Rosetta Resources Inc. today announced financial and operating results for the third quarter of 2010 highlighted by continued positive results from its Eagle Ford resource play in South Texas. In less than one year, the liquids-rich region has become the largest producing area in the Company's portfolio.

Randy Limbacher, Rosetta's Chairman, CEO and President, said, "As we enter the final quarter of the year, the framework is in place for continued production growth and increased shareholder value. We continue to strengthen our position in the Eagle Ford play that is now the major base of production and reserves for the Company. During the quarter, we made significant progress on infrastructure projects that will ensure pipeline and processing capacity for current and projected production from the area for some time into the future. Better than expected results at Gates Ranch and successful drilling results on previously untested acreage are expanding our inventory of investment opportunities in the Eagle Ford play. We continue to assess an oil-producing province in the Southern Alberta Basin in northwest Montana. Our production is now comprised of more than 30 percent liquids and we will continue the sales of non-core assets to reduce our exposure to weak natural gas prices and to lower our cost structure. Rosetta today is a more focused, growth-oriented company with an extremely competitive position in one of the most active resource plays in the United States."

Operational Update

During the third quarter of 2010, Rosetta made capital investments of $85.7 million. Year-to-date, the Company has invested $251.7 million of capital. In the third quarter, the Company drilled 22 gross wells with a 96 percent success rate. Rosetta held a 100 percent working interest in all but one of the wells.

Eagle Ford Shale

Rosetta continues to accelerate its efforts in the Eagle Ford shale play and is conducting a large-scale development program. The Company holds 65,000 net acres with approximately 50,000 acres located in liquids-rich areas of the play. To date, the Company has drilled and completed 20 horizontal wells which represent three percent of the potential net drilling locations. During the third quarter of 2010, Rosetta operated two to three rigs in the Eagle Ford area drilling six horizontal wells. Rosetta plans to drill from six to eight wells in the area during the fourth quarter.

Highlights of the Eagle Ford program for the quarter are as follows:

  • Gates Ranch program a geologic and commercial success - Currently over 95% of our Eagle Ford production is located in the Gates Ranch area compromised of approximately 30,000 net acres. Of that total, 26,500 acres has been fully delineated. Rosetta has drilled and brought on-line 15 horizontal wells with 60% of the production comprised of liquids. The company previously announced an estimated ultimate recovery of 4 Bcfe gross per Eagle Ford well. Recent well performance has consistently exceeded this level. Based on well production data, Rosetta is providing a new estimate of EUR of 7.2 Bcfe gross per well. Utilizing this new EUR, one typical Gates Ranch well has a before income tax net present value of $13.4 million. More than 240 development well locations remain to be drilled representing an aggregate BFIT NPV10 of $3.2 billion for Gates Ranch alone, assuming 2010 effective date for all projects. With the delineation program concluded, efforts are now focused on development of Gates Ranch where multi-well drilling and completion pads will be tested to optimize cost structure, increase operational efficiencies and minimize surface disturbances.
  • New field discovery in previously untested area of the Eagle Ford - A significant milestone for the quarter was the drilling of a discovery well, the Light Ranch 1H, which lies in a 7,500-acre section of the company's leasehold in central Dimmit County. The well was completed with a 4,900-foot lateral and 14 frac stages and brought on-line on Oct. 26, 2010. Currently, the well is flowing at a gross rate of 510 barrels per day (bbl/d) of oil, 1.3 Mmcf/d of residue gas, 260 Bbl/d of NGLs and 800 Bbl/d of load water for a total of 5.9 Mmcfe/d. Since the well is still producing significant load water and cleaning up after fracture stimulation, a stabilized seven-day test rate will be reported at a later date. Rosetta is the operator and holds a 100% working interest in this acreage position. Based on these initial results, the company estimates an additional 75 net potential drilling locations in the Eagle Ford.
  • New transportation and processing capacity agreements in place to alleviate capacity constraints in Gates Ranch - Approximately 15 Mmcfe/d net of the company's Eagle Ford production was curtailed during the quarter due to pipeline capacity constraints. Rosetta has entered into an agreement with Energy Transfer Partners to transport gas on its 50-mile, 24-inch Dos Hermanas Pipeline, targeted for completion on or before December 1, 2010. Under this agreement, long-term transportation capacity will be provided for up to 152 Mmcf/d of Rosetta's gross wellhead gas production from Gates Ranch. In addition, the company has entered into an initial long-term contract for processing of NGLs up to 50 Mmcf/d of gross wellhead gas volume delivered by Rosetta to the new transmission system. The company is in active negotiations with multiple midstream providers for additional firms processing capacity to meet growth demands in the Eagle Ford area and expects to have it secured before year end.

Southern Alberta Basin

In addition to the three wells already drilled in Southern Alberta Basin, Rosetta has currently drilled two of eight wells that are part of a vertical drilling program to assess the commerciality of the play across its large acreage position. The Company now holds approximately 300,000 net acres in the Bakken shale play that is an analog to the prolific Williston Basin. While the Company believes the Southern Alberta Basin area will ultimately be developed with horizontal wells, this vertical program is necessary to evaluate certain key elements of the stimulation design.

Other Operations

In the Sacramento Basin, the second largest producing area for the Company, net production averaged 35 MMcfe/d, a decrease of 6 MMcfe/d from the same period last year. In the Rockies areas of DJ Basin, Pinedale Field and San Juan Basin, net production for the third quarter of 2010 averaged 19 MMcfe/d, an increase of 2 MMcfe/d in the same quarter last year. During the third quarter, the Company drilled 13 new wells in the DJ Basin to partially offset declines in the other regions of the Rockies.

In the South Texas Lobo, Olmos and Perdido trends, Rosetta's production averaged 37 MMcfe/d, compared to 48 MMcfe/d during the third quarter of 2009. The decline reflects the Company's curtailment of capital in natural gas producing areas.

Divestitures

On October 19, 2010, the Company closed the $37.1 million sale of certain properties in the Arkansas, Texas and Louisiana ("Arklatex") areas. The transaction was effective as of August 1, 2010. In addition, Rosetta has entered into a purchase and sale agreement for its assets in the San Juan Basin of New Mexico and Pinedale, Wyoming. This sale is anticipated to close during the fourth quarter of 2010. The two transactions are part of the Company's ongoing effort to fund growth-oriented activities through internally-generated cash flow from operations and divestitures.