with an apparent success rate of 95.7% compared to an apparent success rate of 94% in 2005, in which we drilled 65 wells (35.8 net). Between January 1, 2004 and December 31, 2006, 67% of our wells drilled were exploratory and 33% were developmental. In 2006, 72% of these wells were exploratory and 28% were developmental. The percentage of developmental wells reflects our increased activity in the Barnett Shale area, which has a relatively higher concentration of development well targets than the onshore Gulf Coast area.

In 2006, our natural gas and oil revenues reached a record level at $82.9 million, and our net income available to common shareholders was $18.2 million, or $0.74 and $0.71 per basic and fully diluted share, respectively. In 2005, our natural gas and oil revenues were $78.2 million, and our net income available to common shareholders was $10.6 million, or $0.45 and $0.44 per basic and fully diluted share, respectively. These increases in natural gas and oil revenues and net income were attributable in part to the record levels of production discussed above.

Our financial results are largely dependent on a number of factors, including commodity prices. Commodity prices are outside of our control and historically have been and are expected to remain volatile. Natural gas prices in particular have remained volatile during the last few years. Commodity prices are affected by changes in market demands, overall economic activity, weather, pipeline capacity constraints, inventory storage levels, basis differentials and other factors. As a result, we cannot accurately predict future natural gas, natural gas liquids and crude oil prices, and therefore, cannot accurately predict revenues. Carrizo’s average natural gas sales price for 2006 decreased 17% to $6.56 per Mcf compared to $7.90 per Mcf in 2005, and the average oil sales price for 2006 increased 13% to $63.62 per barrel from $56.36 per barrel in 2005.

Because natural gas and oil prices are unstable, we periodically enter into price-risk-management transactions such as swaps, collars, futures and options to reduce our exposure to price fluctuations associated with a portion of our natural gas and oil production and to achieve a more predictable cash flow. The use of these arrangements limits our ability to benefit from potential increases in the prices of natural gas and oil. Our derivative arrangements may apply to only a portion of our production and provide only partial protection against declines in natural gas and oil prices.

We have continued to reinvest a substantial portion of our operating cash flows into funding our drilling program and increasing the amount of 3-D seismic data available to us. In 2007, we expect capital expenditures, excluding capitalized interest and overhead, to be approximately $165.0 to $175.0 million, as compared to $188.3 million in 2006.

In 2007, we plan to drill 15 gross wells in the onshore Gulf Coast area, 53 gross wells in our Barnett Shale area, 25 to 30 gross wells in our East Texas area, primarily in our Camp Hill oil field, and five wells in other areas. The actual number of wells drilled will vary depending upon various factors, including the availability and cost of drilling rigs, land and industry partner issues, our cash flow, success of drilling programs, weather delays and other factors. If we drill the number of wells we have budgeted for 2007, depreciation, depletion and amortization, oil and natural gas operating expenses and production are expected to increase over levels incurred in 2006. Our ability to drill this number of wells is heavily dependent upon the timely access to oilfield services, particularly drilling rigs. The shortage of available rigs in 2006 delayed the drilling of several wells, slowing our growth in production.

At December 31, 2006, our net debt-to-total net capitalization ratio (computed as total debt net of cash, “net debt”, divided by the sum of (1) net debt plus (2) total book equity) was 46%, an increase from the 44% ratio at the end of 2005. This increase was primarily the result of borrowings under our Senior Secured Revolving Credit Facility totaling $41 million during 2006, partially offset by $33.5 million of net proceeds from the private placement of 1.35 million shares of common stock in July 2006. Please read “—Liquidity and Capital Resources—Financing Arrangements” for more information on our financing activities.

Since our initial public offering, we have grown primarily through the exploration of properties within our project areas, although we consider acquisitions from time to time and may in the future complete acquisitions that we find attractive. In 2004, 2005 and 2006 we completed asset acquisitions in our Barnett Shale project area described below in “—Barnett Shale Area.”

2004 Public Offering and 2005 and 2006 Private Placements of Common Stock

In the first quarter of 2004, we completed the public offering of 6,485,000 shares of our common stock at $7.00 per share. The offering included 3,655,500 newly issued shares offered by us and 2,829,500 shares offered by certain selling shareholders. Our net proceeds of approximately $23.4 million from this offering were used: (1) to accelerate our drilling program, (2) to retain larger interests in portions of our drilling prospects that we otherwise would sell down (or for which we would seek joint partners), (3) to fund a portion of our activities in the Barnett Shale area and (4) for general corporate purposes. We did not receive any proceeds from the shares sold by the selling shareholders.

In the second quarter of 2005, we sold 1.2 million shares of our common stock (or approximately 5% of the fully diluted shares outstanding before the offering) to institutional investors at a price of $15.25 per share in a private placement (the “2005