Carrizo forecasts production growth rate of 11% in 2019

2/6/2019

HOUSTON --  Carrizo Oil & Gas, Inc. has announced its initial 2019 capital program and production guidance. The 2019 plan is designed to facilitate long-term, disciplined growth within cash flow in a mid-$50s NYMEX oil price environment. Highlights of the 2019 plan include:

  • Targeting 2019 DC&I capital spending of $525-$575 million, a reduction of approximately 35% vs. 2018
  • Reducing operated activity to one rig in the Eagle Ford Shale and two to three rigs in the Delaware Basin
  • Continuing to test additional zones and multi-layer, cube development in the Delaware Basin
  • Forecasting 2019 production of 66,800-67,800 Boe/d, equivalent to annual growth of approximately 11%
  • Achieving positive free cash flow in the third quarter of the year
  • Providing longer-term momentum by delivering production growth from the fourth quarter of 2018 to the fourth quarter of 2019

S.P. “Chip” Johnson, IV, Carrizo’s president and CEO said, "Our 2019 capital plan provides us with a prudent path forward in a $50 to $60/bbl world. It allows us to continue delivering profitable, double-digit production growth while also achieving a free-cash-flow-positive inflection point in the third quarter of the year and maintaining momentum into 2020. Additionally, our 2019 plan allows us to balance these objectives with the continued testing of additional layers and development concepts in the Delaware Basin, where we have only scratched the surface of our resource potential.

“Our dual-basin portfolio continues to provide us with significant flexibility. Our pivot to the Eagle Ford Shale during 2018 paid off as its exposure to premium, seaborne crude oil markets insulated us from the regional price differential blowouts seen in the Permian Basin. This allowed us to maintain some of the strongest margins in the industry. With price differentials currently improving in the Permian Basin due to the imminent addition of pipeline capacity out of the region, we are planning to begin shifting capital back to the Delaware Basin this year.”

2019 capital program and guidance

For 2019, Carrizo is providing initial drilling, completion, and infrastructure (DC&I) capital expenditure guidance of $525-$575 million. Carrizo currently plans to reduce its rig count in the Eagle Ford Shale from four to one by the end of the first quarter. The company currently expects to maintain two rigs in the Delaware Basin during the first half of the year, and add a third rig to the play in the second half of the year. Based on this level of activity, the company expects to drill 75-85 gross (65-75 net) operated wells and complete 95-105 gross (85-95 net) operated wells during the year. Carrizo also expects to participate in several net non-operated wells during the year.

Based on this program, Carrizo is providing initial 2019 production guidance of 66,800-67,800 boed. Crude oil production is expected to account for approximately 63% of the company's production for the year, while total liquids are expected to account for approximately 80%. This 2019 production guidance range equates to annual growth of approximately 11% at the midpoint.

During the fourth quarter of 2018, the company took an extended frac holiday while it drilled large multi-pad projects in both the Eagle Ford Shale (36 total wells) and Permian Basin (6 total wells). While this is expected to result in a sequential decline in the company’s production during the first quarter of 2019, Carrizo expects to see a material increase in its production as these wells are completed and turned to sales over the first and second quarters of the year. The company currently expects its 2019 activity plan to maintain this momentum in the second half of the year, resulting in production in the fourth quarter of 2019 exceeding production in the fourth quarter of 2018.

Fourth-quarter 2018 update

Preliminary production volumes during the fourth quarter of 2018 were 68,328 boed, an increase of 6% versus the prior quarter. Crude oil production during the fourth-quarter 2018 averaged 43,040 bopd, while natural gas and NGL production were 83,067 Mcfd and 11,443 Bopd, respectively.

Preliminary drilling, completion, and infrastructure capital expenditures for the fourth-quarter 2018 were $175.4 million, above the company’s initial expectations as it elected to complete an additional pad in the Eagle Ford Shale late in the quarter. This allowed Carrizo to take advantage of the attractive discounts offered by service providers resulting from the industry-wide slowdown in activity. Due to timing, the additional pad did not add any material production to the fourth quarter.

Fourth-quarter conference call and upcoming presentation
The company will hold a conference call to discuss 2018 fourth quarter and full year financial results on Tuesday, Feb. 26, 2019 at 10:00 AM Central Standard Time. Carrizo plans to issue a press release containing its financial and operating results after the market closes on Monday, Feb. 25, 2019.

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