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Carrizo (CRZO) Divests Non-Core Properties, Stock Declines

Zacks

Upstream oil company, Carrizo Oil & Gas, Inc. CRZO recently agreed to divest all its Denver-Julesburg Basin assets for a total consideration of $140 million. The deal will also fetch Carrizo up to $15 million in contingent payments over the next three years, which depends on oil price level surpassing a predetermined limit. The company is yet to declare the name of the buyer.

Carrizo expects the transaction, which has an effective date of Sep 1, 2017, to close in January 2018. In the third quarter, the DJ Basin assets produced 2,427 net barrels of oil equivalent per day (Boe/d), of which 69% was oil.

The divestment is in line with the company's strategy, announced earlier this year, to sell its non-core assets. The sale will also help it to lower its debt burden. It is to be noted that as of Sep 30, 2017, the company had long-term debt of $226 million.

On top of that, the divestiture program of the non-core assets has left the company with core oil and gas resources that include 103,000 net acres in Eagle Ford Shale along with 43,600 net acres in the Delaware Basin. Per Carrizo, the sale of the assets will enable the company to deliver strong and high-return production growth.


Carrizo stock, which has been volatile and trading within the range of $17.69–$20.16 in the past 30-day time-frame, witnessed a sharp decrease of 9.3%, following the news. Analysts believe that the price Carrizo secured from the deal is below its expected level of $200 million. This may have caused the decline in shares.

About Carrizo

Carrizo is a Houston-based energy company actively engaged in the exploration, development, exploitation and production of oil and natural gas primarily in proven trends in the Barnett Shale area in North Texas and along the Texas and Louisiana onshore Gulf Coast regions. Carrizo controls significant prospective acreage blocks and utilizes advanced three-D seismic techniques to identify potential oil and gas reserves and drilling opportunities.

Price Performance

Carrizo has lost 49.8% of its value year to date compared with 23.3% fall of its industry.

Zacks Rank and Stocks to Consider

Carrizo carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector include ConocoPhillips COP, Northern Oil and Gas, Inc. NOG and Denbury Resources Inc. DNR. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based ConocoPhillips is a major global exploration and production company. The company’s sales for 2017 are expected to increase 24.4% year over year. The company delivered an average positive earnings surprise of 152.3% in the last four quarters.

Minnetonka, MN -based Northern Oil and Gas is an independent energy company. The company’s sales for the fourth quarter of 2017 are expected to increase 51.9% year over year. The company delivered an average positive earnings surprise of 175% in the last four quarters.

Plano, TX-based Denbury Resources is an oil and gas company. The company’s sales for the fourth quarter of 2017 are expected to increase 6% year over year. The company delivered an average positive earnings surprise of 125% in the last four quarters.

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