ROSETTA RESOURCES INC. ANNOUNCES
RECORD 2007 FINANCIAL RESULTS AND PROVIDES 2008 OUTLOOK
HOUSTON, TEXAS, February 29, 2008 / PRIME NEWSWIRE / -- Rosetta Resources Inc. (NASDAQ: ROSE) (“Rosetta” or the “Company”) today reported fourth quarter and full-year 2007 financial and operating results and provided a production and capital outlook for 2008. Randy L. Limbacher, President and Chief Executive Officer, will host a conference call, March 3, 2008 at 3:00 p.m. Central Time, to review this information. To participate in the call, dial (888) 203-7667 or listen through the website at http://www.rosettaresources.com.
2007 FOURTH QUARTER RESULTS
Rosetta’s net income and production for the fourth quarter of 2007 were at their highest levels compared to the prior nine quarters that Rosetta has been a stand alone company.
Net income was $17.4 million, up 33% compared to net income of $13.1 million in the fourth quarter of 2006. Fourth quarter diluted earnings per share were $0.34 in 2007, up 31% compared to $0.26 in the fourth quarter of 2006.
For the fourth quarter, production averaged 148 per MMcfe/d, up 51% from the 98 MMcfe/d reported for the comparable period of 2006. Average realized gas prices for the quarter were $7.67 per Mcf, including the effects of hedging; and realized oil prices averaged $89.16 per Bbl.
Revenues for Rosetta totaled $111.1 million, including a positive hedging effect of $5.1 million. Revenues were up 53% from the $72.6 million reported in 2006.
Total lease operating expense ("LOE"), which includes direct LOE, workovers, ad-valorem taxes, and insurance, was $13.8 million or $1.01 per Mcfe. Direct LOE was $7.1 million or $0.52 per Mcfe and workover costs were $1.9 million or $0.14 per Mcfe for the period. Production taxes were $3.0 million or $0.22 per Mcfe and treating, transportation and marketing charges were $1.8 million or $0.13 per Mcfe. Depreciation, depletion and amortization was $47.8 million, based on a DD&A rate of $3.51 per Mcfe.
General and administrative costs were $13.9 million for the fourth quarter, and include $2.7 million in non-cash stock compensation expenses, CEO transition costs, SOX compliance expenses, and costs associated with the Calpine lawsuit.
TOTAL YEAR RESULTS
Net income for the total year 2007 was $57.2 million or $1.13 per share on a diluted basis, up 28% from $44.6 million or $0.88 per diluted share in 2006.
Rosetta's production in 2007 was 45.8 Bcfe or an average of 126 MMcfe/d, up 37% from the 92 MMcfe/d reported for the total year 2006. Average realized gas prices for the same period were $7.61 per Mcf, including the effect of hedging; and realized oil prices averaged $71.54 per Bbl.
Revenues for the year were $363.5 million, including a positive hedging effect of $22.9 million. Revenues were up 34% from the $271.8 million reported for 2006.
Total LOE, which includes direct LOE, workovers, ad-valorem taxes, and insurance, was $47.0 million or $1.03 per Mcfe. Direct LOE was $28.1 million or $0.61 per Mcfe for the period. Production taxes were $6.4 million or $0.14 per Mcfe; and treating, transportation and marketing charges were $6.7 million or $0.14 per Mcfe.
General and administrative costs were $43.9 million, and include $6.8 million in non-cash stock compensation expenses, CEO transition costs, SOX compliance expenses and costs associated with the Calpine lawsuit.
Net cash provided by operating activities was $257.3 million; and capital expenditures, including property acquisition costs of approximately $38.7 million, were $336.1 million for the year ended December 31, 2007.
Rosetta’s 2007 revenues, reserves and production do not include consideration of estimates for interests in certain leases and wells being a portion of the non-consent properties as defined in its transaction with Calpine that closed on July 7, 2005.
2007 Reserves and PV10
Proved oil and natural gas reserves as of December 31, 2007 were 418.4 Bcfe, consisting of 400.2 Bcfe of natural gas and 3.0 million barrels of crude oil, condensate and natural gas liquids. The year end 2007 reserve number increased 3% over the year end 2006 number of 407.8 Bcfe. The 2007 proved reserves includes 86.4 Bcfe of reserve adds, including 9.8 Bcfe of reserves added from the OPEX acquisition in the second quarter of 2007. Reserve additions were partially offset by 30 Bcfe of reserve revisions that were primarily attributable to a change in Lobo per well reserve estimates.
Rosetta’s capital expenditures were $336.1 million in 2007, including $38.7 million for the acquisition of OPEX. The Company’s overall finding cost, excluding reserve revisions, was $3.87 per Mcfe for 2007. The organic finding cost for the year, excluding 2007 property acquisitions and revisions and the associated reserves, was $3.87 per Mcfe.
The year end proved SEC pre-tax PV10 number for the Company was $1,146.7 million using a flat average natural gas price of $6.795 per Mcf and an oil price of $92.50 per Bbl. This number does not include the year end PV10 of the Company’s hedging program of $32.1 million.
The estimated standardized measure of discounted future net cash flows from Rosetta’s proved reserves at December 31, 2007 was $954.2 million. The following table reconciles the pre-tax PV10 to the standardized measure.
Proved Reserves as of December 31, 2007 |
| | Rosetta |
Oil, Condensate, including Natural Gas Liquids (MMBls) | 3,021 |
Natural Gas (MMcf) | 400,233 |
Total MMcfe | 418,358 |
| | |
| Estimated Future Net Revenue Before Income Taxes ($M) | 1,904,486 |
| Present Value of Estimated | |
| Future Net Revenue | |
| Before Income Taxes(Discounted 10% Annum), “PV10” ($M) | 1,146,708 |
| Income Taxes (Discounted 10% Annum) ($M) | (192,484) |
| Standardization Measure of Discounted Future Net Cash Flows ($M) | 954,224 |
2007 Operational Highlights
During 2007, the Company drilled 195 gross and 169 net wells in 2007 with a net success rate of 82%. The majority of this drilling activity took place in the Sacramento Basin, South Texas, and the DJ Basin.
In California’s Sacramento Basin, the Company drilled 27 wells, with 23 successful. The Company continued to extend the southern limits of the Rio Vista field by drilling seven wells, having initial rates ranging from 1-3 MMcfe/d. Deep drilling efforts in the Basin consisted of three Winters’ tests. Two of these tests were successful; one in Rio Vista and one in the Millar area. The deep test in Rio Vista was successful in extending Winters pay that was discovered in 2006. Average production from the Basin was 44 MMcfe/d for the year.
In South Texas, Rosetta drilled 42 wells in the Lobo area with 33 successful on acreage that is covered by 320 square miles of 3D seismic. During the year, Rosetta acquired an additional 10,000 net acres in the Lobo for future prospects. Average production for the Lobo was 41 MMcfe/d in 2007.
In the Perdido trend, ten wells were drilled in 2007, ten of which were successful. Production averaged approximately 10 MMcfe/d in 2007.
In the DJ Basin Niobrara Play, the Company drilled 69 wells, 55 of which were successful. The successful drilling efforts in the fourth quarter of 2006 and full year 2007 increased net production from 1 MMcfe/d at the beginning of the year to 8 MMcfe/d at year end. Furthermore, the Company acquired 12,450 net acres, and shot 34 square miles of 3D seismic in the basin during the year.
In Sabine Lake, the Company drilled four wells. Three of these wells were placed on production in November and were producing at a rate of 13 MMcfe/d net to Rosetta at year end 2007.
Randy L. Limbacher, Rosetta’s President and Chief Executive Officer, commented, “I want to thank the employees of Rosetta for delivering on the Company’s growth targets in 2007. And while our headline reserve replacement results were not as strong as we had hoped, many of our assets delivered very solid performance and we are taking several measures to improve our reserve performance in 2008.”
2008 Capital, Production and Hedging Update
For 2008 the Company announced a capital budget of $290.1 million. The budget excludes potential acquisitions and targets continued organic growth from Rosetta’s core programs. Approximately 73% of the planned 2008 budget is allocated to low risk development and step-out programs. The remainder is allocated to activities, notably in the Rockies, and Texas that could position Rosetta for significant inventory generation. For 2008, the Company expects production to average 140-150 Mmcfe/d.
The Company recently added natural gas swaps and now has 67,909 MMBtu/d hedged for the balance of 2008 at an average price of $7.75 per MMBtu. For 2009, 52,141 MMBtu/d are hedged at an average price of $7.65 per MMBtu, along with 10,000 MMBtu/d for 2010 at an average price of $8.30 per MMBtu.
The Company also entered into 5,000 MMBtu/d of costless collars for both 2008 and 2009, with an average floor price of $8.00 per MMBtu and ceiling price of $10.28 per MMBtu.
In commenting on 2008, Limbacher noted, “Our priorities for this year are to continue to vigorously assert our position with respect to the lawsuit brought by Calpine, efficiently execute our capital programs for growth and value creation, fully assess what I believe are numerous opportunities in our existing portfolio, and build inventory for sustainable growth in the future.”
Forward-Looking Statements:
All statements, other than statements of historical fact, included in this press release are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the intent, belief or current expectations of Rosetta Resources Inc. and its subsidiaries (the “Company”) and its management. These forward-looking statements are based upon current expectations and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those herein described. Accordingly, Recipients are cautioned that these forward-looking statements are not guarantees of future performance. Please refer to Company’s risks, uncertainties and assumptions as it discloses from time to time in the Company’s reports and registration statements filed with the SEC, including the risk factors identified in its Annual Report on Form 10-K for the year ended December 31, 2007, which can also be found on the Company’s website at www.rosettaresources.com. The Company undertakes no duty to update the information contained herein except as required by law.
Investor Contact:
Michael J. Rosinski
Executive Vice President & Chief Financial Officer
Rosetta Resources Inc.
(713) 335-4037
rosinskim@rosettaresources.com
Media Contact:
Clint Woods
Vice President
Pierpont Communications
(713) 627-2223 x 1119
cwoods@piercom.com
Rosetta Resources Inc.
Consolidated Balance Sheet
(In thousands, except share amounts)
| | | December 31, 2007 | | December 31, 2006 |
Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | $ | 3,216 | $ | 62,780 |
| Accounts receivable | | 55,048 | | 36,408 |
| Derivative instruments | | 3,966 | | 20,538 |
| Prepaid expenses | | 10,413 | | 8,761 |
| Other current assets | | 4,249 | | 2,965 |
| Total current assets | | 76,892 | | 131,452 |
| Oil and natural gas properties, full cost method, of which $40.9 million at December 31, 2007 and $37.8 million at December 31, 2006 were excluded from amortization | | 1,566,082 | | 1,223,337 |
| Other | | 6,393 | | 4,562 |
| | | 1,572,475 | | 1,227,899 |
| Accumulated depreciation, depletion, and amortization | | (295,749) | | (145,289) |
| Total property and equipment, net | | 1,276,726 | | 1,082,610 |
| Deferred loan fees | | 2,195 | | 3,375 |
| Other assets | | 1,401 | | 1,968 |
| Total other assets | | 3,596 | | 5,343 |
| Total assets | $ | 1,357,214 | $ | 1,219,405 |
| | | | | |
Liabilities and Stockholders' Equity | | | | |
| Current liabilities: | | | | |
| Accounts payable | $ | 33,949 | $ | 23,040 |
| Accrued liabilities | | 64,216 | | 43,099 |
| Royalties payable | | 18,486 | | 9,010 |
| Derivative instruments | | 2,032 | | - |
| Prepayment on gas sales | | 20,392 | | 17,868 |
| Deferred income taxes | | 720 | | 7,743 |
| Total current liabilities | | 139,795 | | 100,760 |
| Long-term liabilities: | | | | |
| Derivative instruments | | 13,508 | | 11,014 |
| Long-term debt | | 245,000 | | 240,000 |
| Asset retirement obligation | | 18,040 | | 10,253 |
| Deferred income taxes | | 67,916 | | 35,089 |
| Total liabilities | | 484,259 | | 397,116 |
| Commitments and contingencies | | - | | - |
| Stockholders' equity: | | | | |
| Common stock, $0.001 par value; authorized 150,000,000 shares; issued 50,542,648 shares and 50,405,794 shares at December 31, 2007 and December 31, 2006, respectively | | 50 | | 50 |
| Additional paid-in capital | | 762,827 | | 755,343 |
| Treasury stock, at cost; 109,303 shares and 85,788 shares at December 31, 2007 and December 31, 2006, respectively | | (2,045) | | (1,562) |
| Accumulated other comprehensive (loss) income | | (7,225) | | 6,315 |
| Retained earnings | | 119,348 | | 62,143 |
| Total stockholders' equity | | 872,955 | | 822,289 |
| Total liabilities and stockholders' equity | $ | 1,357,214 | $ | 1,219,405 |
Rosetta Resources Inc.
Consolidated/Combined Statement of Operations
(In thousands, except per share amounts)
| | | Successor-Consolidated | | | | Predecessor - Combined |
| | | Year Ended December 31, 2007 | Year Ended December 31, 2006 | Six Months Ended December 31, 2005 | Six Months Ended June 30, 2005 |
| Revenues: | | | | | | | | |
Natural gas sales | $ | 323,341 | $ | 236,496 | $ | 102,058 | $ | 13,713 |
Oil sales | | 40,148 | | 35,267 | | 11,046 | | 8,166 |
Oil and natural gas sales to affiliates | | - | | - | | - | | 81,952 |
Total revenues | | 363,489 | | 271,763 | | 113,104 | | 103,831 |
| Operating costs and expenses: | | | | | | | | |
Lease operating expense | | 47,044 | | 36,273 | | 15,674 | | 16,629 |
Depreciation, depletion, and amortization | | 152,882 | | 105,886 | | 40,500 | | 30,679 |
Exploration expense | | - | | - | | - | | 2,355 |
Dry hole costs | | - | | - | | - | | 1,962 |
Treating and transportation | | 4,230 | | 2,544 | | 1,286 | | 1,998 |
Affiliated marketing fees | | - | | - | | - | | 913 |
Marketing fees | | 2,450 | | 2,257 | | 1,379 | | - |
Production taxes | | 6,417 | | 6,433 | | 3,975 | | 2,755 |
General and administrative costs | | 43,867 | | 33,233 | | 14,687 | | 9,677 |
Total operating costs and expenses | | 256,890 | | 186,626 | | 77,501 | | 66,968 |
| Operating income | | 106,599 | | 85,137 | | 35,603 | | 36,863 |
| | | | | | | | | |
| Other (income) expense | | | | | | | | |
Interest expense with affiliates, net of interest capitalized | | - | | - | | - | | 6,995 |
Interest expense, net of interest capitalized | | 17,734 | | 17,428 | | 8,216 | | - |
Interest (income) | | (1,674) | | (4,503) | | (1,837) | | (516) |
Other (income) expense, net | | (698) | | (40) | | 152 | | 207 |
Total other expense | | 15,362 | | 12,885 | | 6,531 | | 6,686 |
| | | | | | | | | |
| Income before provision for income taxes | | 91,237 | | 72,252 | | 29,072 | | 30,177 |
| Provision for income taxes | | 34,032 | | 27,644 | | 11,537 | | 11,496 |
Net income: | $ | 57,205 | $ | 44,608 | $ | 17,535 | $ | 18,681 |
| | | | | | | | | |
Earnings per share: | | | | | | | | |
| Basic | $ | 1.14 | $ | 0.89 | $ | 0.35 | $ | 0.37 |
| Diluted | $ | 1.13 | $ | 0.88 | $ | 0.35 | $ | 0.37 |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | |
| Basic | | 50,379 | | 50,237 | | 50,003 | | 50,000 |
| Diluted | | 50,589 | | 50,408 | | 50,189 | | 50,160 |
Rosetta Resources Inc.
Consolidated/Combined Statement of Cash Flows
(In thousands, except per share amounts)
| | | Successor - Consolidated | | Predecessor-Combined |
| | | Year Ended December 31 2007 | | Year Ended December 31, 2006 | | Six Months Ended December 31, 2006 | | Six Months Ended June 30, 2005 |
| Cash flows from operating activities | | | | | | | | |
| Net income (loss) | | 57,205 | | 44,608 | | 17,535 | | 18,681 |
| Adjustments to reconcile net income to net cash from operating activities | | | | | | | | |
| Depreciation, depletion and amortization | | 152,882 | | 105,886 | | 40,500 | | 30,679 |
| Affiliate interest expense | | - | | - | | - | | (6,995) |
| Deferred income taxes | | 33,915 | | 27,472 | | 11,537 | | 2,874 |
| Amortization of deferred loan fees recorded as interest expense | | 1,180 | | 1,180 | | 590 | | - |
| Income from unconsolidated investments | | (181) | | (171) | | (241) | | (161) |
| Stock compensation expense | | 6,831 | | 5,702 | | 4,248 | | - |
| Other non-cash charges | | - | | - | | - | | 99 |
| Change in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | (18,640) | | 3,643 | | (40,051) | | 2,378 |
| Accounts receivable from affiliates | | - | | - | | - | | 6,298 |
| Income taxes receivable | | - | | 6,000 | | (6,000) | | - |
| Prepaid expenses | | (1,652) | | 650 | | (9,411) | | 2,563 |
| Other current assets | | (1,284) | | (2,965) | | - | | - |
| Other assets | | 144 | | 1,691 | | (1,726) | | - |
| Accounts payable | | 10,909 | | 8,765 | | 13,442 | | (4,494) |
| Accrued liabilities | | 3,998 | | 310 | | 3,282 | | 241 |
| Royalties payable | | 12,000 | | (3,161) | | 30,039 | | (1,406) |
| Income taxes payable | | - | | - | | - | | 8,622 |
| Net cash provided by operating activities | | 257,307 | | 199,610 | | 63,744 | | 59,379 |
| Cash flows from investing activities | | | | | | | | |
| Acquisition, net of cash acquired | | - | | - | | (910,064) | | - |
| Acquisition of oil and gas properties | | (38,656) | | (35,286) | | - | | - |
| Purchases of property and equipment | | (284,541) | | (201,293) | | (32,994) | | (32,202) |
| Disposals of property and equipment | | 1,105 | | 30 | | 13 | | 1,447 |
| Deposits | | 51 | | 50 | | (201) | | - |
| Other | | | | 435 | | - | | 110 |
| Net cash (used in) provided by investing activities | | (322,041) | | (236,064) | | (943,246) | | (30,645) |
| Cash flows from financing activities | | | | | | | | |
| Equity offering proceeds | | - | | - | | 800,000 | | - |
| Equity offering transaction fees | | - | | 268 | | (55,629) | | - |
| Borrowings on term loan | | - | | - | | 100,000 | | - |
| Payments on term loan | | - | | - | | (25,000) | | - |
| Borrowings on revolving credit facility | | 10,000 | | - | | 225,000 | | - |
| Payments on revolving credit facility | | (5,000) | | - | | (60,000) | | - |
| Loan fees | | - | | - | | (5,145) | | - |
| Notes payable to affiliates | | - | | - | | - | | (27,239) |
| Proceeds from issuances of common stock | | 653 | | 804 | | - | | - |
| Purchases of treasury stock | | (483) | | (1,562) | | - | | - |
| Net cash provided by (used in) financing activities | | 5,170 | | (490) | | 979,226 | | (27,239) |
| | | | | | | | | |
| Net (decrease) increase in cash | | (59,564) | | (36,944) | | 99,724 | | 1,495 |
| Cash and cash equivalents, beginning of period | | 62,780 | | 99,724 | | - | | - |
| Cash and cash equivalents, end of period | $ | 3,216 | $ | 62,780 | $ | 99,724 | $ | 1,495 |
| | | | | | | | | |
| Supplemental disclosures: | | | | | | | | |
| Cash paid for interest expense, net of capitalized Interest | $ | 18,862 | $ | 17,875 | $ | (8,057) | $ | - |
| Cash paid for tax | $ | 115 | $ | 172 | $ | 6,000 | $ | - |
| Supplemental non-cash disclosures: | | | | | | | | |
| Capital expenditures included in accrued liabilities | $ | 12,925 | $ | 5,589 | $ | 33,470 | $ | - |
| Accrued purchase price adjustment | $ | - | $ | 11,400 | $ | - | $ | - |
