UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  SCHEDULE 14A

           Proxy Statement Pursuant to Section 14(a) of the Securities
                      Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [   ]

Check the appropriate box:

[ ]  Preliminary Proxy Statement
[ ]  Confidential, for Use of the Commission Only (as permitted by
       Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to ss.240.14.a-11(c) or ss.240.14a-12

                  CARRIZO OIL & GAS, INC.
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                (Name of Registrant as Specified In Its Charter)

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    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X]  No fee required.
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          pursuant to Exchange  Act Rule 0-11 (set forth the amount on which the
          filing fee is calculated and state how it was determined):

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[ ]  Fee paid previously with preliminary materials.

[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify  the  filing  for which the offsetting fee was paid
     previously.  Identify the previous filing by registration statement number,
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     4)   Date Filed:

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                       (LOGO OF CARRIZO OIL & GAS, INC.)

April 12, 2005

Dear Fellow Shareholder:

     You are cordially  invited to attend the Annual Meeting of  Shareholders of
Carrizo Oil & Gas, Inc. (the "Company") to be held at 10:00 a.m. on Tuesday, May
10, 2005, at the Doubletree Hotel Houston Downtown, 400 Dallas Street,  Houston,
Texas.

     This booklet  includes  the notice of the meeting and the proxy  statement,
which  contains  information  about the Board and its  committees  and  personal
information  about the nominees for the Board.  Other matters on which action is
expected to be taken during the meeting are also described.

     We hope you will find it convenient to attend in person. Whether or not you
expect to attend, to assure  representation at the meeting and the presence of a
quorum,  please date,  sign and promptly  mail the enclosed  proxy in the return
envelope provided.

     A copy  of the  Company's  2004  Annual  Report  to  Shareholders  is  also
enclosed.

SINCERELY,
/s/ S.P. JOHNSON IV
S.P. JOHNSON IV Chief Executive Officer



                             CARRIZO OIL & GAS, INC.

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                             To Be Held MAY 10, 2005

To the Shareholders of
Carrizo Oil & Gas, Inc.:

     NOTICE IS HEREBY GIVEN that the Annual Meeting of  Shareholders  of Carrizo
Oil & Gas,  Inc.  (the  "Company")  will  be held at  Doubletree  Hotel  Houston
Downtown, 400 Dallas Street,  Houston, Texas, on Tuesday, May 10, 2005, at 10:00
a.m. for the following purposes:

     (1)  to elect seven members to the Board of Directors for the ensuing year;

     (2)  to approve an amendment to the Incentive Plan (A) replacing  automatic
          initial  awards of stock options to new  directors to purchase  10,000
          shares of common stock and automatic  awards of stock options to Board
          committee  chairmen  with  discretionary  awards of stock  options  or
          restricted  stock that are  determined by the  Company's  compensation
          committee or Board of Directors, (B) giving the Company's compensation
          committee and Board of Directors additional flexibility in determining
          awards to Board  committee  members and in  establishing  the specific
          terms of awards of options and restricted  stock granted to directors,
          including  without  limitation the vesting  schedules for those awards
          and the dates  those  awards may be  granted,  and (C) making  certain
          clarifications to other provisions of the Incentive Plan;

     (3)  to approve the  appointment of Pannell Kerr Forster of Texas,  P.C. as
          independent  registered  public  accounting  firm for the fiscal  year
          ending December 31, 2005; and

     (4)  to  transact  such other  business  as may  properly  come  before the
          meeting.

     The Company has fixed the close of business on April 6, 2005, as the record
date for  determining  shareholders  entitled to notice of, and to vote at, such
meeting or any adjournment thereof.

     You are cordially invited to attend the meeting in person. Even if you plan
to attend the  meeting,  you are  requested to mark,  sign,  date and return the
accompanying proxy as soon as possible.

By Order of the Board of Directors

/s/ PAUL F. BOLING
PAUL F. BOLING
Secretary

April 12, 2005
1000 Louisiana Street, Suite 1500
Houston, TX 77002



                             CARRIZO OIL & GAS, INC.
                        1000 Louisiana Street, Suite 1500
                              Houston, Texas 77002

                                 PROXY STATEMENT

     This Proxy  Statement is furnished in connection  with the  solicitation of
proxies  by the  Board  of  Directors  of  Carrizo  Oil &  Gas,  Inc.,  a  Texas
corporation  (the  "Company"),  to be  voted  at  the  2005  Annual  Meeting  of
Shareholders  (the "Annual  Meeting")  to be held at  Doubletree  Hotel  Houston
Downtown,  400 Dallas Street,  Houston, Texas on Tuesday, May 10, 2005, at 10:00
a.m., and any and all adjournments thereof.

     This statement and the accompanying form of proxy are first being mailed to
shareholders  on or  about  the week of  April  18,  2005.  In  addition  to the
solicitation of proxies by mail,  regular  officers and employees of the Company
may,  without  additional  compensation,  solicit the return of proxies by mail,
telephone,  telegram  or  personal  contact.  The  Company  will pay the cost of
soliciting  proxies in the accompanying form. The Company will reimburse brokers
or other persons  holding stock in their names or in the names of their nominees
for their reasonable  expenses in forwarding proxy material to beneficial owners
of stock.

VOTING PROCEDURES

     Shareholders of record as of April 6, 2005, the record date for determining
persons entitled to notice of, and to vote at, the Annual Meeting,  are entitled
to vote on all matters at the Annual Meeting and at any adjournments thereof. On
that date, the issued and outstanding  capital stock of the Company consisted of
22,749,554  shares  of common  stock,  par value  $0.01 per share  (the  "Common
Stock").  No other class of stock is outstanding.  Each share of Common Stock is
entitled  to one  vote  on each  matter  submitted  to a vote  of  shareholders.
Cumulative  voting is not  allowed.  The  holders  of a  majority  of the shares
entitled  to vote at the  Annual  Meeting,  represented  in  person or by proxy,
constitute a quorum for the transaction of business at the Annual Meeting.

     All duly  executed  proxies  received  prior to the Annual  Meeting will be
voted in accordance with the choices  specified  thereon and, in connection with
any other business that may properly come before the meeting,  in the discretion
of the persons named in the proxy. As to any matter for which no choice has been
specified  in the proxy,  the shares  represented  thereby  will be voted by the
persons named in the proxy, to the extent applicable,  (1) for the election as a
director of each nominee listed herein;  (2) for the approval of an amendment to
the Incentive  Plan (A)  replacing  automatic  initial  awards of options to new
directors to purchase 10,000 shares of Common Stock with discretionary awards of
stock  options  or  restricted  stock  that  are  determined  by  the  Company's
compensation  committee  or  Board  of  Directors,   (B)  giving  the  Company's
compensation  committee and Board of Directors the  flexibility to establish the
specific terms of awards of options and  restricted  stock granted to directors,
including  without  limitation  the vesting  schedules  for those awards and the
dates those  awards may be granted,  and (C) making  certain  clarifications  to
other  provisions of the Incentive Plan; (3) for the appointment of Pannell Kerr
Forster of Texas, P.C. ("PKF") as independent  registered public accounting firm
for the fiscal year ending  December 31, 2005;  and (4) in the discretion of the
persons  named in the  proxy in  connection  with any  other  business  that may
properly come before the meeting.  A shareholder giving a proxy may revoke it at
any time before it is voted at the Annual  Meeting by delivering  written notice
to the  Secretary  of the Company or by  delivering  a properly  executed  proxy
bearing a later date. A shareholder who attends the Annual Meeting may, if he or
she wishes,  vote by ballot at the Annual  Meeting and that vote will cancel any
proxy  previously  given.  Attendance at the Annual  Meeting will not in itself,
however, constitute the revocation of a proxy.

     Proxies indicating shareholder  abstentions will be counted for purposes of
determining  whether  there is a quorum at the Annual  Meeting,  but will not be
voted on any matter and therefore  will have the same effect as a vote against a
matter,  except in the case of director  elections,  which are  determined  by a
plurality  of votes  cast,  as to which those  abstentions  will have no effect.
Shares  represented  by  "broker  nonvotes"  (i.e.,  shares  held by  brokers or
nominees  for which  instructions  have not been  received  from the  beneficial
owners or persons  entitled to vote and for which the broker or nominee does not
have  discretionary  power to vote on a



particular matter) will be counted for purposes of determining  whether there is
a quorum at the Annual  Meeting,  but will not be voted on any matter,  and thus
will be  disregarded  in the  calculation  of "votes  cast" with respect to that
matter (even though  those  shares may be  considered  as entitled to vote or be
voted on other matters).  Votes cast by proxy or in person at the Annual Meeting
will be counted by the persons  appointed as election  inspectors for the Annual
Meeting.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

     The table  below sets forth  information  concerning  (i) the only  persons
known by the Company,  based solely on statements filed by such persons pursuant
to Section  13(d) or 13(g) of the  Securities  Exchange Act of 1934,  as amended
(the "Exchange Act"), to own beneficially in excess of 5% of the Common Stock as
of December 31, 2004, and (ii) the shares of Common Stock beneficially owned, as
of March 31, 2005, by each director,  the Chief  Executive  Officer and the four
other  executive  officers  who were  serving at the end of the  Company's  last
fiscal year and by all executive officers and directors collectively.  Except as
indicated,  each individual has sole voting power and sole investment power over
all shares  listed  opposite  his name.  As of March 31,  2005,  the Company had
22,735,554 shares of Common Stock issued and outstanding.



                                                                                    Amount and Nature of
                                                                                    Beneficial Ownership
                                                                             ------------------------------------
                                                                                                        Percent
                                                                                                       of Common
                                                                                                         Stock
                          Name and Address of Beneficial Owner(1)             Number of Shares(2)      (rounded)
                  ------------------------------------------------------     ---------------------    -----------
                                                                                                
                  Directors and Executive Officers:
                    S. P. Johnson IV....................................            735,556                 3.2%
                    Paul F. Boling......................................             18,000                   *
                    J. Bradley Fisher...................................             28,333                   *
                    Kendall A. Trahan...................................             17,795                   *
                    Jeremy T. Greene(3).................................                  -                   *
                    Steven A. Webster...................................          2,568,160(4)             11.2%
                    Thomas L. Carter, Jr................................                  -                   *
                    Paul B. Loyd, Jr....................................            314,665                 1.4%
                    F. Gardner Parker...................................             70,000                   *
                    Roger A. Ramsey.....................................              8,333                   *
                    Frank A. Wojtek.....................................            314,699                 1.4%
                    Executive Officers and Directors as a Group (11
                       persons).........................................          4,075,541                17.5%
                  Wells Fargo & Company and Wells Capital
                       Management Incorporated..........................          1,893,340(5)              8.6%
                  Advisory Research, Inc................................          1,724,553(6)              7.8%
                  Wellington Management Company, LLP....................          1,450,900(7)              6.6%

- ----------

     *    Less than 1%.

     (1)  Except  as  otherwise  noted  and  pursuant  to  applicable  community
          property laws, each  shareholder has sole voting and investment  power
          with respect to the shares beneficially owned. The business address of
          each  director and executive  officer is c/o Carrizo Oil & Gas,  Inc.,
          1000 Louisiana Street, Suite 1500, Houston, Texas 77002.

     (2)  The table includes shares of Common Stock that can be acquired through
          the  exercise of options  within 60 days of March 31, 2005 as follows:
          Mr.  Johnson -- 203,333,  Mr. Boling -- 15,000,  Mr. Fisher -- 28,333,
          Mr. Trahan -- 17,795, Mr. Greene -- none, Mr. Webster -- 219,167,  Mr.
          Carter -- none, Mr. Loyd -- 22,500,  Mr. Parker -- 40,000,  Mr. Ramsey
          -- 3,333,  Mr.  Wojtek -- none,  and all officers  and  directors as a
          group --  549,461.  The  percent of the class owned by each person has
          been  computed  assuming  the  exercise  of all  options  deemed to be
          beneficially  owned by that person,  and assuming that no

                                       2


          options  held by any  other  person  have  been  exercised.  The table
          excludes  shares of Common  Stock  subject to options  that  cannot be
          exercised within 60 days of March 31, 2005 as follows:  Mr. Johnson --
          33,335,  Mr.  Boling -- 30,000,  Mr.  Fisher -- 16,667,  Mr. Trahan --
          none, Mr. Greene -- none, Mr. Webster -- 66,667, Mr. Carter -- 10,000,
          Mr. Loyd -- 7,000,  Mr.  Parker -- 15,000,  Mr. Ramsey -- 10,167 , Mr.
          Wojtek -- 2,500, and all officers and directors as a group -- 191,336.

     (3)  Mr. Greene left the Company in January 2005.

     (4)  Shares  shown  include  2,292,127  shares of Common Stock owned by Mr.
          Webster  and 56,866  shares  owned by Cerrito  Partners,  of which Mr.
          Webster is one of three general  partners and could be deemed to share
          voting and dispositive power with the other general partners. However,
          Mr.  Webster  does not admit to having  such power and  disclaims  the
          beneficial ownership of the Common Stock held by Cerrito Partners.

     (5)  Based solely on a Schedule 13G filed on January 21, 2005,  Wells Fargo
          & Company,  a parent holding  company,  reports sole voting power over
          1,788,830  shares,  sole  dispositive  power over 1,279,510 shares and
          shared  dispositive  power  over  67,810  shares,  and  Wells  Capital
          Management  Incorporated,  an investment adviser,  reports sole voting
          power over 1,075,300 shares and sole dispositive  power over 1,112,000
          shares.  The address of the principal business office of Wells Fargo &
          Company is 420 Montgomery Street, San Francisco, California 94104, and
          the  address  of  the  principal  business  office  of  Wells  Capital
          Management   Incorporated  is  525  Market  Street,  10th  Floor,  San
          Francisco, California 94105.

     (6)  Based  solely on an  amendment  to Schedule  13G filed on February 15,
          2005, Advisory Research,  Inc., an investment advisor,  reports shared
          dispositive and voting power over these shares, which are held for its
          investment  advisory  clients.  The address of the principal  business
          office of Advisory Research,  Inc. is 180 North Stetson Street,  Suite
          5500, Chicago, Illinois 60601.

     (7)  Based solely on a Schedule 13G filed on February 14, 2005,  Wellington
          Management Company, LLP, an investment adviser,  reports shared voting
          power over 913,300 shares and shares  dispositive power over 1,450,900
          shares.  The address of the  principal  business  office of Wellington
          Management  Company,  LLP is 75 State  Street,  Boston,  Massachusetts
          02109.



                                   PROPOSAL I

                              ELECTION OF DIRECTORS

     The persons designated as proxies in the enclosed proxy card intend, unless
the  proxy is  marked  with  contrary  instructions,  to vote for the  following
nominees as directors to serve until the 2006 Annual Meeting of Shareholders and
until  their  successors  have been duly  elected and  qualified  or until their
resignation or removal:  Mr. S.P. Johnson IV; Mr. Steven A. Webster;  Mr. Thomas
L. Carter;  Jr., Mr. Paul B. Loyd,  Jr.;  Mr. F.  Gardner  Parker;  Mr. Roger A.
Ramsey and Mr. Frank A. Wojtek.  The Board of Directors has no reason to believe
that any nominee for  election as a director  will not be a candidate or will be
unable  to  serve,  but if for  any  reason  one or more of  these  nominees  is
unavailable as a candidate or unable to serve when election occurs,  the persons
designated  as proxies in the  enclosed  proxy card,  in the absence of contrary
instructions,  will in their discretion vote the proxies for the election of any
of the other nominees or for a substitute nominee or nominees,  if any, selected
by the Board of Directors. The affirmative vote of a plurality of the votes cast
by holders  entitled to vote in the election of directors at the Annual  Meeting
is required for the election of each nominee for director.

NOMINEES

     The following  sets forth  information  concerning  the seven  nominees for
election as directors at the Annual  Meeting,  including  information as to each
nominee's  age as of April 1,  2005,  position  with the  Company  and  business
experience  during the past five years.  All nominees are  currently  serving as
directors and are standing for re-election.

     S.P.  Johnson IV, age 49, has served as our President  and Chief  Executive
Officer and a director since  December 1993.  Prior to that, he worked for Shell
Oil  Company  for  15  years.  His  managerial   positions


                                       3


included Operations Superintendent,  Manager of Planning and Finance and Manager
of  Development  Engineering.  Mr.  Johnson is also a director  of Basic  Energy
Services,  Inc.  (a well  servicing  contractor).  Mr.  Johnson is a  Registered
Petroleum Engineer and has a B.S. in Mechanical  Engineering from the University
of Colorado.

     Steven A. Webster,  age 53, has been the Chairman of our Board of Directors
since June 1997 and has been a director  since 1993.  Mr.  Webster serves as the
Chairman of Global Energy  Partners,  Ltd., an affiliate of CSFB Private Equity,
which makes private  equity  investments in the energy  business.  From December
1997 to May 1999, Mr. Webster was the Chief  Executive  Officer and President of
R&B Falcon Corporation,  an offshore drilling contractor, and prior to that, was
Chairman  and Chief  Executive  Officer  of Falcon  Drilling  Company,  which he
founded in 1988. Mr.  Webster is also a director of Grey Wolf,  Inc. (an onshore
drilling  company),  Seabulk  International,  Inc. (a marine  transportation and
service  provider),  Geokinetics,  Inc. (a seismic  acquisition  and geophysical
services  company),  Crown Resources  Corporation (a precious metals exploration
company),  Goodrich Petroleum  Corporation (an oil and gas exploration company),
Basic Energy Services,  Inc. (a well servicing company) and Brigham  Exploration
Company  (an oil and  gas  exploration  company),  as  well as  various  private
companies.  He is also a trust manager of Camden  Property  Trust (a real estate
investment  trust).  Mr.  Webster holds an M.B.A.  degree from Harvard  Business
School and a Bachelor  of Science in  Industrial  Management  degree from Purdue
University.

     Thomas L. Carter, Jr., age 53, became a director in March 2005. He has been
President and Chief Executive Officer of Black Stone Minerals  Company,  L.P., a
privately-owned  Delaware limited partnership  located in Houston,  Texas, since
its formation in 1998. Mr. Carter has also served as Managing General Partner of
Black Stone Energy  Company from 1980 to the present.  Prior to the formation of
Black Stone,  Mr. Carter  served as Managing  General  Partner of W.T.  Carter &
Bros.  from 1987  through  1992.  From 1975 to 1979,  Mr.  Carter was with Texas
Commerce Bank in Houston,  Texas. Mr. Carter holds an M.B.A. and B.B.A. from the
University of Texas at Austin.

     Paul B. Loyd,  Jr.,  age 58, has been a director  since 1993.  Mr. Loyd was
Chairman of the Board and Chief Executive Officer of Reading & Bates Corporation
from 1991 to 1997 and from 1999 to 2001 until its merger  with  Transocean  Inc.
Mr. Loyd has been the principal of Loyd & Associates,  Inc., a private financial
consulting firm, since 1989. Mr. Loyd was Chief Executive Officer and a director
of  Chiles-Alexander  International,  Inc.  from 1987 to 1989,  President  and a
director of Griffin-Alexander  Drilling Company, from 1984 to 1987, and prior to
that, a director and Chief Financial Officer of Houston Offshore  International,
all of which are  companies  in the  offshore  drilling  industry.  Mr.  Loyd is
currently a director of  Frontier  Oil  Corporation  (a refining  and  marketing
company)  and is a  member  of the  Board  of  Trustees  of  Southern  Methodist
University.  Mr. Loyd served as President  of our company from its  inception in
September 1993 until December 1993. Mr. Loyd holds an undergraduate  degree from
Southern Methodist University and an M.B.A. degree from Harvard Business School.

     F.  Gardner  Parker,  age 63, has been a director  since 2000.  He has been
Managing  Outside Trust Manager with Camden  Property  Trust since 1998. He also
serves on the boards of Crown Resources Corporation,  Sharps Compliance Corp. (a
waste management  services provider) and Blue Dolphin Energy Company (a pipeline
operations and oil and gas  exploration  and  production  holding  company).  In
addition,  he  serves  on  the  board  of  directors  of the  following  private
companies:  Gillman  Automobile  Dealerships,  Net  Near U  Communications,  MCS
Technologies, Camp Longhorn, Inc., nii communications, inc., Sherwood Healthcare
Inc.,  and Arena Power.  Mr.  Parker also worked with Ernst & Ernst (now Ernst &
Young LLP) for 14 years, seven of which he served as a partner. He is a graduate
of The University of Texas.

     Roger A. Ramsey, age 66, has been a director since 2004. He is the Chairman
and Chief Executive Officer of Med Shred, Inc., a privately held corporation. He
served as Chairman of the Board of Allied Waste  Industries,  Inc.  from October
1989 through his  retirement in December 1998,  and Chief  Executive  Officer of
that company from October 1989 through July 1997.  Beginning in 1960, Mr. Ramsey
was employed by the  international  accounting  firm of Arthur  Andersen LLP. In
1968, Mr. Ramsey co-founded Browning-Ferris  Industries, Inc. ("BFI") and served
as its Vice  President and Chief  Financial  Officer until 1976. Mr. Ramsey


                                       4


is a director of WCA Waste Corporation (a waste management company).  Mr. Ramsey
is also a member of the Board of  Trustees  at Texas  Christian  University  and
Chairman of the Board of Vericenter, Inc.

     Frank A. Wojtek,  age 49, has been a director  since 1993. He has been Vice
President,  Secretary and Director of A-Texian  Compressor,  Inc. (a natural gas
compression  services  company)  since July 2004. Mr. Wojtek served as our Chief
Financial  Officer,  Vice  President,  Secretary and  Treasurer  from 1993 until
August 2003.  From 1992 to 1997, Mr. Wojtek was the Assistant to the Chairman of
the Board of Reading & Bates  Corporation (an offshore  drilling  company).  Mr.
Wojtek has also held the positions of Vice President and  Secretary/Treasurer of
Loyd & Associates,  Inc., a private  financial  consulting firm, since 1989. Mr.
Wojtek held the  positions  of Vice  President  and Chief  Financial  Officer of
Griffin-Alexander   Drilling   Company   from   1984  to  1987,   Treasurer   of
Chiles-Alexander  International  Inc. from 1987 to 1989,  and Vice President and
Chief  Financial  Officer of India Offshore Inc. from 1989 to 1992, all of which
were  companies in the offshore  drilling  industry.  Mr.  Wojtek is a Certified
Public  Accountant  and  holds a  B.B.A.  in  Accounting  with  Honors  from The
University of Texas.

DIRECTOR INDEPENDENCE

     The Board has determined that Messrs.  Carter,  Loyd, Parker and Ramsey are
"independent  directors"  within the meaning of Marketplace  Rule 4200(a)(15) of
the Nasdaq Stock Market.

COMMITTEES OF THE BOARD OF DIRECTORS

     The Board of Directors of the Company held three meetings during the fiscal
year ended December 31, 2004, and  transacted  business on six occasions  during
the fiscal year by unanimous written consent.

     During the fiscal year ended December 31, 2004,  each director  attended at
least 75% of the aggregate of the total number of Board of  Directors'  meetings
and of meetings of  committees of the Board of Directors on which he served held
during his service on the Board of Directors.  The Company's  Board of Directors
has a Nominating Committee,  an Audit Committee,  a Compensation Committee and a
Budget Committee.

     The Board of Directors has a Nominating Committee, which currently consists
of Messrs. Webster (chairman),  Loyd and Carter. The primary responsibilities of
the Nominating Committee include identifying,  evaluating and recommending,  for
the approval of the entire Board of  Directors,  potential  candidates to become
members  of the Board of  Directors  and  recommending  membership  on  standing
committees of the Board of Directors.  The Nominating Committee held no meetings
in 2004 but acted  informally  on various  occasions.  A copy of the  Nominating
Committee  Charter may be found on the Company's website at  www.carrizo.cc.  On
March 5, 2005,  the date that was one year  after the date on which the  Company
ceased to be a controlled  company  under the rules of the Nasdaq Stock  Market,
all of the  members  of the  Nominating  Committee  were  required  to meet  the
applicable requirements for independence,  subject to the exception contemplated
by Nasdaq Marketplace Rule 4350 (c)(4)(C). The Board of Directors has determined
that Messrs.  Loyd and Carter are independent  for purposes of Marketplace  Rule
4200(a)(15) of the Nasdaq Stock Market.  Mr. Webster's service on the Nominating
Committee is pursuant to an exception  provided  under the Nasdaq  rules,  which
will permit him to serve on the committee until March 5, 2007.  Under the Nasdaq
rules,  a  non-independent  member of the Board of Directors may serve up to two
years as a member  of a  nominating  committee  under  exceptional  and  limited
circumstances  where  such  individual's  membership  is  required  by the  best
interests of the Company and its shareholders.  The Board of Directors  believes
these  criteria  are  met  with  respect  to  Mr.  Webster's  membership  on the
Nominating  Committee because of his extensive  knowledge of the Company and the
oil and gas industry and because he is a major shareholder of the Company.

     The Board of Directors has an Audit Committee,  which currently consists of
Messrs. Parker (chairman), Loyd and Ramsey. The Audit Committee held 20 meetings
and  transacted  business on one occasion by unanimous  written  consent  during
2004.  The  Audit  Committee  has  direct  responsibility  for the  appointment,
retention,  compensation  and  oversight  of the  independent  auditors  for the
purpose of preparing  the  Company's  annual audit  report or  performing  other
audit,  review or attest services for the Company.  The Audit Committee has sole
authority to approve all engagement fees and terms of the  independent  auditors
and to


                                       5


establish  policies  and  procedures  for  preapproval  of  audit  and  nonaudit
services.  The Audit  Committee  also reviews and discusses  the annual  audited
financial statements with management and the independent auditors. A copy of the
Audit Committee Charter may be found on the Company's website at www.carrizo.cc.

     The Board has  determined  that all of the  members of the Audit  Committee
satisfy  the  independence  standards  under the  Nasdaq  Marketplace  Rules and
Securities  Exchange Act Rule 10A-3. In addition,  the Board has determined that
Mr. Parker is an "audit committee  financial expert," as such term is defined in
Item  401(h) of  Regulation  S-K  promulgated  by the  Securities  and  Exchange
Commission (the "SEC").  Mr. Parker is a certified public  accountant and served
as partner in a major accounting firm.

     The  Board  of  Directors  has a  Compensation  Committee  which  currently
consists of Messrs.  Parker  (chairman) and Ramsey.  The Compensation  Committee
held five meetings during 2004. The primary responsibilities of the Compensation
Committee  are to  review  and  approve  the  compensation  of the  CEO  and the
Company's  other  executive  officers  and  oversee  and advise the Board on the
policies  that govern the  Company's  compensation  programs.  The  Compensation
Committee  has been  appointed  by the  Board of  Directors  to  administer  the
Company's  stock  option  plans  (subject  in some  cases to  action by the full
Board).  A copy  of the  Compensation  Committee  Charter  can be  found  on the
Company's website at www.carrizo.cc.  The Board of Directors has determined that
Messrs.  Parker and Ramsey are  independent  for  purposes of  Marketplace  Rule
4200(a)(15) of the Nasdaq Stock Market.

DIRECTOR NOMINATIONS PROCESS

     In assessing the qualifications of candidates for director,  the Nominating
Committee  considers,  in addition to qualifications  set forth in the Company's
bylaws,   each  potential   nominee's   personal  and  professional   integrity,
experience,  reputation,  skills, ability and willingness to devote the time and
effort  necessary to be an effective  board member,  and commitment to acting in
the best interests of the Company and its shareholders. The Nominating Committee
also  considers  requirements  under the listing  standards  of the Nasdaq Stock
Market, Inc. for a majority of independent directors,  as well as qualifications
applicable  to membership on Board  committees  under the listing  standards and
various  regulations.  The Nominating  Committee  makes  recommendations  to the
Board,   which  in  turn  makes  the  nominations  for   consideration   by  the
shareholders.

     Suggestions for potential  nominees for director can come to the Nominating
Committee from a number of sources,  including  incumbent  directors,  officers,
executive  search  firms and others.  The  Nominating  Committee  will  consider
director  candidates  recommended  by  shareholders.  The  extent  to which  the
Nominating  Committee  dedicates  time and  resources to the  consideration  and
evaluation of any  potential  nominee  brought to its  attention  depends on the
information  available to the Committee about the qualifications and suitability
of the  individual,  viewed  in light of the needs of the  Board,  and is at the
Committee's discretion.  Recognizing the contribution of incumbent directors who
have been able to develop,  over a period of time,  increasing  insight into the
Company and its operations and, therefore, provide an increasing contribution to
the Board as a whole, the Nominating Committee reviews each incumbent director's
qualifications  to continue on the Board in  connection  with the  selection  of
nominees to take office when that director's  term expires,  and conducts a more
detailed  review  of  each  director's  suitability  to  continue  on the  Board
following  expirations of the director's term. Mr. Carter was recommended to the
Nominating Committee for election as a director by Mr. Webster.

     In addition,  the  Nominating  Committee's  policy is that it will consider
candidates for the Board  recommended by shareholders.  Any such  recommendation
should include the candidate's name and  qualifications for Board membership and
should be submitted in writing to the Secretary,  Carrizo Oil & Gas, Inc.,  1000
Louisiana Street, Suite 1500, Houston, Texas 77002, along with:

     o    a signed statement of the proposed candidate consenting to be named as
          a candidate and, if nominated and elected, to serve as a director;

     o    a  statement  that the writer is a  shareholder  of the Company and is
          proposing a candidate for consideration by the Nominating Committee;

                                       6


     o    a statement  detailing any relationship  between the candidate and any
          customer, supplier or competitor of the Company;

     o    the financial and accounting  background of the  candidate,  to enable
          the Nominating  Committee to determine  whether the candidate would be
          suitable for Audit Committee membership; and

     o    detailed  information about any relationship or understanding  between
          the proposing shareholder and the candidate.

     Although the Nominating  Committee will consider candidates  recommended by
shareholders, it may determine not to recommend that the Board, or the Board may
determine  not to,  nominate  those  candidates  for  election  to the  Board of
Directors.

SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS

     Shareholders   may   communicate   with  the  Board  by  submitting   their
communications in writing, addressed to the Board as a whole or, at the election
of the shareholder,  to one or more specific directors,  c/o Secretary,  Carrizo
Oil & Gas, Inc., 1000 Louisiana Street, Suite 1500, Houston, Texas 77002.

     The Audit  Committee of the Board of Directors has  established  procedures
for the receipt,  retention and treatment of  complaints  regarding  accounting,
internal  accounting  controls,  or auditing  matters.  Shareholders who wish to
submit a complaint under these procedures should submit the complaint in writing
to: F. Gardner Parker, Chairman of the Audit Committee, Carrizo Oil & Gas, Inc.,
1000 Louisiana Street, Suite 1500, Houston,  Texas 77002. The Company also has a
confidential  hotline by which employees can communicate  concerns or complaints
regarding these matters.

DIRECTOR ATTENDANCE AT ANNUAL MEETING OF SHAREHOLDERS

     The Company does not have a policy regarding director  attendance at annual
meetings of  shareholders.  Five of the  Company's  directors  attended the 2004
Annual Meeting of Shareholders.

CODE OF CONDUCT

     The Company has a Code of Conduct that is  applicable  to all employees and
directors that satisfies the  requirements of Nasdaq  Marketplace  Rule 4350(n).
The Code of Conduct is available on the Company's website at www.carrizo.cc.

SECTION 16(A) REPORTING COMPLIANCE

     Section  16(a) of the Exchange Act requires  that the  Company's  executive
officers and directors,  and persons who own more than 10% of a registered class
of the  Company's  equity  securities,  file reports of ownership and changes of
ownership with the SEC.  Officers,  directors and greater than 10%  shareholders
are  required by SEC  regulation  to furnish the Company with copies of all such
forms they file.

     Based  solely on its  review of the copies of such  forms  received  by the
Company, and on written  representations by the Company's officers and directors
regarding their  compliance with the filing  requirements,  the Company believes
that during the fiscal year ended  December  31, 2004,  all reports  required by
Section  16(a) to be filed  by its  directors,  officers  and  greater  than 10%
beneficial  owners were filed on a timely  basis,  except two Form 4s each filed
one day late by Mr. Wojtek on October 13, 2004 and September 7, 2004, one Form 4
filed by Douglas A.P.  Hamilton on July 12, 2004 and one Form 4 reporting option
grants filed by each of Bryan Martin,  Christopher Behrens, J.P. Morgan Partners
(23A SBIC), LLC, Mr. Hamilton,  Mr. Wojtek,  Mr. Parker and Mr. Loyd on June 22,
2004.  Mr.  Martin,  Mr.  Behrens and Mr.  Hamilton are former  directors of the
Company,  and JP Morgan  Partners  (23A  SBIC),  LLC is a former 10%  beneficial
owner.

                                       7


COMPENSATION OF NONEMPLOYEE DIRECTORS

     The Board of Directors  has  recommended  the  following  amendments to the
Incentive Plan, subject to shareholder approval:

     o    replacing  automatic  initial  awards of  options to  purchase  10,000
          shares of Common Stock to each director not employed by the Company or
          any of its  subsidiaries  (an "Outside  Director") with  discretionary
          awards of stock options or restricted stock that are determined by the
          Compensation Committee or the Board of Directors; and

     o    giving  the   Compensation   Committee  and  the  Board  of  Directors
          additional flexibility in establishing the specific terms of awards of
          stock options and  restricted  stock to directors,  including  without
          limitation  the vesting  schedules  for and dates those  awards may be
          granted.

     In March 2005, the Board of Directors  approved an annual  retainer for the
2005-2006 director term for each Outside Director not employed by the Company or
any of its  subsidiaries  (an  "Outside  Director")  of  $10,000  per year  plus
compensation  of $2,500 per regular  meeting  attended  ($1,000 if attended  via
telephone), $1,000 per special meeting attended ($500 if attended via telephone)
and $1,000 per committee meeting attended ($500 if attended via telephone).  The
Chairmen of the Audit,  Compensation  and Nominating  Committees will receive an
additional retainer of $12,500,  $6,000 and $2,500,  respectively.  The Board of
Directors  also  approved  an annual  retainer  of $7,500  per  annual  term for
non-chairman  members of the Audit  Committee  and  $4,000  per annual  term for
non-chairman members of the Compensation Committee.

     For the 2004-2005  director term, each Outside Director  received an annual
retainer of $10,000 plus  compensation  of $2,500 per regular  meeting  attended
($1,000 if attended via telephone), $1,000 per special meeting attended ($500 if
attended via  telephone)  and $500 per  committee  meeting ($250 if attended via
telephone).  The  additional  retainers  for  the  Chairmen  of  the  Audit  and
Compensation  Committees  were  $10,000  and  $5,000,   respectively,   and  for
non-chairman members of the Audit,  Compensation and Nominating  Committees were
$2,000, $1,000 and $1,000, respectively.

     Directors  who are also  employees  of the  Company  receive no payment for
serving as  directors.  All  directors  are  reimbursed  for travel and  lodging
expenses of attending meetings.  Under the Incentive Plan, each Outside Director
is  currently  automatically  granted  nonqualified  options to purchase  10,000
shares of Common Stock on the date that person first becomes an Outside Director
of the Company.  Messrs.  Ramsey and Carter  received  such grants upon becoming
directors in May 2004 and March 2005, respectively. If the proposal to amend the
Incentive  Plan is  approved,  these  automatic  grants  will be  replaced  with
discretionary  awards of stock options or restricted stock.  Until the Company's
2004 Annual Meeting of  Shareholders,  each Outside  Director serving on the day
after the date of the annual meeting of shareholders was  automatically  granted
options to purchase an additional  2,500 shares of Common Stock,  subject to the
availability  for issuance of those shares under the Incentive Plan.  Currently,
annual awards of stock options and restricted stock are at the discretion of the
Compensation  Committee or the Board of Directors.  During 2004, each of Messrs.
Loyd,  Parker and Ramsey were  granted  options to purchase  2,500  shares at an
exercise  price per share of $9.215 under the  Incentive  Plan.  On February 19,
2003,  the Incentive Plan was amended to provide for a one-time grant of options
to purchase  25,000 shares of Common Stock to Mr. Parker at a price of $4.65 per
share,  the fair market value as of the date of the grant, as  compensation  for
serving as the Chairman of the Audit Committee.

     Under the  Incentive  Plan,  the  Chairmen of the Audit,  Compensation  and
Nominating Committees are currently  automatically granted additional options to
purchase  3,000,  2,000 and 2,000 shares of Common Stock,  respectively,  on the
first  business  day  following  the date on which  each  annual  meeting of the
Company's  shareholders  is  held;  and  the  Board  of  Directors  may,  in its
discretion,  grant  options to purchase of up to 3,000,  2,000 and 2,000 shares,
respectively, on that date to nonchairmen members of the Audit, Compensation and
Nominating  Committees  who are deemed by the  Committee to be  independent  for
purposes of the rules of the Nasdaq  Stock  Market.  These grants may be made to
the  chairman  or a member of the Audit  Committee,  Compensation  Committee  or
Nominating  Committee,  notwithstanding  that the same  person may also  receive
grants as a chairman or member of another committee. During 2004, Mr. Parker was

                                       8


granted  options  to  purchase  5,000  shares at an  exercise  price of $8.38 as
chairman of both the Audit  Committee  and the  Compensation  Committee.  During
2004, the independent  nonchairmen members of the Compensation Committee and the
Nominating  Committee  were each  granted  options to purchase  1,000  shares of
common stock at an exercise  price of $9.215,  and the  independent  nonchairmen
members of the Audit  Committee  were each  granted  options to  purchase  1,000
shares of common stock at an exercise price of $9.215.  If the proposal to amend
the  Incentive  Plan is approved,  the  automatic  grants will be replaced  with
awards  at the  discretion  of  the  Compensation  Committee  or  the  Board  of
Directors.  The  Company  expects  to grant  shares of  restricted  stock to the
Outside  Directors  in the  2005-2006  director  term as set  forth in the table
below.

     Currently,  each option  granted to an Outside  Director (i) has a ten-year
term,  (ii) has an exercise  price equal to the fair market  value of a share of
Common Stock on the date of grant and (iii)  becomes  exercisable  in cumulative
annual  increments  of  one-third  of the total number of shares of Common Stock
subject thereto, beginning on the first anniversary of the date of grant. Shares
of restricted stock granted to an Outside Director  currently vest in cumulative
annual  increments of one-third of the total number of shares,  beginning on the
first  anniversary of the date of grant.  If the proposal to amend the Incentive
Plan is approved, the vesting terms of any options or shares of restricted stock
granted to  Outside  Directors  will be at the  discretion  of the  Compensation
Committee  or the Board of  Directors.  The Company  does not expect to make any
regular grants of options or restricted stock to Mr. Webster.

     A summary of our proposed director  compensation for the 2005-2006 director
term,  certain  portions  of which are subject to the  approval of the  proposed
amendments to the Incentive Plan, and our actual director  compensation  for the
2004-2005 director term, is set forth below:



                                                                                    
   DIRECTOR COMPENSATION                                  PROPOSED 2005-2006                             2004-2005
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Annual Retainer                             $10,000                                     $10,000
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Committee Annual Cash Retainer:
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   o   Audit Committee                         $12,500 Chairman / $7,500 Member            $10,000 Chairman / $2,000 Member
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   o   Compensation Committee                  $6,000 Chairman / $4,000 Member             $5,000 Chairman / $1,000 Member
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   o   Nominating Committee                    $2,500 Chairman                             - Chairman / $1,000 Member
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Regular Board Cash Meeting Attendance Fee   $2,500 / $1,000 Telephonic                  $2,500 / $1,000 Telephonic
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Special Board Cash Meeting Attendance Fee   $1,000 / $500 Telephonic                    $1,000 / $500 Telephonic
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Committee Cash Meeting Attendance Fee       $1,000 / $500 Telephonic                    $500 / $250 Telephonic
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   New  Member   Restricted  Stock  Award  /   3,000 shares of restricted stock            options to purchase 10,000 shares
   Stock Option Award
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Annual  Member  Restricted  Stock / Stock   1,000 shares of restricted stock            options to purchase 2,500 shares granted
   Option Award
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   Committee  Restricted Stock Award / Stock
   Option Award
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   o   Audit Committee                         2,500 shares of restricted stock to the     options to purchase 3,000 shares
                                               Chairman / 1,500 shares of restricted       granted to the Chairman / options to
                                               stock to each Member                        purchase 1,000 shares granted to each
                                                                                           Member
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   o   Compensation Committee                  1,500 shares of restricted stock to the     options to purchase 2,000 shares
                                               Chairman / 1,000 shares of restricted       granted to the Chairman / options to
                                               stock to each Member                        purchase 1,000 shares granted to each
                                                                                           Member
   ------------------------------------------ ------------------------------------------- -----------------------------------------
   o   Nominating Committee                    1,500 shares of restricted stock to the     options to purchase - shares
                                               Chairman / None to Members                  granted to the Chairman / options to
                                                                                           purchase 1,000 shares granted to each
                                                                                           Member
   ------------------------------------------ ------------------------------------------- -----------------------------------------


                                       9


     We expect that shares of restricted  stock granted to Outside  Directors in
the 2005-2006 director term will become fully vested on the first anniversary of
the date of  grant,  subject  to  approval  of the  proposed  amendments  to the
Incentive Plan by our shareholders.

                       COMPENSATION OF EXECUTIVE OFFICERS

     The following table sets forth the annual, long-term and total compensation
for (i) the  Company's  Chief  Executive  Officer  for the  fiscal  years  ended
December 31, 2004, 2003 and 2002 and (ii) its other four executive  officers for
the fiscal  years ended  December  31, 2004,  2003 and 2002  (collectively,  the
"Named Executives").

                           SUMMARY COMPENSATION TABLE



                                                                                                 Long-Term
                                                                   Annual                       Compensation
                                                                Compensation                       Awards
                                               ------------------------------------------------  ------------
                 Name And                                                    Other Annual          Stock             All Other
            Principal Position          Year    Salary($)    Bonus($)(1)    Compensation($)(2)    Options(#)    Compensation($)(3)
       ------------------------------  ------  -----------  -------------  --------------------  ------------  --------------------
                                                                                             
         S.P. Johnson, IV               2004      257,548        130,046            --               8,334           38,605
           President and Chief          2003      241,668        123,796            --              50,000            5,515
           Executive Officer            2002      233,604         48,017            --                --              4,736
         Paul F. Boling(4)              2004      157,500         56,421                            25,000            6,315
           Chief Financial Officer,     2003       68,626         31,382            --              20,000            1,249
           Vice President, Secretary
           and Treasurer
         J. Bradley Fisher (5)          2004      187,425        109,796            --                --             40,669
           Vice President of            2003      175,771         72,496            --              25,000           10,825
           Operations                   2002      163,848         43,845            --                --              7,368
         Jeremy T. Greene (6)           2004      187,425              0            --                --             39,392
           Vice President of            2003      173,499         70,496            --              40,000            3,441
           Exploration                  2002       84,499         26,345            --              25,000              267
         Kendall A. Trahan              2004      165,567         42,671            --                --             27,504
           Vice President of Land       2003      155,210         32,796            --                --              5,269
                                        2002      150,174          8,805            --                --              4,676

- ----------

(1)  Consists of bonuses  earned with  respect to the fiscal years  listed.  The
     bonuses for 2004 are expected to be paid in April 2005.

(2)  For the  fiscal  years  2002,  2003 and 2004 the Named  Executives  did not
     receive  any annual  compensation  not  properly  categorized  as salary or
     bonus, except for certain perquisites and other personal benefits which are
     not shown because the aggregate  amount of such  compensation,  if any, for
     each Named  Executive  during each of those fiscal years did not exceed the
     lesser of $50,000 or 10% of total salary and bonus  reported for that Named
     Executive.

(3)  For the fiscal year 2004, all other  compensation  consists of special cash
     bonuses in lieu of stock options of $25,000,  $30,000,  $30,000 and $15,000
     for Messrs. Johnson, Fisher, Greene and Trahan, respectively; contributions
     of $12,794,  $5,559,  $8,581,  $8,358 and $11,693 by the Company  under its
     401(k)  plan for  Messrs.  Johnson,  Boling,  Greene,  Fisher  and  Trahan,
     respectively;  life insurance  premiums of $811,  $756, $811, $811 and $811
     for Messrs. Johnson, Boling, Greene, Fisher and Trahan,  respectively;  and
     overriding  royalties  of $1,500 for Mr.  Fisher.  Due to the low number of
     shares of Common Stock  available for issuance under the Incentive Plan, in
     the first quarter of 2004, the Compensation  Committee  recommended and the
     Board of  Directors  approved  the award of a special cash bonus in lieu of
     stock  options to a number of key  employees,  including  Messrs.  Johnson,
     Fisher,  Greene and Trahan.  Subsequently,  because of the  availability of
     additional  shares under the Incentive  Plan,  the Board of


                                       10


     Directors gave these  employees the option to receive stock options in lieu
     of a portion of the cash bonus.  The special  bonuses  described above were
     paid to  Messrs.  Johnson,  Fisher,  Greene and  Trahan  over  three  equal
     installments on April 15, 2004,  August 31, 2004 and February 28, 2005. Mr.
     Johnson  elected to receive  stock options in lieu of a portion of his cash
     bonus and  therefore  he received  $25,000  and options to purchase  16,668
     shares of Common Stock.

     For the fiscal year 2003, all other compensation  consists of contributions
     of $4,818,  $1,125,  $4,674, $4,622, $2,753 and $3,222 by the Company under
     its 401(k) plan for Messrs.  Johnson,  Boling,  Trahan,  Fisher and Greene,
     respectively,  life insurance  premiums of $697, $124, $595, $604, $688 and
     $464 for Messrs. Johnson, Boling, Trahan, Fisher and Greene,  respectively,
     and  overriding  royalties  of $5,599 for Mr.  Fisher.  For the fiscal year
     2002, all other compensation  consists of contributions of $4,088,  $4,129,
     and $3,947 by the Company under its 401(k) plan for Messrs. Johnson, Trahan
     and Fisher,  respectively,  life insurance premiums of $648, $546, $533 and
     $267 for Messrs.  Johnson,  Trahan,  Fisher and Greene,  respectively,  and
     overriding  royalties  of $7,368  for Mr.  Fisher.  The  compensation  from
     overriding  royalties awarded to Mr. Fisher arises from a one-time award of
     an overriding  royalty  interest on the Pitchfork Ranch A-90 #1 well to Mr.
     Fisher in 2001.  The  Company  has since  adopted a policy that it will not
     grant any overriding royalty interests to its employees.

(4)  Mr. Boling commenced his employment with the Company in August 2003.

(5)  Mr. Fisher became Vice President and Chief Operating Officer in March 2005.

(6)  Mr.  Greene  commenced his  employment  with the Company in August 2002. He
     left the Company in January 2005.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

     The following  table sets forth  information  with respect to stock options
granted during the fiscal year 2004 to the Named Executives.



                                                                                                     Potential Realizable
                                                                                                      Values at Assumed
                                    Number of     % of Total                                        Annual Rates of Stock
                                   Securities    Options/SARs                                      Price Appreciation for
                                   Underlying     Granted to                                           Option Term(1)(2)
                                  Options/SARs   Employees in   Exercise Price                     -----------------------
                    Name             Granted      Fiscal Year   ($/share)(1)     Expiration Date      5%($)       10%($)
             ------------------   ------------   ------------   --------------   ---------------   ----------   ----------
                                                                                             
             S. P. Johnson IV.        8,334           9.7           8.265            09/03/2014       48,962       127,635
             Paul F. Boling...       25,000          29.1            6.98            02/19/2014      155,375       354,625
             J. Bradley Fisher           --            --              --               --                --            --
             Jeremy T. Greene.           --            --              --               --                --            --
             Kendall A. Trahan           --            --              --               --                --            --

- ----------

(1)  The exercise  price of the options  granted is equal to or greater than the
     market value of the Common Stock on the date of grant.

(2)  Potential  realizable  value of each grant assumes that the market price of
     the  underlying  security  (based upon the value of the Common Stock on the
     date of grant)  appreciates at annualized rates of 5% and 10% over the term
     of the award. Actual gains, if any, on stock option exercises are dependent
     on the future  performance of Common Stock and overall  market  conditions.
     There can be no assurance that the amounts  reflected on this table will be
     achieved.

                                       11


AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

     The following table sets forth  information with respect to the unexercised
options to purchase  the Common Stock held by the Named  Executives  at December
31, 2004.



                                                                   Number of Securities      Value of Unexercised In-the-
                                                                 Underlying Unexercised        Money Options at Fiscal
                                      Shares         Value      Options at Fiscal Year-End          Year-End($)(2)
                                    Acquired on    Realized    ---------------------------   ----------------------------
                      Name          Exercise(#)     ($)(1)     Exercisable   Unexercisable   Exercisable   Unexercisable
               -----------------   -------------  ----------   -----------   -------------   -----------   -------------
                                                                                         
               S. P. Johnson IV.         --           --          186,667        41,667        1,551,535         254,294
               Paul F. Boling...         --           --            6,667        38,333           37,133         182,267
               J. Bradley Fisher         --           --           28,333        41,667          203,550         324,150
               Jeremy T. Greene.         --           --           29,999        35,001          218,062         247,638
               Kendall A. Trahan      39,500       185,200         82,295           -            568,722            -

- ----------

(1)  Value  realized is calculated  based on the  difference  between the option
     exercise price and the closing  market price of the Company's  Common Stock
     on the date of exercise,  multiplied by the number of shares underlying the
     options.

(2)  Value of  unexercised  in-the-money  options is  calculated  based upon the
     difference  between the option price and the closing price of the Company's
     Common  Stock at  fiscal  year-end,  multiplied  by the  number  of  shares
     underlying the options. The closing price of the Company's Common Stock, as
     reported on the Nasdaq Stock Market on December 31, 2004, was $11.30.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the compensation  committee during the last completed fiscal
year were Mr. Parker,  Mr. Loyd and Bryan R. Martin,  our former  director.  Mr.
Martin resigned from the Board and the compensation  committee in December 2004.
Mr.  Loyd  stepped  down from the  compensation  committee,  and Mr.  Ramsey was
appointed to the  committee,  in February 2005. Mr. Loyd served as our President
from  our  inception  in  September   1993  to  December   1993.   See  "Certain
Transactions."

CERTAIN TRANSACTIONS

Pinnacle Transaction

     During the second quarter of 2003, we and Rocky Mountain Gas, Inc.  ("RMG")
each  contributed our interests in certain natural gas and oil leases in Wyoming
and Montana in areas  prospective  for coalbed  methane to a newly  formed joint
venture,  Pinnacle Gas Resources, Inc. In exchange for the contribution of these
assets,  we and RMG each  received  37.5% of the common  stock of  Pinnacle  and
options to purchase  additional  Pinnacle  common  stock,  or on a fully diluted
basis,  we and RMG each received an ownership  interest in Pinnacle of 26.9%. We
retained our interests in  approximately  145,000 gross acres in the Castle Rock
project  area in Montana and the Oyster  Ridge  project  area in Wyoming.  We no
longer have a drilling  obligation  in  connection  with the oil and natural gas
leases contributed to Pinnacle.

     Simultaneously  with the  contribution  of  these  assets,  affiliates  and
related  parties  of  CSFB  Private  Equity  (the  "CSFB  Parties")  contributed
approximately  $17.6  million  of cash to  Pinnacle  in  return  for  redeemable
preferred  stock of Pinnacle,  25% of Pinnacle's  common stock as of the closing
date and  warrants to purchase  Pinnacle  common  stock at an exercise  price of
$100.00  per share,  subject to  adjustments  ("Series  A  Warrants").  The CSFB
Parties  currently  have  greater  than 50% of the voting  power of the Pinnacle
capital stock through their ownership of Pinnacle common and preferred stock.

     In February 2004, the CSFB Parties  contributed  additional  funds of $11.8
million to continue funding the 2004 development  program of Pinnacle.  Assuming
that we and RMG exercise  our  Pinnacle  options,  the CSFB  Parties'  ownership
interest in Pinnacle would be 54.6%,  and we and RMG each would own 22.7%,  on a
fully diluted  basis.  On the other hand,  assuming we and RMG each elect not to
exercise our Pinnacle  options,  our interest,  on a fully diluted basis,  would
each decline to 16.7%, and,  concurrently,  the CSFB Parties' ownership

                                       12


interest would increase to 66.7%.  Our options are exercisable as long as we own
Pinnacle common stock, but the exercise price increases by 15% every year.

     Immediately  following its formation,  Pinnacle acquired an approximate 50%
working  interest  in  existing  leases and  approximately  36,529  gross  acres
prospective for coalbed methane development in the Powder River Basin of Wyoming
from an  unaffiliated  party  for  $6.2  million.  At the  time of the  Pinnacle
transaction,   these  wells  were   producing  at  a  combined   gross  rate  of
approximately 2.5 MMcfd, or an estimated 1 MMcfd net to Pinnacle.  At the end of
2004 Pinnacle's production was approximately 13 Mmcfe/d gross (5.6 Mmcfe/d net).
In June 2004,  Pinnacle  fulfilled a $14.5 million funding commitment for future
drilling and development  costs on these properties on behalf of the third party
prior to December 31, 2005. The drilling and development work will be done under
the terms of an earn-in joint venture  agreement between Pinnacle and Gastar. As
of December 31, 2004,  Pinnacle owned interests in  approximately  131,000 gross
acres in the Powder River Basin.

     Historically,  the business  operations and development program of Pinnacle
has not  required  us to provide any further  capital  infusion.  In March 2005,
Pinnacle acquired  additional  undeveloped  acreage from an undisclosed  company
which would also significantly increase Pinnacle's development program budget in
2005.  Accordingly,  CCBM and the other Pinnacle shareholders have the option to
participate  in the equity  contribution  into  Pinnacle  needed to finance  the
acquisition and the related  development  program in 2005. The CSFB Parties have
already  made the  first of their  pro rata  contributions.  Should  we elect to
maintain our proportionate  ownership interest in Pinnacle,  we estimate that we
would be required to contribute  two payments of $2.5 million each. The first of
these  payments is due in mid April 2005. If CCBM opts not to contribute  any or
all of its share of the equity  contribution,  its fully  diluted  ownership  in
Pinnacle would be reduced.  CCBM plans to contribute $2.5 million in April 2005,
its share of the equity capital needed to close the acquisition and fund part of
the additional  development program.  There can be no assurance regarding CCBM's
level of  participation  in the second of the two  payments or in future  equity
contributions  needed,  if any. On March 29, 2005, we elected to  participate in
the first payment and contribute $2.5 million to Pinnacle in exchange for Series
A Warrants,  Series B warrants to purchase  Pinnacle common stock at an exercise
price of $0.01 per share, subject to adjustments, and preferred stock.

     The  Company's  Chairman,  Steven A.  Webster,  is also  Chairman of Global
Energy Partners, Ltd., an affiliate of CSFB Private Equity.

     The Company has mutually agreed with RMG, its majority  shareholder and the
CSFB  Parties to provide  Pinnacle  the right  until June 23, 2008 to acquire at
cost any  interest  in natural  gas and oil leases or mineral  interests  in the
Powder River Basin in Wyoming and Montana,  but  excluding  most of Powder River
County,  Montana,  that such  parties may have  acquired  in the  covered  area,
subject to specified exceptions.

     The  Company,  the  CSFB  Parties,  RMG,  RMG's  parent  company,  Peter G.
Schoonmaker,  Gary W. Uhland and Pinnacle also entered into a security  holders'
agreement  providing  for an initial  eight  person  board of  directors,  which
initially  includes  four  directors  nominated  by the  CSFB  Parties  and  two
nominated by each of the Company and RMG,  subject to change as their respective
ownership percentages change. Each party to the security holders' agreement also
granted to the others a right of first  offer and  co-sale  rights.  If the CSFB
Parties  propose to sell all of their  Pinnacle  shares to a third party,  under
specified  circumstances the CSFB Parties may require the other security holders
to include all of their  Pinnacle  shares in that sale. In event of such a sale,
the Pinnacle  preferred  stock will have a preferred  right to receive an amount
equal to its  liquidation  value (as defined  below) per share plus  accrued and
unpaid  dividends  prior to  distributions  to the holders of shares of Pinnacle
common stock and common stock  equivalents.  Pinnacle  also granted the security
holders  pre-emptive  rights  to  purchase  additional  securities  in  order to
maintain  their  proportionate  ownership  of Pinnacle.  The  security  holders'
agreement also provides generally for multiple demand  registration  rights with
respect to the  Pinnacle  common  stock in favor of the CSFB Parties and certain
piggyback   registration   rights  for  the  Company  and  RMG  subject  to  the
satisfaction of specified conditions.

     The Pinnacle  redeemable  preferred  stock  generally has the right to vote
together  with the  Pinnacle  common  stock  and has a class  vote on  specified
matters,  including specified  extraordinary  transactions.  In the event of any
dissolution, liquidation, or winding up by Pinnacle, the holder of each share of
Pinnacle preferred

                                       13


stock will be entitled to be paid a  liquidation  value of $100 per share out of
the assets of Pinnacle available for distribution to its shareholders.

     Dividends on the Pinnacle  preferred  stock are payable either in cash at a
rate of 10.5% per  annum  through  June 23,  2011 and  12.5%  thereafter  or, at
Pinnacle's  option,  by payment  in kind of  additional  shares of the  Pinnacle
preferred  stock.  For  each  additional  share  of  Pinnacle   preferred  stock
distributed  to a holder as an in-kind  dividend,  Pinnacle will also deliver to
that holder one Pinnacle warrant, which will have an exercise price equal to the
exercise  price  of the  outstanding  Pinnacle  warrants  on the  date  of  such
distribution.  On or after July 1, 2005,  Pinnacle may redeem all or any portion
of the Pinnacle  preferred  stock,  provided  that if any Pinnacle  warrants are
still outstanding, Pinnacle may redeem all but a single share; if the redemption
occurs at any time  before  July 1,  2009,  the  redemption  price  will be at a
premium to the liquidation value of the shares.

     Pinnacle is required to redeem its preferred stock upon:

     o    specified  changes of  control,  at a price per share equal to 101% of
          its liquidation value; or

     o    specified events of default, at a price per share equal to 110% of the
          liquidation value prior to June 30, 2005 and, thereafter,  equal to an
          optional redemption price that decreases over time.

     The Pinnacle  warrants entitle the holders to purchase up to 130,000 shares
of Pinnacle common stock at a price of $100 per share and are exercisable at any
time until June 30,  2013.  The Pinnacle  warrants can be exercised in cash,  by
tender of the Pinnacle preferred stock and on a cashless net exercise basis. The
Pinnacle warrants are subject to adjustments,  including, in specified cases, an
adjustment  of the exercise  price to equal the lowest  price at which  Pinnacle
common  stock is sold if such  shares are sold below the  then-current  exercise
price.

2002 Financing

     On February 20, 2002, the Company  consummated the transactions  (the "2002
Financing")  contemplated by a Securities  Purchase Agreement dated February 20,
2002 (the  "2002  Securities  Purchase  Agreement")  among the  Company,  Mellon
Ventures,  L.P.  ("Mellon") and Steven A. Webster  (excluding  the Company,  the
"2002  Investors").  Such  transactions  included  (i) the  payment  by the 2002
Investors of an aggregate purchase price of $6,000,000,  (ii) the sale of 60,000
shares of Series B  Convertible  Participating  Preferred  Stock (the  "Series B
Preferred  Stock")  the  terms  of  which  are set  forth  in the  Statement  of
Resolution  Establishing  Series  of  Shares  designated  Series  B  Convertible
Participating  Preferred Stock (the "Statement of Resolution") and which include
the right to convert such shares into Common Stock (the "Underlying  Shares") at
a price of $5.70  per  share,  subject  to  adjustments,  to the 2002  Investors
pursuant to the terms of the 2002  Securities  Purchase  Agreement and (iii) the
sale of warrants (the "2002  Warrants") to purchase up to 252,632  shares of the
Company's  Common Stock (the "2002  Warrant  Shares") at the  exercise  price of
$5.94 per share,  subject to adjustments,  to the 2002 Investors pursuant to the
terms  of  Warrant   Agreement  dated  February  20,  2002  (the  "2002  Warrant
Agreement") among the Company,  Mellon and Steven A. Webster, (iv) the execution
of the  Shareholders  Agreement dated February 20, 2002 (the "2002  Shareholders
Agreement") among the Company, Mellon, Paul B. Loyd, Jr., Douglas A.P. Hamilton,
Steven A.  Webster,  S.P.  Johnson IV,  Frank A. Wojtek and DAPHAM  Partnership,
L.P., (v) the execution of the Registration  Rights Agreement dated February 20,
2002 ("2002 Registration Rights Agreement") among the Company, Mellon and Steven
A.  Webster  and (vi)  the  execution  of a  Compliance  Sideletter  dated as of
February  20, 2002 by and  between the Company and Mellon (the "2002  Compliance
Sideletter").  The  Company  sold  $4.0  million  and $2.0  million  of Series B
Preferred  Stock and 168,422 and 84,210 2002 Warrants to Mellon and Mr. Webster,
respectively.  In the first  quarter of 2004,  Mellon  converted all of its 2002
Warrants into 168,421 shares of Common Stock.

     In June 2004, the 2002  Shareholders  Agreement was terminated by agreement
of the parties.  Mellon  converted all of its shares of Series B Preferred Stock
(approximately  49,938  shares) into  876,099  shares of Common Stock on May 25,
2004.  Steven  A.  Webster  converted  all  of  his  Series  B  Preferred  Stock
(approximately  25,195  shares) into 442,025  shares of Common Stock on June 30,
2004. As a result, no shares of Series B Preferred Stock remain outstanding.

                                       14


     The 2002 Warrants had a five-year term and originally  entitled the holders
to  purchase  up to 252,632  shares of our common  stock at a price of $5.94 per
share,  subject to adjustment,  and were exercisable at any time after issuance.
As of December 31, 2004, 84,211 of the 2002 Warrants  remained  outstanding (all
held by Mr. Webster).  On March 22, 2005, Mr. Webster  converted all of his 2002
Warrants  into 54,669  shares of Common  Stock.  As a result,  no 2002  Warrants
remain outstanding.  For accounting  purposes,  the 2002 Warrants were valued at
$0.06 per Warrant.  Each of our series of warrants was exercisable on a cashless
basis at the option of the holder.

1999 Financing

     On December 15, 1999, the Company  consummated the transactions  (the "1999
Financing")  contemplated by a Securities  Purchase Agreement dated December 15,
1999 (the "1999 Securities  Purchase  Agreement") among the Company,  CB Capital
Investors,  L.P.  ("Chase")  (now JPMorgan  Partners (23A SBIC),  LLC),  Mellon,
Steven A. Webster,  Douglas A.P.  Hamilton and Paul B. Loyd, Jr.  (excluding the
Company,  the "Investors").  Such  transactions  included (i) the payment by the
Investors of an aggregate  purchase  price of  $30,000,000,  (ii) the sale of an
aggregate of $22,000,000  principal amount of 9% Senior  Subordinated  Notes due
2007 (the "Notes") to the Investors, (iii) the sale of an aggregate of 3,636,364
shares of Common  Stock for $2.20 per share to the  Investors,  (iv) the sale of
warrants  (the  "1999  Warrants")  to  purchase  up to  2,760,189  shares of the
Company's  Common Stock (the "1999  Warrant  Shares") at the  exercise  price of
$2.20 per share, subject to adjustments,  to the Investors, (v) the execution of
a  Shareholders  Agreement  dated  December 15, 1999 among the  Company,  Chase,
Mellon,  Paul B. Loyd,  Jr.,  Douglas A.P.  Hamilton,  Steven A.  Webster,  S.P.
Johnson IV, Frank A. Wojtek and DAPHAM Partnership, L.P., (vi) the execution and
delivery  of the  Warrant  Agreement  dated  December  15,  1999  (the  "Warrant
Agreement") among the Company,  Chase,  Mellon,  Paul B. Loyd, Jr., Douglas A.P.
Hamilton and Steven A. Webster,  (vii) the execution of the Registration  Rights
Agreement dated December 15, 1999 ("Chase  Registration Rights Agreement") among
the Company,  Chase and Mellon, (viii) the execution of the Amended and Restated
Registration  Rights  Agreement  dated  December  15,  1999  ("Amended  Founders
Registration  Rights  Agreement") among the Company,  Paul B. Loyd, Jr., Douglas
A.P.  Hamilton,  Steven A. Webster,  S.P. Johnson IV, Frank A. Wojtek and DAPHAM
Partnership,  L.P.,  and (ix) the  execution  of a Compliance  Sideletter  dated
December  15, 1999 among the  Company,  Chase and Mellon  (the "1999  Compliance
Sideletter").  The Company sold $17.6 million,  $2.2 million, $0.8 million, $0.8
million and $0.8  million  principal  amount of the Notes;  2,909,091,  363,636,
121,212, 121,212 and 121,212 shares of the Company's common stock and 2,208,151,
276,019, 92,006, 92,006 and 92,006 1999 Warrants to Chase, Mellon, Mr. Loyd, Mr.
Hamilton and Mr. Webster, respectively.

     In April 2004, the 1999 Shareholders  Agreement was amended so that Messrs.
Hamilton  and Loyd and DAPHAM  Partnership,  L.P.  are no longer  parties to the
agreement.  In June 2004, the 1999  Shareholders  Agreement was again amended so
that Mellon,  Messrs.  Johnson,  Wojtek and Webster are no longer parties to the
agreement.

     On June 7, 2004,  an  unaffiliated  third  party (the  "Subordinated  Notes
Purchaser")  purchased all the  outstanding  Subordinated  Notes in an aggregate
principal amount of $27,702,426.55  from the original note holders.  In exchange
for  a  $415,536.40   amendment  fee,   certain  terms  and  conditions  of  the
Subordinated  Notes were amended,  to provide for, among other things, (1) a one
year extension of the maturity to December 15, 2008,  (2) a one year  extension,
through  December 15,  2005,  of the  paid-in-kind  ("PIK")  interest  option to
pay-in-kind  60% of the interest  due each period by  increasing  the  principal
balance by a like amount (the "PIK  option"),  (3) an additional one year option
to extend the PIK option through December 15, 2006 at an annual interest rate on
the  deferred  amount of 10% and the payment of a one-time  fee equal to 0.5% of
the principal then outstanding,  (4) an increase and extension on the prepayment
premium on the Subordinated  Notes,  (5) a modification of a covenant  regarding
maximum quarterly  leverage that our Total Debt will not exceed 3.5 times EBITDA
(as such terms are defined in the securities  purchase  agreement related to the
Subordinated  Notes)  for the last 12  months  at any  time  and (6)  additional
flexibility to obtain a separate project financing facility in the future.

                                       15


     In 2004, Mellon, JPMorgan Partners (23A SBIC), Mr. Webster and Mr. Hamilton
exercised 1999 Warrants to purchase 276,019, 2,208,152, 92,006 and 92,006 shares
of Common  Stock,  respectively,  on a  cashless  exercise  basis for a total of
205,692, 1,684,949, 70,205 and 70,205 shares of Common Stock, respectively,  and
Mr. Loyd exercised 1999 Warrants to purchase 92,006 shares for a total of 92,006
shares of Common Stock. As a result, no 1999 Warrants remain outstanding.

     Pursuant  to  amendments  in June  2004,  the 1999  Shareholders  Agreement
provided that the Company's board of directors will nominate and solicit proxies
on behalf of one or two,  depending on the amount of Company  securities held by
Chase, nominees for director designated by Chase. Currently,  Chase does not own
the requisite amount of stock to trigger this obligation and no Chase designated
nominees are nominated for election at the 2005 Annual Meeting of Shareholders.

     The Company agreed in the 1999 Shareholders  Agreement to limit the maximum
number of common stock equivalents issuable under the Company's equity incentive
plans  to  2.5  million  shares  and  equivalents   (including  any  shares  and
equivalents  issued  or  issuable  as of  the  date  of  the  1999  Shareholders
Agreement).  In  April  2004,  the  Company  received  a waiver  under  the 1999
Shareholders Agreement allowing the Company to increase the number of authorized
shares  available under the Incentive Plan to 2,350,000.  The 1999  Shareholders
Agreement has since terminated in accordance with its own terms.

     Additional information concerning the Subordinated Notes, the 1999 Warrants
and the transactions  relating to the 1999 Securities  Purchase Agreement may be
found in the Company's  Current  Report on Form 8-K dated  December 15, 1999 and
the  Company's  Current  Report on Form 8-K dated  June 7, 2004,  including  the
exhibits to each document.

Certain Matters Regarding Mr. Webster

     In December 2001, the Company sold to Mr. Webster a 2% working  interest in
certain leases in Matagorda  County and the right to participate in the Staubach
#1 well  located  within those leases in exchange for $20,000 and the payment by
Mr.  Webster of a 33% promoted  interest for the drilling  costs through  casing
point of that  well.  The terms of this sale were  consistent  with the terms of
sales to other participants in this project.

     In November 1999, the Company entered into a month-to-month  agreement with
San Felipe Resource  Company,  an entity owned by Mr.  Webster,  under which Mr.
Webster  provides  consulting  services to the Company in exchange  for a fee of
$9,000 per month, which was increased to $12,000 per month effective April 2003.
The Company provides office space for Mr. Webster's son.

     In the first  quarter  of 2004,  due to the low  number of shares of Common
Stock  available  for  issuance  under  the  Incentive  Plan,  the  Compensation
Committee recommended and the Board of Directors approved the award of a special
cash bonus in lieu of stock options to Mr.  Webster.  The special bonus was paid
to Mr. Webster in three equal  installments of $40,000 on April 15, 2004, August
31, 2004 and February 28, 2005.

Certain Matters Regarding Mr. Carter

     On March 3, 2005, the Board of Directors  appointed Mr. Carter to the Board
of Directors and the Nominating  Committee.  Mr. Carter and his immediate family
members  collectively own interests  directly and indirectly  through  entities,
which are royalty owners in the Company's  Louisiana  Delta Farms #1,  Louisiana
Delta Farms #2 and King Gas #1. Mr. Carter also serves as an executive  officer,
general  partner or controlling  shareholder of these entities (the "Black Stone
Entities")  and in some cases he and his family hold  substantial  interests  in
these entities.  The Black Stone Entities  acquired the royalty interests from a
third party in June 2004. The Company estimates that, during 2004, (i) the Black
Stone Entities collectively earned approximately $444,770 from working interests
in which the  Company  is a partial  owner,  (ii)  approximately  $24,000 of the
amount received from these working  interests was  attributable to the ownership
of Mr. Carter and his immediate  family,  and (iii) Mr.  Carter's family members
received  $2,063  directly from these working  interests.  These amounts reflect
production  from the Company's  wells for only the trailing seven months of 2004
and are expected to increase for a full year of production in 2005. In addition,
the Black Stone Entities

                                       16


own royalty interests in the undeveloped Lazarus and Twins Prospects,  which the
Company may develop in the future.

     The Board of Directors  determined that Mr. Carter's existing  relationship
with the Company and his interest in the Black Stone Entities does not currently
and will not in the future be deemed to create a conflict of interest  under the
Code of  Ethics  and is in  compliance  with the Code of  Ethics.  The  Board of
Directors determined that Mr. Carter would recuse himself on matters relating to
the Delta  Farms Wells and Lazarus and Twins  Prospects  as an  appropriate  and
preventative  action to eliminate future  conflicts of interest  relating to Mr.
Carter's interest in the Black Stone Entities.

EMPLOYMENT AGREEMENTS

     The Company has entered  into  employment  agreements  with each  executive
officer  listed below.  The following  chart shows the annual base salaries that
the executive officers listed therein are currently being paid by the Company.



                                            Name and Current Position                      Annual Salary
                          ------------------------------------------------------------     -------------
                                                                                        
                          S. P. Johnson IV............................................      $  283,500
                            President and Chief Executive Officer
                          Paul F. Boling..............................................      $  173,250
                            Chief Financial Officer, Vice President, Secretary and
                            Treasurer
                          Gregory E. Evans(1).........................................      $  175,000
                            Vice President of Exploration
                          J. Bradley Fisher (2).......................................      $  226,800
                            Vice President of Operations
                          Jeremy T. Greene (3)........................................           N/A
                            Vice President of Exploration
                          Kendall A. Trahan...........................................      $  173,845
                            Vice President of Land

- ----------

(1)  Mr. Evans' employment commenced in March 2005.

(2)  Mr. Fisher became Vice President and Chief Operating Officer in March 2005.

(3)  Mr. Greene left the Company in January 2005.

     Each of the employment  agreements of Mr. Johnson,  Mr. Trahan,  Mr. Greene
and Mr. Fisher has an initial  three-year term;  provided that at the end of the
second year of such initial term and on every day  thereafter,  the term of each
such employment  agreement will automatically be extended for one day, such that
the  remaining  term of the  agreement  shall  never be less than one year.  The
employment  agreements  for Mr.  Boling and Mr.  Evans have an initial  one year
term;  provided that at the date of the  agreement and on every day  thereafter,
the term of such  employment  agreement is  automatically  extended for one day,
such that the remaining term of the agreement shall never be less than one year.
Under each  agreement,  both the  Company and the  employee  may  terminate  the
employee's  employment at any time. Upon termination of employment on account of
disability or if employment is terminated by the Company for any reason  (except
under certain limited circumstances defined as "for cause" in the agreement), or
if employment is  terminated  either (x) for any reason  (including by reason of
death)  during a sixty day period  following the elapse of one year after such a
change of control ("window  period") or (y) by the employee with good reason (as
defined), under the agreements the employee will generally be entitled to (i) an
immediate  lump sum cash payment equal to 150% for Messrs.  Johnson,  Trahan and
Fisher,  125% in the case of Mr.  Greene and 100% in the case of Mr.  Boling and
Mr. Evans (375% for Messrs. Johnson and Trahan, 275% for Mr. Fisher and 175% for
Mr.  Greene,  if  termination  occurs  after or in  anticipation  of a change of
control)  of his  annual  base  salary  that  would  have been  payable  for the
remainder  of the  term  of the  applicable  agreement  discounted  at 6%,  (ii)
continued participation in all the Company's welfare benefit plans and continued
life insurance and medical  benefits  coverage,  (iii) a pro-rated bonus for the
year of  termination  and (iv) the  immediate  vesting  of any stock  options or
restricted stock  previously  granted to such employee and outstanding as of the
time

                                       17


immediately prior to the date of his termination,  an extension of the period of
exercisability  of any such awards  until the earlier of (A) one year  following
his date of  termination  or (B) the date such awards  would have lapsed had the
employee  remained  employed  for the  remaining  term,  or,  in the case of Mr.
Johnson,  Mr. Fisher and Mr. Trahan,  a cash payment in lieu of each outstanding
compensatory  equity  award  (the  "Cash  Election").  In  the  event  of a Cash
Election,  Mr.  Fisher and Mr.  Trahan will  receive in exchange  for any or all
compensatory  awards that are either  denominated in or payable in Common Stock,
including options and restricted stock, an amount in cash equal to the excess of
(x) the  highest  price per share (as defined  below)  over (y) the  exercise or
purchase  price,  if any, of such  awards.  The Term  "Highest  Price Per Share"
generally  means the highest price per share that can be determined to have been
paid or agreed to be paid for any share of Common  Stock by  certain  classes of
persons,  including  (1) a  beneficial  owner of 10% or more of the  outstanding
voting stock of the Company and (2) a person who has any material involvement in
proposing or  effectuating a change of control (as defined).  If the termination
is after or in  anticipation  of a change  of  control,  the  assumed  remaining
employment  period for Mr. Boling and Mr. Evans for purposes of calculating  the
lump sum described above in subparagraph  (i) shall be 18 months.  If employment
terminates due to death of the employee and other than in a window  period,  the
Company will pay a sum equal to the amount of the employee's  annual base salary
for the remaining term of the agreement, reduced by the amount payable under any
life  insurance  policies to the extent that such  amounts are  attributable  to
premiums  paid by the  Company,  a prorated  annual bonus for the year of death,
continued welfare benefits for the employee's  dependents for one year following
death and immediate  vesting and extension of exercisability of equity awards as
described  above.  The  salaries  in each of these  agreements  are  subject  to
periodic  review and provide for  increases  consistent  with  increases in base
salary  generally  awarded to other  executives of the Company.  Each  agreement
entitles the employee to participate in all of the Company's incentive, savings,
retirement and welfare  benefit plans in which other  executive  officers of the
Company  participate.  The  agreements  each  provide for an annual  bonus in an
amount comparable to the annual bonus of other Company  executives,  taking into
account  the  individual's  position  and  responsibilities.  In the  event of a
dispute  regarding the employee's  rights upon  termination  of employment,  the
agreements  also  provide  that the employee is entitled to payment of his legal
fees and any amounts  potentially due under the Agreement pending  resolution of
the dispute,  provided that he must return any  attorneys'  fees advanced in the
event he is not the prevailing party in the dispute. The agreements also provide
that the employees  will be entitled to a gross-up  payment to offset the effect
of any excise tax imposed under  Section 4999 of the Internal  Revenue Code (the
"Code") in connection  with payments  contingent on a change of control.  Upon a
voluntary termination of employment,  the employees have agreed to be subject to
specified noncompetition covenants.

AUDIT COMMITTEE REPORT

     The Audit  Committee's  purpose is to assist the Board of  Directors in its
oversight of the Company's  internal  controls and financial  statements and the
audit process. The Board of Directors,  in its business judgment, has determined
that the  members of the Audit  Committee,  are  "independent,"  as  required by
applicable  standards of the Nasdaq Stock Market.  The Audit Committee  operates
pursuant to a written charter  adopted by our Board of Directors.  A copy of the
Audit Committee Charter is available on the Company's website at www.carrizo.cc.

     Management is responsible for the  preparation,  presentation and integrity
of the  Company's  financial  statements,  accounting  and  financial  reporting
principles and internal  controls and procedures  designed to assure  compliance
with accounting  standards and applicable laws and regulations.  The independent
auditors are responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards.

     In performing  its  oversight  role,  the Audit  Committee has reviewed and
discussed the audited  financial  statements with management and the independent
auditors.  The Audit Committee has also discussed with the independent  auditors
the matters required to be discussed by Statement on Auditing  Standards No. 61,
Communication with Audit Committees, as currently in effect. The Audit Committee
has  received  the  written  disclosures  and the  letter  from the  independent
auditors  required by Independence  Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as currently in effect.

                                       18


     Based on the reports and discussions  described in this report, and subject
to the  limitations  on the role and  responsibilities  of the  Audit  Committee
referred to below and in the charter,  the Audit  Committee  recommended  to the
Board of  Directors  that the audited  financial  statements  be included in the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2004.

     Members of the Audit Committee rely, without independent  verification,  on
the information  provided to them and on the representations  made by management
and the independent auditors.  Accordingly, the Audit Committee's oversight does
not provide an  independent  basis to determine  that  management has maintained
appropriate   accounting  and  financial  reporting  principles  or  appropriate
internal  controls and procedures  designed to assure compliance with accounting
standards  and  applicable  laws  and   regulations.   Furthermore,   the  Audit
Committee's  considerations and discussions referred to above do not assure that
the  audit  of the  Company's  financial  statements  has  been  carried  out in
accordance  with  generally  accepted  auditing  standards,  that the  financial
statements  are  presented in  accordance  with  generally  accepted  accounting
principles or that the independent auditors are in fact "independent."

The Audit Committee

F. Gardner Parker
Paul B. Loyd, Jr.
Roger A. Ramsey

     PURSUANT TO SEC RULES,  THE FOREGOING AUDIT COMMITTEE  REPORT IS NOT DEEMED
"FILED" WITH THE SEC AND IS NOT  INCORPORATED  BY REFERENCE  INTO THE  COMPANY'S
ANNUAL REPORT ON FORM 10-K.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     The Company's executive  compensation  programs are designed to attract and
retain highly qualified  executives and to motivate them to maximize shareholder
returns.  The Company's  executive  compensation  program is intended to provide
competitive  compensation  levels and  incentive  pay levels  that vary based on
corporate and individual performance.

     There are three basic  components  to the  Company's  current  compensation
system: base pay; annual incentive compensation in the form of a cash bonus; and
long-term  equity-based incentive  compensation.  Each component is addressed in
the context of individual and Company performance and competitive conditions. In
determining  competitive  compensation  levels,  the Company  analyzes data that
includes  information  regarding the general oil and natural gas exploration and
production industry.

     Actual  individual  awards and changes in  remuneration  to the  individual
executives  are  recommended by the  Compensation  Committee but approved by the
Board of Directors.  The Chief  Executive  Officer  works with the  Compensation
Committee in the design of the plans and makes  recommendations to the Committee
regarding the salaries and bonuses of Company  employees that report directly to
him.  Grants or  awards of stock,  including  stock  options,  are  individually
determined and administered by the Compensation Committee.

     Base Pay.  Base pay is designed to be  competitive  with salary  levels for
comparable  executive  positions  at other oil and natural gas  exploration  and
production  companies and the  Compensation  Committee  reviews such  comparable
salary  information as one factor to be considered in  determining  the base pay
for the Company's executive officers.  Other factors the Compensation  Committee
considers in  determining  base pay for each of the executive  officers are that
officer's   responsibilities,    experience,    leadership,   potential   future
contribution,  and demonstrated individual  performance.  The types and relative
importance of specific  financial and other business  objectives  vary among the
Company's executives depending on their positions and the particular  operations
and functions for which they are responsible.  The  Compensation  Committee also
considers  the  Company's  earnings  levels and  progress  in  implementing  its
business  strategy in establishing  base salary  increases for  executives.  The
employment  contracts of the executive  officers  provide that base pay is to be
reviewed at least  annually  and will be  increased at any time and from time to
time, and that any increase will be  substantially  consistent with increases in
base salary  generally  awarded in the ordinary course

                                       19


of business to executives of the Company.  As a result of the Company's positive
financial results and continued drilling success,  the base salary of Mr. Fisher
was increased by 16% in January 2005 and each of Messrs. Johnson, Boling, Fisher
and Trahan was increased by 10%, 10%, 4% and 5%,  respectively,  effective April
2005.

     Annual Bonus. The annual bonus is determined by the Compensation Committee.
The employment  contracts with the executive  officers  contemplate annual bonus
awards in an amount comparable to the annual bonus of other Company  executives,
taking into account the individual's position and responsibilities.  As a result
of the Company's  positive  financial results and continued  drilling success in
2004,  each of Messrs.  Johnson,  Boling,  Fisher and Trahan was awarded a bonus
equal to 50%, 35%, 58% and 25%, respectively, of their annual base pay.

     Special  Cash  Bonus in lieu of Stock  Options.  Due to the low  number  of
shares of Common Stock  available for issuance under the Incentive  Plan, in the
first quarter of 2004, the Compensation  Committee  recommended and the Board of
Directors approved the award of a special cash bonus in lieu of stock options to
a  number  of  key  employees,   including  the  Company's  executive  officers.
Subsequently,  because  of the  availability  of  additional  shares  under  the
Incentive  Plan,  the Board of  Directors  gave  these  employees  the option to
receive  stock  options  in lieu of a portion  of the cash  bonus.  The  special
bonuses were paid to each recipient over three equal  installments  on April 15,
2004, August 31, 2004 and February 28, 2005. Messrs.  Fisher,  Greene and Trahan
did not elect to receive any stock  options and  received  total cash bonuses of
$45,000, $45,000 and $22,500, respectively. Mr. Johnson elected to receive stock
options in lieu of a portion of his cash bonus and therefore he received $25,000
and options to purchase 16,668 shares of Common Stock.

     Long-Term  Equity-Based  Compensation.  To date,  the  Company  has  relied
primarily  upon  stock  option  awards  to  provide  long-term   incentives  for
executives,  although most recently the Compensation Committee has begun to rely
upon  restricted  stock.  Prior to the Company's IPO, the  shareholders  and the
Board of Directors of the Company  approved the Company's  Incentive  Plan.  The
objectives of the  Incentive  Plan are to (i) attract and retain the services of
key employees,  qualified  independent  directors and qualified  consultants and
other  independent  contractors and (ii) encourage a sense of  proprietorship in
and  stimulate  the active  interest  of those  persons in the  development  and
financial   success  of  the  Company  by  making  awards  designed  to  provide
participants in the Incentive Plan with  proprietary  interest in the growth and
performance  of the  Company.  Long-term  equity-based  compensation  is tied to
shareholder return.

     Under  the  Company's  Incentive  Plan,  long-term  incentive  compensation
includes  stock  options,  which  generally have a ten-year term and vest in 33%
increments  in each of the three  years  following  the date of the  grant.  The
exercise  price of stock  options  granted is equal to or greater  than the fair
market value of the Common Stock on the date of grant;  accordingly,  executives
receiving  stock  options are  rewarded  only if the market  price of the Common
Stock appreciates. Stock options are thus designed to align the interests of the
Company's executives with those of its shareholders by encouraging executives to
enhance the value of the Company and,  hence,  the price of the Common Stock and
each shareholder's return.

     On February 19, 2004 and September 3, 2004, the Company  granted options to
purchase  25,000 and 8,334 shares of Common Stock to Mr. Boling and Mr. Johnson,
at an exercise price per share of $6.98 and $8.265, respectively.  These options
have a  ten-year  term and vest in 33%  increments  in each of the  three  years
following the date of the grant.

     Particularly given the significant increase in the Company's stock price in
the  past  few  years,  the  Compensation  Committee  believes  that  the use of
restricted stock may be a preferable tool to incentivize executive officers, and
on April 11, 2005,  granted 9,300,  4,710,  5,800 and 3,000 shares of restricted
stock  to  Messrs.  Johnson,  Boling,  Fisher  and  Trahan,  respectively.   The
Compensation  Committee retains the flexibility to grant either restricted stock
or stock  options in the future,  depending on various  factors,  including  the
price of the Common Stock.

     The  Company  may  periodically  grant  new  awards to  provide  continuing
incentive  for future  performance.  In making the decision to grant  additional
awards, the Compensation  Committee would expect to consider factors such as the
size of previous grants and the number of awards held. In determining whether to
grant

                                       20


executive officers awards under the Plan, the Compensation  Committee  considers
factors,  including that executive's current ownership stake in the Company, the
degree to which increasing that ownership stake would provide the executive with
additional  incentives for future performance,  the likelihood that the grant of
those awards would  encourage  the  executive to remain with the Company and the
value of the executive's service to the Company.

     Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code of 1986,  as amended,  generally  limits (to $1 million per covered
executive)  the   deductibility  for  federal  income  tax  purposes  of  annual
compensation  paid to a company's chief executive  officer and each of its other
four most highly compensated executive officers.  The Compensation Committee and
the  Board  of  Directors  will  take  deductibility  or   nondeductibility   of
compensation  into account but have in the past authorized,  and will retain the
discretion in the future to authorize, the payment of potentially  nondeductible
amounts.

     Compensation of the Chief Executive  Officer.  The  Compensation  Committee
based the compensation of the Company's Chief Executive Officer, Mr. Johnson, on
the same  considerations  described  above for other  executive  officers.  As a
result of the  Company's  positive  financial  results  and  continued  drilling
success,  in April 2005,  the Company  increased  Mr.  Johnson's  salary by 10%,
awarded him a bonus of  $128,750  and  granted  him 9,300  shares of  restricted
stock.

     Executive  compensation is an evolving field.  The  Compensation  Committee
monitors  trends  in this  area,  as  well as  changes  in law,  regulation  and
accounting practices,  that may affect either its compensation  practices or its
philosophy.  Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.

The Compensation Committee

F. Gardner Parker
Roger A. Ramsey

                                       21


PERFORMANCE GRAPH

     The following graph presents a comparison of the yearly  percentage  change
in the cumulative total return on the Common Stock over the period from December
31, 1999 to December 31, 2004,  with the cumulative  total return of the S&P 500
Index and of the American  Stock  Exchange  Natural  Resource  Industry Index of
publicly traded companies over the same period.  The graph assumes that $100 was
invested on December 31, 1999,  in the Common Stock at the closing  market price
at the  beginning  of this  period and in each of the other two  indices and the
reinvestment of all dividends, if any.

     The graph is presented in accordance  with SEC  requirements.  Shareholders
are cautioned  against drawing any conclusions from the data contained  therein,
as past results are not necessarily indicative of future financial performance.



                                                COMPARISON OF CUMULATIVE TOTAL RETURN*
                                         AMONG CARRIZO OIL & GAS, INC., THE S&P 500 INDEX AND
                                      THE AMERICAN STOCK EXCHANGE NATURAL RESOURCE INDUSTRY INDEX

                                                          (PERFORMANCE GRAPH)

                                            --------------- ------- -------- ----------
                                                             S & P    AMEX     C O & G
                                            --------------- ------- -------- ----------
                                                                     
                                               12/31/99      100      100       100
                                            --------------- ------- -------- ----------
                                               03/31/00      102      109       194
                                            --------------- ------- -------- ----------
                                               06/30/00       99      120       300
                                            --------------- ------- -------- ----------
                                               09/30/00       98      130       700
                                            --------------- ------- -------- ----------
                                               12/31/00       90      140       456
                                            --------------- ------- -------- ----------
                                               03/31/01       79      131       325
                                            --------------- ------- -------- ----------
                                               06/30/01       83      122       271
                                            --------------- ------- -------- ----------
                                               09/30/01       71      111       221
                                            --------------- ------- -------- ----------
                                               12/31/01       78      114       222
                                            --------------- ------- -------- ----------
                                               03/31/02       78      131       278
                                            --------------- ------- -------- ----------
                                               06/30/02       67      131       213
                                            --------------- ------- -------- ----------
                                               09/30/02       55      123       211
                                            --------------- ------- -------- ----------
                                               12/31/02       60      125       264
                                            --------------- ------- -------- ----------
                                               03/31/03       58      134       230
                                            --------------- ------- -------- ----------
                                               06/30/03       66      147       305
                                            --------------- ------- -------- ----------
                                               09/30/03       68      150       355
                                            --------------- ------- -------- ----------
                                               12/31/03       76      186       360
                                            --------------- ------- -------- ----------
                                               03/31/04       77      193       363
                                            --------------- ------- -------- ----------
                                               06/30/04       78      192       511
                                            --------------- ------- -------- ----------
                                               09/30/04       76      215       480
                                            --------------- ------- -------- ----------
                                               12/31/04       82      237       565
                                            --------------- ------- -------- ----------

- ----------

* $100 Invested on December 31, 1999 in Stock or Index  (Including  Reinvestment
of Dividends).

     PURSUANT TO SEC RULES,  THE  FOREGOING  COMPENSATION  COMMITTEE  REPORT AND
STOCK  PERFORMANCE  GRAPH  ARE  NOT  DEEMED  "FILED"  WITH  THE  SEC AND ARE NOT
INCORPORATED BY REFERENCE INTO THE COMPANY'S ANNUAL REPORT ON FORM 10-K.

                                       22


EQUITY COMPENSATION PLANS

     Information concerning our equity compensation plan at December 31, 2004 is
as follows:



                                                    Number of                          Number of Securities
                                                Securities to be       Weighted-        Remaining Available
                                                   Issued Upon      Average Exercise        for Future
                                                   Exercise of         Price of           Issuance Under
                                                   Outstanding        Outstanding       Equity Compensation
                                                Options, Warrants       Options,         Plans (Excluding
                                                    and Rights        Warrants and     Securities Reflected
                       Plan Category                    (a)            Rights (b)       in Column (a)) (c)
             --------------------------------   -----------------   ----------------   --------------------
                                                                              
              Equity compensation plans
                approved by security
                holders....................            1,280,507             $ 4.07                394,832

              Equity compensation plans
                not approved by security
                holders(1).................               42,295             $ 3.60                      -
                                                -----------------   ----------------   --------------------
                Total......................            1,322,802             $ 4.05                394,832
                                                =================   ================   ====================

- ----------

(1)  Includes  options to purchase  42,295 shares of Common Stock granted to Mr.
     Trahan prior to the closing of the Company's IPO. These options, which were
     not granted under the Company's  Incentive  Plan, have vested and are fully
     exercisable at the exercise price stated above.

                                   PROPOSAL 2

                        PROPOSAL TO AMEND INCENTIVE PLAN

     At the  time of its  initial  public  offering,  the  Company  adopted  the
Incentive Plan. The objectives of the Incentive Plan are to:

     o    attract and retain the services of key employees,  qualified directors
          and qualified consultants and other independent contractors; and

     o    encourage  the sense of  proprietorship  in and  stimulate  the active
          interest of those persons in the development and financial  success of
          the  Company  by  making   awards   ("Awards")   designed  to  provide
          participants  in the Incentive Plan with  proprietary  interest in the
          growth and performance of the Company.

     The Company currently has reserved 2,350,000 shares of Common Stock for use
in  connection  with the  Incentive  Plan.  Persons  eligible for Awards are (i)
employees  holding  positions  of  responsibility  with the  Company  and  whose
performance  can have a significant  effect on the success of the Company,  (ii)
nonemployee  directors  and  (iii)  certain  nonemployee  consultants  and other
independent contractors.

     As of April 11, 2005,  1,870,338  options  (excluding awards that have been
forfeited or otherwise  again become  available  under the  Incentive  Plan) and
69,075 shares of restricted  stock had been granted under the Incentive  Plan to
72 current and former employees and directors of the Company to purchase a total
of  approximately  1,939,413 shares of Common Stock. As of April 11, 2005, there
were 410,587 shares available for issuance under the Incentive Plan.

     The  Company  is  proposing  to amend the  Incentive  Plan to  replace  the
automatic grant of options to nonemployee directors to purchase 10,000 shares of
Common  Stock  when  they  first  join the  Company's  Board of  Directors  with
discretionary  awards  of  options  to  purchase  Common  Stock  and  shares  of
restricted stock that are determined by the Compensation  Committee of the Board
of  Directors  (the  "Compensation  Committee")  or the  Board,  subject  to the
availability  for issuance of those shares under the Incentive Plan. The Company
is also proposing to amend the Incentive Plan to give the Compensation Committee
and the Board of Directors additional flexibility in establishing specific terms
of awards of stock options and restricted stock,  including  without  limitation
the vesting  schedules for those awards and the dates the awards may be granted.
The Company  believes the  amendments  allow for  increased  flexibility  in the
awards granted to nonemployee directors under the Incentive Plan.

                                       23


     The  Compensation  Committee  administers  the Incentive Plan and has broad
power to take actions  thereunder,  to interpret the Incentive Plan and to adopt
rules, regulations and guidelines for carrying out its purposes. With respect to
Awards to employees and independent contractors, the Compensation Committee may,
in its discretion,  among other things,  extend or accelerate the exercisability
of,  accelerate  the  vesting  of or  eliminate  or make  less  restrictive  any
restrictions  contained in any Award,  waive any restrictions or other provision
of the Incentive Plan or in any Award or otherwise  amend or modify any Award in
any manner that is either (i) not adverse to that participant  holding the Award
or (ii) consented to by that  participant.  The Compensation  Committee also may
delegate to the chief executive officer and other senior officers of the Company
its  duties  under the  Incentive  Plan.  In  February  2005,  the  Compensation
Committee  delegated  authority  to the Chief  Executive  Officer  to  designate
certain eligible  participants,  including executive officers and directors,  to
receive  options  under the Plan and to  determine  the  number of options to be
issued to each such designee, subject to certain limitations.

     The  Board of  Directors  may  amend,  modify,  suspend  or  terminate  the
Incentive Plan for the purpose of addressing  any changes in legal  requirements
or for any other lawful purpose, except that (i) no amendment or alteration that
would adversely affect the rights of any participant  under any Award previously
granted  to  such  participant  shall  be  made  without  the  consent  of  such
participant and (ii) no amendment or alteration  shall be effective prior to its
approval by the  shareholders of the Company to the extent such approval is then
required  pursuant to Rule 16b-3 in order to preserve the  applicability  of any
exemption provided by such rule to any Award then outstanding (unless the holder
of such Award  consents)  or to the extent  shareholder  approval  is  otherwise
required by  applicable  legal  requirements.  The Board of  Directors  may make
certain  adjustments in the event of any subdivision,  split or consolidation of
outstanding  shares of Common Stock, any declaration of a stock dividend payable
in shares of Common Stock, any recapitalization or capital reorganization of the
Company,  any consolidation or merger of the Company with another corporation or
entity, any adoption by the Company of any plan of exchange affecting the Common
Stock or any  distribution  to holders of Common Stock of securities or property
(other than normal cash dividends).

     Awards to employees and  independent  contractors may be in the form of (i)
rights to purchase a specified  number of shares of Common  Stock at a specified
price  not  less  than  that of the  fair  market  value  on the  date of  grant
("Options"), (ii) rights to receive a payment, in cash or Common Stock, equal to
the fair market value or other  specified  value of a number of shares of Common
Stock on the rights exercise date over a specified strike price, (iii) grants of
restricted or unrestricted  Common Stock units denominated in Common Stock, (iv)
grants  denominated in cash and (v) grants  denominated  in cash,  Common Stock,
units  denominated  in Common Stock or any other property which are made subject
to the  attainment  of one or more  performance  goals  ("Performance  Awards").
Subject to certain limitations,  the Compensation Committee has the authority to
determine  the other  terms,  conditions  and  limitations  of Awards  under the
Incentive  Plan. An Option may be either an incentive  stock option ("ISO") that
qualifies,  or a nonqualified  stock option ("NSO") that does not qualify,  with
the  requirements  of  Sections  422  of the  Code;  provided  that  independent
contractors  cannot be awarded ISOs. The  Compensation  Committee will determine
the  employees  and  independent  contractors  to receive  Awards and the terms,
conditions and limitations  applicable to each such Award, which conditions may,
but need not,  include  continuous  service  with the  Company,  achievement  of
specific business objectives, attainment of specified growth rates, increases in
specified  indices or other  comparable  measures  of  performance.  Performance
Awards may include more than one performance goal, and a performance goal may be
based on one or more business criteria applicable to the grantee, the Company as
a whole or one or more of the  Company's  business  units and may include any of
the  following:  increased  revenue,  net income,  stock  price,  market  share,
earnings per share, return on equity or assets or decrease in costs.

     On the date of his or her first  appointment  or  election  to the Board of
Directors,  a nonemployee  director is currently granted NSOs to purchase 10,000
shares of Common  Stock.  The  Compensation  Committee or Board of Directors may
grant NSOs to nonemployee directors annually at its discretion.  Currently, each
NSO  granted  to  nonemployee  directors  (i) has a ten-year  term,  (ii) has an
exercise  price per share equal to the fair market value of a Common Stock share
on the  date of  grant  and  (iii)  becomes  exercisable  in  cumulative  annual
increments  of one-third  of the total number of shares of Common Stock  subject
thereto,  beginning  on

                                       24


the first  anniversary of the date of grant. If a nonemployee  director  resigns
from the Board  without the consent of a majority of the other  directors,  such
director's  NSOs may be exercised only to the extent that they were  exercisable
on the  resignation  date.  If the  proposal is approved  by  shareholders,  the
automatic  initial Award of NSOs to purchase  10,000 shares of Common Stock will
be replaced by  discretionary  Awards of NSOs or shares of restricted stock that
are determined by the  Compensation  Committee or the Board of Directors and the
specific  terms of the Awards,  including the vesting  schedule,  will be at the
discretion of the Compensation Committee or the Board of Directors.

     The Incentive  Plan also  currently  provides for  discretionary  Awards of
options  to  purchase  Common  Stock and  shares of  restricted  stock  that are
determined by the  Compensation  Committee or the Board of Directors;  automatic
annual  Awards of  options  to  purchase  3,000,  2,000 and 2,000  shares to the
Chairmen of the Audit, Compensation and Nominating Committees, respectively; and
discretionary  annual grants of options to purchase up to 3,000, 2,000 and 2,000
shares  to  non-chairman  members  of the  Audit,  Compensation  and  Nominating
Committees,  respectively,  who are deemed  "independent" for purposes of Nasdaq
rules.  Currently,  the date on which the automatic Awards and the discretionary
Awards,  if any, are granted is the first  business day after the annual meeting
of the shareholders of the Company.

     If the  shareholders  vote in favor of the proposal set forth  herein,  the
automatic initial Awards of options to purchase 10,000 shares of Common Stock to
each  new  nonemployee   director,   the  discretionary  Awards  to  nonemployee
directors,   the  automatic   Awards  to  Board   committee   chairmen  and  the
discretionary  Awards to certain  Board  committee  members  will be replaced by
discretionary  Awards of stock  options or shares of  restricted  stock that are
determined  by the  Compensation  Committee or the Board of  Directors,  and the
Compensation   Committee  and  the  Board  of  Directors  will  have  additional
flexibility  in  establishing  the specific terms of Awards of stock options and
restricted stock granted to directors,  including without limitation the vesting
schedules for those Awards and the dates the Awards may be granted.

     Although the Incentive Plan currently allows the Board and the Compensation
Committee  discretion  as to the type of Award and  number of shares  covered by
annual  Awards,  the  proposal,  if  adopted  by  shareholders,   will  increase
discretion  as to the type of Award  and  number  of  shares  covered  by Awards
granted to Board committee chairmen and members. In particular, automatic Awards
of NSOs for service as chairmen on Board  committees  would be discontinued  and
would be replaced by discretionary Awards,  initially of restricted stock. Stock
option  Awards to committee  members,  which  currently  are  discretionary  but
limited in amount,  would become discretionary  Awards,  initially of restricted
stock.

     Currently,  the  Incentive  Plan  provides with respect to vesting of stock
option  Awards to  nonemployee  directors  that each  option  granted  (i) has a
ten-year  term,  (ii) has an exercise  price equal to the fair market value of a
share of  Common  Stock on the date of grant and (iii)  becomes  exercisable  in
cumulative  annual  increments  of  one-third  of the total  number of shares of
Common Stock subject thereto,  beginning on the first anniversary of the date of
grant.  The  Incentive  Plan also  currently  provides that Awards of restricted
stock to  nonemployee  directors  vest in  increments  of one-third of the total
number of shares on the first and second anniversaries of the date of grant, and
the remaining shares vest on the third  anniversary of the date of grant. If the
proposal is approved,  the Board and the  Compensation  Committee  will have the
discretion to set the vesting  schedule for Awards to nonemployee  directors and
it is expected that Awards of restricted stock granted in 2005 will become fully
vested on the first anniversary of the date of grant.

     If the proposal to amend the Incentive Plan is adopted, the Company will no
longer be required to grant certain  Awards on the first  business day after the
annual  meeting  of  the  Company's  shareholders.  Instead,  the  Board  or the
Compensation Committee may determine the date of these Awards in its discretion.
The amendment  also allows the  flexibility of granting more than one Award in a
year.

     The Incentive  Plan currently  provides that unvested  shares of restricted
stock held by  nonemployee  directors  will vest upon a change in control of the
Company. If the amendments to the Incentive Plan are adopted, all unvested stock
options held by nonemployee  directors will vest upon a change in control of the
Company as well. In addition,  all unvested shares of restricted stock and stock
options  held  by  a  nonemployee  director  will  vest  upon  such  nonemployee
director's death.
                                       25


     If the proposal to amend the Incentive Plan is not adopted, the Board would
expect to make the 2005 grants in the same amount and type of Award as specified
below under "New Plan Benefits," but subject to the currently  existing  vesting
schedule and the  requirement  that the Awards be granted on the first  business
day after the annual  meeting of the Company's  shareholders.  In addition,  the
Board or the  Compensation  Committee  would  consider  the receipt by the Board
committee  chairmen of automatic grants of stock options currently  provided for
in the Incentive  Plan in connection  with the  determination  of  discretionary
restricted stock Awards to be granted to the committee chairmen.

     Section 162(m) of the Code generally limits the  deductibility  for federal
income  tax  purposes  of  annual  compensation  paid to a  company's  executive
officers to $1 million per covered executive in a taxable year. The Compensation
Committee and the Board of Directors may take deductibility and nondeductibility
of compensation into account but have in the past authorized,  and retain in the
future the  discretion to authorize,  the payment of  potentially  nondeductible
amounts.

     As of April 1, 2005,  the last reported  sales price of Common Stock on the
Nasdaq National Market was $17.90.

NEW PLAN BENEFITS

     The  allocation  of some of the proposed new benefits  under the  Incentive
Plan  is not  currently  determinable  as  such  allocation  depends  on  future
decisions to be made by the Compensation  Committee or the Board of Directors in
their sole discretion,  subject to applicable  provisions of the Incentive Plan.
If the proposal to amend the Incentive Plan is approved,  the Company expects to
award (1) each nonemployee  director 1,000 shares of restricted  stock; (2) each
member of the  Audit  and  Compensation  Committees  1,500 and 1,000  additional
shares of  restricted  stock,  respectively;  and (3) the chairmen of the Audit,
Compensation and Nominating  Committees 2,500, 1,500 and 1,500 additional shares
of restricted stock, respectively. The Company plans to grant these awards on or
after the first  business day following the date on which the annual  meeting of
the  Company's  shareholders  is  held.  In light  of the  consulting  agreement
described under "Certain  Transactions - Certain Matters Regarding Mr. Webster,"
Mr. Webster, the current chairman of the Nominating Committee,  will not receive
the  award of  1,500  shares  of  restricted  stock  that  the  chairman  of the
Nominating  Committee would otherwise receive.  Because future Awards are in the
discretion of the Board and Compensation Committee, the number of shares subject
to future  Awards  could  increase or decrease  and the type and terms of future
Awards  could  change  as well,  all  without  the need for  future  shareholder
approval.

FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the general rules of present  federal  income
tax law  relating to the tax  treatment  of stock  awards,  ISOs and NSOs issued
under the Incentive  Plan. The discussion is general in nature and does not take
into  account  a  number  of  considerations  which  may  apply  in light of the
particular circumstances of a participant under the Incentive Plan.

Stock Awards and Related Tax Payments

     Under the Code,  federal  income tax  consequences  with respect to a stock
award  depend  on the  facts and  circumstances  of each  stock  award  and,  in
particular,  the nature of the  restrictions  imposed with respect to the shares
which are the subject of the stock  award.  In general,  if shares which are the
subject of the stock award are actually issued to a participant, but are subject
to a "substantial  risk of forfeiture"  (for example,  if rights to ownership of
the shares are conditioned upon the future  performance of substantial  services
by the  participant),  a taxable  event  generally  occurs only when the risk of
forfeiture  lapses.  At such time as the substantial risk of forfeiture  lapses,
the participant  will realize ordinary income to the extent of the excess of the
fair market value of the shares on the date the risk of  forfeiture  lapses over
the  participant's  cost for such  shares (if any),  and the same amount is then
deductible by the Company as  compensation  expense.  If the  restrictions  with
respect to the shares that are the subject of such stock award, by their nature,
do not subject the key employee to a  "substantial  risk of  forfeiture"  of the
shares,  then the participant  will realize  ordinary income with respect to the
shares to the extent of the  excess at the time of the grant of the fair  market
value of

                                       26


the shares over the  participant's  cost; and the same amount is then deductible
by the Company.  If no shares are actually issued to the participant at the time
the stock award is granted,  the  participant  will generally  realize  ordinary
income at the time the participant  receives shares free of any substantial risk
of  forfeiture,  and the amount of such  income will be equal to the fair market
value of the shares at such time over the  participant's  cost,  if any; and the
same amount is then  deductible  by the Company.  The Company's  deductions  for
compensation  paid under the Incentive  Plan are in all cases subject to certain
applicable tax law limitations.

Options

     Some of the options  issuable under the Incentive Plan may constitute  ISOs
within the meaning of Section 422 of the Code, while other options granted under
the Incentive Plan may be NSOs.  Grants to  nonemployee  directors are NSOs. The
Code provides for tax treatment of stock options  qualifying as ISOs that may be
more favorable to participants than the tax treatment accorded NSOs.  Generally,
upon the exercise of an ISO, the optionee  will  recognize no income for federal
income tax purposes.  The  difference  between the exercise price of the ISO and
the fair  market  value of the stock at the time of  exercise  is an addition to
income in determining  alternative minimum taxable income and such amount may be
sufficient in amount to subject the optionee to the alternative  minimum tax. On
the sale of shares  acquired by exercise of an ISO (assuming  that the sale does
not occur within two years of the date of grant of the option or within one year
from the date of exercise),  any gain will be taxed to the optionee as long-term
capital gain. In contrast,  upon the exercise of an NSO, the optionee recognizes
taxable  income  (subject to  withholding)  in an amount equal to the difference
between the then-fair market value of the shares on the date of exercise and the
exercise  price.  Upon any sale of such shares by the optionee,  any  difference
between  the sale price and the fair  market  value of the shares on the date of
exercise  of the NSO will be  treated  generally  as  capital  gain or loss.  No
deduction  is  available  to the  Company  upon the grant or  exercise of an ISO
(although a deduction may be available if the participant disposes of the shares
so purchased  before the  applicable  holding  periods  expire),  whereas,  upon
exercise of an NSO, the Company is entitled to a deduction in an amount equal to
the  income  recognized  by the  participant.  Except  with  respect to death or
disability,  an optionee has three months after  termination  of  employment  in
which to exercise an ISO and retain favorable tax treatment at exercise.

Other

     In general,  a federal income tax deduction is allowed to the Company in an
amount equal to the ordinary income  recognized by a participant with respect to
awards  under the  Incentive  Plan,  provided  that such amount  constitutes  an
ordinary and  necessary  business  expense of the  Company,  that such amount is
reasonable  and that the  Company  satisfies  any  withholding  obligation  with
respect to such income.

     Copies of the Amended and Restated Incentive Plan, the First, Second, Third
and Fourth Amendments to the Incentive Plan, and the proposed Fifth Amendment to
the Incentive Plan are attached as Appendix A.

BOARD RECOMMENDATION

     The Board  believes that the amendment of the Incentive Plan is in the best
interest of the Company and its shareholders.  THE BOARD THEREFORE  RECOMMENDS A
VOTE FOR  APPROVAL OF THE  AMENDMENT,  AND IT IS  INTENDED  THAT THE PROXIES NOT
MARKED TO THE CONTRARY WILL BE SO VOTED.  Directors also have an interest in and
may  benefit  from  the  adoption  of the  amendment  because  it  provides  for
discretionary  awards of stock options and restricted  stock to the  nonemployee
directors of the Company.  Approval of the amendment to the Incentive  Plan will
require the  affirmative  vote of a majority of the shares of Common  Stock cast
and  voted  for  or  against  or  expressly   abstained   with  respect  to  the
consideration of the amendment. Accordingly, abstentions will have the effect of
a vote  against the  proposal  and broker  nonvotes  will not be included in the
tabulation of votes cast on this matter.

                                       27


                                   PROPOSAL 3

               APPOINTMENT OF PANNELL KERR FORSTER OF TEXAS, P.C.
                AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     The Board of Directors has  appointed,  and  recommends the approval of the
appointment  of, Pannell Kerr Forster of Texas,  P.C. as independent  registered
public  accounting firm for the fiscal year ending December 31, 2005. PKF served
as the Company's  independent  public registered  accounting firm for the fiscal
year ended December 31, 2004.  Representatives of PKF are expected to be present
at the Annual Meeting and will be given the opportunity to make a statement,  if
they desire to do so, and to respond to appropriate questions.

     Unless  shareholders  specify otherwise in the proxy,  proxies solicited by
the Board of  Directors  will be voted by the persons  named in the proxy at the
Annual  Meeting to ratify the  selection  of PKF as the  Company's  auditors for
2005. The affirmative vote of a majority of the votes cast at the Annual Meeting
will be required for  ratification.  Although the  appointment of an independent
registered  public  accounting firm is not required to be submitted to a vote of
shareholders,  the  Board  of  Directors  recommended  that the  appointment  be
submitted to our shareholders  for approval.  If our shareholders do not approve
the  appointment of PKF, the Board of Directors will consider the appointment of
another independent registered public accounting firm.

     On August 25, 2004, Ernst & Young LLP advised the Company by letter that it
had resigned from serving as the independent  registered  public accounting firm
of the Company.  Neither the Audit  Committee  nor the Board of Directors of the
Company recommended or approved Ernst & Young's resignation.

     As noted in the  Company's  Current  Report on Form 8-K filed on August 31,
2004,  Ernst & Young's  audit reports on the  Company's  consolidated  financial
statements  as of and for the years  ended  December  31,  2003 and 2002 did not
contain an adverse opinion or disclaimer of opinion,  nor were they qualified or
modified as to  uncertainty,  audit scope or  accounting  principles,  except as
follows:

          (i)  Ernst  &  Young's  audit  report  on the  consolidated  financial
     statements  of the Company for the year ended  December 31, 2003  contained
     two separate paragraphs stating,  respectively,  that "As described in Note
     2, the Company revised the reported amount of the after-tax write-down that
     would have been taken as of  December  31,  2001 using  prices in effect at
     that date. We audited the adjustments described in Note 2 that were applied
     to revise the reported  amount of the full cost ceiling test write-down had
     the Company not utilized the improvements in pricing subsequent to December
     31,  2001 and/or the  addition  of proved oil and  natural gas  reserves on
     existing  properties  subsequent  to the end of the  period  but  prior  to
     issuance of financial statements.  Our procedures included (a) agreeing the
     revised  tax  basis  in the  full  cost  ceiling  test  computation  to the
     Company's underlying records obtained from management,  and (b) testing the
     mathematical   accuracy  of  the   revisions   to  the  full  cost  ceiling
     computation.  In our opinion such adjustments are appropriate and have been
     properly applied.  However, we were not engaged to audit,  review, or apply
     any procedures to the 2001 consolidated financial statements of the Company
     other than with  respect to such  adjustments  and  accordingly,  we do not
     express an opinion or any other form of assurance on the 2001  consolidated
     financial  statements taken as a whole," and "As discussed in Note 2 to the
     consolidated  financial statements,  effective January 1, 2003, the Company
     changed its method of accounting for asset retirement obligations"; and

          (ii)  Ernst &  Young's  audit  report  on the  consolidated  financial
     statements of the Company for the year ended  December 31, 2002 contained a
     separate  paragraph  stating that "As  discussed  above,  the  consolidated
     financial statements of the Company as of December 31, 2001 and for the two
     years then ended were audited by other auditors who have ceased operations.
     As described in Note 5, the Company revised the reported amounts of certain
     temporary  differences  at December  31, 2001.  We audited the  adjustments
     described  in Note 5 that were  applied to revise the  reported  amounts of
     temporary differences in the 2001 consolidated  financial  statements.  Our
     procedures  included (a) agreeing the revised temporary  differences to the
     Company's underlying records obtained from management,  and (b) testing the
     mathematical accuracy of the revisions to the temporary differences. In our
     opinion,  such adjustments are appropriate and have been properly  applied.
     However,  we were not engaged to audit,

                                       28


     review,  or  apply  any  procedures  to  the  2001  consolidated  financial
     statements of the Company other than with respect to such  adjustments and,
     accordingly, we do not express an opinion or any other form of assurance on
     the 2001 consolidated financial statements taken as a whole."

     During the Company's  last two fiscal years and for the period from January
1, 2004 to August 31, 2004, there were no disagreements  between the Company and
Ernst & Young on any matter of accounting  principles  or  practices,  financial
statement disclosure,  or auditing scope or procedure,  which disagreements,  if
not  resolved to the  satisfaction  of Ernst & Young,  would have caused them to
make reference to the subject  matter of the  disagreements  in connection  with
their reports.

     None  of  the  "reportable   events"  described  in  item  304(a)(l)(v)  of
Regulations  S-K under the  Securities  Act of 1933,  as amended,  occurred with
respect to the Company  within the last two fiscal  years or for the period from
January 1, 2004 to August 31, 2004.

     On September 17, 2004, the Company  retained the services of PKF as its new
independent  registered  public  accounting  firm. The Audit Committee  approved
PKF's engagement.

     During the fiscal  years ended  December 31, 2002 and December 31, 2003 and
the period from January 1, 2004 to September  17, 2004,  neither the Company nor
someone on its behalf  consulted with PKF regarding any of the matters or events
set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS' FEES

     PKF billed the  Company  as set forth in the table  below for  professional
services rendered for the audit of the Company's annual financial statements for
the year ended  December 31, 2004 and for the review of the Company's  quarterly
financial statements included in the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004 and for work on other SEC filings.  PKF did
not provide any  non-audit  services for the Company  during  2004.  All amounts
billed by PKF were for work performed  subsequent to its engagement on September
23, 2004 and are reflected in the "Fiscal 2004" column below. Ernst & Young LLP,
the  predecessor  auditor,  billed the  Company  for the audit of the  Company's
annual  financial  statements for the year ended December 31, 2003 and for other
audit  services,  as set forth in the "Fiscal 2003" column below.  Ernst & Young
LLP did not bill the Company for any non-audit  services  during 2004 and billed
the Company $2,500 for non-audit services during 2003.



                     Description                                            Fiscal 2004            Fiscal 2003
                     ---------------------------------------------      ---------------       ----------------
                                                                                        
                     Audit Fees...................................      $244,949              $472,033
                     Audit Related Fees...........................      $0                    $0
                     Tax Fees.....................................      $0                    $0
                     All Other Fees...............................      $0                    $2,500

- ----------

AUDIT COMMITTEE PREAPPROVAL POLICY

     The Audit  Committee has adopted a policy that all audit,  review or attest
engagements and  permissible  non-audit  services,  including the fees and terms
thereof,  to be  performed  by the  independent  auditors,  (subject  to, and in
compliance with, the de minimis  exception for non-audit  services  described in
Section  10A(i)(1)(B) of the Securities  Exchange Act of 1934 and the applicable
rules and regulation of the SEC) will be subject to specific pre-approval of the
Audit  Committee.  No non-audit  services were performed by Ernst & Young or PKF
pursuant to the de minimis exception in 2004.

     THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PKF AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE COMPANY FOR 2005.

                                       29


                             ADDITIONAL INFORMATION

OTHER BUSINESS

     As of the date of this  proxy  statement,  the  Board of  Directors  is not
informed  of any other  matters,  other  than those  above,  that may be brought
before the meeting.  The persons  named in the  enclosed  form of proxy or their
substitutes  will vote with respect to any such matters in accordance with their
best judgment.

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

     Rule 14a-8 under the Securities Exchange Act of 1934, as amended, addresses
when a company must include a shareholder's  proposal in its proxy statement and
identify the  proposal in its form of proxy when the company  holds an annual or
special meeting of shareholders.  Under Rule 14a-8,  proposals that shareholders
intend to have included in the Company's  proxy  statement and form of proxy for
the 2006 Annual Meeting of Shareholders must be received by the Company no later
than  December  19,  2005.  However,  if the date of the 2006 Annual  Meeting of
Shareholders  changes  by more  than 30 days  from the  date of the 2005  Annual
Meeting of  Shareholders,  the deadline is a reasonable  time before the Company
begins to print and mail its proxy  materials,  which deadline will be set forth
in a  Quarterly  Report  on Form  10-Q  or will  otherwise  be  communicated  to
shareholders.   Shareholder  proposals  must  also  be  otherwise  eligible  for
inclusion.

     If a  shareholder  desires  to bring a matter  before an annual or  special
meeting and the  proposal is  submitted  outside the process of Rule 14a-8,  the
shareholder  must follow the procedures set forth in the Company's  Bylaws.  The
Company's  Bylaws  provide  generally  that  shareholders  who wish to  nominate
directors or to bring business  before a  shareholders'  meeting must notify the
Company and provide  certain  pertinent  information at least 80 days before the
meeting  date (or within  ten days after  public  announcement  pursuant  to the
Bylaws of the meeting date, if the meeting date has not been publicly  announced
more  than 90 days in  advance).  If the  date of the  2006  Annual  Meeting  of
Shareholders is the same as the date of the 2005 Annual Meeting of Shareholders,
shareholders who wish to nominate directors or to bring business before the 2006
Annual  Meeting of  Shareholders  must notify the Company no later than February
19, 2006.

     A copy of the  Company's  Bylaws  setting  forth the  requirements  for the
nomination  of director  candidates by  stockholders  and the  requirements  for
proposals by  stockholders  may be obtained from the Company's  Secretary at the
address  indicated on the first page of this proxy  statement.  A nomination  or
proposal  that does not comply with the above  procedures  will be  disregarded.
Compliance with the above procedures does not require the Company to include the
proposed nominee or proposal in the Company's proxy solicitation material.

ANNUAL REPORT ON FORM 10-K

     CARRIZO WILL PROVIDE TO EACH  SHAREHOLDER,  WITHOUT CHARGE AND UPON WRITTEN
REQUEST,  A COPY OF ITS  ANNUAL  REPORT  ON FORM 10-K FOR  2004,  INCLUDING  THE
FINANCIAL  STATEMENTS,  SCHEDULES  AND A LIST  OF  EXHIBITS.  ANY  SUCH  WRITTEN
REQUESTS SHOULD BE DIRECTED TO PAUL F. BOLING, THE SECRETARY OF THE COMPANY,  AT
THE ADDRESS INDICATED ON THE FIRST PAGE OF THIS PROXY STATEMENT.


By Order of the Board of Directors

/s/ PAUL F. BOLING
- ---------------------------
Paul F. Boling
Secretary

Dated: April 12, 2005
Houston, Texas

                                       30


                                 INCENTIVE PLAN
                                       OF
                             CARRIZO OIL & GAS, INC.

    (AS AMENDED AND RESTATED EFFECTIVE AS OF FEBRUARY 17, 2000. HOWEVER, THE
       CHANGES TO THE DEFINITION OF "INDEPENDENT CONTRACTOR" IN SECTION 3
         AND TO THE NUMBER OF AUTHORIZED SHARES IN SECTION 5 ARE SUBJECT
          TO SHAREHOLDER APPROVAL AT THE 2000 MEETING OF SHAREHOLDERS.)

     1. Plan.  This  Incentive  Plan of Carrizo Oil & Gas, Inc. (the "Plan") was
adopted by Carrizo Oil & Gas, Inc. to reward certain corporate  officers and key
employees of Carrizo Oil & Gas,  Inc.  and certain  independent  consultants  by
enabling them to acquire shares of common stock of Carrizo Oil & Gas, Inc.

     2. Objectives. This Plan is designed to attract and retain key employees of
the Company and its Subsidiaries (as hereinafter defined), to attract and retain
qualified  directors of the Company, to attract and retain consultants and other
independent  contractors,  to  encourage  the  sense of  proprietorship  of such
employees,  directors and  independent  contractors  and to stimulate the active
interest of such persons in the development and financial success of the Company
and its  Subsidiaries.  These objectives are to be accomplished by making Awards
(as hereinafter defined) under this Plan and thereby providing  Participants (as
hereinafter  defined) with a proprietary  interest in the growth and performance
of the Company and its Subsidiaries.

     3.  Definitions.  As used herein,  the terms set forth below shall have the
following respective meanings:

          "Annual  Director  Award Date"  means,  for each year  beginning on or
     after the IPO  Closing  Date,  the  first  business  day of the month  next
     succeeding  the date upon which the annual meeting of  stockholders  of the
     Company is held in such year.

          "Authorized  Officer"  means  the  Chairman  of the Board or the Chief
     Executive  Officer  of the  Company  (or any other  senior  officer  of the
     Company to whom either of them shall  delegate the authority to execute any
     Award Agreement).

          "Award" means an Employee  Award,  a Director  Award or an Independent
     Contractor Award.

          "Award  Agreement" means any Employee Award Agreement,  Director Award
     Agreement or Independent Contractor Award Agreement.

          "Board" means the Board of Directors of the Company.

          "Cash Award" means an award denominated in cash.

          "Code" means the Internal  Revenue Code of 1986,  as amended from time
     to time.

          "Committee" means (i) the Compensation  Committee of the Board or (ii)
     such  other  committee  of the  Board  as is  designated  by the  Board  to
     administer the Plan or (iii) to the extent contemplated hereby, the Board.

          "Common  Stock" means the Common Stock,  par value $.01 per share,  of
     the Company.

          "Company" means Carrizo Oil & Gas, Inc., a Texas corporation.

          "Director" means an individual serving as a member of the Board.

          "Director Award" means the grant of a Director Option.

          "Director  Award  Agreement"  means a written  agreement  between  the
     Company and a Participant who is a Nonemployee  Director  setting forth the
     terms, conditions and limitations applicable to a Director Award.

                                       31


          "Disability"  means,  with  respect  to a  Nonemployee  Director,  the
     inability to perform the duties of a Director  for a  continuous  period of
     more than three months by reason of any medically  determinable physical or
     mental impairment.

          "Dividend  Equivalents"  means,  with respect to shares of  Restricted
     Stock that are to be issued at the end of the Restriction Period, an amount
     equal to all dividends and other  distributions (or the economic equivalent
     thereof) that are payable to  stockholders of record during the Restriction
     Period on a like number of shares of Common Stock.

          "Employee" means an employee of the Company or any of its Subsidiaries
     and an  individual  who has agreed to become an  Employee of the Company or
     any of its  Subsidiaries  and is expected to become such an Employee within
     the following six months.

          "Employee Award" means the grant of any Option, SAR, Stock Award, Cash
     Award or Performance  Award,  whether granted singly,  in combination or in
     tandem,  to a Participant  who is an Employee  pursuant to such  applicable
     terms,  conditions and  limitations as the Committee may establish in order
     to fulfill the objectives of the Plan.

          "Employee  Award  Agreement"  means a written  agreement  between  the
     Company  and a  Participant  who is an  Employee  setting  forth the terms,
     conditions and limitations applicable to an Employee Award.

          "Exchange Act" means the  Securities  Exchange Act of 1934, as amended
     from time to time.

          "Fair  Market  Value"  of a  share  of  Common  Stock  means,  as of a
     particular  date,  (i) if shares of Common  Stock are  listed on a national
     securities  exchange,  the mean  between the highest and lowest sales price
     per share of Common Stock on the consolidated  transaction reporting system
     for the principal  national  securities  exchange on which shares of Common
     Stock are listed on that date, or, if there shall have been no such sale so
     reported on that date, on the last  preceding date on which such a sale was
     so  reported,  (ii) if  shares of  Common  Stock are not so listed  but are
     quoted on the Nasdaq  National  Market,  the mean  between  the highest and
     lowest  sales  price per  share of  Common  Stock  reported  by the  Nasdaq
     National  Market on that date, or, if there shall have been no such sale so
     reported on that date, on the last  preceding date on which such a sale was
     so reported, (iii) if the Common Stock is not so listed or quoted, the mean
     between the  closing bid and asked price on that date,  or, if there are no
     quotations  available  for such date, on the last  preceding  date on which
     such quotations shall be available, as reported by the Nasdaq Stock Market,
     or, if not reported by the Nasdaq Stock Market,  by the National  Quotation
     Bureau  Incorporated  or (iv) if shares of  Common  Stock are not  publicly
     traded,  the most  recent  value  determined  by an  independent  appraiser
     appointed by the Company for such purpose;  provided that,  notwithstanding
     the  foregoing,  "Fair  Market  Value"  in the  case of any  Award  made in
     connection  with the IPO,  means the  price per share to the  public of the
     Common Stock in the IPO, as set forth in the final  prospectus  relating to
     the IPO.

          "Incentive Option" means an Option that is intended to comply with the
     requirements set forth in Section 422 of the Code.

          "Independent  Contractor"  means a person  providing  services  to the
     Company or any of its  Subsidiaries,  including an Employee or  Nonemployee
     Director.

          "Independent  Contractor  Award"  means the grant of any  Nonqualified
     Stock Option,  SAR, Stock Award, Cash Award or Performance  Award,  whether
     granted  singly,  in combination or in tandem,  to a Participant  who is an
     Independent  Contractor  pursuant to such applicable terms,  conditions and
     limitations  as the  Committee  may  establish  in  order  to  fulfill  the
     objectives of the Plan.

          "Independent  Contractor Award  Agreement"  means a written  agreement
     between the  Company and a  Participant  who is an  Independent  Contractor
     setting  forth the  terms,  conditions  and  limitations  applicable  to an
     Independent Contractor Award.

          "IPO" means the first time a  registration  statement  filed under the
     Securities Act of 1933 and respecting an underwritten  primary  offering by
     the Company of shares of Common Stock is declared

                                       32


     effective  under that Act and the shares  registered  by that  registration
     statement  are issued and sold by the Company  (otherwise  than pursuant to
     the exercise of any over allotment option).

          "IPO Closing Date" means the date on which the Company first  receives
     payment for the shares of Common Stock it sells in the IPO.

          "Nonemployee  Director"  has the meaning set forth in  paragraph  4(b)
     hereof.

          "Nonqualified  Stock  Option" means an Option that is not an Incentive
     Option.

          "Option"  means a right to  purchase a  specified  number of shares of
     Common Stock at a specified price.

          "Participant" means an Employee, Director or Independent Contractor to
     whom an Award has been made under this Plan.

          "Performance  Award"  means an award made  pursuant  to this Plan to a
     Participant who is an Employee or Independent  Contractor who is subject to
     the attainment of one or more Performance Goals.

          "Performance Goal" means a standard  established by the Committee,  to
     determine in whole or in part whether a Performance Award shall be earned.

          "Restricted  Stock"  means any  Common  Stock  that is  restricted  or
     subject to forfeiture provisions.

          "Restriction  Period" means a period of time  beginning as of the date
     upon which an Award of  Restricted  Stock is made pursuant to this Plan and
     ending as of the date upon which the Common Stock  subject to such Award is
     no longer restricted or subject to forfeiture provisions.

          "Rule 16b-3" means Rule 16b-3  promulgated  under the Exchange Act, or
     any successor rule.

          "SAR"  means a right to  receive a payment,  in cash or Common  Stock,
     equal to the excess of the Fair Market Value or other  specified  valuation
     of a  specified  number of shares of Common  Stock on the date the right is
     exercised over a specified strike price, in each case, as determined by the
     Committee.

          "Stock  Award" means an award in the form of shares of Common Stock or
     units denominated in shares of Common Stock.

          "Subsidiary"  means (i) in the case of a corporation,  any corporation
     of which the Company directly or indirectly owns shares  representing  more
     than 50% of the  combined  voting  power of the  shares of all  classes  or
     series of capital  stock of such  corporation  which have the right to vote
     generally  on  matters  submitted  to a vote  of the  stockholders  of such
     corporation  and (ii) in the case of a partnership or other business entity
     not  organized  as a  corporation,  any such  business  entity of which the
     Company directly or indirectly owns more than 50% of the voting, capital or
     profits interests (whether in the form of partnership interests, membership
     interests or otherwise).

     4. Eligibility.

     (a) Employees.  Key Employees  eligible for Employee Awards under this Plan
are those who hold positions of  responsibility  and whose  performance,  in the
judgment of the Committee,  can have a significant  effect on the success of the
Company and its Subsidiaries.

     (b) Directors.  Directors  eligible for Director Awards under this Plan are
those  who  are  not  employees  of the  Company  or  any  of  its  Subsidiaries
("Nonemployee Directors").

     (c)  Independent   Contractors.   Independent   Contractors   eligible  for
Independent Contractor Awards under this Plan are those Independent  Contractors
providing  services to, or who will  provide  services to, the Company or any of
its Subsidiaries.

     5.  Common  Stock  Available  for  Awards.  Subject  to the  provisions  of
paragraph 15 hereof, there shall be available for Awards under this Plan granted
wholly or  partly  in Common  Stock  (including  rights or  options  that may be
exercised  for or settled in Common  Stock) an aggregate of 1,500,000  shares of
Common

                                       33


Stock,  all of which shall be available  for  Incentive  Options.  The number of
shares of Common Stock that are the subject of Awards under this Plan,  that are
forfeited  or  terminated,  expire  unexercised,  are settled in cash in lieu of
Common  Stock or in a manner  such that all or some of the shares  covered by an
Award are not issued to a  Participant  or are  exchanged for Awards that do not
involve  Common  Stock,  shall again  immediately  become  available  for Awards
hereunder. The Committee may from time to time adopt and observe such procedures
concerning  the  counting  of shares  against  the Plan  maximum  as it may deem
appropriate.  The Board and the  appropriate  officers of the Company shall from
time to time take whatever actions are necessary to file any required  documents
with governmental authorities, stock exchanges and transaction reporting systems
to ensure that shares of Common Stock are  available  for  issuance  pursuant to
Awards.

     6. Administration.

     (a)  This  Plan,  as it  applies  to  Participants  who  are  Employees  or
Independent Contractors but not with respect to Participants who are Nonemployee
Directors,  shall be  administered  by the Committee.  To the extent required in
order for  Employee  Awards to be exempt from  Section 16 of the Exchange Act by
virtue of the  provisions of Rule 16b-3,  (i) the Committee  shall consist of at
least two members of the Board who meet the  requirements  of the  definition of
"non-employee  director" set forth in Rule 16b-3(b)(3)(i)  promulgated under the
Exchange Act or (ii) Awards may be granted by, and the Plan may be  administered
by, the Board.

     (b) Subject to the provisions  hereof,  insofar as this Plan relates to the
Employee Awards or Independent  Contractor Awards, the Committee shall have full
and  exclusive  power  and  authority  to  administer  this Plan and to take all
actions  that  are  specifically   contemplated   hereby  or  are  necessary  or
appropriate in connection with the administration  hereof.  Insofar as this Plan
relates to Employee Awards or Independent Contractor Awards, the Committee shall
also have full and  exclusive  power to  interpret  this Plan and to adopt  such
rules,  regulations  and  guidelines  for  carrying out this Plan as it may deem
necessary  or  proper,  all of  which  powers  shall  be  exercised  in the best
interests of the Company and in keeping with the  objectives  of this Plan.  The
Committee   may,  in  its   discretion,   provide  for  the   extension  of  the
exercisability of an Employee Award or Independent Contractor Award,  accelerate
the vesting or  exercisability  of an Employee Award or  Independent  Contractor
Award,  eliminate  or make less  restrictive  any  restrictions  contained in an
Employee Award or Independent  Contractor Award,  waive any restriction or other
provision of this Plan (insofar as such provision  relates to Employee Awards or
to Independent Contractor Awards) or an Employee Award or Independent Contractor
Award or otherwise  amend or modify an Employee Award or Independent  Contractor
Award in any manner  that is either (i) not adverse to the  Participant  to whom
such  Employee  Award  or  Independent  Contractor  Award  was  granted  or (ii)
consented  to by  such  Participant.  The  Committee  may  make an  award  to an
individual  who it expects to become an  Employee  of the  Company or any of its
Subsidiaries  within the next six months,  with such award being  subject to the
individual's  actually becoming an Employee within such time period, and subject
to such other terms and conditions as may be  established by the Committee.  The
Committee  may  correct  any  defect or supply any  omission  or  reconcile  any
inconsistency  in this Plan or in any Employee Award or  Independent  Contractor
Award in the manner and to the extent the Committee deems necessary or desirable
to  further  the  Plan   purposes.   Any  decision  of  the   Committee  in  the
interpretation  and  administration  of this Plan  shall lie within its sole and
absolute  discretion  and shall be final,  conclusive and binding on all parties
concerned.

     (c) No  member of the  Committee  or  officer  of the  Company  to whom the
Committee has delegated authority in accordance with the provisions of paragraph
7 of this Plan shall be liable for anything done or omitted to be done by him or
her,  by any  member  of the  Committee  or by any  officer  of the  Company  in
connection with the performance of any duties under this Plan, except for his or
her own willful misconduct or as expressly provided by statute.

     7.  Delegation  of  Authority.  The  Committee  may  delegate  to the Chief
Executive  Officer and to other senior  officers of the Company its duties under
this Plan  pursuant to such  conditions  or  limitations  as the  Committee  may
establish,  except  that  the  Committee  may not  delegate  to any  person  the
authority to grant Awards to, or take other action with respect to, Participants
who are subject to Section 16 of the Exchange Act.

                                       34


     8. Employee and Independent Contractor Awards.

     (a) The Committee  shall  determine the type or types of Employee Awards to
be made under this Plan and shall  designate from time to time the Employees who
are to be the recipients of such Awards.  Each Employee Award may be embodied in
an Employee  Award  Agreement,  which shall contain such terms,  conditions  and
limitations  as shall be determined by the Committee in its sole  discretion and
shall be signed by the  Participant to whom the Employee Award is made and by an
Authorized Officer for and on behalf of the Company. Employee Awards may consist
of those  listed in this  paragraph  8(a) hereof and may be granted  singly,  in
combination or in tandem.  Employee Awards may also be made in combination or in
tandem with, in replacement  of, or as  alternatives  to, grants or rights under
this Plan or any other employee plan of the Company or any of its  Subsidiaries,
including the plan of any acquired entity. An Employee Award may provide for the
grant or issuance of additional, replacement or alternative Employee Awards upon
the  occurrence  of  specified  events,  including  the exercise of the original
Employee Award granted to a Participant. All or part of an Employee Award may be
subject to conditions  established by the Committee,  which may include, but are
not  limited to,  continuous  service  with the  Company  and its  Subsidiaries,
achievement of specific  business  objectives,  increases in specified  indices,
attainment  of  specified  growth  rates and other  comparable  measurements  of
performance.  Upon the  termination  of employment  by a  Participant  who is an
Employee, any unexercised, deferred, unvested or unpaid Employee Awards shall be
treated as set forth in the applicable Employee Award Agreement.

          (i) Stock Option.  An Employee  Award may be in the form of an Option.
     An Option awarded  pursuant to this Plan may consist of an Incentive Option
     or a Nonqualified  Option. The price at which shares of Common Stock may be
     purchased  upon the exercise of an Incentive  Option shall be not less than
     the Fair Market Value of the Common  Stock on the date of grant.  The price
     at which  shares of Common  Stock may be  purchased  upon the exercise of a
     Nonqualified  Option  shall be not less than the Fair  Market  Value of the
     Common Stock on the date of grant. Subject to the foregoing provisions, the
     terms,  conditions  and  limitations  applicable  to  any  Options  awarded
     pursuant  to this Plan,  including  the term of any Options and the date or
     dates  upon which  they  become  exercisable,  shall be  determined  by the
     Committee.

          (ii) Stock Appreciation Right. An Employee Award may be in the form of
     an SAR.  The  terms,  conditions  and  limitations  applicable  to any SARs
     awarded pursuant to this Plan,  including the term of any SARs and the date
     or dates upon which they become  exercisable,  shall be  determined  by the
     Committee.

          (iii) Stock  Award.  An  Employee  Award may be in the form of a Stock
     Award. The terms, conditions and limitations applicable to any Stock Awards
     granted pursuant to this Plan shall be determined by the Committee.

          (iv) Cash Award. An Employee Award may be in the form of a Cash Award.
     The terms, conditions and limitations applicable to any Cash Awards granted
     pursuant to this Plan shall be determined by the Committee.

          (v) Performance Award. Without limiting the type or number of Employee
     Awards  that may be made  under  the  other  provisions  of this  Plan,  an
     Employee  Award may be in the form of a  Performance  Award.  A Performance
     Award shall be paid, vested or otherwise  deliverable  solely on account of
     the attainment of one or more pre-established,  objective Performance Goals
     established  by the Committee  prior to the earlier to occur of (x) 90 days
     after the  commencement  of the period of service to which the  Performance
     Goal  relates  and  (y) the  lapse  of 25% of the  period  of  service  (as
     scheduled  in good faith at the time the goal is  established),  and in any
     event while the outcome is substantially  uncertain.  A Performance Goal is
     objective  if a third party having  knowledge  of the relevant  facts could
     determine  whether the goal is met. Such a Performance Goal may be based on
     one or more  business  criteria that apply to the  individual,  one or more
     business units of the Company,  or the Company as a whole,  and may include
     one or more of the following:  increased revenue,  net income, stock price,
     market  share,  earnings per share,  return on equity,  return on assets or
     decrease in costs.  Unless otherwise  stated,  such a Performance Goal need
     not be  based  upon an  increase  or  positive  result  under a  particular
     business


                                       35


     criterion and could  include,  for example,  maintaining  the status quo or
     limiting economic losses (measured,  in each case, by reference to specific
     business   criteria).   In  interpreting  Plan  provisions   applicable  to
     Performance  Goals and Performance  Awards, it is the intent of the Plan to
     conform  with the  standards  of  Section  162(m) of the Code and  Treasury
     Regulation ss.  1.162-27(e)(2)(i),  and the Committee in establishing  such
     goals and interpreting  the Plan shall be guided by such provisions.  Prior
     to the payment of any compensation  based on the achievement of Performance
     Goals,  the Committee must certify in writing that  applicable  Performance
     Goals and any of the  material  terms  thereof  were,  in fact,  satisfied.
     Subject to the foregoing provisions,  the terms, conditions and limitations
     applicable  to any  Performance  Awards made pursuant to this Plan shall be
     determined by the Committee.

     (b)  Notwithstanding  anything to the contrary  contained in this Plan, the
following limitations shall apply to any Employee Awards made hereunder:

          (i) no  Participant  may  be  granted,  during  any  one-year  period,
     Employee Awards consisting of Options or SARs that are exercisable for more
     than 250,000 shares of Common Stock;

          (ii) no Participant may be granted,  during any one-year period, Stock
     Awards covering or relating to more than 50,000 shares of Common Stock (the
     limitation set forth in this clause (ii),  together with the limitation set
     forth in clause (i) above,  being hereinafter  collectively  referred to as
     the "Stock Based Awards Limitations"); and

          (iii) no Participant may be granted Employee Awards consisting of cash
     or in any other form permitted  under this Plan (other than Employee Awards
     consisting  of Options or SARs or otherwise  consisting of shares of Common
     Stock or units  denominated  in such  shares) in  respect  of any  one-year
     period  having  a value  determined  on the  date of  grant  in  excess  of
     $500,000.

     (c) The  Committee  shall have the sole  responsibility  and  authority  to
determine the type or types of  Independent  Contractor  Awards to be made under
this Plan and may make any such  Awards as could be made to an  Employee,  other
than Incentive Options.

     9.  Director  Awards.  Each  Nonemployee  Director of the Company  shall be
granted  Director  Awards in accordance with this paragraph 9 and subject to the
applicable  terms,  conditions  and  limitations  set forth in this Plan and the
applicable  Director Award Agreement.  Notwithstanding  anything to the contrary
contained  herein,  Director  Awards  shall  not be made in any  year in which a
sufficient  number  of shares of  Common  Stock are not  available  to make such
Awards under this Plan.

     (a) Initial  Director  Options.  On the IPO Closing Date, each  Nonemployee
Director shall be  automatically  awarded a Director  Option on 10,000 shares of
Common Stock.

     (b) Other  Director  Options.  Effective  upon the IPO Closing Date, on the
date of his or her first  appointment  or election to the Board of Directors,  a
Nonemployee  Director  shall  automatically  be granted a Director  Option  that
provides for the purchase of 10,000 shares of Common Stock. In addition, on each
Annual Director Award Date, each  Nonemployee  Director shall  automatically  be
granted a Director  Option that  provides  for the  purchase of 2,500  shares of
Common Stock.

     (c) Terms.  Each  Director  Option  shall have a term of ten years from the
date of grant,  notwithstanding  any  earlier  termination  of the status of the
holder as a  Nonemployee  Director.  The purchase  price of each share of Common
Stock  subject to a Director  Option  shall be equal to the Fair Market Value of
the  Common  Stock on the date of grant.  All  Director  Options  shall vest and
become  exercisable  in increments of one-third of the total number of shares of
Common Stock that are subject  thereto  (rounded up to the nearest whole number)
on the first and second  anniversaries of the date of grant and of all remaining
shares of Common Stock that are subject thereto on the third  anniversary of the
date  of  grant.  All  unvested  Director  Options  shall  be  forfeited  if the
Nonemployee  Director resigns as a Director without the consent of a majority of
the other Directors.

     (d)  Agreements.  Any Award of  Director  Options  shall be  embodied  in a
Director  Award  Agreement,  which  shall  contain  the  terms,  conditions  and
limitations  set forth above and shall be signed by the  Participant to whom the
Director  Options are granted and by an Authorized  Officer for and on behalf of
the Company.

                                       36


     10. Payment of Awards.

     (a) General.  Payment of Employee Awards or Independent  Contractor  Awards
may be made in the form of cash or Common Stock, or a combination  thereof,  and
may include such  restrictions as the Committee shall determine,  including,  in
the case of Common Stock, restrictions on transfer and forfeiture provisions. If
payment of an Employee Award or Independent Contractor Award is made in the form
of Restricted  Stock,  the applicable  Award  Agreement  relating to such shares
shall  specify  whether  they are to be  issued at the  beginning  or end of the
Restriction  Period.  In the event  that  shares of  Restricted  Stock are to be
issued at the beginning of the Restriction  Period, the certificates  evidencing
such  shares (to the extent  that such shares are so  evidenced)  shall  contain
appropriate  legends and restrictions  that describe the terms and conditions of
the  restrictions  applicable  thereto.  In the event that shares of  Restricted
Stock are to be issued at the end of the Restricted Period, the right to receive
such  shares  shall be  evidenced  by book entry  registration  or in such other
manner as the Committee may determine.

     (b)  Deferral.  With the  approval  of the  Committee,  amounts  payable in
respect of Employee Awards or Independent  Contractor Awards may be deferred and
paid either in the form of installments or as a lump-sum payment.  The Committee
may permit selected Participants to elect to defer payments of some or all types
of  Employee  Awards  or  Independent   Contractor  Awards  in  accordance  with
procedures  established  by the Committee.  Any deferred  payment of an Employee
Award or Independent  Contractor  Award,  whether  elected by the Participant or
specified by the Award Agreement or by the Committee, may be forfeited if and to
the extent that the Award Agreement so provides.

     (c) Dividends and Interest. Rights to dividends or Dividend Equivalents may
be extended to and made part of any  Employee  Award or  Independent  Contractor
Award  consisting  of shares of Common Stock or units  denominated  in shares of
Common  Stock,  subject  to  such  terms,  conditions  and  restrictions  as the
Committee may establish.  The Committee may also establish  rules and procedures
for the crediting of interest on deferred cash payments and Dividend Equivalents
for Employee  Awards or Independent  Contractor  Awards  consisting of shares of
Common Stock or units denominated in shares of Common Stock.

     (d)  Substitution  of  Awards.  At  the  discretion  of  the  Committee,  a
Participant  who is an  Employee  or  Independent  Contractor  may be offered an
election to substitute an Employee  Award or  Independent  Contractor  Award for
another  Employee Award or Independent  Contractor  Award or Employee  Awards or
Independent Contractor Awards of the same or different type.

     11. Stock Option Exercise. The price at which shares of Common Stock may be
purchased  under an Option shall be paid in full at the time of exercise in cash
or, if elected by the  optionee,  the optionee may purchase such shares by means
of tendering Common Stock or surrendering  another Award,  including  Restricted
Stock or Director  Restricted Stock,  valued at Fair Market Value on the date of
exercise,  or any combination  thereof. The Committee shall determine acceptable
methods for Participants who are Employees or Independent  Contractors to tender
Common Stock or other Employee Awards or Independent Contractor Awards; provided
that  any  Common  Stock  that is or was the  subject  of an  Employee  Award or
Independent  Contractor Award may be so tendered only if it has been held by the
Participant  for six months.  The Committee may provide for procedures to permit
the  exercise or  purchase of such Awards by use of the  proceeds to be received
from  the  sale of  Common  Stock  issuable  pursuant  to an  Employee  Award or
Independent  Contractor Award. Unless otherwise provided in the applicable Award
Agreement, in the event shares of Restricted Stock are tendered as consideration
for the exercise of an Option,  a number of the shares  issued upon the exercise
of the  Option,  equal to the number of shares of  Restricted  Stock or Director
Restricted  Stock used as consideration  therefor,  shall be subject to the same
restrictions as the Restricted  Stock or Director  Restricted Stock so submitted
as well as any additional restrictions that may be imposed by the Committee.

     12. Taxes. The Company shall have the right to deduct applicable taxes from
any Employee  Award payment and withhold,  at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash or
number of shares of Common Stock or a  combination  thereof for payment of taxes
required by law or to take such other  action as may be necessary in the opinion
of the Company to satisfy all  obligations  for  withholding of such taxes.  The
Committee  may also permit  withholding  to be  satisfied by


                                       37


the transfer to the Company of shares of Common Stock  theretofore  owned by the
holder of the Employee Award with respect to which  withholding is required.  If
shares of Common Stock are used to satisfy tax withholding, such shares shall be
valued based on the Fair Market Value when the tax withholding is required to be
made.  The  Committee  may provide  for loans,  on either a short term or demand
basis,  from the Company to a  Participant  who is an  Employee  or  Independent
Contractor to permit the payment of taxes required by law.

     13.  Amendment,  Modification,  Suspension  or  Termination.  The Board may
amend,  modify,  suspend or  terminate  this Plan for the  purpose of meeting or
addressing any changes in legal  requirements or for any other purpose permitted
by law, except that (i) no amendment or alteration  that would adversely  affect
the  rights  of any  Participant  under  any Award  previously  granted  to such
Participant  shall be made without the consent of such  Participant  and (ii) no
amendment  or  alteration  shall  be  effective  prior  to its  approval  by the
stockholders  of the  Company  to the  extent  such  approval  is then  required
pursuant to Rule 16b-3 in order to preserve the  applicability  of any exemption
provided by such rule to any Award then  outstanding  (unless the holder of such
Award consents) or to the extent  stockholder  approval is otherwise required by
applicable legal requirements.

     14.  Assignability.  Unless  otherwise  determined  by  the  Committee  and
provided in the Award  Agreement,  no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the
Exchange Act shall be assignable or otherwise transferable except by will or the
laws of descent and distribution or pursuant to a qualified  domestic  relations
order  as  defined  by the  Code or Title I of the  Employee  Retirement  Income
Security Act, or the rules  thereunder.  The Committee may prescribe and include
in applicable  Award Agreements  other  restrictions on transfer.  Any attempted
assignment of an Award or any other benefit under this Plan in violation of this
paragraph 14 shall be null and void.

     15. Adjustments.

     (a) The existence of outstanding  Awards shall not affect in any manner the
right or power of the Company or its  stockholders  to make or authorize  any or
all  adjustments,  recapitalizations,  reorganizations  or other  changes in the
capital stock of the Company or its business or any merger or  consolidation  of
the Company,  or any issue of bonds,  debentures,  preferred or prior preference
stock  (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the  dissolution or liquidation of the Company,  or any sale or
transfer of all or any part of its assets or  business,  or any other  corporate
act or proceeding of any kind,  whether or not of a character similar to that of
the acts or proceedings enumerated above.

     (b) In the event of any subdivision or consolidation of outstanding  shares
of Common Stock,  declaration of a dividend payable in shares of Common Stock or
other stock split,  then, except with respect to the Existing  Options,  (i) the
number of shares of Common Stock  reserved  under this Plan,  (ii) the number of
shares of Common Stock covered by outstanding Awards in the form of Common Stock
or units  denominated  in Common  Stock,  (iii) the  exercise  or other price in
respect of such Awards,  (iv) the appropriate  Fair Market Value and other price
determinations for such Awards, (v) the number of shares of Common Stock covered
by Director  Options  automatically  granted  pursuant to paragraph 9 hereof and
(vi) the Stock Based Awards Limitations shall each be  proportionately  adjusted
by  the  Board  to  reflect  such  transaction.   In  the  event  of  any  other
recapitalization or capital  reorganization of the Company, any consolidation or
merger of the Company with another  corporation  or entity,  the adoption by the
Company of any plan of exchange  affecting the Common Stock or any  distribution
to holders of Common  Stock of  securities  or property  (other than normal cash
dividends  or  dividends  payable  in  Common  Stock),   the  Board  shall  make
appropriate  adjustments  to (i) the number of shares of Common Stock covered by
Awards in the form of Common Stock or units  denominated  in Common Stock,  (ii)
the  exercise or other price in respect of such  Awards,  (iii) the  appropriate
Fair  Market  Value and other price  determinations  for such  Awards,  (iv) the
number of shares of Common  Stock  covered  by  Director  Options  automatically
granted  pursuant  to  paragraph  9  hereof  and  (v)  the  Stock  Based  Awards
Limitations  to give effect to such  transaction  shall each be  proportionately
adjusted  by  the  Board  to  reflect  such  transaction;   provided  that  such
adjustments  shall only be such as are  necessary to maintain the  proportionate
interest of the holders of the Awards and preserve, without exceeding,


                                       38


the value of such  Awards.  In the event of a corporate  merger,  consolidation,
acquisition of property or stock, separation, reorganization or liquidation, the
Board shall be authorized to issue or assume Awards by means of  substitution of
new Awards, as appropriate, for previously issued Awards or to assume previously
issued Awards as part of such adjustment.

     (c) In the  event of a  corporate  merger,  consolidation,  acquisition  of
property or stock, separation, reorganization or liquidation, the Board may make
such  adjustments to outstanding  Awards or other provisions for the disposition
of outstanding  Awards as it deems  equitable,  and shall be authorized,  in its
discretion,  (i) to  provide  for  the  substitution  of a new  Award  or  other
arrangement (which, if applicable, may be exercisable for such property or stock
as the  Board  determines)  for an  outstanding  Award or the  assumption  of an
outstanding  Award,  regardless  of whether in a  transaction  to which  Section
424(a) of the Code applies, (ii) to provide,  prior to the transaction,  for the
acceleration of the vesting and exercisability of, or lapse of restrictions with
respect to, the outstanding  Award and, if the transaction is a cash merger,  to
provide for the termination of any portion of the Award that remains unexercised
at the time of such  transaction or (iii) to provide for the acceleration of the
vesting and exercisability of an outstanding Award and the cancellation  thereof
in exchange for such payment as shall be mutually  agreeable to the  Participant
and the Board.

     16. Restrictions.  No Common Stock or other form of payment shall be issued
with  respect to any Award unless the Company  shall be  satisfied  based on the
advice of its counsel that such issuance will be in compliance  with  applicable
federal and state  securities  laws. It is the intent of the Company that grants
of Awards under this Plan comply with Rule 16b-3 with respect to persons subject
to Section 16 of the  Exchange  Act unless  otherwise  provided  herein or in an
Award Agreement,  that any ambiguities or inconsistencies in the construction of
such an Award or this Plan be  interpreted  to give  effect  to such  intention.
Certificates evidencing shares of Common Stock delivered under this Plan (to the
extent that such shares are so  evidenced)  may be subject to such stop transfer
orders and other  restrictions  as the  Committee may deem  advisable  under the
rules,  regulations  and  other  requirements  of the  Securities  and  Exchange
Commission,  any securities exchange or transaction  reporting system upon which
the Common Stock is then listed or to which it is admitted for quotation and any
applicable  federal or state securities law. The Committee may cause a legend or
legends  to be  placed  upon  such  certificates  (if  any) to make  appropriate
reference to such restrictions.

     17. Unfunded Plan.  Insofar as it provides for Awards of cash, Common Stock
or rights thereto,  this Plan shall be unfunded.  Although  bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common
Stock or rights  thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate any
assets  that may at any time be  represented  by cash,  Common  Stock or  rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company,  the Board or the  Committee be deemed to be a trustee of any
cash,  Common  Stock or rights  thereto  to be  granted  under  this  Plan.  Any
liability or  obligation  of the Company to any  Participant  with respect to an
Award of cash,  Common  Stock or rights  thereto  under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Award  Agreement,  and no such  liability or  obligation of the Company shall be
deemed to be secured by any pledge or other  encumbrance  on any property of the
Company.  Neither the Company nor the Board nor the Committee  shall be required
to give any security or bond for the  performance of any obligation  that may be
created by this Plan.

     18. Governing Law. This Plan and all determinations  made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities  laws of the United States,  shall be governed by and
construed in accordance with the laws of the State of Texas.

     19.  Effectiveness.  The  Plan as  hereby  amended  and  restated  shall be
effective as of February 17, 2000,  except for the change to the  definition  of
"Independent  Contractor"  and to the number of authorized  shares in Section 5,
which  shall  become  effective  upon  shareholder  approval  at the 2000 Annual
Meeting of Shareholders.

                                       39


                    INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

              (As Amended and Restated Effective February 17, 2000)

                                 FIRST AMENDMENT

     WHEREAS,  Carrizo Oil & Gas,  Inc., a Texas  corporation  (the  "Company"),
maintains the Incentive Plan of Carrizo Oil & Gas, Inc., as amended and restated
effective February 17, 2000 (the "Plan");

     WHEREAS,  the  Company  desires  amend the Plan to increase  the  aggregate
number of shares the Company's  common stock  available  for issuance  under the
Plan from 1,500,000 shares to 1,850,000 shares;

     WHEREAS, the Company's shareholders approved such increase in the aggregate
number of shares of the Company's  common stock available for issuance under the
Plan at the Company's annual shareholder meeting held on May 22, 2002; and

     WHEREAS,  under  Section  13 of the  Plan,  the Board of  Directors  of the
Company has reserved the right to amend the Plan;

     NOW,  THEREFORE,  the Plan is hereby  amended,  effective  May 22, 2002, to
increase the aggregate  number of shares of the Company's common stock available
for issuance under the Plan by deleting the number "1,500,000" from Section 5 of
the Plan and replacing said number with the number "1,850,000."

     IN WITNESS  WHEREOF,  The Board of Directors of Carrizo Oil & Gas, Inc. has
caused this amendment to be executed by a duly authorized officer of the Company
in a  number  of  copies,  all of  which  shall  constitute  one  and  the  same
instrument,  which may be  sufficiently  evidenced by any executed  copy hereof,
this 13th day of August, 2002, but effective as of the date specified herein.

                             CARRIZO OIL & GAS, INC.

                                       By: /s/ FRANK A. WOJTEK
                                       -----------------------
                                       Name: Frank A. Wojtek
                                       Title:   V.P. and Chief Financial Officer

                                       40


                    INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

           (As Amended and Restated Effective as of February 17, 2000)

                                    AMENDMENT

     Carrizo  Oil & Gas,  Inc.,  a Texas  corporation  (the  "Company"),  having
reserved the right under Section 13 of the Incentive  Plan of Carrizo Oil & Gas,
Inc. (the "Plan"), to amend the Plan, does hereby add at the end of Section 9 of
the Plan,  effective as of February 18, 2003, a new  subsection  (e), to read as
follows:

          (e)  Special  Grant of Audit  Committee  Chairman  Options.  Effective
     February 18, the chairman of the audit  committee of the Company shall as a
     one-time grant be granted a Director  Option that provides for the purchase
     of 25,000 shares of Common Stock,  has a term of ten years from the date of
     such grant,  notwithstanding  any earlier  termination of the status of the
     holder as a  Nonemployee  Director,  and vests and becomes  exercisable  in
     increments  of one-third of the total number of shares of Common Stock that
     are subject  thereto  (rounded up to the nearest whole number) on the first
     and second  anniversaries  of the date of grant and of all remaining shares
     of Common Stock that are subject  thereto on the third  anniversary  of the
     date of grant and the purchase  price of each share of Common Stock subject
     to such  Director  Option  shall be equal to the Fair  Market  Value of the
     Common Stock on the date of grant.

     IN WITNESS  WHEREOF,  this  Amendment  has been  executed  effective  as of
February 18, 2003.

                                       CARRIZO OIL & GAS, INC.

                                       By: /s/ FRANK A. WOJTEK
                                       -----------------------
                                       Frank A. Wojtek
                                       Vice President, Chief Financial
                                       Officer, Secretary and Treasurer


                                       41


                    INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

                                 THIRD AMENDMENT

     Carrizo  Oil & Gas,  Inc.,  a Texas  corporation  (the  "Company"),  having
reserved the right under Section 13 of the Incentive  Plan of Carrizo Oil & Gas,
Inc. (the "Plan"), to amend the Plan, does hereby amend and restate Section 9(b)
of the Plan, effective as of May 23, 2003, to read in its entirety as follows:

          (b)  Other  Director  Options.  On  the  date  of  his  or  her  first
     appointment or election to the Board of Directors,  a Nonemployee  Director
     shall  automatically  be granted a Director  Option that  provides  for the
     purchase of 10,000  shares of Common  Stock.  In  addition,  on each Annual
     Director Award Date:

               (i) each  Nonemployee  Director shall  automatically be granted a
          Director  Option that  provides  for the  purchase of 2,500  shares of
          Common Stock;

               (ii) each  Nonemployee  Director  that is the chairman of each of
          the audit and  compensation  committees,  in addition to the  Director
          Options granted under Section  9(b)(i),  also shall  automatically  be
          granted  a  Director  Option  that  provides  for the  purchase  of an
          additional 3,000 and 2,000 shares, respectively; and

               (iii) the  Board or the  Committee  may,  in its  discretion,  in
          addition to the Director Options granted under Section 9(b)(i),  grant
          Director  Options  for the  purchase  of up to 3,000  shares and up to
          2,000 shares,  respectively,  to non-chairmen members of the audit and
          compensation  committees  who  are  deemed  by  the  Committee  to  be
          "independent"  for purposes of the rules of The Nasdaq  Stock  Market,
          Inc.

     Grants under  Sections  9(b)(ii) and (iii) may be made to the chairman or a
member  of  the  audit  committee  or  compensation   committee,   respectively,
notwithstanding  that the same  person may also  receive  grants  under  Section
9(b)(ii) or (iii) as a chairman or member of the compensation committee or audit
committee, respectively.

     The  Company  also does hereby  amend and  restate  Section 19 of the Plan,
effective as of May 23, 2003, to read in its entirety as follows:

          19.  Effectiveness.  The  Plan  was  amended  and  restated  effective
     February 17, 2000 and subsequently  amended by a First Amendment  effective
     May 22, 2002, a Second  Amendment  effective  February 18, 2003 and a Third
     Amendment effective May 23, 2003.

     IN WITNESS  WHEREOF,  this Amendment has been executed  effective as of May
23, 2003.

                                       CARRIZO OIL & GAS, INC.

                                       By: /s/ FRANK A. WOJTEK
                                       -----------------------
                                       Frank A. Wojtek
                                       Vice President, Chief Financial
                                       Officer, Secretary and Treasurer

                                       42


                    INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

                                FOURTH AMENDMENT

     Carrizo  Oil & Gas,  Inc.,  a Texas  corporation  (the  "Company"),  having
reserved the right under Section 13 of the Incentive  Plan of Carrizo Oil & Gas,
Inc. (the "Plan"),  to amend the Plan, does hereby amend the Plan,  effective as
of May 21, 2004, as follows:

          1. The definition of "Annual  Director Award Date" in Section 3 of the
     Plan is hereby amended in its entirety to read as follows:

               "`Annual  Director  Award Date' means,  for each year,  the first
          business  day  following  the  date on which  the  annual  meeting  of
          stockholders of the Company is held in such year."

          2. The  definition  of  "Director  Award" in  Section 3 of the Plan is
     hereby amended in its entirety to read as follows:

               "`Director  Award'  means  the  grant  of a  Director  Option  or
          Director Restricted Stock."

          3.  Section 3 of the Plan is hereby  amended by adding  the  following
     definitions  to  Section  3 of the  Plan in their  respective  alphabetical
     order:

               "`Change in Control' is defined in Attachment A."

               "`Director  Restricted  Stock" means  Restricted Stock granted to
          Nonemployee Directors pursuant to the applicable terms, conditions and
          limitations specified in Section 9(f) hereof."

          4.  Section 5 of the Plan is hereby  amended by  replacing  the number
     "1,850,000" with the number "2,350,000."

          5.  Subsection  9(b) of the  Plan  is  hereby  amended  to read in its
     entirety as follow:

               "(b)  Other  Director  Options.  On the date of his or her  first
          appointment  or  election  to the Board of  Directors,  a  Nonemployee
          Director  shall  automatically  be  granted  a  Director  Option  that
          provides  for the  purchase  of  10,000  shares of  Common  Stock.  In
          addition, on each Annual Director Award Date:

               (i) the Board or the Committee may, in its discretion, grant each
          Nonemployee  Director a Director Option that provides for the purchase
          of such number of shares of Common Stock as the Board or the Committee
          may determine in its  discretion,  subject to the limitation that such
          awards  may not  exceed  the  number of shares  of Common  Stock  then
          available for award under this Plan;

               (ii) each  Nonemployee  Director  that is the chairman of each of
          the audit,  compensation and nominating committees, in addition to the
          Director   Options   granted   under  Section   9(b)(i),   also  shall
          automatically  be granted a Director  Option that provides for, in the
          case of the  chairman  of the  audit  committee,  the  purchase  of an
          additional  3,000  shares  of  Common  Stock  and,  in the case of the
          chairman of each of the  compensation  or nominating  committees,  the
          purchase of an additional 2,000 shares of Common Stock,  respectively;
          and

               (iii) the  Board or the  Committee  may,  in its  discretion,  in
          addition to the Director Options granted under Section 9(b)(i),  grant
          Director  Options  for the  purchase  of up to  3,000  shares  to each
          Nonemployee  Director  who  is a  non-chairman  member  of  the  audit
          committee  and may grant  Director  Options for the  purchase of up to
          2,000 shares to each Nonemployee Director who is a non-chairman member
          of the compensation or nominating committees,  provided that each such
          non-  chairman  member  of  the  audit,   compensation  or  nominating
          committees to whom such Director  Option is to be granted is deemed by
          the  Committee  to be  "independent"  for purposes of the rules of The
          Nasdaq Stock Market, Inc."

                                       43


          6.  Section  9 of the Plan is  hereby  amended  by  adding  to the end
     thereof a new subsection (f), to read in its entirety as follows:

               "(f) Director Restricted Stock.

               (i)  On  each  Annual  Director  Award  Date,  the  Board  or the
          Committee may, in its discretion,  grant each Nonemployee  Director an
          Award of  Director  Restricted  Stock  for such  number  of  shares of
          Restricted  Stock as the Board or the  Committee  may determine in its
          discretion,  subject to the limitation that such Awards may not exceed
          the number of shares of Common  Stock then  available  for award under
          this Plan.

               (ii)  Each  Award of  Director  Restricted  Stock  shall  vest in
          increments  of one-third  of the total number of shares of  Restricted
          Stock  that are  subject  thereto  (rounded  up to the  nearest  whole
          number) on the first and second anniversaries of the date of grant and
          of all remaining  shares of Restricted  Stock that are subject thereto
          on the third anniversary of the date of grant; provided, however, that
          upon a Change in  Control,  all shares of  Director  Restricted  Stock
          shall  immediately  vest. All unvested  shares of Director  Restricted
          Stock shall be  forfeited  if the  Nonemployee  Director  resigns as a
          Director without the consent of a majority of the other Directors.

               (iii) Any Award of Director Restricted Stock shall be embodied in
          a Director Award Agreement,  which shall contain the terms, conditions
          and limitations set forth above and shall be signed by the Participant
          to whom the Director  Restricted Stock is granted and by an Authorized
          Officer for and on behalf of the Company."

          7. The Plan is hereby  amended by adding  "Attachment  A"  attached to
     this Amendment to the end of the Plan as a new "Attachment A" thereto.

     IN WITNESS  WHEREOF,  this Amendment has been executed  effective as of May
21, 2004.

                                       CARRIZO OIL & GAS, INC.

                                       By: /s/ Paul F. Boling
                                       ----------------------
                                       Paul F. Boling
                                       Vice President, Chief Financial
                                       Officer, Secretary and Treasurer

                                       44


                                  ATTACHMENT A

                               "CHANGE IN CONTROL"

     The following  definitions apply regarding Change in Control  provisions of
the foregoing Plan:

     "Affiliate"  shall have the meaning  ascribed to such term in Rule 12b-2 of
the General  Rules and  Regulations  under the Exchange Act, as in effect on the
date of this Agreement.

     "Associate" shall mean, with reference to any Person,  (a) any corporation,
firm,  partnership,  association,  unincorporated  organization  or other entity
(other than the Company or a subsidiary  of the Company) of which such Person is
an officer  or  general  partner  (or  officer  or general  partner of a general
partner) or is, directly or indirectly,  the Beneficial  Owner of 10% or more of
any class of equity  securities,  (b) any  trust or other  estate in which  such
Person has a substantial  beneficial  interest or as to which such Person serves
as trustee or in a similar fiduciary  capacity and (c) any relative or spouse of
such  Person,  or any  relative  of such  spouse,  who has the same home as such
Person.

     "Beneficial Owner" shall mean, with reference to any securities, any Person
if:

          (a) such Person or any of such  Person's  Affiliates  and  Associates,
     directly  or  indirectly,  is the  "beneficial  owner"  of  (as  determined
     pursuant  to Rule  13d-3 of the  General  Rules and  Regulations  under the
     Exchange Act, as in effect on the date of this  Agreement)  such securities
     or otherwise has the right to vote or dispose of such securities, including
     pursuant to any agreement,  arrangement or understanding (whether or not in
     writing);  provided,  however,  that  a  Person  shall  not be  deemed  the
     "Beneficial  Owner" of, or to  "beneficially  own," any security under this
     subsection (a) as a result of an agreement, arrangement or understanding to
     vote such security if such  agreement,  arrangement or  understanding:  (i)
     arises  solely  from a  revocable  proxy or consent  given in response to a
     public (i.e., not including a solicitation  exempted by Rule 14a-2(b)(2) of
     the General Rules and Regulations  under the Exchange Act) proxy or consent
     solicitation  made  pursuant to, and in  accordance  with,  the  applicable
     provisions of the General Rules and Regulations  under the Exchange Act and
     (ii) is not then  reportable  by such  Person  on  Schedule  13D  under the
     Exchange Act (or any comparable or successor report);

          (b) such Person or any of such  Person's  Affiliates  and  Associates,
     directly  or  indirectly,  has the  right or  obligation  to  acquire  such
     securities  (whether such right or obligation is  exercisable  or effective
     immediately  or only  after the  passage  of time or the  occurrence  of an
     event) pursuant to any agreement,  arrangement or understanding (whether or
     not in writing) or upon the exercise of conversion rights, exchange rights,
     other rights, warrants or options, or otherwise;  provided, however, that a
     Person  shall not be deemed the  Beneficial  Owner of, or to  "beneficially
     own," (i) securities  tendered  pursuant to a tender or exchange offer made
     by such Person or any of such Person's  Affiliates or Associates until such
     tendered   securities  are  accepted  for  purchase  or  exchange  or  (ii)
     securities issuable upon exercise of Exempt Rights; or

          (c) such Person or any such Person's  Affiliates or Associates (i) has
     any  agreement,  arrangement or  understanding  (whether or not in writing)
     with  any  other  Person  (or any  Affiliate  or  Associate  thereof)  that
     beneficially  owns such  securities for the purpose of acquiring,  holding,
     voting  (except  as set  forth in the  proviso  to  subsection  (a) of this
     definition) or disposing of such  securities or (ii) is a member of a group
     (as that term is used in Rule 13d-5(b) of the General Rules and Regulations
     under the Exchange  Act) that  includes any other Person that  beneficially
     owns such securities;

     provided,  however,  that nothing in this  definition  shall cause a Person
     engaged in business as an  underwriter  of securities to be the  Beneficial
     Owner of, or to  "beneficially  own," any securities  acquired through such
     Person's  participation  in good  faith in a firm  commitment  underwriting
     until the  expiration  of 40 days after the date of such  acquisition.  For
     purposes  hereof,  "voting" a security  shall  include  voting,  granting a
     proxy,  consenting  or making a request  or demand  relating  to  corporate
     action (including,  without  limitation,  a demand for stockholder list, to
     call a stockholder  meeting or to inspect  corporate  books and records) or
     otherwise giving an  authorization  (within the meaning of Section 14(a) of
     the Exchange Act) in respect of such security.

                                       45


     The terms "beneficially own" and "beneficially  owning" shall have meanings
that are correlative to this definition of the term "Beneficial Owner".

     "Change of Control" shall mean any of the following:

          (a) any  Person  (other  than  an  Exempt  Person)  shall  become  the
     Beneficial  Owner  of 40% or  more  of the  shares  of  Common  Stock  then
     outstanding or 40% or more of the combined voting power of the Voting Stock
     of the  Company  then  outstanding;  provided,  however,  that no Change of
     Control  shall be deemed to occur for  purposes of this  subsection  (a) if
     such Person shall become a Beneficial Owner of 40% or more of the shares of
     Common  Stock or 40% or more of the  combined  voting  power of the  Voting
     Stock of the  Company  solely as a result of (i) an Exempt  Transaction  or
     (ii) an acquisition  by a Person  pursuant to a  reorganization,  merger or
     consolidation, if, following such reorganization,  merger or consolidation,
     the  conditions  described in clauses (i), (ii) and (iii) of subsection (c)
     of this definition are satisfied; or

          (b)  individuals  who, as of May 21, 2004,  constitute  the Board (the
     "Incumbent  Board")  cease for any reason to constitute at least a majority
     of the Board;  provided,  however,  that any individual becoming a director
     subsequent to May 21, 2004 whose  election,  or nomination  for election by
     the Company's  shareholders,  was approved by a vote of at least a majority
     of the directors then comprising the Incumbent Board shall be considered as
     though such  individual  were a member of the  Incumbent  Board;  provided,
     further,  that  there  shall  be  excluded,  for  this  purpose,  any  such
     individual  whose  initial  assumption  of office occurs as a result of any
     actual or threatened  election contest that is subject to the provisions of
     Rule 14a-11 under the Exchange Act; or

          (c) the Company engages in and completes a  reorganization,  merger or
     consolidation, in each case, unless, following such reorganization,  merger
     or  consolidation,  (i) more  than 85% of the then  outstanding  shares  of
     common stock of the corporation resulting from such reorganization,  merger
     or  consolidation  and the combined  voting  power of the then  outstanding
     Voting  Stock  of  such  corporation   beneficially   owned,   directly  or
     indirectly,  by  all or  substantially  all of the  Persons  who  were  the
     Beneficial Owners of the outstanding Common Stock immediately prior to such
     reorganization,   merger,   or  consolidation  in  substantially  the  same
     proportions as their ownership,  immediately prior to such  reorganization,
     merger or  consolidation,  of the outstanding  Common Stock, (ii) no Person
     (excluding any Exempt Person or any Person beneficially owning, immediately
     prior  to  such  reorganization,   merger  or  consolidation,  directly  or
     indirectly, 40% or more of the Common Stock then outstanding or 40% or more
     of the  combined  voting  power of the  Voting  Stock of the  Company  then
     outstanding) beneficially owns, directly or indirectly,  40% or more of the
     then outstanding  shares of common stock of the corporation  resulting from
     such  reorganization,  merger or consolidation or the combined voting power
     of the then outstanding Voting Stock of such corporation and (iii) at least
     a majority  of the  members of the board of  directors  of the  corporation
     resulting from such reorganization, merger or consolidation were members of
     the Incumbent  Board at the time of the execution of the initial  agreement
     or initial action by the Board providing for such reorganization, merger or
     consolidation; or

          (d) the Company engages in and completes (i) a complete liquidation or
     dissolution  of the  Company  unless such  liquidation  or  dissolution  is
     approved as part of a plan of liquidation and dissolution  involving a sale
     or disposition of all or substantially  all of the assets of the Company to
     a  corporation  with  respect  to  which,  following  such  sale  or  other
     disposition,  all of the  requirements  of clauses (ii) (A), (B) and (C) of
     this subsection (d) are satisfied, or (ii) the sale or other disposition of
     all or  substantially  all of the  assets of the  Company,  other than to a
     corporation,   with  respect  to  which,   following  such  sale  or  other
     disposition,  (A) more  than 85% of the then  outstanding  shares of common
     stock or such corporation and the combined voting power of the Voting Stock
     of such corporation is then beneficially owned, directly or indirectly,  by
     all or substantially  all of the Persons who were the Beneficial  Owners of
     the  outstanding  Common  Stock  immediately  prior  to such  sale or other
     disposition  in  substantially  the same  proportion  as  their  ownership,
     immediately  prior to such sale or other  disposition,  of the  outstanding
     Common  Stock,  (B) no Person  (excluding  any Exempt Person and any Person
     beneficially  owning,  immediately prior to such sale or other disposition,
     directly or indirectly, 40% or more of the Common


                                       46


     Stock then  outstanding or 40% or more of the combined  voting power of the
     Voting Stock of the Company then outstanding)  beneficially owns,  directly
     or indirectly,  40% or more of the then outstanding  shares of common stock
     of such  corporation and the combined voting power of the then  outstanding
     Voting Stock of such corporation and (C) at least a majority of the members
     of the board of directors of such corporation were members of the Incumbent
     Board at the time of the  execution  of the  initial  agreement  or initial
     action of the Board providing for such sale or other  disposition of assets
     of the Company.

          Notwithstanding the foregoing, no Change of Control shall be deemed to
     have occurred pursuant to subsections (a), (c) or (d) of this definition as
     a result of (i) any  Person  that is  currently  party to the  Shareholders
     Agreement  dated as of December  15, 1999 among the Company,  C.B.  Capital
     Investors,  L.P. (now J.P. Morgan Partners (23A SBIC),  LLC), S.P.  Johnson
     IV,  Frank A.  Wojtek,  Steven A.  Webster and Mellon  Ventures,  L.P.,  as
     amended  from  time to  time,  or the  Shareholders  Agreement  dated as of
     February 20, 2002 among the Company,  Mellon  Ventures,  L.P., S.P. Johnson
     IV,  Frank A. Wojtek and Steven A.  Webster,  as amended  from time to time
     (collectively,  the  "Shareholders  Agreements"),  becoming the  Beneficial
     Owner at any time of 40% or more of the  shares of  Common  Stock or 40% or
     more of the combined  voting  power of the Voting Stock of the Company,  or
     (ii) any other Person  becoming the Beneficial  Owner at any time of 40% or
     more of the shares of Common  Stock or 40% or more of the  combined  voting
     power of the  Voting  Stock of the  Company  to the  extent  caused  by the
     attribution to that other Person of the beneficial  ownership of the Common
     Stock or Voting  Stock of a Person who is listed in clause (i) above and is
     a member of a group  with such  other  Person  solely  because  of a voting
     agreement,  tag-along rights or other rights  substantially  similar to the
     rights set forth in the Shareholders Agreements.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Exempt Person" shall mean the Company,  any subsidiary of the Company, any
employee  benefit plan of the Company or any subsidiary of the Company,  and any
Person organized, appointed or established by the Company for or pursuant to the
terms of any such plan.

     "Exempt Rights" shall mean any rights to purchase shares of Common Stock or
other Voting  Stock of the Company if at the time of the  issuance  thereof such
rights are not separable from such Common Stock or other Voting Stock (i.e., are
not transferable  otherwise than in connection with a transfer of the underlying
Common Stock or other Voting Stock) except upon the occurrence of a contingency,
whether  such rights  exist as of May 21, 2004 or are  thereafter  issued by the
Company as a dividend on shares of Common  Stock or other Voting  Securities  or
otherwise.

     "Exempt  Transaction"  shall  mean an  increase  in the  percentage  of the
outstanding  shares of Common Stock or the  percentage  of the  combined  voting
power of the outstanding  Voting Stock of the Company  beneficially owned by any
Person solely as a result of a reduction in the number of shares of Common Stock
then  outstanding  due to the  repurchase of Common Stock or Voting Stock by the
Company,  unless  and until  such time as (a) such  Person or any  Affiliate  or
Associate of such Person shall purchase or otherwise become the Beneficial Owner
of  additional  shares  of  Common  Stock  constituting  1% or more of the  then
outstanding shares of Common Stock or additional Voting Stock representing 1% or
more of the combined voting power of the then  outstanding  Voting Stock, or (b)
any other Person (or Persons) who is (or collectively  are) the Beneficial Owner
of shares of Common Stock constituting 1% or more of the then outstanding shares
of Common Stock or Voting Stock  representing  1% or more of the combined voting
power  of the then  outstanding  Voting  Stock  shall  become  an  Affiliate  or
Associate of such Person.

     "Person"  shall  mean  any  individual,  firm,  corporation,   partnership,
association, trust, unincorporated organization or other entity.

     "Voting Stock" shall mean, with respect to a corporation, all securities of
such  corporation  of any class or series that are entitled to vote generally in
the  election of directors of such  corporation  (excluding  any class or series
that  would  be  entitled  so to  vote  by  reason  of  the  occurrence  of  any
contingency, so long as such contingency has not occurred).

                                       47


                    INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

                                 FIFTH AMENDMENT

     Carrizo  Oil & Gas,  Inc.,  a Texas  corporation  (the  "Company"),  having
reserved the right under Section 13 of the Incentive  Plan of Carrizo Oil & Gas,
Inc. (the "Plan"),  to amend the Plan,  does hereby amend Section 9 of the Plan,
effective as of May 10, 2005, to read in its entirety as follows:

          "9. Director Awards. Each Nonemployee Director of the Company shall be
     granted  Director Awards in accordance with this paragraph 9 and subject to
     the applicable terms, conditions and limitations set forth in this Plan and
     the applicable  Director Award Agreement.  Notwithstanding  anything to the
     contrary contained herein, Director Awards shall not be made in any year in
     which a sufficient  number of shares of Common  Stock are not  available to
     make such Awards under this Plan.

               (a) Director  Options.  On the date of a  Nonemployee  Director's
          first  appointment  or  election to the Board of  Directors  and on or
          after each Annual Director Award Date, the Board or the Committee may,
          in its  discretion,  grant  such  Nonemployee  Director  one  or  more
          Director  Options  that  provides  for the  purchase of such number of
          shares of Common Stock as the Board or the  Committee may determine in
          its  discretion,  subject to the  limitation  that such Awards may not
          exceed the number of shares of Common Stock then  available  for award
          under this Plan.

          Each Director Option shall,  unless otherwise provided in the specific
          Award  granted,  have a term of ten  years  from  the  date of  grant,
          notwithstanding any earlier termination of the status of the holder as
          a  Nonemployee  Director.  The purchase  price of each share of Common
          Stock  subject to a Director  Option shall be equal to the Fair Market
          Value  of the  Common  Stock on the date of  grant.  Upon a Change  in
          Control,  all Director  Options shall  immediately  vest. All Director
          Options held by a Nonemployee Director shall vest upon such Director's
          death.  All  unvested  Director  Options  shall  be  forfeited  if the
          Nonemployee  Director  resigns as a Director  without the consent of a
          majority of the other Directors.

          Any Award of Director  Options  shall be embodied in a Director  Award
          Agreement,  which shall contain the terms,  conditions and limitations
          of the Award,  including without limitation those set forth above, and
          shall be signed by the  Participant  to whom the Director  Options are
          granted and by an Authorized Officer for and on behalf of the Company.
          Without  limiting  the  generality  of  any  other  provision  hereof,
          Director  Options  in  addition  to those  provided  for in the  first
          paragraph  of this  subsection  may be  granted  by the  Board  or the
          Committee to a Nonemployee Director who serves as chairman or a member
          of the Audit,  Compensation  or  Nominating  committees  of the Board;
          provided that each such  non-chairman  member of any such committee to
          whom a Director  Option is to be granted is deemed by the Committee to
          be "independent" for purposes of the rules of The Nasdaq Stock Market,
          Inc.

               (b)  Director  Restricted  Stock.  On the  date of a  Nonemployee
          Director's first appointment or election to the Board of Directors and
          on or  after  each  Annual  Director  Award  Date,  the  Board  or the
          Committee may, in its discretion,  grant such Nonemployee Director one
          or more  Awards  of  Restricted  Stock  for such  number  of shares of
          Restricted  Stock as the Board or the  Committee  may determine in its
          discretion,  subject to the limitation that such Awards may not exceed
          the number of shares of Common  Stock then  available  for award under
          this Plan.

     Upon a Change in  Control,  all shares of Director  Restricted  Stock shall
immediately vest. All unvested  Restricted Stock held by a Nonemployee  Director
shall  vest  upon  such  Director's  death.  All  unvested  shares  of  Director
Restricted  Stock shall be forfeited if the  Nonemployee  Director  resigns as a
Director without the consent of a majority of the other Directors.

     Any Award of  Director  Restricted  Stock  shall be  embodied in a Director
Award  Agreement,  which shall contain the terms,  conditions and limitations of
the Award,  including  without  limitation  those set forth above,  and shall be
signed by the Participant to whom the Director  Restricted  Stock is granted and
by an Authorized Officer for and on behalf of the Company.  Without limiting the
generality of any other provision hereof,

                                       48


Awards  of  Restricted  Stock in  addition  to those  provided  for in the first
paragraph of this  subsection  may be granted by the Board or the Committee to a
Nonemployee  Director  who  serves  as  chairman  or  a  member  of  the  Audit,
Compensation  or  Nominating  committees  of the Board;  provided that each such
non-chairman  member of any such committee to whom an Award of Restricted  Stock
is to be granted is deemed by the Committee to be "independent"  for purposes of
the rules of The Nasdaq Stock  Market,  Inc." The Company also does hereby amend
and restate the  definition of "Director  Restricted  Stock" in Section 3 of the
Plan, effective as of May 10, 2005, to read in its entirety as follows:

          ""Director   Restricted  Stock"  means  Restricted  Stock  granted  to
     Nonemployee Directors pursuant to Section 9 hereof."

     The  Company  also does hereby  amend and  restate  Section 19 of the Plan,
effective as of May 10, 2005, to read in its entirety as follows:

          "19.  Effectiveness.  The  Plan was  amended  and  restated  effective
     February 17, 2000 and subsequently  amended by a First Amendment  effective
     May 22,  2002,  a Second  Amendment  effective  February  18, 2003, a Third
     Amendment effective May 23, 2003, a Fourth Amendment effective May 21, 2004
     and a Fifth Amendment effective May 10, 2005."

     IN WITNESS  WHEREOF,  this Amendment has been executed  effective as of May
10, 2005.

                                       CARRIZO OIL & GAS, INC.




                                       By:
                                          ---------------------
                                          Paul F. Boling
                                          Vice President, Chief Financial
                                          Officer, Secretary and Treasurer

                                       49


                            CARRIZO OIL & GAS, INC.

                                  MAY 10, 2005

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTOR

     The undersigned hereby appoints S.P. Johnson IV and Paul F. Boling, jointly
and severally,  proxies,  with full power of substitution and with discretionary
authority to vote all shares of Common Stock that the undersigned is entitled to
vote at the Annual  Meeting of  Shareholders  of Carrizo  Oil & Gas,  Inc.  (the
"Company") to be held on Tuesday,  May 10, 2005, at the Doubletree Hotel Houston
Downtown,  Houston,  Texas at 10:00 a.m., or at any adjournment thereof,  hereby
revoking any proxy heretofore given. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED  HEREIN.  IN THE ABSENCE OF SPECIFIC  DIRECTIONS TO
THE CONTRARY, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.

The  undersigned  hereby  acknowledges  receipt  of the  Notice  of,  and  Proxy
Statement for, the aforementioned Annual Meeting.

                 (CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)



                           ANNUAL MEETING OF SHAREHOLDERS OF

                            CARRIZO OIL & GAS, INC.

                                  May 10, 2005

                           PLEASE DATE, SIGN AND MAIL
                             YOUR PROXY CARD IN THE
                           ENVELOPE PROVIDED AS SOON
                                  AS POSSIBLE.


THE BOARD OF DIRECTORS  RECOMMENDS  A VOTE "FOR" THE  ELECTION OF DIRECTORS  AND
"FOR"  PROPOSALS 2 AND 3. PLEASE SIGN,  DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]




                                                                                                                
                                                                                                               FOR  AGAINST  ABSTAIN
1.  Election of Directors:                        *     2.  Approval of the Amendment to the Incentive  Plan.  [ ]    [ ]      [ ]
                        NOMINEES                  *
[ ] FOR ALL NOMINEES    [ ] S.P. Johnson IV       *     3.  Approval  of  the  Appointment  of  Pannell  Kerr  [ ]    [ ]      [ ]
                        [ ] Steven A. Webster     *         Forster   of   Texas,   P.C.   as  the  Company's
[ ] WITHHOLD AUTHORITY  [ ] Thomas L. Carter, Jr. *         Independent Registered Public Accounting Firm for
    FOR ALL NOMINEES    [ ] Paul B. Loyd, Jr.     *         the  fiscal  year  ending  December   31,   2005.
                        [ ] F. Gardner Parker     *
[ ] FOR ALL EXCEPT      [ ] Roger A. Ramsey       *     4.  With  discretionary  authority  as  to such other
    (See instructions   [ ] Frank A. Wojtek       *         matters as may properly come before the meeting.
     below).                                      *
                                                  *
INSTRUCTIONS:                                     *
To withold authority to  vote for any  individual *
nominee(s),  mark "FOR ALL  EXCEPT"  and fill  in *
the  circle  next  to  each  nominee  you wish to *
withhold, as shown here: [X]                      *
***************************************************


To  change  the  address  on your  account,  please  check  the box at right and
indicate your new address in the address  space above.  Please note that changes
to the registered name(s) on the account may not be submitted via this method.

Signature of Shareholder
                        -------------------------------

                    Date
                        ------------------------

Signature of Shareholder
                        -------------------------------

                    Date
                        ------------------------


NOTE:  Please  sign  exactly as your name or names  appear on this  Proxy.  When
shares are hold  jointly,  each holder  should  sign.  When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation,  please sign full corporate name by duly authorized
officer,  giving full title as such. If signer is a partnership,  please sign in
parternship name by authorized person.