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): October 29, 2008
CARRIZO
OIL & GAS, INC.
(Exact
name of registrant as specified in its charter)
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000-29187-87
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76-0415919
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(State or other jurisdiction of
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(Commission
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(I.R.S.
Employer
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incorporation)
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File Number)
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Identification No.)
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1000
Louisiana Street
Suite
1500
Houston,
Texas
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77002
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(Address
of principal executive offices)
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(Zip
code)
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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:
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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[
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01 Entry
into a Material Definitive Agreement.
Seventh
Amendment to Credit Agreement
On
October 29, 2008, Carrizo Oil & Gas, Inc. (the “Company”) entered
into the Seventh Amendment (the “Seventh Amendment”) to the Credit Agreement
dated as of May 25, 2006 among the Company, certain subsidiaries of
the Company, the lenders party thereto and JPMorgan Chase Bank, N.A.
(“JPMorgan”), as administrative agent (the “Credit Agreement”).
Pursuant
to the Seventh Amendment, Guaranty Bank replaced JPMorgan as administrative
agent and issuing bank under the Credit Agreement and the aggregate commitments
of the lenders under the Credit Agreement were increased from $165 million
to $222.5 million. Commitments were provided by four banks that
were members of our lending group prior to the Seventh Amendment and two banks
that are new to our lending group.
The
Seventh Amendment also amended the Credit Agreement to, among other things,
(1) extend the maturity date of the Credit Agreement from
May 25, 2010 to October 29, 2012, (2) increase the
interest rate margins applicable to Eurodollar loans from a range of between
1.5% and 3.0% to a range of between 2.0% and 3.5% (depending on the then-current
level of borrowing base usage), (3) increase the interest rate margins
applicable to base rate loans from a range of between 0.25% and 1.75% to a range
of between 0.75% and 2.25% (depending on the then-current level of
borrowing base usage), (4) provide that the interest rate on each base rate
borrowing can never be lower than the Adjusted Daily LIBO Rate plus a margin
between 2.0% and 3.5% (depending on the then-current level of borrowing base
usage), (5) change the dates on which scheduled redeterminations of the
borrowing base are made to March 31 and September 30 of each year,
(6) increase the amount of investments that the Company may make by
$10 million and (7) require that the Company’s ratio of total net debt
to Consolidated EBITDAX (as defined in the Credit Agreement) not exceed 4.00 to
1.00 (as opposed to 3.25 to 1.00 prior to the Seventh Amendment).
As of
October 29, 2008, $120 million principal amount was outstanding under
the Credit Agreement, bearing interest at a weighted average rate of 5.3125%
per annum.
The
foregoing description of the Seventh Amendment is not complete and is qualified
by reference to the complete document, which is attached hereto as
Exhibit 10.1 and is incorporated herein by reference.
Guaranty
Bank and certain other lenders under the Credit Agreement and their affiliates
or predecessors have in the past performed, and may in the future from time to
time perform, investment banking, advisory, general financial or commercial
services for the Company and its affiliates for which they have in the past
received, and may in the future receive, customary fees and reimbursement of
expenses.
Avista
Joint Venture
On
November 3, 2008, and effective as of August 1, 2008, the
Company and Carrizo (Marcellus) LLC (“Carrizo Marcellus”), a wholly-owned
subsidiary of the Company, entered into a joint venture with ACP II Marcellus
LLC (“Avista”) and Avista Capital Partners II, L.P., affiliates of Avista
Capital Holdings, LP, a private equity firm focused on investments in the
energy, media and healthcare sectors. Under the terms of the joint
venture, Carrizo Marcellus and Avista have each committed to contribute up to
$150 million in cash and properties to acquire and develop acreage in the
Marcellus Shale play, including the dedication of all of their respective
current Marcellus leasehold. The joint venture controls approximately 155,000
net acres in the play.
Carrizo
Marcellus will serve as operator of the joint venture properties under a joint
operating agreement with Avista and will provide all geotechnical, land and
accounting support. The Company has also agreed to perform specified
management services for Avista on the same cost and reimbursement bases provided
for in the joint operating agreement. An operating committee composed
of one representative of each party will provide overall supervision and
direction of joint operations. Each representative has a vote equal
to the participating interest in the properties and operations of the party it
represents. Avista or its designee has the right to become a
co-operator of the properties if all of its membership interests or
substantially all of its assets are sold to an unaffiliated third party or if
Carrizo Marcellus defaults under the terms of any pledge of its interest in the
properties.
Avista
has agreed to fund 100% of the joint venture’s next approximately
$71.5 million of expenditures related to the Marcellus Shale play (the
“Initial Cash Contribution”), currently projected to be spent over the course of
the next 8 to 12 months. After the Initial Cash Contribution has been
funded by Avista, the parties will thereafter share all costs of joint venture
operations in accordance with their participating interests, which the Company
expects will generally be 50/50 thereafter.
Subject
to specified exceptions, net cash flow from hydrocarbon production from the
dedicated properties and sale proceeds from the properties will be allocated
first to the joint venture partners in proportion to their respective
investments (with property dedications generally valued on a cost basis) until
Avista has recovered its investment, then 100% to Carrizo Marcellus until it
recovers approximately $33.5 million, and then in accordance with the
parties’ participating interests. Carrizo Marcellus has agreed to
jointly market Avista’s share of the production from the properties with its own
until the cash flows and sale proceeds are being allocated in accordance with
the parties’ participating interests. In addition to Carrizo
Marcellus’s share in the production and sale proceeds from joint venture
properties, the Company (through a wholly-owned subsidiary) also acquired in the
transaction an interest in Avista that is entitled to increasing percentages of
Avista’s profits if Avista’s members receive a return of their investment and
specified internal rates of return on these investments are
achieved. The interest in Avista provides consent rights only in
limited, specified circumstances and generally does not entitle the holder to
vote or participate in the management of Avista, which is controlled by its
members and affiliates.
As part
of the transaction, and subject to certain exceptions, the parties have agreed
to enter into an area of mutual interest covering the Marcellus Shale play,
wherein any lease, royalty or mineral rights acquired by one party within the
area must be offered in proportionate share to the other on the same terms and
conditions. The area of mutual interest will remain in place until
the earliest to occur of the following events, at which time the area of mutual
interest will only continue to apply to those areas where the joint venture is
active: (i) December 31, 2010, (ii) the date on which the
parties’ collective investment reaches $300 million, (iii) upon
Avista’s request to be designated (or have its designee designated) as a
co-operator of the properties in connection with the sale to an unaffiliated
third party of all of its membership interests or substantially all of its
assets and (iv) upon Carrizo Marcellus’s required designation of Avista (or its
designee) as a co-operator of the properties in connection with a default by
Carrizo Marcellus under the terms of any pledge of its interest in the
properties.
The
parties have limited rights to transfer their respective interests in the
properties until the Initial Cash Contribution has been
satisfied. After that time, each party’s ability to transfer its
interest in the joint venture to third parties is subject in most instances to
preferential purchase rights for transfers of less than 10% of its interest in
joint venture properties, or to “tag along” rights for most other
transfers. Avista’s tag along rights do not apply upon a change of
control of the Company.
Steven A.
Webster, Chairman of the Company’s Board of Directors, serves as Co-Managing
Partner and President of Avista Capital Holdings LP, which has the ability
to control Avista. As previously disclosed, the Company has been a
party to prior arrangements with affiliates of Avista Capital Holdings LP
in respect of the Company’s investment in Pinnacle Gas Resources,
Inc.
The
summary of the Participation Agreement in this report does not purport to be
complete and is qualified by reference to such agreement, which is filed as an
exhibit hereto. The agreement contains representations, warranties
and other provisions that were made or agreed to, among other things, to provide
the parties thereto with specified rights and obligations and to allocate risk
among them. Accordingly, the agreement should not be relied upon as
constituting a description of the state of affairs of any of the parties thereto
or their affiliates at the time it was entered into or otherwise.
_________________
Certain
statements in this report, including but not limited to statements regarding
funding under the credit facility, benefits and effects of the amendments to the
credit facility, the Company’s proportionate interest in the joint venture, the
timing of expenditures by the joint venture 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 a determination
as to the amount of borrowings to be made under the amendment to the credit
facility, satisfaction of conditions to funding borrowings under the amendment
to the credit agreement,
general market conditions, results of the joint venture’s operations and
other risks described in “Risk Factors” and other sections in the Company’s Form
10-K for
the year ended December 31, 2007 and in its other filings with the Securities
and Exchange Commission.
Item
2.03 Creation of a Direct Financial Obligation.
The
discussion under Item 1.01 of this Current Report with respect to the
Seventh Amendment is incorporated herein by reference.
Item
9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Description
3
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: November
4, 2008
4
Exhibit
Index
Exhibit Description