Carrizo Oil & Gas announced record year-end proved reserves and record production for the fourth quarter and full year 2009.
Year-end proved reserves were a record 601.9 Bcfe based on reports from Carrizo's third-party reserve engineers. This is an increase of approximately 20% over the year-end 2008 proved reserves of 502.6 Bcfe. The calculation of these reserves was based on oil and natural gas prices of $56.10 per barrel and $3.30 per Mcf, respectively. These prices reflect the SEC's new pricing methodology, which requires the use of the trailing 12-month arithmetic average of the price on the first day of the month. These prices were 40% higher and 34% lower than the prices used at the end of 2008 for oil and natural gas, respectively. This reserve increase equates to the replacement of 400% of 2009 production.
Included in the 2009 reserve results is a negative revision of 32.5 Bcfe for proved undeveloped and proved non-producing reserves associated with our Camp Hill heavy oil steam-flood project. These reserves are no longer classified as proved under the new SEC rules because development is not scheduled to be initiated within five years. Excluding the negative revision at Camp Hill, the Company would have had a 498% production replacement ratio.
An additional new SEC reporting rule adopted in 2009 allows proved undeveloped (PUD) reserves to be booked beyond one offset location where reliable technology exists that establishes reasonable certainty of economic producibility. Under this rule, Carrizo recorded an additional 47.4 Bcfe of proved reserves (primarily proved undeveloped) in the Barnett Shale due to additional offset drilling locations. The Company also experienced a negative price-related revision of 36.6 Bcfe in the Barnett Shale due to the new pricing methodology, which was approximately $2.30 per Mcf below the $5.67 per Mcf year-end spot price that would have been used under the old SEC rules.
From year-end 2008 to 2009, our reported Barnett Shale reserves increased 137.6 Bcfe, or 32%, from 432.1 Bcfe to 569.7 Bcfe, and proved developed reserves increased 86.2 Bcfe, or 39%, from 223.7 Bcfe to 309.9 Bcfe. Gulf Coast reserves decreased 5.8 Bcfe, from 21.3 Bcfe to 15.5 Bcfe. Camp Hill reserves decreased 32.5 Bcfe, from 49.2 Bcfe to 16.7 Bcfe.
"We had an excellent operational year in net reserve additions despite our reduced drilling program and the impact of lower prices," commented Brad Fisher, Chief Operating Officer. "The strength of our Barnett Shale drilling program is illustrated by the 112.5 Bcfe of net proved developed reserve additions we made for less than $124 million in total Barnett Shale drilling expenditures."
Production during the fourth quarter of 2009 was a record 8.68 Bcfe (94.4 MMcfe/d), or 20.4% above the 7.21 Bcfe (78.4 MMcfe/d) of production in the fourth quarter 2008 and 5.8% above third quarter 2009 production. Annual production for 2009 reached a record level of 33.0 Bcfe (90.5 MMcfe/d), or 28.9% higher than the 25.6 Bcfe (70.0 MMcfe/d) of production in 2008. Approximately 97% of fourth quarter and total 2009 production was natural gas.
At December 31, 2009, there were 32.7 net horizontal wells in the Barnett Shale already drilled but waiting on completion and/or pipeline connection, having a total estimated initial production rate of 77.6 MMcfe per day.
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