Exploration & Production | Quarterly / Earnings Reports | Production | Third Quarter (3Q) Update
Rosetta Pulls in Strong 3Q Results; Hints at 2015 Plans
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Rosetta Resources Inc. reported third quarter 2014 net income of $78.4 million, or $1.27 per diluted share, versus net income of $41.0 million, or $0.67 per diluted share, for the same period in 2013. Adjusted net income (non-GAAP) for the quarter was $33.4 million, or $0.54 per diluted share, versus adjusted net income of $61.7 million, or $1.01 per diluted share in 2013.
Highlights
- Increased total daily production to 73.5 MBoe/d, up 44 percent versus 2013 and 20 percent quarter-over-quarter
- Increased Permian daily production to 8.2 MBoe/d, up 82 percent quarter-over-quarter
- Successfully completed seven Delaware Basin horizontal wells
- Announces 2014 fourth quarter capital, volume and expense guidance
- 2014 full-year capital guidance remains unchanged
- 2014 full-year production expected to be at the high end of prior guidance; updated range to 65 -- 66 MBoe/d
- Announces 2015 preliminary capital and production plans
Jim Craddock, Rosetta's Chairman, CEO and President, commented: "Rosetta's third quarter production reached the highest level in our history and reflects another quarter of positive growth and favorable execution of our strategic plans in our core basins. The execution of our Delaware Basin horizontal delineation program is consistently delivering very competitive wells across our Reeves County core area. In addition, our Eagle Ford assets continue to generate strong returns even in a low commodity price world. Rosetta's balanced commodity mix, portfolio of higher return projects, and active hedging strategy along with our balance sheet focus, provide the flexibility needed to adapt and compete in our cyclical industry. We are well-positioned to prudently execute our strategy and advance our operations in a potentially challenging future price environment."
2014 Third Quarter Results
Production for the quarter averaged a record 73.5 thousand barrels of oil equivalent per day, an increase of 44 percent from the same period in 2013 and 20 percent from the prior quarter (enlarge chart). The increases were due to production growth from successful Wolfcamp delineation in the Permian Basin and continued development of the Company's Eagle Ford assets. All-time record highs were also achieved in oil, natural gas and natural gas liquids volumes. Oil production in the third quarter averaged 21.2 thousand barrels per day, an increase of 39 percent from third quarter 2013. Natural gas liquids daily production increased by 45 percent to 26.0 MBbls/d compared to the prior year third quarter.
Revenues for the third quarter of 2014 were $365.6 million compared to $194.6 million for the same period in 2013. Third quarter revenues excluding unrealized derivatives were $288.9 million in 2014 and $226.6 million in 2013.
Total per-unit cash production costs, including direct lease operating expense, workovers, insurance, treating and transportation and taxes other than income, were $9.44 per barrel of oil equivalent in the third quarter, a $0.56 per BOE decrease compared to the prior quarter. Increased Permian activity led to increases in per-unit direct LOE and treating and transportation, which were more than offset by lower per-unit workover expense. A summary of the Rosetta's third quarter and year-to-date operating costs on a per-unit basis is included in the attached "Summary of Operating Data" table.
Operational Update
In the third quarter of 2014, Rosetta made capital investments of approximately $275 million, excluding acquisitions. The Company drilled a total of 36 gross operated wells, completed 32 gross wells and 37 wells were placed on production. Third quarter capital spending included approximately $15.6 million for central facilities projects. Total capital cost incurred through the first nine months of 2014 totaled $1,029 million, excluding acquisitions.
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Financing and Derivatives Update
As of September 30, 2014, the Company had $110 million of borrowings outstanding with $690 million available for borrowing under the Senior Revolving Credit Facility. On September 30, 2014, the Company's semi-annual borrowing base redetermination was completed. The Company's borrowing base and committed amounts under the Credit Facility were reconfirmed by the lenders at $950 million and $800 million, respectively. On October 31, 2014, Rosetta had $140 million in net borrowings outstanding with $660 million available for borrowing under the Credit Facility.
2014 Outlook
Rosetta's 2014 capital guidance remains unchanged at $1.2 billion, excluding acquisition capital. Fourth quarter capital spending is projected to be approximately $170 million. The estimated production guidance range for the fourth quarter is 72 -- 74 MBoe/d. The Company expects to deliver annual production at the high end of the previously disclosed 2014 annual production guidance range of 63 -- 66 MBoe/d. The Company is effectively narrowing the production guidance range to 65 -- 66 MBoe/d, or approximately 32 percent year-over-year production growth.
In total, on a per-unit basis Rosetta's projected range of fourth quarter 2014 expenses is lower compared to the third quarter actuals primarily due to lower estimates for workover expense and DD&A expense. A summary of the Company's production and cost per-unit expense guidance ranges for fourth quarter of 2014 is outlined in the attached "Summary of Guidance" table.
2015 Preview
Rosetta's Board-approved 2015 budget will be released in early December. Given the current commodity price environment, the Company is providing a preliminary look ahead to 2015. Operational plans for 2015 include an increase in activity in the Permian running four to six horizontal rigs in the Delaware Basin, primarily allocated to upper Wolfcamp activity. The Company also plans to operate two to three rigs in South Texas to continue Lower Eagle Ford development focused on higher return areas and Upper Eagle Ford activities. The Company estimates 2015 capital spending to be approximately $950 million, excluding acquisitions. This level of capital spending is about 20 percent lower than 2014 projected capital and will deliver 2015 annual production ranging from 77 -- 83 MBoe/d, which equates to more than 20 percent year-over-year production growth at the midpoint.
Jim Craddock continued, "Our preliminary plans for 2015 include a lower capital spending level that preserves the strength of our balance sheet, supports continued delineation activity in the Delaware Basin and expansion of the Upper Eagle Ford testing program and delivers more than 20 percent annual production growth. We will continue to evaluate our 2015 plans in light of the current volatile commodity price environment and will adjust the Company's 2015 plans as conditions dictate."