Wunderlich Securities Reiterates Its Hold Rating On Rosetta Resources; Raises PT

Rosetta Resources ROSE ended 2010 with 479 bcfe of proved reserves at a finding and development cost of $1.40/mcfe, and its production placement ratio was 482%. The company grew reserves by 36% after divesting $90 million of assets during the year. The company's proved reserves mix is 16% oil and condensate, 24% natural gas liquids, and 60% U.S. natural gas; this should become less gassy and more liquid rich during 2011. Plenty of dry powder to fund 2011 Capex. ROSE announced on January 4 that it plans to spend $360 million during 2011. Wunderlich had expected the company to generate cash flow of $280 million. Inclusive of the $225 million asset sales and untapped borrowing capacity of $195 million, ROSE should be able to cruise through 2011 with a great deal of flexibility in spending and accelerating drilling. Wunderlich incorporated the year-end results into its net asset estimate, and its estimate increased to $46.05 per share, up from a prior estimate of $39.76 per share. Wunderlich's NAV consists of $15.09 per share of proved reserves, $29.46 per share for probable reserves from the Gates Ranch in the South Texas Eagle Ford Play, and $2.88 per share for the acreage within the South Alberta Basin Bakken Play. Wunderlich has a $46 PT and a Hold rating on ROSE ROSE closed Monday at $45.36