Edgar Filing: CARRIZO OIL & GAS INC

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).

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[ ] Definitive additional materials.

[ ] Soliciting material pursuant to Section 240.14a-12

Carrizo Oil & Gas, Inc.
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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

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[LOGO OF CARRIZO OIL & GAS, INC.]

April 26, 2004

Dear Fellow Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of
Carrizo Oil & Gas, Inc. (the "Company") to be held at 10:00 a.m. on Friday, May
21, 2004, at the Omni Houston Hotel Westside, 13210 Katy Freeway, Houston,
Texas.

This booklet includes the notice of the meeting and the proxy statement,
which contains information about the Board and its committees and personal
information about the nominees for the Board. Other matters on which action is
expected to be taken during the meeting are also described.

We hope you will find it convenient to attend in person. Whether or not you
expect to attend, to assure representation at the meeting and the presence of a
quorum, please date, sign and promptly mail the enclosed proxy in the return
envelope provided.

A copy of the Company's 2003 Annual Report to Shareholders is also
enclosed.

Sincerely,

/s/ S.P. JOHNSON IV
S.P. JOHNSON IV
Chief Executive Officer

CARRIZO OIL & GAS, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 2004

To The Shareholders of
Carrizo Oil & Gas, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Carrizo
Oil & Gas, Inc. (the "Company") will be held at the Omni Houston Hotel Westside,
13210 Katy Freeway, Houston, Texas, on Friday, May 21, 2004, at 10:00 a.m. for
the following purposes:

(1) to elect nine members to the Board of Directors for the ensuing year;

(2) to approve an amendment to the Incentive Plan (A) increasing by
500,000 the number of shares of Common Stock available for issuance
under the Incentive Plan, (B) replacing automatic annual awards of
options to purchase 2,500 shares of Common Stock to each nonemployee
director with discretionary awards of stock options or restricted
stock that are determined by the Company's compensation committee or
Board of Directors, (C) providing for additional stock option grants
to the chairman and certain members of the nominating committee of the
Board of Directors and (D) making certain clarifications to other
provisions of the Incentive Plan;

(3) to approve the appointment of Ernst & Young LLP as independent public
accountants of the Company for the fiscal year ending December 31,
2004; and

(4) to transact such other business as may properly come before the
meeting.

The Company has fixed the close of business on April 8, 2004, as the record
date for determining shareholders entitled to notice of, and to vote at, such
meeting or any adjournment thereof.

You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, you are requested to mark, sign, date and return the
accompanying proxy as soon as possible.

By Order of the Board of Directors

/s/ Paul F. Boling
Paul F. Boling
Secretary

April 26, 2004
14701 St. Mary's Lane, Suite 800
Houston, TX 77079

CARRIZO OIL & GAS, INC.
14701 St. Mary's Lane, Suite 800
Houston, Texas 77079

PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Carrizo Oil & Gas, Inc., a Texas
corporation (the "Company"), to be voted at the 2004 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Omni Houston Hotel
Westside, 13210 Katy Freeway, Houston, Texas on Friday, May 21, 2004, at 10:00
a.m., and any and all adjournments thereof.

This statement and the accompanying form of proxy are first being mailed to
shareholders on or about the week of April 26, 2004. In addition to the
solicitation of proxies by mail, regular officers and employees of the Company
may, without additional compensation, solicit the return of proxies by mail,
telephone, telegram or personal contact. The Company will pay the cost of
soliciting proxies in the accompanying form. The Company will reimburse brokers
or other persons holding stock in their names or in the names of their nominees
for their reasonable expenses in forwarding proxy material to beneficial owners
of stock.

VOTING PROCEDURES

Shareholders of record as of April 8, 2004 the record date for determining
persons entitled to notice of, and to vote at, the Annual Meeting, are entitled
to vote on all matters at the Annual Meeting and at any adjournments thereof. On
that date, the issued and outstanding capital stock of the Company consisted of
18,410,386 shares of Common Stock, par value $0.01 per share (the "Common
Stock") and 71,987.01 shares of Series B Convertible Participating Preferred
Stock, par value $0.01 per share (the "Series B Preferred Stock"). No other
class of stock is outstanding. Each share of Common Stock is entitled to one
vote on each matter submitted to a vote of shareholders. The Series B Preferred
Stock will not be entitled to vote at the Annual Meeting and generally has no
right to vote for directors or on other matters except in certain specified
circumstances or as required by law. Cumulative voting is not allowed. The
holders of a majority of the shares entitled to vote at the Annual Meeting,
represented in person or by proxy, constitute a quorum for the transaction of
business at the Annual Meeting.

All duly executed proxies received prior to the Annual Meeting will be
voted in accordance with the choices specified thereon and, in connection with
any other business that may properly come before the meeting, in the discretion
of the persons named in the proxy. As to any matter for which no choice has been
specified in the proxy, the shares represented thereby will be voted by the
persons named in the proxy, to the extent applicable, (1) for the election as a
director of each nominee listed herein; (2) for the approval of an amendment to
the Incentive Plan (A) increasing by 500,000 the number of shares of Common
Stock available for issuance under the Incentive Plan, (B) replacing automatic
annual awards of stock options to purchase 2,500 shares of Common Stock to each
nonemployee director with discretionary awards of stock options or restricted
stock that are determined by the Compensation Committee or the Board of
Directors, (C) providing for additional stock option grants to the chairman and
certain members of the Nominating Committee of the Board of Directors and (D)
making certain clarifications to other provisions of the Incentive Plan; (3) for
the appointment of Ernst & Young LLP as independent public accountants of the
Company for the fiscal year ending December 31, 2004; and (4) in the discretion
of the persons named in the proxy in connection with any other business that may
properly come before the meeting. A shareholder giving a proxy may revoke it at
any time before it is voted at the Annual Meeting by delivering written notice
to the Secretary of the Company or by delivering a properly executed proxy
bearing a later date. A shareholder who attends the Annual Meeting may, if he or
she wishes, vote by ballot at the Annual Meeting and that vote will cancel any
proxy previously given. Attendance at the Annual Meeting will not in itself,
however, constitute the revocation of a proxy.

Proxies indicating shareholder abstentions will be counted for purposes of
determining whether there is a quorum at the Annual Meeting, but will not be
voted on any matter and therefore will have the same effect as a vote against a
matter, except in the case of director elections, which are determined by a
plurality of votes

cast, as to which those abstentions will have no effect. Shares represented by
"broker nonvotes" (i.e., shares held by brokers or nominees for which
instructions have not been received from the beneficial owners or persons
entitled to vote and for which the broker or nominee does not have discretionary
power to vote on a particular matter) will be counted for purposes of
determining whether there is a quorum at the Annual Meeting, but will not be
voted on any matter, and thus will be disregarded in the calculation of "votes
cast" with respect to that matter (even though those shares may be considered as
entitled to vote or be voted on other matters). Votes cast by proxy or in person
at the Annual Meeting will be counted by the persons appointed as election
inspectors for the Annual Meeting.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The table below sets forth information concerning (i) the only persons
known by the Company, based on statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of
March 31, 2004, and (ii) the shares of Common Stock beneficially owned, as of
March 31, 2004, by each director, one nominee for director, the Chief Executive
Officer and the four other executive officers who were serving at the end of the
Company's last fiscal year and one other individual who served as an executive
officer in 2003 and by all executive officers and directors collectively. Except
as indicated, each individual has sole voting power and sole investment power
over all shares listed opposite his name.

AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-----------------------------------
PERCENT
OF COMMON
STOCK (2)
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER OF SHARES (ROUNDED)
---------------------------------------------- -------------------- ---------

Directors and Executive Officers:
S. P. Johnson IV............................... 703,890(3)(4) 3.8%
Paul F. Boling................................. -- --
J. Bradley Fisher.............................. 43,333 *
Kendall A. Trahan.............................. 120,128 *
Jeremy T. Greene............................... 8,333 *
Steven A. Webster.............................. 2,573,454(3)(4)(5) 13.4%
Douglas A. P. Hamilton......................... 533,011(3)(4)(6) 2.9%
Paul B. Loyd, Jr............................... 895,183(3)(4) 4.8%
Christopher C. Behrens......................... 3,750,369(3)(4)(7) 18.2%
Bryan R. Martin................................ 3,750,369(3)(4)(7) 18.2%
F. Gardner Parker.............................. 55,000 *
Roger A. Ramsey................................ -- --
Frank A. Wojtek................................ 804,699(3)(4) 4.4%
Executive Officers and Directors as a Group (12
persons)....................................... 13,237,769 66.5%
DAPHAM Partnership, L.P........................ 395,960(3)(4)(8) 2.2%
JPMorgan Partners (23A SBIC), LLC.............. 3,750,369(3)(9) 18.2%
Mellon Ventures, L.P........................... 1,412,409(3)(4)(10) 7.3%

----------
* Less than 1%.

(1) Except as described in notes 3 and 4 below or otherwise noted and
pursuant to applicable community property laws, each shareholder has
sole voting and investment power with respect to the shares
beneficially owned. The business address of each director and
executive officer other than Messrs. Behrens and Martin is c/o Carrizo
Oil & Gas, Inc., 14701 St. Mary's Lane, Suite 800, Houston, Texas
77079. The business address of Messrs. Behrens and Martin is 1221 6th
Avenue of the Americas, 39th Floor, New York, New York 10020.

(2) The table includes shares of Common Stock that can be acquired through
the exercise of options, warrants or convertible securities within 60
days of March 31, 2004 as follows: Mr. Johnson - 171,667, Mr. Boling -
0, Mr. Fisher - 43,333, Mr. Trahan - 120,128, Mr. Greene - 8,333, Mr.
Webster - 791,360, Mr. Hamilton - 114,506, Mr. Loyd - 114,506, Mr.
Behrens - 3,750,369, Mr. Martin -

3,750,369, Mr. Parker - 25,000, Mr. Wojtek - 70,000, all officers and
directors as a group - 3,574,241, JPMorgan Partners - 3,750,369, and
Mellon Ventures, L.P. - 1,048,773. The percent of the class owned by
each person has been computed assuming the exercise of all options,
warrants and convertible securities deemed to be beneficially owned by
that person, and assuming that no options, warrants or convertible
securities held by any other person have been exercised. The table
excludes shares of Common Stock subject to options that cannot be
exercised within 60 days of March 31, 2004, as follows: Mr. Johnson -
48,333, Mr. Boling - 45,000, Mr. Fisher - 26,667, Mr. Trahan - 6,667,
Mr. Greene - 56,667, Mr. Webster - 78,333, Mr. Hamilton - 2,500, Mr.
Loyd - 2,500, Mr. Behrens - 2,500, Mr. Martin - 5,833, Mr. Parker -
22,500, and all officers and directors as a group - 334,862.

(3) Pursuant to a Shareholders Agreement dated December 15, 1999, among
the Company, S.P. Johnson IV, Frank A. Wojtek, Steven A. Webster,
Douglas A. P. Hamilton, Paul B. Loyd, Jr., DAPHAM Partnership L.P.,
JPMorgan Partners and Mellon Ventures, L.P., certain shareholders of
the Company may be deemed to have formed a group pursuant to Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such group could be deemed to have
beneficial ownership, for purposes of Sections 13(d) and 13(g) of the
Exchange Act, of all equity securities of the Company beneficially
owned by such parties. Such parties would, as of March 31, 2004 be
deemed to beneficially own an aggregate of 10,365,085 shares (45.5%).
Each party to the Shareholders Agreement listed above disclaims
beneficial ownership of any common stock owned by the other parties to
the Shareholders Agreement. As of April 2004 Messrs. Hamilton, Loyd
and DAPHAM Partnership L.P., formerly parties to the agreement, were
no longer parties to this agreement.

(4) Pursuant to a Shareholders Agreement dated February 20, 2002, among
the Company, S.P. Johnson IV, Frank A. Wojtek, Steven A. Webster,
Douglas A. P. Hamilton, Paul B. Loyd, Jr., DAPHAM Partnership L.P.,
and Mellon Ventures, L.P., certain shareholders of the Company may be
deemed to have formed a group pursuant to Rule 13d-5(b)(1) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such group could be deemed to have beneficial ownership, for
purposes of Sections 13(d) and 13(g) of the Exchange Act, of all
equity securities of the Company beneficially owned by such parties.
Such parties would, as of March 31, 2004 be deemed to beneficially own
an aggregate of 6,614,716 shares (32.2%). Each party to the
Shareholders Agreement listed above disclaims beneficial ownership of
any common stock owned by the other parties to the Shareholders
Agreement. As of April 2004 Messrs. Hamilton, Loyd and DAPHAM
Partnership L.P., formerly parties to the agreement, were no longer
parties to this agreement.

(5) Shares shown include 1,725,228 shares of Common Stock owned by Mr.
Webster and 56,866 shares owned by Cerrito Partners, of which Mr.
Webster is one of three general partners and could be deemed to share
voting and dispositive power with the other general partners. However,
Mr. Webster does not admit to having such power and disclaims the
beneficial ownership of the Common Stock held by Cerrito Partners.

(6) Shares shown do not include 395,960 shares of Common Stock
beneficially owned by DAPHAM Partnership, L.P., the limited partner of
which is a charitable remainder trust of which Mr. Hamilton, his wife
and children are among the beneficiaries, and 138,648 shares of Common
Stock beneficially owned by certain trusts established for the benefit
of Mr. Hamilton's children, and for each of which Mr. Hamilton's wife
serves as trustee. Mr. Hamilton disclaims beneficial ownership of all
of such shares.

(7) Shares shown include 3,723,701 shares beneficially owned by JPMorgan
Partners (23A SBIC), LLC (formerly CB Capital Investors, LLC). Messrs.
Behrens and Martin may be deemed to have beneficial ownership of such
shares because they are a general partner and a principal,
respectively, of JPMorgan Partners, which is a member and the
investment manager of JPMorgan Partners (23A SBIC), LLC. Each of
Messrs. Behrens and Martin disclaims beneficial ownership of all such
shares.

(8) The address of DAPHAM Partnership, L.P. is 1114 Avenue of the
Americas, 31st Floor, New York, New York 10036.

(9) The name of CB Capital Investors, LLC was changed to JPMorgan Partners
(23A SBIC), LLC as part of a business combination effective January 1,
2001. The address of JPMorgan Partners (23A SBIC),

LLC is 1221 6th Avenue of the Americas, 39th Floor, New York, New York
10020. Shares shown include 17,500, 9,167 and 7,500 shares of Common
Stock that can be acquired through the exercise of options within 60
days of March 31, 2004 by Mr. Behrens, Mr. Martin and Mr. Chavkin, a
former director of the Company. Mr. Behrens, Mr. Martin and Mr.
Chavkin are obligated to transfer any shares issued in connection with
the exercise of the options to JPMorgan Partners (23A SBIC), LLC.

(10) The address of Mellon Ventures, L.P. is 1114 Avenue of the Americas,
31st Floor, New York, New York 10036.

PROPOSAL I

ELECTION OF DIRECTORS

The persons designated as proxies in the enclosed proxy card intend, unless
the proxy is marked with contrary instructions, to vote for the following
nominees as directors to serve until the 2005 Annual Meeting of Shareholders and
until their successors have been duly elected and qualified: Mr. S.P. Johnson
IV; Mr. Steven A. Webster; Christopher C. Behrens; Mr. Douglas A.P. Hamilton;
Mr. Paul B. Loyd, Jr.; Mr. Bryan Martin; Mr. F. Gardner Parker; Mr. Roger A.
Ramsey and Mr. Frank A. Wojtek. The Board of Directors has no reason to believe
that any nominee for election as a director will not be a candidate or will be
unable to serve, but if for any reason one or more of these nominees is
unavailable as a candidate or unable to serve when election occurs, the persons
designated as proxies in the enclosed proxy card, in the absence of contrary
instructions, will in their discretion vote the proxies for the election of any
of the other nominees or for a substitute nominee or nominees, if any, selected
by the Board of Directors. The affirmative vote of a plurality of the votes cast
by holders entitled to vote in the election of directors at the Annual Meeting
is required for the election of each nominee for director.

NOMINEES

The following sets forth information concerning the nine nominees for
election as directors at the Annual Meeting, including information as to each
nominee's age as of April 1, 2004, position with the Company and business
experience during the past five years. All nominees, except for Mr. Ramsey, are
currently serving as directors and are standing for re-election. Mr. Ramsey was
recommended for nomination by our Chairman of the Board and two non-management
directors.

S.P. Johnson IV, age 48, has served as our President and Chief Executive
Officer and a director since December 1993. Prior to that, he worked for Shell
Oil Company for 15 years. His managerial positions included Operations
Superintendent, Manager of Planning and Finance and Manager of Development
Engineering. Mr. Johnson is also a director of Basic Energy Services, Inc. (a
well servicing contractor). Mr. Johnson is a Registered Petroleum Engineer and
has a B.S. in Mechanical Engineering from the University of Colorado.

Steven A. Webster, age 52, has been the Chairman of our Board of Directors
since June 1997 and has been a director since 1993. Mr. Webster serves as the
Chairman of Global Energy Partners, Ltd., an affiliate of CSFB Private Equity,
which makes private equity investments in the energy business. From December
1997 to May 1999, Mr. Webster was the Chief Executive Officer and President of
R&B Falcon Corporation, an offshore drilling contractor, and prior to that, was
Chairman and Chief Executive Officer of Falcon Drilling Company, which he
founded in 1988. Mr. Webster is also a director of Grey Wolf, Inc. (an onshore
drilling company), Seabulk International, Inc. (a marine transportation and
service provider), Geokinetics, Inc. (a seismic acquisition and geophysical
services company), Crown Resources Corporation (a precious metals exploration
company), Goodrich Petroleum Corporation (an oil and gas exploration company),
Basic Energy Services, Inc. (a well servicing company) and Brigham Exploration
Company (an oil and gas exploration company), as well as various private
companies. He is also a trust manager of Camden Property Trust (a real estate
investment trust). Mr. Webster holds an M.B.A. degree from Harvard Business
School and a Bachelor of Science in Industrial Management degree from Purdue
University.

Christopher C. Behrens, age 43, has been a director since December 1999.
Since 1998, Mr. Behrens has been a General Partner of J.P. Morgan Partners, LLC
(formerly Chase Capital Partners), the private equity investment affiliate of JP
Morgan Chase & Co. which focuses on energy investments and industrial buyouts.
Mr. Behrens is a director of Brand Services Inc., Interline Brands, Inc. and
Berry Plastics Corporation, as well as various private companies. Mr. Behrens
received a B.A. from the University of California at Berkeley and an M.A. from
Columbia University.

Douglas A. P. Hamilton, age 57, has been a director since 1993. Mr.
Hamilton, a private investor, has been an active investor in the oil and gas
business since 1985. Mr. Hamilton has been the President of Anatar Investments,
Inc., a diversified investment capital firm with active investments in oil and
gas and offshore contract drilling, since 1979 and is a co-owner of the French
Culinary Institute, a cooking school in New York City. Mr. Hamilton has a degree
from the University of North Carolina and completed the Program for Management
Development at Harvard Business School.

Paul B. Loyd, Jr., age 57, has been a director since 1993. Mr. Loyd was
Chairman of the Board and Chief Executive Officer of Reading & Bates Corporation
from 1991 to 1997 and from 1999 to 2001 until its merger with Transocean Inc.
Mr. Loyd has been the principal of Loyd & Associates, Inc., a private financial
consulting firm, since 1989. Mr. Loyd was Chief Executive Officer and a director
of Chiles-Alexander International, Inc. from 1987 to 1989, President and a
director of Griffin-Alexander Drilling Company, from 1984 to 1987, and prior to
that, a director and Chief Financial Officer of Houston Offshore International,
all of which are companies in the offshore drilling industry. Mr. Loyd is
currently a director of Transocean Inc. (an offshore drilling contractor) and
Frontier Oil Corporation (a refining and marketing company) and is a member of
the Board of Trustees of Southern Methodist University. Mr. Loyd served as
President of our company from its inception in September 1993 until December
1993. Mr. Loyd holds an undergraduate degree from Southern Methodist University
and an M.B.A. degree from Harvard Business School.

Bryan R. Martin, age 37, has been a director since March 2002. Since 2000,
he has been a Principal at J.P. Morgan Partners, LLC (formerly Chase Capital
Partners), the private equity investment affiliate of JP Morgan Chase & Co.
which focuses on energy investments and industrial buyouts. Prior to his role at
J.P. Morgan Partners, LLC, Mr. Martin was a Partner of the Beacon Group since
1994 and co-manager of the Beacon Group Energy Funds. Prior to that Mr. Martin
worked as an Equity Analyst at Fidelity Investments co-managing the Select
Energy and Specialty Retail portfolios. Mr. Martin holds a bachelors degree from
Yale University and a Masters in Management from the J. L. Kellogg Graduate
School of Management. Mr. Martin is also a director of Coherent Networks,
Crosstown Traders, SmartSynch, Shell Technology Investment Partners and
Wellogix. In addition, Mr. Martin is a member of the Investment Committees of
Lime Rock Partners and Shell Technology Investment Partners.

F. Gardner Parker, age 62, has been a director since 2000. He has been
Managing Outside Trust Manager with Camden Property Trust since 1998. He also
serves on the boards of Crown Resources Corporation and Sharps Compliance Corp.
(a waste management services provider). In addition, he serves on the board of
directors of the following private companies: Gillman Automobile Dealerships,
Net Near U Communications, MCS Technologies, Camp Longhorn, Inc., nii
communications, inc., Sherwood Healthcare Inc., and Arena Power. Mr. Parker also
worked with Ernst & Ernst (now Ernst & Young LLP) for 14 years, seven of which
he served as a partner. He is a graduate of The University of Texas.

Roger A. Ramsey, age 65, is the retired Chairman of the Board of Allied
Waste Industries, Inc. He served as Chairman of the Board of Allied Waste
Industries, Inc. from October 1989 through his retirement in December 1998, and
Chief Executive Officer of that company from October 1989 through July 1997.
Beginning in 1960, Mr. Ramsey was employed by the international accounting firm
of Arthur Andersen LLP. In 1968, Mr. Ramsey co-founded Browning-Ferris
Industries, Inc. ("BFI") and served as its Vice President and Chief Financial
Officer until 1976. Mr. Ramsey is also a member of the Board of Trustees at
Texas Christian University and Chairman of the Board of Vericenter, Inc. He is
not currently one of our directors.

Frank A. Wojtek, age 48, has been a director since 1993. Mr. Wojtek served
as our Chief Financial Officer, Vice President, Secretary and Treasurer from
1993 until August 2003. From 1992 to 1997, Mr. Wojtek was the Assistant to the
Chairman of the Board of Reading & Bates Corporation (an offshore

drilling company). Mr. Wojtek has also held the positions of Vice President and
Secretary/Treasurer of Loyd & Associates, Inc., a private financial consulting
firm, since 1989. Mr. Wojtek held the positions of Vice President and Chief
Financial Officer of Griffin-Alexander Drilling Company from 1984 to 1987,
Treasurer of Chiles-Alexander International Inc. from 1987 to 1989, and Vice
President and Chief Financial Officer of India Offshore Inc. from 1989 to 1992,
all of which were companies in the offshore drilling industry. Mr. Wojtek is a
Certified Public Accountant and holds a B.B.A. in Accounting with Honors from
The University of Texas.

DIRECTOR INDEPENDENCE

The Board has determined that Messrs. Behrens, Hamilton, Loyd, Martin,
Parker and Ramsey are "independent directors" within the meaning of Marketplace
Rule 4200(a)(15) of the Nasdaq Stock Market.

Nasdaq Marketplace Rule 4350(c) sets forth certain requirements for
independent directors and independent directors as members of committees. A
controlled company is exempt from the requirements of Rule 4350(c), except
4350(c)(2), which provides for executive sessions by independent directors.
Prior to March 5, 2004, the Company qualified as a controlled company because
Messrs. Webster, Hamilton, Johnson, Loyd and Wojtek, DAPHAM Partnership, L.P.,
JP Morgan and Mellon Ventures were deemed to have formed a group pursuant to
Rule 13d-5(b)(1) of the Exchange Act as a result of entering into certain
shareholders agreements described in "Related Transactions." Until March 5,
2004, the members of this group could be deemed to have beneficial ownership,
for purposes of Sections 13(d) and 13(g) of the Exchange Act, of more than 50%
of the voting power of the Company's equity securities. On March 5, 2004, the
Company issued 235,500 shares of Common Stock and certain shareholders,
including certain of the shareholders described above, sold shares of Common
Stock in a registered, underwritten public offering. On completion of these
sales, these shareholders no longer owned 50% of the voting power of the
Company's equity securities on this basis and the Company ceased to be a
controlled company; and ceased to qualify for the exemption. The transition
rules of the Nasdaq Stock Market require that the Company have (i) at least one
independent director on each of the Nominating Committee and the Compensation
Committee on the day it ceased to be a controlled company; (ii) a majority of
independent directors on those committees within 90 days after it ceased be a
controlled company; and (iii) a majority of independent directors on the Board
by March 5, 2005. The Company will comply with these transition rules.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of the Company held seven meetings during the fiscal
year ended December 31, 2003, and transacted business on ten occasions during
the fiscal year by unanimous written consent.

During the fiscal year ended December 31, 2003, each director attended at
least 75% of the aggregate of the total number of Board of Directors' meetings
and of meetings of committees of the Board of Directors on which he served. The
Company's Board of Directors has a Nominating Committee, an Audit Committee, a
Compensation Committee and a Budget Committee.

The Board of Directors has a Nominating Committee, which currently consists
of Messrs. Webster, Loyd and Martin. The primary responsibilities of the
Nominating Committee include identifying, evaluating and recommending, for the
approval of the entire Board of Directors, potential candidates to become
members of the Board of Directors and recommending membership on standing
committees of the Board of Directors. The Nominating Committee was established
in March 2004, so it did not hold any meetings in 2003. The Board of Directors
adopted a charter for the Nominating Committee. A copy of the Nominating
Committee Charter may be found on the Company's website at www.carrizo.cc. The
Board of Directors has determined that Messrs. Loyd and Martin are independent
for purposes of Marketplace Rule 4200(a)(15) of the Nasdaq Stock Market. By
March 5, 2005, the date that is one year after the date on which the Company
ceased to be a controlled company under the rules of the Nasdaq Stock Market,
all of the members of the Nominating Committee will be required to meet the
applicable requirements for independence, subject to the exception contemplated
by Nasdaq Marketplace Rule 4350 (c)(4)(C).

The Board of Directors has an Audit Committee which, during the fiscal year
ended December 31, 2003, consisted of Messrs. Parker, Loyd and Martin. The Audit
Committee met four times during fiscal 2003. The Audit Committee has direct
responsibility for the appointment, retention, compensation and oversight of the
independent auditors for the purpose of preparing the Company's annual audit
report or performing other audit, review or attest services for the Company. The
Audit Committee has sole authority to approve all engagement fees and terms of
the independent auditors and to establish policies and procedures for
preapproval of audit and nonaudit services. The Audit Committee also reviews and
discusses the annual audited financial statements with management and the
independent auditors. The Board of Directors adopted a new Audit Committee
charter, which is included in this proxy as Exhibit A and is available on the
Company's website at www.carrizo.cc.

The Board has determined that all of the members of the Audit Committee
satisfy the independence standards under the Nasdaq Marketplace Rules and will
satisfy the standards for independence set forth in Securities Exchange Act Rule
10A-3 after the Annual Meeting, when the Company expects Mr. Martin to step down
from the Audit Committee and to be replaced by Mr. Ramsey, if he is elected. In
addition, the Board has determined that Mr. Parker is an "audit committee
financial expert," as such term is defined in Item 401(h) of Regulation S-K
promulgated by the Securities and Exchange Commission (the "SEC"). Mr. Parker is
a certified public accountant and served as partner in a major accounting firm.

The Board of Directors has a Compensation Committee which, during the
fiscal year ended December 31, 2003, consisted of Messrs. Parker, Hamilton and
Behrens. The primary responsibilities of the Compensation Committee are to
review and approve the compensation of the CEO and the Company's other executive
officers and oversee and advise the Board on the policies that govern the
Company's compensation programs. The Compensation Committee has been appointed
by the Board of Directors to administer the Company's stock option plans
(subject in some cases to action by the full Board). The Board of Directors
adopted a charter for the Compensation Committee. A copy of the Compensation
Committee Charter can be found on the Company's website at www.carrizo.cc. The
Board of Directors has determined that Messrs. Parker, Hamilton and Behrens are
independent for purposes of Marketplace Rule 4200(a)(15) of the Nasdaq Stock
Market. The Compensation Committee held two meetings during fiscal 2003.

DIRECTOR NOMINATIONS PROCESS

In assessing the qualifications of candidates for director, the Nominating
Committee considers, in addition to qualifications set forth in the Company's
bylaws, each potential nominee's personal and professional integrity,
experience, reputation, skills, ability and willingness to devote the time and
effort necessary to be an effective board member, and commitment to acting in
the best interests of the Company and its shareholders. The Nominating Committee
also considers requirements under the listing standards of the Nasdaq Stock
Market, Inc. for a majority of independent directors, as well as qualifications
applicable to membership on Board committees under the listing standards and
various regulations. The Nominating Committee makes recommendations to the
Board, which in turn makes the nominations for consideration by the
shareholders. JPMorgan Partners (23A SBIC), LLC has the right, pursuant to a
shareholders agreement, to designate two members for nomination to the Board of
Directors.

Suggestions for potential nominees for director can come to the Nominating
Committee from a number of sources, including incumbent directors, officers,
executive search firms and others. The Nominating Committee will consider
director candidates recommended by shareholders. The extent to which the
Nominating Committee dedicates time and resources to the consideration and
evaluation of any potential nominee brought to its attention depends on the
information available to the Committee about the qualifications and suitability
of the individual, viewed in light of the needs of the Board, and is at the
Committee's discretion. Recognizing the contribution of incumbent directors who
have been able to develop, over a period of time, increasing insight into the
Company and its operations and, therefore, provide an increasing contribution to
the Board as a whole, the Nominating Committee reviews each incumbent director's
qualifications to continue on the Board in connection with the selection of
nominees to take office when that director's term expires, and conducts a more
detailed review of each director's suitability to continue on the Board
following expirations of the director's term.

In addition, the Nominating Committee's policy is that it will consider
candidates for the Board recommended by shareholders. Any such recommendation
should include the candidate's name and qualifications for Board membership and
should be submitted in writing to the Secretary, Carrizo Oil & Gas, Inc., 14701
St. Mary's Lane, Suite 800, Houston, Texas 77079, along with:

o a signed statement of the proposed candidate consenting to be named as
a candidate and, if nominated and elected, to serve as a director;

o a statement that the writer is a shareholder of the Company and is
proposing a candidate for consideration by the Nominating Committee;

o a statement detailing any relationship between the candidate and any
customer, supplier or competitor of the Company;

o the financial and accounting background of the candidate, to enable
the Nominating Committee to determine whether the candidate would be
suitable for Audit Committee membership; and

o detailed information about any relationship or understanding between
the proposing shareholder and the candidate.

Although the Nominating Committee will consider candidates recommended by
shareholders, it may determine not to recommend that the Board, and the Board
may determine not to, nominate those candidates for election to the Board of
Directors.

SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS

Shareholders may communicate with the Board by submitting their
communications in writing, addressed to the Board as a whole or, at the election
of the shareholder, to one or more specific directors, c/o Secretary, Carrizo
Oil & Gas, Inc., 14701 St. Mary's Lane, Suite 800, Houston, Texas 77079.

The Audit Committee of the Board of Directors has established procedures
for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls, or auditing matters. Shareholders who wish to
submit a complaint under these procedures should submit the complaint in writing
to: F. Gardner Parker, Chairman of the Audit Committee, Carrizo Oil & Gas, Inc.,
14701 St. Mary's Lane, Suite 800, Houston, Texas 77079. The Company has also
established a confidential hotline by which employees can communicate concerns
or complaints regarding these matters.

DIRECTOR ATTENDANCE AT ANNUAL MEETING OF SHAREHOLDERS

The Company does not have a policy regarding director attendance at annual
meetings of shareholders. Two of the Company's directors attended the 2003
Annual Meeting.

CODE OF CONDUCT

The Company has adopted a Code of Conduct applicable to all employees and
directors that satisfies the requirements of Nasdaq Marketplace Rule 4350(n).
The Code of Conduct is available on the Company's website at www.carrizo.cc.

SECTION 16(A) REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires that the Company's executive
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, file reports of ownership and changes of
ownership with the SEC. Officers, directors and greater than 10% shareholders
are required by SEC regulation to furnish the Company with copies of all such
forms they file.

Based solely on its review of the copies of such forms received by the
Company, and on written representations by the Company's officers and directors
regarding their compliance with the filing requirements, the Company believes
that during the fiscal year ended December 31, 2003, all reports required by
Section 16(a) to be filed by its directors, officers and greater than 10%
beneficial owners were filed on a timely

basis, except one Form 4 reporting a sale pursuant to a plan adopted under Rule
10b5-1 of the Exchange Act filed by Mr. Wojtek one day late on December 2, 2003,
one Form 4 reporting the acquisition of stock options on May 27, 2003 by Mr.
Behrens filed on November 12, 2003, one Form 4 reporting the acquisition of
stock options on May 27, 2003 by Mr. Martin filed on November 12, 2003, and one
Form 4 reporting indirect beneficial ownership of the aforementioned options
granted to Mr. Behrens and Mr. Martin filed by certain affiliates of JPMorgan
Partners on November 12, 2003.

COMPENSATION OF NONEMPLOYEE DIRECTORS

The Board of Directors has recommended the following amendments to the
Incentive Plan, subject to shareholder approval:

o replacing automatic annual awards of options to purchase 2,500 shares
of Common Stock to each director not employed by the Company or any of
its subsidiaries (an "Outside Director") with discretionary awards of
stock options or restricted stock that are determined by the
Compensation Committee or the Board of Directors;

o automatically granting to the Chairman of the Nominating Committee
additional options to purchase 2,000 shares of Common Stock on the
first business day following the date on which the annual meeting of
the Company's shareholders is held; and

o providing that the Compensation Committee or the Board of Directors
may, in their discretion, grant additional options to purchase 2,000
shares of Common Stock to non-chairman members of the Nominating
Committee who are deemed "independent" for purposes of Nasdaq rules.

Effective January 1, 2001, the Compensation Committee proposed and the
Board of Directors approved a $1,000 per year annual retainer to be paid to each
Outside Director plus compensation of $3,000 per meeting attended ($1,000 if
attended via telephone) and $500 per committee meeting attended ($250 if
attended via telephone). In April 2003, the Board of Directors, effective for
the 2002-2003 director term, approved an additional retainer of $5,000 per
annual director term for the Chairman of the Compensation Committee and an
additional retainer of $10,000 per annual term for the Chairman of the Audit
Committee. On February 19, 2003, the Company's Incentive Plan (the "Incentive
Plan") was amended to provide for a one-time grant of options to purchase 25,000
shares of Common Stock to Mr. Parker at a price of $4.65 per share, the fair
market value as of the date of the grant, as compensation for serving as the
Chairman of the Audit Committee. In March 2004, the Board of Directors increased
the annual retainer to be paid to each outside Director to $10,000 per year,
reduced the compensation for attendance at regular meetings of the Board from
$3,000 per meeting attended to $2,500 per meeting attended ($1,000 if attended
via telephone) and reduced the compensation for attendance at special meetings
of the Board from $3,000 per meeting attended to $1,000 per meeting attended
($500 if attended via telephone). In March 2004, the Board of Directors approved
an annual retainer of $2,000 per annual term for non-chairman members of the
Audit Committee and $1,000 per annual term for non-chairman members of the
Compensation and Nominating Committees and $2,500 for the Chairman of the
Nominating Committee.

Directors who are also employees of the Company receive no payment for
serving as directors. All directors are reimbursed for travel and lodging
expenses of attending meetings. Under the Incentive Plan, Messrs. Webster,
Hamilton and Loyd, the then-current Outside Directors, were granted options to
purchase 10,000 shares of Common Stock at an exercise price per share of $11.00
in connection with the Company's initial public offering in August 1997 (the
"IPO"). Thereafter, each additional Outside Director was automatically granted
nonqualified options to purchase 10,000 shares of Common Stock on the date that
person first became an Outside Director of the Company. Currently, each Outside
Director serving on the day after the date of the annual meeting of shareholders
is automatically granted options to purchase an additional 2,500 shares of
Common Stock, subject to the availability for issuance of those shares under the
Incentive Plan. During the fiscal year ended December 31, 2003 options to
purchase 2,500 shares were granted to each of Messrs. Behrens, Hamilton, Loyd,
Martin and Parker at an exercise price per share of $5.75. Each option granted
to an Outside Director will (i) have a ten-year term, (ii) have an exercise
price equal to the fair market value of a share of Common Stock on the date of
grant and (iii) become exercisable in cumulative

annual increments of one-third of the total number of shares of Common Stock
subject thereto, beginning on the first anniversary of the date of grant.

At the 2003 Annual Meeting, the Board of Directors recommended and the
shareholders approved certain changes to the Incentive Plan. The Chairman of the
Audit Committee and the Chairman of the Compensation Committee are automatically
granted additional options to purchase 3,000 and 2,000 shares of Common Stock,
respectively, on the first business day following the date on which each annual
meeting of the Company's shareholders is held; and the Board of Directors may,
in its discretion, grant options to purchase of up to 3,000 shares and up to
2,000 shares, respectively, on the date specified above to nonchairmen members
of the audit and compensation committees who are deemed by the Committee to be
independent for purposes of the rules of the Nasdaq Stock Market. These grants
may be made to the chairman or a member of the Audit Committee or Compensation
Committee, respectively, notwithstanding that the same person may also receive
grants as a chairman or member of the Compensation Committee or Audit Committee,
respectively. During the fiscal year ended December 31, 2003 Mr. Parker was
granted options to purchase 5,000 shares at an exercise price of $5.75 as
chairman of both the Audit Committee and the Compensation Committee.

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the annual, long-term and total compensation
for (i) the Company's Chief Executive Officer for the fiscal years ended
December 31, 2003, 2002 and 2001 and (ii) its other four executive officers, and
(iii) one other individual who served as an executive officer in 2003, for the
fiscal years ended December 31, 2003, 2002 and 2001 (collectively, the "Named
Executives").

SUMMARY COMPENSATION TABLE

LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- ------------
NAME AND OTHER ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) COMPENSATION($)(2)
------------------ ------ --------- -------- ------------------ ------------ ------------------

S.P. Johnson IV 2003 241,668 48,017 -- 50,000 5,515
President and Chief 2002 233,604 1,296 -- -- 4,736
Executive Officer 2001 228,501 500 -- 45,000 3,954

Paul F. Boling (3) 2003 68,626 1,382 -- 20,000 1,249
Chief Financial Officer,
Vice President,
Secretary and Treasurer

Kendall A. Trahan 2003 155,210 8,805 -- -- 5,269
Vice President of Land 2002 150,174 1,296 -- -- 4,676
2001 146,893 500 -- 20,000 4,304

J. Bradley Fisher 2003 175,771 3,845 -- 25,000 10,825
Vice President of 2002 163,848 1,296 -- -- 7,368
Operations 2001 134,100 500 -- 30,000 19,300

Jeremy T. Greene (4) 2003 173,499 26,345 -- 40,000 3,441
Vice President of 2002 84,499 1,296 -- 25,000 267
Exploration

Frank A. Wojtek (5) 2003 109,678 8,343 -- -- 255,172
Chief Financial Officer, 2002 166,860 1,296 -- -- 4,397
Vice President, Secretary 2001 163,215 500 -- 20,000 3,975
and Treasurer

----------

(1) For the fiscal years 2001, 2002 and 2003 the Named Executives did not
receive any annual compensation not properly categorized as salary or
bonus, except for certain perquisites and other personal benefits
which are not shown because the aggregate amount of such compensation,
if any, for each Named Executive during each of those fiscal years did
not exceed the lesser of $50,000 or 10% of total salary and bonus
reported for that Named Executive.

(2) For the fiscal year 2003, all other compensation consists of
contributions of $4,818, $1,125, $4,674, $4,622, $2,753 and $3,222 by
the Company under its 401(k) plan for Messrs. Johnson, Boling, Trahan,
Fisher, Greene and Wojtek, respectively, life insurance premiums of
$697, $124, $595, $604, $688 and $464 for Messrs. Johnson, Boling,
Trahan, Fisher, Greene and Wojtek, respectively, overriding royalties
of $5,599 for Mr. Fisher and payments under an employment agreement of
$251,486 for Mr. Wojtek in accordance with his departure from the
Company. For the fiscal year 2002, all other compensation consists of
contributions of $4,088, $3,754, $4,129 and $3,947 by the Company
under its 401(k) plan for Messrs. Johnson, Wojtek, Trahan and Fisher,
respectively, life insurance premiums of $648, $642, $546, $533 and
$267 for Messrs. Johnson, Wojtek, Trahan, Fisher and Greene,
respectively, and overriding royalties of $7,368 for Mr. Fisher. For
the fiscal year 2001, all other compensation consists of contributions
of $3,402, $3,443, $3,838, and $3,078 by the Company under its 401(k)
plan for Mr. Johnson, Mr. Wojtek, Mr. Trahan and Mr. Fisher,
respectively, life insurance premiums of $552, $533, $466 and $399 for
Mr. Johnson, Mr. Wojtek, Mr. Trahan and Mr. Fisher, respectively, and
overriding royalties of $15,823 for Mr. Fisher. The compensation from
overriding royalties awarded to Mr. Fisher arises from a one-time
award of an overriding royalty interest on the Pitchfork Ranch A-90 #1
well to Mr. Fisher in 2001. The Company has since adopted a policy
that it will not grant any overriding royalty interests to its
employees.

(3) Mr. Boling commenced his employment with the Company in August 2003.

(4) Mr. Greene commenced his employment with the Company in August 2002.

(5) Mr. Wojtek served as the Company's Chief Financial Officer, Vice
President, Secretary and Treasurer until August 2003.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to stock options
granted during the fiscal year 2003 to the Named Executives.

POTENTIAL REALIZABLE
VALUES AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)(2)
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE ---------------------
NAME GRANTED FISCAL YEAR ($/SHARE)(1) EXPIRATION DATE 5%($) 10%($)
----------- ------------ ------------ -------------- --------------- --------- ---------

S. P. Johnson IV.... 50,000 37 4.43 4/6/13 157,500 410,500
Paul F. Boling...... 20,000 15 5.725 8/11/13 81,500 212,500
Kendall A. Trahan... -- -- -- -- -- --
J. Bradley Fisher... 25,000 18 4.37 4/2/13 77,500 202,500
Jeremy T. Greene.... 40,000 30 4.37 4/2/13 124,000 324,000
Frank A. Wojtek..... -- -- -- -- -- --

----------

(1) The exercise price of the options granted is equal to or greater than
the market value of the Company's Common Stock on the date of grant.

(2) Potential realizable value of each grant assumes that the market price
of the underlying security (based upon the value of the Common Stock
on the date of grant) appreciates at annualized rates of 5% and 10%
over the term of the award. Actual gains, if any, on stock option
exercises are dependent on the future performance of Common Stock and
overall market conditions. There can be no assurance that the amounts
reflected on this table will be achieved.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information with respect to the unexercised
options to purchase the Common Stock held by the Named Executives at December
31, 2003.

NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END($)(2)
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- ----------- ---------- ----------- ------------- ----------- -------------

S. P. Johnson IV -- -- 155,000 65,000 692,185 186,350
Paul F. Boling -- -- -- 20,000 -- 29,400
Kendall A. Trahan 4,500 18,708 120,128 6,667 363,258 21,267
J. Bradley Fisher 55,000 193,010 35,000 35,000 138,050 102,650
Jeremy T. Greene -- -- 8,333 56,667 28,667 170,553
Frank A. Wojtek -- -- 70,000 -- 311,300 --

----------

(1) Value realized is calculated based on the difference between the
option exercise price and the closing market price of the Company's
Common Stock on the date of exercise, multiplied by the number of
shares underlying the options.

(2) Value of unexercised in-the-money options is calculated based upon the
difference between the option price and the closing price of the
Company's Common Stock at fiscal year-end, multiplied by the number of
shares underlying the options. The closing price of the Company's
Common Stock, as reported on the Nasdaq Stock Market on December 31,
2003, was $7.20.

CERTAIN TRANSACTIONS

Pinnacle Transaction

During the second quarter of 2003, the Company and Rocky Mountain Gas, Inc.
("RMG") each contributed their interests in certain natural gas and oil leases
in Wyoming and Montana in areas prospective for coalbed methane to a newly
formed joint venture, Pinnacle Gas Resources, Inc. In exchange for the
contribution of these assets, the Company received 37.5% of the common stock of
Pinnacle and options to purchase additional Pinnacle common stock. The Company
retained its interests in approximately 145,000 gross acres in the Castle Rock
coalbed methane project area in Montana and the Oyster Ridge project area in
Wyoming.

Simultaneously with the contribution of these assets, affiliates and
related parties of CSFB Private Equity ("CSFB") contributed approximately $17.6
million of cash to Pinnacle in return for redeemable preferred stock of
Pinnacle, 25% of Pinnacle's common stock as of the closing date and warrants to
purchase Pinnacle common stock. In February 2004, the CSFB contributed
additional funds of $11.8 million to Pinnacle to fund future drilling,
development and acquisitions in return for additional shares of preferred stock
and warrants. Currently, on a fully diluted basis, and assuming neither RMG nor
the Company exercises its options, the CSFB parties own 66.7% of Pinnacle and
RMG, and the Company each own 16.7% of Pinnacle.

The Company's Chairman, Steven A. Webster, is also Chairman of Global
Energy Partners, Ltd., an affiliate of CSFB Private Equity.

The Company provides specified accounting, treasury, tax, insurance and
financial reporting functions to Pinnacle under a transition services agreement
for a monthly fee equal to the Company's actual cost to provide these services.
The agreement automatically renews on a quarterly basis unless one of the
parties gives notice of its intent to terminate the agreement.

The Company has mutually agreed with RMG, its majority shareholder and the
CSFB parties to provide Pinnacle the right until June 23, 2008 to acquire at
cost any interest in natural gas and oil leases or mineral interests in the
Powder River Basin in Wyoming and Montana, but excluding most of Powder River
County, Montana, that such parties may have acquired in the covered area,
subject to specified exceptions.

The Company, the CSFB parties, RMG, RMG's parent company, Peter G.
Schoonmaker, Gary W. Uhland and Pinnacle also entered into a security holders'
agreement providing for an initial eight person board of directors, which
initially includes four directors nominated by the CSFB parties and two
nominated by each of the Company and RMG, subject to change as their respective
ownership percentages change. Each party to the security holders' agreement also
granted to the others a right of first offer and co-sale rights. If the CSFB
parties propose to sell all of their Pinnacle shares to a third party, under
specified circumstances the CSFB parties may require the other security holders
to include all of their Pinnacle shares in that sale. In event of such a sale,
the Pinnacle preferred stock will have a preferred right to receive an amount
equal to its liquidation value (as defined below) per share plus accrued and
unpaid dividends prior to distributions to the holders of shares of Pinnacle
common stock and common stock equivalents. Pinnacle also granted the security
holders pre-emptive rights to purchase additional securities in order to
maintain their proportionate ownership of Pinnacle. The security holders'
agreement also provides generally for multiple demand registration rights with
respect to the Pinnacle common stock in favor of the CSFB parties and certain
piggyback registration rights for the Company and RMG subject to the
satisfaction of specified conditions.

The Pinnacle redeemable preferred stock issued to the CSFB parties
generally has the right to vote together with the Pinnacle common stock and has
a class vote on specified matters, including specified extraordinary
transactions. In the event of any dissolution, liquidation, or winding up by
Pinnacle, the holder of each share of Pinnacle preferred stock will be entitled
to be paid a liquidation value of $100 per share out of the assets of Pinnacle
available for distribution to its shareholders.

Dividends on the Pinnacle preferred stock are payable either in cash at a
rate of 10.5% per annum through June 23, 2011 and 12.5% thereafter or, at
Pinnacle's option, by payment in kind of additional shares of the Pinnacle
preferred stock. For each additional share of Pinnacle preferred stock
distributed to a holder as an in-kind dividend, Pinnacle will also deliver to
that holder one Pinnacle warrant, which will have an exercise price equal to the
exercise price of the outstanding Pinnacle warrants on the date of such
distribution. On or after July 1, 2005, Pinnacle may redeem all or any portion
of the Pinnacle preferred stock, provided that if any Pinnacle warrants are
still outstanding, Pinnacle may redeem all but a single share; if the redemption
occurs at any time before July 1, 2009, the redemption price will be at a
premium to the liquidation value of the shares.

Pinnacle is required to redeem its preferred stock upon:

o specified changes of control, at a price per share equal to 101% of
its liquidation value; or

o specified events of default, at a price per share equal to 110% of the
liquidation value prior to June 30, 2005 and, thereafter, equal to an
optional redemption price that decreases over time.

The Pinnacle warrants entitle the holders to purchase up to 130,000 shares
of Pinnacle common stock at a price of $100 per share and are exercisable at any
time until June 30, 2013. The Pinnacle warrants can be exercised in cash, by
tender of the Pinnacle preferred stock and on a cashless net exercise basis. The
Pinnacle warrants are subject to adjustments, including, in specified cases, an
adjustment of the exercise price to equal the lowest price at which Pinnacle
common stock is sold if such shares are sold below the then-current exercise
price.

2002 Financing

On February 20, 2002, the Company consummated the transactions (the "2002
Financing") contemplated by a Securities Purchase Agreement dated February 20,
2002 (the "2002 Securities Purchase Agreement") among the Company, Mellon and
Steven A. Webster (excluding the Company, the "2002 Investors"). Such
transactions included (i) the payment by the 2002 Investors of an aggregate
purchase price of $6,000,000, (ii) the sale of 60,000 shares of Series B
Convertible Participating Preferred Stock (the "Series B Preferred Stock") the
terms of which are set forth in the Statement of Resolution Establishing Series
of Shares designated Series B Convertible Participating Preferred Stock (the
"Statement of Resolution") and which include the right to convert such shares
into Common Stock, par value $0.01 (the "Common Stock") of the Company (the
"Underlying Shares") at a price of $5.70 per share, subject to adjustments, to
the 2002 Investors pursuant to the terms of the 2002 Securities Purchase
Agreement and

(iii) the sale of warrants (the "2002 Warrants") to purchase up to 252,632
shares of the Company's Common Stock (the "2002 Warrant Shares") at the exercise
price of $5.94 per share, subject to adjustments, to the 2002 Investors pursuant
to the terms of Warrant Agreement dated February 20, 2002 (the "2002 Warrant
Agreement") among the Company, Mellon and Steven A. Webster, (iv) the execution
of the Shareholders Agreement dated February 20, 2002 (the "2002 Shareholders
Agreement") among the Company, Mellon, Paul B. Loyd, Jr., Douglas A.P. Hamilton,
Steven A. Webster, S.P. Johnson IV, Frank A. Wojtek and DAPHAM Partnership,
L.P., (v) the execution of the Registration Rights Agreement dated February 20,
2002 ("2002 Registration Rights Agreement") among the Company, Mellon and Steven
A. Webster and (vi) the execution of a Compliance Sideletter dated as of
February 20, 2002 by and between the Company and Mellon (the "2002 Compliance
Sideletter"). The Company sold $4.0 million and $2.0 million of Series B
Preferred Stock and 168,422 and 84,210 Warrants to Mellon and Mr. Webster,
respectively. Holders of Series B Preferred Stock are entitled to receive
cumulative dividends on each share of Series B Preferred Stock, payable
semi-annually. Dividends will be paid, at the option of the Company, (i) in cash
at the rate of $8.00 per year or (ii) by issuing additional shares of Series B
Preferred Stock at the annual rate of 0.10 of a share of Series B Preferred
Stock on each share of Series B Preferred Stock as converted. The 2002
Shareholders Agreement was amended in April 2004 so that Messrs. Hamilton and
Loyd and DAPHAM Partnership, L.P. are no longer parties to the agreement.

Sale of Common Stock, Notes and Warrants

On December 15, 1999, the Company consummated the transactions (the "1999
Financing") contemplated by a Securities Purchase Agreement dated December 15,
1999 (the "1999 Securities Purchase Agreement") among the Company, CB Capital
Investors, L.P. ("Chase") (now JPMorgan Partners (23A SBIC), LLC), Mellon
Ventures, L.P. ("Mellon"), Paul B. Loyd, Jr., Douglas A.P. Hamilton and Steven
A. Webster (excluding the Company, the "Investors"). Such transactions included
(i) the payment by the Investors of an aggregate purchase price of $30,000,000,
(ii) the sale of an aggregate of $22,000,000 principal amount of 9% Senior
Subordinated Notes due 2007 (the "Notes") to the Investors, (iii) the sale of an
aggregate of 3,636,364 shares of the Company's Common Stock for $2.20 per share
to the Investors, (iv) the sale of warrants (the "Warrants") to purchase up to
2,760,189 shares of the Company's Common Stock (the "Warrant Shares") at the
exercise price of $2.20 per share, subject to adjustments, to the Investors, (v)
the execution of the Shareholders Agreement dated December 15, 1999 (the "1999
Shareholders Agreement") among the Company, Chase, Mellon, Paul B. Loyd, Jr.,
Douglas A.P. Hamilton, Steven A. Webster, S.P. Johnson IV, Frank A. Wojtek and
DAPHAM Partnership, L.P., (vi) the execution and delivery of the Warrant
Agreement dated December 15, 1999 (the "Warrant Agreement") among the Company,
Chase, Mellon, Paul B. Loyd, Jr., Douglas A.P. Hamilton and Steven A. Webster,
(vii) the execution of the Registration Rights Agreement dated December 15, 1999
("Chase Registration Rights Agreement") among the Company, Chase and Mellon,
(viii) the execution of the Amended and Restated Registration Rights Agreement
dated December 15, 1999 ("Amended Founders Registration Rights Agreement") among
the Company, Paul B. Loyd, Jr., Douglas A.P. Hamilton, Steven A. Webster, S.P.
Johnson IV, Frank A. Wojtek and DAPHAM Partnership, L.P., and (ix) the execution
of a Compliance Sideletter dated December 15, 1999 among the Company, Chase and
Mellon (the "1999 Compliance Sideletter"). The Company sold $17.6 million, $2.2
million, $0.8 million, $0.8 million and $0.8 million principal amount of the
Notes; 2,909,091, 363,636, 121,212, 121,212 and 121,212 shares of the Company's
common stock and 2,208,151, 276,019, 92,006, 92,006 and 92,006 Warrants to
Chase, Mellon, Mr. Loyd, Mr. Hamilton and Mr. Webster, respectively. The 1999
Shareholders Agreement was amended in April 2004 so that Messrs. Hamilton and
Loyd and DAPHAM Partnership, L.P. are no longer parties to the agreement.

Under the 1999 Shareholders Agreement each of S.P. Johnson IV, Frank A.
Wojtek, Steven A. Webster, Chase and Mellon (the "Shareholders") have agreed not
to transfer shares of the Common Stock or the Warrants to a competitor of the
Company and have agreed to cause certain transferees to be bound by the
Shareholders Agreement.

The 1999 Shareholders Agreement provides that so long as Chase owns at
least 15% of the Common Stock of the Company (with percentage ownership being
determined as specified in the 1999 Shareholders

Agreement), the Shareholders agree to vote their shares to cause the election of
two directors to be nominated by Chase. The Shareholders have agreed, so long as
Chase owns at least 7.5% of the Common Stock (with percentage ownership being
determined as specified in the 1999 Shareholders Agreement) of the Company but
less than 15%, to vote their shares to cause the election of one director to be
nominated by Chase. The Shareholders have also agreed if at any time after
December 15, 2004, Chase then owns at least 15% of the Common Stock (with
percentage ownership being determined as specified in the 1999 Shareholders
Agreement) that, unless there shall have occurred certain completed or proposed
sale transactions involving the Company or there has occurred a specified
minimum public float of Common Stock, then Chase has the right to designate two
additional members to the Board and the size of the Board shall be increased
accordingly. The Company believes that these requirements have been satisfied
following the completion of a public offering in early 2004. The Company, upon
Board approval, was entitled to increase the size of the Board by one additional
member at any time after the first shareholders meeting following the Financing,
and, as such, approved the addition to the Board of Mr. Parker in fiscal 2000.
If the Company at any other time increases the size of the Board of Directors,
the Shareholders have agreed to take action, including the voting of their
securities, to cause to be elected the number of directors nominated by Chase
necessary to maintain the applicable proportion of directors nominated by Chase
to the Board of Directors.

Pursuant to the 1999 Shareholders Agreement, Messrs. Christopher Behrens
and Arnold Chavkin were appointed to the Company's Board of Directors. Upon Mr.
Chavkin's resignation from the Board of Directors of the Company effective March
2002, JPMorgan Partners designated Bryan R. Martin as his replacement, and Mr.
Martin was appointed to the Board of Directors.

For so long as Chase is entitled to designate a director, at least one such
director is required to be a member of each committee of the Company's Board of
Directors and the board of directors of any subsidiary of the Company.

The Company agreed in the 1999 Shareholders Agreement to limit the maximum
number of common stock equivalents issuable under the Company's equity incentive
plans to 2.5 million shares and equivalents (including any shares and
equivalents issued or issuable as of the date of the 1999 Shareholders
Agreement). In April 2004 the Company received a waiver under the 1999
Shareholders Agreement allowing the Company to increase the number of authorized
shares available under the Incentive Plan to 2,350,000.

The Shareholders have also agreed in the 1999 Shareholders Agreement to
cooperate with the Company in complying with the terms of the 1999 Compliance
Sideletter (described below), including by voting in favor of actions taken to
remedy certain regulatory problems.

If S.P. Johnson IV, Frank A. Wojtek, Steven A. Webster or certain
transferees thereof (each, a "Founder Shareholder") desires to make certain
transfers of shares of Common Stock that are not Public Sales (as determined in
the 1999 Shareholders Agreement), such Founder Shareholder must allow Mellon and
any Shareholder who holds at least 10% of the Common Stock of the Company and is
not a Founder Shareholder (collectively, the "Significant Shareholders") the
option also to include shares in the transfer. If the prospective transferee is
unwilling or unable to acquire all such shares, then the transferring Founder
Shareholder may either cancel the proposed transfer or allocate on a
proportional basis the number of shares the prospective transferee is willing to
acquire among the transferring Founder Shareholder and the Significant
Shareholders.

Under the 1999 Shareholders Agreement, the Company has granted to the
Significant Shareholders rights to purchase certain (i) equity securities, (ii)
debt securities, (iii) options, warrants and other rights to acquire each of
such securities and (iv) common stock equivalents convertible into or
exchangeable for equity securities issuable by the Company, provided that
securities issued pursuant to equity incentive plans, securities issued in
certain public offerings, securities issued as consideration in a merger,
business combination or acquisition, certain securities issued upon conversion
of other securities, the Warrant Shares, and certain distributions of securities
are all excluded from this right.

The 1999 Shareholders Agreement terminates upon the first to occur of (a)
notice of termination by holders of 50% of the shares held by Chase or Mellon
(and certain of their transferees), (b) certain sale

transactions involving the Company or (c) the time neither Chase nor Mellon (or
certain of their transferees) owns more than 7 1/2% of the Common Stock.

Additional information concerning the Notes, the Warrants, the 1999
Shareholders Agreement and the transactions relating to the 1999 Securities
Purchase Agreement may be found in the Company's Current Report on Form 8-K
dated December 15, 1999, including the exhibits to that document.

Other Transactions

In 2000, the Company received a finder's fee valued at $1,544,180 from
affiliates of Donaldson, Lufkin & Jenrette ("DLJ") in connection with their
purchase of a significant minority shareholder interest in Michael Petroleum
Corporation ("MPC"). MPC is a privately-held exploration and production company
which focuses on the prolific gas producing Lobo Trend in South Texas. The
minority shareholder interest in MPC was purchased by entities affiliated with
DLJ. The Company elected to receive the fee in the form of 18,947 shares of
common stock, 1.9% of the outstanding common shares of MPC, which is accounted
for as a cost basis investment. Steven A. Webster, who is the Chairman of the
Board of the Company, is also the Chairman of Global Energy Partners Ltd., a
merchant banking affiliate of DLJ (now known as CSFB Private Equity) which makes
investments in energy companies, and joined the Board of Directors of MPC in
connection with the transaction. MPC could be deemed to be a competitor of the
Company.

During the third quarter of 2001, the Company sold its interest in MPC
pursuant to an agreement between MPC and its shareholders for the sale of a
majority interest in MPC to Calpine Natural Gas Company. The Company received
total cash proceeds of $5.7 million, of which $5.5 million was paid to the
Company during the third quarter of 2001 and the balance was paid during 2002
and 2003.

In December 2001, the Company sold to Mr. Webster a 2% working interest in
certain leases in Matagorda County and the right to participate in the Staubach
#1 well located within those leases in exchange for $20,000 and the payment by
Mr. Webster of a 33% promoted interest for the drilling costs through casing
point of that well. The terms of this sale were consistent with the terms of
sales to other participants in this project.

In November 1999, the Company entered into a month-to-month agreement with
San Felipe Resource Company, an entity owned by Mr. Webster, under which Mr.
Webster provides consulting services to the Company in exchange for a fee of
$9,000 per month, which was increased to $12,000 per month effective April 2003.

In April 2004, due to the low number of shares of Common Stock available
for issuance under the Incentive Plan, the Compensation Committee recommended
and the Board of Directors approved the award of a special cash bonus in lieu of
stock options to Mr. Webster. The special bonus is paid to Mr. Webster over
three equal installments on April 15, 2004, August 31, 2004 and February 28,
2005. Mr. Webster received his first installment on April 15, 2004 of $40,000.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with each executive
officer listed below. The following chart shows the annual base salaries that
the executive officers listed therein are currently being paid by the Company.

NAME AND CURRENT POSITION ANNUAL SALARY
------------------------- -------------

S. P. Johnson IV..................................... $ 257,548
President and Chief Executive Officer
Paul F. Boling....................................... $ 157,500
Chief Financial Officer, Vice President,
Secretary and Treasurer(1)
Jeremy T. Greene..................................... $ 181,913
Vice President of Exploration
Kendall A. Trahan.................................... $ 165,567
Vice President of Land
J. Bradley Fisher.................................... $ 187,425
Vice President of Operations

----------
(1) Mr. Boling assumed this position effective August 2003.

Each of the employment agreements of Mr. Johnson, Mr. Trahan, Mr. Greene
and Mr. Fisher has an initial three-year term; provided that at the end of the
second year of such initial term and on every day thereafter, the term of each
such employment agreement will automatically be extended for one day, such that
the remaining term of the agreement shall never be less than one year. The
employment agreement for Mr. Boling has an initial one year term; provided that
at the date of the agreement and on every day thereafter, the term of such
employment agreement is automatically extended for one day, such that the
remaining term of the agreement shall never be less than one year. Under each
agreement, both the Company and the employee may terminate the employee's
employment at any time. Upon termination of employment on account of disability
or if employment is terminated by the Company for any reason (except under
certain limited circumstances defined as "for cause" in the agreement), or if
employment is terminated either (x) by the employee subsequent to a change of
control (as defined and including certain terminations prior to a change of
control if caused by a person involved in precipitating a change of control) or
(y) by reason of death during a sixty day period following the elapse of one
year after such a change of control ("window period") or with good reason (as
defined), under the agreement the employee will generally be entitled to (i) an
immediate lump sum cash payment equal to 150% for Messrs. Johnson, Trahan and
Fisher, 125% in the case of Mr. Greene and 100% in the case of Mr. Boling (375%
for Messrs. Johnson and Trahan, 275% for Mr. Fisher and 175% for Mr. Greene, if
termination occurs after a change of control) of his annual base salary that
would have been payable for the remainder of the term of the applicable
agreement discounted at 6%, (ii) continued participation in all the Company's
welfare benefit plans and continued life insurance and medical benefits coverage
and (iii) the immediate vesting of any stock options or restricted stock
previously granted to such employee and outstanding as of the time immediately
prior to the date of his termination, or a cash payment in lieu thereof (the
"Cash Election"). Provided that the awards vest only if the termination of
employment is by Mr. Trahan with good reason or during a window period or is by
the Company without cause, then in the event of a Cash Election, Mr. Trahan will
receive in exchange for any or all compensatory awards that are either
denominated in or payable in Common Stock, including options and restricted
stock, an amount in cash equal to the excess of (x) the highest price per share
(as defined below) over (y) the exercise or purchase price, if any, of such
awards. The Term "Highest Price Per Share" generally means the highest price per
share that can be determined to have been paid or agreed to be paid for any
share of Common Stock by certain classes of persons, including (1) a beneficial
owner of 10% or more of the outstanding voting stock of the Company and (2) a
person who has any material involvement in proposing or effectuating a change of
control (as defined). If employment terminates due to death of the employee and
other than in a window period, the Company will pay a sum equal to the amount of
the employee's annual base salary for the remaining term of the agreement,
reduced by the amount payable under any life insurance policies to the extent
that such amounts are attributable to premiums paid by the Company. The salaries
in each of these

agreements are subject to periodic review and provide for increases consistent
with increases in base salary generally awarded to other executives of the
Company. Each agreement entitles the employee to participate in all of the
Company's incentive, savings, retirement and welfare benefit plans in which
other executive officers of the Company participate. The agreements each provide
for an annual bonus in an amount comparable to the annual bonus of other Company
executives, taking into account the individual's position and responsibilities.

AUDIT COMMITTEE REPORT

The Audit Committee's purpose is to assist the Board of Directors in its
oversight of the Company's internal controls and financial statements and the
audit process. The Board of Directors, in its business judgment, has determined
that the members of the Audit Committee, are "independent," as required by
applicable standards of the Nasdaq Stock Market. See "Board of Directors and
Committees of the Board." The Audit Committee operates pursuant to a written
charter adopted by our Board of Directors; a copy of the current Audit Committee
charter is attached to this proxy statement as Appendix A.

Management is responsible for the preparation, presentation and integrity
of the Company's financial statements, accounting and financial reporting
principles and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors are responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards.

In performing its oversight role, the Audit Committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The Audit Committee has also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The Audit Committee
has received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as currently in effect.

Based on the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Audit Committee
referred to below and in the charter, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

Members of the Audit Committee rely, without independent verification, on
the information provided to them and on the representations made by management
and the independent auditors. Accordingly, the Audit Committee's oversight does
not provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the independent auditors are in fact "independent."

The Audit Committee

F. Gardner Parker
Paul B. Loyd, Jr.
Bryan R. Martin

PURSUANT TO SEC RULES, THE FOREGOING COMPENSATION COMMITTEE REPORT IS NOT
DEEMED "FILED" WITH THE SEC AND IS NOT INCORPORATED BY REFERENCE INTO CARRIZO'S
ANNUAL REPORT ON FORM 10-K.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Company's executive compensation programs are designed to attract and
retain highly qualified executives and to motivate them to maximize shareholder
returns. The Company's executive compensation

program is intended to provide competitive compensation levels and incentive pay
levels that vary based on corporate and individual performance.

There are three basic components to the Company's current compensation
system: base pay; annual incentive compensation in the form of a cash bonus; and
long-term equity-based incentive compensation. Each component is addressed in
the context of individual and Company performance and competitive conditions. In
determining competitive compensation levels, the Company analyzes data that
includes information regarding the general oil and natural gas exploration and
production industry.

Actual individual awards and changes in remuneration to the individual
executives are recommended by the Compensation Committee but approved by the
Board of Directors. The Chief Executive Officer works with the Compensation
Committee in the design of the plans and makes recommendations to the Committee
regarding the salaries and bonuses of Company employees that report directly to
him. Grants or awards of stock, including stock options, are individually
determined and administered by the Compensation Committee.

Base Pay. Base pay is designed to be competitive with salary levels for
comparable executive positions at other oil and natural gas exploration and
production companies and the Compensation Committee reviews such comparable
salary information as one factor to be considered in determining the base pay
for the Company's executive officers. Other factors the Compensation Committee
considers in determining base pay for each of the executive officers are that
officer's responsibilities, experience, leadership, potential future
contribution, and demonstrated individual performance. The types and relative
importance of specific financial and other business objectives vary among the
Company's executives depending on their positions and the particular operations
and functions for which they are responsible. The Compensation Committee also
considers the Company's earnings levels and progress in implementing its
business strategy in establishing base salary increases for executives. The
employment contracts of the executive officers provide that base pay is to be
reviewed at least annually and will be increased at any time and from time to
time, and that any increase will be substantially consistent with increases in
base salary generally awarded in the ordinary course of business to executives
of the Company. As a result of the Company's positive financial results and
continued drilling success, the base salary of each of Messrs. Johnson, Boling,
Greene, Trahan and Fisher was increased by 5% effective April, 2004.

Annual Bonus. The annual bonus is determined by the Compensation Committee.
The employment contracts with the executive officers contemplate annual bonus
awards in an amount comparable to the annual bonus of other Company executives,
taking into account the individual's position and responsibilities. As a result
of the Company's positive financial results and continued drilling success, each
of Messrs. Johnson, Boling, Greene, Trahan and Fisher was awarded a bonus equal
to 40%, 20%, 40%, 20% and 40%, respectively, of their annual base pay.

Special Cash Bonus in lieu of Stock Options. Due to the low number of
shares of Common Stock available for issuance under the Incentive Plan, the
Compensation Committee recommended and the Board of Directors approved the award
of a special cash bonus in lieu of stock options to a number of key employees,
including the Company's executive officers. The special bonuses are paid to each
recipient over three equal installments on April 15, 2004, August 31, 2004 and
February 28, 2005. Accordingly, Messrs. Johnson, Greene, Fisher and Trahan
received their first installments on April 15, 2004 of $25,000, $15,000, $15,000
and $7,500, respectively.

Long-Term Equity-Based Compensation. To date, the Company has relied
primarily upon stock option awards to provide long-term incentives for
executives. Prior to the Company's IPO, the shareholders and the Board of
Directors of the Company approved the Company's Incentive Plan. The objectives
of the Incentive Plan are to (i) attract and retain the services of key
employees, qualified independent directors and qualified consultants and other
independent contractors and (ii) encourage a sense of proprietorship in and
stimulate the active interest of those persons in the development and financial
success of the Company by making awards designed to provide participants in the
Incentive Plan with proprietary interest in the growth and performance of the
Company. Long-term equity-based compensation is tied to shareholder return.

Under the Company's Incentive Plan, long-term incentive compensation
consists of stock options, which generally have a ten-year term and vest in 33%
increments in each of the three years following the date of the grant. The
exercise price of stock options granted is equal to or greater than the fair
market value of the Common Stock on the date of grant; accordingly, executives
receiving stock options are rewarded only if the market price of the Common
Stock appreciates. Stock options are thus designed to align the interests of the
Company's executives with those of its shareholders by encouraging executives to
enhance the value of the Company and, hence, the price of the Common Stock and
each shareholder's return.

On April 7, 2003, the Company granted options to purchase 40,000 and 20,000
shares of Common Stock, respectively, to Mr. Greene and Mr. Fisher at an
exercise price per share of $4.43. On August 12, 2003, the Company granted
options to purchase 20,000 shares of Common Stock to Mr. Boling at an exercise
price per share of $5.725. As a result of the Company's positive financial
results and continued drilling success, on April 17, 2003, the Company granted
options to purchase 50,000 shares of Common Stock to Mr. Johnson at an exercise
price per share of $4.43. On February 19, 2004, the Company granted options to
purchase 25,000 shares of Common Stock to Mr. Boling at an exercise price per
share of $6.98. These options have a ten-year term and vest in 33% increments in
each of the three years following the date of the grant.

The Company may periodically grant new options to provide continuing
incentive for future performance. In making the decision to grant additional
options, the Compensation Committee would expect to consider factors such as the
size of previous grants and the number of options held. In determining whether
to grant executive officers stock options under the Plan, the Compensation
Committee considers factors, including that executive's current ownership stake
in the Company, the degree to which increasing that ownership stake would
provide the executive with additional incentives for future performance, the
likelihood that the grant of those options would encourage the executive to
remain with the Company and the value of the executive's service to the Company.

Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code of 1986, as amended, generally limits (to $1 million per covered
executive) the deductibility for federal income tax purposes of annual
compensation paid to a company's chief executive officer and each of its other
four most highly compensated executive officers. The Compensation Committee and
the Board of Directors will take deductibility or nondeductibility of
compensation into account but have in the past authorized, and will retain the
discretion in the future to authorize, the payment of potentially nondeductible
amounts.

Compensation of the Chief Executive Officer. The Compensation Committee
based the compensation of the Company's Chief Executive Officer, Mr. Johnson, on
the same considerations described above for other executive officers. As a
result of the Company's positive financial results and continued drilling
success, on April 1, 2004, the Company increased Mr. Johnson's salary by 5%, and
awarded him a bonus of $122,500.

Executive compensation is an evolving field. The Compensation Committee
monitors trends in this area, as well as changes in law, regulation and
accounting practices, that may affect either its compensation practices or its
philosophy. Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.

The Compensation Committee

F. Gardner Parker
Christopher C. Behrens
Douglas A.P. Hamilton

PERFORMANCE GRAPH

The following graph presents a comparison of the yearly percentage change
in the cumulative total return on the Common Stock over the period from December
31, 1998 to December 31, 2003, with the cumulative total return of the S&P 500
Index and of the American Stock Exchange Natural Resource Industry Index of
publicly traded companies over the same period. The graph assumes that $100 was
invested on December 31, 1998, in the Common Stock at the closing market price
at the beginning of this period and in each of the other two indices and the
reinvestment of all dividends, if any.

The graph is presented in accordance with SEC requirements. Shareholders
are cautioned against drawing any conclusions from the data contained therein,
as past results are not necessarily indicative of future financial performance.

COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CARRIZO OIL & GAS, INC., THE S&P 500 INDEX AND
THE AMERICAN STOCK EXCHANGE NATURAL RESOURCE INDUSTRY INDEX

(PERFORMANCE GRAPH)

--------------------------------------------------------------------------------
S & P AMEX C O & G
--------------------------------------------------------------------------------

12/31/98 100 100 100
--------------------------------------------------------------------------------
03/31/99 105 110 82
--------------------------------------------------------------------------------
06/30/99 112 125 141
--------------------------------------------------------------------------------
09/30/99 104 133 141
--------------------------------------------------------------------------------
12/31/99 120 136 145
--------------------------------------------------------------------------------
03/31/00 122 149 282
--------------------------------------------------------------------------------
06/30/00 118 162 436
--------------------------------------------------------------------------------
09/30/00 117 176 1,018
--------------------------------------------------------------------------------
12/31/00 107 190 664
--------------------------------------------------------------------------------
03/31/01 94 178 473
--------------------------------------------------------------------------------
06/30/01 100 165 393
--------------------------------------------------------------------------------
09/30/01 85 150 321
--------------------------------------------------------------------------------
12/31/01 93 154 322
--------------------------------------------------------------------------------
03/31/02 93 178 404
--------------------------------------------------------------------------------
06/30/02 81 177 310
--------------------------------------------------------------------------------
09/30/02 66 167 306
--------------------------------------------------------------------------------
12/31/02 72 170 383
--------------------------------------------------------------------------------
03/31/03 69 182 335
--------------------------------------------------------------------------------
06/30/03 79 200 444
--------------------------------------------------------------------------------
09/30/03 81 203 516
--------------------------------------------------------------------------------
12/31/03 90 252 524
--------------------------------------------------------------------------------

----------
* $100 Invested on December 31, 1998 in Stock or Index (Including Reinvestment
of Dividends).

PURSUANT TO SEC RULES, THE FOREGOING COMPENSATION COMMITTEE REPORT AND
STOCK PERFORMANCE GRAPH ARE NOT DEEMED "FILED" WITH THE SEC AND ARE NOT
INCORPORATED BY REFERENCE INTO CARRIZO'S ANNUAL REPORT ON FORM 10-K.

PROPOSAL 2

PROPOSAL TO AMEND INCENTIVE PLAN

At the time of its initial public offering, the Company adopted the
Incentive Plan. The objectives of the Incentive Plan are to:

o attract and retain the services of key employees, qualified directors
and qualified consultants and other independent contractors; and

o encourage the sense of proprietorship in and stimulate the active
interest of those persons in the development and financial success of
the Company by making awards ("Awards") designed to provide
participants in the Incentive Plan with proprietary interest in the
growth and performance of the Company.

The Company currently has reserved 1,850,000 shares of Common Stock for use
in connection with the Incentive Plan. Persons eligible for Awards are (i)
employees holding positions of responsibility with the Company and whose
performance can have a significant effect on the success of the Company, (ii)
nonemployee directors and (iii) certain nonemployee consultants and other
independent contractors. As described in "Certain Transactions" the Company has
agreed in the Shareholders Agreement dated December 15, 1999 to limit the
maximum number of common stock equivalents issuable under the Company's equity
incentive plans to 2.5 million shares and equivalents (including any shares and
equivalents issued or issuable as of December 15, 1999 without the consent of
certain parties to that Agreement). In April 2004 the Company received a waiver
under this agreement allowing the Company to increase the number of authorized
shares available under the Incentive Plan to 2,350,000.

As of March 31, 2004, options under the Incentive Plan had been granted to
53 current and former employees and directors of the Company to purchase a total
of approximately 1,638,500 shares of Common Stock at an exercise price per share
not less than fair market value on the date of grant (the initial public
offering price to the public in the case of options awarded in connection with
the initial public offering). As of March 31, 2004, there were only 81,500
shares available for issuance under the Plan. If the shareholders vote in favor
of the proposal set forth herein, an additional 500,000 shares of Common Stock
will be available for issuance under the Plan. The proposed increase in the
number of authorized shares available under the Plan is equal to approximately
2.7% of the currently outstanding Common Stock. Shares of Common Stock that are
the subject of awards under the Incentive Plan that are forfeited or terminated,
expire unexercised, are settled in cash in lieu of Common Stock or in a manner
such that all or some of the shares covered by an award are not issued or are
exchanged for awards that do not involve Common Stock, will not count against
this limit and may be regranted under the Incentive Plan.

The Company is proposing to amend the Incentive Plan to replace the
automatic annual grant of options to nonemployee directors to purchase 2,500
shares of Common Stock with discretionary awards of options to purchase Common
Stock and shares of restricted stock that are determined by the Compensation
Committee of the Company's Board of Directors (the "Compensation Committee") or
the Board of Directors, subject to the availability for issuance of those shares
under the Incentive Plan. If the proposal is approved by shareholders, on the
first business day following the Annual Meeting, the Company plans to grant each
nonemployee director a number of shares of restricted stock equal to $20,000
(based on the fair market value of a share of Common Stock on such date). All
shares of restricted stock granted to nonemployee directors would vest in
cumulative annual increments of one-third, beginning on the first anniversary of
the date of grant; provided, however, that upon a change of control (as defined
in the Incentive Plan), the shares of restricted stock will vest immediately. If
a nonemployee director resigns from the Board without the consent of a majority
of the other directors, all of his unvested shares of restricted stock would be
forfeited. The Company believes the amendment is necessary to allow flexibility
in the awards granted to directors under the Incentive Plan.

The Company is also proposing to amend the Incentive Plan to provide:

o for an additional grant of options to purchase 2,000 shares of Common
Stock to be awarded automatically on an annual basis to the Chairman
of the Nominating Committee;

o that the Compensation Committee or the Board of Directors may, in
their discretion, annually grant additional options to purchase up to
2,000 shares of Common Stock to non-chairman members of the Nominating
Committee who are deemed "independent" for purposes of Nasdaq rules;
and

o for a clarification that the "Annual Director Award Date" defined in
the Incentive Plan is the first business day following the date on
which the annual meeting of the Company's shareholders is held.

If approved by shareholders, the grant to the Chairman of the Nominating
Committee could be made notwithstanding the fact that the same person may also
receive grants as a chairman or member of the Audit Committee or the
Compensation Committee. The Company is proposing the amendments providing for
grants of options to the Chairman and certain other members of the Nominating
Committee because the Nominating Committee was established by the Board of
Directors in March 2004.

The Compensation Committee administers the Incentive Plan and has broad
power to take actions thereunder, to interpret the Incentive Plan and to adopt
rules, regulations and guidelines for carrying out its purposes. With respect to
Awards to employees and independent contractors, the Compensation Committee may,
in its discretion, among other things, extend or accelerate the exercisability
of, accelerate the vesting of or eliminate or make less restrictive any
restrictions contained in any Award, waive any restrictions or other provision
of the Incentive Plan or in any Award or otherwise amend or modify any Award in
any manner that is either (i) not adverse to that participant holding the Award
or (ii) consented to by that participant. The Compensation Committee also may
delegate to the chief executive officer and other senior officers of the Company
its duties under the Incentive Plan. In recent times, any action taken with
respect to executive officers or directors of the Company has also been approved
by the entire Board.

The Board of Directors may amend, modify, suspend or terminate the
Incentive Plan for the purpose of addressing any changes in legal requirements
or for any other lawful purpose, except that (i) no amendment or alteration that
would adversely affect the rights of any participant under any Award previously
granted to such participant shall be made without the consent of such
participant and (ii) no amendment or alteration shall be effective prior to its
approval by the shareholders of the Company to the extent such approval is then
required pursuant to Rule 16b-3 in order to preserve the applicability of any
exemption provided by such rule to any Award then outstanding (unless the holder
of such Award consents) or to the extent shareholder approval is otherwise
required by applicable legal requirements. The Board of Directors may make
certain adjustments in the event of any subdivision, split or consolidation of
outstanding shares of Common Stock, any declaration of a stock dividend payable
in shares of Common Stock, any recapitalization or capital reorganization of the
Company, any consolidation or merger of the Company with another corporation or
entity, any adoption by the Company of any plan of exchange affecting the Common
Stock or any distribution to holders of Common Stock of securities or property
(other than normal cash dividends).

Awards to employees and independent contractors may be in the form of (i)
rights to purchase a specified number of shares of Common Stock at a specified
price not less than that of the fair market value on the date of grant
("Options"), (ii) rights to receive a payment, in cash or Common Stock, equal to
the fair market value or other specified value of a number of shares of Common
Stock on the rights exercise date over a specified strike price, (iii) grants of
restricted or unrestricted Common Stock units denominated in Common Stock, (iv)
grants denominated in cash and (v) grants denominated in cash, Common Stock,
units denominated in Common Stock or any other property which are made subject
to the attainment of one or more performance goals ("Performance Awards").
Subject to certain limitations, the Compensation Committee has the authority to
determine the other terms, conditions and limitations of Awards under the
Incentive Plan. An Option may be either an incentive stock option ("ISO") that
qualifies, or a nonqualified stock option ("NSO") that does not qualify, with
the requirements of Sections 422 of the Code; provided that independent
contractors cannot be awarded ISOs. The Compensation Committee will determine
the employees and independent contractors to receive Awards and the terms,
conditions and limitations applicable to each such Award, which conditions may,
but need not, include continuous service with the Company, achievement of

specific business objectives, attainment of specified growth rates, increases in
specified indices or other comparable measures of performance. Performance
Awards may include more than one performance goal, and a performance goal may be
based on one or more business criteria applicable to the grantee, the Company as
a whole or one or more of the Company's business units and may include any of
the following: increased revenue, net income, stock price, market share,
earnings per share, return on equity or assets or decrease in costs.

On the date of his or her first appointment or election to the Board of
Directors, a nonemployee director will be granted NSOs to purchase 10,000 shares
of Common Stock. In addition, on the first business day following the date on
which each Annual Report meeting of the Company's shareholders is held, each
nonemployee director then serving currently is automatically granted NSOs to
purchase 2,500 shares of Common Stock. Each NSO granted to nonemployee directors
will (i) have a ten-year term, (ii) have an exercise price per share equal to
the fair market value of a Common Stock share on the date of grant and (iii)
become exercisable in cumulative annual increments of one-third of the total
number of shares of Common Stock subject thereto, beginning on the first
anniversary of the date of grant. If a nonemployee director resigns from the
Board without the consent of a majority of the other directors, such director's
NSOs may be exercised only to the extent that they were exercisable on the
resignation date. If the proposal is approved by shareholders, this automatic
award of NSOs to purchase 2,500 shares of Common Stock will be replaced by
discretionary awards of NSOs or shares of restricted stock that are determined
by the Compensation Committee or the Board of Directors.

On February 18, 2003, the Board of Directors amended the Incentive Plan in
order to make a special grant to Mr. Parker of NSOs to purchase 25,000 shares of
Common Stock.

At the 2003 Annual Meeting, the Board recommended and the shareholders
approved certain changes to the Incentive Plan. The Chairman of the Audit
Committee and the Chairman of the Compensation Committee are automatically
granted additional NSOs to purchase 3,000 and 2,000 shares of Common Stock,
respectively, on the first business day following the date on which each annual
meeting of the Company's shareholders is held; and the Board of Directors may,
in its discretion, grant NSOs to purchase of up to 3,000 shares and up to 2,000
shares, respectively, on the date specified to nonchairman members of the Audit
and Compensation Committees who are deemed by the Compensation Committee to be
"independent" for purposes of the rules of the Nasdaq Stock Market. These grants
could be made to the chairman or a member of the Audit Committee or Compensation
Committee, respectively, notwithstanding that the same person may also receive
grants as a chairman or member of the Compensation Committee or Audit Committee,
respectively. See "Compensation of Nonemployee Directors" above.

If the shareholders vote in favor of the proposal set forth herein, the
number of shares of common stock available for issuance under the Incentive Plan
will increase by 500,000 shares to 2,350,000 shares of Common Stock; automatic
awards of options to purchase 2,500 shares of Common Stock to each nonemployee
director will be replaced by discretionary awards of stock options or shares of
restricted stock that are determined by the Compensation Committee or the Board
of Directors; the Chairman of the Nominating Committee will automatically be
granted options to purchase 2,000 shares of Common Stock on the first business
day following the date on which each annual meeting of the Company's
shareholders is held; and the Compensation Committee or the Board of Directors
may, in their discretion, grant options to purchase up to 2,000 shares of Common
Stock to non-chairman members of the Nominating Committee who are deemed
"independent" for purposes of Nasdaq rules on the first business day following
the date on which each annual meeting of the Company's shareholders is held.

Section 162(m) of the Code, generally limits the deductibility for federal
income tax purposes of annual compensation paid to a company's executive
officers to $1 million per covered executive in a taxable year. The Compensation
Committee and the Board of Directors may take deductibility and nondeductibility
of compensation into account but have in the past authorized, and retain in the
future the discretion to authorize, the payment of potentially nondeductible
amounts.

As of March 31, 2004, the last reported sales price of Common Stock on the
Nasdaq National Market was $7.25.

NEW PLAN BENEFITS

The allocation of some of the proposed new benefits under the Incentive
Plan is not currently determinable as such allocation depends on future
decisions to be made by the Compensation Committee or the Board of Directors in
their sole discretion, subject to applicable provisions of the Incentive Plan.
Since Mr. Webster, the current chairman of the Nominating Committee, is not
considered a nonemployee director, he will not receive a grant of options to
purchase 2,000 shares of Common Stock if this amendment to the Incentive Plan is
approved by shareholders. The Company expects to award each nonemployee director
a number of shares of restricted stock equal to $20,000 (based on the fair
market value of a share of Common Stock on the date of grant) on the first
business day following the date on which the annual meeting of the Company's
shareholders is held.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the general rules of present federal income
tax law relating to the tax treatment of stock awards, ISOs and NSOs issued
under the Incentive Plan. The discussion is general in nature and does not take
into account a number of considerations which may apply in light of the
particular circumstances of a participant under the Incentive Plan.

Stock Awards and Related Tax Payments

Under the Code, federal income tax consequences with respect to a stock
award depend on the facts and circumstances of each stock award and, in
particular, the nature of the restrictions imposed with respect to the shares
which are the subject of the stock award. In general, if shares which are the
subject of the stock award are actually issued to a participant, but are subject
to a "substantial risk of forfeiture" (for example, if rights to ownership of
the shares are conditioned upon the future performance of substantial services
by the participant), a taxable event generally occurs only when the risk of
forfeiture lapses. At such time as the substantial risk of forfeiture lapses,
the participant will realize ordinary income to the extent of the excess of the
fair market value of the shares on the date the risk of forfeiture lapses over
the participant's cost for such shares (if any), and the same amount is then
deductible by the Company as compensation expense. If the restrictions with
respect to the shares that are the subject of such stock award, by their nature,
do not subject the key employee to a "substantial risk of forfeiture" of the
shares, then the participant will realize ordinary income with respect to the
shares to the extent of the excess at the time of the grant of the fair market
value of the shares over the participant's cost; and the same amount is then
deductible by the Company. If no shares are actually issued to the participant
at the time the stock award is granted, the participant will generally realize
ordinary income at the time the participant receives shares free of any
substantial risk of forfeiture, and the amount of such income will be equal to
the fair market value of the shares at such time over the participant's cost, if
any; and the same amount is then deductible by the Company. The Company's
deductions for compensation paid under the Incentive Plan are in all cases
subject to certain applicable tax law limitations.

Options

Some of the options issuable under the Incentive Plan may constitute ISOs
within the meaning of Section 422 of the Code, while other options granted under
the Incentive Plan may be NSOs. Grants to nonemployee directors are NSOs. The
Code provides for tax treatment of stock options qualifying as ISOs that may be
more favorable to participants than the tax treatment accorded NSOs. Generally,
upon the exercise of an ISO, the optionee will recognize no income for federal
income tax purposes. The difference between the exercise price of the ISO and
the fair market value of the stock at the time of exercise is an addition to
income in determining alternative minimum taxable income and such amount may be
sufficient in amount to subject the optionee to the alternative minimum tax. On
the sale of shares acquired by exercise of an ISO (assuming that the sale does
not occur within two years of the date of grant of the option or within one year
from the date of exercise), any gain will be taxed to the optionee as long-term
capital gain. In contrast, upon the exercise of an NSO, the optionee recognizes
taxable income (subject to withholding) in an amount equal to the difference
between the then-fair market value of the shares on the date of exercise and the

exercise price. Upon any sale of such shares by the optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the NSO will be treated generally as capital gain or loss. No
deduction is available to the Company upon the grant or exercise of an ISO
(although a deduction may be available if the participant disposes of the shares
so purchased before the applicable holding periods expire), whereas, upon
exercise of an NSO, the Company is entitled to a deduction in an amount equal to
the income recognized by the participant. Except with respect to death or
disability, an optionee has three months after termination of employment in
which to exercise an ISO and retain favorable tax treatment at exercise.

Other

In general, a federal income tax deduction is allowed to the Company in an
amount equal to the ordinary income recognized by a participant with respect to
awards under the Incentive Plan, provided that such amount constitutes an
ordinary and necessary business expense of the Company, that such amount is
reasonable and that the Company satisfies any withholding obligation with
respect to such income.

Copies of the Amended and Restated Incentive Plan, the First, Second and
Third Amendments to the Incentive Plan, and the proposed Fourth Amendment to the
Incentive Plan are attached as Appendix B.

BOARD RECOMMENDATION

The Board believes that the amendment of the Incentive Plan is in the best
interest of the Company and its shareholders. THE BOARD THEREFORE RECOMMENDS A
VOTE FOR APPROVAL OF THE AMENDMENT, AND IT IS INTENDED THAT THE PROXIES NOT
MARKED TO THE CONTRARY WILL BE SO VOTED. Since the amendment will increase the
number of shares available for issuance under the Incentive Plan to all
directors and executive officers of the Company, each of the directors and
executive officers of the Company has an interest in and may benefit from the
adoption of the amendment. Directors also have an interest in and may benefit
from the adoption of the amendment because it provides for discretionary awards
of stock options and restricted stock to the nonemployee directors of the
Company, an additional annual award of stock options to the Chairman of the
Nominating Committee and a discretionary additional award of stock options to
non-chairman members of the Nominating Committee. Approval of the amendment to
the Incentive Plan will require the affirmative vote of a majority of the shares
of Common Stock cast with respect to the consideration of the amendment.
Accordingly, abstentions and broker nonvotes will not be included in the
tabulation of votes cast on this matter.

EQUITY COMPENSATION PLANS

Information concerning our equity compensation plan at December 31, 2003 is
as follows:

NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES WEIGHTED-AVERAGE FOR FUTURE ISSUANCE
TO BE ISSUED UPON EXERCISE PRICE OF UNDER EQUITY
EXERCISE OF OUTSTANDING OUTSTANDING COMPENSATION PLANS
OPTIONS, WARRANTS AND OPTIONS, (EXCLUDING SECURITIES
RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- ----------------------- ------------------- ------------------------

Equity compensation plans
approved by security
holders................. 1,506,702 $3.71 131,500
Equity compensation plans
not approved by security
holders (1)............. 131,120 $3.60 --
------------ -------- ----------
Total................... 1,637,822 $3.70 131,500
============ ======== ==========

----------

(1) Includes options to purchase 77,295 and 53,825 shares of Common Stock
granted to Mr. Trahan and a former officer, respectively, prior to the
closing of the Company's IPO. These options, which were not granted under
the Company's Incentive Plan, have vested and are fully exercisable at the
exercise price stated above.

PROPOSAL 3
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has appointed, and recommends the approval of the
appointment of, Ernst & Young LLP, as independent public accountants for the
fiscal year ending December 31, 2004. Ernst & Young LLP served as independent
public accountants for the fiscal year ended December 31, 2003. Representatives
of Ernst & Young LLP are expected to be present at the Annual Meeting and will
be given the opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions.

Unless shareholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to ratify the selection of Ernst & Young LLP as the Company's
auditors for 2004. The affirmative vote of a majority of the votes cast at the
Annual Meeting will be required for ratification.

PRINCIPAL AUDITOR FEES

Ernst & Young LLP billed the Company as set forth in the table below for
professional services rendered in the fiscal year ended December 31, 2003.

DESCRIPTION AMOUNT
--------------- -----------

Audit Fees
2003................................................. $ 472,033
2002................................................. 87,750
Audit - Related Fees
2003................................................. 0
2002................................................. 0
Tax Fees ................................................
2003................................................. 0
2002................................................. 0
All Other Fees
2003................................................. 2,500
2002................................................. 0

----------

Audit fees for 2003 include consulting for the Pinnacle transaction, audit
services, and consents and comfort letters for the Company's registration
statement on Form S-2 and related public offering.

AUDIT COMMITTEE PREAPPROVAL POLICY

The Audit Committee has adopted a policy that all audit, review or attest
engagements and permissible non-audit services, including the fees and terms
thereof, to be performed by the independent auditors, (subject to, and in
compliance with, the de minimis exception for non-audit services described in
Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 and the applicable
rules and regulations of the SEC) will be subject to specific pre-approval of
the Audit Committee. No non-audit services were performed pursuant to the de
minimis exception in 2003.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & Young LLP.

ADDITIONAL INFORMATION

OTHER BUSINESS

As of the date of this proxy statement, the Board of Directors is not
informed of any other matters, other than those above, that may be brought
before the meeting. The persons named in the enclosed form of proxy or their
substitutes will vote with respect to any such matters in accordance with their
best judgment.

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

Rule 14a-8 under the Securities Exchange Act of 1934, as amended, addresses
when a company must include a shareholder's proposal in its proxy statement and
identify the proposal in its form of proxy when the company holds an annual or
special meeting of shareholders. Under Rule 14a-8, proposals that shareholders
intend to have included in the Company's proxy statement and form of proxy for
the 2005 Annual Meeting of Shareholders must be received by the Company no later
than December 15, 2004. However, if the date of the 2004 Annual Meeting of
Shareholders changes by more than 30 days from the date of the 2005 Annual
Meeting of Shareholders, the deadline is a reasonable time before the Company
begins to print and mail its proxy materials, which deadline will be set forth
in a Quarterly Report on Form 10-Q or will otherwise be communicated to
shareholders. Shareholder proposals must also be otherwise eligible for
inclusion.

If a shareholder desires to bring a matter before an annual or special
meeting and the proposal is submitted outside the process of Rule 14a-8, the
shareholder must follow the procedures set forth in the Company's Bylaws. The
Company's Bylaws provide generally that shareholders who wish to nominate
directors or to bring business before a shareholders' meeting must notify the
Company and provide certain pertinent information at least 80 days before the
meeting date (or within ten days after public announcement pursuant to the
Bylaws of the meeting date, if the meeting date has not been publicly announced
more than 90 days in advance). If the date of the 2005 Annual Meeting of
Shareholders is the same as the date of the 2004 Annual Meeting of Shareholders,
shareholders who wish to nominate directors or to bring business before the 2005
Annual Meeting of Shareholders must notify the Company no later than March 2,
2005.

A copy of the Company's Bylaws setting forth the requirements for the
nomination of director candidates by stockholders and the requirements for
proposals by stockholders may be obtained from the Company's Secretary at the
address indicated on the first page of this proxy statement. A nomination or
proposal that does not comply with the above procedures will be disregarded.
Compliance with the above procedures does not require the Company to include the
proposed nominee or proposal in the Company's proxy solicitation material.

ANNUAL REPORT ON FORM 10-K

CARRIZO WILL PROVIDE TO EACH STOCKHOLDER, WITHOUT CHARGE AND UPON WRITTEN
REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. ANY SUCH WRITTEN REQUESTS SHOULD
BE DIRECTED TO PAUL F. BOLING, THE SECRETARY OF THE COMPANY, AT THE ADDRESS
INDICATED ON THE FIRST PAGE OF THIS PROXY STATEMENT.

By Order of the Board of Directors

/s/ PAUL F. BOLING
Paul F. Boling
Secretary

Dated: April 26, 2004
Houston, Texas

APPENDIX A

CARRIZO OIL & GAS, INC.
AUDIT COMMITTEE CHARTER

PURPOSE

The Audit Committee of the Board of Directors (the "Committee") is
appointed by the Board to oversee the accounting and financial reporting
processes and audits of the financial statements of the Company and to assist
the Board in monitoring (i) the integrity of the Company's financial statements,
(ii) the performance of the Company's internal audit function and independent
auditors, (iii) the independence and qualifications of the firm of independent
public auditors hired to audit the Company's financial statements (the
"independent auditors"), and (iv) the compliance by the Company with legal and
regulatory requirements.

MEMBERSHIP AND MEETINGS

The Committee shall consist of not less than three directors, each of whom
shall serve at the discretion of the Board. The Committee's composition shall
meet the independence and experience requirements of the Nasdaq Stock Market,
Inc. ("Nasdaq"), Section 10A(m)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act"), and applicable rules and regulations of the Commission, subject
to an exception for purposes of the Nasdaq rules for one member to the extent
allowed by Nasdaq rule 4350(d)(2)(B)(i). Each member shall be able to read and
understand fundamental financial statements, and at least one member shall have
past employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background which
results in the individual's financial sophistication. The members of the
Committee shall be appointed by the Board.

The Committee shall meet at least quarterly, with special meetings called
as circumstances dictate, and shall meet periodically with management, the
internal auditors and the independent auditors.

COMMITTEE AUTHORITY AND RESPONSIBILITIES

The Committee has the authority to conduct or authorize investigations into
any matters within the Committee's scope of responsibilities.

The Committee shall provide regular reports of Committee activities to the
Board, and perform such other functions, as requested by the Board or required
by law or Nasdaq rules.

Oversight of the Independent Auditors

The Committee shall be directly responsible for the appointment,
compensation, and retention of the independent auditors (subject, if applicable,
to shareholder ratification). The Committee shall be directly responsible for
the oversight of the work of the independent auditors (including resolution of
disagreements between management and the independent auditors regarding
financial reporting) for the purpose of preparing or issuing an audit report or
related work or performing other audit, review or attest services for the
Company. The Committee shall be responsible for ensuring the independence of the
independent auditors. The independent auditors shall report directly to the
Committee.

The Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditors, subject to the de minimis exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Committee prior to the completion of the audit. The
Committee may form and delegate authority to subcommittees consisting of one or
more members when appropriate, including the authority to grant preapprovals of
audit and permitted non-audit services, provided that decisions of such
subcommittee to grant preapprovals shall be presented to the full Committee at
its next scheduled meeting.

The Committee, to the extent it deems necessary or appropriate, shall:

1. Ensure that the independent auditors submit to the Committee on a
periodic basis a formal written statement delineating all
relationships between the independent auditors and the Company,
actively engage in a dialogue with the independent auditors with
respect to any such disclosed relationships or services that may
impact the objectivity and independence of the independent auditors,
and recommend that the Board take appropriate action in response to
the written statement to satisfy itself of the independence of the
independent auditors.

2. Review and evaluate the lead partner of the independent auditor team.

Retention and Compensation of External Advisors

The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Committee, for payment of compensation to the independent auditors for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Committee.

Financial Statement and Disclosure Matters

The Committee, to the extent it deems necessary or appropriate, shall:

1. Review and discuss with management and the independent auditors the
annual audited financial statements, including disclosures made in
management's discussion and analysis, and recommend to the Board whether
the audited financial statements should be included in the Company's Form
10-K.

2. Review and discuss with management and the independent auditors the
Company's quarterly financial statements prior to the filing of its Form
10-Q.

3. Review, discuss and document quarterly reports from the independent
auditors on:

(a) All critical accounting policies and practices to be used.

(b) All alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditors.

(c) Other material written communications between the independent
auditors and management, such as any management letter or schedule of
unadjusted differences.

4. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit, including any difficulties encountered in the course of the
audit work, any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management.

5. Discuss with the independent auditors any matters brought to the
Committee's attention as a result of the application of the Statement of
Auditing Standards No. 71 (Interim Financial Information).

6. Discuss with management and the independent auditors the design,
quality and adequacy of the Company's internal control over financial
reporting.

7. Review disclosures made to the Committee by the Company's CEO and
CFO during their certification process for the Form 10-K and Form 10-Q
about any significant deficiencies in the design or operation of internal
control over financial reporting or material weaknesses therein and any
fraud involving management or other employees who have a significant role
in the Company's internal controls.

8. Prepare a report to shareholders as required by the SEC to be
included in the Company's annual proxy statement.

Compliance Oversight Responsibilities

The Committee, to the extent it deems necessary or appropriate, shall:

1. Receive reports from the independent auditors under Section 10A(b)
of the Exchange Act if the independent auditors detect or become aware of
any illegal acts.

2. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.

3. Discuss with management and the independent auditors any
correspondence with regulators or governmental agencies and any published
reports which raise material issues regarding the Company's financial
statements or accounting policies.

4. Discuss with the Company's Chief Financial Officer or other
personnel, including counsel, legal matters that may have a material impact
on the financial statements or the Company's compliance policies.

Review and Approval of Related Party Transactions

The Committee shall review all related party transactions (as that term is
defined by Item 404 of Regulation S-K) for potential conflicts of interest. All
such transactions shall be approved by the Committee.

Annual Review of Charter and Committee Performance

At least annually, the Committee shall review and reassess the adequacy of
this Charter. The Committee shall report the results of the review to the Board
and, if necessary, recommend that the Board amend this Charter.

OVERSIGHT/RELIANCE

While the Committee has the responsibilities and powers set forth in this
Charter, the Board and the Committee recognize that the Company's management is
responsible for preparing the Company's financial statements and the independent
auditors are responsible for auditing the financial statements, the internal
controls over financial reporting and reviewing the Company's unaudited interim
financial statements. Therefore, the Committee's responsibility is in the nature
of oversight. It is not the responsibility of the Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate or are in accordance with generally acceptable accounting principles.
In carrying out its oversight responsibilities, the Committee is not providing
any expert or special assurances as to the Company's financial statements or the
work of the independent auditors. Absent actual knowledge to the contrary (which
shall be promptly reported to the Board), each member of the Committee shall be
entitled to assume and rely upon (i) the integrity of those persons and
organizations within and outside the Company from which it receives information,
and (ii) the accuracy of the financial and other information provided to the
Committee by such persons and organizations.

APPENDIX B

INCENTIVE PLAN
OF
CARRIZO OIL & GAS, INC.

(AS AMENDED AND RESTATED EFFECTIVE AS OF FEBRUARY 17, 2000.
HOWEVER, THE CHANGES TO THE DEFINITION OF "INDEPENDENT CONTRACTOR" IN
SECTION 3 AND TO THE NUMBER OF AUTHORIZED SHARES IN SECTION 5 ARE SUBJECT
TO SHAREHOLDER APPROVAL AT THE 2000 MEETING OF SHAREHOLDERS.)

1. Plan. This Incentive Plan of Carrizo Oil & Gas, Inc. (the "Plan") was
adopted by Carrizo Oil & Gas, Inc. to reward certain corporate officers and key
employees of Carrizo Oil & Gas, Inc. and certain independent consultants by
enabling them to acquire shares of common stock of Carrizo Oil & Gas, Inc.

2. Objectives. This Plan is designed to attract and retain key employees of
the Company and its Subsidiaries (as hereinafter defined), to attract and retain
qualified directors of the Company, to attract and retain consultants and other
independent contractors, to encourage the sense of proprietorship of such
employees, directors and independent contractors and to stimulate the active
interest of such persons in the development and financial success of the Company
and its Subsidiaries. These objectives are to be accomplished by making Awards
(as hereinafter defined) under this Plan and thereby providing Participants (as
hereinafter defined) with a proprietary interest in the growth and performance
of the Company and its Subsidiaries.

3. Definitions. As used herein, the terms set forth below shall have the
following respective meanings:

"Annual Director Award Date" means, for each year beginning on or
after the IPO Closing Date, the first business day of the month next
succeeding the date upon which the annual meeting of stockholders of the
Company is held in such year.

"Authorized Officer" means the Chairman of the Board or the Chief
Executive Officer of the Company (or any other senior officer of the
Company to whom either of them shall delegate the authority to execute any
Award Agreement).

"Award" means an Employee Award, a Director Award or an Independent
Contractor Award.

"Award Agreement" means any Employee Award Agreement, Director Award
Agreement or Independent Contractor Award Agreement.

"Board" means the Board of Directors of the Company.

"Cash Award" means an award denominated in cash.

"Code" means the Internal Revenue Code of 1986, as amended from time
to time.

"Committee" means (i) the Compensation Committee of the Board or (ii)
such other committee of the Board as is designated by the Board to
administer the Plan or (iii) to the extent contemplated hereby, the Board.

"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.

"Company" means Carrizo Oil & Gas, Inc., a Texas corporation.

"Director" means an individual serving as a member of the Board.

"Director Award" means the grant of a Director Option.

"Director Award Agreement" means a written agreement between the
Company and a Participant who is a Nonemployee Director setting forth the
terms, conditions and limitations applicable to a Director Award.

"Disability" means, with respect to a Nonemployee Director, the
inability to perform the duties of a Director for a continuous period of
more than three months by reason of any medically determinable physical or
mental impairment.

"Dividend Equivalents" means, with respect to shares of Restricted
Stock that are to be issued at the end of the Restriction Period, an amount
equal to all dividends and other distributions (or the economic equivalent
thereof) that are payable to stockholders of record during the Restriction
Period on a like number of shares of Common Stock.

"Employee" means an employee of the Company or any of its Subsidiaries
and an individual who has agreed to become an Employee of the Company or
any of its Subsidiaries and is expected to become such an Employee within
the following six months.

"Employee Award" means the grant of any Option, SAR, Stock Award, Cash
Award or Performance Award, whether granted singly, in combination or in
tandem, to a Participant who is an Employee pursuant to such applicable
terms, conditions and limitations as the Committee may establish in order
to fulfill the objectives of the Plan.

"Employee Award Agreement" means a written agreement between the
Company and a Participant who is an Employee setting forth the terms,
conditions and limitations applicable to an Employee Award.

"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.

"Fair Market Value" of a share of Common Stock means, as of a
particular date, (i) if shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price
per share of Common Stock on the consolidated transaction reporting system
for the principal national securities exchange on which shares of Common
Stock are listed on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was
so reported, (ii) if shares of Common Stock are not so listed but are
quoted on the Nasdaq National Market, the mean between the highest and
lowest sales price per share of Common Stock reported by the Nasdaq
National Market on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was
so reported, (iii) if the Common Stock is not so listed or quoted, the mean
between the closing bid and asked price on that date, or, if there are no
quotations available for such date, on the last preceding date on which
such quotations shall be available, as reported by the Nasdaq Stock Market,
or, if not reported by the Nasdaq Stock Market, by the National Quotation
Bureau Incorporated or (iv) if shares of Common Stock are not publicly
traded, the most recent value determined by an independent appraiser
appointed by the Company for such purpose; provided that, notwithstanding
the foregoing, "Fair Market Value" in the case of any Award made in
connection with the IPO, means the price per share to the public of the
Common Stock in the IPO, as set forth in the final prospectus relating to
the IPO.

"Incentive Option" means an Option that is intended to comply with the
requirements set forth in Section 422 of the Code.

"Independent Contractor" means a person providing services to the
Company or any of its Subsidiaries, including an Employee or Nonemployee
Director.

"Independent Contractor Award" means the grant of any Nonqualified
Stock Option, SAR, Stock Award, Cash Award or Performance Award, whether
granted singly, in combination or in tandem, to a Participant who is an
Independent Contractor pursuant to such applicable terms, conditions and
limitations as the Committee may establish in order to fulfill the
objectives of the Plan.

"Independent Contractor Award Agreement" means a written agreement
between the Company and a Participant who is an Independent Contractor
setting forth the terms, conditions and limitations applicable to an
Independent Contractor Award.

"IPO" means the first time a registration statement filed under the
Securities Act of 1933 and respecting an underwritten primary offering by
the Company of shares of Common Stock is declared

effective under that Act and the shares registered by that registration
statement are issued and sold by the Company (otherwise than pursuant to
the exercise of any overallotment option).

"IPO Closing Date" means the date on which the Company first receives
payment for the shares of Common Stock it sells in the IPO.

"Nonemployee Director" has the meaning set forth in paragraph 4(b)
hereof.

"Nonqualified Stock Option" means an Option that is not an Incentive
Option.

"Option" means a right to purchase a specified number of shares of
Common Stock at a specified price.

"Participant" means an Employee, Director or Independent Contractor to
whom an Award has been made under this Plan.

"Performance Award" means an award made pursuant to this Plan to a
Participant who is an Employee or Independent Contractor who is subject to
the attainment of one or more Performance Goals.

"Performance Goal" means a standard established by the Committee, to
determine in whole or in part whether a Performance Award shall be earned.

"Restricted Stock" means any Common Stock that is restricted or
subject to forfeiture provisions.

"Restriction Period" means a period of time beginning as of the date
upon which an Award of Restricted Stock is made pursuant to this Plan and
ending as of the date upon which the Common Stock subject to such Award is
no longer restricted or subject to forfeiture provisions.

"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor rule.

"SAR" means a right to receive a payment, in cash or Common Stock,
equal to the excess of the Fair Market Value or other specified valuation
of a specified number of shares of Common Stock on the date the right is
exercised over a specified strike price, in each case, as determined by the
Committee.

"Stock Award" means an award in the form of shares of Common Stock or
units denominated in shares of Common Stock.

"Subsidiary" means (i) in the case of a corporation, any corporation
of which the Company directly or indirectly owns shares representing more
than 50% of the combined voting power of the shares of all classes or
series of capital stock of such corporation which have the right to vote
generally on matters submitted to a vote of the stockholders of such
corporation and (ii) in the case of a partnership or other business entity
not organized as a corporation, any such business entity of which the
Company directly or indirectly owns more than 50% of the voting, capital or
profits interests (whether in the form of partnership interests, membership
interests or otherwise).

4. Eligibility.

(a) Employees. Key Employees eligible for Employee Awards under this Plan
are those who hold positions of responsibility and whose performance, in the
judgment of the Committee, can have a significant effect on the success of the
Company and its Subsidiaries.

(b) Directors. Directors eligible for Director Awards under this Plan are
those who are not employees of the Company or any of its Subsidiaries
("Nonemployee Directors").

(c) Independent Contractors. Independent Contractors eligible for
Independent Contractor Awards under this Plan are those Independent Contractors
providing services to, or who will provide services to, the Company or any of
its Subsidiaries.

5. Common Stock Available for Awards. Subject to the provisions of
paragraph 15 hereof, there shall be available for Awards under this Plan granted
wholly or partly in Common Stock (including rights or options that may be
exercised for or settled in Common Stock) an aggregate of 1,500,000 shares of
Common

Stock, all of which shall be available for Incentive Options. The number of
shares of Common Stock that are the subject of Awards under this Plan, that are
forfeited or terminated, expire unexercised, are settled in cash in lieu of
Common Stock or in a manner such that all or some of the shares covered by an
Award are not issued to a Participant or are exchanged for Awards that do not
involve Common Stock, shall again immediately become available for Awards
hereunder. The Committee may from time to time adopt and observe such procedures
concerning the counting of shares against the Plan maximum as it may deem
appropriate. The Board and the appropriate officers of the Company shall from
time to time take whatever actions are necessary to file any required documents
with governmental authorities, stock exchanges and transaction reporting systems
to ensure that shares of Common Stock are available for issuance pursuant to
Awards.

6. Administration.

(a) This Plan, as it applies to Participants who are Employees or
Independent Contractors but not with respect to Participants who are Nonemployee
Directors, shall be administered by the Committee. To the extent required in
order for Employee Awards to be exempt from Section 16 of the Exchange Act by
virtue of the provisions of Rule 16b-3, (i) the Committee shall consist of at
least two members of the Board who meet the requirements of the definition of
"non-employee director" set forth in Rule 16b-3(b)(3)(i) promulgated under the
Exchange Act or (ii) Awards may be granted by, and the Plan may be administered
by, the Board.

(b) Subject to the provisions hereof, insofar as this Plan relates to the
Employee Awards or Independent Contractor Awards, the Committee shall have full
and exclusive power and authority to administer this Plan and to take all
actions that are specifically contemplated hereby or are necessary or
appropriate in connection with the administration hereof. Insofar as this Plan
relates to Employee Awards or Independent Contractor Awards, the Committee shall
also have full and exclusive power to interpret this Plan and to adopt such
rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Employee Award or Independent Contractor Award, accelerate
the vesting or exercisability of an Employee Award or Independent Contractor
Award, eliminate or make less restrictive any restrictions contained in an
Employee Award or Independent Contractor Award, waive any restriction or other
provision of this Plan (insofar as such provision relates to Employee Awards or
to Independent Contractor Awards) or an Employee Award or Independent Contractor
Award or otherwise amend or modify an Employee Award or Independent Contractor
Award in any manner that is either (i) not adverse to the Participant to whom
such Employee Award or Independent Contractor Award was granted or (ii)
consented to by such Participant. The Committee may make an award to an
individual who it expects to become an Employee of the Company or any of its
Subsidiaries within the next six months, with such award being subject to the
individual's actually becoming an Employee within such time period, and subject
to such other terms and conditions as may be established by the Committee. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Employee Award or Independent Contractor
Award in the manner and to the extent the Committee deems necessary or desirable
to further the Plan purposes. Any decision of the Committee in the
interpretation and administration of this Plan shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned.

(c) No member of the Committee or officer of the Company to whom the
Committee has delegated authority in accordance with the provisions of paragraph
7 of this Plan shall be liable for anything done or omitted to be done by him or
her, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan, except for his or
her own willful misconduct or as expressly provided by statute.

7. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish, except that the Committee may not delegate to any person the
authority to grant Awards to, or take other action with respect to, Participants
who are subject to Section 16 of the Exchange Act.

8. Employee and Independent Contractor Awards.

(a) The Committee shall determine the type or types of Employee Awards to
be made under this Plan and shall designate from time to time the Employees who
are to be the recipients of such Awards. Each Employee Award may be embodied in
an Employee Award Agreement, which shall contain such terms, conditions and
limitations as shall be determined by the Committee in its sole discretion and
shall be signed by the Participant to whom the Employee Award is made and by an
Authorized Officer for and on behalf of the Company. Employee Awards may consist
of those listed in this paragraph 8(a) hereof and may be granted singly, in
combination or in tandem. Employee Awards may also be made in combination or in
tandem with, in replacement of, or as alternatives to, grants or rights under
this Plan or any other employee plan of the Company or any of its Subsidiaries,
including the plan of any acquired entity. An Employee Award may provide for the
grant or issuance of additional, replacement or alternative Employee Awards upon
the occurrence of specified events, including the exercise of the original
Employee Award granted to a Participant. All or part of an Employee Award may be
subject to conditions established by the Committee, which may include, but are
not limited to, continuous service with the Company and its Subsidiaries,
achievement of specific business objectives, increases in specified indices,
attainment of specified growth rates and other comparable measurements of
performance. Upon the termination of employment by a Participant who is an
Employee, any unexercised, deferred, unvested or unpaid Employee Awards shall be
treated as set forth in the applicable Employee Award Agreement.

(i) Stock Option. An Employee Award may be in the form of an Option.
An Option awarded pursuant to this Plan may consist of an Incentive Option
or a Nonqualified Option. The price at which shares of Common Stock may be
purchased upon the exercise of an Incentive Option shall be not less than
the Fair Market Value of the Common Stock on the date of grant. The price
at which shares of Common Stock may be purchased upon the exercise of a
Nonqualified Option shall be not less than the Fair Market Value of the
Common Stock on the date of grant. Subject to the foregoing provisions, the
terms, conditions and limitations applicable to any Options awarded
pursuant to this Plan, including the term of any Options and the date or
dates upon which they become exercisable, shall be determined by the
Committee.

(ii) Stock Appreciation Right. An Employee Award may be in the form of
an SAR. The terms, conditions and limitations applicable to any SARs
awarded pursuant to this Plan, including the term of any SARs and the date
or dates upon which they become exercisable, shall be determined by the
Committee.

(iii) Stock Award. An Employee Award may be in the form of a Stock
Award. The terms, conditions and limitations applicable to any Stock Awards
granted pursuant to this Plan shall be determined by the Committee.

(iv) Cash Award. An Employee Award may be in the form of a Cash Award.
The terms, conditions and limitations applicable to any Cash Awards granted
pursuant to this Plan shall be determined by the Committee.

(v) Performance Award. Without limiting the type or number of Employee
Awards that may be made under the other provisions of this Plan, an
Employee Award may be in the form of a Performance Award. A Performance
Award shall be paid, vested or otherwise deliverable solely on account of
the attainment of one or more pre-established, objective Performance Goals
established by the Committee prior to the earlier to occur of (x) 90 days
after the commencement of the period of service to which the Performance
Goal relates and (y) the lapse of 25% of the period of service (as
scheduled in good faith at the time the goal is established), and in any
event while the outcome is substantially uncertain. A Performance Goal is
objective if a third party having knowledge of the relevant facts could
determine whether the goal is met. Such a Performance Goal may be based on
one or more business criteria that apply to the individual, one or more
business units of the Company, or the Company as a whole, and may include
one or more of the following: increased revenue, net income, stock price,
market share, earnings per share, return on equity, return on assets or
decrease in costs. Unless otherwise stated, such a Performance Goal need
not be based upon an increase or positive result under a particular
business

criterion and could include, for example, maintaining the status quo or
limiting economic losses (measured, in each case, by reference to specific
business criteria). In interpreting Plan provisions applicable to
Performance Goals and Performance Awards, it is the intent of the Plan to
conform with the standards of Section 162(m) of the Code and Treasury
Regulation ss. 1.162-27(e)(2)(i), and the Committee in establishing such
goals and interpreting the Plan shall be guided by such provisions. Prior
to the payment of any compensation based on the achievement of Performance
Goals, the Committee must certify in writing that applicable Performance
Goals and any of the material terms thereof were, in fact, satisfied.
Subject to the foregoing provisions, the terms, conditions and limitations
applicable to any Performance Awards made pursuant to this Plan shall be
determined by the Committee.

(b) Notwithstanding anything to the contrary contained in this Plan, the
following limitations shall apply to any Employee Awards made hereunder:

(i) no Participant may be granted, during any one-year period,
Employee Awards consisting of Options or SARs that are exercisable for more
than 250,000 shares of Common Stock;

(ii) no Participant may be granted, during any one-year period, Stock
Awards covering or relating to more than 50,000 shares of Common Stock (the
limitation set forth in this clause (ii), together with the limitation set
forth in clause (i) above, being hereinafter collectively referred to as
the "Stock Based Awards Limitations"); and

(iii) no Participant may be granted Employee Awards consisting of cash
or in any other form permitted under this Plan (other than Employee Awards
consisting of Options or SARs or otherwise consisting of shares of Common
Stock or units denominated in such shares) in respect of any one-year
period having a value determined on the date of grant in excess of
$500,000.

(c) The Committee shall have the sole responsibility and authority to
determine the type or types of Independent Contractor Awards to be made under
this Plan and may make any such Awards as could be made to an Employee, other
than Incentive Options.

9. Director Awards. Each Nonemployee Director of the Company shall be
granted Director Awards in accordance with this paragraph 9 and subject to the
applicable terms, conditions and limitations set forth in this Plan and the
applicable Director Award Agreement. Notwithstanding anything to the contrary
contained herein, Director Awards shall not be made in any year in which a
sufficient number of shares of Common Stock are not available to make such
Awards under this Plan.

(a) Initial Director Options. On the IPO Closing Date, each Nonemployee
Director shall be automatically awarded a Director Option on 10,000 shares of
Common Stock.

(b) Other Director Options. Effective upon the IPO Closing Date, on the
date of his or her first appointment or election to the Board of Directors, a
Nonemployee Director shall automatically be granted a Director Option that
provides for the purchase of 10,000 shares of Common Stock. In addition, on each
Annual Director Award Date, each Nonemployee Director shall automatically be
granted a Director Option that provides for the purchase of 2,500 shares of
Common Stock.

(c) Terms. Each Director Option shall have a term of ten years from the
date of grant, notwithstanding any earlier termination of the status of the
holder as a Nonemployee Director. The purchase price of each share of Common
Stock subject to a Director Option shall be equal to the Fair Market Value of
the Common Stock on the date of grant. All Director Options shall vest and
become exercisable in increments of one-third of the total number of shares of
Common Stock that are subject thereto (rounded up to the nearest whole number)
on the first and second anniversaries of the date of grant and of all remaining
shares of Common Stock that are subject thereto on the third anniversary of the
date of grant. All unvested Director Options shall be forfeited if the
Nonemployee Director resigns as a Director without the consent of a majority of
the other Directors.

(d) Agreements. Any Award of Director Options shall be embodied in a
Director Award Agreement, which shall contain the terms, conditions and
limitations set forth above and shall be signed by the Participant to whom the
Director Options are granted and by an Authorized Officer for and on behalf of
the Company.

10. Payment of Awards.

(a) General. Payment of Employee Awards or Independent Contractor Awards
may be made in the form of cash or Common Stock, or a combination thereof, and
may include such restrictions as the Committee shall determine, including, in
the case of Common Stock, restrictions on transfer and forfeiture provisions. If
payment of an Employee Award or Independent Contractor Award is made in the form
of Restricted Stock, the applicable Award Agreement relating to such shares
shall specify whether they are to be issued at the beginning or end of the
Restriction Period. In the event that shares of Restricted Stock are to be
issued at the beginning of the Restriction Period, the certificates evidencing
such shares (to the extent that such shares are so evidenced) shall contain
appropriate legends and restrictions that describe the terms and conditions of
the restrictions applicable thereto. In the event that shares of Restricted
Stock are to be issued at the end of the Restricted Period, the right to receive
such shares shall be evidenced by book entry registration or in such other
manner as the Committee may determine.

(b) Deferral. With the approval of the Committee, amounts payable in
respect of Employee Awards or Independent Contractor Awards may be deferred and
paid either in the form of installments or as a lump-sum payment. The Committee
may permit selected Participants to elect to defer payments of some or all types
of Employee Awards or Independent Contractor Awards in accordance with
procedures established by the Committee. Any deferred payment of an Employee
Award or Independent Contractor Award, whether elected by the Participant or
specified by the Award Agreement or by the Committee, may be forfeited if and to
the extent that the Award Agreement so provides.

(c) Dividends and Interest. Rights to dividends or Dividend Equivalents may
be extended to and made part of any Employee Award or Independent Contractor
Award consisting of shares of Common Stock or units denominated in shares of
Common Stock, subject to such terms, conditions and restrictions as the
Committee may establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and Dividend Equivalents
for Employee Awards or Independent Contractor Awards consisting of shares of
Common Stock or units denominated in shares of Common Stock.

(d) Substitution of Awards. At the discretion of the Committee, a
Participant who is an Employee or Independent Contractor may be offered an
election to substitute an Employee Award or Independent Contractor Award for
another Employee Award or Independent Contractor Award or Employee Awards or
Independent Contractor Awards of the same or different type.

11. Stock Option Exercise. The price at which shares of Common Stock may be
purchased under an Option shall be paid in full at the time of exercise in cash
or, if elected by the optionee, the optionee may purchase such shares by means
of tendering Common Stock or surrendering another Award, including Restricted
Stock or Director Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine acceptable
methods for Participants who are Employees or Independent Contractors to tender
Common Stock or other Employee Awards or Independent Contractor Awards; provided
that any Common Stock that is or was the subject of an Employee Award or
Independent Contractor Award may be so tendered only if it has been held by the
Participant for six months. The Committee may provide for procedures to permit
the exercise or purchase of such Awards by use of the proceeds to be received
from the sale of Common Stock issuable pursuant to an Employee Award or
Independent Contractor Award. Unless otherwise provided in the applicable Award
Agreement, in the event shares of Restricted Stock are tendered as consideration
for the exercise of an Option, a number of the shares issued upon the exercise
of the Option, equal to the number of shares of Restricted Stock or Director
Restricted Stock used as consideration therefor, shall be subject to the same
restrictions as the Restricted Stock or Director Restricted Stock so submitted
as well as any additional restrictions that may be imposed by the Committee.

12. Taxes. The Company shall have the right to deduct applicable taxes from
any Employee Award payment and withhold, at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash or
number of shares of Common Stock or a combination thereof for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by

the transfer to the Company of shares of Common Stock theretofore owned by the
holder of the Employee Award with respect to which withholding is required. If
shares of Common Stock are used to satisfy tax withholding, such shares shall be
valued based on the Fair Market Value when the tax withholding is required to be
made. The Committee may provide for loans, on either a short term or demand
basis, from the Company to a Participant who is an Employee or Independent
Contractor to permit the payment of taxes required by law.

13. Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law, except that (i) no amendment or alteration that would adversely affect
the rights of any Participant under any Award previously granted to such
Participant shall be made without the consent of such Participant and (ii) no
amendment or alteration shall be effective prior to its approval by the
stockholders of the Company to the extent such approval is then required
pursuant to Rule 16b-3 in order to preserve the applicability of any exemption
provided by such rule to any Award then outstanding (unless the holder of such
Award consents) or to the extent stockholder approval is otherwise required by
applicable legal requirements.

14. Assignability. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the
Exchange Act shall be assignable or otherwise transferable except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The Committee may prescribe and include
in applicable Award Agreements other restrictions on transfer. Any attempted
assignment of an Award or any other benefit under this Plan in violation of this
paragraph 14 shall be null and void.

15. Adjustments.

(a) The existence of outstanding Awards shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.

(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock, declaration of a dividend payable in shares of Common Stock or
other stock split, then, except with respect to the Existing Options, (i) the
number of shares of Common Stock reserved under this Plan, (ii) the number of
shares of Common Stock covered by outstanding Awards in the form of Common Stock
or units denominated in Common Stock, (iii) the exercise or other price in
respect of such Awards, (iv) the appropriate Fair Market Value and other price
determinations for such Awards, (v) the number of shares of Common Stock covered
by Director Options automatically granted pursuant to paragraph 9 hereof and
(vi) the Stock Based Awards Limitations shall each be proportionately adjusted
by the Board to reflect such transaction. In the event of any other
recapitalization or capital reorganization of the Company, any consolidation or
merger of the Company with another corporation or entity, the adoption by the
Company of any plan of exchange affecting the Common Stock or any distribution
to holders of Common Stock of securities or property (other than normal cash
dividends or dividends payable in Common Stock), the Board shall make
appropriate adjustments to (i) the number of shares of Common Stock covered by
Awards in the form of Common Stock or units denominated in Common Stock, (ii)
the exercise or other price in respect of such Awards, (iii) the appropriate
Fair Market Value and other price determinations for such Awards, (iv) the
number of shares of Common Stock covered by Director Options automatically
granted pursuant to paragraph 9 hereof and (v) the Stock Based Awards
Limitations to give effect to such transaction shall each be proportionately
adjusted by the Board to reflect such transaction; provided that such
adjustments shall only be such as are necessary to maintain the proportionate
interest of the holders of the Awards and preserve, without exceeding, the value
of such Awards. In the event of a corporate merger, consolidation, acquisition
of property or stock,

separation, reorganization or liquidation, the Board shall be authorized to
issue or assume Awards by means of substitution of new Awards, as appropriate,
for previously issued Awards or to assume previously issued Awards as part of
such adjustment.

(c) In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Board may make
such adjustments to outstanding Awards or other provisions for the disposition
of outstanding Awards as it deems equitable, and shall be authorized, in its
discretion, (i) to provide for the substitution of a new Award or other
arrangement (which, if applicable, may be exercisable for such property or stock
as the Board determines) for an outstanding Award or the assumption of an
outstanding Award, regardless of whether in a transaction to which Section
424(a) of the Code applies, (ii) to provide, prior to the transaction, for the
acceleration of the vesting and exercisability of, or lapse of restrictions with
respect to, the outstanding Award and, if the transaction is a cash merger, to
provide for the termination of any portion of the Award that remains unexercised
at the time of such transaction or (iii) to provide for the acceleration of the
vesting and exercisability of an outstanding Award and the cancellation thereof
in exchange for such payment as shall be mutually agreeable to the Participant
and the Board.

16. Restrictions. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. It is the intent of the Company that grants
of Awards under this Plan comply with Rule 16b-3 with respect to persons subject
to Section 16 of the Exchange Act unless otherwise provided herein or in an
Award Agreement, that any ambiguities or inconsistencies in the construction of
such an Award or this Plan be interpreted to give effect to such intention.
Certificates evidencing shares of Common Stock delivered under this Plan (to the
extent that such shares are so evidenced) may be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system upon which
the Common Stock is then listed or to which it is admitted for quotation and any
applicable federal or state securities law. The Committee may cause a legend or
legends to be placed upon such certificates (if any) to make appropriate
reference to such restrictions.

17. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock
or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common
Stock or rights thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company, the Board or the Committee be deemed to be a trustee of any
cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to an
Award of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Award Agreement, and no such liability or obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by this Plan.

18. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Texas.

19. Effectiveness. The Plan as hereby amended and restated shall be
effective as of February 17, 2000, except for the change to the definition of
"Independent Contractor" and to the number of authorized shares in Section 5,
which shall become effective upon shareholder approval at the 2000 Annual
Meeting of Shareholders.

INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

(As Amended and Restated Effective February 17, 2000)

FIRST AMENDMENT

WHEREAS, Carrizo Oil & Gas, Inc., a Texas corporation (the "Company"),
maintains the Incentive Plan of Carrizo Oil & Gas, Inc., as amended and restated
effective February 17, 2000 (the "Plan");

WHEREAS, the Company desires amend the Plan to increase the aggregate
number of shares the Company's common stock available for issuance under the
Plan from 1,500,000 shares to 1,850,000 shares;

WHEREAS, the Company's shareholders approved such increase in the aggregate
number of shares of the Company's common stock available for issuance under the
Plan at the Company's annual shareholder meeting held on May 22, 2002; and

WHEREAS, under Section 13 of the Plan, the Board of Directors of the
Company has reserved the right to amend the Plan;

NOW, THEREFORE, the Plan is hereby amended, effective May 22, 2002, to
increase the aggregate number of shares of the Company's common stock available
for issuance under the Plan by deleting the number "1,500,000" from Section 5 of
the Plan and replacing said number with the number "1,850,000."

IN WITNESS WHEREOF, The Board of Directors of Carrizo Oil & Gas, Inc. has
caused this amendment to be executed by a duly authorized officer of the Company
in a number of copies, all of which shall constitute one and the same
instrument, which may be sufficiently evidenced by any executed copy hereof,
this 13th day of August, 2002, but effective as of the date specified herein.

CARRIZO OIL & GAS, INC.

By: /s/ FRANK A. WOJTEK
------------------------
Name: Frank A. Wojtek
Title: V.P. and Chief
Financial Officer

INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

(As Amended and Restated Effective as of February 17, 2000)

AMENDMENT

Carrizo Oil & Gas, Inc., a Texas corporation (the "Company"), having
reserved the right under Section 13 of the Incentive Plan of Carrizo Oil & Gas,
Inc. (the "Plan"), to amend the Plan, does hereby add at the end of Section 9 of
the Plan, effective as of February 18, 2003, a new subsection (e), to read as
follows:

(e) Special Grant of Audit Committee Chairman Options. Effective
February 18, the chairman of the audit committee of the Company shall as a
one-time grant be granted a Director Option that provides for the purchase
of 25,000 shares of Common Stock, has a term of ten years from the date of
such grant, notwithstanding any earlier termination of the status of the
holder as a Nonemployee Director, and vests and becomes exercisable in
increments of one-third of the total number of shares of Common Stock that
are subject thereto (rounded up to the nearest whole number) on the first
and second anniversaries of the date of grant and of all remaining shares
of Common Stock that are subject thereto on the third anniversary of the
date of grant and the purchase price of each share of Common Stock subject
to such Director Option shall be equal to the Fair Market Value of the
Common Stock on the date of grant.

IN WITNESS WHEREOF, this Amendment has been executed effective as of
February 18, 2003.

CARRIZO OIL & GAS, INC.

By: /s/ FRANK A. WOJTEK
----------------------
Frank A. Wojtek
Vice President, Chief Financial
Officer, Secretary and Treasurer

INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

THIRD AMENDMENT

Carrizo Oil & Gas, Inc., a Texas corporation (the "Company"), having
reserved the right under Section 13 of the Incentive Plan of Carrizo Oil & Gas,
Inc. (the "Plan"), to amend the Plan, does hereby amend and restate Section 9(b)
of the Plan, effective as of May 23, 2003, to read in its entirety as follows:

(b) Other Director Options. On the date of his or her first
appointment or election to the Board of Directors, a Nonemployee Director
shall automatically be granted a Director Option that provides for the
purchase of 10,000 shares of Common Stock. In addition, on each Annual
Director Award Date:

(i) each Nonemployee Director shall automatically be granted a
Director Option that provides for the purchase of 2,500 shares of
Common Stock;

(ii) each Nonemployee Director that is the chairman of each of
the audit and compensation committees, in addition to the Director
Options granted under Section 9(b)(i), also shall automatically be
granted a Director Option that provides for the purchase of an
additional 3,000 and 2,000 shares, respectively; and

(iii) the Board or the Committee may, in its discretion, in
addition to the Director Options granted under Section 9(b)(i), grant
Director Options for the purchase of up to 3,000 shares and up to 2,000
shares, respectively, to non-chairmen members of the audit and
compensation committees who are deemed by the Committee to be
"independent" for purposes of the rules of The Nasdaq Stock Market,
Inc.

Grants under Sections 9(b)(ii) and (iii) may be made to the chairman or a
member of the audit committee or compensation committee, respectively,
notwithstanding that the same person may also receive grants under Section
9(b)(ii) or (iii) as a chairman or member of the compensation committee or audit
committee, respectively.

The Company also does hereby amend and restate Section 19 of the Plan,
effective as of May 23, 2003, to read in its entirety as follows:

19. Effectiveness. The Plan was amended and restated effective
February 17, 2000 and subsequently amended by a First Amendment effective
May 22, 2002, a Second Amendment effective February 18, 2003 and a Third
Amendment effective May 23, 2003.

IN WITNESS WHEREOF, this Amendment has been executed effective as of May
23, 2003.

CARRIZO OIL & GAS, INC.

By: /s/ FRANK A. WOJTEK
------------------------
Frank A. Wojtek
Vice President, Chief Financial
Officer, Secretary and Treasurer

INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.

FOURTH AMENDMENT

Carrizo Oil & Gas, Inc., a Texas corporation (the "Company"), having
reserved the right under Section 13 of the Incentive Plan of Carrizo Oil & Gas,
Inc. (the "Plan"), to amend the Plan, does hereby amend the Plan, effective as
of May 21, 2004, as follows:

1. The definition of "Annual Director Award Date" in Section 3 of the
Plan is hereby amended in its entirety to read as follows:

"'Annual Director Award Date' means, for each year, the first
business day following the date on which the annual meeting of
stockholders of the Company is held in such year."

2. The definition of "Director Award" in Section 3 of the Plan is
hereby amended in its entirety to read as follows:

"'Director Award' means the grant of a Director Option or
Director Restricted Stock."

3. Section 3 of the Plan is hereby amended by adding the following
definitions to Section 3 of the Plan in their respective alphabetical
order:

"'Change in Control' is defined in Attachment A."

"'Director Restricted Stock' means Restricted Stock granted to
Nonemployee Directors pursuant to the applicable terms, conditions and
limitations specified in Section 9(f) hereof."

4. Section 5 of the Plan is hereby amended by replacing the number
"1,850,000" with the number "2,350,000."

5. Subsection 9(b) of the Plan is hereby amended to read in its
entirety as follow:

"(b) Other Director Options. On the date of his or her first
appointment or election to the Board of Directors, a Nonemployee
Director shall automatically be granted a Director Option that
provides for the purchase of 10,000 shares of Common Stock. In
addition, on each Annual Director Award Date:

(i) the Board or the Committee may, in its discretion, grant each
Nonemployee Director a Director Option that provides for the purchase
of such number of shares of Common Stock as the Board or the Committee
may determine in its discretion, subject to the limitation that such
awards may not exceed the number of shares of Common Stock then
available for award under this Plan;

(ii) each Nonemployee Director that is the chairman of each of
the audit, compensation and nominating committees, in addition to the
Director Options granted under Section 9(b)(i), also shall
automatically be granted a Director Option that provides for, in the
case of the chairman of the audit committee, the purchase of an
additional 3,000 shares of Common Stock and, in the case of the
chairman of each of the compensation or nominating committees, the
purchase of an additional 2,000 shares of Common Stock, respectively;
and

(iii) the Board or the Committee may, in its discretion, in
addition to the Director Options granted under Section 9(b)(i), grant
Director Options for the purchase of up to 3,000 shares to each
Nonemployee Director who is a non-chairman member of the audit
committee and may grant Director Options for the purchase of up to
2,000 shares to each Nonemployee Director who is a non-chairman member
of the compensation or nominating committees, provided that each such
non-chairman member of the audit, compensation or nominating
committees to whom such Director Option is to be granted is deemed by
the Committee to be "independent" for purposes of the rules of The
Nasdaq Stock Market, Inc."

6. Section 9 of the Plan is hereby amended by adding to the end
thereof a new subsection (f), to read in its entirety as follows:

"(f) Director Restricted Stock.

(i) On each Annual Director Award Date, the Board or the
Committee may, in its discretion, grant each Nonemployee Director an
Award of Director Restricted Stock for such number of shares of
Restricted Stock as the Board or the Committee may determine in its
discretion, subject to the limitation that such Awards may not exceed
the number of shares of Common Stock then available for award under
this Plan.

(ii) Each Award of Director Restricted Stock shall vest in
increments of one-third of the total number of shares of Restricted
Stock that are subject thereto (rounded up to the nearest whole
number) on the first and second anniversaries of the date of grant and
of all remaining shares of Restricted Stock that are subject thereto
on the third anniversary of the date of grant; provided, however, that
upon a Change in Control, all shares of Director Restricted Stock
shall immediately vest. All unvested shares of Director Restricted
Stock shall be forfeited if the Nonemployee Director resigns as a
Director without the consent of a majority of the other Directors.

(iii) Any Award of Director Restricted Stock shall be embodied in
a Director Award Agreement, which shall contain the terms, conditions
and limitations set forth above and shall be signed by the Participant
to whom the Director Restricted Stock is granted and by an Authorized
Officer for and on behalf of the Company."

7. The Plan is hereby amended by adding "Attachment A" attached to
this Amendment to the end of the Plan as a new "Attachment A" thereto.

IN WITNESS WHEREOF, this Amendment has been executed effective as of May
21, 2004.

CARRIZO OIL & GAS, INC.

By:
------------------------
Paul F. Boling
Vice President, Chief Financial
Officer, Secretary and Treasurer

ATTACHMENT A

"CHANGE IN CONTROL"

The following definitions apply regarding Change in Control provisions of
the foregoing Plan:

"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.

"Associate" shall mean, with reference to any Person, (a) any corporation,
firm, partnership, association, unincorporated organization or other entity
(other than the Company or a subsidiary of the Company) of which such Person is
an officer or general partner (or officer or general partner of a general
partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of
any class of equity securities, (b) any trust or other estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as trustee or in a similar fiduciary capacity and (c) any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person.

"Beneficial Owner" shall mean, with reference to any securities, any Person
if:

(a) such Person or any of such Person's Affiliates and Associates,
directly or indirectly, is the "beneficial owner" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement) such securities
or otherwise has the right to vote or dispose of such securities, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subsection (a) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding: (i)
arises solely from a revocable proxy or consent given in response to a
public (i.e., not including a solicitation exempted by Rule 14a-2(b)(2) of
the General Rules and Regulations under the Exchange Act) proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act and
(ii) is not then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);

(b) such Person or any of such Person's Affiliates and Associates,
directly or indirectly, has the right or obligation to acquire such
securities (whether such right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding (whether or
not in writing) or upon the exercise of conversion rights, exchange rights,
other rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to "beneficially
own," (i) securities tendered pursuant to a tender or exchange offer made
by such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange or (ii)
securities issuable upon exercise of Exempt Rights; or

(c) such Person or any such Person's Affiliates or Associates (i) has
any agreement, arrangement or understanding (whether or not in writing)
with any other Person (or any Affiliate or Associate thereof) that
beneficially owns such securities for the purpose of acquiring, holding,
voting (except as set forth in the proviso to subsection (a) of this
definition) or disposing of such securities or (ii) is a member of a group
(as that term is used in Rule 13d-5(b) of the General Rules and Regulations
under the Exchange Act) that includes any other Person that beneficially
owns such securities;

provided, however, that nothing in this definition shall cause a Person
engaged in business as an underwriter of securities to be the Beneficial
Owner of, or to "beneficially own," any securities acquired through such
Person's participation in good faith in a firm commitment underwriting
until the expiration of 40 days after the date of such acquisition. For
purposes hereof, "voting" a security shall include voting, granting a
proxy, consenting or making a request or demand relating to corporate
action (including, without limitation, a demand for stockholder list, to
call a stockholder meeting or to inspect corporate books and records) or
otherwise giving an authorization (within the meaning of Section 14(a) of
the Exchange Act) in respect of such security.

The terms "beneficially own" and "beneficially owning" shall have meanings
that are correlative to this definition of the term "Beneficial Owner".

"Change of Control" shall mean any of the following:

(a) any Person (other than an Exempt Person) shall become the
Beneficial Owner of 40% or more of the shares of Common Stock then
outstanding or 40% or more of the combined voting power of the Voting Stock
of the Company then outstanding; provided, however, that no Change of
Control shall be deemed to occur for purposes of this subsection (a) if
such Person shall become a Beneficial Owner of 40% or more of the shares of
Common Stock or 40% or more of the combined voting power of the Voting
Stock of the Company solely as a result of (i) an Exempt Transaction or
(ii) an acquisition by a Person pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation,
the conditions described in clauses (i), (ii) and (iii) of subsection (c)
of this definition are satisfied; or

(b) individuals who, as of May 21, 2004, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to May 21, 2004 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board; provided,
further, that there shall be excluded, for this purpose, any such
individual whose initial assumption of office occurs as a result of any
actual or threatened election contest that is subject to the provisions of
Rule 14a-11 under the Exchange Act; or

(c) the Company engages in and completes a reorganization, merger or
consolidation, in each case, unless, following such reorganization, merger
or consolidation, (i) more than 85% of the then outstanding shares of
common stock of the corporation resulting from such reorganization, merger
or consolidation and the combined voting power of the then outstanding
Voting Stock of such corporation beneficially owned, directly or
indirectly, by all or substantially all of the Persons who were the
Beneficial Owners of the outstanding Common Stock immediately prior to such
reorganization, merger, or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the outstanding Common Stock, (ii) no Person
(excluding any Exempt Person or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 40% or more of the Common Stock then outstanding or 40% or more
of the combined voting power of the Voting Stock of the Company then
outstanding) beneficially owns, directly or indirectly, 40% or more of the
then outstanding shares of common stock of the corporation resulting from
such reorganization, merger or consolidation or the combined voting power
of the then outstanding Voting Stock of such corporation and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the initial agreement
or initial action by the Board providing for such reorganization, merger or
consolidation; or

(d) the Company engages in and completes (i) a complete liquidation or
dissolution of the Company unless such liquidation or dissolution is
approved as part of a plan of liquidation and dissolution involving a sale
or disposition of all or substantially all of the assets of the Company to
a corporation with respect to which, following such sale or other
disposition, all of the requirements of clauses (ii) (A), (B) and (C) of
this subsection (d) are satisfied, or (ii) the sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation, with respect to which, following such sale or other
disposition, (A) more than 85% of the then outstanding shares of common
stock or such corporation and the combined voting power of the Voting Stock
of such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the Persons who were the Beneficial Owners of
the outstanding Common Stock immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the outstanding
Common Stock, (B) no Person (excluding any Exempt Person and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 40% or more of the Common

Stock then outstanding or 40% or more of the combined voting power of the
Voting Stock of the Company then outstanding) beneficially owns, directly
or indirectly, 40% or more of the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding
Voting Stock of such corporation and (C) at least a majority of the members
of the board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or initial
action of the Board providing for such sale or other disposition of assets
of the Company.

Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred pursuant to subsections (a), (c) or (d) of this definition as a
result of (i) any Person that is currently party to the Shareholders
Agreement dated as of December 15, 1999 among the Company, C.B. Capital
Investors, L.P. (now J.P. Morgan Partners (23A SBIC), LLC), S.P. Johnson
IV, Frank A. Wojtek, Steven A. Webster and Mellon Ventures, L.P., as
amended from time to time, or the Shareholders Agreement dated as of
February 20, 2002 among the Company, Mellon Ventures, L.P., S.P. Johnson
IV, Frank A. Wojtek and Steven A. Webster, as amended from time to time
(collectively, the "Shareholders Agreements"), becoming the Beneficial
Owner at any time of 40% or more of the shares of Common Stock or 40% or
more of the combined voting power of the Voting Stock of the Company, or
(ii) any other Person becoming the Beneficial Owner at any time of 40% or
more of the shares of Common Stock or 40% or more of the combined voting
power of the Voting Stock of the Company to the extent caused by the
attribution to that other Person of the beneficial ownership of the Common
Stock or Voting Stock of a Person who is listed in clause (i) above and is
a member of a group with such other Person solely because of a voting
agreement, tag-along rights or other rights substantially similar to the
rights set forth in the Shareholders Agreements.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Exempt Person" shall mean the Company, any subsidiary of the Company, any
employee benefit plan of the Company or any subsidiary of the Company, and any
Person organized, appointed or established by the Company for or pursuant to the
terms of any such plan.

"Exempt Rights" shall mean any rights to purchase shares of Common Stock or
other Voting Stock of the Company if at the time of the issuance thereof such
rights are not separable from such Common Stock or other Voting Stock (i.e., are
not transferable otherwise than in connection with a transfer of the underlying
Common Stock or other Voting Stock) except upon the occurrence of a contingency,
whether such rights exist as of May 21, 2004 or are thereafter issued by the
Company as a dividend on shares of Common Stock or other Voting Securities or
otherwise.

"Exempt Transaction" shall mean an increase in the percentage of the
outstanding shares of Common Stock or the percentage of the combined voting
power of the outstanding Voting Stock of the Company beneficially owned by any
Person solely as a result of a reduction in the number of shares of Common Stock
then outstanding due to the repurchase of Common Stock or Voting Stock by the
Company, unless and until such time as (a) such Person or any Affiliate or
Associate of such Person shall purchase or otherwise become the Beneficial Owner
of additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock or additional Voting Stock representing 1% or
more of the combined voting power of the then outstanding Voting Stock, or (b)
any other Person (or Persons) who is (or collectively are) the Beneficial Owner
of shares of Common Stock constituting 1% or more of the then outstanding shares
of Common Stock or Voting Stock representing 1% or more of the combined voting
power of the then outstanding Voting Stock shall become an Affiliate or
Associate of such Person.

"Person" shall mean any individual, firm, corporation, partnership,
association, trust, unincorporated organization or other entity.

"Voting Stock" shall mean, with respect to a corporation, all securities of
such corporation of any class or series that are entitled to vote generally in
the election of directors of such corporation (excluding any class or series
that would be entitled so to vote by reason of the occurrence of any
contingency, so long as such contingency has not occurred).

Shares Class Common

HOLDER ACCOUNT NUMBER

[ ] Mark this box with an X if you have
made changes to your name or
address details above.

ANNUAL MEETING PROXY CARD

(A) ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.

FOR WITHHOLD FOR WITHHOLD FOR WITHHOLD

01 - S.P. Johnson IV [ ] [ ] 05 - Paul B. Loyd, Jr. [ ] [ ] 09 - Frank A. Wojtek [ ] [ ]

02 - Steven A. Webster [ ] [ ] 06 - Bryan R. Martin [ ] [ ]

03 - Christopher C. Behrens [ ] [ ] 07 - F. Gardner Parker [ ] [ ]

04 - Douglas A.P. Hamilton [ ] [ ] 08 - Roger A. Ramsey [ ] [ ]

(B) ISSUES
The Board of Directors recommends a vote FOR the following proposals.

FOR AGAINST ABSTAIN
2. APPROVAL OF THE AMENDMENT TO THE [ ] [ ] [ ]
INCENTIVE PLAN.

FOR AGAINST ABSTAIN
3. APPROVAL OF THE APPOINTMENT OF ERNST & [ ] [ ] [ ]
YOUNG, LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2004.

4. With discretionary authority as to such
other matters as may properly come before
the meeting.

(C) AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Sign exactly as name appears hereon.
(Joint owners should each sign. When signing as attorney, executor, officer,
administrator, trustee or guardian, please give full title as such.)

Signature 1 - Please keep signature within the box
[ ]

Signature 2 - Please keep signature within the box
[ ]

Date (mm/dd/yyyy)
[ / / ]

PROXY -- CARRIZO OIL & GAS, INC.

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 21, 2004

The undersigned hereby appoints S.P. Johnson IV and Paul F. Boling, jointly
and severally, proxies, with full power of substitution and with discretionary
authority to vote all shares of Common Stock that the undersigned is entitled
to vote at the Annual Meeting of Shareholders of Carrizo Oil & Gas, Inc. (the
"Company") to be held on Friday, May 21, 2004, at the Omni Houston Hotel
Westside, 13210 Katy Freeway, Houston, Texas at 10:00 a.m., or at any
adjournment thereof, hereby revoking any proxy heretofore given. THIS PROXY,
WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IN THE
ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.

The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforementioned Annual Meeting.

PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.