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Rosetta Resources Inc. Announces 2015 Second Quarter Financial and Operational Results

20:00 EDT 16 Jul 2015 | Globe Newswire

  • Delivered total daily oil equivalent production volumes of 63.0 MBoe/d, exceeding the high end of the quarterly guidance range for the quarter.
  • Achieved record Permian daily production of 9.0 MBoe/d, an increase of 23 percent from the first quarter 2015.
  • Successfully completed three South Gates Ranch and four Reeves County horizontal wells.

HOUSTON, July 17, 2015 (GLOBE NEWSWIRE) -- Rosetta Resources Inc. (NASDAQ:ROSE) (“Rosetta” or the “Company”) today reported adjusted net income (non-GAAP) for the second quarter 2015 of $11.8 million, or $0.16 per diluted share, versus adjusted net income of $50.5 million, or $0.82 per diluted share for the same period in 2014. The decrease in adjusted net income was primarily driven by lower commodity prices, partially offset by higher production volumes. Net income for the quarter, which included a non-cash impairment of $245.2 million, was a loss of $341.7 million, or $(4.52) per diluted share, versus net income of $14.4 million, or $0.23 per diluted share, in 2014. Adjusted EBITDA (non-GAAP) was $125.9 million in the second quarter of 2015, compared to $181.5 million in the second quarter 2014. A summary of the adjustments made to calculate adjusted net income and adjusted EBITDA is included in the attached “Non-GAAP Reconciliation Disclosure” tables.

2015 Second Quarter Results

Production for the quarter averaged 63.0 thousand barrels of oil equivalent per day (“MBoe/d”), an increase of two percent from the same period in 2014 and above the high end of the 57 – 60 MBoe/d second quarter 2015 guidance range. Natural gas liquids (“NGLs”) and natural gas daily production volumes increased by two and nine percent, respectively, compared to the prior year second quarter. Oil production in the second quarter averaged 18.2 thousand barrels per day, a decrease of four percent from the same period in 2014 but roughly flat compared to the first quarter 2015 volumes.

Revenues for the second quarter of 2015 were $101.3 million compared to $220.9 million for the same period in 2014.  Second quarter revenues excluding unrealized derivative losses were $198.1 million in 2015 and $264.6 million in 2014.  A summary of the Company’s quarterly production results and average sales prices by commodity is included in the attached “Summary of Operating Data” table.

Lease operating expense (“LOE”), including workovers and insurance expense, for the second quarter was $2.88 per Boe, a 36 percent decrease on a per-unit basis from the same period in 2014 due to higher volumes and cost reduction efforts. Second quarter LOE was also 22 percent lower compared to the first quarter 2015. Treating and transportation expense decreased by three percent on a per-unit basis versus the first quarter to $4.02 per Boe. Overall, total cash production costs for the second quarter decreased eight percent compared to first quarter 2015 on a per-unit basis and were below the Company’s second quarter guidance range. A summary of the Company’s second quarter operating costs on a per-unit basis is included in the attached “Summary of Operating Data” table.

Operational Update

In the second quarter of 2015, Rosetta made capital investments of approximately $49.7 million.  The Company completed seven gross operated wells and seven were placed on production. The second quarter capital spend included approximately $38.6 million for drilling and completion activities and $11.1 million of other capital expenses including leasehold, capitalized interest and geological and geophysical costs.

EAGLE FORD

Daily production from the Eagle Ford was 54.0 MBoe/d in the second quarter, five percent lower than the same period in 2014 due to decreased drilling and completion activity. Capital spending in the second quarter included $14.3 million related to well drilling and completion activity. During the quarter, three wells were completed and brought on production in the South Gates Ranch.

PERMIAN BASIN

Rosetta’s production from the Permian averaged approximately 9.0 MBoe/d in the second quarter, an increase of 100 percent from the same period in 2014 and the Company’s highest recorded daily production volumes since beginning operations in the basin in 2013. Capital spending included $24.3 million for well completion and non-operated drilling activities. During the quarter, four gross operated horizontal wells were completed and brought on production in Reeves County.

Proposed Merger with Noble Energy

On May 10, 2015, Rosetta and Noble Energy ("Noble") entered into the Merger Agreement pursuant to which each share of Rosetta common stock will be converted into the right to receive 0.542 shares of Noble common stock. The Merger Agreement was unanimously approved by Rosetta’s board of directors and by Noble’s board of directors. Following the approval by Rosetta’s stockholders, the merger is expected to close July 20, 2015.

Rosetta Resources Inc. is an independent exploration and production company engaged in the acquisition and development of onshore unconventional resource plays in the United States of America.  The Company owns positions in the Eagle Ford area in South Texas and in the Permian Basin in West Texas.  Rosetta is based in Houston, Texas. 

[ROSE-F]

Forward-Looking Statements

This press release includes forward-looking statements, which give the Company's current expectations or forecasts of future events based on currently available information. Forward-looking statements are statements that are not historical facts, such as expectations regarding drilling plans, including the acceleration or deceleration thereof, production rates and guidance, proven reserves, resource potential, incremental transportation capacity, exit rate guidance, net present value, development plans, progress on infrastructure projects, exposures to weak oil, natural gas, and NGL prices, changes in the Company's liquidity, changes in acreage positions, expected expenses, expected capital expenditures, and projected debt balances. The assumptions of management and the future performance of the Company are subject to a wide range of business risks and uncertainties and there is no assurance that these statements and forecasts will be met. Factors that could affect the Company's business include, but are not limited to: the risks associated with drilling and completion of oil and natural gas wells; the Company's ability to find, acquire, market, develop, and produce new reserves; the risk of drilling dry holes; oil, liquids and natural gas price volatility; derivative transactions (including the costs associated therewith and the abilities of counterparties to perform thereunder); uncertainties in the estimation of proved, probable, and possible reserves and in the projection of future rates of production and reserve growth; inaccuracies in the Company's assumptions regarding items of income and expense and the level of capital expenditures; uncertainties in the timing of exploitation expenditures; operating hazards attendant to the oil and natural gas business; cyber-attacks; drilling and completion losses that are generally not recoverable from third parties or insurance; potential mechanical failure or underperformance of significant wells; midstream and pipeline construction difficulties and operational upsets; climatic conditions; availability and cost of material, equipment and services; the risks associated with operating in a limited number of geographic areas, including the Permian; actions or inactions of third-party operators of the Company's properties; the Company's ability to retain and hire skilled personnel; diversion of management's attention from existing operations while pursuing acquisitions or dispositions; availability and cost of capital; the strength and financial resources of the Company's competitors; regulatory developments; environmental risks; uncertainties in the capital markets; general economic and business conditions; industry trends; and other factors detailed in the Company's most recent Form 10-K and other filings with the Securities and Exchange Commission.  If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted. The Company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

References to quantities of oil, NGLs or natural gas may include amounts that the Company believes will ultimately be produced, but are not yet classified as “proved reserves” under SEC definitions. We use the term "net risked resource potential" to describe the Company's internal estimates of volumes of natural gas and oil that are not classified as proved developed reserves but are potentially recoverable through exploratory drilling or additional drilling or recovery techniques.  Estimates of net risked resource potential are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of not being realized by the Company.  Estimates of net risked resource potential may change significantly as development provides additional data, and actual quantities that are ultimately recovered may differ substantially from prior estimates.

   
Rosetta Resources Inc.  
Consolidated Balance Sheet  
(In thousands, except par value and share amounts)  
       
  June 30,
2015
 December 31,
2014
  
  (Unaudited)    
Assets      
Current assets:      
Cash and cash equivalents  $  7,688  $  34,397   
Accounts receivable    97,293     117,070   
Derivative instruments     139,307     221,250   
Prepaid expenses    6,881     8,142   
Other current assets    3,992     3,535   
Total current assets     255,161     384,394   
Oil and natural gas properties using the full cost method of accounting:      
Proved properties    5,566,386     5,337,537   
Unproved/unevaluated properties, not subject to amortization    517,031     550,979   
Gathering systems and compressor stations    281,233     285,989   
Other fixed assets    31,904     34,339   
     6,396,554     6,208,844   
Accumulated depreciation, depletion and amortization, including impairment    (3,660,636)    (2,434,003)  
Total property and equipment, net     2,735,918     3,774,841   
Other assets:       
Debt issuance costs    24,604     25,741   
Deferred tax asset    46,961    —    
Derivative instruments    35,833     65,419   
Other long-term assets     68     272   
Total other assets     107,466     91,432   
Total assets $  3,098,545  $  4,250,667   
Liabilities and Stockholders' Equity       
Current liabilities:      
Accounts payable and accrued liabilities $  109,555  $  179,353   
Royalties and other payables    78,324     98,972   
Deferred income taxes    46,961     72,445   
Total current liabilities     234,840     350,770   
Long-term liabilities:      
Long-term debt    1,800,000     2,000,000   
Deferred income taxes    699     207,854   
Other long-term liabilities    27,499     22,930   
Total liabilities     2,063,038     2,581,554   
Stockholders' equity:      
Preferred stock, $0.001 par value; authorized 5,000,000 shares; no shares issued in 2015 or 2014   —     —    
Common stock, $0.001 par value; authorized 150,000,000 shares; issued 76,532,669 shares and
62,306,601 shares at June 30, 2015 and December 31, 2014, respectively
    77     62   
Additional paid-in capital    1,440,869     1,192,836   
Treasury stock, at cost; 801,651 shares and 788,493 shares at June 30, 2015 and December 31, 2014, respectively    (27,702)    (27,414)  
Accumulated other comprehensive loss    (215)    (234)  
(Accumulated deficit) retained earnings    (377,522)    503,863   
Total stockholders' equity     1,035,507     1,669,113   
Total liabilities and stockholders' equity $  3,098,545  $  4,250,667   
       

 

Rosetta Resources Inc. 
Consolidated Statement of Operations 
(In thousands, except per share amounts) 
(Unaudited) 
          
 Three Months Ended June 30,  Six Months Ended June 30, 
  2015   2014    2015   2014  
Revenues:         
Oil sales $  83,960  $  162,703   $  146,477  $  294,380  
NGL sales   26,717     55,442      52,612     110,737  
Natural gas sales    32,235     52,140      69,464     103,519  
Derivative instruments   (41,643)    (49,395)     5,860     (73,180) 
Total revenues    101,269     220,890      274,413     435,456  
Operating costs and expenses:         
Lease operating expense    16,498     25,064      38,320     44,585  
Treating and transportation    23,042     18,618      47,456     39,295  
Taxes, other than income   9,262     12,259      17,941     22,465  
Depreciation, depletion and amortization    86,825     90,640      187,582     165,415  
Impairment of oil and gas properties   245,205    —       1,043,338    —   
Reserve for commercial disputes  —   —       9,200    —   
General and administrative costs    28,206     21,667      50,126     41,205  
Total operating costs and expenses    409,038     168,248      1,393,963     312,965  
Operating (loss) income    (307,769)    52,642      (1,119,550)    122,491  
Other expense (income):         
Interest expense, net of interest capitalized   21,165     17,327      43,213     32,617  
Interest income   (1)    (1)     (2)    (13) 
Other (income) expense, net   (362)    12,496      (547)    12,647  
Total other expense    20,802     29,822      42,664     45,251  
(Loss) income before provision for income taxes   (328,571)    22,820      (1,162,214)    77,240  
Income tax (benefit) expense    13,140     8,376      (280,829)    27,553  
Net (loss) income $  (341,711) $  14,444   $  (881,385) $  49,687  
(Loss) earnings per share:         
Basic$  (4.52) $  0.24   $  (12.62) $  0.81  
Diluted$  (4.52) $  0.23   $  (12.62) $  0.81  
Weighted average shares outstanding:         
Basic    75,555     61,452      69,850     61,416  
Diluted    75,555     61,617      69,850     61,599  
          

 

Rosetta Resources Inc.  
Consolidated Statement of Cash Flows  
(In thousands)  
(Unaudited)  
       
  Six Months Ended June 30,  
   2015   2014   
Cash flows from operating activities:      
Net (loss) income  $  (881,385) $  49,687   
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, depletion and amortization     187,582     165,415   
Impairment of oil and gas properties    1,043,338  —    
Deferred income taxes     (280,828)    26,521   
Amortization of deferred loan fees recorded as interest expense    2,141     1,900   
Loss on debt extinguishment   —      3,101   
Stock-based compensation expense    7,753     7,393   
Loss due to change in fair value of derivative instruments    111,529     59,529   
Change in operating assets and liabilities:      
Accounts receivable     19,777     (14,840)  
Prepaid expenses    1,856     2,578   
Other current assets     (457)    (3,320)  
Long-term assets    204     46   
Accounts payable and accrued liabilities    11,948     (15,041)  
Royalties and other payables    (20,648)    15,901   
Other long-term liabilities    (1,154)    810   
Net cash provided by operating activities    201,656     299,680   
Cash flows from investing activities:      
Acquisitions of oil and gas assets   —      (79,020)  
Additions to oil and gas assets    (271,316)    (675,835)  
Disposals of oil and gas assets    10,052     8   
Net cash used in investing activities    (261,264)    (754,847)  
Cash flows from financing activities:      
Borrowings on Credit Facility    190,000     550,000   
Payments on Credit Facility    (390,000)    (550,000)  
Issuance of Senior Notes   —      500,000   
Retirement of Senior Notes   —      (200,000)  
Proceeds from issuance of common stock    234,787    —    
Deferred loan fees    (1,600)    (8,354)  
Proceeds from stock options exercised   —      376   
Purchases of treasury stock    (288)    (2,546)  
Excess tax benefit from share-based awards   —      101   
Net cash provided by financing activities    32,899     289,577   
Net decrease in cash     (26,709)    (165,590)  
Cash and cash equivalents, beginning of period    34,397     193,784   
Cash and cash equivalents, end of period $  7,688  $  28,194   
       
Supplemental disclosures:      
Capital expenditures included in Accounts payable and accrued liabilities $  48,050  $  195,400   
Operating liabilities settled in stock $  6,419  $  -    
       

 

 Rosetta Resources Inc. 
Summary of Operating Data 
(In thousands, except percentages and per unit amounts) 
            
  Three Months Ended June 30,  Six Months Ended June 30,  
   2015  2014  % Change
Increase/
(Decrease)
  2015  2014  % Change
Increase/
(Decrease)
 
  (In thousands, except percentages and per unit amounts) (In thousands, except percentages and per unit amounts) 
            
Daily production by area (MBoe/d):          
 Eagle Ford   54.0    56.9   (5%)    56.2    53.4   5% 
 Permian   9.0    4.5   100%    8.2    4.4   86% 
 Other   -     0.1   (100%)    -     0.1   (100%) 
 Total (MBoe/d)   63.0    61.5   2%    64.4    57.9   11% 
            
            
Daily production:          
 Oil (MBbls/d)   18.2    19.0   (4%)    18.2    17.6   3% 
 NGLs (MBbls/d)   21.7    21.2   2%    22.0    19.9   11% 
 Natural Gas (MMcf/d)   138.6    127.3   9%    144.7    122.5   18% 
 Total (MBoe/d)   63.0    61.5   2%    64.4    57.9   11% 
            
            
Average sales prices:          
 Oil, excluding derivatives ($/Bbl)$  50.76 $  93.99   (46%) $  44.35 $  92.46   (52%) 
 Oil, including realized derivatives ($/Bbl)   71.50    90.88   (21%)    68.20    89.84   (24%) 
 NGL, excluding derivatives ($/Bbl)   13.51    28.71   (53%)    13.21    30.75   (57%) 
 NGL, including realized derivatives ($/Bbl)   18.24    29.20   (38%)    17.73    30.21   (41%) 
 Natural gas, excluding derivatives ($/Mcf)   2.56    4.50   (43%)    2.65    4.67   (43%) 
 Natural gas, including realized derivatives ($/Mcf)   3.47    4.39   (21%)    3.44    4.52   (24%) 
 Total (excluding realized derivatives) ($/Boe)$  24.92 $  48.33   (48%) $  23.05 $  48.54   (53%) 
 Total (including realized derivatives) ($/Boe)$  34.55 $  47.30   (27%) $  33.13 $  47.24   (30%) 
            
            
Average costs (per Boe):          
 Direct LOE$  2.18 $  2.64   (17%) $  2.49 $  2.92   (15%) 
 Workovers   0.65    1.78   (63%)    0.75    1.28   (41%) 
 Insurance   0.05    0.06   (17%)    0.05    0.05   -  
 Treating and transportation   4.02    3.33   21%    4.07    3.75   9% 
 Taxes, other than income   1.62    2.19   (26%)    1.54    2.14   (28%) 
 DD&A   15.14    16.21   (7%)    16.10    15.79   2% 
 G&A, excluding stock-based compensation   4.08    3.15   30%    3.64    3.23   13% 
 Interest expense   3.69    3.10   19%    3.71    3.11   19% 
            

 

Rosetta Resources Inc.
Derivatives Summary
Status as of July 7, 2015
      
     Notional Daily Average Average 
 SettlementDerivativeVolume  Floor/Fixed Prices  Ceiling Prices
ProductPeriodInstrumentBblper Bblper Bbl
Crude oil2015Costless Collar8,000  55.0084.80
Crude oil2015Swap12,000  89.81 
Crude oil2016Swap6,000  90.28 
      
      
   Notional Daily   
 SettlementDerivativeVolumeFixed Prices 
ProductPeriodInstrumentBblper Bbl 
NGLs2015Swap7,000  31.90 
      
      
    Notional Daily Average Average 
 SettlementDerivativeVolume Floor/Fixed Prices Ceiling Prices
ProductPeriodInstrumentMMBtuper MMBtuper MMBtu
Natural gas2015Costless Collar50,000  3.60  5.04
Natural gas2016Costless Collar40,000  3.50  5.58
      
Natural gas2015Swap50,000  4.13 
Natural gas2016Swap30,000  4.04 

 
Rosetta Resources Inc. 
Non-GAAP Reconciliation Disclosure - Adjusted Net Income 
(In thousands, except per share amounts)

The following table reconciles net income (GAAP) to adjusted net income (non-GAAP) for the three months and six months ended June 30, 2015 and 2014.  Adjusted net income eliminates the unrealized derivative activity from our results for all periods, the impact of ceiling test asset impairments for the three and six months ended June 30, 2015, the transaction and financing costs associated with the Noble merger for the period indicated below, the reserve for commercial dispute for the period indicated below, a loss on debt extinguishment for the periods indicated below, along with the related tax effect for all periods and the impact of valuation allowances against the Company’s net U.S. federal deferred tax assets in the periods indicated. The Company uses this information to analyze operating trends and for comparative purposes within the industry. This measure is not intended to replace net income (GAAP) but rather to provide additional information that may be helpful in evaluating the Company’s operational trends and performance. Our method of computing adjusted net income may not be the same method used to compute similar measures reported by other entities.

      
 Three Months Ended June 30, Six Months Ended June 30,  
  2015   2014   2015   2014   
Net (loss) income (GAAP)$  (341,711) $  14,444  $  (881,385) $  49,687   
Unrealized derivative loss   96,829     43,681     111,529     59,529   
Impairment of oil and gas properties   245,205     -     1,043,338     -   
Noble merger - transaction costs   5,101     -     5,101     -   
Reserve for commercial dispute   -     -     9,200     -   
Loss on debt extinguishment   -     12,629     -     12,629   
Tax benefit related to the above   (122,712)    (20,294)    (413,301)    (26,006)  
Valuation allowance   129,057     -     129,057     -   
Adjusted net income (Non-GAAP)$  11,769  $  50,460  $  3,539  $  95,839   
          
          
Net income per share (GAAP)         
Basic$  (4.52) $  0.24  $  (12.62) $  0.81   
Diluted   (4.52)    0.23     (12.62)    0.81   
          
Adjusted net income per share (Non-GAAP)         
Basic$  0.16  $  0.82  $  0.05  $  1.56   
Diluted   0.16     0.82     0.05     1.56   

 

Rosetta Resources Inc.
Non-GAAP Reconciliation Disclosure – Adjusted EBITDA
(In thousands)

The following table reconciles net income (GAAP) to adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2015 and 2014. The Company defines adjusted EBITDA as earnings before interest expense, income taxes and depreciation, depletion and amortization expense and other similar non-cash or non-recurring charges. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. Adjusted EBITDA is not a measure of net income or cash flows as determined by GAAP. This measure is not intended to replace operating income (GAAP) but rather to provide additional information that may be helpful in evaluating the Company’s operational trends and performance. Our method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities.

       
  Three Months Ended June 30,  Six Months Ended June 30,  
   2015   2014   2015   2014   
Net (loss) income (GAAP) $  (341,711) $  14,444  $  (881,385) $  49,687   
Interest expense, net of interest capitalized    21,165     17,327     43,213     32,617   
Income tax expense (benefit)    13,140     8,376     (280,829)    27,553   
Other (income) expense, net    (362)    12,496     (547)    12,647   
Depreciation, depletion and amortization    86,825     90,640     187,582     165,415   
Impairment of oil and gas properties    245,205     -     1,043,338     -   
EBITDA (Non-GAAP) $  24,262  $  143,283  $  111,372  $  287,919   
Unrealized derivative loss     96,829     43,681     111,529     59,529   
Stock-based compensation expense    4,803     4,035     7,753     7,393   
Interest income    (1)    (1)    (2)    (13)  
Cash premium on debt extinguishment    -     (9,500)    -     (9,500)  
Adjusted EBITDA (Non-GAAP) $  125,893  $  181,498  $  230,652  $  345,328   
           
           
  Three Months Ended June 30,  Six Months Ended June 30,  
   2015   2014   2015   2014   
Cash flows from operating activities (GAAP) $  93,985  $  148,456  $  201,656  $  299,680   
Interest expense, net of interest capitalized    21,165     17,327     43,213     32,617   
Amortization of deferred loan fees recorded as interest expense    (1,121)    (916)    (2,141)    (1,900)  
Current income tax (benefit) expense    (1)    459     (1)    1,032   
Change in operating assets and liabilities    12,228     16,278     (11,526)    13,866   
Other cash adjustments    (363)    (106)    (549)    33   
Adjusted EBITDA (Non-GAAP) $  125,893  $  181,498  $  230,652  $  345,328   
           
Investor Contact:

Antoinette D. (Toni) Green
Vice President, Investor Relations & Strategy
Rosetta Resources Inc.
info@rosettaresources.com

Blake F. Holcomb
Investor Relations Manager
Rosetta Resources Inc.
info@rosettaresources.com

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