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Eagle Ford Helped Carrizo Set Oil-Driven Records During 1Q

Houston-based Carrizo Oil & Gas Inc. turned in first quarter results that included record production and revenue driven by record oil results.

CEO Chip Johnson credited the company's performance in the Eagle Ford Shale and the Niobrara formation for the first quarter success. "Oil production exceeded our guidance, primarily due to well performance in both our Eagle Ford and Niobrara plays," Johnson said. "Gas production exceeded forecast, primarily due to higher-than-expected Marcellus production resulting from changes in our completion schedule, which allowed for reduced downtime on offsetting producing pads."

Production volumes during the first quarter of 2013 were 2.394 million boe, an increase of 15,000 boe, from fourth quarter 2012 production of 2.38 million boe. Record oil production of 9,311 b/d represented a 57% increase over the year-ago quarter. The increase was mainly due to new wells brought online during the quarter, primarily in the Eagle Ford and Marcellus, partially offset by normal production decline and the company's Niobrara joint venture transactions in the fourth quarter of 2012.

"During the quarter we were able to add a little over 4,300 net new bolt-on acres to our Eagle Ford position in La Salle County, TX, at an attractive price due to near-term lease expirations. We immediately moved one of our three rigs onto these leases in order to hold the acreage," Johnson said.

"In the second quarter we will initiate the investigation of further Eagle Ford downspacing from our current 750 feet between laterals by drilling two wells with approximately 500 feet between well bores. We expect to complete and test these wells in the third quarter. We plan to complete and test our horizontal well drilled to evaluate the Pearsall potential below our Eagle Ford acreage in May."

In Ohio, Carrizo recently finished construction of a drilling pad in Guernsey County for its first Utica Shale well and expects to spud the well in July or August. "We now control about 14,600 net acres in the liquids-rich southern Utica," Johnson said.

In the Barnett Shale, Carrizo management is talking with advisers to potentially help it sell a portion or all of its assets in the play. A full sale could generate about $300 million, Wells Fargo Securities said in a note. A smaller sale of Barnett assets could mean the company would have to enter into another joint venture in the Utica Shale.

Net income was $2.5 million (6 cents/share) compared to $10.7 million (27 cents/share) for the year-ago quarter. Adjusted net income was $21.6 million (54 cents/share) compared to $18.5 million (46 cents/share) during the year-ago quarter. An unrealized loss on derivatives of $21.2 million was recorded for the first quarter as compared to an unrealized loss on derivatives of $7.4 million for the first quarter of 2012.

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