PRESS RELEASE CONTACT: CARRIZO OIL & GAS, INC.
B. ALLEN CONNELL, DIRECTOR OF INVESTOR RELATIONS
PAUL F. BOLING, CHIEF FINANCIAL OFFICER
(713) 328-1000
CARRIZO OIL & GAS, INC. ANNOUNCES FOURTH QUARTER AND ANNUAL 2004 FINANCIAL
RESULTS INCLUDING RECORD REVENUES AND EBITDA
HOUSTON, MARCH 16, 2005 -- CARRIZO OIL & GAS, INC. (NASDAQ: CRZO) today reported
the Company's financial results for the fourth quarter of 2004, which included
the following highlights:
FOURTH QUARTER 2004 RESULTS --
THE FOURTH QUARTER 2004 RESULTS INCLUDED THE FOLLOWING HIGHLIGHTS:
o RECORD PRODUCTION OF 2.43 BCFE.
o RECORD QUARTERLY REVENUE OF $16.3 MILLION.
o NET INCOME OF $3.1 MILLION.
o RECORD EBITDA, AS DEFINED BELOW, OF $11.6 MILLION.
Revenues for the three months ended December 31, 2004 increased 83 percent
reaching a record $16.3 million as compared to $8.9 million during the quarter
ended December 31, 2003. The increase in revenues was driven by higher natural
gas production and higher prevailing oil and natural gas prices. Production
volumes during the three months ended December 31, 2004 increased 31 percent
reaching a record 2.43 Bcfe as compared to 1.86 Bcfe during the fourth quarter
of 2003. The increase was largely due to new production contributions from the
Beach House #1, the LL&E wells, the Lopez #13, the Peal Ranch wells and the
Barnett Shale wells, partially offset by natural declines. Carrizo's average oil
sales price increased 59 percent to $44.80 per barrel from $28.17 per barrel
during the fourth quarter of 2003, while the average natural gas sales price
increased 35 percent to $6.53 per Mcf from $4.83 per Mcf in the fourth quarter
of 2003. The above prices include the effect of hedging activities.
After dividends, accretion of discount on preferred stock and the cumulative
effect of change in accounting principle, the Company reported net income
available to common shares ("Net Income") of $3.1 million, or $0.14 and $0.14
per basic and diluted share, respectively, for the three months ended December
31, 2004, an increase of 275 percent compared to $0.8 million, or $0.06 and
$0.05 per basic and diluted share, respectively, for the same quarter during
2003. Excluding both the $1.0 million non-cash after-tax impact (comprised of
(1) the $0.3 million stock option compensation expense-related to employee stock
options repriced in 2000, (2) $0.2 million for bad debt expense and (3) a $0.6
million equity in the loss of Pinnacle Gas Resources, Inc. - primarily
attributable to dividends on Pinnacle preferred stock); and the $0.2 million
non-recurring, after-tax impact of general and administrative expenses comprised
of legal and professional fees related to the Sarbanes-Oxley
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compliance project and other projects), Net Income for the quarter ended
December 31, 2004 was $4.4 million, or $0.20 and $0.19 per basic and diluted
share, respectively.
EBITDA (earnings before interest, income tax, depreciation and amortization
expenses, and certain other non-cash items) during the fourth quarter of 2004
was $11.6 million, or $0.53 and $0.50 per basic and diluted share, respectively,
an increase of 97 percent compared to $5.9 million, or $0.40 and $0.34 per basic
and diluted share, respectively, during the fourth quarter of 2003. Excluding
the $0.7 million of general and administrative expenses comprised of bad debt
expense and non-recurring legal and professional fees, EBITDA for the fourth
quarter of 2004 was $12.3 million, or $0.56 and $0.53 per basic and diluted
share, respectively.
Oil and natural gas operating expenses (excluding production taxes) increased to
$1.6 million during the three months ended December 31, 2004 as compared to $1.2
million for the fourth quarter of 2003. The increase was primarily due to higher
workover expense and higher lifting costs due to the increased well count of the
Barnett Shale wells and other new wells mentioned above.
Depreciation, depletion and amortization expenses ("DD&A") were $4.9 million
during the three months ended December 31, 2004 as compared to $3.1 million
during the fourth quarter of 2003. The increase in DD&A expense was due to (1)
an increase in the production volumes and (2) an increase in the DD&A rate
primarily due to additions to the proved property cost base.
General and administrative expenses ("G&A") increased to $2.1 million during the
three months ended December 31, 2004 from $1.4 million during the same quarter
of 2003. The increase in G&A was largely due to the impact of: $0.3 million in
bad debt expense and $0.4 million in higher legal and professional fees
associated with the Sarbanes-Oxley compliance project and other projects.
Non-cash stock option compensation expense was $0.4 million ($0.3 million after
tax) for the three months ended December 31, 2004. This represents the
quarter-to-quarter increase in value of employee stock options that were
repriced in 2000.
Other income and expense for the fourth quarter of 2004 was a net expense of
$0.6 million largely attributable to the non-cash equity in the loss of Pinnacle
of $0.6 million (both before and after tax). Other income and expense for the
fourth quarter of 2003 was a net charge of $0.6 million largely attributable to
the non-cash equity in the loss of Pinnacle. Net losses are expected in this
early phase of Pinnacle's development of its coalbed methane play, and are
expected to continue into 2005.
RESULTS FOR THE YEAR ENDED 2004 --
THE RESULTS FOR THE YEAR ENDED 2004 INCLUDE THE FOLLOWING HIGHLIGHTS:
o RECORD PRODUCTION OF 8.32 BCFE.
o RECORD REVENUES OF $51.4 MILLION.
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o RECORD NET INCOME OF $10.5 MILLION.
o RECORD EBITDA, AS DEFINED BELOW, OF $36.3 MILLION.
Revenues for the year ended 2004 increased 33 percent to $51.4 million from
$38.5 million during the year ended 2003. The increase in revenues was driven by
higher prevailing oil and natural gas prices and higher production. Production
volumes during the year ended 2004 increased 11 percent to 8.32 Bcfe as compared
to 7.46 Bcfe in 2003. Carrizo's average oil sales price increased 34 percent to
$38.78 per barrel from $28.90 per barrel in 2003, while the average natural gas
sales price increased 13 percent to $6.09 per Mcf from $5.35 per Mcf in 2003.
The above prices include the effect of hedging activities.
The Company reported Net Income of $10.5 million, or $0.53 and $0.48 per basic
and diluted share, respectively, for the year ended 2004, as compared to $7.2
million, or $0.50 and $0.43 per basic and diluted share, respectively, for 2003.
Excluding both the $2.3 million non-cash after-tax impact (comprised of (1) the
$0.7 million stock option compensation expense - related to employee stock
options repriced in 2000, (2) $0.2 million for bad debt expense and (3) the $1.4
million equity loss of Pinnacle Gas Resources - primarily attributable to
dividends on Pinnacle preferred stock); and the $0.2 million non-recurring,
after-tax impact of general and administrative expenses comprised of legal and
professional fees related to the Sarbanes-Oxley compliance project and other
projects), Net Income for the year ended 2004 was $13.0 million, or $0.65 and
$0.60 per basic and diluted share, respectively.
EBITDA for 2004 was $36.3 million, or $1.82 and $1.66 per basic and diluted
share, respectively, an increase of 40 percent compared to $26.0 million, or
$1.82 and $1.56 per basic and diluted share, respectively, in 2003. Excluding
the $0.7 million impact from general and administrative expenses comprised of
bad debts and non-recurring legal and professional fees, EBITDA for 2004 was
$37.0 million, or $1.85 and $1.70 per basic and diluted share, respectively.
Oil and natural gas operating expenses (excluding production taxes) increased to
$5.3 million during the year ended 2004 as compared to $4.3 million in 2003. The
increase was primarily due to the increased well count comprised of the Barnett
Shale wells and other new wells.
Depreciation, depletion and amortization expenses ("DD&A") were $15.5 million
during the year ended 2004 as compared to $11.9 million in 2003. The increase in
DD&A expense was due to (1) an increase in the DD&A rate primarily due to
additions to the proved property cost base and (2) increased production volumes.
General and administrative expenses ("G&A") increased to $7.2 million during the
year ended 2004 from $5.6 million in 2003. The increase in G&A was due primarily
to higher incentive compensation costs of $0.8 million, non-cash expenses of
$0.3 million in bad debt expense and non-recurring expense of $0.4 million in
legal and professional fees in connection with the 2003 year-end audit, costs
related to Sarbanes-Oxley compliance, higher professional fees in connection
with the subordinated debt financings and in part to higher salary and benefit
costs.
Non-cash stock option compensation expense increased to $1.1 million ($0.7
million after tax) during the year ended 2004 from $0.3 million ($0.2 million
after tax) in 2003.
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Other income and expense for 2004 was a net charge of $0.9 million largely
comprised of (1) non-cash equity in the loss of Pinnacle of $1.4 million (both
before and after tax), partially offset by (2) the sale of our Enron claim for a
gain of $0.5 million, which was fully reserved for in prior years. Other income
and expense in 2003 was $0.8 million for the equity in the loss of Pinnacle.
"Carrizo had an outstanding year in 2004, reaching record levels in production,
reserves and EBITDA," commented S.P. Johnson IV, Carrizo's President and Chief
Executive Officer. "Our anticipated surge in production in the fourth quarter
led to record quarterly revenues and EBITDA. Over 2004, our staff did an
excellent job managing our drilling or participation in 71 new wells with an
overall 92 percent success rate. Although not finalized, our 2005 $70.0 million
drilling plan is based on a balance between our successful Gulf Coast drilling
program and our accelerating Barnett Shale program, where we now have more than
40,000 net acres. This drilling plan would be a 46 percent increase over 2004.
"We also made significant improvements in our balance sheet last year, including
a successful equity offering in February, conversion of our preferred stock in
the second quarter, a new subordinated term loan in October and steady increases
in the capacity of our senior revolver. The result is more than $15.0 million of
undrawn capacity in addition to our discretionary cash flow. We are off to a
great start in 2005."
OTHER MATTERS
The results reported in the press release include the Company's estimate of
results of Pinnacle Gas Resources, Inc., which is reflected in the Company's
financial statements using the equity method of accounting. Pinnacle, a private
company, has not completed its year-end audit, and its final results remain
subject to change, which could in turn result in changes in the Company's
results. The Company expects that any changes to Pinnacle's financial results as
a result of the completion of its audit will have no material impact on the
Company's reported financial results for the fourth quarter and year ended 2004.
The Company expects to file with the SEC a Form 12b-25, stating that it will
require additional time to complete and file its 2004 Annual Report on Form 10-K
largely due to the delay in obtaining the audited financial statements of
Pinnacle Gas Resources, Inc., incorporated into Carrizo's financial statements,
and the workload and requirements of management associated with the
Sarbanes-Oxley Act, which, in turn, has delayed the independent accountants
from completing their audit of the Form 10-K.
Carrizo Oil & Gas, Inc., is a Houston-based energy company actively engaged in
the exploration, development, exploitation and production of oil and natural gas
primarily in proven onshore trends along the Texas and Louisiana Gulf Coast
regions and in the Barnett Shale area in North Texas. Carrizo controls
significant prospective acreage blocks and utilizes advanced 3-D seismic
techniques to identify potential oil and gas reserves and drilling
opportunities.
Statements in this news release, including but not limited to those relating to
the Company's or management's intentions, beliefs, expectations, hopes,
projections, assessment of risks, estimations, plans or predictions for the
future including the portion of the Company's results relating to Pinnacle Gas
Resources, Inc., future Pinnacle results, potential effects or timing, cash
flow, drilling
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plans, reserve growth, effect of financing, growth in Barnett Shale, the
expected timing of drilling of additional wells and other statements that are
not historical facts are forward looking statements that are based on current
expectations. Although the Company believes that its expectations are based on
reasonable assumptions, it can give no assurance that these expectations will
prove correct. Important factors that could cause actual results to differ
materially from those in the forward looking statements include the final
results of the Pinnacle audit, the results and dependence on exploratory
drilling activities, operating risks, oil and gas price levels, land issues,
availability of equipment, weather and other risks described in the Company's
Form 10-K for the year ended December 31, 2003 and its other filings with the
Securities and Exchange Commission.
(Financial Highlights to Follow)
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CARRIZO OIL & GAS, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Oil and natural gas revenues $ 16,267,040 $ 8,892,967 $ 51,373,991 $ 38,508,067
------------ ------------ ------------ ------------
Costs and expenses:
Oil and natural gas operating expenses 1,600,407 1,229,763 5,259,896 4,330,706
Production taxes 943,103 423,639 3,132,387 2,393,151
Depreciation, depletion and amortization 4,902,805 3,140,338 15,464,232 11,867,651
General and administrative expenses 2,115,309 1,364,627 7,190,552 5,638,623
Accretion expense related to asset retirement obligations 1,749 12,842 22,641 41,518
Stock option compensation expense (benefit) 447,018 (6,348) 1,064,299 312,889
------------ ------------ ------------ ------------
Total costs and expenses 10,010,391 6,164,861 32,134,007 24,584,538
------------ ------------ ------------ ------------
Operating income 6,256,649 2,728,106 19,239,984 13,923,529
------------ ------------ ------------ ------------
Other income and expenses, net (579,540) (637,618) (893,437) (801,975)
Interest income 30,757 8,351 75,474 58,603
Interest expense, net of amounts capitalized (515,218) (61,386) (697,134) (77,118)
------------ ------------ ------------ ------------
Income before income taxes 5,192,648 2,037,453 17,724,887 13,103,039
------------ ------------ ------------ ------------
Income tax expense 2,050,654 1,009,795 6,871,013 5,062,630
------------ ------------ ------------ ------------
Net income before cumulative effect of change in accounting principle 3,141,994 1,027,658 10,853,874 8,040,409
------------ ------------ ------------ ------------
Dividends and accretion of discount on preferred stock -- 189,309 350,720 740,830
------------ ------------ ------------ ------------
Net income available to common shares before cumulative effect of
change in accounting principle 3,141,994 838,349 10,503,154 7,299,579
------------ ------------ ------------ ------------
Cumulative effect of change in accounting principle -- -- -- 128,374
------------ ------------ ------------ ------------
Net income available to common shares $ 3,141,994 $ 838,349 $ 10,503,154 $ 7,171,205
============ ============ ============ ============
EBITDA (see table below) $ 11,583,266 $ 5,890,189 $ 36,296,962 $ 26,044,930
============ ============ ============ ============
Basic net income per common share:
Net income before cumulative effect of change in accounting principle $ 0.14 $ 0.06 $ 0.53 $ 0.51
Cumulative effect of change in accounting principle -- -- -- (0.01)
------------ ------------ ------------ ------------
Basic net income per common share $ 0.14 $ 0.06 $ 0.53 $ 0.50
============ ============ ============ ============
Diluted net income per common share:
Net income before cumulative effect of change in accounting principle $ 0.14 $ 0.05 $ 0.48 $ 0.44
Cumulative effect of change in accounting principle -- -- -- (0.01)
------------ ------------ ------------ ------------
Diluted net income per common share $ 0.14 $ 0.05 $ 0.48 $ 0.43
============ ============ ============ ============
Basic weighted average common shares outstanding 22,053,053 14,569,768 19,958,452 14,311,820
------------ ------------ ------------ ------------
Diluted weighted average common shares outstanding 23,091,680 17,288,664 21,818,065 16,744,296
------------ ------------ ------------ ------------
</Table>
(more)
CARRIZO OIL & GAS, INC.
CONDENSED BALANCE SHEETS
<Table>
<Caption>
12/31/04 12/31/03
------------ ------------
(unaudited)
ASSETS:
Cash and cash equivalents $ 5,668,000 $ 3,322,057
Other current assets 15,965,885 11,003,512
Property and equipment, net 205,482,585 135,273,200
Other assets 1,689,447 567,755
Investment in Pinnacle Gas Resources, Inc. 5,229,134 6,636,589
------------ ------------
TOTAL ASSETS $234,035,051 $156,803,113
============ ============
LIABILITIES AND EQUITY:
Accounts payable and accrued liabilities $ 30,682,970 $ 24,001,971
Current maturities of long-term debt 89,653 2,139,549
Long-term notes payable 18,032,002 7,121,646
Long-term subordinated notes payable, net 44,852,384 26,991,413
Deferred income taxes 18,112,950 12,479,553
Other liabilities 1,406,567 883,117
Convertible participating preferred stock -- 7,114,103
Equity 120,858,525 76,071,761
------------ ------------
TOTAL LIABILITIES AND EQUITY $234,035,051 $156,803,113
============ ============
</Table>
(1) Income tax expense for the three and twelve months ended December 31,
2004 includes a $2,027,286 and $6,678,475, respectively, provision for
deferred income taxes and a $23,367 and $192,539, respectively,
provision for currently payable franchise taxes. Income tax expense for
the three and twelve months ended December 31, 2003 includes a $964,795
and $4,882,630, respectively, provision for deferred income taxes and a
$45,000 and $180,000, respectively, provision for currently payable
franchise taxes.
(2) Long-term notes payable at December 31, 2003 includes a note in the
principal amount $863,246 payable by CCBM, Inc. (a wholly-owned
subsidiary of the Company) to Rocky Mountain Gas, Inc. recourse solely
to CCBM, Inc.'s interests in certain undeveloped oil and natural gas
leases in Wyoming and Montana. At December 31, 2004 and 2003 current
maturities of long-term debt include zero and $863,246, respectively,
related to the CCBM, Inc. note.
(3) Long-term subordinated notes payable are presented net of discounts of
$1,987,206 and $342,012 as of December 31, 2004 and 2003, respectively.
(4) Stock option compensation expense (benefit) is a non-cash charge
(benefit) resulting from the change in the price of the stock
underlying employee stock options that were repriced in February 2000.
(5) In February 2002, the Company consummated the sale of $6 million of
convertible participating preferred stock and warrants to purchase the
Company's common stock. Convertible preferred stock is presented net of
discounts. All of the convertible participating preferred stock was
converted into 1,318,125 shares of common stock during the three months
ended June 30, 2004.
(6) During the twelve months ended December 31, 2004, 2,928,611 warrants
were converted into 2,159,627 shares of common stock.
(7) The Company adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations" on January 1, 2003, resulting in a charge of
$128,374 for the year ended December 31, 2003 to record the cumulative
effect of the change in accounting principle.
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CARRIZO OIL & GAS, INC.
NON-GAAP DISCLOSURES
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED TWELVE MONTHS ENDED
Reconciliation of Net Income to EBITDA DECEMBER 31, DECEMBER 31,
-------------------------------------- -------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net income before cumulative effect of change in accounting principle $ 3,141,994 $ 1,027,658 $10,853,874 $ 8,040,409
----------- ----------- ----------- -----------
Cumulative effect of change in accounting principle -- -- -- (128,374)
----------- ----------- ----------- -----------
Net Income before dividends $ 3,141,994 $ 1,027,658 $10,853,874 $ 7,912,035
----------- ----------- ----------- -----------
Adjustments:
Depreciation, depletion and amortization 4,902,805 3,140,338 15,464,232 11,867,651
Interest expense, net of amounts capitalized and interest income 484,461 53,035 621,660 18,515
Income taxes 2,050,654 1,009,795 6,871,013 5,062,630
Equity in loss of Pinnacle Gas Resources, Inc. 554,585 652,869 1,399,243 829,692
Stock option compensation expense (benefit) 447,018 (6,348) 1,064,299 312,889
Accretion expense related to asset retirement obligations 1,749 12,842 22,641 41,518
----------- ----------- ----------- -----------
EBITDA, as defined $11,583,266 $ 5,890,189 $36,296,962 $26,044,930
=========== =========== =========== ===========
EBITDA per basic common share $ 0.53 $ 0.40 $ 1.82 $ 1.82
=========== =========== =========== ===========
EBITDA per diluted common share $ 0.50 $ 0.34 $ 1.66 $ 1.56
=========== =========== =========== ===========
</Table>
CARRIZO OIL & GAS, INC.
PRODUCTION VOLUMES AND PRICES
(unaudited)
<Table>
Production volumes-
Oil and condensate (Bbls) 66,266 87,700 309,411 450,343
Natural gas (Mcf) 2,035,016 1,329,268 6,462,325 4,760,906
Natural gas equivalent (Mcfe) 2,432,612 1,855,468 8,318,791 7,462,964
Average sales prices-
Oil and condensate (per Bbl) $44.80 $28.17 $38.78 $28.90
Natural gas (per Mcf) $ 6.53 $ 4.83 $ 6.09 $ 5.35
Natural gas equivalent (per Mcfe) $ 6.69 $ 4.79 $ 6.18 $ 5.16
</Table>
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