UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report (date of earliest event reported): July 21,
2005
CARRIZO
OIL & GAS, INC.
(Exact
name of registrant as specified in its charter)
|
Texas
|
000-29187-87
|
76-0415919
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification
No.)
|
|
1000
Louisiana Street
Suite
1500
Houston,
Texas
|
77002
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
Registrant’s
telephone number, including area code: (713)
328-1000
Not
applicable
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425 under the Securities
Act (17
CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17
CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under
the
Exchange Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under
the
Exchange Act (17 CFR 240.13e-4(c))
Item
1.01 Entry
Into a Material Definitive Agreement.
On
July 21,
2005, Carrizo Oil & Gas, Inc., a Texas corporation (the “Company” or “we”),
entered into a Second Lien Credit Agreement with Credit Suisse, as
Administrative Agent and Collateral Agent (the “Agent”) and the lenders party
thereto (the “Second Lien Credit Facility”) that matures on July 21, 2010.
The Second Lien Credit Facility provides for a term loan facility in an
aggregate principal amount of $150 million. It is secured by substantially
all
of our assets and is guaranteed by our subsidiary. The liens securing the
Second
Lien Credit Facility are second in priority to the liens securing our First
Lien
Credit Facility, as more fully described in the Intercreditor Agreement
among
us, the Agent, the agent under the First Lien Credit Facility (as defined
below)
and the lenders dated July 21, 2005.
A
portion of the proceeds from the Second Lien Credit Facility were used
(1) to repay and cancel all outstanding indebtedness under our senior
subordinated notes and our senior secured subordinated notes; (2) to
repay
existing indebtedness under our First Lien Credit Facility; and (3) to
pay
associated transaction costs. The remaining proceeds are expected to be
used to
partially fund our ongoing capital expenditures program and for other general
corporate purposes.
The
interest rate on each Base Rate Loan will be (1) the greater of the Agent’s
Prime Rate and the Federal Funds Effective Rate plus 0.5%, plus (2) a margin
of
5.0%. The interest rate on each Eurodollar Loan will be the adjusted LIBO
Rate
plus a margin of 6.0%. Interest on Eurodollar Loans is payable on either
the
last day of each interest period or every three months, whichever is earlier.
Interest on Base Rate Loans is payable quarterly.
We
are subject to certain covenants under the terms of the Second Lien Credit
Facility. These covenants include, but are not limited to, the maintenance
of
the following financial covenants: (1) a minimum current ratio of
1.0 to
1.0 including availability under the borrowing base under the First Lien
Credit
Facility; (2) a minimum quarterly interest coverage ratio of 2.75
to 1.0
through June 30, 2006 and 3.0 to 1.0 thereafter; (3) a minimum
quarterly proved reserve coverage ratio of 1.5 to 1.0 through September 30,
2006 and 2.0 to 1.0 thereafter; and (4) a maximum total net recourse
debt
to EBITDA (as defined in the Second Lien Credit Facility) ratio of not
more than
3.5 to 1.0 through June 30, 2006 and 3.25 to 1.0 thereafter. The
Second
Lien Credit Facility also places restrictions on additional indebtedness,
dividends to shareholders, liens, investments, mergers, acquisitions, asset
dispositions, repurchase or redemption of our common stock, speculative
commodity transactions, transactions with affiliates and other
matters.
The
Second Lien Credit Facility is subject to customary events of default.
Subject
to certain exceptions. Subject to certain exceptions, if an event of default
occurs and is continuing, the Agent may accelerate amounts due under the
Second
Lien Credit Facility (except for a bankruptcy event of default, in which
case
such amounts will automatically become due and payable). If an event of
default
occurs under the Second Lien Credit Facility as a result of an event of
default
under the First Lien Credit Facility, the Agent may not accelerate the
amounts
due under the Second Lien Credit Facility until the earlier of 45 days
after the
occurrence of the event resulting in the default and acceleration of the
loans
under the First Lien Credit Facility.
2
In
connection with the Second Lien Credit Facility, we amended our first lien
credit facility, which provides us with a revolving line of credit of up
to
$75.0 million and a term loan facility of up to $25.0 million (the “First Lien
Credit Facility”), with Hibernia National Bank and Union Bank of California,
N.A. Such amendment includes without limitation: (1) an adjustment
to the
maximum total net recourse debt to EBITDA (as defined in the First Lien
Credit
Facility, as amended) ratio, such that the maximum is 3.5 to 1.0 through
September 30, 2006, 3.25 to 1.0 through December 31, 2006 and 3.0 to 1.0
thereafter; (2) an adjustment to the covenant regarding maintenance
of a
minimum shareholders’ equity, such that the quarterly minimum is $115 million;
(3) an adjustment to the covenant regarding maintenance of a minimum
EBITDA
to interest expense ratio, such that the minimum is 2.75 to 1.0 through
September 30, 2006 and 3.0 to 1.0 thereafter; and (4) the
addition of
other provisions and a consent which permits the indebtedness incurred
and the
liens granted under the Second Lien Credit Facility.
The
foregoing descriptions of the Second Lien Credit Facility and the amendment
to
the First Lien Credit Facility are not complete and are qualified by reference
to the complete documents which are attached hereto as exhibits and incorporated
herein by reference.
Item
2.03 Creation
of a Direct Financial Obligation.
On
July 21, 2005, we entered into the Second Lien Credit Facility and
consummated related transactions, as described under Item 1.01 above. The
discussion under Item 1.01 of this Current Report is incorporated herein
by
reference.
Item
7.01 Regulation
FD Disclosure.
In
April 2005, we acquired assets in the Barnett Shale for approximately $4.1
million. This acquisition consisted of approximately 600 net acres and
working
interests in 14 existing gross wells (7.3 net) with an estimated 5.4 Bcfe
of
proved reserves, based upon our internal estimates. All of the interests
in the
wells acquired related to wells in which we already had an interest. The
consideration paid for this acquisition was approximately $2.3 million
in cash
and 112,697 shares of our common stock.
On
or about April 30, 2005, two of our top producing wells, the Delta Farms
#1 and
the Beach House #1, were shut in for workovers. The workover on the Beach
House
#1 has been completed, and it was put online on July 1, 2005. The Beach
House #1
currently averages approximately 0.5 MMcfe/d net, compared to 2.0 MMcfe/d
net
prior to the workover. The workover on the Delta Farms #1 also has been
completed, and it was put online on July 14, 2005. The Delta Farms
#1
currently averages approximately 0.7 MMcfe/d net, compared to 2.0 MMcfe/d
net
prior to the workover. While there can be no assurance at this time and
we
cannot predict whether the wells will achieve production at the pre-shut
in
levels, it is likely that the production levels of these wells will continue
to
improve in the near term. We estimate that the impact from these workovers
on
our second quarter average daily production was a reduction of approximately
2.0
MMcfe/d.
As
a result of natural declines and delays in tying new wells on line (including
an
estimated 7.0 MMcfe/d of production from wells awaiting completion and/or
pipeline hookup),
3
as
well as the shut-in wells described above, we estimate that our second
quarter
production was in the range of 23 to 24 MMcfe/d as compared to our first
quarter
2005 production and our second quarter 2004 production of 26.2 and 21.6
MMcfe/d,
respectively.
We
recently completed a scheduled May 2005 borrowing base redetermination
under our
First Lien Credit Facility. Our prior borrowing base of $33 million was
increased to $39 million, effective June 30, 2005 through July 20, 2005.
This
borrowing base included the impact of the workovers completed on the Delta
Farms
#1 and Beach House #1 wells. In connection with the amendment of our First
Lien
Credit Facility described under Item 1.01 above, our borrowing base was
reduced
to $10 million, effective July 21, 2005.
Through
our wholly owned subsidiary, CCBM, Inc. (“CCBM”), we have a minority ownership
interest in Pinnacle Gas Resources, Inc. (“Pinnacle”), which explores for
coalbed methane reserves in Montana and Wyoming. In March 2005, Pinnacle
entered
into a purchase and sale agreement to acquire additional undeveloped acreage,
which would also significantly increase its development program budget
in 2005.
CCBM and the other Pinnacle shareholders were given the option to participate
in
the equity contribution into Pinnacle needed to finance this acquisition
and its
development program in 2005. Should we maintain our proportionate ownership
interest in Pinnacle on a fully diluted basis, we estimate that we would
be
required to contribute approximately $3.2 million in the near term and,
if
requested by Pinnacle’s Board of Directors, up to an additional $3.2 million by
December 31, 2006. If CCBM does not contribute any or all of its share
of the
equity contribution, its fully diluted ownership in Pinnacle would be reduced.
In May 2005, CCBM initially subscribed, subject to certain conditions,
to
purchase additional Pinnacle capital stock valued at $3.0 million, its
approximate share of the first installment of the equity capital needed
to fund
the acquisition and part of the additional development program. However,
subject
to approval from our board of directors and from Pinnacle, we expect that
CCBM
will now elect not to participate in the equity contribution in Pinnacle.
There
can be no assurance regarding CCBM’s level of participation in future equity
contributions to Pinnacle,
if any.
Certain
statements in this report, including but not limited to statements regarding
our
second quarter production, the impact of workovers on production, the equity
contribution in Pinnacle, our capital expenditures program and the use
of
proceeds from the Second Lien Credit Facility and other statements that
are not
historical facts, are forward looking statements that are based on current
expectations. Although the Company believes that its expectations are based
on
reasonable assumptions, it can give no assurance that these expectations
will
prove correct. Important factors that could cause actual results to differ
materially from those in the forward looking statements include our results
of
operations, general market conditions, the effect and success of workovers,
actions by Pinnacle and other risks described in our Form 10-K for the
year
ended December 31, 2004 and our other filings with the Securities and Exchange
Commission.
4
Item
9.01 Financial
Statements and Exhibits.
(c) Exhibits.
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Exhibit
Number
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Description
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10.1
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10.2
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10.3
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10.4
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5
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
CARRIZO
OIL & GAS, INC.
By:
/s/ Paul F. Boling
Name: Paul
F. Boling
Title: Vice
President and Chief Financial Officer
Date: July
22, 2005
6
INDEX
OF EXHIBITS
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Number
|
Description
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10.1
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|
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10.2
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10.3
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10.4
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