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): March 28,
2006
CARRIZO
OIL & GAS, INC.
(Exact
name of registrant as specified in its charter)
|
Texas
|
000-29187-87
|
76-0415919
|
|
(State
or other jurisdiction
|
(Commission
|
(I.R.S.
Employer
|
|
of
incorporation)
|
File
Number)
|
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
4.02(a) Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or
Completed
Interim Review.
On
March
28, 2006, Carrizo Oil & Gas, Inc. (the “Company”) concluded that it will
restate its financial statements for the year ended December 31, 2004 and
the
quarters ended March 31, June 30 and September 30, 2005 to account for
certain
derivatives used by the Company to hedge exposure to natural gas and oil
prices,
which were previously accounted for using cash flow hedge accounting. We
completed
a review of our documentation practices underlying our derivative positions
in
2004 and 2005 and determined that we lacked sufficient documentation as
required
by Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for
Derivative Instruments and Hedging Activities” to account for these positions as
cash flow hedges. Under cash flow hedge accounting, the after-tax change
in the
fair value of the open derivative positions (“fair value change”) is reported as
Other Comprehensive Income in the equity section of the balance sheet.
Alternatively, mark-to-market accounting requires that the fair value change
is
reported in earnings. Accordingly, we will restate in our Form
10-K
for the year ended December 31, 2005 (the “2005 Form 10-K”),
expected to be filed later this week, the consolidated financial statements
for
the year ended December 31, 2004 to reflect the impact of mark-to-market
accounting on these oil and natural gas derivatives, currently estimated
to be a
non-cash, after-tax benefit of $0.7 million to earnings, resulting in net
income
of $11.2 million, or $0.51 per fully diluted share, compared to previously
reported results of $10.5 million, or $0.48 per fully diluted share.
Our
2005
Form
10-K will
reflect the impact of mark-to-market accounting for all open positions
in 2005
on the Company’s oil and natural gas derivatives and also the interest rate
swaps entered into in July 2005 in connection with the Company’s $150 million
Second Lien Term Loan. For the year ended December 31, 2005, the earnings
impact
of mark-to-market accounting is currently estimated to be a non-cash, after-tax
net charge of $2.7 million, or $0.11 per fully diluted share. Accordingly,
net
income for the year ended December 31, 2005 is estimated to be $10.2 million,
or
$0.42 per fully diluted share, as compared to the previously announced
results
of $13.0 million, or $0.53 per fully diluted share.
The
impacts to net income, mentioned above, also include corrections for certain
computational errors in the fair value of the Company’s derivatives previously
reported in Other Comprehensive Income in 2004 and 2005. The 2005 Form
10-K will
also present by quarter for 2004 and 2005 the impacts of (1) the change
to the
mark-to-market accounting method and (2) the correction for computational
errors
in the fair valuation of derivatives.
The
aforementioned change in accounting method in no way changes the Company’s
intent to hold these derivative positions to their maturity and, accordingly,
the future realized impact of such derivative positions on the Company’s
financial results will be the same using either the cash flow hedge accounting
method or mark-to-market accounting method.
The
determination to restate was approved by the audit committee of the Company’s
board of directors upon the recommendation of the Company’s senior management.
The
Company plans to include the restated financial information in its 2005 Form
10-K. Investors are cautioned not to rely on the Company’s historical financial
statements for the year ended December 31, 2004 and each of the quarterly
periods in 2004 and 2005 until such filings have been made.
Because
preparation and completion of the Company’s financial statements in connection
with its 2005 Form 10-K is ongoing, the financial information presented in
this
report, including the effect of the errors described above, is preliminary
and
subject to adjustment.
The
Company’s audit committee and management have discussed the matters described
herein with the Company’s independent registered public accounting
firm.
Statements
in this report, including but not limited to those relating to timing of
filings, results of restatements and audits, expected earnings to be reported
and the Company’s or management’s intentions, beliefs, expectations, hopes,
projections, assessment of risks, estimations, plans or predictions for the
future, including the timing of the completion of the restatement, any restated
amounts, impact of the restatement, timing of filings with the SEC 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 delays and uncertainties that may be encountered in connection with
the
restatement, final audits and reviews by the Company and its auditors and other
risks described in the Company’s Form 10-K for the year ended December 31, 2004
and its other filings with the SEC. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated. Investors should
not
place undue reliance on forward-looking statements. Each forward-looking
statement speaks only as of the date of the particular statement and the Company
undertakes no duty to update any forward looking statement.
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: April
3, 2006