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In mid-2003, we became active
in the Barnett Shale area in North Texas (primarily in the Tarrant,
Parker, Denton, Johnson, Hill and Erath counties). Improvements
in fracture techniques in recent years have dramatically changed
the economics of 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 notably longer-lived compared
to thetypical 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 a horizontal well range from approximately $2.0 million
to $3.5 million. Our Barnett horizontal wells generally have target
depths of 8,500 to 11,500 feet including the lateral section. During
2007, we held an average 78 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 2008, we plan to increase our average working interests
to between 90 and 95 percent.
Accordingly, we believe that
continued development of producing reserves in the Barnett Shale
play has lengthened our overall average reserve life and, on balance,
added a long-lived cash flow stream to help fund our future capital
exploration and development program. In our Barnett Shale area through
December 31, 2007, we had acquired 85,429 net acres, drilled 182
gross (118.2 net) wells and increased our total proved reserves
in the Barnett Shale area to 276.0 Bcfe. As of February 7,2008,
our current net production in the Barnett Shale area was estimated
at 57 MMcfe/d.
As of December 31, 2007,
we operated 153 producing oil and gas wells, which accounted for
approximately 75% of the onshore Gulf Coast area production and
approximately 85% of the Barnett Shale production.
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, 2007, we owned approximately 8.3% of the common stock of Pinnacle
on a fully diluted basis. During the second quarter of 2007, Pinnacle
became a publicly traded entity on the Nasdaq Global Market.
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:
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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 85% over the last four years
and a 100% drilling success rate in our Barnett Shale area since
inception in 2003. During 2008, we are drilling or plan to drill
approximately 15 gross (5.8 net) wells in the onshore Gulf Coast
area and 68 gross (62.6 net) wells in the Barnett Shale area.
We have planned approximately $300 million for capital expenditures
in 2008, approximately $250 million of which we expect to use
for drilling activities, including $185 million in the Barnett
Shale area and $23 million in onshore Gulf Coast area. |
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Focus on Prolific and Industry-Proven
Trends. We focus our activities both in the industry-proven
Barnett Shale trend in which our wells have generally longer-lived
reserves and the prolific onshore Gulf Coast area where our
management, our technical staff and our field operations teams
have significant prior experience. Although we have broadened
our areas of operations to include the Rocky Mountains, the
U.K. North Sea and shale trends in Arkansas, West Texas/New
Mexico, Mississippi/Alabama, Illinois/Kentucky and Pennsylvania/New
York, we plan to focus a majority of our near-term capital expenditures
in the Barnett Shale area in North Texas, where we have acquired
a significant acreage position and accumulated a large drillsite
inventory, and in the onshore Gulf Coast area, where we believe
our accumulated data and knowledge base provide a competitive
advantage. |
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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 |
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