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Carrizo Begins Multipad Drilling in Eagle Ford, Beats Guidance in 1Q

Carrizo Oil & Gas Inc. reported progress in its shift to multipad development in the Eagle Ford Shale and beat its production guidance for the first quarter, while also seeing strong initial production from a new well targeting part of the Wolfcamp formation in the Delaware sub-basin of the Permian.

The Houston-based independent on Monday reported total production of 4.61 million boe (51,257 boe/d) in 1Q2018, which was above guidance (48,600-49,800 boe/d) and a 10.5% increase from the year-ago quarter (4.17 million boe, 46,367 boe/d).

The company attributed the production increase in part to an earlier than anticipated expansion of its water-handling capacity in the Delaware sub-basin. It also said year/year comparisons in production were impacted by "a significant amount of acquisition and divestiture activity,” which included a deal that nearly doubled its position in the Permian, and separate divestitures in the Utica, Marcellus and Eagle Ford shales, as well as the Denver-Julesburg Basin.

Crude oil production rose 18.3% year/year to 3.07 million bbl (34,136 b/d) from 2.6 million bbl (28,844 b/d), while natural gas liquids (NGL) production increased 82%, to 739,000 bbl (8,213 b/d) from 406,000 bbl (4,508 b/d). However, natural gas production declined 31.6%, to 4.81 Bcf (53.4 MMcf/d) from 7.03 Bcf (78.1 MMcf/d) in 1Q2017.

Broken down by play, production grew more than six-fold in the Delaware to 15,235 boe/d, up from 2,418 boe/d in the year-ago quarter. Production also grew 9.3% in the Eagle Ford to 35,623 boe/d  from 32,578 boe/d in 1Q2017. Meanwhile, Niobrara formation production plummeted 96.5% to 399 boe/d from 11,371 boe/d in the year-ago quarter.

During 1Q2018, Carrizo drilled 11 gross (nine net) operated wells and completed 31 gross (26 net) operated wells in the Eagle Ford. It also drilled 10 gross (seven net) operated wells and completed three gross (two net) operated wells in the Delaware sub-basin.

In the Eagle Ford, Carrizo's first large-scale multipad project, consisting of 16 wells on three pads in the Brown Trust project area, achieved targeted plateau production in early April and had an average IP of 13,700 boe/d on restricted chokes, 91% weighted toward oil. The company, which outlined its plans to shift to multipad drilling last March, said gross production exceeded 12,000 b/d.

Meanwhile, in the Delaware, Carrizo said its Griffin State Unit 1922 10H well in the Phantom block targeting the Wolfcamp B formation, achieved a peak 30-day IP rate of 2,150 boe/d on a restricted choke, 54% oil and 75% liquids. The Griffin State well is Carrizo's 12th targeting the Wolfcamp B from the Phantom block.

Carrizo is maintaining its full-year guidance for capital expenditures to $750-800 million, and it reiterated its production guidance of 58,500-60,100 boe/d for the year. The company also said it would continue to an average of five to six rigs and two to three completion crews in 2018, with deployment spread between the Eagle Ford and the Delaware.

Carrizo plans to drill 93-103 gross (82-91 net) operated wells and complete 113-123 gross (96-105 net) operated wells over the course of the year. Of those, it plans to drill 60-65 gross (56-61 net) wells and complete 80-85 gross (71-76 net) wells in the Eagle Ford, with 33-38 gross (26-30 net) wells and completing 33-38 gross (25-29 net) wells in the Delaware. At the end of 1Q2018, Carrizo had 20 gross (17 net) wells in the Eagle Ford and 12 gross (10 net) wells in the Delaware either in progress or waiting on completion.

Net income was $14.7 million (18 cents/share) in 1Q2018, compared with $40 million (61 cents) in the year-ago quarter. Total revenues were $225.3 million, compared with $151.4 million a year ago.

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