Noble Energy Plans Expansion into Eagle Ford

Rosetta-Noble Merger
Rosetta-Noble Merger

Houston-based Noble Energy announced Monday it plans to get into the shale business by acquiring independent producer, Rosetta Resources. The $2.1 billion deal will allow Noble to move into over 100,000 Texas acres including 50,000 in the Eagle Ford.

After months of instability due to low and fluctuating crude prices, this deal is significant because it reveals a renewed confidence in the industry and the tenacity and resilience of U.S. producers. Many also believe it may be a tipping point for future mergers.

It is possible the merger of these two shale drillers will ultimately aid a rebound in oil prices. For now, though, it demonstrates the exploration-and-production sector’s ability to keep going in adverse conditions.
— The Wall Street Journal

Rosetta is a leading producer in the The Eagle Ford and reported 2015 Q1 production at 58.4 MBoe/d, a 17% increase from the same period last year.  Also during the quarter, the company spent $67.8 million for drilling and completion activity: they drilled three wells were drilled, 14 completed and 11 were brought on production.

I am excited to announce this strategic transaction which adds two exceptional and material areas to our global portfolio. The Eagle Ford and the Permian are premier unconventional resource plays, two of the most economic in the U.S., which will expand our resource base and development inventory and further diversify our portfolio.
— Dave Stover, Noble Energy's Chairman, CEO, and President

Rosetta Resources Sets Two Year Plan


Rosetta Resources announced its fourth quarter operational update and released a two year strategic outlook that includes major spending cuts.

In a press release on Tuesday, Rosetta Resources reported a Q4 net income of $185.5 million, which was up from $29.5 million for the same period last year. For the year, the company reported income of $313.6 million, or $5.09 per diluted share, versus net income of $199.4 million in 2013. Production for the quarter increased 41 percent from 2013 and averaged 73 MBoe/d.

Eagle Ford

Rosetta credits annual production records to the ongoing development of their Eagle Ford assets. The company’s capital budget for 2014 included included $666 million for drilling and completion in the Eagle Ford shale, where 94 wells were drilled and 95 wells were completed. Daily production from the Eagle Ford increased 36 percent over last year averaging 65 MBoe/d in the fourth quarter.

Two Year Forecast

As Rosetta Resources looks to the future, their spending plan includes holding core acreage positions and conserving as the industry waits for a commodity price recovery. Capital spending will be up to $350 million per year, with a major goal to be to operate within cash flow for 2015 and 2016. The company's production goals for this time period will be for about 60 thousand barrels of oil equivalent per day.

Rosetta has taken important steps the past several months to position the Company on solid footing so that our shareholders will benefit the most from a commodity price recovery.” Craddock added “We’ve chosen to defer production growth and focused instead on living within our means, maintaining our core acreage positions, and defending a target production level of about 60,000 Boe per day.
— Jim Craddock, Rosetta's Chairman, CEO and President

Rosetta Resources Hits Record Production and Proved Reserves in 2013


Rosetta Resources had a record setting year in 2013, increasing total annual production from ~37,000 boe/d in 2012 to 50,000 boe/d. That's an increase of 34%.

The company also increased its total reservesby 39%  to 279 million boe.

Approximately 30% or 84 mmboe of the total added reserves came from Rosetta's successful development of the Eagle Ford.

In 2013, we continued to deliver competitive growth in production and reserves while expanding our operations into a new basin. We remain focused on developing our Eagle Ford assets and committed to fully advancing our Permian Basin operations.
— Jim Craddock. Rosetta's CEO

Rosetta Resources Eagle Ford Drilling and Completion Initiatives

In total, Rosetta spent ~67% of it's development budget in the Eagle Ford in 2013. $600 million was spent on drilling and completion activity in the Eagle Ford shale, with Rosetta drilling 111 wells and completing 79.

As of late 2013, Rosetta still had a lot of running room in the Eagle Ford. Approximately 23% of the wells the company has drilled in the Eagle Ford were sitting idle and waiting to be completed.

Read more:Rosetta Resources Has Yet to Complete 23% of its Drilled Eagle Ford Wells

According to the company, well costs improved in the Eagle Ford and have fallen to $6.5 - $7 million for average wells.

Rosetta Resources Expanding in Delaware Basin

Rosetta is also expanding into other areas, including the Delaware Basin. On December 3o, 2013, the company entered an agreement to acquire assets in the basin for $85 million. The purchase covers 5,078 net acres (14,985 gross) in Reeves County.

Rosetta at a Glance in 2013

  • Total annual production up ~34% to 50,000 boe/d
  • Eagle Ford added 30% or 84 mmboe to company's reserves
  • $600 million spent on drilling and completion  in Eagle Ford
  • Eagle Ford wells drilled - 111
  • Eagle Ford completed wells - 79
  • Purchase of 5,078 net acres for $85 million in Delaware Basin


Rosetta Resources Plans to Spend $735 Million in the Eagle Ford in 2014

Rosetta Resources Eagle Ford Acreage Map By Area
Rosetta Resources Eagle Ford Acreage Map By Area

Rosetta Resources will spend approximately tw0-thirds of its $1.1 billion budget in 2014 in the Eagle Ford.

The company will spend $735 million running 4-5 rigs, with plans to drill and complete 90-95 gross wells. Approximately half of the activity will target the Eagle Ford from the company's Gates Ranch leases.

Read more:Rosetta Acquires Additional Eagle Ford Interests at Gates Ranch

As a result of Eagle Ford and Permian Basin growth, Rosetta expects production to grow 20-30% to 60,000-65,000 boe/d.

The 2014 capital plan is structured to deliver between 20 and 30 percent combined production growth from our Eagle Ford and Delaware Basin assets. The program reflects increasing activity as we initiate broader scale horizontal development in Reeves County and further expand development in new areas of our current Eagle Ford position,” said Jim Craddock, CEO. “We will continue to focus our efforts on integrating our West Texas assets while continuing to efficiently execute the development of our Eagle Ford leases.

Rosetta will run six rigs and spend $265 million in the Permian Basin in 2014.

Also read:Rosetta Has Yet To Complete 23% of Its Eagle Ford Wells

Fourth Quarter Operational Delays Impact Production

Rosetta's fourth quarter 2013 production was negatively affected several issues that are estimated to have lowered production by ~4,000 boe/d. Rosetta expects fourth quarter production will average 52,000 boe/d and full-year 2013 production will average 50,000 boe/d.

  • Operational issues on a third-party gathering system
  • Operational issues at a third-party processing plant
  • Wells shut-in due to adjacent well completions
  • Rosetta compressor station fire

Jim Craddock, CEO, commented, "Our strength is our people and our personnel have done a great job of minimizing the impacts of several external hurdles we faced this quarter. We look forward to discussing our fourth quarter results, as well as our outlook for 2014, with investors in February."

Rosetta Resources Has Yet To Complete 23% of Its Drilled Eagle Ford Wells

Rosetta Eagle Ford Asset Map - June 2013
Rosetta Eagle Ford Asset Map - June 2013

Rosetta Resources has completed 180 Eagle Ford wells and has 53 wells drilled and awaiting completion.

To put it another way - approximately 23% of the wells the company has drilled to date are sitting idle waiting to be completed.

Based on rough estimates, that means completion crews are a little more than six months behind drilling operations.

Even though an additional rig will be added in the fourth quarter, Rosetta is expected to begin working off the backlog of drilled wells as it transitions into 2014.

Rosetta’s third quarter production results continued on a record pace and demonstrate our ability to maintain development of our core Eagle Ford position while integrating the Permian Basin assets into our operations....
— Jim Craddock, CEO.

Rosetta's daily production was up 33% over the same quarter in 2012 and up 3% over the second quarter to 48,500 boe/d. The company operated five rigs in the third quarter and is expected to run six rigs in the fourth quarter. At Gates Ranch, the company will run 2-3 rigs.

The company's Karnes Trough leases are now fully developed.