Discontinued Operations

3 Months Ended

Mar. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

3. Discontinued Operations

On December 27, 2012, the Company agreed to sell Carrizo UK, and all of its interest in the Huntington Field discovery, including a 15% non-operated working interest and certain overriding royalty interests, to a subsidiary of Iona Energy Inc. (“Iona Energy”). The sale closed on February 22, 2013 with an agreed-upon price of $184.0 million, including the assumption and repayment by Iona Energy of the $55.0 million of borrowings outstanding under Carrizo UK's senior secured multicurrency credit facility ("the Huntington Facility”) as of the closing date.

In connection with this sale, the Company recognized net proceeds of approximately $144.1 million, including net purchase price adjustments (primarily related to working capital) and deferred consideration, resulting in a gain on sale of approximately $37.3 million, net of transaction costs and a $30.5 million accrual for estimated future obligations related to the sale. The Company expects to receive deferred consideration of $18.5 million as of the earlier of six months from the agreement closing date or when Iona Energy receives payment for its first lifting of production from the Huntington Field, in accordance with the sale and purchase agreement, as amended.

The remaining assets and liabilities associated with the sale of Carrizo UK have been classified as discontinued operations in the consolidated balance sheets. Given the expected timing of payments related to the liabilities, the Company has classified the estimated amounts expected to be paid in the next 12 months as current. See “Note 2. Summary of Significant Accounting Policies—Use of Estimates” for further discussion of estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosures related to the sale of Carrizo UK.

The related results of operations and cash flows have been classified as discontinued operations, net of income taxes, in the consolidated statements of income and cash flows. For the three months ended March 31, 2013 and 2012, the Company’s U.K. assets had no production or revenues. The following table summarizes the amounts included in net income (loss) from discontinued operations, net of income taxes presented in the consolidated statements of income for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31,
	2013			2012
	(In thousands)
OIL AND GAS REVENUES	$	—		$	—
COSTS AND EXPENSES
General and administrative	5			2
Accretion related to asset retirement obligations	36			76
TOTAL COST AND EXPENSES	41			78
OPERATING LOSS	(41		)	(78		)
OTHER INCOME AND EXPENSES
Gain on sale of discontinued operations	37,294			—
Gain (loss) on derivative instruments, net	(44		)	(765		)
Interest expense	(253		)	(879		)
Capitalized interest	253			—
Other income (expense), net	24			(798		)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS BEFORE INCOME TAXES	37,233			(2,520		)
INCOME TAX (EXPENSE) BENEFIT	(13,575		)	1,267
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES	$	23,658		$	(1,253	)

Income Taxes

Carrizo UK is a disregarded entity for U.S. income tax purposes. Accordingly, the income tax (expense) benefit reflected above includes the Company's U.S. deferred income tax (expense) benefit associated with the income (loss) from discontinued operations before income taxes. The related U.S. deferred tax assets and liabilities have been classified as deferred income taxes of continuing operations in the consolidated balance sheet.

Foreign Currency

The U.S. dollar was the functional currency for the Company’s operations in the U.K. North Sea. Transaction gains or losses that occured due to the realization of assets and the settlement of liabilities denominated in a currency other than the functional currency were recorded as Other income (expense), net.