Rosetta Resources Executive Insights: Multi-Pad, Southern Alberta Map

On Wednesday, Rosetta Resources, Inc. (NASDAQ:ROSE) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.


Neal Dingmann – SunTrust Robinson Humphrey: Jim or Randy just wanted — two questions here. First, you mentioned around the multi-pad, I think Jim was talking about it around Gardendale was wondering how cost will come down as you start doing more of this multi-pad drilling and if that’s, if so, is that already factored in through your lowered cost expectations?

James E. Craddock – Sr. Vice President, Drilling and Production Operations: Neal, this is Jim. We’ve actually been doing the three-well pad work now for quite a while at Gates and obviously we take those practices and move them on to the other areas, but at Klotzman, we had initial well test there, but we’ll be doing three-well pads there and do those as we go forward. I think we have said previously, we think that doing the pad work, we estimate that segment is about $0.5 million of well on average and it’s already baked into our cost expectation.

Neal Dingmann – SunTrust Robinson Humphrey: Just as my follow-up, just was wondering as far as capacity or infrastructure, I know there has been a couple of outages out there unlike the King at Regency, number one I guess do you have any exposure to that and then just on sort of capacity beside obviously the Gardendale coming on if there is other latter part of this year significant things that we should be point to that will be coming on?

James E. Craddock – Sr. Vice President, Drilling and Production Operations: As you know and I think it’s in some of our charts. We move gas on a number of different pipelines and Regency is one of them. So, yes we saw that as well. The good news for us that is we had significant capacity in place on other carriers. We were able to move that gas to those other carriers and into those plants, so really for first quarter we were unaffected by that outage. So, we are pleased with outcome there.

John E. Hagale – EVP, CFO and Treasurer: Then as it relates to our ability to move product in general and what’s coming on, we’ve started showing this in some of the presentations, but now that we’ve got that we’re looking towards the end of this year to have more and more oil volumes coming on. Trucking and piping oil is not a constraint for us and so that actually leverages our ability to move gas and NGL, so in the past we would’ve shown some things showing wet gas going from 190 million a day in say, May of this year, to 195 million to 245 million next year and if we had converted those into oil volumes, we would have said, oil takeaway capacity, we would have said it’s probably 54,000 barrels of oil a day, again that’s not guidance but that’s capacity. Now that we’re drilling more in the Karnes Trough and Briscoe areas, if you try to convert those to total takeaway capacity it greatly expands our ability to move product, because there really is no trucking or pipe capacity constraints on oil. So if it was 52,000 or 54,000 barrels a day before that that was equivalent takeaway, today it is probably 74,000 barrels, so we got plenty of room. That’s why we’ve said a couple of times that our take away capacity really isn’t constraint for the next couple years.

Southern Alberta Map

Phil McPherson – Global Hunter Securities: I was wondering on the Southern Alberta map, you listed three wells and you show the green dots or the gray dots where they were done. Could you tell us which ones correlate to each and then take it a step further and tell us which of the four blue dots is currently under completion, so we can understand the progression?

John E. Hagale – EVP, CFO and Treasurer: You bet Phil, this is John. Start at the top, the 12-13 well is the furthest west well…

Phil McPherson – Global Hunter Securities: At Buffalo Lake there?

John E. Hagale – EVP, CFO and Treasurer: Correct. 07-04 is the Riverbend and then the Simonson well is which is called Chalk Butte on here.

John D. Clayton – Sr. Vice President, Asset Development: The four wells in blue are the ones that we were either being drilled or drilling phase, and the one farthest north, which is the Big Rock well, will be the one that we will probably have results on 1st.

Phil McPherson – Global Hunter Securities: That well, did that have a 3,500 foot lateral or what was the lateral length on that one?

John D. Clayton – Sr. Vice President, Asset Development: They were rough about 3,500 feet.

Phil McPherson – Global Hunter Securities: Okay. They were about the same. I know you guys don’t want to give us too much. You are kind of waiting to get things done. So, I appreciate that. Just a bigger kind of question, it was surprising that you announced the increase in the borrowing base and I know you gave some early comments there, was there a reason that you had to do it right now? I mean you said you had that capability for a while, but it just seems out of the blue to have that much liquidity and be paying for the unused portion?

John E. Hagale – EVP, CFO and Treasurer: It’s interesting, we have had that capability probably for six months. I think we have had it at the last borrowing base, which pre dates me as being the CFO, but what I would say is the pricing came down some, our ability to increase it – the main there, and when I looked at the total cost of increasing it, it was $600,000 or $700,000 because the pricing came down at the same time, so we went ahead and took that to give us flexibility. Quite honestly, if we get out there and decide we don’t need it, the way this accordions work, you can bring that back in, reduce your cost for a little while and then raise it back up. I think for now, it gives us good flexibility at not a huge cost.

Randy L. Limbacher – Chairman of the Board, CEO and President: I would also put it in the context of our historical capital activity. So, we were running $300 million or so of liquidity against what were historically $300 million type annual capital expenditures, and we have now obviously doubled that or significantly higher than that. So, it kind of makes sense to – it would be good idea to maintain a higher level of liquidity given the size of the Company has changed significantly over which you have historically (indiscernible).

Phil McPherson – Global Hunter Securities: Randy one more. I really appreciate the comment you made about the 500 million barrels, a potential on the Eagle Ford. Can you just tell me, does that relate to all of your acreage? Is it related to the 40,000 that’s been derisked or the 47,000 that is now kind of almost derisked or how does that kind of breakdown?

Randy L. Limbacher – Chairman of the Board, CEO and President: I would say that’s the risked amount against all the acreage, but we have a panel that’s – in most of IR presentations. It’s probably on the website right now, where it shows that by area and it’s broken down, so you get a pretty good idea of it, but that would be across the entire Eagle Ford position. Again, we’re down to very low portion of it that hasn’t been tested and derisk, so that’s pretty much the whole position.