Carrizo Oil and Gas (Nasdaq:CRZO) announced a new strategy focusing on oil and liquids rich development, thus joining the growing ranks of exploration and production companies shifting away from natural gas development.
The company also raised its capital spending for 2010 from $170 million to $225 million, and launched an offering of 2.5 million shares of common stock to help pay for this new strategy.

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Carrizo Oil and Gas was the second exploration and production company recently to increase capital spending along with a common stock offering. Brigham Exploration Company (Nasdaq:BEXP) said that it would increase its 2010 capital budget from $199 million to $294 million to accelerate the development of its Williston Basin properties including the Bakken and Three Forks formations. The company also sold 13 million shares of common stock to finance the extra drilling.

Carrizo Oil and Gas will use the capital raised to focus on two areas. The company has acquired 6,800 acres in the Eagle Ford Shale in Texas, and will allocate $30 million in 2010 to acquire and develop more acreage here. The company plans on drilling two horizontal wells in 2010.

Petrohawk Energy (NYSE:HK) is one of the leaders in developing the Eagle Ford Shale. The company has 350,000 net acres under lease here, and proved reserves of 288 Bcfe as of December 31, 2009.

Carrizo Oil and Gas has allocated $25 million for the purchase of 50,000 net acres in the Niobrara formation in the Rocky Mountain area. The company plans on drilling as many as three horizontal wells during the year.

Carrizo Oil and Gas didn't say where the acreage is in the Eagle Ford Shale or the Niobrara, but indicated that the land was near recent discoveries by EOG Resources (NYSE:EOG) in the area.

EOG Resources recently announced the results of the Jake 2-01H well in Colorado in the Niobrara, which the company said produced 50,000 barrels of oil in the first 90 days.

The new strategy represents a major shift for Carrizo Oil and Gas, which was previously almost exclusively focused on the Barnett Shale. The company's original plan was to spend $132 million of its $170 million budget to develop the 52,000 acres that it has under net lease in the Barnett Shale.

Carrizo Oil and Gas also just initiated a development program in the Marcellus Shale, where it has acreage in Pennsylvania, West Virginia and New York. The company is in a joint venture here with Avista Capital Partners. Carrizo Oil and Gas didn't say whether the new strategy would delay any development here.

The Bottom Line
Carrizo Oil and Gas joins the crowded field of exploration and production companies shifting away from natural gas to oil and liquids development. (To learn more, check out Unearth Profits In Oil Exploration And Production.)

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