Carrizo Oil & Gas Inc. (NASDAQ: CRZO) elaborates on current operations and Q2 earnings. The Excerpts from the Q2 Call are below.

Q: Eagle Ford continues to look like you’re having really nice success there. Can you just talk about space in a little bit more there? I know you’ve been able to down space a bit with the Brown Trust and others, but just any comments you could have around how you view the rest of your space and field?

President and Chief Executive Officer S.P. “Chip” Johnson: I think generally we’re sticking with 330-foot spacing in bulk of the acreage. There’s still a couple of places we think 500 feet might be better on the Brown Trust. We did have some of the wells in 250 feet. And so far we haven’t seen any interference or better or worse performance, but we’re still in the early six-month period where everything is on restricted chokes and constrained rate. So it’s hard to tell. I think we’d rather just say 330-foot is the easy answer and we’ll keep trying to figure out ways to tighten that up.

Q: Secondly, Chip, there seemed to be a little confusion or maybe just talk a little bit about the Brown Trust accelerated payout. Is that sort of typical of what you’re seeing on a lot of your plays? And again, I mean, frankly I was glad to see it, but I just – if you could talk maybe a bit more about that?

President and Chief Executive Officer S.P. “Chip” Johnson: Well, I don’t think we have back-ins after payout anywhere else in our inventory. We used to – we bought out some of those partners three or four years ago. But this was an arrangement we got into with a major where we had at least half the minerals, they own the other half, and we made a deal with them eight years ago where we could drill and they could either participate or they could back-in after payout. And sometimes they participate, sometimes they back in.

This time, they’re going to back in. And this had been in the fourth quarter. We probably would have had to draw attention to it. But if it had just been in the middle of the year, it wouldn’t have made much difference. But they have 1,000 barrel a day drop in production in the fourth quarter. We felt like we needed to point that out. Otherwise, we thought this would have happened in the first or second quarter of next year.

Q: When that just balances, I guess that’s just sort of a onetime item then, correct?

President and Chief Executive Officer S.P. “Chip” Johnson: On those wells. Next year when we bring on more wells in the Brown Trust, if that company has not participated, then it’ll start another back-in after payout on those wells.

The good thing was we made that much more EBITDA this year than we expected to, because of the raise in the oil prices. So, we felt like it was a good thing.

Q: Just wanted to follow up a little bit on what you’d said there on the Permian and, clearly, you guys were talking about lower activity as you work later this year. But I guess just from a high level, should we expect Permian to continue to grow in the third quarter and then also in the fourth quarter or do you start to see Permian flatten out or even decline a little late this year in terms of the production there? And then into the first half of 2019, just a similar question, does Permian grow? Does it flatten? Does it decline? How do you see that playing out with the activity shift?

Vice President of Investor Relations Jeff P. Hayden: So, if you think about it, you just kind of add on a little bit in some of those questions about activity. What you probably see just given the drilling activity in Eagle Ford this year, and then in fact we’re keeping four rigs there for the first half of next year, I think it’s safe to assume that you probably see the completion activity weighted to the Eagle Ford in the first half of the year. And then it’ll probably be weighted a little more towards Permian in the back half of the year. Given that, what you’re probably going to looking at in the Permian is kind of a flattening. I don’t know if you’ll necessarily see a decline, but maybe a flattening of production over the next several quarters. And then as you get kind of later next year, you probably see the Permian start to incline a lot more as we start increasing the completion activity out there.

In the meantime, I think, between now and then you’re going to see a lot of production growth likely in the Eagle Ford Shale as we kind of shift our activity over there.

Q: I guess is it safe to assume that the changes you guys have made, a shift in capital to Permian that basically all your Permian acreage as you’re looking to protect will get held over the next year here?

President and Chief Executive Officer S.P. “Chip” Johnson: We’ve got a drilling schedule in the Permian that takes care of our acreage. That’s still something – that’s the most critical thing we have to do at this point.

Q: Okay. Now that makes sense for sure. And I guess just lastly on the asset sale that you guys had just mentioned here. Just trying to get a sense in terms of magnitude, if you guys could let us know what the proceeds are and is this a one-off deal or might you guys monetize other little bits and pieces of the Permian going forward?

President and Chief Executive Officer S.P. “Chip” Johnson: Well, I guess in the past we’ve actually sold some little bits and pieces. This one, especially because it was non-op and the new owner, the new operator of these assets was pretty aggressive about capital spending. We felt like this could reduce our non-op CapEx budget significantly over the next two years and we felt like we got a good price for it. Part of our CapEx increase this year has been non-op. We have some other non-op partners who ramped up their activity in different parts of the core of the Delaware Basin and so we’ve had to increase our CapEx for that. But we felt like this was a good chance to maybe get out of some non-op at a good price and reduce that exposure to somebody else’s capital footprint.

Legal Notice