10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

Commission File Number 000-29187-87

CARRIZO OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

Texas	76-0415919
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

1000 Louisiana Street, Suite 1500, Houston, Texas	77002
(Address of principal executive offices)	(Zip Code)

(713) 328-1000

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  ¨    NO  x

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of July 29, 2011 was 39,297,781.

Explanatory Note

The sole purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, originally filed with the Securities and Exchange Commission on August 9, 2011, is to furnish Exhibit 101 to the Form 10-Q which contains the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes included in Part 1, Item 1 of the Form 10-Q. As permitted by Rule 405(a) (2)(ii) of Regulation S-T, Exhibit 101 was required to be furnished by amendment within 30 days of the original filing date of the Form 10-Q.

No changes have been made to the Form 10-Q other than the furnishing of Exhibit 101 described above. This amendment does not reflect subsequent events occurring after the original filing date of the Form 10-Q or modify or update in any way disclosures made in the Form 10-Q.

Pursuant to rule 406T of Regulation S-T, the Interactive Data File on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Item 6. Exhibits.

The following exhibits are required by Item 601 of Regulation S-K and are filed as part of this report:

Exhibit Number			Exhibit Description
	*4.3	—	Eighth Supplemental Indenture dated August 5, 2011 among Carrizo Oil & Gas, Inc. the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee.
	*4.4	—	Ninth Supplemental Indenture dated August 5, 2011 among Carrizo Oil & Gas, Inc. the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as trustee.
	*31.1	—	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*31.2	—	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*32.1	—	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	*32.2	—	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	**101	—	Interactive Data Files

* Previously filed.

** Furnished, not filed.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Carrizo Oil & Gas, Inc. (Registrant)
Date: August 11, 2011	By:	/s/ Paul F. Boling
		Vice President, Chief Financial Officer and Secretary (Principal Financial Officer)
Date: August 11, 2011	By:	/s/ David L. Pitts
		Vice President and Chief Accounting Officer (Principal Accounting Officer)

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data	Jun. 30, 2011	Dec. 31, 2010
Consolidated Balance Sheets
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	90,000	90,000
Common stock, shares issued	39,280	38,906
Common stock, shares outstanding	39,280	38,906

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statements of Operations
OIL AND GAS REVENUES	$ 50,672	$ 32,922	$ 94,730	$ 71,878
COSTS AND EXPENSES
Lease operating	7,427	6,166	14,093	11,243
Production tax	1,466	885	2,407	1,790
Ad valorem tax	981	468	1,672	1,672
Depreciation, depletion and amortization	20,595	11,079	37,271	20,920
Impairment of oil and gas properties		2,731		2,731
General and administrative (inclusive of stock-based compensation expense of $6,805 and $3,156 for the three months ended June 30, 2011 and 2010, respectively, and $10,655 and $5,320 for the six months ended June 30, 2011 and 2010, respectively)	14,094	7,750	23,339	14,686
Accretion related to asset retirement obligations	71	53	145	104
TOTAL COSTS AND EXPENSES	44,634	29,132	78,927	53,146
OPERATING INCOME	6,038	3,790	15,803	18,732
OTHER INCOME AND EXPENSES:
Gain (loss) on derivative instruments, net	12,065	3,214	11,878	26,016
Loss on extinguishment of debt			(897)
Interest expense	(12,407)	(9,845)	(24,615)	(19,655)
Capitalized interest	5,649	4,992	10,909	9,461
Other income (expense), net	(1)	(51)	61	(21)
INCOME BEFORE INCOME TAXES	11,344	2,100	13,139	34,533
INCOME TAX EXPENSE	(3,602)	(315)	(4,662)	(13,012)
NET INCOME	7,742	1,785	8,477	21,521
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES
Increase in market value of investment in Pinnacle Gas Resources, Inc., net of income taxes		15
COMPREHENSIVE INCOME	$ 7,742	$ 1,800	$ 8,477	$ 21,521
NET INCOME PER COMMON SHARE
BASIC	$ 0.20	$ 0.05	$ 0.22	$ 0.66
DILUTED	$ 0.20	$ 0.05	$ 0.21	$ 0.65
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC	38,898	34,060	38,841	32,574
DILUTED	39,497	34,464	39,450	33,022

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 29, 2011
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Entity Registrant Name	CARRIZO OIL & GAS INC
Entity Central Index Key	0001040593
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		39,297,781

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Debt

6 Months Ended

Jun. 30, 2011

Debt

Debt

6. DEBT

Debt consisted of the following at June 30, 2011 and December 31, 2010:

		0000000000000		0000000000000
	June 30, 2011		December 31, 2010
	(In thousands)
Senior Notes	$	400,000	$	400,000
Unamortized discount for Senior Notes		(2,627)		(2,751)
Convertible Senior Notes		73,750		73,750
Unamortized discount for Convertible Senior Notes		(5,114)		(6,405)
Senior Secured Revolving Credit Facilities		141,000		93,500
Senior Secured Multicurrency Credit Facility		-		-
Other		-		160
		607,009		558,254
Less: Current maturities		-		(160)
	$	607,009	$	558,094

Prior Senior Secured Revolving Credit Facility

Prior to January 27, 2011, the Company had a senior secured revolving credit facility (the "Prior Credit Facility") with Wells Fargo Bank, N.A., as administrative agent. In connection with the Company's entrance into a new senior secured revolving credit facility with an increased borrowing capacity and extended maturity as discussed below, on January 27, 2011, the Company repaid its full indebtedness outstanding under the senior credit agreement governing the Prior Credit Facility and terminated such senior credit agreement. As a result, the Company recognized a $0.9 million non-cash pre-tax loss on extinguishment of debt, related to the deferred financing costs attributable to the commitments of two banks in the Prior Credit Facility who are not participating in the new credit facility.

Senior Secured Revolving Credit Facility

On January 27, 2011, the Company entered into a new $750 million secured revolving credit facility with a five-year term ("Revolving Credit Facility") with BNP Paribas as the administrative agent, sole book runner and lead arranger. The Revolving Credit Facility provides for a borrowing capacity up to the lesser of (i) the Borrowing Base (as defined in the senior credit agreement governing the Revolving Credit Facility) and (ii) $750 million. The Revolving Credit Facility matures on January 27, 2016. It is secured by substantially all of the Company's assets and is guaranteed by certain of the Company's subsidiaries. The initial Borrowing Base under the Revolving Credit Facility was $350 million. Subsequent to the sale of certain of the Company's non-core Barnett Shale properties in the second quarter of 2011 described in Note 4. Property Plant and Equipment, the Borrowing Base availability under the Revolving Credit Facility was reduced from $350 million to $300 million. On June 10, 2011, the Borrowing Base availability was raised to $340 million after completing the regular semi-annual Borrowing Base redetermination. The next Borrowing Base redetermination is currently expected to occur on or before November 1, 2011.

The annual interest rate on each base rate borrowing is (a) the greatest of the Prime Rate, the Federal Funds Effective Rate plus 0.5% and the adjusted LIBO rate for a three-month interest period on such day plus 1.00%, plus (b) a margin between 1.00% and 2.00% (depending on the then-current level of borrowing base usage). The interest rate on each Eurodollar loan will be the adjusted LIBO rate for the applicable interest period plus a margin between 2.00% to 3.00% (depending on the then-current level of borrowing base usage).

The Company is subject to certain covenants under the terms of the Revolving Credit Facility which include, but are not limited to, the maintenance of the following financial covenants: (1) a ratio of Total Debt to EBITDA of not more than (a) 4.75 to 1.00 for fiscal quarters ending June 30, 2011 through December 31, 2011, (b) 4.25 to 1.00 for fiscal quarters ending March 31, 2012 through June 30, 2012 and (c) 4.00 to 1.00 for fiscal quarters ending September 30, 2012 and thereafter; (2) a current ratio of not less than 1.0 to 1.0; (3) a Senior Debt to EBITDA ratio of not more than 2.50 to 1.00; and (4) an EBITDA to Interest Expense ratio of not less than 2.50 to 1.00. At June 30, 2011, the ratio of Total Debt to EBITDA was 3.30 to 1.00, the current ratio was 1.81 to 1.0, the Senior Debt to EBITDA ratio was 0.79 to 1.00 and the EBITDA to Interest Expense ratio was 4.73 to 1.00. Because the calculation of the financial ratios are made as of a certain date, the financial ratios can fluctuate significantly period to period as the amounts outstanding under the Revolving Credit Facility are dependent on the timing of cash flows related to operations, capital expenditures, sales of oil and gas properties and securities offerings. At June 30, 2011, the Company had $141 million of borrowings outstanding under the Revolving Credit Facility with a weighted average interest rate of 2.81%. At June 30, 2011, the Company also had $0.4 million in letters of credit outstanding which reduced the amounts available under the Revolving Credit Facility. Future availability under the $340 million borrowing base is subject to the terms and covenants of the Revolving Credit Facility. The Revolving Credit Facility is used to fund ongoing working capital needs and the remainder of the Company's capital expenditure plan only to the extent such amounts exceed the cash flow from operations, proceeds from the sale of oil and gas properties and securities offerings.

UK Huntington Limited Recourse Credit Facility

From issuance through June 30, 2011, no amounts were outstanding under the Company's Senior Secured Multicurrency Credit Facility (the "Huntington Facility") and no letters of credit had been issued.

During the first quarter of 2011, the Company made an equity contribution of approximately $22 million to Carrizo UK Huntington Ltd. ("Carrizo UK"). At June 30, 2011, Carrizo UK has a cash balance of $9.5 million which represents the remaining portion of the equity contribution. Initial borrowings under the Huntington Facility are conditioned on, among other things, the Company's prior utilization of the equity contribution on normal business operations in the UK North Sea.

The annual interest rate on each borrowing is (a) LIBOR (EURIBOR for euro-denominated loans) for the applicable interest period, plus (b) a margin of (i) 3.50% until the completion of the Huntington Field development project and 3.0% thereafter for the term loan credit facility and post-completion revolving credit facility or (ii) 4.75% for the cost overrun facility.

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Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

11. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

On October 28, 2010, the Company and certain of its wholly owned subsidiaries (collectively, the "Subsidiary Guarantors") entered into a purchase agreement pursuant to which the Company agreed to sell $400 million aggregate principal amount of the Company's Senior Notes. Certain, but not all, of the Company's wholly owned subsidiaries have issued full, unconditional and joint and several guarantees of the Senior Notes and may guarantee future issuances of debt securities. On May 4, 2011, two of the Subsidiary Guarantors, CCBM, Inc. and Chama Pipeline Holding LLC, were released from their respective guarantees of the Senior Notes and the Convertible Senior Notes. These entities were subsequently dissolved.

The rules of the SEC require that condensed consolidating financial information be provided for a subsidiary that has guaranteed the debt of a registrant issued in a public offering, where the guarantee is full, unconditional and joint and several and where the voting interest of the subsidiary is 100% owned by the registrant. The Company is, therefore, presenting condensed consolidating financial information as of June 30, 2011 and December 31, 2010, and for the three and six months ended June 30, 2011 and 2010 on a parent company, combined guarantor subsidiaries, combined non-guarantor subsidiaries, eliminating entries, and consolidated basis and should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows, or financial position had the Subsidiary Guarantors operated as independent entities.

Investments in subsidiaries are accounted for by the respective parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. Typically in a condensed consolidating financial statement, the net income and equity of the parent company equals the net income and equity of the consolidated entity. The Company's oil and gas properties are accounted for using the full cost method of accounting whereby impairments and DD&A are calculated and recorded on a country by country basis. However, when calculated separately on a legal entity basis, the combined totals of parent company and subsidiary impairments and DD&A can be more or less than the consolidated total as a result of differences in the properties each entity owns including amounts of costs incurred, production rates, reserve mix, future development costs, etc. Accordingly, elimination entries are required to eliminate any differences between consolidated and parent company and subsidiary company combined impairments and DD&A.

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

		00000000000		00000000000		00000000000		00000000000		00000000000
	June 30, 2011
	Parent Company		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Eliminations		Consolidated
ASSETS	(In thousands)
Current assets	$	1,136,869	$	45,679	$	9,793	$	(1,105,536)	$	86,805
Property and equipment, net		132,330		888,521		38,789		6,856		1,066,496
Investments in subsidiaries		(127,494)		-		-		127,494		-
Other assets		94,028		69,802		4,190		(70,696)		97,324
Total assets	$	1,235,733	$	1,004,002	$	52,772	$	(1,041,882)	$	1,250,625
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities	$	85,636	$	1,129,779	$	51,281	$	(1,105,536)	$	161,160
Long-term liabilities		682,468		870		2,338		(69,076)		616,600
Shareholders' equity		467,629		(126,647)		(847)		132,730		472,865
Total liabilities and shareholders' equity	$	1,235,733	$	1,004,002	$	52,772	$	(1,041,882)	$	1,250,625
	December 31, 2010
	Parent Company		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Eliminations		Consolidated
ASSETS	(In thousands)
Current assets	$	1,029,000	$	22,733	$	-	$	(991,401)	$	60,332
Property and equipment, net		194,243		784,790		-		4,024		983,057
Investments in subsidiaries		(139,829)		-		-		139,829		-
Other assets		99,876		78,288		-		(77,419)		100,745
Total assets	$	1,183,290	$	885,811	$	-	$	(924,967)	$	1,144,134
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities	$	85,783	$	1,024,622	$	-	$	(991,401)	$	119,004
Long-term liabilities		644,315		1,018		-		(76,839)		568,494
Shareholders' equity		453,192		(139,829)		-		143,273		456,636
Total liabilities and shareholders' equity	$	1,183,290	$	885,811	$	-	$	(924,967)	$	1,144,134

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

		00000000000		00000000000		00000000000		00000000000		00000000000
	For the Three Months Ended June 30, 2011
	Parent Company		Combined Guarantor  Subsidiaries		Combined Non- Guarantor  Subsidiaries		Eliminations		Consolidated
	(In thousands)
Oil and Gas revenues	$	9,389	$	41,283	$	-	$	-	$	50,672
Cost and expenses		21,788		24,237		143		(1,534)		44,634
Operating income (loss)		(12,399)		17,046		(143)		1,534		6,038
Other income and (expense), net		15,242		(8,255)		(1,681)		-		5,306
Income (loss) before income taxes		2,843		8,791		(1,824)		1,534		11,344
Income tax (expense) benefit		(784)		(3,230)		976		(564)		(3,602)
Equity in income (loss) of subsidiaries		4,713		-		-		(4,713)		-
Net income (loss)	$	6,772	$	5,561	$	(848)	$	(3,743)	$	7,742
	For the Three Months Ended June 30, 2010
	Parent Company		Combined Guarantor  Subsidiaries		Combined Non- Guarantor  Subsidiaries		Eliminations		Consolidated
	(In thousands)
Oil and Gas revenues	$	8,371	$	24,551	$	-	$	-	$	32,922
Cost and expenses		17,387		12,818		-		(1,073)		29,132
Operating income (loss)		(9,016)		11,733		-		1,073		3,790
Other income and (expense), net		553		(2,243)		-		-		(1,690)
Income before income taxes		(8,463)		9,490		-		1,073		2,100
Income tax (expense) benefit		2,697		(2,629)		-		(383)		(315)
Equity in income (loss) of subsidiaries		6,861		-		-		(6,861)		-
Net income (loss)	$	1,095	$	6,861	$	-	$	(6,171)	$	1,785

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

		00000000000		00000000000		00000000000		00000000000		00000000000
	For the Six Months Ended June 30, 2011
	Parent Company		Combined Guarantor   Subsidiaries		Combined Non- Guarantor   Subsidiaries		Eliminations		Consolidated
	(In thousands)
Oil and Gas revenues	$	18,164	$	76,566	$	-	$	-	$	94,730
Cost and expenses		37,969		43,647		143		(2,832)		78,927
Operating income (loss)		(19,805)		32,919		(143)		2,832		15,803
Other income and (expense), net		11,098		(12,081)		(1,681)		-		(2,664)
Income (loss) before income taxes		(8,707)		20,838		(1,824)		2,832		13,139
Income tax (expense) benefit		3,059		(7,656)		976		(1,041)		(4,662)
Equity in income (loss) of subsidiaries		12,334		-		-		(12,334)		-
Net income (loss)	$	6,686	$	13,182	$	(848)	$	(10,543)	$	8,477
	For the Six Months Ended June 30, 2010
	Parent Company		Combined Guarantor   Subsidiaries		Combined Non- Guarantor   Subsidiaries		Eliminations		Consolidated
	(In thousands)
Oil and Gas revenues	$	19,599	$	52,279	$	-	$	-	$	71,878
Cost and expenses		31,177		24,338		-		(2,369)		53,146
Operating income (loss)		(11,578)		27,941		-		2,369		18,732
Other income and (expense), net		20,459		(4,658)		-		-		15,801
Income (loss) before income taxes		8,881		23,283		-		2,369		34,533
Income tax (expense) benefit		(3,831)		(8,336)		-		(845)		(13,012)
Equity in income (loss) of subsidiaries		14,947		-		-		(14,947)		-
Net income (loss)	$	19,997	$	14,947	$	-	$	(13,423)	$	21,521

CARRIZO OIL & GAS, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

	For the Six Months Ended June 30, 2011
	Parent Company		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Eliminations		Consolidated
					(In thousands)
Net cash provided by operating activities	$	18,563	$	56,042	$	(483)	$	-	$	74,122
Net cash used in investing activities		(57,759)		(114,348)		(35,130)		114,121		(93,116)
Net cash provided by financing activities		42,199		65,766		45,124		(114,121)		38,968
Net increase (decrease) in cash and cash equivalents		3,003		7,460		9,511		-		19,974
Cash and cash equivalents, beginning of period		1,418		2,710		-		-		4,128
Cash and cash equivalents, end of period	$	4,421	$	10,170	$	9,511	$	-	$	24,102
	For the Six Months Ended June 30, 2010
	Parent Company		Combined Guarantor Subsidiaries		Combined Non- Guarantor Subsidiaries		Eliminations		Consolidated
					(In thousands)
Net cash provided by operating activities	$	4,042	$	36,136	$	-	$	-	$	40,178
Net cash used in investing activities		(127,570)		(163,310)		-		124,663		(166,217)
Net cash provided by financing activities		124,954		124,663		-		(124,663)		124,954
Net increase (decrease) in cash and cash equivalents		1,426		(2,511)		-		-		(1,085)
Cash and cash equivalents, beginning of period		1,337		2,500				-		3,837
Cash and cash equivalents, end of period	$	2,763	$	(11)	$	-	$	-	$	2,752

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after elimination of all significant intercompany transactions and balances and are presented in accordance with U.S. generally accepted accounting principles. The Company proportionately consolidates its undivided interests in oil and gas properties as well as investments in unincorporated entities, such as partnerships and LLCs where the Company, as a partner or member, has undivided interests in the oil and gas properties. The consolidated financial statements reflect all necessary adjustments, all of which were of a normal recurring nature and are in the opinion of management necessary for a fair presentation of the Company's interim financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These reclassifications had no effect on total assets, total liabilities, shareholders' equity, net income, comprehensive income or net cash provided by/used in operating, investing or financing activities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from these estimates. The Company evaluates subsequent events through the date the financial statements are issued.

Significant estimates include volumes of proved oil and gas reserves which are used in calculating the amortization of proved oil and gas property costs, the present value of future net revenues included in the full cost ceiling test, estimates of future taxable income used in assessing the realizability of deferred tax assets, and asset retirement obligations. Other significant estimates include the impairment of unproved properties, fair values of derivative instruments, stock-based compensation, the collectability of outstanding receivables, and contingencies. Proved oil and gas reserve estimates have numerous inherent uncertainties. The accuracy of any reserve estimate is a function of the quality and quantity of available data and the application of engineering and geological interpretation and judgment to available data. Subsequent drilling results, testing and production may justify revisions of such estimates. Accordingly, proved oil and gas reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. In addition, proved oil and gas reserve estimates are vulnerable to changes in market prices of oil and gas. Such prices have been volatile in the past and can be expected to be volatile in the future.

Estimates are based on current assumptions that may be materially affected by changes to future economic conditions such as the market prices of oil and gas, the creditworthiness of counterparties, interest rates and the market value and volatility of the Company's common stock. Future changes in these assumptions may affect these significant estimates materially in the near term.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Accounts Receivable and Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts when it determines that it will not collect all or a part of an accounts receivable balance. The Company assesses the collectability on a quarterly basis and adjusts the allowance as necessary using the specific identification method. At June 30, 2011 and December 31, 2010, the Company's allowance for doubtful accounts was $2.3 million and $2.5 million, respectively.

Concentration of Credit Risk

Substantially all of the Company's accounts receivable result from oil and gas sales, joint interest billings to third parties in the oil and gas industry or drilling and completion advances to third-party operators for development costs of wells in progress. This concentration of customers and joint interest owners may impact the Company's overall credit risk in that these entities may be similarly affected by changes in economic and other industry conditions. The Company does not require collateral from its customers. The Company generally has the right to offset revenue against related billings to joint interest owners.

Derivative instruments subject the Company to a concentration of credit risk. See Note 9. Derivative Instruments for further discussion of concentration of credit risk related to the Company's derivative instruments.

Oil and Gas Properties

Oil and gas properties are accounted for using the full cost method of accounting under which all productive and nonproductive costs directly associated with property acquisition, exploration and development activities are capitalized to costs centers established on a country-by-country basis. Internal costs directly associated with acquisition, exploration and development activities are capitalized and totaled $ 3.1 million and $1.6 million for the three months ended June 30, 2011 and 2010, respectively, and $5.5 million and $2.8 million for the six months ended June 30, 2011 and 2010, respectively. Costs related to production, general corporate overhead and similar activities are expensed as incurred.

Capitalized oil and gas property costs within a cost center are amortized on an equivalent unit-of-production method, converting oil and natural gas liquids to gas equivalents at the ratio of one barrel of oil or natural gas liquids to six thousand cubic feet of gas, which represents their approximate relative energy content. The equivalent unit-of-production rate is computed on a quarterly basis by dividing production by proved oil and gas reserves at the beginning of the quarter then applying such amount to capitalized oil and gas property costs, which includes estimated asset retirement costs, less accumulated amortization, plus the estimated future expenditures (based on current costs) to be incurred in developing proved reserves, net of estimated salvage values. Average depreciation, depletion and amortization ("DD&A") per Mcfe on oil and gas properties was $1.82 and $1.16 for the three months ended June 30, 2011 and 2010, respectively, and $1.68 and $1.16 for the six months ended June 30, 2011 and 2010, respectively.

Costs not subject to amortization include unevaluated leasehold costs, seismic costs associated with specific unevaluated properties, related capitalized interest and the cost of exploratory wells in progress. Significant costs are assessed individually on a quarterly basis to determine whether or not and to what extent proved reserves have been assigned to the properties or if an impairment has occurred, in which case the related costs are added to the oil and gas property costs subject to amortization. Factors the Company considers in its impairment assessment include drilling results by the Company and other operators, and the terms of oil and gas leases not held by production and drilling capital expenditure plans. The Company expects to complete its evaluation of the majority of its unproved properties within the next two to five years. Insignificant costs are grouped by major area and added to the oil and gas property costs subject to amortization based on the average primary lease term of the properties. The Company capitalized interest costs associated with its unevaluated leasehold and seismic costs of $5.6 million and $5.0 million for the three months ended June 30, 2011 and 2010, and $10.9 million and $9.5 million for the six months ended June 30, 2011 and 2010, respectively. Interest is capitalized on the average balance of unproved properties using a weighted-average interest rate based on outstanding borrowings.

Proceeds from the sale of oil and gas properties are recognized as a reduction of capitalized oil and gas property costs with no gain or loss recognized, unless the sale significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. The Company has not had any sales of oil and gas properties that significantly alter that relationship.

Capitalized costs, less accumulated amortization and related deferred income taxes, are limited to the "cost center ceiling" equal to (i) the sum of (A) the present value of estimated future net revenues from proved oil and gas reserves, less estimated future expenditures to be incurred in developing and producing the proved reserves computed using a discount factor of 10%, (B) the costs of properties not subject to amortization, and (C) the lower of cost or estimated fair value of unproved properties included in the costs being amortized; less (ii) related income tax effects. If the net capitalized costs exceed the cost center ceiling, the excess is recognized as an impairment of oil and gas properties. An impairment recognized in one period may not be reversed in a subsequent period even if higher oil and gas prices increase the cost center ceiling applicable to the subsequent period.

The estimated future net revenues used in the ceiling test are calculated using average quoted market prices for sales of oil and gas on the first calendar day of each month during the preceding 12-month period prior to the end of the current reporting period. Prices are held constant indefinitely and are not changed except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts. Prices used in the ceiling test computation do not include the impact of derivative instruments because the Company elected not to meet the criteria to qualify its derivative instruments for hedge accounting treatment.

Depreciation of other property and equipment is provided using the straight-line method based on estimated useful lives ranging from five to ten years.

Deferred Financing Costs

Deferred financing costs include legal fees, accounting fees, underwriting fees, printing costs, and other direct costs associated with the issuance of debt instruments and costs associated with revolving credit facilities. The capitalized costs are amortized to interest expense using the effective interest method over the terms of the debt instruments or credit facilities.

Investments

Prior to the sale in January 2011 (see Note 3. Investments), the Company accounted for its investment in Pinnacle Gas Resources, Inc. ("Pinnacle") as available-for-sale and adjusted the book value to fair value through other comprehensive income (loss), net of income taxes. This fair value was assessed quarterly for other than temporary impairment based on publicly available information. If the impairment was deemed other than temporary, it was recognized in earnings. Subsequent recoveries in fair value were reflected as increases to investments and other comprehensive income (loss), net of income taxes.

The Company accounts for its investment in Oxane Materials, Inc. ("Oxane") using the cost method of accounting and adjusts the carrying amount of its investment for contributions to and distributions from Oxane.

Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, receivables, payables, derivative instruments and current and long-term debt. The carrying amounts of cash and cash equivalents, receivables, payables and short-term debt approximate fair value due to the highly liquid or short-term nature of these instruments. The carrying amounts of long-term debt under the Prior Credit Facility and the Revolving Credit Facility (each as defined in Note 6. Debt) approximate fair value as these borrowings bear interest at variable rates of interest. The carrying amounts of the Company's 8.625% Senior Notes due 2018 ("Senior Notes")and the Company's 4.375% convertible senior notes due 2028 ("Convertible Senior Notes") do not approximate fair value because the notes bear interest at fixed rates of interest. See Note 10. Fair Value Measurements.

Asset Retirement Obligations

The Company's oil and gas properties require expenditures to plug and abandon wells after the reserves have been depleted. The asset retirement obligation is recognized when the well is drilled with an associated increase in oil and gas property costs. The asset retirement obligation is recorded at fair value and requires estimates of the costs to plug and abandon wells, the costs to restore the surface, the remaining lives of wells based on oil and gas reserve estimates and future inflation rates. The obligation is discounted using a credit-adjusted risk-free interest rate which is accreted over time to its expected settlement value. Estimated costs consider historical experience, third party estimates and state regulatory requirements and do not consider salvage values. At least annually, the Company reassesses its asset retirement obligations to determine whether a change in the estimated obligation is necessary. On a quarterly basis, the Company evaluates whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed and updates its estimated obligation if necessary.

Commitments and Contingencies

Liabilities are recognized for contingencies when it is both probable that an asset has been impaired or that a liability has been incurred and the amount of such loss is reasonably estimable.

Revenue Recognition

Oil and gas sales are recognized when the products are sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred and collectability of the revenue is reasonably assured. The Company follows the sales method of accounting for oil and gas revenues whereby revenue is recognized for all oil and gas sold to purchasers, regardless of whether the sales are proportionate to the Company's ownership interest in the property. Production imbalances are recognized as an asset or liability to the extent that the Company has an imbalance on a specific property that is in excess of its remaining proved oil and gas reserves. Oil and gas sales volumes are not significantly different from the Company's share of production, and as of June 30, 2011 and December 31, 2010, the Company did not have any material production imbalances.

Derivative Instruments

The Company uses derivative instruments, typically fixed-rate swaps, costless collars, puts, calls and basis differential swaps, to manage commodity price risk associated with a portion of its forecasted oil and gas production. Derivative instruments are recognized at their current fair value as assets or liabilities in the consolidated balance sheets. Although the derivative instruments provide an economic hedge of the Company's exposure to commodity price risk associated with oil and gas production, because the Company elected not to meet the criteria to qualify its derivative instruments for hedge accounting treatment, unrealized gains and losses as a result of changes in the fair value of derivative instruments are recognized as gain (loss) on derivative instruments, net in the consolidated statements of operations. Realized gains and losses as a result of cash settlements with counterparties to the Company's derivative instruments are also recorded as gain (loss) on derivative instruments, net in the consolidated statements of operations. The Company offsets fair value amounts recognized for derivative instruments executed with the same counterparty.

The Company's Board of Directors establishes risk management policies and reviews derivative instruments, including volumes, types of instruments and counterparties, on a quarterly basis. These policies require that derivative instruments be executed only by the President or Chief Financial Officer after consultation with and concurrence by the President, Chief Financial Officer and Chairman of the Board. The master contracts with approved counterparties identify the President and Chief Financial Officer as the only Company representatives authorized to execute trades. See Note 9. Derivative Instruments for further discussion of the Company's derivative instruments.

Stock-Based Compensation

The Company grants stock options, stock appreciation rights ("SARs") that may be settled in cash or common stock ("Stock SARs"), SARs that may only be settled in cash ("Cash SARs"), restricted stock awards and restricted stock units to directors, employees and independent contractors. The Company recognized the following stock-based compensation expenses for the periods indicated which is reflected as general and administrative expense in the consolidated statements of operations:

		00000000		00000000		00000000		00000000
	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Stock Options and SARs	$	3,794	$	100	$	6,914	$	521
Restricted Stock Awards and Units		4,450		3,056		6,450		4,799
		8,244		3,156		13,364		5,320
Less: amounts capitalized		(1,439)		-		(2,709)		-
Total Stock-Based Compensation Expense	$	6,805	$	3,156	$	10,655	$	5,320

Stock Options and SARs. For stock options and Stock SARs that the Company expects to settle in common stock, stock-based compensation expense is based on the grant-date fair value and recognized over the vesting period (generally three years). For Cash SARs and any Stock SARs that the Company expects to settle in cash, stock-based compensation expense is based on the fair value remeasured at each reporting period, recognized over the vesting period (generally three years) and classified as other accrued liabilities for the portion of the awards that are vested or are expected to vest within the next 12 months, with the remainder classified as other long-term liabilities. The Company recognizes stock-based compensation expense over the vesting period for stock options and SARs using the straight-line method, except for awards with performance conditions, in which case the Company uses the graded vesting method. Stock options typically expire ten years after the date of grant. SARs typically expire seven years after the date of grant. The Company uses the Black-Scholes-Merton option pricing model to compute the fair value of stock options and SARs.

Restricted Stock Awards and Units. For restricted stock awards and units, stock-based compensation expense is based on the grant-date fair value and recognized over the vesting period (generally one to three years) using the straight-line method, except for awards or units with performance conditions, in which case the Company uses the graded vesting method. The fair value of restricted stock awards and units is based on the average of the high and low price of the Company's common stock on the grant date. For restricted stock awards and units granted to independent contractors, stock-based compensation expense is based on fair value remeasured at each reporting period and recognized over the vesting period (generally three years) using the straight-line method.

Foreign Currency

The U.S. dollar is the functional currency for the Company's operations in the U.K. North Sea. Transaction gains or losses that occur due to the realization of assets and the settlement of liabilities using a currency denominated in other than the functional currency are recorded as other income (expense), net in the consolidated statements of operations.

Income Taxes

Deferred income taxes are recognized at each reporting period for the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts based on tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The Company routinely assesses the realizability of its deferred tax assets and considers its estimate of future taxable income based on production of proved reserves at estimated future pricing in making such assessments. If the Company concludes that it is more likely than not that some portion or all of the deferred tax assets will not be realized, the deferred tax assets are reduced by a valuation allowance. The Company classifies interest and penalties associated with income taxes as interest expense.

Net Income Per Common Share

Supplemental net income per common share information is provided below:

		$00001,785		$00001,785		$00001,785		$00001,785
	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands, except per share amounts)
Net income	$	7,742	$	1,785	$	8,477	$	21,521
Weighted average common shares outstanding
Basic weighted average common shares outstanding		38,898		34,060		38,841		32,574
Restricted stock, stock options and warrants		599		404		609		448
Diluted weighted average common shares outstanding		39,497		34,464		39,450		33,022
Net income (loss) per common share
Basic	$	0.20	$	0.05	$	0.22	$	0.66
Diluted	$	0.20	$	0.05	$	0.21	$	0.65

Basic income per common share is based on the weighted average number of shares of common stock outstanding during the period. Diluted income per common share is based on the weighted average number of common shares and all potentially dilutive common shares outstanding during the period which include restricted stock units, stock options, Stock SARs expected to be settled in common stock, warrants and convertible debt. The Company excluded 1,369 and 263,230 shares related to restricted stock units, stock options and warrants from the calculation of dilutive shares for the three months ended June 30, 2011 and 2010, and 688 and 263,230 shares for the six months ended June 30, 2011 and 2010, respectively, because the grant prices were greater than the average market prices of the common shares for the period and would be antidilutive to the computation. Shares of common stock subject to issuance upon the conversion of the Convertible Senior Notes did not have an effect on the calculation of dilutive shares for the three and six months ended June 30, 2011 or 2010, because the conversion price was in excess of the market price of the common stock for those periods.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity

Shareholders' Equity

8. SHAREHOLDERS' EQUITY

On November 24, 2009, the Company entered into a Land Agreement, as amended (the "Land Agreement"), with an unrelated third party and its affiliate. The Land Agreement expired pursuant to its terms on May 31, 2011. Under the Land Agreement, the Company was able to acquire up to $20 million of oil, gas and mineral interests/leases in certain specified areas in the Barnett Shale from such third party. In consideration for the Company's receipt of an option to purchase the leases acquired by the third party, each time the third party purchased a lease group under the Land Agreement the Company agreed to issue to the third party's affiliate warrants to purchase a number of shares of the Company's common stock with an exercise price of $22.09 and an expiration date of August 21, 2017. In addition, under certain circumstances where the Company reached surface casing point on an initial well in one of the areas covered by the Land Agreement but has not achieved a specified lease up threshold for acreage in such area, the Company agreed to issue additional warrants. The warrants are subject to antidilution adjustments and may be exercised on a "cashless" basis.

Under the Land Agreement, the Company issued warrants to purchase 57,461 shares of common stock in 2010 and warrants to purchase 18,608 shares of common stock onduring the first quarter of 2011. No Warrants were issued in the second quarter of 2011. During the third quarter of 2011, we expect to issue approximately 5,000 additional warrants to the third party's affiliate for leases acquired prior to the expiration of the Land Agreement.

During the second quarter of 2011, we contributed $1.0 million in common stock to the Carrizo Oil & Gas, Inc endowed scholarship fund at the University of Texas at Arlington ("UTA") where we are producing natural gas from a number of wells in the Barnett Shale play.

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Derivative Instruments

6 Months Ended

Jun. 30, 2011

Derivative Instruments

Derivative Instruments

9. DERIVATIVE INSTRUMENTS

The Company relies on various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in its forward cash flows supporting its capital expenditure program. The derivative instruments typically used are fixed-rate swaps, costless collars, puts, calls and basis differential swaps. Under these derivative instruments, payments are received or made based on the differential between a fixed and a variable product price. These agreements are settled in cash at termination, expiration or exchanged for physical delivery contracts. The Company's current long-term strategy is to manage exposure for a substantial, but varying, portion of forecasted production up to 36 months. The derivative instruments are carried at fair value in the consolidated balance sheets, with changes in fair value recognized as gain (loss) on derivative instruments, net in the consolidated statements of operations for the period in which the changes occur or as required by the terms of our credit facilities.

The fair value of derivative instruments at June 30, 2011, and December 31, 2010 was a net asset of $22.4 million and $24.1 million, respectively. At June 30, 2011, approximately 63% of the fair value of the Company's derivative instruments were with Credit Suisse, 18% were with BNP Paribas, 12% were with Shell Energy North America (US) LP, 6% were with Credit Agricole, and the remaining less than 1% were with Societe Generale and master netting agreements are in place with these counterparties. Because the counterparties are either investment grade financial institutions or an investment grade international oil and gas company, the Company believes it has minimal credit risk and accordingly does not currently require its counterparties to post collateral to support the asset positions of its derivative instruments. As such, the Company is exposed to credit risk to the extent of nonperformance by the counterparties to its derivative instruments. Although the Company does not currently anticipate such nonperformance, it continues to monitor the financial viability of its counterparties. Because Credit Suisse, BNP Paribas, Credit Agricole, and Societe Generale are lenders in the Company's Revolving Credit Facility, and BNP Paribas and Societe Generale are lenders in the Company's Huntington Facility, the Company is not required to post collateral with respect to derivatives instruments in a net liability position with these counterparties as the contracts are secured by the Revolving Credit Facility or the Huntington Facility.

The following sets forth a summary of the Company's natural gas derivative positions at average delivery location (Waha and Houston Ship Channel) prices as of June 30, 2011. Our crude oil derivative positions at June 30, 2011 were not significant.

Period	Volume (in MMbtu)		Weighted Average Floor  Price ($/MMbtu)		Weighted Average Ceiling  Price ($/MMbtu)
2011		15,180,000	$	5.54	$	5.61
2012		18,943,000	$	5.50	$	5.60
2013		7,300,000	$	5.21	$	5.21

In connection with the derivative instruments above, the Company has entered into protective put spreads. When the market price declines below the short put price as reflected below, the Company will effectively receive the market price plus a put spread. For example, for the remainder of 2011, if market prices fall below the short put price of $4.92, the floor price becomes the market price plus the put spread of $1.15 on 5,849,000 of the 15,180,000 MMBtus and the remaining 9,331,000 MMBtus would have a floor price of $5.54.

Period	Volume (in MMbtu)		Weighted Average Short Put Price ($/MMbtu)		Weighted Average Put Spread ($/MMbtu)
2011		5,849,000	$	4.92	$	1.15
2012		6,404,000	$	5.05	$	1.22

For the three and six months ended June 30, 2011 and 2010, the Company recorded the following related to its derivative instruments:

		0000000		0000000		0000000		0000000
	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Realized gain	$	4,904	$	8,792	$	14,910	$	13,747
Unrealized gain (loss)		7,161		(5,578)		(3,032)		12,269
Gain (loss) on derivative instruments, net	$	12,065	$	3,214	$	11,878	$	26,016

The Company deferred the payment of premiums associated with certain of its oil and gas derivative instruments totaling $3.2 million and $3.9 million at June 30, 2011 and December 31, 2010, respectively. The Company classified $2.1 million and $3.9 million as other current liabilities at June 30, 2011 and December 31, 2010, respectively, and $1.1 million as other non-current liabilities at June 30, 2011. These deferred premiums will be paid to the counterparty with each monthly settlement (July 2011 – March 2014) and recognized as a reduction of realized gain on derivative instruments.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies

Commitments and Contingencies

7. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is party to certain legal actions and claims arising in the ordinary course of business. While the outcome of these events cannot be predicted with certainty, management does not currently expect these matters to have a material adverse effect on the financial position or results of operations of the Company.

The financial position and results of operations of the Company continue to be affected from time to time in varying degrees by domestic and foreign political developments as well as legislation and regulations pertaining to restrictions on oil and gas production, imports and exports, natural gas regulation, tax increases, environmental regulations and cancellation of contract rights. Both the likelihood and overall effect of such occurrences on the Company vary greatly and are not predictable.

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Consolidated Statements of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 8,477	$ 21,521
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation, depletion and amortization	37,271	20,920
Unrealized (gain) loss on derivative instruments	3,032	(12,269)
Impairment of oil and gas properties		2,731
Accretion related to asset retirement obligations	145	104
Loss on extinguishment of debt	897
Stock-based compensation	10,655	5,320
Allowance for doubtful accounts	(54)	345
Deferred income taxes	4,739	12,995
Amortization of discount and deferred financing costs, net of amounts capitalized	1,570	4,066
Other, net	4,058	813
Changes in operating assets and liabilities-
Accounts receivable	(2,912)	(9,327)
Accounts payable	8,381	(5,295)
Accrued liabilities	3,876	(2,562)
Other, net	(6,013)	816
Net cash provided by operating activities	74,122	40,178
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(219,179)	(164,949)
Change in capital expenditure payables and accruals	12,464	(2,662)
Proceeds from sales of oil and gas properties	101,590	1,977
Advances to operators	(138)	116
Advances for joint operations	12,368	(412)
Other, net	(221)	(287)
Net cash used in investing activities	(93,116)	(166,217)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	346,000	163,600
Debt repayments	(298,660)	(113,000)
Proceeds from common stock offering, net of offering costs		74,042
Proceeds from stock options exercised	47	667
Payments of debt issuance costs	(8,419)	(355)
Net cash provided by financing activities	38,968	124,954
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	19,974	(1,085)
CASH AND CASH EQUIVALENTS, beginning of period	4,128	3,837
CASH AND CASH EQUIVALENTS, end of period	$ 24,102	$ 2,752

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Investments

6 Months Ended

Jun. 30, 2011

Investments

Investments

3. INVESTMENTS

Investments consisted of the following at June 30, 2011 and December 31, 2010:

		0000000000000		0000000000000
	June 30, 2011		December 31, 2010
	(In thousands)
Pinnacle Gas Resources, Inc.	$	-	$	869
Oxane Materials, Inc.		2,523		2,523
	$	2,523	$	3,392

Pinnacle Gas Resources, Inc.

On January 25, 2011, Pinnacle announced that it had been acquired by Powder Holdings, LLC, an entity controlled by SW Energy Capital LP. Under the terms of the merger agreement, the Company received $0.9 million, or $0.34 per share, for its 2,555,825 shares of Pinnacle common stock during the second quarter of 2011.

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Property and Equipment

6 Months Ended

Jun. 30, 2011

Property and Equipment

Property and Equipment

4. PROPERTY AND EQUIPMENT

At June 30, 2011 and December 31, 2010, property and equipment consisted of the following:

	June 30,       2011		December 31,     2010
	(In thousands)
Proved oil and natural gas properties	$	973,778	$	941,267
Costs not subject to amortization		439,750		352,479
Land, building and other equipment		7,697		7,314
Total property and equipment		1,421,225		1,301,060
Accumulated depreciation, depletion and amortization		(354,729)		(318,003)
Property and equipment, net	$	1,066,496	$	983,057

During the second quarter of 2011, the Company sold a substantial portion of its non-core area Barnett Shale properties to KKR Natural Resources, a partnership formed between an affiliate of Kohlberg Kravis Roberts & Co. L.P. (KKR) and Premier Natural Resources. Net proceeds received from the sale were approximately $98 million, which represent an agreed upon purchase price of approximately $104 million less net purchase price adjustments. Purchase price adjustments primarily relate to proceeds received by the Company for sales of hydrocarbons from such properties between the effective date of January 1, 2011 and the closing date of May 17, 2011. The proceeds from such sale were recognized as a reduction of proved oil and gas properties, net.

On August 4, 2010, the Company entered into a purchase and sale agreement with Reliance Marcellus II, LLC ("Reliance"), a wholly-owned subsidiary of Reliance Holding USA, Inc. and an affiliate of Reliance Industries Limited pursuant to which Reliance purchased 20% of our interests in oil and gas properties in parts of Pennsylvania in the Marcellus Shale for a combination of cash and a commitment to pay certain of our future development costs. Simultaneous with such transaction, our joint venture partner, ACP II Marcellus, LLC ("ACP II"), an affiliate of Avista Capital Holdings LP, entered into a purchase and sale agreement with Reliance under which it agreed to sell its entire interest in the same properties to Reliance. In June 2011, in accordance with the title and post-closing adjustment provisions of the purchase and sale agreements described above, the Company provided additional interests in oil and gas properties in parts of Pennsylvania in the Marcellus Shale to Reliance in substitution of properties included in the sale that were affected by certain alleged title defects. In exchange for such substitute properties, the Company received $0.3 million in cash from Reliance relating to the sale of 20% of its interest. Additionally, during the second quarter of 2011, the Company received cash distributions of $3.3 million on its B Unit investment in ACP II as a result of ACP II's distribution to Avista of remaining proceeds from its sale of oil and gas properties to an affiliate of Reliance. These distributions are recognized as a reduction of capitalized oil and gas property costs.

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

12. SUBSEQUENT EVENTS

On August 5, 2011, the Company, its two recently formed wholly owned subsidiaries, Carrizo (Eagle Ford) LLC and Carrizo (Niobrara) LLC, and Wells Fargo Bank, National Association, as Trustee, entered into the Eighth Supplemental Indenture and Ninth Supplemental Indenture, pursuant to which such wholly owned subsidiaries have issued full, unconditional and joint and several guarantees of the Senior Notes and the Convertible Senior Notes, respectively, and may guarantee future issuances of debt securities. These subsidiaries also guarantee borrowings under the Revolving Credit Facility.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

5. INCOME TAXES

For the three and six months ended June 30, 2011 and 2010, all of the Company's income before income taxes is derived primarily from activities within the United States as well as the Company's activities in the United Kingdom. The Company's estimated annual effective income tax rates are used to allocate expected annual income tax expense to interim periods. The rates are the ratio of estimated annual income tax expense to estimated annual income before income taxes by taxing jurisdiction, except for discrete items, which are significant, unusual or infrequent items for which income taxes are computed and recorded in the interim period in which the specific transaction occurs. The estimated annual effective income tax rates is applied to the year-to-date income before income taxes by taxing jurisdiction to determine the income tax expense allocated to the interim period. The Company updates its estimated annual effective income tax rate at the end of each quarterly period considering the geographic mix of income based on the tax jurisdictions in which the Company operates. Actual results that are different from the assumptions used in estimating the annual effective income tax rate, will impact future income tax expense. Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate rate of 35% to income before income taxes as follows:

		0000000		0000000		0000000		0000000
	Three Months Ended June  30,				Six Months Ended June  30,
	2011		2010		2011		2010
	(In thousands)
Income tax expense at the statutory rate	$	3,971	$	735	$	4,599	$	12,087
State income taxes, net of federal benefit		127		14		1,702		1,348
Foreign income taxes		(175)				(175)
Capital loss associated with investment in Pinnacle for which no income tax benefit was recognized in prior years		-				(1,135)		-
Other, net		(321)		(434)		(329)		(423)
Income tax expense	$	3,602	$	315	$	4,662	$	13,012

As of June 30, 2011, the Company had income tax net operating loss ("NOL") carryforwards of approximately $181.8 million which expire between 2019 and 2031 if not utilized in earlier periods. The realization of the deferred tax assets related to NOL carryforwards is dependent on the Company's ability to generate taxable income in the future. The Company believes it will be able to generate sufficient taxable income in the NOL carry forward period. As such, the Company believes that it is more likely than not that its deferred tax assets will be fully realized.

At June 30, 2011, the Company had no material uncertain tax positions and the tax years since 1999 remain open to review by federal and various state tax jurisdictions.

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Consolidated Statements of Operations (Parenthetical) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statements of Operations
Stock-based compensation expense	$ 6,805	$ 3,156	$ 10,655	$ 5,320

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Nature of Operations

6 Months Ended

Jun. 30, 2011

Nature of Operations

Nature of Operations

1. NATURE OF OPERATIONS

Carrizo Oil & Gas, Inc. is an independent energy company which, together with its subsidiaries (collectively referred to herein as the "Company"), is engaged in the exploration, development and production of oil and gas in the United States and the U.K. North Sea. The Company's current operations are principally focused in proven, producing oil and gas plays in the Barnett Shale in North Texas, the Marcellus Shale in Pennsylvania, New York and West Virginia, the Eagle Ford Shale in South Texas, the Niobrara Formation in Colorado and the Huntington Field located in the U.K. North Sea.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

10. FAIR VALUE MEASUREMENTS

Accounting guidelines for measuring fair value establish a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Other inputs that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the Company's assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

		000000		000000		000000		000000		000000		000000		000000		000000
	June 30, 2011								December 31, 2010
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Investment in Pinnacle Gas Resources, Inc.	$	-	$	-	$	-	$	-	$	869	$	-	$	-	$	869
Derivative instruments		-		39,297		-		39,297		-		48,140		-		48,140
Liabilities:
Derivative instruments		-		(16,934)		-		(16,934)		-		(24,062)		-		(24,062)
Total	$	-	$	22,363	$	-	$	22,363	$	869	$	24,078	$	-	$	24,947

The fair values of derivative instruments are based on a third-party pricing model which utilizes inputs that include (a) quoted forward prices for oil and gas, (b) discount rates, (c) volatility factors and (d) current market and contractual prices, as well as other relevant economic measures. The estimates of fair value are compared to the values provided by the counterparty for reasonableness. Derivative instruments are subject to the risk that counterparties will be unable to meet their obligations. Such non-performance risk is considered in the valuation of the Company's derivative instruments, but to date has not had a material impact on estimates of fair values. The fair values reported in the consolidated balance sheets are as of a particular point in time and subsequently change as these estimates are revised to reflect actual results, changes in market conditions and other factors. The assets and liabilities for derivative instruments included in the tables above are presented on a gross basis. The assets and liabilities for derivative instruments included in the consolidated balance sheets are presented on a net basis when such amounts are with the same counterparty and subject to master netting agreements. The fair value of the investment in Pinnacle was based on the closing price of Pinnacle's common stock on December 31, 2010. The Company had no transfers in or out of Levels 1 or 2 for the six months ended June 30, 2011.

Fair Value of Other Financial Instruments

The Company's other financial instruments consist of cash and cash equivalents, receivables, payables and current and long-term debt. The carrying amounts of cash and cash equivalents, receivables, payables and short-term debt approximate fair value due to the highly liquid or short-term nature of these instruments. The fair values of the borrowings under the Revolving Credit Facility as of June 30, 2011 and the Prior Credit Facility as of December 31, 2010, approximate the carrying amounts and were based upon interest rates currently available to the Company for borrowings with similar terms. The fair values of the Convertible Senior Notes and Senior Notes at June 30, 2011, were estimated at approximately $73.4 million and $414.0 million based on quoted market prices.

Other Fair Value Measurements

The initial measurement of asset retirement obligations at fair value is calculated using discounted future cash flows of internally estimated costs. Significant Level 3 inputs used in the calculation of asset retirement obligations include the costs of plugging and abandoning wells, surface restoration and reserve lives.

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Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 24,102	$ 4,128
Accounts receivable, net
Oil and gas sales	16,063	16,027
Joint interest billing	15,978	14,309
Related party	1,478
Other	345	560
Advances to operators	625	487
Fair value of derivative instruments	17,754	17,698
Prepaids and other current assets	10,460	7,123
Total current assets	86,805	60,332
PROPERTY AND EQUIPMENT, NET
Proved oil and gas properties, net	622,548	626,665
Costs not subject to amortization	439,750	352,479
Other property and equipment, net	4,198	3,913
TOTAL PROPERTY AND EQUIPMENT, NET	1,066,496	983,057
DEFERRED FINANCING COSTS, NET	20,539	14,670
INVESTMENTS	2,523	3,392
FAIR VALUE OF DERIVATIVE INSTRUMENTS	4,717	7,257
DEFERRED INCOME TAXES	67,979	72,587
INVENTORY		1,646
OTHER ASSETS	1,566	1,193
TOTAL ASSETS	1,250,625	1,144,134
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade	24,731	33,653
Revenue and royalties payable	32,896	23,864
Current state tax payable		4,052
Accrued drilling costs	51,415	26,884
Accrued interest	7,908	5,953
Other accrued liabilities	20,935	11,838
Advances for joint operations	15,775	3,407
Current maturities of long-term debt		160
Deferred income taxes	5,418	5,286
Other current liabilities	2,082	3,907
Total current liabilities	161,160	119,004
LONG-TERM DEBT, NET OF CURRENT MATURITIES AND DEBT DISCOUNT	607,009	558,094
ASSET RETIREMENT OBLIGATIONS	6,133	6,369
FAIR VALUE OF DERIVATIVE INSTRUMENTS	87	715
OTHER LIABILITIES	3,371	3,316
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $0.01 par value (90,000 shares authorized, 39,280 and 38,906 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively)	393	389
Additional paid-in capital	638,593	630,845
Accumulated deficit	(166,121)	(174,598)
Total shareholders' equity	472,865	456,636
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,250,625	$ 1,144,134