Outperforming assets in the Permian Basin and Eagle Ford Shale led Carrizo Oil & Gas Inc. to increase 2018 production guidance to 60,200-60,500 boe/d from the previous range of 58,700-60,100 boe/d.
The increase, announced earlier this month with the third quarter earnings results, comes despite fourth quarter production impacts caused by heavy rains in Texas and maintenance on a DCP Midstream LLC gathering system in the Eagle Ford. Downtime on wells that offset some completions in the Eagle Ford also has curbed volumes. The issues are likely to curtail production by more than 1,000 b/d for the final quarter.
However, the company produced 5.95 million boe (64,627 boe/d) during the third quarter, up 17% from the year-ago period and from the 5.19 million boe (57,077 boe/d) in 2Q2018. Third quarter volumes came in well above the guidance range of 62,000-63,000 boe/d for the period, which also included a 265% year/year (y/y) gain in production from the Permian assets in the Delaware sub-basin.
Overall, crude oil production was also up 17% y/y to 40,813 b/d. The Permian gains came despite an activity shift weighted toward the Eagle Ford that began over the summer, where the company plans to run more rigs over the next year or so until crude oil prices improve in West Texas.
“During the third quarter, we completed our activity pivot to the Eagle Ford Shale,” said CEO Chip Johnson. “We currently have four of our six rigs operating in the play, where our production continues to benefit from advantaged pricing. We expect our activity to remain weighted to the Eagle Ford Shale until the second half of 2019.”
Completions are expected to wind down heading into the new year as the company focuses on building up an inventory of Eagle Ford wells to help grow production.
With the Eagle Ford set to drive growth, the company plans to focus its Permian program on testing multi-layer development concepts throughout the Wolfcamp formation aimed at improving the long-term value of the assets, which it bulked up in a transaction with Devon Energy Corp.
Both average realized crude and liquids prices were up during the quarter, with Carrizo earning $67.78/bbl for oil, compared withs $47.37/bbl in the year-ago quarter. Natural gas was flat over the same time at about $2.21/Mcf. Revenue was up on those gains to $303.4 million, versus $181.3 million in 2Q2018.
Carrizo reported net income of $76.1 million (88 cents/share) for the third quarter, up from net income of $5.6 million (7 cents) in the year-ago quarter.