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And still holding. Anybody here wanna talk weather?
Looking to accumulate more shares of CRZO. I think they're going to have an excellent quarter. I wish they would bring their debt burden down, but I like it in the $30 area prior to earnings.
Those interested in domestic oil producers and growing long-term production should think about Carrizo.
Last year Carrizo increased Barrels of Oil Equivalent Production per Day (BOEPD) by 26% and are expected to have long-term compound production growth of 28%.
This growth rate is comparable to other domestic players such as Continental (CLR), EOG, Whiting (WLL) and Noble (NE).
@DFW - I see $CRZO as a buy here, with the break up value or PV10 which is what most of these assets sale for, speaking from personal experience.
Your welcome...it looked interesting and I thought I would share it...
Thanks-- i saw this yesterday at Seeking Alpha... i'm surprised we're not getting some more positive trading volume but it's a low volume day for many stocks... i guess the market adage "sell in May and go away" led many to sell in April and now "they" are "gone away."
As CRZO shows its greater earning potential over coming qrtrs, this should finally fly back above $30.
Why Small Cap, Domestic Oil Producer Carrizo Could Yield Huge Gains
Apr 28 2013
http://seekingalpha.com/article/1379631-why-small-cap-domestic-oil-producer-carrizo-could-yield-huge-gains?source=email_alternative_energy_investing&ifp=0
Those interested in domestic oil producers and growing long-term production should think about Carrizo. Last year Carrizo increased Barrels of Oil Equivalent Production per Day (BOEPD) by 26% and are expected to have long-term compound production growth of 28%. This growth rate is comparable to other domestic players such as Continental (CLR), EOG, Whiting (WLL) and Noble (NE) (although the latter does have some other assets).
... But The Most Exciting Part Is Asset Values
The proven value of Carrizo's assets, discounted at a rate of ten percent (PV10) is already $1.6 billion. Contrast that with the current market cap of $950 million. Consider then the value when "probable" assets are added: the total PV10 would be over $4.5 billion. In this we can see the extent of Carrizo's upside potential.
Drilling highlights; Maverick Basin – Eagle Ford Shale: Carrizo has ~48,000 net acres prospective in the Cretaceous-age Eagle Ford Shale in the moderately over-pressured (0.6-0.7 psi/ft) northern condensate window primarily in LaSalle County, Texas at a depth of less than 10,000’.
Estimated Eagle Ford original oil-inplace is 40+ Mmboe per section.
Five months later and the question is the same....too much debt for me.
Key points on $CRZO for consideration: Carrizo was an early mover into the Eagle Ford and according to its website has 41,000 net acres and 50 wells (primarily in the oil and condensate windows).
The company started remaking itself from a mostly natural gas producer to liquids producer in 2010 and now claims liquids account for over 60% of revenue.
The company has met and exceeded its Eagle Ford goals; profits have nearly quadrupled thanks to the company's higher oil production.
Carrizo's financials show that, as of the second quarter of 2012, quarterly revenue growth is at 83% year-over-year, total debt is $870 million, and debt/equity is 166.
In addition to the Eagle Ford, the company has valuable assets in the Niobrara and Utica shale, natural gas in the Marcellus and Barnett shale, and North Sea oil.
Insider's buying. Credit Suisse analyst has future eps #'s on steady rise.
they just sold a large chunk of nat gas proven reserves. i still have the $25 july puts. they have recovered a little bit in the last couple days but i may have to take the opportunity to unload for a small loss. i never thought it'd get above $30 should waited longer to buy(crzo $25 july put) and then doubled up
I think crzo broke out on 3/1/2012 on double average daily volume. I now think it is backtesting that resistance line (now support), which coinsides with it's 200D SMA. At a minimum, price is consolidating. Anybody here care to comment? Stock price is less than what the value of their Eagle Ford assets are. And, 80% liquids production going forward. This is not a natgas play, imo!
earnings miss. looks like there wee buyers anyaway. i knew this was a tough sector to bet against but with no real earnings how is this up? can these prices hold throughout the quarter?
put city. rooting for missed earnings. nat gas was low and oil didnt spike until after Q4 last year. they might be guiding upward but still losing $. im looking for a pullback to 24 or 25 to sell my puts
Its working well for us!
I think there's to much association with natural gas and not enough with oil. I'm holding my position and I hope we don't revisit the $18 area. If something happens over in Iran and we spike, I'll bail.
I've accumulated shares in this company yesterday and at today's open. Wish me luck.
We were figuring at another board that the Utica shale play was risky, so this is a brilliant move by Carrizo and it helps Avista to get going.
Nice comeback today.
Trueheart
Boo boo, the presentation Monday to the independent producers will tell all about where the company is headed.
I read the financials and they don't appear to me to warrant the huge decrease in share price.
Trueheart
Forgot to mention more sellers than buyers. Sorry!
Company debt and crude in confirmed downtrend since May? What are your thoughts? Do you really think they'll earn as much as CEO has stated they would next year?
Thank you in advance. I had puts on this stocks and should have held, but it was a good trade and I made good coin! No position. Like GPOR and BEXP. ATPG is my lotto pick!
What are your thoughts as to why this stock has lost over 50% of its value over the last three months?
Thanks.
Trueheart
Gapped down on above average volume. Volume on rebound anemic so far!
I like Brigham too, looks like CRZO should be looking again soon though.
http://seekingalpha.com/article/288086-5-beaten-up-oil-shale-stocks-sure-to-ride-high-again?source=yahoo
I like Brigham exploration and nitro petroleum better.
I've seen G1 completion data on a well in Webb county (South of LaSalle) of 400 ft thick. Wilcox 2059, OLMOS 7147, Austin Chalk 10023, Eagleford 10550, Buda 10946 (they completed in Eagleford, so it must've been a test to see the thickness well).
http://seekingalpha.com/article/287506-carrizo-why-it-s-the-best-oil-stock?source=email_portfolio
A recent 4-part series of Seeking Alpha articles looked at investing in the Bakken – here, here, here and here. The series concluded that Brigham (BEXP), compared with other drillers - Continental (CLR), Whiting (WLL), Oasis (OAS), Northern (NOG) and Kodiak (KOG) - is the standout Bakken investment prospect. The conclusion remains valid and has since been supported by very good Q2 results and subsequent analyst upgrades.
However, BEXP is not at the top of the small/mid cap investment charts when one looks outside the Bakken. That honor goes to Carrizo (CRZO).
At first look Carrizo appears to be a natural gas producer. But it is not. It is essentially a high growth oil & liquids driller with a profitable gas legacy business. Right now, in Q3 2011, Carrizo does generate more sales revenue from gas than from liquids but the company is at the inflection point and from Q4 2011, sales of liquids will dominate. The switch to liquids becomes pronounced in 2012 and this major transition is the reason for the outsized growth in analysts’ sales and EPS estimates.
The following chart is useful in understanding how Carrizo’s sales mix is changing from gas to liquids. The data for 2010, and up to Q2 2011, is from filed quarterly reports, and forecasts from Q3 2011, to end 2012, are based on analysts' published numbers. Figures for 2013 are indicative only, based on overall sales growth of 33%. All figures are $ millions.
(Click charts to enlarge)
Business operations
Carrizo has a collection of valuable leases; Eagle Ford 33,000 acres within the oil and condensate windows; Niobrara 62,000 acres predominately oil; Marcellus gas shale 118,000 acres; Barnett gas shale 32,000 acres and Fayetteville gas shale 20,000 acres, and lastly a small stake in a North Sea field. All acreage figures are net.
Of the company’s net $253 million 2011 capex plan, $225 million is targeted at Eagle Ford and Niobrara, being $195 million drilling and $30 million land acquisition. This $225 million represents 90% of the company’s full year budget and the $195 million drilling plan is almost 5 times that of 2010.
Carrizo’s Eagle Ford leases are primarily located in La Salle County, partly in the Hawksville field considered by many to be one of the hottest prospects within the Eagle Ford. Petrohawk (HK), currently being acquired by BHP Billiton, is a major player in this area with 236,000 acres. According to Petrohawk, its average shale thickness is over 300 feet. This is several times thicker than that of formations such as the Bakken which, although not entirely uniform, is often cited as having a thickness of about 40 feet. With Eagle Ford’s low porosity this should pave the way for multiple horizontal wells to be drilled at differing depths without experiencing meaningful well to well communication. This has obvious repercussions for volumes of oil capable of being extracted, value of leases owned, low cost of infrastructure, efficiency of production and overall profitability.
Although Carrizo has not (yet) published specific details about shale thickness in the Eagle Ford leases, the indications from competitors and from maps are that the leases contain shale in the 200-300 feet bracket.
Of Carrizo’s $253 million net 2011 capital budget, a total of $160 million is being dedicated to drilling in Eagle Ford where the company has three dedicated rigs. The company estimates drilling cost per 5,000ft well is about $7-8 million. With EUR of 400 Mboe and NYMEX at $85 this gives a payback of 1.8 years. Based on 115 acre spacing, Carrizo estimates it will drill 230 x 5,000ft laterals.
It is worth questioning the number of acres required for each well. There are reports that areas within the Eagle Ford region have multiple levels of oil bearing shale but we have no specific information from Carrizo. Nonetheless, 115 acre spacing looks comfortably conservative. Ultimately, drillers may be able to drill with 100 feet spacing or less. In theory, this would require as little as 500,000 square feet – equal to just over 11 acres - for a single 5,000ft lateral. Furthermore, given Carrizo’s shale thickness of 200-300ft, it seems that more than one well can be drilled at a given location, thus multiplying the number of wells per acre. Today however, not even the most optimistic commentator would suggest that a single well will require an average as low as 10 acres. Suffice it to say that 115 acre spacing is conservative and that the ultimate inventory of prospective wells should be much greater than at present.
It is for economic reasons such as these mentioned that Eagle Ford acreage sells at over $20,000 per acre versus about $5,000 per acre for Bakken. Recall that in June 2011, Marathon (MRO) paid $24,800 an acre for 141,000 Eagle Ford acres. Marathon knows a thing or two about the oil business, and presumably about Eagle Ford. BHP Billiton, in acquiring Petrohawk, is also showing awareness of Eagle Ford’s potential as a valuable oil producing region. Whilst the popular press has typically described Petrohawk as a gas producer the fact is that it too is morphing into a shale oil producer.
The second area of focus for Carrizo is Niobrara, where the company plans to spend $35 million on drilling this year where Carrizo now has one dedicated rig. Here, each well costs $3.6 million to drill. With EUR of 300 Mboe and NYMEX of $75 (due to higher differential), the payback is 2.4 years. Assuming 320 acre spacing CRZO estimates it will drill 97 wells in Niobrara.
At the current spud rate, and using today’s conservative well spacing number, Carrizo has over 10 years of drilling inventory between Eagle Ford and Niobrara. Over time this inventory number should increase by more intensive well drilling and also through further land acquisitions.
Natural gas production at Carrizo will receive less attention going forward but it remains a profitable and valuable business with some growth potential remaining. Evidence of the company’s strategy was provided in Q2 2011, when Carrizo sold some non-core Barnett shale acreage to KKR for $104 million. Similar transactions can be expected in the future and during the Q2 earnings conference call Carrizo management conceded the company is looking to close a deal on additional Eagle Ford land in La Salle County, which is likely to be funded by disposal of other non-core assets.
Financials
Carrizo’s financials are impressive. Sales were $173 million in 2010 and are on track to hit $273 million this year and then accelerate to $565 million in 2012. EPS growth, propelled by the switch of emphasis to oil from gas, is even better. EPS were $1.12 in 2010, and are forecast by analysts to reach $1.64 in 2011 and then $4.90 in 2012.
So, what might preliminary 2013 EPS look like? Sales in 2013 of $750 million, an increase of 33% over 2012, would produce 2013 EPS of about $7.00.
As to whether or not these 2012 analysts’ estimates and the 2013 guesstimates are achievable - much depends on Carrizo’s liquidity position and capex plans.
Carrizo’s liquidity and funding positions are secure. During late 2010 and early 2011 the company wisely put in place advantageous long-term funding arrangements that have enabled it to fund growth through borrowings instead of via dilutive shareholder offerings. In particular in November 2010, it established $400 million unsecured notes due in 2018, and in January 2011, and entered into a $750 million revolving credit due 2016, with a borrowing base of $350 million. Looking back, these were clearly prescient moves and management is to be commended.
Cash from operations is an important driver of liquidity going forward. Forecast cash from operations is $135 million in 2011, rising to over $300 million in 2012 and then above $400 million in 2013. Once again, these are impressive numbers.
In 2012 and in 2013, with the help of the $300+ million and $400+ million cash from operations, and with the ongoing support from the $400 million 2018 notes and the $350 million credit facility availability, Carrizo should certainly have the scope to implement further large capex programs in order to continue the strong growth cycle into 2013.
Overall, the analysts’ $4.90 EPS forecast for 2012 is manageable. And indicative EPS of $7.00 for 2013 also seems doable.
Investing in CRZO
The recent correction has thrown up some exceptional bargains, CRZO stock being a great example.
Having traded at $44 in July the stock cratered to $26 during the August market blow-up. With the market looking to find its legs again, CRZO has only mustered a weak recovery to the $30 level. Meanwhile on August 9, the company reported in-line EPS for Q2 with revenue showing excellent growth but still a shade below estimates. Following the earnings release analysts tweaked their estimates ever so slightly with the average target prices for the stock remaining unchanged at $46. At this price the stock is now on a forward p/e of 6.2.
At the beginning of this article it was stated that Brigham (BEXP) is the standout investment prospect within the Bakken but that, overall, CRZO stock is a better buy. Here’s what the respective analysts say:
BEXP CRZO
Number of analysts 21 15
High target price $46.00 $55.00
Low target price $27.50 $39.00
Mean target price $38.80 $46.20
Current stock price $28.69 $30.37
Upside % to mean 35% 52%
Note: CRZO stock is currently $9 below the lowest target by any of the 15 analysts following the company!
The bottom line
In spring 2012, now just 6 months away, analysts will post new next year EPS estimates for CRZO and these are likely to be in the region of $7.00. During this era of paltry economic growth (Pimco’s ‘new normal’ if you prefer) it takes very little to cause a wobble in the summer, which seriously hurts confidence and share prices. The converse occurs around year-end and into the New Year as optimism about the future is pervasive. In such a springtime environment stocks of growth companies trade on much better forward P/Es than during the dog days of summer. Come spring 2012, CRZO stock is likely to trade on a next year P/E of 8-10 without pushing the envelope. That should value the shares at $56-$70. From today’s $30 stock price this represents a double in 6 months.
This is why CRZO is one of the absolute best oil stocks out there, even better than BEXP, which itself is a great investment. And all that is without a word about acquisition premiums that will occur when more shale plays are taken out from time to time. There will be further acquisition deals, you can bank on it.
Let’s be clear: To maximize returns buy now and sell in spring 2012 with a plan to repeat this entire exercise in mid 2012. There is no room for sentiment in today’s markets.
Disclosure: I am long BEXP CRZO
This is a stock to own of this Fall if the CEO is right....
CEO on Mad Money (CNBC) Tuesday and they sold some of the leases that they just could not get too and expect to double in 3rd quarter (can't remember if it was production or stock price).
530 Barrels per day. Doesn't seem to be that productive. Any idea how much other wells are pulling from the region? Stock is selling off on the news...
Sounds like a reasonable guess. Either way we are in very good shape for the new year. Cheers!
I have not. They were supposed to release results by the end of the year. With today being the last day, I'm guessing they won't. Look for them to comment on Niobrara on their Jan 6 presentation in San Fran. That's my best guess!
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