UPDATE: Bank of America Initiates Coverage on Rosetta Resources with Buy Rating, $60 PT on Permian Acquisition Announcement

In a report published Wednesday, Bank of America analyst Jason Smith initiated coverage on Rosetta Resources

with a Buy rating and $60.00 price target. In the report, Smith noted, “Rosetta has built a solid position in the Eagle Ford shale over the past few years while high-grading the balance of the portfolio. While initially dilutive to NAV, the recently announced $768mm Permian acquisition from Comstock should improve production visibility, providing significant running room at current levels. Additionally, the acquisition diversifies the asset base away from a single play, with upside potential from future development drilling. Rosetta has underperformed the peer group by 12% year-to-date, as post acquisition the need for financing created an overhang on the shares. With roughly $1bn of capital raised on April 17 (30% equity), this headwind should now be behind the company, with a balance sheet that is still conservatively capitalized relative to most of its peers. A shift to tighter well spacing or horizontal drilling in the Permian represent potential upside from the acquisition, but at current levels there is no value in the share price for the acquired assets, in our view.” Rosetta Resources closed on Tuesday at $42.91.