Carrizo Reports Record Results for Second Quarter 2007

Carrizo Oil & Gas reported the Company's financial results for the second quarter of 2007.

Revenues for the three months ended June 30, 2007 were $32.9 million, 99 percent higher than the $16.5 million during the quarter ended June 30, 2006. The increase in revenue was driven primarily by higher production and higher realized natural gas prices. Production volumes during the three months ended June 30, 2007 were 4.20 Bcfe (46.2 MMcfe/d), 74 percent higher compared to 2.42 Bcfe (26.6 MMcfe/d) during the second quarter of 2006 and 0.99 Bcfe above the first quarter 2007 production of 3.21 Bcfe. The increase over the second quarter production was primarily due to the successful drilling of Barnett Shale area wells, particularly the three South East Tarrant County Campuzano wells, the addition of the Baby Ruth and Doberman wells in the Gulf Coast area and the successful recompletion of the Galloway Gas Unit #1 well #1. Carrizo's average natural gas sales price increased 20 percent to $7.54 per Mcf compared to $6.29 per Mcf in the second quarter of 2006 while the average oil sales price decreased four percent to $64.25 per barrel compared to $66.99 per barrel during the second quarter of 2006. The above prices exclude the cash effect of hedging activities - prices, including the cash effect of hedges, are presented in the table below.

The Company reported net income of $8.1 million, or $0.32 and $0.31 per basic and diluted share, respectively, for the three months ended June 30, 2007, as compared to $2.6 million, or $0.11 and $0.10 per basic and diluted share, respectively, for the same quarter during 2006. Excluding the $1.9 million non-cash, after-tax benefit, comprised of the mark-to-market unrealized gain of $2.4 million on derivatives, the stock compensation expense of $0.7 million and the $0.2 million decrease in bad debt expense, net income for the quarter ended June 30, 2007 was $6.2 million, or $0.24 and $0.23 per basic and diluted share, respectively.

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the second quarter of 2007 was $24.3 million, or $0.94 and $0.91 per basic and diluted share, respectively, as compared to $12.0 million, or $0.49 and $0.48 per basic and diluted share, respectively, during the second quarter of 2006.

Lease operating expenses (excluding production taxes) increased to $4.4 million during the three months ended June 30, 2007 as compared to $2.9 million for the second quarter of 2006, largely due to the increased well count of the Barnett Shale wells, higher costs of certain oilfield services, increased ad valorem taxes and higher transportation and other product costs.

Depreciation, depletion and amortization expenses ("DD&A") were $10.8 million during the three months ended June 30, 2007 ($2.57 per Mcfe) as compared to $6.6 million ($2.72 per Mcfe) during the second quarter of 2006. The increase in DD&A expense was due primarily to an increase in production volumes partially offset by a decrease in the DD&A rate attributable to the increase in the reserve base.

General and administrative expenses ("G&A") increased to $3.6 million during the three months ended June 30, 2007 from $2.5 million during the same quarter of 2006. The increase in G&A was due primarily to the increase in staff to accommodate company growth.

Non-cash stock-based compensation expense was $1.0 million ($0.7 million after tax) for the three months ended June 30, 2007 compared to $0.6 million ($0.4 million after tax) for the same period in 2006.

The net gain on derivatives was $4.1 million during the three months ended June 30, 2007, comprised of (1) $3.7 million ($2.4 million after tax) for the unrealized mark-to-market, non-cash gain on derivatives and (2) the $0.4 million gain for cash settled derivatives.

Interest expense, net of amounts capitalized, was $3.8 million for the three months ended June 30, 2007 compared to $2.2 million for the three months ended June 30, 2006. The increases in 2007 were largely attributable to the $75.0 million increase under our Second Lien Credit Facility in January 2007, borrowings under our Senior Secured Credit Facility and higher effective interest rates.


    Results for the Six Months Ended June 30, 2007 --

    --  Record production of 7.41 Bcfe, or 40,941 Mcfe/d.
    --  Record revenue of $55.5 million.
    --  Net Income of $5.6 million, or net income of $9.6 million before the
        non-cash net charge noted below.
    --  Record EBITDA, as defined below, of $40.7 million.

Revenues for the six months ended June 30, 2007 were $55.5 million, 45 percent higher than the $38.4 million during the six months ended June 30, 2006. The increase in revenues was primarily driven by higher production and higher realized natural gas prices. Production volumes during the six months ended June 30, 2007 were 7.41 Bcfe (40.9 MMcfe/d), 43 percent higher compared to 5.19 Bcfe (28.7 MMcfe/d) during the first half of 2006. Production increased due to the addition of new Barnett Shale wells, the addition of the Baby Ruth and Doberman wells in the Gulf Coast and the successful recompletion of the Galloway Gas Unit #1 well #1. Carrizo's average natural gas sales price increased four percent to $7.21 compared to $6.92 per Mcf in the same period of 2006, and the average oil sales price decreased five percent to $60.33 per barrel from $63.72 per barrel during the first half of 2006.

The Company reported net income of $5.6 million, or $0.22 and $0.21 per basic and diluted share, respectively, for the six months ended June 30, 2007, as compared to $9.2 million, or $0.38 and $0.37 per basic and diluted share, respectively, for the same period during 2006. Excluding the $4.0 million non-cash, after-tax expense, comprised of the mark-to-market unrealized loss of $2.9 million on derivatives, the stock compensation expense of $1.3 million and the $0.2 million decrease in bad debt expense, net income for the six months ended June 30, 2007 was $9.6 million, or $0.37 and $0.36, respectively, per basic and diluted share.

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the first half of 2007 was $40.7 million, or $1.59 and $1.54 per basic and diluted share, respectively, as compared to $28.2 million, or $1.16 and $1.13 per basic and diluted share, respectively, during the first half of 2006.

Lease operating expenses (excluding production taxes) increased to $8.4 million during the six months ended June 30, 2007 as compared to $5.3 million for the same period of 2006, largely due to the increased well count of the Barnett Shale wells, higher workover expenses, higher costs of oilfield services, higher ad valorem taxes and higher transportation and other product costs.

Depreciation, depletion and amortization expenses ("DD&A") were $18.8 million during the six months ended June 30, 2007 ($2.54 per Mcfe) as compared to $14.0 million ($2.70 per Mcfe) during the same period of 2006. The increase in DD&A expense was due primarily to an increase in production volumes partially offset by a decrease in the DD&A rate attributable to the increase in the reserve base.

General and administrative expenses ("G&A") increased to $7.5 million during the six months ended June 30, 2007 from $6.2 million during the same period of 2006. The increase in G&A was primarily due to increased staffing to accommodate company growth.

Non-cash stock-based compensation expense was $2.0 million ($1.3 million after tax) for the six months ended June 30, 2007 compared to $1.2 million ($0.8 million after tax) for the same period in 2006.

The net loss on derivatives was $1.6 million during the six months ended June 30, 2007, comprised of (1) $4.4 million ($2.9 million after tax) for the unrealized mark-to-market, non-cash loss on derivatives ($4.5 million loss on oil and gas derivatives and $0.1 million gain on interest rate swaps) and (2) $2.8 million for cash settled gains on derivatives.

Interest expense, net of amounts capitalized, was $7.3 million for the six months ended June 30, 2007 compared to $4.4 million for the same period in 2006. The increase is largely attributable to the $75.0 million increase under our Second Lien Credit Facility in January 2007, borrowings under our Senior Secured Credit Facility beginning in mid-2006, and higher effective interest rates.

S.P. Johnson IV, Carrizo's President and Chief Executive Officer, commented, "We are very pleased with our strong production growth in the second quarter. Steady drilling and fracing in South East Tarrant County in the Barnett Shale was complemented by our two high rate Company operated wells in the Gulf Coast area - Baby Ruth #1 and Doberman #1. The Company's current estimated net production is 49 MMcfe/d with 28 MMcfe/d from the Barnett Shale and 21 MMcfe/d from the onshore Gulf Coast. Our Barnett Shale production will continue to grow with several expected high rate wells waiting on pipeline hook-up."

"We currently operate four drilling rigs in the Barnett Shale with two in South East Tarrant, including a recently contracted H&P Flex 4 rig, one rig in the 'core' area in Denton County and one rig drilling a downspacing pilot in Parker County. This will be our first test of 500 feet interwell spacing. A production surge is anticipated in September as an estimated 24 MMcfe/d of net production should come online, including six South East Tarrant County wells. Carrizo has a 100 percent working interest in all of its SE Tarrant wells."

"In other areas, we announced a significant discovery on a Carrizo generated prospect in the UK North Sea where we have a 15 percent working interest in two blocks with a discovery well that has flowed over 11,000 BOEPD. The well has been shut-in pending partner meetings to formulate plans for appraisal well drilling. In two adjoining acreage blocks with similar geological prospects, we have working interests of 27 percent and 100 percent. We remain focused on expanding our acreage position in our other Shale plays, in which we now have over 240,000 net acres. In the Floyd Shale in Mississippi, we have leased over 137,000 net acres. Our first horizontal Floyd Shale well in Mississippi has been drilled and cased. Frac stimulation is planned for September."

Carrizo Oil & Gas, Inc., is a Houston-based energy company actively engaged in the exploration, development, exploitation and production of oil and natural gas primarily in proven onshore trends along the Texas and Louisiana Gulf Coast regions and the Barnett Shale area in North Texas. Carrizo controls significant prospective acreage blocks and utilizes advanced 3-D seismic techniques to identify potential oil and gas reserves and drilling opportunities.

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