Carrizo Oil & Gas Lowers Production Guidance $CRZO Falls 6%

Carrizo Oil & Gas $CRZO announced second quarter earnings before the market open Tuesday. The stock fell 6% after decreased 2017 oil production guidance with ExL Delaware basin acquisitions. 

Carrizo Oil & Gas $CRZO announced second quarter earnings before the market open Tuesday. The stock fell 6% after decreased 2017 oil production guidance with the ExL Delaware basin acquisitions. $CRZO had crude oil production of 33,629 Bbls/d, 40% above the second quarter of 2016 and total production of 51,019 Boe/d, 23% above the second quarter of 2016. 

The previously-announced acquisition of Delaware Basin properties remains on track to close by mid-August.

Earnings: Net income of $56.3 million, or $0.85 per diluted share, and Net Cash Provided by Operating Activities of $102.7 million. Adjusted Net Income of $20.0 million, or $0.30 per diluted share, and Adjusted EBITDA of $111.9 million, EPS of $0.30 beating expected $0.25.  Compared to  net loss of $262.1 million, or $4.46 per basic and diluted share in Q216.

Reaction: Carrizo Oil & Gas Inc NASDAQ: CRZO – Aug 8 Open 13.25 =0.89 (-6.30%)
 
Lowered Production Guidance
 
Via CRZO Statement:
 
Based on the changes to the planned drilling and completion schedule, Carrizo is decreasing its 2017 oil production guidance to 34,600-34,800 Bbls/d from 35,700-36,000 Bbls/d previously. Using the midpoint of this range, the Company’s 2017 oil production growth guidance equates to 35%.
 
For natural gas and NGLs, Carrizo is adjusting its 2017 guidance to 81-83 MMcf/d and 5,900-6,000 Bbls/d, respectively, from 80-84 MMcf/d and 5,900-6,100 Bbls/d, respectively.
 
For the third quarter of 2017, Carrizo expects oil production to be 35,400-35,800 Bbls/d, and natural gas and NGL production to be 73-77 MMcf/d and 5,900-6,100 Bbls/d, respectively.
 
  • Natural Gas Plays
  • Oil Plays
 
Divestures

“With the scale we now expect to have in these two plays, our plan is to focus our activity on these regions. As a result, we currently have active divestiture processes for our assets in the Marcellus, Utica, and Niobrara. We believe the resulting streamlined portfolio should lead to improved long-term returns from our development program as well as at the corporate level.

Hedges

“Given the volatile nature of commodity prices as well as the expected closing of the ExL acquisition, we have materially increased our crude oil hedge position. Since the end of June, we have increased our 2018 crude oil hedge position to 18 MBbls/d from 6 MBbls/d previously, and have also added 6 MBbls/d in 2019. With the downside protection the hedges provide, we believe we can organically de-lever our balance sheet in 2018 even if prices were to weaken from current levels. We also believe we are positioned to run a free cash flow positive program in 2019 and beyond at current strip prices.

“The second quarter was another strong quarter for the Company operationally. Crude oil production increased 17% versus the prior quarter. This was led by the Eagle Ford, which was up 20% sequentially. As a result, crude oil production during the quarter materially outperformed the initial guidance that was provided back in May.”

Operational Update

In the Eagle Ford Shale, Carrizo drilled 23 gross (21.2 net) operated wells during the second quarter and completed 26 gross (21.6 net) wells. Crude oil production from the play was more than 30,600 Bbls/d for the quarter, up 20% versus the prior quarter. At the end of the quarter, Carrizo had 28 gross (26.6 net) operated Eagle Ford wells in progress or waiting on completion, equating to net crude oil production potential of approximately 10,000 Bbls/d. The Company is currently operating three rigs in the Eagle Ford, but plans to move one of its rigs to the Delaware Basin later this quarter. Carrizo expects to drill approximately 93 gross (80 net) operated wells and complete 93 gross (84 net) operated wells in the play during 2017.

ExL properties

Carrizo continues to be pleased with the well performance on the ExL properties. Since the beginning of the second quarter, three Wolfcamp A wells and three Wolfcamp B wells have been completed and brought online. Currently, there are 14 gross producing horizontal wells on the acreage with 8 additional wells currently drilling or waiting on completion. See below for the peak 30-day rates from the recent wells:

  • Fowler State Unit 1720 #1 (Wolfcamp A) – 1,591 Boe/d (50% oil, 68% liquids) from an approximate 6,900 ft. lateral
  • Zeman 40 Unit #1 (Wolfcamp B) – 1,766 Boe/d (61% oil, 75% liquids) from an approximate 7,900 ft. lateral
  • Saul 3571 heel (Wolfcamp B) – 1,217 Boe/d (56% oil, 71% liquids) from an approximate 4,000 ft. lateral

Additionally, the Davis 2728 Unit #1 well (Wolfcamp B) was brought online in late June, but has yet to achieve a peak 30-day rate. To date, the well has achieved a peak 15-day rate of 1,315 Boe/d (59% oil, 74% liquids) from an approximate 9,500 ft. lateral. The remaining two wells were brought online in late July and are still cleaning up.

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