1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1999
--------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to _________
Commission File Number 000-22915.
CARRIZO OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0415919
- ------------------------------- -------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
14811 ST. MARY'S LANE, SUITE 148, HOUSTON, TEXAS 77079
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(281) 496-1352
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(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the registrant's common stock, par value
$0.01 per share, as of May 12, 1999, the latest practicable date, was
10,375,000.
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CARRIZO OIL & GAS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Condensed Balance Sheets
- As of March 31, 1999 and December 31, 1998 2
Condensed Statements of Operations
- For the three-month periods ended March 31, 1998
and 1999 3
Condensed Statements of Cash Flows
- For the three-month periods ended March 31, 1998
and 1999 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Items 1-6. 16
SIGNATURES 18
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CARRIZO OIL & GAS, INC.
CONDENSED BALANCE SHEETS
December 31, March 31,
1998 1999
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,187,656 $ 1,834,437
Accounts receivable 4,227,365 3,927,229
Advances to operators 1,192,079 836,099
Other current assets 117,614 117,614
------------ ------------
Total current assets 6,724,714 6,715,379
PROPERTY AND EQUIPMENT, net (full-cost method of accounting for oil and
gas properties) 57,878,191 59,097,733
OTHER ASSETS 385,127 306,883
------------ ------------
$ 64,988,032 $ 66,119,995
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 10,003,376 $ 9,052,949
Dividends payable 720,360 736,568
Other current liabilities 275,116 231,101
Current maturities of long-term debt 930,000 4,828,445
------------ ------------
Total current liabilities 11,928,852 14,849,063
LONG-TERM DEBT (Note 4) 11,126,000 9,844,405
DEFERRED INCOME TAXES -- --
MANDATORILY REDEEMABLE PREFERRED STOCK (10,000,000 shares
authorized with 320,110.53 and 327,286.69 issued and outstanding at December
31, 1998 and March 31, 1999, respectively) (Note 5) 30,730,695 31,503,330
SHAREHOLDERS' EQUITY:
Warrants (Note 5) 300,000 300,000
Common Stock (40,000,000 shares authorized with 10,375,000 issued and
Outstanding at December 31, 1998 and March 31, 1999, respectively) 103,750 103,750
Additional paid-in capital 32,845,727 32,845,727
Retained earnings (deficit) (21,907,082) (23,326,280)
Deferred compensation (139,910) --
------------ ------------
11,202,485 9,923,197
------------ ------------
$ 64,988,032 $ 66,119,995
============ ============
The accompanying notes are an integral part of these financial statements.
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CARRIZO OIL & GAS, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three
Months Ended
March 31,
--------------------------------
1998 1999
------------ ------------
OIL AND NATURAL GAS REVENUES $ 2,338,882 $ 1,842,314
COSTS AND EXPENSES:
Oil and natural gas operating expenses 629,446 743,704
Depreciation, depletion and amortization 759,504 943,191
General and administrative 834,352 707,525
------------ ------------
Total costs and expenses 2,223,302 2,394,420
------------ ------------
OPERATING INCOME (LOSS) 115,580 (552,106)
OTHER INCOME AND EXPENSES:
Interest income
193,503 6,485
Interest expense (57,731) (260,382)
Capitalized interest 54,646 260,382
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 305,998 (545,621)
INCOME TAXES 120,463 7,002
------------ ------------
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 185,535 (552,623)
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
REPORTING COSTS OF START-UP ACTIVITIES (Note 6) -- 77,731
------------ ------------
NET INCOME (LOSS) $ 185,535 $ (630,354)
============ ============
LESS: DIVIDENDS AND ACCRETION ON PREFERRED SHARES (670,494) (788,843)
------------ ------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (484,959) $ (1,419,197)
============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (Note 3)
$ (.05) $ (.13)
BASIC AND DILUTED LOSS PER COMMON SHARE OF CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (Notes 3 and 6) -- (.01)
------------ ------------
BASIC AND DILUTED LOSS PER COMMON SHARE (Note 3) $ (.05) $ (.14)
============ ============
The accompanying notes are an integral part of these financial statements.
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CARRIZO OIL & GAS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Three
Months Ended
March 31,
--------------------------------
1998 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 185,535 $ (630,354)
Adjustment to reconcile net income (loss) to net cash provided by
operating activities-
Depreciation, depletion and amortization 759,504 943,191
Deferred income taxes 99,903 --
Cumulative effect of change in accounting principle -- 77,731
Changes in assets and liabilities-
Accounts receivable 535,122 300,136
Other assets (7,980) (86,378)
Accounts payable, trade (5,013,493) (1,119,729)
Other current liabilities (13,197) (44,015)
------------ ------------
Net cash used in
operating activities (3,454,606) (559,418)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, accrual basis (8,918,344) (1,935,933)
Adjustment to cash basis 734,773 169,302
Advance to operators (96,856) 355,980
------------ ------------
Net cash used in
investing activities (8,280,427) (1,410,651)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of preferred stock 28,810,431 --
Proceeds from long-term debt -- 2,616,850
Debt repayments (7,950,000) --
------------ ------------
Net cash provided by financing activities 20,860,431 2,616,850
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,125,398 646,781
CASH AND CASH EQUIVALENTS, beginning of period 2,674,837 1,187,656
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 11,800,235 $ 1,834,437
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest (net of amounts capitalized) $ -- $ --
============ ============
The accompanying notes are an integral part of these financial statements.
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CARRIZO OIL & GAS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND PRINCIPLES OF COMBINATION:
The condensed financial statements included herein have been prepared by Carrizo
Oil & Gas, Inc. (the Company), and are unaudited, except for the balance sheet
at December 31, 1998, which has been prepared from the audited financial
statements at that date. The financial statements reflect necessary adjustments,
all of which were of a recurring nature, and are in the opinion of management
necessary for a fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). The Company
believes that the disclosures presented are adequate to allow the information
presented not to be misleading. The condensed financial statements included
herein should be read in conjunction with the audited financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
The Company was formed in 1993 and is the surviving entity after a series of
combination transactions (the Combination). The Combination included the
following transactions: (a) Carrizo Production, Inc. (a Texas corporation and an
affiliated entity with ownership substantially the same as Carrizo), was merged
into Carrizo and the outstanding shares of capital stock of Carrizo Production,
Inc., were exchanged for an aggregate of 343,000 shares of common stock of
Carrizo; (b) Carrizo acquired Encinitas Partners Ltd. (a Texas limited
partnership of which Carrizo Production, Inc., served as the general partner) as
follows: Carrizo acquired from the shareholders who serve as directors of
Carrizo their limited partner interests in Encinitas Partners Ltd. for an
aggregate consideration of 468,533 shares of common stock and, on the same date,
Encinitas Partners Ltd. was merged into Carrizo and the outstanding limited
partner interests in Encinitas Partners Ltd. were exchanged for an aggregate of
860,699 shares of common stock; (c) La Rosa Partners Ltd. (a Texas limited
partnership of which Carrizo served as the general partner) was merged into
Carrizo and the outstanding limited partner interests in La Rosa Partners Ltd.
were exchanged for an aggregate of 48,700 shares of common stock; and (d)
Carrizo Partners Ltd. (a Texas limited partnership of which Carrizo served as
the general partner) was merged into Carrizo and the outstanding limited partner
interests in Carrizo Partners Ltd. were exchanged for an aggregate of 569,068
shares of common stock.
Simultaneous with the Combination, the Company completed its initial public
offering (the Offering) of 2,875,000 shares of its common stock at a public
offering price of $11.00 per share. The Offering provided the Company with
proceeds of approximately $28.1 million, net of expenses.
The Combination was accounted for as a reorganization of entities as prescribed
by Securities and Exchange Commission (SEC) Staff Accounting Bulletin 47 because
of the high degree of common ownership among, and the common control of, the
combining entities. Accordingly, the accompanying financial statements have been
prepared using the historical costs and results of operations of the affiliated
entities. There were no significant differences in accounting methods or their
application among the combining entities. All intercompany balances have been
eliminated. Certain reclassifications have been made to prior period amounts to
conform to the current period's financial statement presentation.
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2. GOING CONCERN:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Due principally to depressed oil and
gas prices, the Company's operating cash flows have decreased significantly in
1998 and through the first quarter of 1999. The Company projects that, after
considering advances and borrowing base adjustments obtained during the first
quarter of 1999, and without further increases in borrowing base capacity under
its existing revolving credit facility, debt repayments totaling approximately
$4,828,445 will be required in the 12 months ended March 31, 1999. The Company
raised $2 million in additional financing under its existing credit facility in
March 1999; however, it is anticipated that these proceeds will be utilized to
fund the Company's ongoing drilling program and for working capital. The Company
must find additional oil and gas reserves in order to significantly increase the
financing available through its existing revolving credit facility.
The Company projects that its cash sources will exceed its planned needs for
cash in 1999. Such cash sources include additional borrowings subject to
borrowing availability, cash flows from currently producing properties along
with those nearing completion or pending pipeline hookup and projected net cash
flows from wells to be drilled. Cash needs in 1999 include debt requirements,
working capital, drilling expenditures, lease bonus payments, geological and
geophysical costs on its active exploration projects and cash general and
administrative costs. The Company also has specific plans which involve, among
other things, cost reductions, hedging activities to lock in higher prices and
the drilling of high probability exploration and development prospects that it
believes will generate the necessary borrowing capacity and cash flow to fund
its 1999 obligations. There are no assurances, however, that the Company will be
able to generate cash flows sufficient to pay all of its 1999 obligations as
they become due because of the sensitivity of such cash flow projections to
factors such as oil and natural gas sales price volatility, production levels,
operating cost fluctuations, and other variables inherent in the oil and gas
industry. The current uncertainties surrounding the sufficiency of its future
cash flows and the lack of firm commitments for additional capital raise
substantial doubt about the ability of the Company to continue as a going
concern. The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
As of March 31, 1999 and December 31, 1998, respectively, the Company had
$37,432,153 and $37,060,418 of investment in unevaluated properties. In order to
fully realize this investment through the exploration and development of these
properties, additional capital resources above the amount currently available
from the borrowing base and net cash flow from operations will be necessary to
fund such capital expenditures. The Company is continuing to seek additional
financing from a variety of sources, including new common or preferred equity
investors and additional debt financing. No assurance can be given that
additional financing will be available by these or other means on terms
acceptable to the Company. Without a continued increase in commodity prices,
successful drilling or raising additional capital, the Company anticipates that
it will be required to limit or defer its planned oil and gas exploration and
development program, which could adversely affect the recoverability and
ultimate value of the Company's oil and gas properties. The Company has the
ability to control the pace of drilling in projects where it has a 100 percent
working interest. In other projects where the Company only has a partial
ownership, the Company generally has the right, but not the obligation, to
participate for its percentage interest in drilling wells and can decline to
participate if it does not have sufficient capital resources at the time such
drilling operations commence. The Company may also transfer its right to
participate in drilling wells in exchange for cash, a reversionary interest, or
some combination thereof or may seek to sell or transfer all or a portion of its
interest in undeveloped properties.
3. EARNINGS PER COMMON SHARE:
Supplemental earning per share information is provided below:
For the Three Months Ended March 31,1998
----------------------------------------------------
Per-Share
Income Shares Amount
------------ ---------- ------------
Net Income $ 185,535
Less: Dividends and accretion on preferred stock (670,494)
------------
Basic Earnings per Share
Net Loss available to common shareholders $ (484,959) 10,375,000 $ (0.05)
============
Stock Options -- 112,769
------------ ------------
Diluted Earnings per Share
Net Loss available to common
shareholders plus assumed conversions $ (484,959) 10,487,769 $ (0.05)
============ ============ ============
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For the Three Months Ended March 31,1999
----------------------------------------------------
Per-Share
Income Shares Amount
------------ ---------- ------------
Net Loss before cumulative effect of change in accounting
principle $ (552,623)
Less: Dividends and accretion on preferred stock (788,843)
------------
Basic Earnings per Share before cumulative change in
accounting principle
Net Loss available to common shareholders $ (1,341,466) 10,375,000 $ (0.13)
============
Stock Options -- --
------------ ------------
Diluted Earnings per Share before cumulative effect of change
in accounting principle Net Loss available to common
shareholders plus assumed conversions $ (1,341,466) 10,375,000 $ (0.13)
============ ============ ============
Cumulative effect of change in accounting
principle $ (77,731)
Basic Earnings per Share of cumulative effect of change in
accounting principle
Net Loss available to common shareholders $ (77,731) 10,375,000 $ (0.01)
============ ========== ============
Stock Options -- --
------------ ------------
Diluted Earnings per Share of cumulative effect of change in
accounting principle Net Loss available to common
shareholders plus assumed conversions $ (77,731) 10,375,000 $ (0.01)
============ ============ ============
Net Loss $ (630,354)
Less: Dividends and accretion on preferred stock (788,843)
------------
Basic Earnings per Share
Net Loss available to common shareholders $ (1,419,197) 10,375,000 $ (0.14)
============
Stock Options -- --
------------ ------------
Diluted Earnings per Share
Net Loss available to common shareholders plus
assumed conversions $ (1,419,197) 10,375,000 $ (0.14)
============ ============ ============
Net income (loss) per common share has been computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the periods. The Company had outstanding 250,000 and 443,500 stock
options and 1,000,000 warrants, during the three months ended March 31, 1998 and
1999, respectively, which were antidilutive and were not included in the
calculation because the exercise price of these instruments exceeded the
underlying market value of the options and warrants.
4. FINANCING ARRANGEMENTS:
In connection with the Offering, the Company entered into an amended revolving
credit agreement with Compass Bank (the "Company Credit Facility"), to provide
for a maximum loan amount of $25 million, subject to borrowing base limitations.
The maximum loan amount was amended to $10 million in April, 1999. Under the
Company Credit Facility, the principal outstanding is due and payable upon
maturity in June 2000 with interest due monthly. The Company Credit Facility was
subsequently amended in September 1998 to provide for a term loan under the
facility (the "Term Loan") in addition to the revolving credit facility limited
by the Company's borrowing base. The Term Loan was initially due and payable
upon maturity in September 1999. The interest rate for borrowings is calculated
at a floating rate based on the
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Compass index rate or LIBOR plus 2 percent. The Company's obligations are
secured by certain of its oil and gas properties and cash or cash equivalents
included in the borrowing base.
Under the Company Credit Facility, Compass, in its sole discretion, will make
semiannual borrowing base determinations based upon the proved oil and natural
gas properties of the Company. Compass may redetermine the borrowing base and
the monthly borrowing base reduction at any time and from time to time. The
Company may also request borrowing base redeterminations in addition to its
required semiannual reviews at the Company's cost. As of March 31, 1999 and
December 31, 1998, respectively, the borrowing base was $6,171,738 and
$6,076,000 and borrowings outstanding were $5,351,000 and $5,056,000.
Proceeds from the Borrowing Base portions of this credit facility have been used
to provide funding for exploration and development activity. Substantially all
of Carrizo's oil and natural gas property and equipment is pledged as collateral
under this facility. At March 31, 1999 and December 31, 1998, borrowings under
this facility totaled $5,351,000 and $5,056,000, respectively, with an
additional $521,738 and $1,020,000, respectively, available for future
borrowings. Borrowings outstanding under the Term Loan portion of the facility
were $9,000,000 and $7,000,000 at March 31, 1999 and December 31, 1998,
respectively. The facility was also available for letters of credit, two and one
of which have been issued for $299,000 and $224,000 at March 31, 1999 and
December 31, 1998, respectively. The term loan is guaranteed by certain members
of the Board of Directors.
The Company is subject to certain covenants under the terms of the Company
Credit Facility, including, but not limited to, (a) maintenance of specified
tangible net worth and (b) maintenance of a ratio of quarterly cash flow (net
income plus depreciation and other noncash charges, less noncash income) to
quarterly debt service (payments made for principal in connection with the
credit facility plus payments made for principal other than in connection with
such credit facility) of no less than 1.25 to 1.00. The Company Credit Facility
also places restrictions on, among other things, (a) incurring additional
indebtedness, loans and liens, (b) changing the nature of business or business
structure, (c) selling assets and (d) paying dividends. In March 1999, the
Company Credit Facility was amended to decrease the required specified tangible
net worth covenant.
In March 1999, the Company borrowed an additional $2 million on the term loan
portion of the Company Credit Facility increasing the total outstanding
borrowing under the Term Loan to $9 million. Certain members of the Board of
Directors have guaranteed the Term Loan. The maturity date of the Term Loan was
amended to provide for twelve monthly installments of $750,000 beginning January
1, 2000. The Company also received a deferral of principal payments due under
the borrowing base facility until July 1, 1999. At such time, the available
borrowing base portion of the loan will be reviewed and is expected to begin to
reduce ratably at $325,000 per month with any difference between the available
borrowing base and amounts outstanding being currently due. Should the Company
be able to add sufficient value to its borrowing base through drilling
activities, the required principal payments would be reduced. Certain members of
the Board of Directors have provided $2 million in collateral primarily in the
form of marketable securities to secure the borrowing base facility.
5. MANDATORILY REDEEMABLE PREFERRED STOCK:
In January 1998, the Company consummated the sale of 300,000 shares of Preferred
Stock and Warrants to purchase 1,000,000 shares of Common Stock to affiliates of
Enron Corp. The net proceeds received by the Company from this transaction were
approximately $28.8 million and were used primarily for oil and natural gas
exploration and development activities in Texas and Louisiana and to repay
related indebtedness. The Preferred Stock provides for annual cumulative
dividends of $9.00 per share, payable quarterly in cash or, at the option of the
Company until January 15, 2002, in additional shares of Preferred Stock. The
Company expects to continue payment in kind dividends due in 1999. Dividend
payments for the three months ended March 31, 1999 were made by the issuance of
an additional 7,337.02 shares of Preferred Stock. As of April 15, 1999 there
were 334,623.71 shares of Preferred Stock outstanding.
The Preferred Stock is required to be redeemed by the Company (i) on January 8,
2005, or (ii) after a request for redemption from the holders of at least 30,000
shares of the Preferred Stock (or, if fewer than such number of shares of
Preferred Stock are outstanding, all of the outstanding shares of Preferred
Stock) and the occurrence of the following events: (a) the Company has failed at
any point in time to declare and pay any two dividends in the amount then due
and payable on or before the date the second of such dividends is due and such
dividends remain unpaid at such time, (b) the Company breaches certain other
covenants concerning the payment of dividends or other distributions on or
redemption or acquisition of shares of its capital stock ranking at parity with
or junior to the Preferred Stock, (c) for two consecutive fiscal quarterly
periods the quarterly Cash Flow (as defined below) of the Company is less than
the amount of the dividends accrued in respect to the Preferred Stock, (d) the
Company fails to pay certain amounts due on indebtedness for borrowed money or
there has otherwise been an acceleration of such indebtedness for borrowed
money, (e) there is a
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violation of the Shareholders' Agreement that is not waived or (f) the Company
sells, leases, exchanges or otherwise disposes of all or substantially all of
its property and assets which transaction does not provide for the redemption of
the Series A Preferred Stock. "Cash Flow" means net income prior to preferred
dividends and accretion (i) plus (to the extent included in net income prior to
preferred dividends and accretion) depreciation, depletion and amortization and
other non-cash charges and losses on the sale of property (ii) minus non-cash
income items and required principal payments on indebtedness for borrowed money
with a maturity from the original date of incurrence of such indebtedness of six
months or greater (excluding voluntary prepayments and refinancing, but
including prepayments (other than in connection with refinancing) which would
otherwise be due under such indebtedness within a 60-day period following the
date of such prepayment). The Preferred Stock also may be redeemed at the option
of the Company at any time in whole or in part. All redemptions are at a price
per share, together with dividends accumulated and unpaid to the date of
redemption, decreasing over time from an initial rate of $104.50 per share to
$100.00 per share. If the Company fails to meet its redemption obligations, the
holders of the Preferred Stock will generally have the right, voting separately
as a class, to elect additional directors, which in most cases will constitute a
majority of the board.
The Company's Cash Flow (as defined above) for the three months ended March 31,
1999 was less than the amount of the dividends accrued with respect to the
Preferred Stock for such period. There can be no assurance as to whether the
Company's Cash Flow for the three months ended June 30, 1999 will exceed the
amount of the dividends to be accrued with respect to the Preferred Stock.
6. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants Statement of Position 98-5, which provides guidance on the
accounting for start up costs and organization costs that required the recording
of the cumulative effect of a change in accounting principle to write off
unamortized organization costs of $77,731.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
Statement No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance. Statement No. 133 cannot be applied retroactively.
Statement No. 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997 and, at the company's
election, before January 1, 1998. The Company routinely enters into financial
instrument contracts to hedge price risks associated with the sale of crude oil
and natural gas. Statement No. 133 amends, modifies and supercedes significantly
all of the authoritative literature governing the accounting for and disclosure
of derivative financial instruments and hedging activities. As a result,
adoption of Statement No. 133 will impact the accounting for and disclosure of
the Company's operations. The Company is assessing the impact Statement No. 133
will have on its financial accounting and disclosures and intends to adopt the
provisions of such statement in accordance with the requirements provided by the
statement.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected certain aspects of the Company's financial position
and results of operations during the periods included in the accompanying
unaudited condensed financial statements. This discussion should be read in
conjunction with the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the annual financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and the unaudited condensed financial statements
included elsewhere herein. Unless otherwise indicated by the context, references
herein to "Carrizo" or "Company" mean Carrizo Oil & Gas, Inc., a Texas
corporation that is the registrant.
GENERAL OVERVIEW
The Company began operations in September 1993 and initially focused on the
acquisition of producing properties. As a result of the increasing availability
of economic onshore 3-D seismic surveys, the Company began to obtain 3-D seismic
data and options to lease substantial acreage in 1995 and began to drill its 3-D
based prospects in 1996. The Company drilled 53 wells in 1998 and five wells
through the three months ended March 31, 1999. The Company has budgeted to drill
a total of 18 to 44 gross wells (4.6 to 17.5 net) in 1999. Accordingly,
depreciation, depletion and amortization, oil and gas operating expenses and
production are expected to increase. The Company has typically retained the
majority of its interests in shallow, normally pressured prospects and sold a
portion of its interests in deeper, overpressured prospects.
The Company has primarily grown through the internal development of properties
within its exploration project areas, although the Company acquired properties
with existing production in the Camp Hill Project in late 1993, the Encinitas
Project in early 1995 and the La Rosa Project in 1996. The Company made these
acquisitions through the use of limited partnerships with Carrizo or Carrizo
Production, Inc. as the general partner. However, as operations have expanded,
the Company has increasingly funded its activities through bank borrowings and
cash flow from operations in order to retain a greater portion of the interests
it develops.
The Company's revenues, profitability, future growth and ability to borrow funds
or obtain additional capital, and the carrying value of its properties are
substantially dependent on the success of the Company's exploration program and
the prevailing prices of oil and natural gas. It is impossible to predict future
oil and natural gas price movements with certainty. Declines in prices received
for oil and natural gas may have an adverse effect on the Company's financial
condition, liquidity, ability to finance capital expenditures, and results of
operations. Lower prices may also impact the amount of reserves that can be
produced economically by the Company.
Due to the instability of oil and natural gas prices, in 1995 the Company began
utilizing, from time to time, certain hedging instruments (e.g., NYMEX futures
contracts) for a portion of its oil and gas production to achieve a more
predictable cash flow, as well as to reduce the exposure to price fluctuations.
The Company's hedging arrangements apply to only a portion of its production,
provide only partial price protection against declines in oil and natural gas
prices and limit potential gains from future increases in prices. Such hedging
arrangements may expose the Company to risk of financial loss in certain
circumstances, including instances where production is less than expected, the
Company's customers fail to purchase contracted quantities of oil or natural
gas, or a sudden unexpected event materially impacts oil or natural gas prices.
The Company accounts for all these transactions as hedging activities and,
accordingly, gains and losses from hedging activities are included in oil and
gas revenues during the period the hedged transactions occur. Historically,
gains and losses from hedging activities have not been material. The Company
expects that the amount of hedges that it has in place will vary from time to
time. The Company entered in hedging transactions covering 660 Mmcf and 180 Mmcf
at an average price (Houston Ship Channel) of $2.13 and $2.99 resulting in a net
gain of $117,000 and $150,000 for the first quarters of 1999 and 1998,
respectively. The Company had outstanding hedge positions as of March 31, 1999
and 1998, respectively, covering 1,080 Mmcf for April-December 1999 and 488 Mmcf
for April-July 1998 at an average price of $1.93 and $2.15 (Houston Ship
Channel). The Company also had outstanding hedge positions as of March 31, 1999
covering 54,000 Bbls for April-December 1999 at an average price of $15.45. The
fair market value of the hedge positions as March 31, 1999 is approximately
$(30,000).
The Company uses the full-cost method of accounting for its oil and gas
properties. Under this method, all acquisition, exploration and development
costs, including any general and administrative costs that are directly
attributable to the Company's acquisition, exploration and development
activities, are capitalized in a "full-cost pool" as incurred. The Company
records depletion of its full-cost pool using the unit-of-production method. To
the extent that such capitalized
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costs in the full-cost pool (net of depreciation, depletion and amortization and
related deferred taxes) exceed the present value (using a 10 percent discount
rate) of estimated future net after-tax cash flows from proved oil and gas
reserves, such excess costs are charged to operations. A ceiling test write-down
was not required for the three months ended March 31, 1999 and 1998. Once
incurred, a write-down of oil and gas properties is not reversible at a later
date.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999,
Compared to the Three Months Ended March 31, 1998
Oil and natural gas revenues for the three months ended March 31, 1999 decreased
21 percent to $1,842,000 from $2,339,000 for the same period in 1998. Production
volumes for natural gas during the three months ended March 31, 1999 were
703,694 Mcf, essentially unchanged from 707,171 Mcf for the same period in 1998.
Average gas prices decreased 27 percent to $1.92 per Mcf in the first quarter of
1999 from $2.64 per Mcf in the same period in 1998. Production volumes for oil
in the first quarter of 1999 increased 44 percent to 47,759 Bbls from 33,175
Bbls for the same period in 1998. Average oil prices decreased 27 percent to
$10.33 per barrel in the first quarter of 1999 from $14.19 per barrel in the
same period in 1998. The increase in oil production was due primarily to the
Jones Branch acquisition during the fourth quarter of 1998. Natural gas
production remained substantially unchanged primarily as a result of the
increased production due to the Jones Branch acquisition offset by the natural
decline of existing wells.
The following table summarizes production volumes, average sales prices and
operating revenues for the Company's oil and natural gas operations for the
three months ended March 31, 1998 and 1999:
1999 Period
Compared to 1998 Period
--------------------------------
March 31 Increase % Increase
1998 1999 (Decrease) (Decrease)
------------ ------------ ------------ ---------
Production volumes-
Oil and condensate (Bbls) 33,175 47,759 14,584 44%
Natural gas (Mcf) 707,171 703,694 (3,477) 0%
Average sales prices-(1)
Oil and condensate (per Bbl) $ 14.19 $ 10.33 $ (3.86) (27)%
Natural gas (per Mcf) 2.64 1.92 (.72) (27)%
Operating revenues-
Oil and condensate $ 470,689 $ 493,436 $ 22,747 5%
Natural gas 1,868,193 1,348,878 (519,315) (28)%
------------ ------------ ------------
Total $ 2,338,882 $ 1,842,314 $ (496,568) (21)%
============ ============ ============
- ---------
(1) Includes impact of hedging activities.
Oil and natural gas operating expenses for the three months ended March 31, 1999
increased 18 percent to $744,000 from $629,000 for the same period in 1998
primarily due to the addition of new production offset by a reduction in costs
on older producing fields. Operating expenses per equivalent unit increased to
$.75 per Mcfe in the first quarter of 1999 from $.69 per Mcfe in the same period
in 1998 as a result of the natural decrease in production of natural gas on
older wells offset by cost control measures implemented in certain oil producing
fields.
Depreciation, depletion and amortization (DD&A) expense for the three months
ended March 31, 1999 increased 24 percent to $943,000 from $760,000 for the same
period in 1998. This increase was due to increased amortization of deferred loan
costs, increased production and additional seismic and drilling costs offset by
the lower asset base resulting from the ceiling test write-down in the fourth
quarter of 1998. General and administrative expense for the three months ended
March 31, 1999 decreased 15 percent to $708,000 from $834,000 for the same
period in 1998 primarily as a result of cost control measures implemented in the
first quarter of 1999.
Interest income for the three months ended March 31, 1999 decreased to $6,000
from $194,000 in the first quarter of 1998 as a result of declining cash
balances Net interest expense for the three months ended March 31, 1999,
decreased to zero from $3,000 from in the same period in 1998. Capitalized
interest increased to $260,000 in the first quarter of 1999 from $55,000 in the
first quarter of 1998 reflecting higher debt levels in the 1999 quarter.
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Income (loss) before income taxes for the three months ended March 31, 1999
decreased to a loss of $546,000 from income of $306,000 in the same period in
1998. Net income (loss) for the three months ended March 31, 1999 decreased to a
loss of $630,000 from income of $186,000 for the same period in 1998 primarily
as a result of the factors described above and the charge of $78,000 for the
cumulative effect of change in method of reporting costs of start-up activities.
LIQUIDITY AND CAPITAL RESOURCES
Note 2 to the Financial Statements notes that the financial statements have been
prepared assuming the Company will continue as a going concern but also notes
the uncertainties about the Company's future ability to pay its obligations when
they become due and the lack of firm commitments for additional capital raised
substantial doubt about the ability of the Company to continue as a going
concern. As stated in that note, the financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern. See Note 2 in the Notes to
the Company's Financial Statements.
The Company has made and will be required to make oil and gas capital
expenditures substantially in excess of its net cash flow from operations in
order to complete the exploration and development of its existing properties.
The Company will require additional sources of financing to fund drilling
expenditures on properties currently owned by the Company and to fund leasehold
costs and geological and geophysical cost on its active exploration projects.
Management of the Company continues to seek financing for its capital program
from a variety of sources. The Company is seeking common or preferred equity
investors. The Company is also seeking additional debt financing, although it
has no additional borrowings currently available under its credit agreement. No
assurance can be given that the Company will be able to obtain additional
financing by these or other means on terms that would be acceptable to the
Company. The Company's inability to obtain additional financing would have a
material adverse effect on the Company. Without raising additional capital, the
Company anticipates that it will be required to limit or defer its planned oil
and gas exploration and development program, which could adversely affect the
recoverability and ultimate value of the Company's oil and gas properties. The
Company may also be required to pursue other financial alternatives, which could
include sales of assets or a sale or merger of the Company.
The Company's primary sources of liquidity have included proceeds from the
Offering and from the sale of shares of Preferred Stock and the Warrants, funds
generated by operations, equity capital contributions and borrowings, primarily
under revolving credit facilities.
Cash flows used in operations (after changes in working capital) were $3,454,606
and $559,418 for the three months ended March 31, 1998 and 1999, respectively.
The decrease in cash flows used in operations in 1999 as compared to 1998 was
due primarily to decreases in trade accounts payable in 1998.
The Company has budgeted capital expenditures in 1999 of approximately $2.2
million to $9.5 million of which $500,000 is expected to be used to fund 3-D
seismic surveys and land acquisitions and $1.7 million to $ 9.0 million of which
is expected to be used for drilling activities in the Company's project areas.
The Company has budgeted to drill approximately 18 to 44 gross wells (4.6 to
17.8 net) in 1999. The actual number of wells drilled and capital expended is
dependent upon available financing and cash flow. This decrease in planned
drilling activity resulted primarily from the lack of availability of capital
resources.
The Company has continued to reinvest a substantial portion of its cash flows
into increasing its 3-D prospect portfolio, improving its 3-D seismic
interpretation technology and funding its drilling program. Oil and gas capital
expenditures were $1.9 million for the three months ended March 31, 1999. The
Company's drilling efforts resulted in the successful completion of 31 gross
wells (10.3 net) during the year ended December 31, 1998 and five gross wells
(0.7 net) during the three months ended March 31, 1999.
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FINANCING ARRANGEMENTS
In connection with the Offering, the Company entered into an amended revolving
credit agreement with Compass Bank (the "Company Credit Facility"), to provide
for a maximum loan amount of $25 million, subject to borrowing base limitations.
The maximum borrowing base loan amount was amended to $10 million in April,
1999. Under the Company Credit Facility, the principal outstanding is due and
payable upon maturity in June 2000 with interest due monthly. The Company Credit
Facility was subsequently amended in September 1998 to provide for a term loan
under the facility (the "Term Loan") in addition to the revolving credit
facility limited by the Company's borrowing base. The Term Loan was initially
due and payable upon maturity in September 1999. The interest rate for
borrowings is calculated at a floating rate based on the Compass index rate or
LIBOR plus 2 percent. The Company's obligations are secured by certain of its
oil and gas properties and cash or cash equivalents included in the borrowing
base.
Under the Company Credit Facility, Compass, in its sole discretion, will make
semiannual borrowing base determinations based upon the proved oil and natural
gas properties of the Company. Compass may redetermine the borrowing base and
the monthly borrowing base reduction at any time and from time to time. The
Company may also request borrowing base redeterminations in addition to its
required semiannual reviews at the Company's cost. As of March 31, 1999 and
December 31, 1998, respectively, the borrowing base was $5,790,925 and
$6,076,000 and borrowings outstanding were $6,171,738 and $5,056,000.
Proceeds from the Borrowing Base portions of this credit facility have been used
to provide funding for exploration and development activity. Substantially all
of Carrizo's oil and natural gas property and equipment is pledged as collateral
under this facility. At March 31, 1999 and December 31, 1998 borrowings under
this facility totaled $5,351,000 and $5,056,000, respectively, with and an
additional $521,738 and $1,020,000, respectively, available for future
borrowings. Borrowings outstanding under the Term Loan portion of the facility
were $9,000,000 and $7,000,000 at March 31, 1999 and December 31, 1998,
respectively. The facility was also available for letters of credit, two and one
of which have been issued for $299,000 and $224,000 at March 31, 1999 and
December 31, 1998, respectively. The term loan is guaranteed by certain members
of the Board of Directors.
The Company is subject to certain covenants under the terms of the Company
Credit Facility, including, but not limited to, (a) maintenance of specified
tangible net worth and (b) maintenance of a ratio of quarterly cash flow (net
income plus depreciation and other noncash charges, less noncash income) to
quarterly debt service (payments made for principal in connection with the
credit facility plus payments made for principal other than in connection with
such credit facility) of no less than 1.25 to 1.00. The Company Credit Facility
also places restrictions on, among other things, (a) incurring additional
indebtedness, loans and liens, (b) changing the nature of business or business
structure, (c) selling assets and (d) paying dividends. In March 1999, the
Company Credit Facility was amended to decrease the required specified tangible
net worth covenant.
In March 1999, the Company borrowed an additional $2 million on the term loan
portion of the Company Credit Facility increasing the total outstanding
borrowing under the Term Loan to $9 million. Certain members of the Board of
Directors have guaranteed the Term Loan. The maturity date of the Term Loan was
amended to provide for twelve monthly installments of $750,000 beginning January
1, 2000. The Company also received a deferral of principal payments due under
the borrowing base facility until July 1, 1999. At such time, the available
borrowing base portion of the loan will be reviewed and is expected to begin to
reduce ratably at $325,000 per month with any difference between the available
borrowing base and amounts outstanding being currently due. Should the Company
be able to add sufficient value to its borrowing base through drilling
activities, the required principal payments would be reduced. Certain members of
the Board of Directors have provided $2 million in collateral primarily in the
form of marketable securities to secure the borrowing base facility.
In January 1998, the Company consummated the sale of 300,000 shares of Preferred
Stock and Warrants to purchase 1,000,000 shares of Common Stock to affiliates of
Enron Corp. The net proceeds received by the Company from this transaction were
approximately $28.8 million and were used primarily for oil and natural gas
exploration and development activities in Texas and Louisiana and to repay
related indebtedness. The Preferred Stock provides for annual cumulative
dividends of $9.00 per share, payable quarterly in cash or, at the option of the
Company until January 15, 2002, in additional shares of Preferred Stock. The
Company expects to continue payment in kind dividends due in 1999. Dividend
payments for the three months ended December 31, 1999 were made by the issuance
of an additional 7,337.02 shares of Preferred Stock. As of April 15, 1999 there
were 334,623.71 shares of Preferred Stock outstanding.
The Preferred Stock is required to be redeemed by the Company (i) on January 8,
2005, or (ii) after a request for redemption from the holders of at least 30,000
shares of the Preferred Stock (or, if fewer than such number of shares of
Preferred Stock are outstanding, all of the outstanding shares of Preferred
Stock) and the occurrence of the following
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events: (a) the Company has failed at any point in time to declare and pay any
two dividends in the amount then due and payable on or before the date the
second of such dividends is due and such dividends remain unpaid at such time,
(b) the Company breaches certain other covenants concerning the payment of
dividends or other distributions on or redemption or acquisition of shares of
its capital stock ranking at parity with or junior to the Preferred Stock, (c)
for two consecutive fiscal quarterly periods the quarterly Cash Flow (as defined
below) of the Company is less than the amount of the dividends accrued in
respect to the Preferred Stock, (d) the Company fails to pay certain amounts due
on indebtedness for borrowed money or there has otherwise been an acceleration
of such indebtedness for borrowed money, (e) there is a violation of the
Shareholders' Agreement that is not waived or (f) the Company sells, leases,
exchanges or otherwise disposes of all or substantially all of its property and
assets which transaction does not provide for the redemption of the Series A
Preferred Stock. "Cash Flow" means net income prior to preferred dividends and
accretion (i) plus (to the extent included in net income prior to preferred
dividends and accretion) depreciation, depletion and amortization and other
non-cash charges and losses on the sale of property (ii) minus non-cash income
items and required principal payments on indebtedness for borrowed money with a
maturity from the original date of incurrence of such indebtedness of six months
or greater (excluding voluntary prepayments and refinancing, but including
prepayments (other than in connection with refinancing) which would otherwise be
due under such indebtedness within a 60-day period following the date of such
prepayment). The Preferred Stock also may be redeemed at the option of the
Company at any time in whole or in part. All redemptions are at a price per
share, together with dividends accumulated and unpaid to the date of redemption,
decreasing over time from an initial rate of $104.50 per share to $100.00 per
share. If the Company fails to meet its redemption obligations, the holders of
the Preferred Stock will generally have the right, voting separately as a class,
to elect additional directors, which in most cases will constitute a majority of
the board.
The Company's Cash Flow (as defined above) for the three months ended March 31,
1999 was less than the amount of the dividends accrued with respect to the
Preferred Stock for such period. There can be no assurance as to whether the
Company's Cash Flow for the three months ended June 30, 1999 will exceed the
amount of the dividends to be accrued with respect to the Preferred Stock.
EFFECTS OF INFLATION AND CHANGES IN PRICE
The Company's results of operations and cash flows are affected by changing oil
and gas prices. If the price of oil and gas increases (decreases), there could
be a corresponding increase (decrease) in the operating cost that the Company is
required to bear for operations, as well as an increase (decrease) in revenues.
Inflation has had a minimal effect on the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
Statement No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance. Statement No. 133 cannot be applied retroactively.
Statement No. 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997 and, at the company's
election, before January 1, 1998. The Company routinely enters into financial
instrument contracts to hedge price risks associated with the sale of crude oil
and natural gas. Statement No. 133 amends, modifies and supercedes significantly
all of the authoritative literature governing the accounting for and disclosure
of derivative financial instruments and hedging activities. As a result,
adoption of Statement No. 133 will impact the accounting for and disclosure of
the Company's operations. The Company is assessing the impact Statement No. 133
will have on its financial accounting and disclosures and intends to adopt the
provisions of such statement in accordance with the requirements provided by the
statement.
YEAR 2000
The "Year 2000 Issue" is a general term used to refer to certain business
implications of the arrival of the new millennium. In simple terms, on January
1, 2000, all computerized systems that use the two-digit convention to identify
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the applicable year, including both information technology systems and
non-information technology systems that use embedded technology, could fail
completely or create erroneous data as a result of the system failing to
recognize the two digit internal date "00" as representing the year 2000.
The Company has completed its initial assessment of Year 2000 compliance of its
internal information technology systems, which consist primarily of financial
and accounting systems and geological evaluation systems, and does not believe
that these systems have any material issues with respect to Year 2000
compliance. The Company's internal information technology systems are all new
and widely utilized. Its vendors have advised the Company that all of these
systems are either Year 2000 compliant or can be easily upgraded to be Year 2000
compliant. The Company anticipates that its Year 2000 remediation efforts for
information technology systems, consisting primarily of software upgrades, will
continue through 1999, and anticipates incurring less than $10,000 in connection
with these efforts.
The Company has not identified any non-information technology systems that use
embedded technology on which it relies and which it believes is likely to have a
Year 2000 problem; however such assessment is expected to continue through 1999.
Like every other business enterprise, the Company is at risk from Year 2000
failures on the part of its major business counterparts, including suppliers and
service providers, as well as potential failures in public and private
infrastructure services, including electricity, water, gas, transportation and
communications.
Through communications with industry partners and others, the Company is also
evaluating the risk presented by potential Year 2000 non-compliance of third
parties. Because such risks vary substantially, companies are being contacted
based on the estimated magnitude of the risk posed to the Company by their
potential Year 2000 non-compliance. The Company anticipates that these efforts
will continue through 1999 and will not result in significant costs to the
Company.
The Company's assessment of its Year 2000 issues involves many assumptions.
There can be no assurance that the Company's assumptions will prove accurate,
and actual results could differ significantly from the assumptions. In
conducting its Year 2000 compliance efforts, the Company has relied primarily on
vendor representations with respect to its internal computerized systems and
representations from third parties with which the Company has business
relationships and has not independently verified these representations. There
can be no assurance that these representations will prove to be accurate. A Year
2000 failure could result in a business disruption that adversely affects the
Company's business, financial condition or results of operations. The Company is
unlikely to be insured for Year 2000 losses should they occur. Although it is
not currently aware of any likely business disruption, the Company is developing
contingency plans to address Year 2000 failures and expects this work to
continue through 1999.
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PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
From time to time the Company is a party to various legal proceedings
arising in the ordinary course of business. The Company is not
currently a party to any litigation that it believes could have a
material adverse effect on the financial position of the Company.
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
FORWARD LOOKING STATEMENTS
The statements contained in all parts of this document, including, but
not limited to, those relating to the Company's schedule, targets, estimates or
results of future drilling, budgeted wells, increases in wells, budgeted and
other future capital expenditures, use of offering proceeds, effects of
litigation, expected production or reserves, increases in reserves, acreage
working capital requirements, hedging activities, the ability of expected
sources of liquidity to implement its business strategy, and any other
statements regarding future operations, financial results, business plans and
cash needs and other statements that are not historical facts are forward
looking statements. When used in this document, the words "anticipate,"
"estimate," "expect," "may," "project," "believe" and similar expression are
intended to be among the statements that identify forward looking statements.
Such statements involve risks and uncertainties, including, but not limited to,
those relating to the Company's dependence on its exploratory drilling
activities, the volatility of oil and natural gas prices, the need to replace
reserves depleted by production, operating risks of oil and natural gas
operations, the Company's dependence on its key personnel, factors that affect
the Company's ability to manage its growth and achieve its business strategy,
risks relating to, limited operating history, technological changes, significant
capital requirements of the Company, the potential impact of government
regulations, litigation, competition, the uncertainty of reserve information and
future net revenue estimates, property acquisition risks and other factors
detailed in the Registration Statement and the Company's other filings with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
Exhibit
Number Description
------ -----------
+2.1 -- Combination Agreement by and among the Company, Carrizo
Production, Inc., Encinitas Partners Ltd., La Rosa Partners
Ltd., Carrizo Partners Ltd., Paul B. Loyd, Jr., Steven A.
Webster, S.P. Johnson IV, Douglas A.P. Hamilton and Frank
A. Wojtek dated as of June 6, 1997 (Incorporated herein by
reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-29187)).
+3.1 -- Amended and Restated Articles of Incorporation of the
Company (Incorporated herein by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
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+3.2 -- Statement of Resolution Establishing Series of Shares
Designated 9% Series A Preferred Stock (Incorporated herein
by reference to Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997).
+3.3 -- Amended and Restated Bylaws of the Company, as amended by
Amendment No. 1 (incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form
8-A (Registration No. 000-22915).
4.1 -- Fifth Amended, Restated, and Combined Loan Agreement
between the Company and Compass Bank dated May 22, 1999.
4.2 -- Amended and Restated Limited Guaranty, Douglas A. P.
Hamilton dated May 22, 1999.
4.3 -- Stock Pledge Agreement, Steven A. Webster dated
May 22, 1999.
4.4 -- Sixth Amendment to First Amended, Restated and Combined
Loan Agreement by and between Carrizo Oil & Gas, Inc. and
Compass Bank dated April 23, 1999.
4.5 -- Amended and Restated Limited Guaranty, Paul B. Loyd, Jr.
dated May 22, 1999.
27.1 -- Financial Data Schedule.
+ Incorporated herein by reference as indicated.
Reports on Form 8-K
On February 23, 1999, the Company filed a Form 8-K/A that included
financial statements and pro forma financial information with respect to its
acquisition of certain oil and gas producing properties in Wharton County,
Texas, along with certain rights to participate in certain exploration prospects
and associated rights of access to certain seismic data and related information
and certain other related assets from Hall-Houston Oil Company and others. This
acquisition was originally reported on a Form 8-K, filed on December 28, 1998.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Carrizo Oil & Gas, Inc.
(Registrant)
Date: May 17, 1999 By: /s/ S. P. Johnson, IV
--------------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 1999 By: /s/ Frank A. Wojtek
--------------------------------------------
Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
+2.1 -- Combination Agreement by and among the Company, Carrizo
Production, Inc., Encinitas Partners Ltd., La Rosa Partners
Ltd., Carrizo Partners Ltd., Paul B. Loyd, Jr., Steven A.
Webster, S.P. Johnson IV, Douglas A.P. Hamilton and Frank
A. Wojtek dated as of June 6, 1997 (Incorporated herein by
reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-29187)).
+3.1 -- Amended and Restated Articles of Incorporation of the
Company (Incorporated herein by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
+3.2 -- Statement of Resolution Establishing Series of Shares
Designated 9% Series A Preferred Stock (Incorporated herein
by reference to Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997).
+3.3 -- Amended and Restated Bylaws of the Company, as amended by
Amendment No. 1 (incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form
8-A (Registration No. 000-22915).
4.1 -- Fifth Amended, Restated, and Combined Loan Agreement
between the Company and Compass Bank dated March 22, 1999.
4.2 -- Amended and Restated Limited Guaranty, Douglas A. P.
Hamilton dated March 22, 1999.
4.3 -- Stock Pledge Agreement, Steven A. Webster dated
March 22, 1999.
4.4 -- Sixth Amendment to First Amended, Restated and Combined
Loan Agreement by and between Carrizo Oil & Gas, Inc. and
Compass Bank dated April 23, 1999.
4.5 -- Amended and Restated Limited Guaranty, Paul B. Loyd, Jr.
dated March 22, 1999.
27.1 -- Financial Data Schedule.
+ Incorporated herein by reference as indicated.