Rosetta Closes On Permian Purchase
Closed on the previously announced purchase of Permian Basin assets.
Rosetta Resources Inc. (NYSE: ROSE) has closed on the previously-announced purchase of Permian Basin assets from Comstock Resources Inc. (NYSE: CRK) for $811 million in cash.
The deal, which was originally announced in mid-March, was for $768 million, but customary closing adjustments of $43.3 million pushed the total higher. The effective date of the transaction is Jan. 1 and total is subject to additional post-closing adjustments.
Rosetta funded the transaction largely through the net proceeds from the senior notes issued in April, and from borrowing from the company’s senior revolving credit facility. As of March 15, Rosetta has 100 million outstanding with $700 million available for borrowing under the credit facility.
"This oil-targeted acquisition provides entry into the Permian Basin and a new core area with growth potential in well delineated assets," said Jim Craddock, Rosetta's chairman and chief executive. "The transaction adds a significant number of oil well locations to our project inventory and further advances Rosetta's long-term unconventional resource development strategy."
The acquisition covers 53,306 net acres (87,373 gross) in Reeves and Gaines counties in West Texas. The Reeves County assets located in the Delaware Basin include 40,182 net acres and 74 producing (52 operated) primarily Wolfbone wells. The deal marks Rosetta’s first expansion outside of the Eagle Ford and is an important part of the company’s strategy to diversify its risk.
Total current net production is about 3,300 barrels of oil equivalent (BOE) per day of which more than 73% is oil. Rosetta projects significant growth potential for the area based on an estimated 1,300 gross, or nearly 800 net well locations targeting the Wolfbone on 40-acre vertical well spacing. The company estimates total net risked resources potential of 145 million BOE, of which 67% is oil and 82% liquids.
For its part, Comstock said the sale of the assets will enable it to reduce debt and to increase its planned drilling program in the Eagle Ford shale.
Comstock revised its capital budget for 2013 when the deal was announced to reflect the sale of its West Texas properties and an increase in drilling activity in its Eagle Ford shale in South Texas. The company now plans to spend $410 million in 2013 on drilling activities and $12 million on exploratory leasehold for total capital expenditures of $422 million.
Comstock plans to spend $347 million to drill 82 wells (50.5 net) on its on-going operations in South Texas and East Texas/North Louisiana. The Eagle Ford shale will account for $312 million of the budget where Comstock plans to drill 72 wells (46.9 net) with the remainder related to the company's natural gas properties primarily in East Texas and North Louisiana.
Rosetta independent oil and gas company based in Houston. Comstock is an independent oil and gas company based in Frisco, Texas.