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

  • 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

Source:Rosetta Resources Inc.