Texas
|
76-0415919
|
|||
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
|||
incorporation
or organization)
|
1000 Louisiana Street,
Suite 1500, Houston, TX
|
77002
|
(Address
of principal executive offices)
|
(Zip
Code)
|
PART
I. FINANCIAL INFORMATION
|
PAGE
|
||
Item
1.
|
|||
As
of March 31, 2008 (Unaudited) and December 31, 2007
|
2
|
||
For
the three-month periods ended March 31, 2008 and 2007
|
3
|
||
For
the three-month periods ended March 31, 2008 and 2007
|
4
|
||
5
|
|||
Item
2.
|
13
|
||
Item
3.
|
20
|
||
Item
4.
|
21
|
||
PART
II. OTHER INFORMATION
|
|||
22
|
|||
23
|
March
31,
|
December
31,
|
|||||||
ASSETS
|
2008
|
2007
|
||||||
(Unaudited)
|
||||||||
(In
thousands, except share amount)
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 24,769 | $ | 8,026 | ||||
Accounts
receivable, trade (net of allowance for doubtful accounts of $1,359 and
$1,430
|
||||||||
at
March 31, 2008 and December 31, 2007, respectively)
|
32,601 | 26,411 | ||||||
Advances
to operators
|
1,167 | 1,113 | ||||||
Fair
value of derivative financial instruments
|
- | 1,829 | ||||||
Prepayments
and deposits
|
1,659 | 3,913 | ||||||
Deferred
income taxes
|
8,246 | 324 | ||||||
Total
current assets
|
68,442 | 41,616 | ||||||
PROPERTY
AND EQUIPMENT, net full-cost method of accounting for oil
|
||||||||
and
natural gas properties (including unevaluated costs of properties of
$170,216 and
|
||||||||
$124,373
at March 31, 2008 and December 31, 2007, respectively)
|
750,240 | 646,810 | ||||||
DEFERRED
FINANCING COSTS, NET
|
5,351 | 5,921 | ||||||
INVESTMENT
IN PINNACLE GAS RESOURCES, INC.
|
6,173 | 11,071 | ||||||
OTHER
ASSETS
|
3,181 | 3,245 | ||||||
TOTAL
ASSETS
|
$ | 833,387 | $ | 708,663 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable, trade
|
46,363 | $ | 49,700 | |||||
Accrued
liabilities
|
39,409 | 36,091 | ||||||
Advances
for joint operations
|
651 | 872 | ||||||
Current
maturities of long-term debt
|
2,250 | 2,251 | ||||||
Fair
value of derivative financial instruments
|
23,561 | 2,755 | ||||||
Total
current liabilities
|
112,234 | 91,669 | ||||||
LONG-TERM
DEBT, NET OF CURRENT MATURITIES
|
217,688 | 252,250 | ||||||
ASSET
RETIREMENT OBLIGATION
|
6,478 | 5,869 | ||||||
FAIR
VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS
|
7,483 | 1,050 | ||||||
DEFERRED
INCOME TAXES
|
49,781 | 46,321 | ||||||
DEFERRED
CREDITS
|
762 | 783 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
- | - | ||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Common
stock, par value $0.01 (40,000 shares authorized; 30,620
and
|
||||||||
28,009
issued and outstanding at March 31, 2008 and
|
||||||||
December
31, 2007, respectively)
|
306 | 280 | ||||||
Additional
paid-in capital
|
381,922 | 246,099 | ||||||
Retained
earnings
|
60,048 | 65,344 | ||||||
Accumulated
other comprehensive income, net of tax
|
2,229 | 5,425 | ||||||
Unearned
compensation - restricted stock
|
(5,544 | ) | (6,427 | ) | ||||
Total
shareholders' equity
|
438,961 | 310,721 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 833,387 | $ | 708,663 | ||||
For
the Three
|
||||||||
Months
Ended
|
||||||||
March
31,
|
||||||||
2008
|
2007
|
|||||||
(In
thousands except
|
||||||||
per
share amounts)
|
||||||||
OIL
AND NATURAL GAS REVENUES
|
$ | 53,560 | $ | 22,612 | ||||
COSTS
AND EXPENSES:
|
||||||||
Oil
and natural gas operating expenses (exclusive of depreciation,
depletion
|
||||||||
and
amortization shown separately below)
|
8,391 | 4,703 | ||||||
Depreciation,
depletion and amortization
|
14,087 | 8,038 | ||||||
General
and administrative (inclusive of stock-based compensation expense
of
|
||||||||
$1,480
and $979 for the three months ended March 31, 2008 and
2007,
|
||||||||
respectively)
|
6,519 | 4,878 | ||||||
Accretion
expense related to asset retirement obligations
|
58 | 88 | ||||||
TOTAL
COSTS AND EXPENSES
|
29,055 | 17,707 | ||||||
OPERATING
INCOME
|
24,505 | 4,905 | ||||||
OTHER
INCOME AND EXPENSES:
|
||||||||
Net
loss on derivatives (Note 7)
|
(29,816 | ) | (5,711 | ) | ||||
Other
income and expenses, net
|
69 | 116 | ||||||
Interest
income
|
148 | 344 | ||||||
Interest
expense
|
(6,455 | ) | (6,154 | ) | ||||
Capitalized
interest
|
3,718 | 2,686 | ||||||
LOSS
BEFORE INCOME TAXES
|
(7,831 | ) | (3,814 | ) | ||||
INCOME
TAX BENEFIT (Note 4)
|
2,535 | 1,269 | ||||||
NET
LOSS
|
$ | (5,296 | ) | $ | (2,545 | ) | ||
BASIC
LOSS PER SHARE
|
$ | (0.18 | ) | $ | (0.10 | ) | ||
DILUTED
LOSS PER SHARE
|
$ | (0.18 | ) | $ | (0.10 | ) | ||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||
BASIC
|
28,799 | 25,658 | ||||||
DILUTED
|
28,799 | 25,658 | ||||||
For
the Three
|
||||||||
Months
Ended
|
||||||||
March
31,
|
||||||||
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (5,296 | ) | $ | (2,545 | ) | ||
Adjustment
to reconcile net loss to net
|
||||||||
cash
provided by operating activities-
|
||||||||
Depreciation,
depletion and amortization
|
14,087 | 8,038 | ||||||
Fair
value loss of derivative financial instruments
|
29,069 | 8,062 | ||||||
Accretion
of discounts on asset retirement obligations
|
58 | 88 | ||||||
Stock-based
compensation
|
1,480 | 979 | ||||||
Deferred
income taxes
|
(2,740 | ) | (1,370 | ) | ||||
Other
|
145 | 12 | ||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(6,121 | ) | 3,384 | |||||
Other
assets
|
922 | 430 | ||||||
Accounts
payable
|
7,258 | 1,539 | ||||||
Accrued
liabilities
|
2,335 | 553 | ||||||
Net
cash provided by operating activities
|
41,197 | 19,170 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital
expenditures
|
(115,571 | ) | (47,815 | ) | ||||
Change
in capital expenditure accrual
|
(9,289 | ) | 1,709 | |||||
Proceeds
from the sale of properties
|
5 | 1,363 | ||||||
Advances
to operators
|
(55 | ) | 747 | |||||
Advances
for joint operations
|
(220 | ) | (80 | ) | ||||
Other
|
(5 | ) | (74 | ) | ||||
Net
cash used in investing activities
|
(125,135 | ) | (44,150 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net
proceeds from debt issuance and borrowings
|
51,000 | 75,000 | ||||||
Debt
repayments
|
(85,563 | ) | (41,564 | ) | ||||
Proceeds
from common stock offering, net of offering costs
|
135,233 | - | ||||||
Proceeds
from stock options exercised
|
76 | 65 | ||||||
Deferred
loan costs and other
|
(65 | ) | (2,867 | ) | ||||
Net
cash provided by financing activities
|
100,681 | 30,634 | ||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
16,743 | 5,654 | ||||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
8,026 | 5,408 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 24,769 | $ | 11,062 | ||||
CASH
PAID FOR INTEREST (NET OF AMOUNTS CAPITALIZED)
|
$ | 2,466 | $ | 3,251 | ||||
2008
|
2007
|
|||||||
(In
millions)
|
||||||||
Stock
Option Expense
|
$ | 0.1 | $ | 0.1 | ||||
Restricted
Stock Expense
|
1.4 | 0.9 | ||||||
Total
Stock-Based Compensation Expense
|
$ | 1.5 | $ | 1.0 | ||||
For
the Three Months
|
||||||||
Ended
March 31,
|
||||||||
2008
|
2007
|
|||||||
Cimarex
Energy Co.
|
- | 14 | % | |||||
Houston
Pipeline Co.
|
13 | % | 20 | % | ||||
Crosstex
Energy Services, Ltd.
|
13 | % | - | |||||
DTE
Energy Trading, Inc.
|
34 | % | - | |||||
Three
Months
|
||||||||
Ended
March 31,
|
||||||||
2008
|
2007
|
|||||||
(In
thousands, except
|
||||||||
per
share amounts)
|
||||||||
Net
loss
|
$ | (5,296 | ) | $ | (2,545 | ) | ||
Average
common shares outstanding
|
||||||||
Weighted
average common shares outstanding
|
28,799 | 25,658 | ||||||
Stock
options
|
- | - | ||||||
Diluted
weighted average common shares outstanding
|
28,799 | 25,658 | ||||||
Loss
per common share
|
||||||||
Basic
|
$ | (0.18 | ) | $ | (0.10 | ) | ||
Diluted
|
$ | (0.18 | ) | $ | (0.10 | ) | ||
March
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
Second
Lien Credit Facility
|
$ | 219,938 | $ | 220,500 | ||||
Senior
Secured Revolving Credit Facility
|
- | 34,000 | ||||||
Other
|
- | 1 | ||||||
219,938 | 254,501 | |||||||
Current
maturities
|
(2,250 | ) | (2,251 | ) | ||||
$ | 217,688 | $ | 252,250 | |||||
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
Shares
outstanding at January 1
|
28,009 | 25,981 | ||||||
Equity
offering
|
2,588 | - | ||||||
Restricted
stock issued, net of forfeitures
|
9 | 5 | ||||||
Employee
stock options exercised
|
15 | 6 | ||||||
Common
stock repurchased and retired for tax withholding
obligation
|
(1 | ) | (1 | ) | ||||
Shares
outstanding at March 31
|
30,620 | 25,991 | ||||||
Three
Months
|
||||||||
Ended
March 31,
|
||||||||
2008
|
2007
|
|||||||
(In
millions)
|
||||||||
Realized
gains (losses):
|
||||||||
Natural
gas and oil derivatives
|
$ | (0.5 | ) | $ | 2.3 | |||
Interest
rate swaps
|
(0.2 | ) | 0.1 | |||||
(0.7 | ) | 2.4 | ||||||
Unrealized
losses:
|
||||||||
Natural
gas and oil derivatives
|
$ | (26.9 | ) | $ | (8.0 | ) | ||
Interest
rate swaps
|
(2.2 | ) | (0.1 | ) | ||||
(29.1 | ) | (8.1 | ) | |||||
Loss
on derivatives, net
|
$ | (29.8 | ) | $ | (5.7 | ) | ||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Second
Quarter 2008
|
273,000 | $ | 7.94 | 3,185,000 | $ | 7.14 | $ | 8.83 | ||||||||||||
Third
Quarter 2008
|
276,000 | 7.94 | 3,036,000 | 7.13 | 8.82 | |||||||||||||||
Fourth
Quarter 2008
|
276,000 | 7.94 | 3,036,000 | 7.13 | 8.82 | |||||||||||||||
First
Quarter 2009
|
- | - | 2,520,000 | 7.37 | 9.10 | |||||||||||||||
Second
Quarter 2009
|
- | - | 2,548,000 | 7.12 | 8.85 | |||||||||||||||
Third
Quarter 2009
|
- | - | 2,576,000 | 7.16 | 8.88 | |||||||||||||||
Fourth
Quarter 2009
|
- | - | 2,576,000 | 7.17 | 8.90 | |||||||||||||||
First
Quarter 2010
|
- | - | 1,170,000 | 7.55 | 9.27 | |||||||||||||||
Second
Quarter 2010
|
- | - | 1,183,000 | 7.07 | 8.79 | |||||||||||||||
Third
Quarter 2010
|
- | - | 1,196,000 | 7.19 | 8.90 | |||||||||||||||
Fourth
Quarter 2010
|
- | - | 1,196,000 | 7.25 | 8.96 | |||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Second
Quarter 2008
|
9,100 | $ | 70.00 | $ | 76.75 | |||||||
Third
Quarter 2008
|
9,200 | 70.00 | 76.75 | |||||||||
Fourth
Quarter 2008
|
9,200 | 70.00 | 76.75 | |||||||||
(1)
|
Based
on Houston Ship Channel and Waha spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
Notional
|
Fixed
|
|||||||
Quarter
|
Amount
|
LIBOR
Rate
|
||||||
Second
Quarter 2008
|
219,938 | 5.32 | % | |||||
Third
Quarter 2008
|
219,375 | 5.31 | % | |||||
Fourth
Quarter 2008
|
218,813 | 5.31 | % | |||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Investment
in Pinnacle Gas Resources, Inc.
|
$ | 6,173 | $ | - | $ | - | $ | 6,173 | ||||||||
Liabilities:
|
||||||||||||||||
Oil
and natural gas derivatives
|
- | (26,125 | ) | - | $ | (26,125 | ) | |||||||||
Interest
rate swaps
|
- | (4,919 | ) | - | $ | (4,919 | ) | |||||||||
Total
|
$ | 6,173 | $ | (31,044 | ) | $ | - | $ | (24,871 | ) | ||||||
·
|
In the
last three quarters of 2008 we plan to drill 53 gross wells (50.9
net) in the Barnett Shale area, eleven gross wells (3.1 net) in the Gulf
Coast area, 37 gross wells (37.0 net) in our Camp Hill field (which
includes approximately 14 service wells), one gross (0.2 net) U.K. North
Sea appraisal wells and 29 gross wells (14.5 net) in other
areas. The actual number of wells drilled will vary depending
upon various factors, including the availability and cost of drilling
rigs, land and industry partner issues, our cash flow, success of drilling
programs, weather delays and other factors. If we drill the
number of wells we have budgeted for 2008, depreciation, depletion and
amortization, oil and natural gas operating expenses and production are
expected to increase over levels incurred in 2007. Our ability
to drill this number of wells is heavily dependent upon the timely access
to oilfield services, particularly drilling
rigs.
|
·
|
We
plan to continue the development of the Barnett Shale. We
currently have 25 gross (21.8 net) wells awaiting completion or pipeline
connections. We expect to bring these wells online in the
second and third quarter of 2008.
|
·
|
We
plan to continue the development of other new drilling programs in the
Floyd Shale in Mississippi, the Fayetteville Shale in Arkansas, the
Marcellus Shale in New York and Pennsylvania and the North
Sea.
|
·
|
We
expect to continue to hedge production to decrease our exposure to
reductions in natural gas and oil prices. At March 31, 2008, we
had hedged approximately 25,047,000 MMBtus of natural gas production
through 2010 and 27,500 Bbls of oil production through
2008.
|
For
the Three
|
2008
Period
|
|||||||||||||||
Months
Ended
|
Compared
to 2007 Period
|
|||||||||||||||
March
31,
|
Increase
|
%
Increase
|
||||||||||||||
2008
|
2007
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate (MBbls)
|
53 | 60 | (7 | ) | (12 | )% | ||||||||||
Natural
gas (MMcf)
|
6,014 | 2,845 | 3,169 | 111 | % | |||||||||||
Average
sales prices
|
||||||||||||||||
Oil
and condensate (per Bbl)
|
$ | 96.10 | $ | 56.23 | $ | 39.87 | 71 | % | ||||||||
Natural
gas (per Mcf)
|
8.06 | 6.76 | 1.30 | 19 | % | |||||||||||
Operating
revenues (In thousands)
|
||||||||||||||||
Oil
and condensate
|
$ | 5,095 | $ | 3,383 | $ | 1,712 | 51 | % | ||||||||
Natural
gas
|
48,465 | 19,229 | 29,236 | 152 | % | |||||||||||
Total
Operating Revenues
|
$ | 53,560 | $ | 22,612 | $ | 30,948 | 137 | % | ||||||||
·
|
Cash
on hand and cash generated by operations. Cash flows from
operations are highly dependent on commodity prices and market conditions
for oil and gas field services. We hedge a portion of our
production to reduce the downside risk of declining natural gas and oil
prices.
|
·
|
Available
borrowings under the Senior Credit Facility. On December 20,
2007, the borrowing base availability under the Senior Credit Facility
increased from $117.0 million to $145.0 million. At April 30,
2008, cash available under the Senior Credit Facility was $106.0
million. The next borrowing base redetermination is scheduled
for May 2008 at which time we currently expect our borrowing base to
increase by a yet undetermined
amount.
|
·
|
Other
debt and equity offerings. In February 2008, we received $135.2
million from an underwritten public offering of 2,587,500 shares of our
common stock priced at $54.50 per share. As situations or
conditions arise, we may issue debt, equity or other instruments to
supplement our cash flows.
|
·
|
Asset
sales. In order to fund our drilling program, we may consider
the sale of certain properties or assets no longer deemed core to our
future growth.
|
Three
months ended
|
||||||||
March
31,
|
||||||||
2008
|
2007
|
|||||||
Oil
positions settled (Bbls)
|
18,200 | - | ||||||
Natural
gas positions settled (MMBtu)
|
4,132,000 | 1,887,000 | ||||||
Realized
gain/(loss) ($ millions) (1)
|
$ | (0.5 | ) | $ | 2.3 | |||
Unrealized
loss ($ millions) (1)
|
$ | (26.9 | ) | $ | (8.0 | ) | ||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Second
Quarter 2008
|
273,000 | $ | 7.94 | 3,185,000 | $ | 7.14 | $ | 8.83 | ||||||||||||
Third
Quarter 2008
|
276,000 | 7.94 | 3,036,000 | 7.13 | 8.82 | |||||||||||||||
Fourth
Quarter 2008
|
276,000 | 7.94 | 3,036,000 | 7.13 | 8.82 | |||||||||||||||
First
Quarter 2009
|
- | - | 2,520,000 | 7.37 | 9.10 | |||||||||||||||
Second
Quarter 2009
|
- | - | 2,548,000 | 7.12 | 8.85 | |||||||||||||||
Third
Quarter 2009
|
- | - | 2,576,000 | 7.16 | 8.88 | |||||||||||||||
Fourth
Quarter 2009
|
- | - | 2,576,000 | 7.17 | 8.90 | |||||||||||||||
First
Quarter 2010
|
- | - | 1,170,000 | 7.55 | 9.27 | |||||||||||||||
Second
Quarter 2010
|
- | - | 1,183,000 | 7.07 | 8.79 | |||||||||||||||
Third
Quarter 2010
|
- | - | 1,196,000 | 7.19 | 8.90 | |||||||||||||||
Fourth
Quarter 2010
|
- | - | 1,196,000 | 7.25 | 8.96 | |||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Second
Quarter 2008
|
9,100 | $ | 70.00 | $ | 76.75 | |||||||
Third
Quarter 2008
|
9,200 | 70.00 | 76.75 | |||||||||
Fourth
Quarter 2008
|
9,200 | 70.00 | 76.75 | |||||||||
(1)
|
Based
on Houston Ship Channel and Waha spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
(c)
Total Number of
|
(d)
Maximum Number
|
|||||||||||||||
Shares
Purchased as
|
(or
Appropriate Dollar
|
|||||||||||||||
(a)
Total Number
|
Part
of Publicly
|
Value)
of Shares that May
|
||||||||||||||
of
Shares
|
(b)
Average Price
|
Announced
Plans or
|
Yet
Be Purchased Under
|
|||||||||||||
Period
|
Purchased(1)
|
Paid
Per Share
|
Programs
|
the
Plan or Programs
|
||||||||||||
January
2008
|
285 | $ | 46.61 | - | - | |||||||||||
February
2008
|
459 | 48.83 | - | - | ||||||||||||
March
2008
|
354 | 59.85 | - | - | ||||||||||||
Total
|
1,098 | $ | 51.81 | - | - | |||||||||||
|
(1) The
1,098 shares related to the surrender of shares of common stock to satisfy
tax withholding obligations in connection with the vesting of restricted
stock issued to employees under our long-term incentive
plan.
|
Exhibit
Number
|
Description
|
|
31.1
|
—
|
|
31.2
|
—
|
|
32.1
|
—
|
|
32.2
|
—
|
†
|
Incorporated
herein by reference as indicated.
|
Carrizo
Oil & Gas, Inc.
|
|
(Registrant)
|
|
Date: May
8, 2008
|
By: /s/S. P. Johnson,
IV
|
President
and Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date: May
8, 2008
|
By: /s/Paul F.
Boling
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|