Like many, but not all, producers, Houston-based Carrizo Oil & Gas Inc. has shifted to oil because that’s where the profits are.

“Our potential Eagle Ford and Niobrara inventory of 800 drill sites means we potentially have an oil [reserves over production ratio] of 70 years, CEO Chip Johnson told financial analysts Tuesday.

“We are not treading water hoping that natural gas prices will increase by CNG [compressed natural gas] cars and trucks, or waiting for new shale cat[alytic] crackers or new gas plants to make our NGLs [natural gas liquids] more valuable.”

The pursuit of profit means no new drilling by Carrizo in the Barnett Shale, where the company has now sold off one-third of its production, Johnson noted.

Carrizo production was 2.354 million boe, a decrease of 39,000 boe, or 2%, from second quarter of 2012 production of 2.39 MMboe, primarily due to the sale of Barnett Shale production to Atlas Resource Partners LP on May 1 [see Shale Daily, March 19], offset by new wells brought on during the quarter primarily in the Eagle Ford Shale and Niobrara Formation.

“Not only did our oil production set another record, averaging over 8,600 b/d, our total revenue grew over 80% from the same quarter last year,” Johnson said. “Our operations are becoming increasingly efficient; our [earnings before interest, taxes, depreciation and amortization] for the quarter was over $36.70/boe of production, reflecting the effect of our improvement in costs per unit of production and the benefit of our oilier production mix.

“Our activity forecast for the fourth quarter is to continue at the same pace as the third quarter; drilling with three rigs in the Eagle Ford Shale, one rig in the Marcellus Shale in northern Pennsylvania, and one rig in the Niobrara with plans to add another Niobrara rig early in the first quarter of next year.

“The Eagle Ford Shale continues to be the focus of our investing; we have recently added approximately 2,000 tuck-in acres in La Salle County, bringing our total to approximately 48,000 net acres. In addition, we have finalized our plans to drill our first Pearsall Shale test to spud later this month on one of our acreage blocks in southern Frio County.”

During the last week 10 of the company’s 14 drilled and completed Marcellus wells in Wyoming County, PA, were brought online. Production from the 10 wells is about 50 MMcf/d gross (15 MMcf/d net), which is flowing north on the new southern Laser Pipeline to an interconnect with the Tennessee Interstate Gas Transmission line. The remaining four wells are expected to come online at the end of November, Johnson said.

Adjusted revenues were $105.9 million, which includes oil and gas revenues of $96.2 million and realized hedge gains of $9.7 million, compared to $58.7 million for the third quarter of 2011, which includes oil and gas revenues of $51.7 million and realized hedge gains of $7 million. The increase in adjusted revenues was primarily driven by increased oil production and prices partially offset by lower gas production and prices.

Including the impact of realized hedges, company’s average realized oil price increased 7% to $97.56/bbl compared to $91.38/bbl for the third quarter of 2011. The average realized gas price decreased 21% to $2.93/Mcf compared to $3.73/Mcf for the third quarter of 2011.

Adjusted net income was $17.8 million (44 cents/share) compared to $9.3 million (24 cents/share) during the third quarter of 2011. Carrizo reported a net loss of $0.9 million (minus 2 cents/share), primarily attributable to a $24.7 million unrealized loss on derivatives, compared to net income of $21.6 million (55 cents/share) for the third quarter of 2011.