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Carrizo Oil & Gas Inc.

Wed, 10 Dec 2008|



Wait for another couple hundred people to show up in August or. Also with me is Richard an error or head of investor relations that we can -- answer -- to afterwards. For a start there's a picture of our neutral site on the University of Texas Arlington campus up in Fort Worth. This is an agency lecturing drilling on the middle of the campus throwing underneath those buildings in the background Barnett shale we drilled six wells up there. Starting last Thanksgiving -- put those wells on production about a month ago after growing six -- tracking them. That combined rate of about 35 -- -- you today right now we have that cut back about 25 million today. But the world through the best well we've -- drove the Barnett shale. Read this later. And that. Three jurors 600 million dollar market -- PMP company that operates in these areas. We produce in the green areas we produce about ninety million cubic feet equivalent per day. 71 of that is in the Barnett about nineteen you know eventual Gold Coast. We're exploring and these other shale plays primarily the Marcellus Shale. Talk a little bit more about that at the end we also have. Geological group that generates prospects and -- -- We're we have no risk to apple involved and we made one of biggest discoveries in the -- received last six years two years ago we'll talk about it. Or strategy -- is pretty simple and light financial crisis on we're doing is drilling in the Barnett -- we have six -- running in the core right now. With those six were running in the -- we can world predict what production for growth will be over the next. Indefinite period ones were -- -- those words with those experts running our production will still be growing five years now. We're drawing -- BCF wells. Grows -- have come on line and were known dates when they. We have. About 350 drill sites left ago in just -- warrior hero talk about. So we don't need to really released anything else -- any -- capital. Before -- -- plan. Down the road we hope to expand into the Marcellus Shale. We've done a pretty creative field private equity company terror. Reduce our cost point -- We control about a 107000. Net acres right after that it -- In the in the past you can read on here how how well we've done in terms of production growth were growth -- Reserve replacement growth. We -- -- some -- Also. Probably figured out this conference all everybody's cost of dropping. We're seeing. Downward pressure on -- rates for -- cost. Everything sort I think everything's gonna get better on our margins going forward. We did have some production shut in because of the Hurricane -- we did have been damaged or wells that most of the gas plants -- him. Southeast Texas and south Louisiana -- shredding and usually produced no electricity -- couldn't sell gas for about a month. All -- back online now. But I'll talk mostly about that Barnett shale we're the next middle of the presentation. We got into the Barnett shale -- 03. We started the company and 93 went public in 97 were mostly. 3-D seismic on -- Gold Coast where once once -- republic we needed something more predictable. You know three got -- the Barnett shale we beat some of the bigger players by about a year and that's worked out. Very well forces you can see from all these Qaeda plots in terms of from -- -- growth wells drilled. Production -- this this has been home run for us and our market cap -- gone up about. Went up about twenty fold after -- -- to display. Make that distinction as of July 1 this year. This is what -- reserve replacement looked like. Hitting as high as 887%. Last year and that's on top of -- productions so we're very proud of that. This is -- our total reserves look like left -- proved in dark blues -- -- have to concede has become. I really Balkan accompanying note that on -- at three. Most solid. Big chunk -- the dark blue Barnett. Those are all somewhere in the place surrounded by production we think those. Even though the problems now those -- some putts and PP's. This is what our -- looks like next year -- the far right hand column. You could see the biggest component rose 240 million dollars drilling in the Barnett shale. That's -- six -- program and that about -- or cash flow we project for next year. Everything else on -- is optional. Drilling and other plays. Also buying land Nana that's committed to right now -- wait until probably February or march he worked the winner looked like. She with the recount looks like to credit markets look like they'll decide what to do. Right now we don't intend to -- -- money and what things look better in February. Also -- -- is. Down at the bottom you can see our Marcellus Shale land. You can't tell but the Marcellus Shale drilling for next year. We'll go to zero -- this because we've done deal with the Vista capital where they put up the next 71 million. Capital into that played were both doing jointly now so that got -- of our capital needs for next year. This is what our balance -- looks like or looked like on 930. Big change for -- recently was that we were able to get our revolver increased by about 57 million dollars three weeks ago. That got us up to 222. Point five million dollars. And there are still some other banks would talk computers to see if we get that higher also. Instead. Word will do another re determination once we have -- reserves and we've gone on. Forty million one -- productions. Number. Earlier in the year. We do today. Convertible bond in May and it was a 375 million dollar bond and for prices -- hundred dollars for sure which looks really smart now. That's important creates coupon and mostly we use that money to pay off this term -- note that was about a 10% people. So that was perfect timing we got that done. Now we have all liquidity we need. We had 88 million drawn on -- revolve round of the 222 were closer now won ten but we've also slowed down a lot we don't see that. -- be used. Total. -- -- about 48% that'll probably go into the fifties but since most of our drilling is in the Barnett. We don't have a problem. We call this the this continuity slide. You could pretty well track -- -- growth in production with our market cap up until the third quarter this year. And then there's a huge disconnect right here. This is where we know our production will be though in the post quote that's based on our existing production. And all the wells we've already drilled there will bring on line right now. That are all in nearly in these theaters like southeastern. So we can just get back to normal we don't have to do anything different in our strategy for drove six -- -- -- bring them on line. In southeastern counties will be -- and number like this which equates to about an eighty dollar. Hampshire price so. All we want to do is get back to. To the way things -- there's nothing else we have to do differently in terms of leasing or hitting something new. -- the path we wrong with the guns. Barnett shale covers. A lot of counties and around Fort -- these are the thirteen counties were most of the activity occurs. We're active and all these counties but mostly active in the counties to eastward economics for the -- This area it is the size of New Jersey can easily support 30000 was on -- I think to about 6000 right. This is what the production in the -- looks like that the -- is sort of the gold standard right now for all the shale plays. It was essentially making nothing two years ago when. Mitchell energy really cracked the code on how to. Inexpensively fracture stimulate -- -- well purple orange oil wells to start making money. And they got very active in these two candidates at the bottom Denton and wise -- heal faster production -- -- spotted. This growth and no one bought Mitchell which everybody -- it was crazy time now looks like you know stroke of genius. They started production in those areas and some other -- And then you know five. We got in -- 03 you know five everybody started drilling horizontal wells. And at first it was more of -- access issues if you drilled horizontally to drill underneath the lakes golf courses and cities. But it also improved economics you get the equivalent of about three -- -- for the costs through. So play really took off at that point we ended up with -- -- UG HSB can play -- that caused this big growth. Most people think the total play will capped out at about five BCF per day towards in the next year. That's because a lot of the areas drove by the beer companies are already -- about. Like I said before we don't even had another really our production will keep growing for five years -- that includes all the declines that happen with these kind of place. You can see what happens in the over parts of the play -- a lot of rigs drilling in those two counties and they can just barely keep production flat. That's because the declines humans these please if -- early in the play. And your small player you tremendous leverage to position. This is more work detail on the play. This is -- county where Fort Worth essentially fills up that county. The red dots -- all the wells that have been completed by industry this year the green -- -- to where we own acreage. And the Daschle was were were focusing. 90% of our activity. This is southeastern -- we started leasing here. You know three and about a 150 dollars breakthrough and the prices got as high as 27000 dollars -- -- last night. They've fallen off considerably we're still much to work equilibrium -- -- that's been very active very cool water companies. Also want to hear it through my considered one million today as important fact we have 78 -- -- -- behind pipe. And those wells have been drilled. In some cases there's a drilling -- way because we drove usually six wells had until the drilling -- off -- -- -- cancer for acting. Then you -- six wells on one so you're -- production growth -- sort of step function. But once you get to some point did it become steady state should be. Bringing six -- compromise. At three million days each net about eighteen. Net per month you production. And that's about where we are right now we brought. Five new wells on the last two days they'll look like -- -- in the -- -- we've -- today Annette wells. That's in southeastern we have some other ones and didn't. Right here which -- from the corps of wells have been tested in just waiting on -- to transfer Coca. This is how we've done in the Barnett sent three. Could see how are recount groove productions for. Deserves -- grown and in -- bottom right hand slide. Shows individual well performance. In this monster -- area which -- created -- a few years ago. And the point -- that we any huge he had the best wells in this area. And then one of our peers. Have very profitable wells that they start falling off so technically we think we can compete with anybody in this play. And we're gonna run you six words and keep track and social -- and -- -- It is a resource -- -- we also get efficiencies to better at all this whole time drilling. Days for well keeps falling even though especially in the the corps we're now drilling. Very complicated. Wells that have two or three kicks in them before they get -- and sometimes 141000 feet measured depth so very complicated wells mostly using. Slumped as -- -- durable technology which is really expect things but are time Israel keeps falling. Economics keep getting better. This is. Getting even into the heart of the heart. Of the play for us this is southeastern Kennedy that's the University of Texas Arlington like Arlington Dallas Fort Worth airport. This is all city and we're we have drill sites were all these little orange circles and we police surrounded. And if you have 38 -- you can pretty much. Started -- -- start drilling from the -- from there you need pipeline hook ups ultimately and that's why we picked some of these series because they. Matchup with Kia Hughes. Like school runways -- pipelines. Competition objections. So we've been able to get pipelines -- through the middle of the cities in the right ways. And get these -- -- -- that you refute that. There. And so this area for us have 350. More locations. At 48 through space and already -- and seismic over most of -- so we can drill here for five -- -- you know buying loans. This is typical Barnett production curve on the right -- of the decline. -- -- -- -- -- -- -- -- -- Also we -- the economics on the left of -- -- for average southeastern well and -- well only if you already own land. So that you shows that at a dollar -- -- -- cost. In a pretty decent commodity price markets -- -- -- we can go we can drill down below. Five dollar nymex which we issue here as a 23% would return in -- -- and so as far as profitability. We have very some of the lowest have to be costs in the country here and we can keep doing here indefinite. In addition to that. What we've seen is that instead of four BCF for world growth which is what we modeled the phone. Were actually if you look at the post sixteen wells we drove -- making. What looks more like four point -- well that this is only nine months of data on some of these wells it was still early. But that's still that that's kind of direction want to see -- -- go. So we'll probably start modeling these things a little higher now again this is at 48 exploration. What is all this sacred worth in the -- this is -- -- reviews for a long time we have about 85000 net acres with seismic. We can confirm that about 65% of his -- global. We in this slide you 68 which will lead in the right now we're drilling on forty -- world won't drilling -- -- Tarrant County. So that's should be a conservative number -- -- over 900 drove right. We use one point eight BCF as the ultimate recovery per well that's an average between four BCF. In southeast turn one he heal from west side of the way. At a 24% -- -- still have one point two keys yet reserve. Potential -- about 20% of that -- -- the rest is all problems that that knee yes and some guidelines. We user market barrier about a dollar fifty for him -- -- that's what. Two years' worth of deals went for in the Barnett were acreage mix like we have. That number might be -- are now based on where prices are but I think that's offset by these facing and the ultimate recovery. Anyway that works out to 61 dollars this year. That it excludes everything else in the company. The nineteen million that they in the Gulf Coast all the other shale acreage in the reserve -- -- -- -- -- -- that things that can change those numbers most obviously are down -- we're now drilling it for -- for space and we're gonna test between the pilots this year. The bigger companies have already gone to twenty acres and some places in the Clinton gets 75%. Those -- -- well that's not damn things like that that's -- numbers so. That would make that would double tripled or quadrupled our recount in some cases from what were planning to do right now. The other thing we've look at is stacking. The Barnett is so thick and southeastern counties. That when you look at micro seismic. Fractures not getting all the way the -- so -- -- away. Well opera or with the section -- that that well should come on line by viewing and enacted -- a whole other layer. And double that whole area again so. We don't think that would be as good as -- area. The rock doesn't look as good that looks like to be easier for you to be easier for well and you basically. Not had to buy any more lenient it and -- -- sites do that. -- also repressed who's not been retracting vertical wells is pretty standard ones they've been. On declined for three or four years but. -- -- wells haven't had that much activity because they're not that old. We retract one about six weeks ago wells won't back. The production to about three times higher than it was but it still below the initial rates were stripped clean and well up let's make a lot of water like it did the first time. And we'll know more about that probably about you. Some kind of analysis. But if you can add have to be easier for half -- million dollars and where are you already with no new infrastructure that that'll make money holding long. This is sort of what -- slide. Right now I'd be happy with what it was sixty dollars for sure but. If you start at 61 dollars a share in -- down space across period into which you get. Also since we're high -- are experts proposals -- better on ultimate recovery human down. You can see it and some pretty beat them. After the Barnett we think the next big target for us will be the Marcellus Shale. We started studying this about three years ago we didn't like the acreage costs relative to the amount of production data. -- a lot of shale plays out there that look good on paper but not that many of you have great production results. Right at the in the last year some of the operators started. Publishing with the production was that they were making four BCF horizontal wells and that was the green light for -- we started buying acreage. We ultimately ended up with about a 160000. Acres. From northern West Virginia in this over pressure area. Into central Pennsylvania into northeast Pennsylvania and New York State -- war. It just put them Marcellus and perspective that yellow area is the core of the Barnett which is the sweet spot. We're still not -- this week's fight is in the Marcellus. You would think it would be in the -- -- deepest parts of the play right now some of the best production. Range announces he is and one of the shallow -- less mature approach -- some things could be better. There is production data now available from three -- four companies. It's hard to get data from Pennsylvania because you have to even -- the dating him for five years as opposed lot of other states that to score off of press releases and publicly announced data were very impressed with -- -- economics work. As good as the -- in general maybe not all of -- work. But the good thing about him for brain -- and they're pipelines on the north and south sides of Pennsylvania that goes to northeastern markets and probably get a premium. Instead of -- discount. And the royalty useful thing here I think the highest world -- we've ever paid just 20% mostly were paying. Fifteen to sixteen person so. That's the most profitable. We're most expensive or if your expenses for the operator is higher royalty so we're getting around that and we should -- -- commodity place. They're not a lot of infrastructure in this area. That can handle. Deep horizontal wells in high pressure -- lot of low pressure wells and Pennsylvania. There's a -- Black River play right here there's a lot of low pressure production. West Virginia so there is high. But it's -- taking -- through a long time to build enough -- supplies. -- plans to deal with everything that's can be used also. It's gonna take a while you know -- up here right clues to start drilling is bigger he was on wills and durable storage class. Just talk a little bit more about this joint venture we did with the district capital. We had been spending money or -- buying leases we already -- -- to an acreage position we couldn't figure out how we fund going forward. If we did start drilling all these horizontal wells. So we looked at it away -- we could contribute the experts to a joint venture -- market price. Which was higher than we pay it forward. -- Vista came in and they're gonna put up. Money until -- get up to that point which right now it's 71 million dollars. So they pay the next 71 million dollars for everything we do in this -- in drilling. Seismic. And then at that point we go forward 5050 we think that 71 million. Will be spent mostly on drilling vertical wells in our different -- blocks. Were scattered all through this way we want to find the sweet spot. We know enough now about -- -- -- plays that we think we know to look for walks and rock cores and then some for anthrax. And with that data that we can decide world one focus. We don't buy a lot of land up here anymore. Land prices have fallen dramatically we have made some -- -- offers but right now people take them just complaining about that he called back. So nobody else's is top and those of but we have an effort right now to last us for -- do. I mentioned and Dorsey earlier this was kind of one off thing for us. It was similar to what we did in the -- -- Gold Coast where we. Accumulate a lot of 3-D seismic and we buy some cheap land try to for the prospect together. Less risky ones we -- ourselves rescue once would look would -- partner. And in the North -- There was some experts blocks essentially -- back you know three and we once qualities we. We're able to back -- politicized and groups sell these deals -- companies so we have no risk Kaplan. And we drove this prospect. To use government because discovers its -- We found pay two different zones in the central city where Lex goes the operator. Were gases the next biggest player. And the -- proposals -- when it. And we basically made a discovery here shallow -- -- -- Shallow oil zone then went back Ian -- he had a pretty well figured out -- -- and you don't complain to the government this year. The party's over here who were British gas has objected that are -- was bigger than we had it. Shown to the government and so they drove these two well red dot. About two months ago -- well. We think this one is generous divorce -- resolute it's got bigger. But we have less sorry you know are gonna change much. This is -- separate accumulation in her estimation. So that'll help us out because they'll bring that oil to our facility and you know what it is we originally thought we put -- here so here. Right now we have an offer of worry. -- -- pipeline. To a BP platform -- we have a couple heating options -- what the best way to go is. When this comes on line should come on line 35000 BOE per day Willis 70% of that we're assuming that -- -- who -- It's gonna take longer now to get the monetization figured out especially having to be majors and the deal. Long before we go for companies we already -- In the deeper zone. -- we never figured out how big that is we said it could be portion of this 110 million barrels. Our partners said it could be -- portion of 250 million barrels. So we just still enough pinned down with oil water contact is in the -- of work so we're sticking with our numbers -- we can prove that is bigger than that. There will be well broke down here sometime next year we had some reprocessed -- -- three B we have to wait before we do that. This that are very good deal for us as we have no risk capital and it. We think we can finance -- going -- with some project financing from the UK banks we have a couple of term sheets for that the other thing we can do yourself. And if it remarkable pay apple world essentially proved reserves on that shallow area we would probably sell. Well just have to wait and see you work what transpires in the next few months in terms of prices and credit markets. This flight aren't -- just summarizes where we -- all we did. Lot of the stated courses of seven data so it's get a little old thing will be able to show comparable numbers this year. And it shows sort of -- we are on a bunch of things what we're doing in the Barnett -- with a six were program testing them space and staff levels of refractive. Also in the Marcellus. We acquired a lot of experts we're trying to get wells permitted right have a -- vertical wells. And then we'll go forward trying to pin that down spinning mostly of this is money for the next year. Also equity wise we did just raise borrowing base -- 57 million dollars. We don't plan to -- that -- but it does give some nice cushion going forward will be trying to raise that again in February. -- that we'll go to the break out room and thank you for coming.

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