Carrizo Oil & Gas Says 3Q05 Revenues Increased 43%

Carrizo Oil & Gas says that revenues for the three months ended September 30, 2005 increased 43 percent to $17.6 million as compared to $12.3 million during the quarter ended September 30, 2004. The increase in revenues was driven by higher natural gas production and higher prevailing oil and natural gas prices. Production volumes during the three months ended September 30, 2005 increased seven percent to 2.18 Bcfe as compared to 2.04 Bcfe during the third quarter of 2004. Carrizo's average oil sales price increased 44 percent to $62.84 per barrel from $43.57 per barrel during the third quarter of 2004, while the average natural gas sales price increased 35 percent to $7.65 per Mcf from $5.69 per Mcf in the third quarter of 2004. The above prices include the effect of hedging activities.

After dividends and accretion of discount on preferred stock, and before exclusion of certain non-cash after-tax charges, the Company reported net income available to common shares ("Net Income") of $0.6 million, or $0.02 and $0.02 per basic and diluted share, respectively, for the three months ended September 30, 2005, as compared to $3.4 million, or $0.15 and $0.15 per basic and diluted share, respectively, for the same quarter during 2004. For the quarter ended September 30, 2005, Net Income was $4.7 million, or $0.19 and $0.19 per basic and diluted share, respectively, excluding $4.1 million for the non-cash after-tax charges attributable to (1) stock option compensation expense ($1.2 million -- related to employee stock options repriced in 2000), (2) loss on the early extinguishment of long-term debt ($2.4 million -- related to unamortized debt issuance cost and discount on debt retired in the Company's July 2005 debt refinancing) and (3) equity in the loss of Pinnacle Gas Resources, Inc. ("Pinnacle") ($0.4 million -- comprised of $0.1 million net income from operations offset by $0.5 million for dividends on preferred stock).

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the third quarter of 2005 was $13.3 million, or $0.55 and $0.53 per basic and diluted share, respectively, as compared to $9.4 million, or $0.43 and $0.41 per basic and diluted share, respectively, during the third quarter of 2004.

Oil and gas operating expenses, excluding production taxes, decreased to $1.3 million during the three months ended September 30, 2005 as compared to $1.4 million for the third quarter of 2004.

Production taxes increased to $0.9 million during the three months ended September 30, 2005 as compared to $0.8 million for the third quarter of 2004 due to higher oil and natural gas sales.

Depreciation, depletion and amortization expenses ("DD&A") were $4.7 million during the three months ended September 30, 2005 as compared to $3.7 million during the third quarter of 2004. The increase in DD&A expense was due to (1) an increase in the DD&A rate primarily due to additions to the proved property cost base and (2) an increase in the production volumes.

General and administrative expenses ("G&A") increased to $1.9 million during the three months ended September 30, 2005 from $1.3 million during the same quarter of 2004. The increase in G&A was due primarily to higher salary (due to salary raises and increased headcount) and incentive compensation costs.

Non-cash stock based compensation expense was $1.9 million for the three months ended September 30, 2005 as compared to a $0.1 million benefit during the third quarter of 2004. These amounts represent primarily the change in value of employee stock options that were repriced in 2000.

Loss on early extinguishment of long-term debt was a non-cash charge of $3.7 million (or $2.4 million after tax) for the three months ended September 30, 2005, primarily attributable to the unamortized debt issuance cost and discount on the long-term debt retired in the Company's July 2005 debt refinancing.

Other income and expense for the three months ended September 30, 2005 was a net expense of $0.5 million attributable primarily to the non-cash equity in the loss of Pinnacle of $0.4 million (both before and after tax). Other income and expense for the three months ended September 30, 2004 was a net benefit of $0.3 million, directly attributable to the non-cash $0.2 million loss in the equity of Pinnacle (both before and after tax) and (2) the sale of our Enron claim for a gain of $0.5 million, which was fully reserved for in prior years. Net losses are expected in this early phase of Pinnacle's development of its coalbed methane play, initiated in the second half of 2003.

Interest income was $0.4 million for the three months ended September 30, 2005 as compared to an inconsequential amount in the third quarter of 2004. The increase is attributable to the significant increase in our cash balance following the recent debt refinancing.

Interest expense, net of amounts capitalized, was $1.8 million for the three months ended September 30, 2005 compared to $0.1 million for the three months ended September 30, 2004. The increase is attributable to the significant increase in our long-term debt in connection with the Company's July 2005 debt refinancing, partially offset by higher capitalized interest. The interest expense, net of capitalized interest, had been inconsequential in periods prior to the fourth quarter of 2004 because the interest expense that is capitalizable ("capitalizable interest") under GAAP has typically been equal to or greater than the gross interest expense (i.e. interest expense before capitalization of interest expense) in each period. Starting in the fourth quarter of 2004, the gross interest expense exceeded the capitalizable interest by an amount proportionate to the outstanding debt in excess of the Company's unproved property balance.

Results for the Nine Months Ended September 30, 2005 --

The results for the nine months ended September 30, 2005 include the following highlights:

    * Record Production of 6.9 Bcfe.

    * Record revenues of $49.4 million.

    * Net income of $6.8 million, or $12.1 million before non-cash charges,
      noted below.

    * Record EBITDA, as defined below, of $35.8 million.

Revenues for the nine months ended September 30, 2005 increased 41 percent to $49.4 million from $35.1 million during the nine months ended September 30, 2004. The increase in revenues was driven by higher prevailing oil and natural gas prices and higher production. Production volumes during the nine months ended September 30, 2005 increased 17 percent to 6.9 Bcfe as compared to 5.9 Bcfe during the first nine months of 2004. Carrizo's average oil sales price increased 50 percent to $55.79 per barrel from $37.14 per barrel during the first nine months of 2004, while the average natural gas sales price increased 15 percent to $6.78 per Mcf from $5.89 per Mcf in the first nine months of 2004. The above prices include the effect of hedging activities.

The Company reported Net Income of $6.8 million, or $0.29 and $0.28 per basic and diluted share, respectively, for the nine months ended September 30, 2005, as compared to $7.4 million, or $0.38 and $0.34 per basic and diluted share, respectively, for the same period during 2004. For the nine months ended September 30, 2005, Net Income was $12.1 million, or $0.52 and $0.50 per basic and diluted share, respectively, excluding $5.3 million for the non-cash after-tax items of (1) stock option compensation expense ($1.9 million -- related to employee stock options repriced in 2000) (2) loss on the early extinguishment of long-term debt ($2.4 million -- related to unamortized debt issuance cost and discount on debt retired in our recent debt refinancing) and (3) equity in the loss of Pinnacle ($1.0 million -- comprised of $0.3 million net income from operations offset by $1.3 million for dividends on preferred stock).

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the first nine months of 2005 was $35.8 million, or $1.53 and $1.48 per basic and diluted share, respectively, as compared to $24.7 million, or $1.28 and $1.15 per basic and diluted share, respectively, during the first nine months of 2004.

Oil and gas operating expenses, excluding production taxes, increased to $4.2 million during the nine months ended September 30, 2005 as compared to $3.7 million in the first nine months of 2004. The increase was primarily the result of the addition of new wells (including a number of Barnett Shale wells).

Production taxes increased to $2.9 million during the nine months ended September 30, 2005 as compared to $2.2 million for the third quarter of 2004. The increase is attributable to significantly higher oil and gas revenues.

Depreciation, depletion and amortization expenses ("DD&A") were $14.4 million during the nine months ended September 30, 2005 as compared to $10.6 million during the first nine months of 2004. The increase in DD&A expense was due (1) to an increase in the DD&A rate primarily due to additions to the proved property cost base and (2) in part to increased production volumes.

General and administrative expenses ("G&A") increased to $6.2 million during the nine months ended September 30, 2005 from $5.1 million during the same period of 2004. The increase in G&A was due primarily to higher salary (due to increased headcount and annual raises) and incentive compensation costs.

Non-cash stock based compensation expense was $2.9 million ($1.9 million after tax) for the nine months ended September 30, 2005 as compared to $0.6 million ($0.4 million after tax) for the first nine months of 2004.

Loss on early extinguishment of long-term debt was a non-cash charge of $3.7 million (or $2.4 million after tax) for the nine months ended September 30, 2005, primarily attributable to the unamortized debt issuance cost and discount on the long-term debt retired in the Company's July 2005 debt refinancing.

Other income and expense for the nine months ended September 30, 2005 was a net expense of $1.3 million primarily attributable to (1) the non-cash equity in the loss of Pinnacle of $1.0 million (both before and after tax) and (2) a $0.2 million loss in connection with excess plugging and abandonment costs. Other income and expense for the first nine months of 2004 was a net expense of $0.3 million, directly attributable to the $0.8 million non-cash equity in the loss of Pinnacle (both before and after tax) and (2) the sale of our Enron claim for a gain of $0.5 million, which was fully reserved for in prior years.

Interest income was $0.5 million for the nine months ended September 30, 2005 as compared to a inconsequential amount in the first nine months of 2004. The increase is directly attributable to the significant increase in our cash balance following the recent debt refinancing.

Interest expense, net of amounts capitalized, was $2.9 million for the nine months ended September 30, 2005 compared to $0.2 million for the first nine months of 2004. The increase is attributable to the significant increase in our long-term debt in connection with the Company's July 2005 debt refinancing, partially offset by higher capitalized interest. The interest expense, net of capitalized interest, had been inconsequential in periods prior to the fourth quarter of 2004 because the interest expense that is capitalizable ("capitalizable interest") under GAAP has typically been equal to or greater than the gross interest expense (i.e. interest expense before capitalization of interest expense) in each period. Starting in the fourth quarter of 2004, the gross interest expense exceeded the capitalizable interest by an amount proportionate to the outstanding debt in excess of the Company's unproved property balance.

"We continue to set new performance records both in our quarter and year- to-date results," commented S.P. Johnson IV, Carrizo's President and Chief Executive Officer. "Record revenues and EBITDA are especially impressive considering that two of our largest producers were shut-in for workovers from late April to mid-July, later followed by a number of our wells temporarily shut-in until September 30th for the Katrina and Rita hurricanes. Production should continue to climb in the fourth quarter favorably impacted by the Company-operated Galloway #1 (30% working interest) in Liberty County, Texas, put on line in late September along with several Barnett Shale wells to be put on line by the end of the quarter. Year to date, we have had apparent successes in drilling 14 out of 17 Gulf Coast wells (82%) and all of the 31 Barnett Shale wells. With our recent financings completed, we remain positioned to carry out our onshore Gulf Coast drilling program (2 rigs running, including 1 operated) with higher working interests and to accelerate our horizontal drilling program in the Barnett Shale (3 rigs running, including 2 operated). We now have more than 75,000 net acres in the Barnett Shale play and continue to add high quality acreage near successful wells."

"We are also pleased to announce that Jack L. Bayless, formerly with Unocal Corporation, has joined our management team as Vice President of Land."

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