Carrizo Says 3Q07 Revenues Up 49% Compared to 3Q06

Carrizo Oil & Gas (Nasdaq: CRZO) reported the Company's financial results for the third quarter of 2007. Revenues for the three months ended September 30, 2007 were $30.3 million, 49% higher than the $20.3 million during the quarter ended September 30, 2006. The increase in revenue was driven primarily by higher production. Production volumes during the three months ended September 30, 2007 were 4.4 Bcfe (48.2 MMcfe/d), 55% higher compared to 2.9 Bcfe (31.0 MMcfe/d) during the third quarter of 2006. The increase over the third quarter 2006 production was primarily due to the successful drilling of additional Barnett Shale area wells, production from the Baby Ruth and Doberman #1 wells in the Gulf Coast region and increased production from the recompleted Galloway Gas Unit 1 well #1 and the LL&E #1 in the Gulf Coast area. Carrizo's average natural gas sales price decreased to $6.33 per Mcf compared to $6.39 per Mcf in the third quarter of 2006 while the average oil sales price increased 10% to $75.40 per barrel compared to $68.46 per barrel during the third quarter of 2006.

The Company reported net income of $5.4 million, or $0.21 and $0.20 per basic and diluted share, respectively, for the three months ended September 30, 2007, as compared to $4.8 million, or $0.19 and $0.18 per basic and diluted share, respectively, for the same quarter during 2006. Excluding the $0.1 million non-cash, after-tax expense, comprised of the mark-to-market unrealized gain of $0.5 million on derivatives and the stock compensation expense of $0.6 million, the net income for the quarter ended September 30, 2007 was $5.5 million, or $0.21 per basic and diluted share.

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) during the third quarter of 2007 was $22.9 million, or $0.88 and $0.85 per basic and diluted share, respectively, as compared to $15.7 million, or $0.62 and $0.60 per basic and diluted share, respectively, during the third quarter of 2006.

Lease operating expenses (excluding production taxes) increased to $5.8 million during the three months ended September 30, 2007 as compared to $2.9 million for the third quarter of 2006, primarily attributable to increased production, increased workover expense, increased ad valorem taxes and increased transportation and other product costs mainly attributable to the Barnett Shale area.

Depreciation, depletion and amortization expenses ("DD&A") were $10.2 million during the three months ended September 30, 2007 ($2.30 per Mcfe) as compared to $7.6 million ($2.66 per Mcfe) during the third 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 $3.3 million during the three months ended September 30, 2007 from $2.3 million during the same quarter of 2006. The increase in G&A was due primarily to the increase in staff and related costs, increased legal and consulting fees and higher rent expense as a result of office expansion.

Non-cash stock-based compensation expense was $1.1 million ($0.6 million after tax) for the three months ended September 30, 2007 compared to $0.8 million ($0.5 million after tax) for the same period in 2006.

The net gain on derivatives was $3.7 million during the three months ended September 30, 2007, comprised of (1) $0.9 million ($0.5 million after tax) for the unrealized mark-to-market, non-cash gain on derivatives and (2) the $2.8 million gain for cash settled derivatives.

Interest expense, net of amounts capitalized, was $4.1 million for the three months ended September 30, 2007 compared to $2.1 million for the three months ended September 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.

Revenues for the nine months ended September 30, 2007 were $85.8 million, 46% higher than the $58.7 million during the nine months ended September 30, 2006. The increase in revenues was primarily driven by higher production. Production volumes during the nine months ended September 30, 2007 were 11.8 Bcfe (43.4 MMcfe/d), 47% higher compared to 8.0 Bcfe (29.5 MMcfe/d) during the nine months ended 2006. Production increased due to the addition of new Barnett Shale wells and new production from the Baby Ruth and Doberman wells in the Gulf Coast area and increased production from the recently recompleted Galloway Gas Unit 1 well #1 in the Gulf Coast. Carrizo's average natural gas sales price increased 2% to $6.88 compared to $6.74 per Mcf in the same period of 2006, and the average oil sales price decreased 1% to $65.22 per barrel from $65.54 per barrel during the same period in 2006.

The Company reported net income of $11.0 million, or $0.42 and $0.41 per basic and diluted share, respectively, for the nine months ended September 30, 2007, as compared to $14.0 million, or $0.57 and $0.55 per basic and diluted share, respectively, for the same period during 2006. Excluding the $4.1 million non-cash, after-tax expense, comprised of the mark-to-market unrealized loss of $2.3 million on derivatives, the stock compensation expense of $2.0 million and the $0.2 million decrease in bad debt expense, net income for the nine months ended September 30, 2007 was $15.1 million, or $0.58 and $0.57, per basic and diluted share, respectively.

EBITDA (earnings before interest, income tax, depreciation and amortization expenses, and certain other non-cash items) for the nine months ended September 30, 2007 was $63.7 million, or $2.47 and $2.39 per basic and diluted share, respectively, as compared to $43.8 million, or $1.79 and $1.73 per basic and diluted share, respectively, for the same period in 2006.

Lease operating expenses (excluding production taxes) increased to $14.3 million during the nine months ended September 30, 2007 as compared to $8.2 million for the same period of 2006, largely due to increased production, the increased number of producing wells and the rising costs of oilfield services, higher workover expenses, increased ad valorem taxes and increased transportation and other product costs mainly attributable to the Barnett Shale area.

Depreciation, depletion and amortization expenses ("DD&A") were $29.0 million during the nine months ended September 30, 2007 ($2.45 per Mcfe) as compared to $21.6 million ($2.69 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 $10.8 million during the nine months ended September 30, 2007 from $8.5 million during the same period of 2006. The increase in G&A was primarily due to an increase in staff and related costs, higher rent and office expense due to office expansion and increased legal and consulting fees.

Non-cash stock-based compensation expense was $3.1 million ($2.0 million after tax) for the nine months ended September 30, 2007 compared to $2.0 million ($1.3 million after tax) for the same period in 2006.

The net gain on derivatives was $2.1 million during the nine months ended September 30, 2007, comprised of (1) $5.6 million for cash settled gains on derivatives, partially offset by (2) $3.5 million ($2.3 million after tax) for the unrealized mark-to-market, non-cash loss on derivatives.

Interest expense, net of amounts capitalized, was $11.4 million for the nine months ended September 30, 2007 compared to $6.5 million for the same period in 2006. The increase was 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.

"We had an excellent quarter operationally," commented S.P. Johnson IV, Carrizo's President and Chief Executive Officer, "adding significant wells in the Barnett Shale, both in Denton County and southeast Tarrant County. Although pipeline logistics delayed some production startups into the fourth quarter, we still had record production in the quarter. The current Barnett Shale and total Company rates are approximately 41 MMcfe/d and 62 MMcfe/d, respectively. Another estimated 31 MMcfe/d has been drilled and is waiting on completion and/or pipeline in the Barnett Shale. We anticipate that about 27 MMcfe/d of the total will come online from two SE Tarrant drilling pads, half in late December and half in late January. New wells in these areas, where we have about 110 potential drillsites, are averaging initial rates of 4 MMcfe/d gross (3 MMcfe/d net). In addition, our urban leasing and drilling is proceeding as planned in the Arlington, TX area where we have started building our first drilling location on the University of Texas Arlington campus."

"In the Floyd Shale in Mississippi we fracture stimulated the first stage in our horizontal well and are swabbing back frac fluid. It is still too early to determine whether our frac technique on that stage is commercial. We have started planning our next well which will test the northwest end of the play where we have about 60,000 net acres and is near a competitor's well with a reported commercial flow rate."

"In the North Sea we began appraisal drilling on our Huntington Paleocene Forties discovery on August 30th and should finish about December 1st. At that point we will have drilled and logged seven lateral wellbores from one top hole in an effort to delineate the reservoir and formulate a development plan for submittal to the government."

"After completion of the Paleocene laterals we expect to drill an appraisal well to the deeper Jurassic Fulmar in a structural position which should determine the depth of the oil water contact. Further appraisal drilling in the Fulmar can then be planned. The 13,000 feet Fulmar test well will take about 60 days."

"A second rig will be brought in later this month to initiate exploration in the adjacent Block 22/13b in which we hold a 27.27% working interest. Carrizo has farmed-out its cost-bearing position in the first two Paleocene prospects, retaining half it's equity interest (13.6%) in exchange for getting its share of drilling and testing costs carried by its JV partner, Oilexco. Our working interest in the rest of the block is unaffected by the election in this small carve-out area."

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