshore Gulf Coast and Barnett Shale areas.
	Focus on Prolific and Industry-Proven Trends. We focus our activities both in the prolific onshore Gulf Cost area where our management, our technical staff and our field operations teams have significant prior experience and in the industryproven Barnett Shale trend in which our wells have generally longer-lived reserves. Although we have broadened our areas of operations to include the Rocky Mountains, the U.K. North Sea and shale trends in West Texas/New Mexico, Mississippi/Alabama, Kentucky and Arkansas, we plan to focus a majority of our near-term capital expenditures in the onshore Gulf Coast area, where we believe our accumulated data and knowledge base provide a competitive advantage, and in the Barnett Shale area in North Texas, where we have acquired a significant acreage position and accumulated a large drillsite inventory.
	Aggressively Evaluate 3-D Seismic Data and Acquire Acreage to Maintain a Large Drillsite Inventory. We have accumulated and continue to add to a multiyear inventory of 3-D seismic and geologic data along the prolific producing trend of the onshore Gulf Coast area and industry-proven trend of the Barnett Shale area. In 2006, we added approximately 761 square miles of newly released 3-D and seismic data. We believe our utilization of large-scale 3-D