Carrizo Oil & Gas

The banks who lend money to Carrizo Oil & Gas, a Marcellus/Utica driller, have taken a look at the company and its assets and have determined that instead of a “borrowing base” (or line of credit) worth $570 million, Carrizo has done well enough that they’re ready to goose it up to a credit line of $675 million–a nice $105 million increase. (Maybe we should bank where Carrizo does!) Carrizo has said “hold on there a minute pardner, we’re just gonna increase it another $15 million for now.” And so Carrizo’s line of credit is now worth $585 million…
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We don’t often talk about personnel changes at Marcellus and Utica Shale companies–unless they’re in the “C” suite: Chief Executive Officer, Chief Marketing Officer, Chief Financial Officer. It is that last one that has just had a changeover at Marcellus/Utica driller Carrizo Oil & Gas. CFO Paul Boling, who was Vice President, Chief Financial Officer, Secretary, and Treasurer retired on Monday. He’s been replaced by David L. Pitts, Carrizo’s current Vice President and Chief Accounting Officer…
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Carrizo Oil & Gas is a big energy company, but has relatively small operations in both the Utica and Marcellus Shales. Lately they’ve been focusing their efforts on “oily” shale plays, like the Eagle Ford in Texas (they spent 78% of their drilling budget on the Eagle Ford last quarter). However, Carrizo does maintain a steady program in both the Marcellus and Utica. Yesterday Carrizo released their second quarter 2014 financial and operational update. Below we’ve pulled out those areas that touch on their operations in the northeast…
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Carrizo Oil & Gas is a Houston-based driller with drilling operations in four shale plays in the U.S. Two of the four are the Marcellus and Utica. Earlier this week Carrizo issued their first quarter 2014 operational and financial update. Among the tidbits MDN has picked up from that release: Carrizo has gotten a $100 million increase in the line of credit from their banks–more money to drill with; the company spent 75% of its drilling and completions budget in 1Q14 on the Eagle Ford, an “oily” play; for the rest of the year, the company is spending the majority of its budget for land acquisition on the Eagle Ford and the Utica; they will drill 9 Utica wells this year and they are currently negotiating a midstream (pipeline) solution for the Utica; they’ve recently added more Utica leases in Guernsey County, OH; in the Marcellus, Carrizo plans to drill a total of 25 wells this year, but they are hampered and somewhat frustrated by lack of midstream capacity in the Marcellus.

Below we have lifted out of the update those sections that provide the most information about Carrizo’s operation in the Marcellus and Utica…
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Last November MDN told you that Carrizo was de-emphasizing the Marcellus and instead focusing on more oily and wet gas plays, like the Utica (see Carrizo Down on Marcellus, Up on Utica and Other Wet/Oil Plays). In releasing their 2013 fourth quarter and full year results yesterday, Carrizo’s CEO Chip Johnson said, “We began our shift from gas to oil back in 2010, and I’m pleased to say that we’ve now completed the transition. Crude oil now accounts for more than 60% of our proved reserves, and even though we sold almost 45% of our 2012 U.S. reserve base through our Barnett Shale and other non-core divestitures, we were still able to increase our PV-10 by 44% in 2013. Oil also now accounts for the majority of our production, as we expect it to be approximately 60% of 2014 volumes.”

Does that mean Carrizo is exiting the Marcellus completely? Not according to the update. Carrizo drilled 6 Marcellus wells in 4Q13. They complain that midstream (pipeline) delays continue to “impact” their operations in the Marcellus, along with really low commodity prices. So for now they’ve pulled back. For 2014 they plan to complete the wells they’ve already drilled–24 in all, and finish up drilling 3 wells already begun. According to our trusty NGI’s Shale Play Factbook, Carrizo owns leases on 49,200 acres in the Marcellus (and 21,700 acres in the Utica). Here’s yesterday’s update which clearly details the oil/wet gas direction of the company…
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Carrizo Oil & Gas, a driller in the Marcellus Shale as well as in other shale plays, announced today it has sold the rest of its remaining Barnett Shale properties (the first shale play for Carrizo’s drilling) as well as selling off other “non-core” assets in East Texas and in the Marcellus itself. Proceeds from the sales: $268 million, which Carrizo plans to use to pay back loans and for more drilling mostly in the Eagle Ford Shale. The Utica Shale is in Carrizo’s sites for 2014.

There’s nothing in today’s statement that indicates Carrizo is abandoning the Marcellus, although their recent 2Q13 financial/operational update indicates they have scaled back a great deal on the Marcellus (see Carrizo Oil & Gas 2Q13: Scaling Back in the Marcellus…for Now). Carrizo’s statement (below) does not indicate where the 2,850 “non-core” acres they’ve just sold in the Marcellus are located…
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Marcellus and Utica Shale driller Carrizo Oil & Gas issued a second quarter brief update yesterday to say results they’re getting in the Eagle Ford Shale play (in Texas) are better than expected. Carrizo gets both oil and gas in the Eagle Ford, which seems to be their focus lately. Carrizo operates three rigs in the Eagle Ford, two in the Niobrara Formation (Colorado), and one rig in the Marcellus. According to the release, Carrizo will move up previously planned Utica drilling from 2014 to 2013 to avoid drilling in the winter. They plan to drill their second Utica well by the end of this year.

According to MDN’s Marcellus and Utica Shale Databook 2013, Volume 1, for the period Jan-Apr 2013, Carrizo had 8 permits issued for drilling in Pennsylvania, and 2 permits for drilling in Ohio. Relevant portions of yesterday’s Carrizo update:
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