Rosetta Resources (ROSE) Stock Spikes Following $2.1 Billion Acquisition by Noble Energy

NEW YORK (TheStreet) -- Rosetta Resources (ROSE) shares are up 28.6% to $24.86 in early market trading on Monday after the Houston-based oil and gas producer was bought by rival Noble Energy (NBL) for $2.1 billion today.

Noble paid $26.62 per share, a 38% premium over Rosetta's closing price on Friday, with the deal expected to close in the third quarter of this year. The deal still needs to be approved by Rosetta's shareholders.

Two of the plays that Noble specifically mentioned in its bid announcement are the 50,000 acre Eagle Ford and 56,000 acre Permian Basin which were responsible for producing 66,000 barrels of crude per day in the first quarter.

"The Eagle Ford and the Permian are premier unconventional resource plays, two of the most economic in the U.S. The transaction will be immediately accretive to our per share production, reserves, earnings, and cash flow," said Noble CEO Dave Stover.

Noble shares are down 7.39% to $45.49 in morning trading today.

TheStreet has further coverage of the deal here.

TheStreet Ratings team rates ROSETTA RESOURCES INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROSETTA RESOURCES INC (ROSE) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1631.3% when compared to the same quarter one year ago, falling from $35.24 million to -$539.67 million.
  • The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ROSETTA RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $107.67 million or 28.80% when compared to the same quarter last year. Despite a decrease in cash flow ROSETTA RESOURCES INC is still fairing well by exceeding its industry average cash flow growth rate of -51.31%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.33%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1577.19% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: ROSE Ratings Report
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