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Rosetta: Spending, Producing More After Permian Acquisition

Rosetta Resources Inc. has raised its 2013 guidance for spending and production and increased its borrowing base in light of its pending acquisition of Permian Basin assets announced last month.

Rosetta's total production during the first quarter is expected to average an all-time record of 47,000 boe/d, up 39% from the same period in 2012 and 6% from the prior quarter. Oil production will be 12,400 b/d, an increase of 67% from the prior year and 6.4% over the fourth quarter. The company expects total production for the quarter to be 62% liquids. In the first quarter Rosetta made capital investments of $161 million, drilling 24 gross wells with a 100% success rate and completing 17 wells. At the end of the quarter, 38 drilled wells were awaiting completion.

The company said it expects full-year average daily production to range 51,000-55,000 boe/d, representing 40% year-over-year production growth. The 2013 exit rate is anticipated to range 56,000-60,000 boe/d, including oil and total liquids production of 16,000-19,000 b/d and 35,000-38,000 boe/d, respectively.

Last month Rosetta agreed to pay Comstock Resources Inc. $768 million for a package of Permian Basin oil and liquids-rich assets, giving it entry into the West Texas basin (see Shale Daily, March 18).

After giving effect to the pending acquisition, Rosetta said Monday its first quarter total production would have been 49,500 boe/d, including oil production of 14,400b/d. Capital investments for the quarter would have totaled $206 million. March production would have been 50,000 boe/d, including 2,900 boe/d from the Permian assets being acquired.

The company's 2013 capital guidance range has been revised upward from $640-700 million to $840-900 million. The 2013 program is based on a five- to six-rig program in South Texas and a Delaware Basin program with three rigs increasing to six rigs during the year. About $600 million will be spent for development activities primarily located in the liquids-rich window of the Eagle Ford Shale, including about $55 million allocated to facilities projects. About $175 million will be allocated to operated and nonoperated development activity in the oil-rich Delaware Basin, including $7 million for facilities projects. In addition, the guidance range now includes $25 million of capitalized interest related to the pending acquisition. The remainder of the capital plan includes allocations for new ventures activity and other corporate capital.

Rosetta increased its credit facility to $1.5 billion from $750 million. The semi-annual borrowing base redetermination was recently completed, and the company's borrowing base increased from $625 million to $800 million. The maturity date of the credit agreement was extended to May 2018. As of Monday, Rosetta had $305 million outstanding under the credit facility.

The company also said Monday that it intends to offer $700 million of senior unsecured notes to fund the Permian acquisition, as well as issue 7 million shares of common stock with a portion of proceeds also funding the Permian acquisition.

"We like the Permian acquisition but the market was awaiting clarity on financing of the transaction, today's announcements should remove the overhang," Wells Fargo Securities said. "With financing in place and inventory concerns alleviated, Rosetta has addressed major concerns with the stock. We like the direction the company is headed but await for a more attractive entry point."

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