Thursday, October 24, 2013

Rosetta Resources: Why Is This Mid-Sized Energy Firm An Attractive Buy For Long Term Investors?

Rosetta Resources has transformed from an Eagle Ford pure play to a liquids firm operating at Eagle Ford and Permian Basin. The company boasts of strong inventory and has increasing levels of production which will translate into top and bottom line growth. My current price target is $82.30 which shows significant upside from current levels.  

Rosetta Resources (ROSE) is a mid-sized independent energy firm which is engaged in exploration and development of onshore unconventional energy resources. The company has been operating at Eagle Ford in South Texas, but it has now entered the Permian Basin in West Texas. Rosetta has been one of the leading producers at Eagle Ford Shale, which is known for its high quality of crude and NGLs.

Rosetta Resources was formed in mid-2005 by Calpine Corporation (CPN), an independent wholesale power producer with a market cap of ~$8.6 billion, through a spinoff of its domestic oil and gas business. Calpine Corporation mainly focuses on its fleet of low-carbon, natural-gas powered, renewable geo-thermal power plants.

Rosetta's main producing area is Eagle Ford. Until two years ago, Rosetta was mainly producing from the Gates Ranch area at Eagle Ford. A year later, in 2012, it expanded its operations to Karnes Trough, Briscoe Ranch and Central Dimmit. The company is still looking for more expansion opportunities, particularly in the liquids-rich areas, and in the previous quarter, it made two significant acquisitions.

Key Acquisitions

At the end of Q1-2013, Rosetta agreed to purchase Comstock Resources' (CRK) 53,306 net acres in Gaines and Reeves Counties, Texas, for $768 million thus making its entry into the lucrative Permian Basin. The acquisition was completed on 14th May and was financed through issuance of 5.625% senior notes and common stock offering. The area holds reserves of 145 million barrels, of which 67% is oil and 82% liquids, and currently produces ….. read full article at Seeking Alpha