Carrizo Oil & Gas (ticker: CRZO) will be presenting at EnerCom’s The Oil & Gas Conference® 21 in Denver, on Tuesday, August 16, 2016. Carrizo Oil and Gas is a Houston-based upstream operator primarily focused on unconventional U.S. shale plays. The majority of the company’s assets are located in the Eagle Ford and South Texas, but the company also holds assets in the Utica, Niobrara, Marcellus and Delaware Basins. The company’s production is 76% liquids.
In the recent commodity downturn, Carrizo has largely been focused on developing its best performing asset, the Eagle Ford. The company recently added a 4,000 acre bolt-on acquisition in La Salle County and is planning further acquisitions in the same area. In addition, the company is divesting assets that it doesn’t believe will be beneficial in the long run in order to act as a capital offset for acquisitions.
In the 1Q16 earnings call, Chip Johnson IV, Carrizo’s president and chief executive officer, commented on the company’s strategy, “We were able to fund the acquisition by selling undeveloped acreage in a non-core exploration play. We continue to seek quality acquisition opportunities during the current commodity price downturn.”
In addition to acquisitions and divestitures, Carrizo is also experimenting with stagger-stacked laterals and down-spacing from 330-500 feet down to 175-280 feet. The testing area is in their Eagle Ford core acreage and represents about 75% of future drilling locations.
When asked about the performance and possible communication of down-spaced laterals, Johnson stated, “What we use as a threshold is that we need to have at least six months of non-interference for the economics to work, so that’s what we’re looking for. Someday there will be interference, there has to be. But, the math works on the economics if you get six months of non-interference.” The company continues to operate two rigs in the Eagle Ford with a well cost of about $4.1 million and breakeven oil price of $35.15 per barrel.
Oil and natural gas production growth was seen nearly every quarter of 2015, but the upper range of the guidance for 2Q16 is lower than what was realized in 1Q16. The company plans to manage its leasehold obligations by holding its full-year average oil production steady with 4Q15 in order to preserve assets, drive cost reductions, and improve balance sheet strength.
