Eagle Ford, Delaware drilling and completions are moving the needle
Carrizo Oil & Gas, Inc. (ticker: CRZO) had a net income of $14.7 million, or $0.18 per share in Q1 2018. The company went above the high-end of its guidance range, producing 51,257 BOEPD in the quarter. Carrizo said that the increased production was due to its recent A&D activity.
Carrizo President and CEO S.P. “Chip” Johnson, IV said the proceeds from the DJ Basin and Eagle Ford divestitures were used to help retire $370 million of debt and preferred stock.
Eagle Ford drums up large-scale multipad
In the Eagle Ford Shale, where the company holds approximately 79,100 net acres, Carrizo drilled 11 gross (nine net) operated wells during the first quarter and completed 31 gross (26 net) operated wells. Production from the play was more than 35,600 BOEPD.
Initial production from the company’s first large-scale multipad project in the Eagle Ford Shale, located in its Brown Trust project area, began as scheduled at the end of March. Production from the multipad recently averaged approximately 13,700 BOEPD (91% oil) on restricted chokes. The multipad consists of 16 wells on three pads, with an average lateral length of approximately 9,100 feet and frac stage spacing of 150-180 feet. Carrizo said it holds an average working interest of 79% in the wells.
At the end of the quarter, Carrizo had 20 gross (17 net) operated Eagle Ford Shale wells in progress or waiting on completion. Carrizo expects to drill 60-65 gross (56-61 net) operated wells and complete 80-85 gross (71-76 net) operated wells in the play during 2018.
Delaware Basin
In the Delaware Basin with 38,600 net acres, Carrizo drilled 10 gross (seven net) operated wells during the first quarter and completed three gross (two net) operated wells. Production from the play was more than 15,200 BOEPD for the quarter.
At the end of the quarter, Carrizo had 12 gross (10 net) operated Delaware Basin wells in progress or waiting on completion. Carrizo expects to drill 33-38 gross (26-30 net) operated wells and complete 33-38 gross (25-29 net) operated wells in the play during 2018.
Infrastructure, hedging
Building up infrastructure in the Delaware, Carrizo’s water-handling initiatives have reached overall disposal capacity of ~125,000 BPD. The company plans to increase its total water-takeaway capacity to ~250,000 BPD by mid-2019.
Carrizo recently executed a firm transportation agreement on ONEOK’s Roadrunner pipeline. This agreement provides the company with 40 MMcf/d of guaranteed takeaway capacity through November and provides certainty of flow on more than 90% of the company’s current net natural gas production from the Phantom area.
Additionally, Carrizo currently has 13,500 BPD of guaranteed capacity on Oryx’s system, which increases to 25,000 BPD later this year. These agreements, Carrizo said, combined with the company’s Midland-Cushing basis hedges, provide it with a significant amount of insulation from potential bottlenecks or basis blowouts during the year.
In order to manage its commodity price exposure, Carrizo has put various basis hedges in place. For the balance of the year, Carrizo has basis swaps locking in a $0.10/Bbl Midland-Cushing differential on 6,000 BPD. The company also has basis swaps locking in a $2.91/Bbl LLS-Cushing premium on 6,000 BPD over the same period.
CapEx
Drilling, completion and infrastructure capital expenditures for the first quarter of 2018 were $209.9 million, Carrizo said.
Approximately 65% of the first quarter drilling, completion and infrastructure spending was in the Eagle Ford Shale, while approximately 35% was in the Delaware Basin. Land and seismic expenditures during the quarter were $5.5 million, and were primarily focused in the Delaware Basin.
For 2018, Carrizo is maintaining its drilling, completion, and infrastructure capital expenditure guidance of $750-$800 million. The company’s 2018 development plan calls for it to run an average of 5-6 rigs and 2-3 completion crews during the year between its assets in the Eagle Ford Shale and Delaware Basin.
Based on this level of activity, Carrizo expects to drill 93-103 gross (82-91 net) operated wells and complete 113-123 gross (96-105 net) operated wells during the year. Carrizo is maintaining its 2018 production guidance of 58,500-60,100 BOEPD.
