Rosetta Resources Inc. Announces First Quarter Financial and Operating Results

Rosetta Resources, Inc, which has a strong presence in the Glacier County, Montana Oil Patch, issued a press relase Tuesday updating the company’s First Quarter Financials as well as Operations.

According to the relase, the company has

  • Increased daily production by 31 percent with 106 percent growth in total liquids
  • Achieved 11 percent quarter-over-quarter production growth in Eagle Ford shale
  • Sold legacy natural gas assets in South Texas
  • Nearly doubled borrowing base to $625 million

HOUSTON, May 8, 2012 (GLOBE NEWSWIRE) — Rosetta Resources Inc. (Nasdaq:ROSE) (“Rosetta” or the “Company”) today reported first quarter 2012 net income of $22.3 million, or $0.42 per diluted share, versus net income of $11.0 million, or $0.21 per diluted share, for the same period in 2011. The growth in net income is primarily due to increased production, higher realized prices and a more favorable product mix. The quarter included an unrealized loss on derivative activities of $18.0 million, or an after-tax loss of $11.5 million. Adjusted net income (non-GAAP) was $33.8 million, or $0.64 per diluted share excluding unrealized hedging losses. As previously disclosed, this is the first quarter that Rosetta has used mark-to-market accounting for its commodity derivative contracts, as the Company discontinued hedge accounting effective January 1, 2012.

“The performance of our Eagle Ford assets during the first quarter continued to drive strong operating and financial results and set the stage for another successful year in 2012,” said Randy Limbacher, Rosetta’s chairman, CEO and president. “With the expansion of our development activities outside of the Gates Ranch area, Rosetta is well-positioned for future growth in production and reserves.”

2012 First Quarter Results

Production for the quarter averaged an all-time quarterly record of 33.8 thousand barrels of oil equivalent per day (“MBoe/d”), up 31 percent from the same period in 2011 and six percent from the prior quarter. The year-over-year increase was primarily driven by production growth from the Eagle Ford shale, which averaged approximately 30.4 MBoe/d for the first quarter of 2012, up from 14.9 MBoe/d for the same period in 2011. Total liquids production also reached all-time high levels for the period, averaging 17.4 thousand barrels per day (“MBbls/d”) for the quarter.

Revenues for the first quarter of 2012 were $114.5 million compared to $97.1 million for the same period in 2011. First quarter revenues excluding derivative activities were $130.4 million in 2012 and $88.4 million in 2011. For the quarter, 79 percent of revenue was generated from oil, condensate and NGL sales including the effects of realized derivatives, as compared to 49 percent a year ago.

Operating margins in the first quarter 2012 continue to improve versus the prior year. As compared to the same period in 2011, equivalent average sales prices including the effects of realized derivatives increased by 3 percent, the depreciation, depletion, and amortization (“DD&A”) rate declined by 27 percent and other average costs decreased another 15 percent. Development success in the Eagle Ford coupled with the sale of legacy natural gas properties resulted in a 56 percent reduction in total lease operating expense (“LOE”) on a per unit basis, which includes the cost of direct LOE, workovers, insurance, and ad valorem tax. A summary of the Company’s results on a per unit basis is included in the attached “Summary of Operating Data” table.

Operational Update

During the first quarter of 2012, Rosetta made capital investments of $132.7 million. Drilling activities for the quarter were focused in the Eagle Ford shale where 15 gross wells were drilled with a 100 percent success rate and 12 wells were completed. The Company operated four to five rigs in the area.

EAGLE FORD SHALE

Production from the Eagle Ford shale grew 11 percent from the fourth quarter of 2011, increasing from 27.4 MBoe/d to 30.4 MBoe/d. The area accounted for 90 percent of Rosetta’s total production for the quarter.

In April 2012, Rosetta began operations from its contracted crude oil gathering, storage, and trucking terminal located in Gardendale, Texas. The long-term agreement provides 25,000 barrels per day (“Bbls/d”) firm oil transportation capacity for Gates Ranch, Briscoe Ranch and Central Dimmit County properties. Additionally, Rosetta has firm gas transportation and processing capacity in place to meet planned total production levels for at least the next two years.

The Company plans to complete 16 Eagle Ford wells during the second quarter and operate five rigs in the play. A new crude oil gathering, storage, and truck loading facility to serve the Karnes Trough area is scheduled to begin operations this summer. At quarter end, Rosetta had 14 drilled wells awaiting completion and tie-in to facilities.

As of March 31, 2012, Rosetta has completed a total of 75 horizontal Eagle Ford wells. Less than 10 percent of its identified Eagle Ford inventory is drilled and on production.

SOUTHERN ALBERTA BASIN

During the quarter, exploration work continued on Rosetta’s current seven-well horizontal drilling program in the Southern Alberta Basin. Completion operations on the fourth horizontal well are underway with the three remaining wells scheduled to follow.

Divestitures

Rosetta completed a major portion of the previously announced divestiture of its Lobo and Olmos properties in South Texas. The transaction has an effective date of January 1, 2012. The sales price for the properties totaled $95 million, subject to customary closing adjustments and the receipt of required consents for assignment. On March 23, 2012, the Company closed the sale of properties for which consents for assignment, if required, were already received. Net proceeds, after adjusting for the January 1, 2012 effective date, were $65.6 million. The remaining portion of the transaction is anticipated to close in the second quarter of 2012.

Financing and Hedging Update  

As of March 31, 2012, the Company had approximately $53.1 million of cash, up $6.0 million from the cash balance at year-end 2011. Rosetta utilized $50.0 million of the divestiture net proceeds from the Lobo and Olmos transaction to repay debt drawn during the quarter under the Restated Revolver. The semi-annual borrowing base redetermination was completed for the Revolver and effective April 25, 2012 the Company’s borrowing base increased from $325 million to $625 million. On May 4, 2012, Rosetta had $30.0 million outstanding with $595 million available for borrowing under the Restated Revolver. The Company had cash on hand and cash available under its Restated Revolver of approximately $620 million as of May 4, 2012.

The attached “Hedging Summary” table outlines Rosetta’s overall hedge position as of March 31, 2012 and includes additional hedges for 2014 production not previously disclosed.

2012 Outlook 

Adjusting only for the impact of divestitures during the quarter, Rosetta expects average production between 35 – 38 MBoe/d for the full year based on its 2012 capital program of $640 million.  Exit rates for the year are estimated between 39 – 44 MBoe/d. The Company is currently producing approximately 34.2 MBoe/d of which 55 percent is liquids. In addition, the Company’s expense guidance has been adjusted. Total annual per unit cost ranges are outlined in the attached “Summary of Expense Guidance” table.

Presence in Glacier County

According to the Montana Board of Oil and Gas Conservation Database, Rosetta has 24 wells in viarous stages of development in Glacier County. Two of the wells, the Simonson Farms 3608-34-01HB (oil) and the Wave Chalk Butte 1-27 (natural gas) are listed as being in production.

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Author: montanaoilreport

After my first job at a newspaper -- delivering papers for the Jackson (TN) Sun, ink was in my veins. Since the 1970's I've worked in every area of the Printing and Publishing industry, with most of that time spent in the pressroom. In 2008 I moved to Montana and purchased the Sun Times of Fairfield (fairfieldsuntimes.com). In 2011 I realized that most media outlets were either ignoring, or attacking, the growing oil and gas industry in Montana, so I started the Montana Oil Report as the source of information on this important industry.

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