Hi Paul -
Re: Rosetta Resources, Inc. (ROSE)
It looks like the company has profited from the development of the Natural Gas resources on their Eagle Ford properties.
shale.typepad.com
05/31/2011
Rosetta Resources Moves Forward On Eagle Ford Shale Program During First Quarter Of 2011
Rosetta Resources (ROSE) reported on its Eagle Ford Shale development activity during the first quarter of 2011. The company is putting 90% of its 2011 capital budget into the Eagle Ford Shale and plans to drill forty wells here in 2011.
Rosetta Resources completed nine wells, and reported production of 89 million cubic feet of natural gas equivalents per day during the first quarter of 2011. As of 5/1/2011, production from the Eagle Ford Shale was 120 million cubic feet of natural gas equivalents per day.
Rosetta Resources has completed 31 wells since entering the play and is operating three rigs. The company is planning to drill between ten and twelve horizontal wells during the second quarter of 2011.
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They seem to have divested themselves from their other high cost properties selling holdings located in Sacramento CA. and Yuma County Colorado (Rosetta completed the previously announced sale of its DJ Basin properties in Yuma County, Colorado on March 31, 2011 and the divestiture of its Sacramento Basin assets in California on April 15, 2011. The combined sales price for the properties totaled $255 million, subject to customary closing adjustments.)
It appears that their recent strategy at Eagle Ford is to build out a midstream NG collection system(s) or at least partnership with one or more companies as the company will invest $325 million in midstream capital in the Eagle Ford Shale area. ( pipelineandgasjournal.com ).
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Is this why you originally purchased the company? Did you value their assets based on their NG and midstream operation(s)?
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I have noticed that many of the small E&P companies that have experienced huge growth recently bought and/or developed inexpensive NG resources and built Midstream operations to service their new wells. This strategy adds significant value to the company and allows them to be a low cost producers when using the new horizontal fracking technology (especially when upgrading the current producing wells w/ horizontal laterals).
April 21, 2011
Energy Transfer Partners Announces Expansion of Its Eagle Ford Shale Projects
businesswire.com
"...Energy Transfer Partners, L.P. (NYSE: ETP) today announced it has entered into long-term fee-based agreements with multiple producers, including Rosetta Resources Operating LP , SM Energy Company, and a subsidiary of Anadarko Petroleum Corporation (NYSE: APC), to provide natural gas gathering, processing, and liquids services from the prolific Eagle Ford Shale. To facilitate these agreements, which include volume commitments in excess of 540,000 MMBtu per day of natural gas, ETP will significantly expand the previously announced Rich Eagle Ford Mainline (REM) pipeline in South Texas and will construct a new processing facility in Jackson County, Texas....".
I wonder if this is their strategy for their Southern Alberta Basin properties?
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My take away and an emerging long term value proposition is to identify low cost producer of NG resources that can also develop a profitable Midstream operation. Rosetta Resources seems to have found a strong midstream partner in ETP.
I am currently researching another company that has a similar strategy and has made investments of over $140M in the last six months accumulating the necessary assets (on the cheap) to build such an operation.
Here is a hint for a company doing the same thing. They bought their core NG assets in a bankruptcy sale February 2010 for $81M ( mariettatimes.com ). I love it when they can buy very profitable assets for $0.50 on the dollar.
EKS |
