Carrizo Oil and Gas (CRZO, Financial) plans to drill approximately 65 gross or 58 net operating wells in frac and 64 gross or net operating wells in the play this fiscal year. These supplementary wells should contribute to the top line growth this year with better profit margin.
Expansion in the cards
Looking ahead, the company plans to produce about 21,400 to 21,800 net barrels of oil per day for the second-quarter 2015. This is significantly greater than its oil production in the second-quarter 2014 and about 1% higher than its production in the first-quarter 2015 at the midpoint. It expects its gas and natural gas production to remain in the range of 68 to 74 million cubic feet equivalent per day for the second-quarter 2015.
Furthermore, Carrizo banks on its Eagle Ford shale that has good long-term prospects. It has about 83,200 net acres at the Eagle Ford shale. Its Eagle Ford shale is capable enough to generate profit even at the current oil price level. Its oil falls under Brent oil category that is currently being traded at $55 per barrels. Moreover, it is seeing improvement in the completion and drilling activities across its shale plays that should lead to better costs structure for Carrizo and enhance its bottom line performance this year. It has reduced drilling and completion costs at Eagle Ford shale by more than 19% so far this year.
Apart from the Eagle Ford shale, the company plans to plans to develop its Utica Shale in 2016. It is at present working at the groundwork to ramp up its activities in 2016 with better crude oil price. It has drilled 3 gross operated wells and completed 1 gross at this resource. It is really encouraged with its Brown 1H well in Guernsey Country that is producing great oil. This well has average run rate of 500Bbls/d of condensate for the first 17 days in the first-quarter 2015.
Conclusion
Carrizo is executing various initiatives such as cutting down its costs through reducing its cycle days and lowering its capital expenditure. This should release more funds for Carrizo to pay off its rising debt. Moreover, it promises robust oil production in the future that should add growth to its top as well as bottom line in the future. So, Carrizo Oil & Gas does offer a good platform for investment in the long-run. Its short term pains of minimizing operating costs and capital expenditure will enable the company to reap the fruits in the future, when oil and natural gas prices take a u turn.
