Gas Authority Of India Buys 20% Interest In Carrizo Oil And Gas (CRZO) Eagle Ford Acreage; An Executive Interview With The President And CEO
January 10, 2012 - The Wall Street Transcript has just published Oil & Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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S.P. Johnson IV has been President and Chief Executive Officer of Carrizo Oil & Gas Inc. since founding it in 1993. Previously, he worked for 15 years at Shell Oil in different E&P engineering roles. He has a B.S. in mechanical engineering from the University of Colorado. Mr. Johnson is on the board of Basic Energy Services, Inc., and was a board member of Pinnacle Gas Resources, Inc., until 2011. Carrizo Oil & Gas went public in 1997 and started drilling in the Barnett shale in 2003. Since then, the company has built sizable acreage positions in the Fayetteville, Marcellus, Eagle Ford and Niobrara shale plays. Carrizo and Avista Capital Partners are building an acreage position in the Utica shale.
TWST: Many companies in your industry have been refocusing from natural gas to oil. Would you comment on the trend as it pertains to Carrizo?
Mr. Johnson: We started trying to become more oily back in early 2010 and started buying acreage in the Eagle Ford and Niobrara shale plays. We started drilling before the end of 2010 and now we're in development mode in both plays. And as of November of this year, half of our revenues were from oil and half were from natural gas, and that's as opposed to about 90% gas and 10% oil third quarter last year. So we've made a quick turn. think our oil production will keep going up rapidly as we're spending about 70% of our capital budget on oil right now. And as we said once before, we think we'll be at 5,000 BOPD before the end of this year, which we still think we'll hit, and that will make that number even higher.
TWST: In the second quarter, you announced two joint ventures. Would you talk about those partnerships and the value you believe they'll add for shareholders?
Mr. Johnson: We announced two different joint ventures. One was with the Gas Authority of India, which is basically a mid-stream company in India that wanted to explore for shale gas primarily in India, and they wanted to start learning about it in the U.S. So we have partnered with them in the Eagle Ford. They bought a 20% interest in a piece of our Eagle Ford acreage, and they are now our partners there, and we're currently drilling wells and fracking and producing. What it does for us is it not only brought us some capital at an important time, but brought us a partner that's interested in potentially more U.S. deals and also may be a partner in shale gas in India.
The other JV we did was with Avista Capital Partners, where we basically formed a joint venture to acquire leases in Utica Shale in eastern Ohio. in that deal, Avista put up 90% of the capital. We put up 10% of the capital to acquire leases and do some test drillings. And there we have an option period, during which time, we can equalize with them at 50/50 by paying some costs plus interest. So the advantage of that deal is that we get to apply our acreage before the acreage costs get too high using Avista as a financing vehicle, and then we'll get to see how the play develops and how successful it is before we have to put up the rest of our money.
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