ROSE: Error in the newsletter

[dan_s]

Rosetta Resources (ROSE): An updated Net Income & Cash Flow Forecast model has been posted under the Watch List tab.

This morning I noticed an error in the last edition of The View From Houston newsletter (dated 6/17/2014). On the Small-Cap Growth Portfolio table, I screwed up and failed to update the valuation for ROSE to what I have in my forecast model. I've double checked my forecast this morning and my valuation for ROSE is now $69.00/share.

The big jump in my valuation ($13/share) is because I now think a multiple of 6X CFPS is justified for ROSE. The company is focused on increasing their liquids production and they recently reaffirmed their production guidance. My forecast is based on the midpoint of their guidance, but I expect them to come in near the top of guidance. ROSE's production this year should be approximately 62,500 boepd (37% natural gas, 30% crude oil and 33% NGLs). As I mentioned in my opening remarks at yesterday's luncheon, the price of NGLs is drifting higher. This should give Rosetta a nice revenue boost in the 2nd half. Plus, less than 20% of Rosetta's crude oil is hedged with Collars that have ceilings at $109.63/bbl. I think a lot of the forecasts submitted to First Call are missing this.

ROSE is a former Sweet 16 company that I have been following closely for over five years. I have a very high level of confidence in my forecast model.

NOTE: Whenever one of our portfolio companies approaches my Fair Value Estimate, I double check my forecast model to see if a change in the valuation is justified. I check all of the Sweet 16 forecasts at least twice a month.

[dan_s]

Good stuff on ROSE and OAS in this article.

http://seekingalpha.com/article/2274593 ... ht-futures