CRZO : NASDAQ : US$22.58
We lowered our target price $1 to $34 per share due to a slightly higherNGL composition. Notably, our target price includes a value of $20K per
acre for the company’s Utica Shale leasehold in Guernsey County. Early this year, Carrizo exercised its option to increase its leasehold in the Utica play to 17,000 net acres; approximately 50% of the acreage is in highly prospective Guernsey County. The company plans to drill its first Utica test in Guernsey County this summer.
Eagle Ford/Niobrara drive expected oil production outperformance In ’13, our oil/liquids growth outlook is ~38%, which is ~10% above
guidance (28%) underpinned by ongoing development in the Eagle Ford and Niobrara plays. Carrizo is conducting a three-rig program in the
Eagle Ford and two-rig program in the Niobrara. The company has generated competitive/consistent results across both plays.
Sale of North Sea lowers net debt-to-EBITDA to critical 3x threshold The recent sale of the Huntington field along with a series of minor liquidity events in the fourth quarter lowered the company’s net debt-to- EBITDA from 3.7x to 3x. Importantly, Carrizo is on a path to further lower net debt-to-EBITDA below 3x in future years. Additionally, the company has revolver financing visibility into late ’14 conservatively assuming the current bank borrowing base.
Almost $600 million in financial liquidity generated since September Last September, the company issued $300 million of term debt. After
accounting for the term debt, Carrizo’s bank line actually increased by $40 million due to the company’s oil production growth. Additionally,
the company generated ~$130 million in cash proceeds through two JVs in the Niobrara Shale and the sale of non-core Gulf Coast and Utica
Shale assets. Combined with the North Sea sale, these transactions increased the company’s financial liquidity by ~$590 million.