Although financial vehicles to fund oil and gas companies have gotten very creative over the years, "you cannot hide poor-quality properties with great financing," says Mike Rosinski, chief financial officer of newly public Rosetta Resources in Houston. "Ultimately it's the quality of the properties that matters. In the 1980s and 1990s the common wisdom was 'own the assets, not the equity,'" he told Houston Energy Finance Group members recently. He explained various creative financial vehicles that had been tried during the 1980s and 1990s such as trusts, and SPERS. Rosinski learned his financial lessons through many years of working as chief financial officer for units of Tenneco, including Tengasco, and Santa Fe Energy Resources in the 1980s and 1990s. Deal structures he participated in include off-balance-sheet financing "back when that was not a dirty word," he said, alluding to recent energy-industry accounting scandals. Tenneco often partnered with a second E&P or financial company to make low-cost reserve acquisitions, where a third party would make a volumetric production payment as part of the deal. In one transaction, Tenneco partnered with T. Boone Pickens and Mesa Petroleum to acquire long-lived Hugoton Basin, Kansas, gas properties. A few years later when Tenneco was broken up and sold in packages, Mesa bought those same properties back. In another deal, competing bids for a large E&P company package soared and the winner, Shell Oil Co., ended up paying a full $1 billion more than what Tenneco had bid-a stunning amount of money brought to the table at that time. In the 1980s, a trust was carved out of properties of Houston Oil & Minerals. Trust concepts are returning to the market today, but Rosinski says, "I'm not sure that retail investors understand them. A trust is going to be a return on their investment and only part of their investment."

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