Carrizo Oil & Gas Inc CRZO reported fourth-quarter results Monday that prompted KeyBanc Capital Markets to "dramatically" lower its estimates and outlook for the Houston-based energy name.
The Analyst
KeyBanc's Chris Stevens downgraded Carrizo Oil & Gas' stock rating from Overweight to Sector Weight with no assigned price target.
The Thesis
Throughout the fourth quarter, Carrizo's oil production averaged 40.2 million barrels per day, which fell short of management's guidance of 40.4-40.8 mb/d and the 40.4 mb/d Stevens was modeling, the analyst said in the downgrade note. The Q4 EPS and DCPS of 58 cents and $1.92 were mixed versus the analyst's expectations of 58 cents per share and $1.88, and capital expenditure in the quarter of $215 million was "high," as it came in above the $180 million expected, Stevens said.
Looking forward to 2018, Carrizo guided its oil production 10 percent below Stevens' expectations, while capital expenditure came in 13 percent ahead of estimates, the analyst said.
Carrizo's management attributed its higher-than-expected cost spending plans to operational constraints in the Delaware, as it is producing more water than for which it has available disposal capacity, Stevens said.
Well costs in the Eagle Ford region also increased 2 percent, while estimate ultimate recoveries were lowered by 13 percent due to performance issues related to parent-child degradation and steeper declines, according to KeyBanc.
The analyst lowered his full year 2018 EPS estimate from $3.20 to $2.31 and 2019's estimates were lowered from $4.02 per share to $3.08 per share.
Price Action
Shares of Carrizo Oil & Gas were trading lower by more than 13 percent ahead of Tuesday's market open.
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