HOUSTON, Aug. 8, 2008 (PRIME NEWSWIRE) -- Rosetta Resources Inc. (Nasdaq:ROSE) ("Rosetta" or the "Company") today announced financial and operating results for the second quarter 2008. Highlights include:
* Natural gas and crude oil production of 155 MMcfe/d, up 29
percent over the same period in 2007
* Revenues of $154.5 million, an increase of 78 percent from
second quarter 2007
* Earnings of $39.3 million or $0.77 per diluted share, up 200
percent and 196 percent, respectively, from the same period a
year ago
For the second quarter ended June 30, 2008, Rosetta reported record net income of $39.3 million, or $.77 per diluted share, an increase of 200 percent from $13.1 million, or $0.26 per diluted share, for the same period in 2007. Production and revenues for the second quarter of 2008 were 155 MMcfe/d and $154.5 million, respectively. The increase in revenues was attributable to both higher commodity prices and the higher production. Total revenue was reduced by $16.6 million due to the effect of natural gas hedging.
Total lease operating expense ("LOE"), which includes direct LOE, workovers, ad valorem taxes and insurance, was $14.2 million or $1.00 per Mcfe during the second quarter. Direct LOE was $8.3 million or $0.59 per Mcfe, workover costs were $2.5 million or $0.17 per Mcfe, ad valorem taxes were $2.8 million or $0.20 per Mcfe and insurance was $0.6 million or $0.04 per Mcfe. Production taxes were $5.8 million or $0.41 per Mcfe and treating and transportation and marketing charges were $2.6 million or $0.18 per Mcfe. Depreciation, depletion and amortization was $51.7 million, based on a DD&A rate of $3.67 per Mcfe.
General and administrative costs were $13.5 million for the second quarter including $3.4 million in non-cash stock compensation expense and $1.8 million of legal costs associated with the Calpine lawsuit.
For the six months ended June 30, 2008, Rosetta reported net income of $66.8 million, or $1.31 per diluted share, an increase of 143 percent from $27.1 million, or $0.54 per diluted share, for the same period in 2007. Production and revenues for the first six months of 2008 were 153 MMcfe/d and $282.8 million, respectively. These increases were attributable to higher commodity prices and production. Total revenue was reduced by $17.3 million due to the effect of natural gas hedging.
For the six months ended June 30, 2008, LOE was $27.6 million or $0.98 per Mcfe. Direct LOE was $17.1 million or $0.61 per Mcfe, workover costs were $3.6 million or $0.13 per Mcfe, ad valorem taxes were $5.7 million or $0.20 per Mcfe and insurance was $1.2 million or $0.04 per Mcfe. Production taxes were $9.2 million or $0.33 per Mcfe and treating and transportation and marketing charges were $4.6 million or $0.16 per Mcfe. Depreciation, depletion and amortization was $103.2 million, based on a DD&A rate of $3.70 per Mcfe.
General and administrative costs were $25.6 million for the six months ended June 30, 2008 including $3.7 million in non-cash stock compensation expense and $6.1 million of legal costs associated with the Calpine lawsuit.
Randy L. Limbacher, Rosetta's President and Chief Executive Officer, commented, "We made tremendous progress in the quarter on our stated priorities for 2008. We delivered strong operational performance during a period of very high prices, which further enhanced our financial position. Organizationally, we made some key hires and are well on our way to having a skilled team in place to focus on program execution and building inventory to fuel growth. It is an exciting time for our company as we gain momentum for the future."
OPERATIONS UPDATE
During the second quarter, the Company drilled 35 gross and 28 net wells with a net success rate of 87%. The majority of this drilling activity took place in South Texas and the Rockies. Year to date through the second quarter, the Company has drilled 71 gross and 61 net wells with a net success rate of 85%.
In the Sacramento Basin, the Company drilled one well which was successful, as drilling activity resumed late in the second quarter. Average production from the Basin was 44 MMcfe/d for the quarter.
In the Rockies, the Company drilled 17 wells in the second quarter, of which 15 were successful. Net production from the area was 11 MMcfe/d for the second quarter. In the San Juan Basin, the Company acquired a non-operated interest in a producing property in May 2008 for a purchase price of approximately $29.5 million. Production from this property is expected to average 2 MMcfe/d net in the third quarter of 2008.
In South Texas, Rosetta drilled 15 wells in the second quarter, with 12 being productive for an 80% success rate. Net production from this region, including both the Lobo and Perdido trends, was 59 MMcfe/d for the quarter.
Rosetta drilled one successful well in Sabine Lake in the second quarter of 2008. The State Tract 30-3 was tied in and on production in late July at an initial rate of approximately 3 MMcfe/d net. Average production from Sabine Lake for the quarter was 13 MMcfe/d.
2008 OUTLOOK
The Company's capital spending plan remains at $290 million for the year. Production guidance also remains unchanged at an annual average of 140-150 MMcfe/d. The guidance range reflects anticipated decline in the latter part of the year, particularly in the Gulf of Mexico where the Company has significantly scaled back capital spending.
The Company's hedge position is unchanged with 67,892 MMBtu/d hedged for the balance of 2008 at an average price $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 $8.31 per MMBtu.
With respect to the Calpine lawsuit, the Company continues to defend against what the Company believes are meritless claims by Calpine arising out of a transaction that Calpine's board and an extensive group of professionals thoroughly vetted, reviewed and approved.
On July 7, 2008, the Company filed a letter with the Bankruptcy Court in New York setting forth the legal deficiencies in Calpine Corporation's claims and requesting the required conference with the Court prior to filing a motion for summary judgment in Rosetta's favor as to all claims by Calpine Corporation. Rosetta is seeking dismissal of the action given the evidence that the transaction by which Rosetta acquired the oil and gas business conducted by Calpine Corporation's subsidiaries establishes that Calpine Corporation did not transfer any property to Rosetta and is legally prohibited from challenging transfers made to Rosetta by Calpine subsidiaries Calpine Fuels Corporation and Calpine Gas Holdings LLC.
Separately, Rosetta filed a motion that contends that PA Consulting Group ("PA"), who has acted as one of Calpine's consultants in the bankruptcy process, should be disqualified from providing any opinions on at least two grounds. First, in May 2008, Calpine and PA agreed to a revised engagement agreement under which PA's Todd Filsinger agreed to serve as Calpine's Interim Chief Operating Officer and PA became eligible to receive a success fee. In addition to Mr. Filsinger's dual roles, PA's potential recovery of an additional fee affected by the outcome of a case in which it purports to render expert testimony violates Rule 7-109(C) of the Code of Professional Responsibility, requiring PA's disqualification. Second, Rosetta contends that, as the consultants who advised Calpine to file the lawsuit, PA lacks independence and is conflicted from rendering an impartial view on valuation. The Bankruptcy Court set August 27, 2008 as the hearing date for Rosetta's motion.
For more information, visit www.rosettaresources.com.
The Rosetta Resources Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3139
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 including Rosetta's ability to successfully meet its production guidance and the successful completion and commercial operation of the drilling prospects identified in this news release. 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.
Rosetta Resources Inc.
Consolidated Balance Sheet
(In thousands, except share amounts)
June 30, December 31,
2008 2007
---------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 70,768 $ 3,216
Accounts receivable 87,335 55,048
Derivative instruments -- 3,966
Deferred income taxes 40,085 --
Prepaid expenses 5,392 10,413
Other current assets 3,892 4,249
---------- ----------
Total current assets $ 207,472 $ 76,892
---------- ----------
Oil and natural gas properties, full cost
method, of which $41.0 million at June 30,
2008 and $40.9 million at December 31,
2007 were excluded from amortization 1,702,274 1,566,082
Other fixed assets 7,357 6,393
---------- ----------
1,709,631 1,572,475
Accumulated depreciation, depletion, and
amortization (396,905) (295,749)
---------- ----------
Total property and equipment, net 1,312,726 1,276,726
Deferred loan fees 1,605 2,195
Other assets 1,321 1,401
---------- ----------
Total other assets 2,926 3,596
---------- ----------
Total assets $1,523,124 $1,357,214
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 38,718 $ 33,949
Accrued liabilities 48,888 64,216
Royalties payable 32,079 18,486
Derivative instruments 107,611 2,032
Prepayment on gas sales 27,844 20,392
Deferred income taxes -- 720
---------- ----------
Total current liabilities 255,140 139,795
Long-term liabilities:
Derivative instruments 46,582 13,508
Long-term debt 245,000 245,000
Asset retirement obligation 26,028 18,040
Deferred income taxes 93,835 67,916
---------- ----------
Total liabilities 666,585 484,259
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value;
authorized 5,000,000 shares; no shares
issued in 2008 or 2007 -- --
Common stock, $0.001 par value; authorized
150,000,000 shares; issued 50,849,270
shares and 50,542,648 shares at June 30,
2008 and December 31, 2007, respectively 50 50
Additional paid-in capital 769,402 762,827
Treasury stock, at cost; 121,639 and
109,303 shares at June 30, 2008 and
December 31, 2007, respectively (2,309) (2,045)
Accumulated other comprehensive loss (96,756) (7,225)
Retained earnings 186,152 119,348
---------- ----------
Total stockholders' equity 856,539 872,955
---------- ----------
Total liabilities and stockholders' equity $1,523,124 $1,357,214
========== ==========
Rosetta Resources Inc.
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues:
Natural gas sales $ 136,142 $ 77,436 $ 248,587 $ 146,597
Oil sales 18,325 9,438 34,213 16,073
--------- --------- --------- ---------
Total revenues 154,467 86,874 282,800 162,670
Operating Costs and
Expenses:
Lease operating
expense 14,174 12,566 27,588 21,362
Depreciation,
depletion, and
amortization 51,738 36,342 103,152 66,893
Treating and
transportation 1,539 882 2,843 1,645
Marketing fees 1,016 669 1,764 1,332
Production taxes 5,754 1,200 9,192 2,185
General and
administrative costs 13,516 9,898 25,623 17,967
--------- --------- --------- ---------
Total operating costs
and expenses 87,737 61,557 170,162 111,384
--------- --------- --------- ---------
Operating income 66,730 25,317 112,638 51,286
Other (income) expense
Interest expense, net
of interest
capitalized 4,470 4,680 8,024 9,050
Interest income (317) (257) (556) (1,229)
Other (income) expense,
net (89) (182) (131) (182)
--------- --------- --------- ---------
Total other expense 4,064 4,241 7,337 7,639
--------- --------- --------- ---------
Income before provision
for income taxes 62,666 21,076 105,301 43,647
Provision for income
taxes 23,351 7,985 38,497 16,565
--------- --------- --------- ---------
Net income $ 39,315 $ 13,091 $ 66,804 $ 27,082
========= ========= ========= =========
Earnings per share:
--------- --------- --------- ---------
Basic $ 0.78 $ 0.26 $ 1.32 $ 0.54
========= ========= ========= =========
Diluted $ 0.77 $ 0.26 $ 1.31 $ 0.54
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 50,585 50,354 50,547 50,340
Diluted 50,961 50,625 50,873 50,565
Rosetta Resources Inc.
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2008 2007
--------- ---------
Cash flows from operating activities
Net income $ 66,804 $ 27,082
Adjustments to reconcile net income to net
cash from operating activities
Depreciation, depletion and amortization 103,152 66,893
Deferred income taxes 38,262 16,479
Amortization of deferred loan fees
recorded as interest expense 590 590
Income from unconsolidated investments (166) (85)
Stock compensation expense 3,677 3,176
Change in operating assets and liabilities:
Accounts receivable (32,287) (1,492)
Other current assets 5,379 (11,659)
Other assets 186 331
Accounts payable 4,769 7,345
Accrued liabilities 2,578 (2,247)
Royalties payable 21,045 7,882
--------- ---------
Net cash provided by operating activities 213,989 114,295
--------- ---------
Cash flows from investing activities
Acquisition of oil and gas properties (29,503) (38,656)
Purchases of property and equipment (119,594) (128,139)
Disposals of property and equipment 27 1,005
Other -- 26
--------- ---------
Net cash used in investing activities (149,070) (165,764)
--------- ---------
Cash flows from financing activities
Proceeds from stock options exercised 2,898 571
Purchases of treasury stock (265) (113)
--------- ---------
Net cash provided by financing activities 2,633 458
--------- ---------
Net increase (decrease) in cash 67,552 (51,011)
Cash and cash equivalents, beginning of
period 3,216 62,780
--------- ---------
Cash and cash equivalents, end of period $ 70,768 $ 11,769
========= =========
Supplemental non-cash disclosures:
Capital expenditures included in accrued
liabilities $ 19,450 $ 27,694