After a concerted effort, Rosetta Resources Inc. has turned a corner in its two-year transformation plan. In the process, the Houston-based company resolved a sticky lawsuit with former parent Calpine Corp., shifted its business model away from a focus on conventional assets toward resource-focused assets, and brought on new talent.

"We wanted to build our inventory of opportunities," said Randy L. Limbacher, chief executive officer, at a recent Houston Producers Forum meeting in Houston.

"We did a great job building top-line growth, but it came at the expense of whittling down the inventory, so our cupboards got pretty bare. Between that issue, the visibility on what type of inventory we had going forward and the Calpine overhang, we saw our cash flow multiple locked in a range of 1 to 2.5 times.We hoped that resolving Calpine and gaining more visibility on the inventory would expand the multiple, and we’ve seen that happen. Now our multiples are in the 5-to-6 range."

As the company retooled its portfolio in 2009, its management examined the existing legacy assets under an unconventional lens "to see what was left out there inventory-wise." It also executed some smaller acquisitions and put together some organic positions in the Eagle Ford shale and the Alberta Basin Bakken. Finally, the company divested $20 million of noncore assets.

"Last year, we made a decision not to access the capital markets at what looked to be a very inopportune time to us. Instead, we made the decision that’s not always very popular and let our production fall a little bit. As for the capital that was left, we focused on what was going to get us the best inventory to carry the company through the future."

This change in strategic focus prompted the company to finish shooting a 3-D survey over pieces of its Lobo Trend property in South Texas; to test new concepts in its Sacramento Basin properties and pursue infill drilling in the Denver-Julesburg Basin. Rosetta also extended its maturities on a portion of its debt.

This year, the company announced a $280-million capital program, nearly its 2009 budget. At year-end 2008 Rosetta reported reserves of 398 billion cubic feet equivalent.

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