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U.S. producer Noble Energy to buy out Clayton Williams for $2.7 bln

U.S. producer Noble Energy to buy out Clayton Williams for $2.7 bln

Jan 17, 2017
4 min read
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U.S. oil producer Nobel Energy reached an agreement to purchase smaller rival Clayton Williams Energy for about $2.7 billion in a cash and stock deal to increase its portfolio in an important American oil field.

Noble Energy said the deal includes 71,000 net acres in the core of the Southern Delaware Basin in Reeves and Ward counties in Texas and an additional 100,000 net acres in other areas of the Permian Basin, the firm said in a statement.

“We have been very disciplined in assessing expansion opportunities in the Delaware Basin,” said David Stover, chairman, president and chief executive of Noble Energy. “This transaction brings all the key elements we value: excellent rock quality, a large contiguous acreage position adjacent to our own, and robust midstream opportunities, reinforcing the Delaware Basin as a long-term value and growth driver for Noble Energy.”

Almost 2,400 Delaware Basin gross drilling locations have been identified, targeting the Upper and Lower Wolfcamp A zones, along with the Wolfcamp B and C.  The average lateral length of the future locations is 8,000 feet.

The total estimated net resource potential on the acreage is of over 1 billion barrels of oil equivalent in the Wolfcamp zones, with significant upside potential in other zones.

Noble Energy has an outlook to increase production on the acquired assets from 10 million barrels of oil equivalent per day currently (70 per cent oil) to approximately 60 million barrels of oil equivalent per day in 2020 in the company's base plan.

“We are rapidly accelerating activity in 2017, starting the year with four rigs operating in the Southern Delaware Basin - three on Noble Energy's acreage and one on the Clayton Williams Energy position,” Stover said.

A second rig is planned to be added to the new acreage in the second quarter, following closing of the transaction, and a third later in the year, in order to exit 2017 with a combined six rigs running in the Delaware Basin

Existing midstream Delaware Basin assets include over 300 miles of oil, natural gas, and produced water gathering pipelines (over 100 miles for each product).

The deal is expected to close in the second quarter of 2017.

Under the deal's terms, Clayton Williams shareholders would receive 2.7874 shares of Noble Energy common stock and $34.75 in cash for each share of common stock held.

Houston, Texas-based Noble Energy said its total capital budget for 2017 is now estimated at $2.1 billion-$2.5 billion and sees sales volumes between 410,000-420,000 barrels of oil equivalent per day (boepd)

Noble Energy said it would fund the cash portion of the acquisition through a draw on its revolving credit facility, which stood untouched at $4 billion at the end of 2016, and expects to raise above $1 billion in 2017 through ongoing portfolio management and optimisation.

The company also expects to retire outstanding debt of Clayton Williams Energy assumed as part of the transaction at or following the closing.  This, along with general and administrative cost elimination, will result in annual cost synergies to Noble Energy of approximately $75 million.

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