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Rosetta Resources: Record Income

by: Zacks.com posted on: May 20, 2008 | about stocks: ROSE

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Rosetta Resources (ROSE) has been cashing in with record natural gas production as natural gas and crude prices remain high. The company has surprised on earnings two out of the last three quarters on average of 10.38%. Rosetta's price-to-book is 1.53.

Full Analysis

Rosetta Resources Inc. is an independent oil and gas company that explores primarily for natural gas. The company's exploration and production activities are concentrated in the Sacramento Basin of California, South Texas, the Gulf of Mexico, and the Rocky Mountains.

Rosetta, a Zacks #1 Rank (Strong Buy), operates about 90% of its proved reserves which are approximately 96% natural gas and 64% proved developed with a reserve life index of about 12 years.

Rosetta Resources Reports Record Income in the First Quarter

On May 8, Rosetta reported record first quarter earnings that beat Wall Street estimates by 38.46%, or 15 cents a share. Net income increased 96% to a record $27.5 million, or 54 cents per share, compared to net income of $14.0 million, or 28 cents per share, in the first quarter of 2007.

Revenues increased 69% to $128.3 million, including a negative hedging effect of $0.7 million, from $75.8 million in 2007.

Production also rose 41% compared to the year-ago period. Average realized gas prices for the quarter were $8.74 per Mcf, including hedging effects. Average realized oil prices were $100.10 per Bbl.

Guidance for 2008

For the remainder of 2008, Rosetta is keeping its volume and capital guidance unchanged at 140-150 MMcfe/d and $290 million. The company's hedge position is also unchanged for the balance of 2008 at an average price of $7.75 per MMBtu.

Unit cash costs are expected to be in line with first quarter actual results.

Analysts Raise Estimates for the Second Quarter and the Full Year

In response to the first-quarter earnings report, brokerage analysts have raised estimates for the second quarter and the year in the last week. Consensus estimates for the second quarter rose two cents to 48 cents from 46 cents per share. Estimates increased 45% in the last 90 days.

For the year, the story is the same. Consensus estimates are up 10 cents in the last week to $1.82 from $1.72 per share, a 29% increase over the estimate from 90 days ago.

Rosetta's 2008 P/E is 14.84. Its price-to-book is 1.53, under the industry average of 2.65.

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