1. Mid-Cities Tech Club December 3, 2008 Tarrant County Urban Drilling

2. 22 Shale Plays New Albany Shale Fayetteville Shale Barnett / Woodford Shale Floyd Shale Marcellus Shale Barnett Shale Haynesville Shale Woodford Shale Eagleford Shale

3. 33 Barnett Shale Industry Overview Average over 3.5 Bcfe/d – 30% annual increase (1) Average household uses Mcf each month Over 1,200 new completions reported in 2008 Major activity focused on Tarrant, Johnson, Parker, Denton, Wise, Hood, Hill and Erath counties Peak at 5 BCFD in 2010-2012? (1) Based on 2008 data provided by the Texas Railroad Commission.

4. 44 Barnett Shale Continuing to Grow Total Newark east field production (gas & oil) from public records Denton/Wise volumes flat Tarrant surpassed Denton & Wise in March 2006 Johnson surpassed Tarrant in November 2006 Source: Texas Railroad Commission

5. Regional Geology WEST Productive Area Barnett Shale overlies Ellenberger formation Ellenberger is water- bearing in this area Geologic features such a faults allow potential communication between Barnett and Ellenberger Viola formation acts as barrier between Barnett and Ellenberger

6. 66 Barnett Shale Carrizo Leases / 2008 Industry Completions Jack Hood Somervell Erath Johnson Hill Parker Tarrant Wise Denton Carrizo lease Industry completion Ft. Worth

7. 77 Barnett Shale Tarrant County Urban Development Overview Pantego UT-Arlington Fort Worth DFW Carrizo acreage Existing drillsite Completions Permits Pipeline Future pipeline Thickest most gas-rich part of the Barnett sits under the urban areas in SE Tarrant County 20 sq mile area with surface partially or completely developed Most surface owners also still own the mineral rights beneath their property

8. Urban Drilling Development of this resource not possible without horizontal drilling technology

9. Urban Drilling - UTA

10. Barnett Urban Project Lifecycle Identify & acquire rights to drillsite Lease mineral rights surrounding drillsite Acquire subsurface seismic data Formulate development drilling plan Permit wells and facilities Drill wells Complete wells Install facilities Produce natural gas!

11. UTA Drillsite

12. 12 Urban Drilling - Project Leasing Once geologic model confirms area as prospective Carrizo uses company and third party land professionals to coordinate mineral leasing In urban areas, drillsite acquisition most difficult - NIMBY Typically business or PLM degreed individuals Mineral leasing –Negotiate the “lease” of minerals which gives operator the right to drill and produce the minerals under property –Lease bonus – paid to lessor (mineral owner) up front when lease is signed; in Barnett as high as $6,000 for 0.2 acre lot –Royalty – typically 25% of all gas produced by lessee (Carrizo); 2 – 4 times the lease bonus over life of well –UTA lease paid lower bonus and higher royalty –Lease in effect as long as well produces

13. Barnett Urban Project Lifecycle Identify & acquire rights to drillsite Lease mineral rights surrounding drillsite Acquire subsurface seismic data Formulate development drilling plan Permit wells and facilities Drill wells Complete wells Install facilities Produce natural gas!

14. Barnett Shale 3D Seismic Uses sound waves to create an image of subsurface Mathematical model of how quickly various subsurface formations reflect waves created by seismic source Receivers are placed all around source allowing modelling in 3 dimensions

15. 3D Seismic Faults

16. 3D Seismic Faults Remember – faults in Barnett are a possible pathway into Ellenberger and water

17. Barnett Urban Project Lifecycle Identify & acquire rights to drillsite Lease mineral rights surrounding drillsite Acquire subsurface seismic data Formulate development drilling plan Permit wells and facilities Drill wells Complete wells Install facilities Produce natural gas!

18. Development Planning Engineers model projected reserves from each well –Analysis of geology from other nearby wells –How much gas is in-place and how much of it can each well produce Engineers estimate the cost to drill and complete the wells Engineers run economics to assess project viability –Use computer programs –Requires understanding of commodity market (natural gas) Engineers get management approval to spend capital

19. 19 Urban Drilling - Project Permitting Carrizo project engineers coordinate Work closely with local municipality to secure approval to drill Usually requires approval of city planning staff and city council uses company and third party land professionals to coordinate mineral leasing Very detailed ordinances address traffic, noise, safety, screening for drilling and production operations Carrizo engineers must understand all facets of operations to prepare and get permits approved

20. NOISE SOURCE DECIBEL LEVELNOISE EFFECT Jet takeoff (25 M) 150Eardrum rupture Aircraft carrier deck 140Earphones at high levels Jet takeoff (100 M) 130 Thunderclap, live rock music, 120Human pain threshold Chain Saw, Steel Mill, Riveting, auto horn at 1 M 110 Jet takeoff (305 M), outboard motor, power lawn mower, motorcycle, farm tractor, jackhammer, garbage truck 100Serious hearing damage (8 hrs) Busy urban street, diesel truck, food blender 90Hearing damage (8 hrs) Garbage disposal, dishwasher, average factory, freight train (15 M) 80Possible hearing damage Freeway traffic at 15 M, vacuum cleaner 70Annoying Conversation in restaurant, office, background music 60 Quiet suburb, conversation at home 50Quiet Library 40 Quiet rural area 30 Whisper, rustling leaves 20Very Quiet Breathing 10 Project Permitting - Noise

21. Project Permitting - Transportation Location Construction Rig Move 1 st Well 2 nd Well 3 rd Well 4 th Well 5 th Well Rig Demob Completion Ops Trucks/Day

22. Barnett Urban Project Lifecycle Identify & acquire rights to drillsite Lease mineral rights surrounding drillsite Acquire subsurface seismic data Formulate development drilling plan Permit wells and facilities Drill wells Complete wells Install facilities Produce natural gas!

23. Barnett Urban Project Lifecycle

24. 24 Drilling Engineers design wells For horizontal drilling, industry engineers have designed motors and mud systems to allow drilling up to 6,000 feet from surface site Complex system of mechanical equipment integrated with computer technology allows drilling with minimal “footprint” Engineers monitor ongoing daily drilling in real time to make sure wellbore is in correct location Steering well complex – only possible with modern computing capabilities

25. Fracture Stimulation

26. Drilling rig is composed of Several Sections –Power generation –Derrick and draw works and sub structure –Rotational system –Drill string –Mud system –Well control equipment –Pipe handling –Living quarters Drilling Rig

27. Fracture Stimulation Rig is on a track which allows the rig to complete one well and commence drilling another in 4 to 6 hours vs. 3 days for a conventional skid move using bull dozers

28. Barnett Urban Project Lifecycle Identify & acquire rights to drillsite Lease mineral rights surrounding drillsite Acquire subsurface seismic data Formulate development drilling plan Permit wells and facilities Drill wells Complete wells Install facilities Produce natural gas!

29. Fracturing Process Fresh water Sand Friction Reducers and Stabilizing Chemicals Combined in a Blender Transferred to pumps with increase the pressure of the mixture Mixture is pumped down hole and into the formation causing cracks in the rock The sand props the crack open and provides a conduit for gas to escape from the rock Engineers determine how much sand and water to pump and at what rates and pressures to produce the most natural gas from each well

30. Fracture Stimulation

31. 31 Fracture Stimulation

32. WellborePumped FracFracture Event Fracture Stimulation

33. Barnett Urban Project Lifecycle Identify & acquire rights to drillsite Lease mineral rights surrounding drillsite Acquire subsurface seismic data Formulate development drilling plan Permit wells and facilities Drill wells Complete wells Install facilities Produce natural gas!

34. Engineers design equipment for separation of gas from water and other impurities Engineers design equipment for compression of gas for sale into gas pipeline Engineers supervise construction and installation of these facilities at the wellsite after drilling and completion operations are finished Production