Energy

Noble Energy Acquires 171,000 Permian Basin Acres in Clayton Williams Deal

Paul Ausick

Published: January 17, 2017 10:20 am

Last Updated: January 12, 2020 3:49 pm

Independent oil and gas company Noble Energy Inc. (NYSE: NBL) announced Monday that it has agreed to acquire Clayton Williams Energy Inc. (NASDAQ: CWEI) in a cash and stock transaction that values the latter at $2.7 billion. Including approximately $500 million in assumed Clayton Williams debt, the transaction totals $3.2 billion. The companies expect the transaction to close in the second quarter of this year, subject to customary regulatory reviews and a vote of Clayton Williams shareholders.

Clayton Williams shareholders will receive 2.7874 shares of Noble stock and $34.75 in cash for each share of Clayton Williams stock they own. That represents about $139 per share of Clayton Williams stock, a premium of 33.7% based on the stock’s closing price of $103.98 last Friday.

For its investment, Noble is acquiring a total of 71,000 net acres in the southern Delaware basin of the Permian Basin and another 100,000 net Permian acres to add to the company’s existing 47,200 net Permian acres. The Delaware basin acreage includes 2,400 identified drilling locations with an average lateral length of 8,000 feet. The net unrisked resource potential is at least 1 billion barrels of oil equivalent in the Wolfcamp zone along with “significant upside potential in other zones.”

Noble CEO David L. Stover said:

This combination creates the industry’s second largest Southern Delaware Basin acreage position and provides more than 4,200 drilling locations on approximately 120,000 net acres, with over 2 billion barrels of oil equivalent in net unrisked resource.  In addition to the benefits driven by larger scale, the midstream assets and planned buildout provide significant synergies and substantial dropdown potential in association with our ownership in Noble Midstream Partners.

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.  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.

Noble expects the acquired properties to be self-funding and accretive to earnings and cash flow per share beginning in 2018.

Noble will fund the $665 million cash portion of the acquisition by drawing on its revolving credit facility of $4 billion, none of which has been drawn.

The company forecasts production growth on the acquired acreage to rise from about 10,000 barrels a day of oil equivalent currently to at least 60,000 barrels a day by 2020. The rig count is expected to rise from three at the end of this year to five or six in 2020.

Clayton Williams stock traded up about 36% early Tuesday, at $141.25 in a 52-week range of $6.35 to $146.00. The high was posted early this morning.

Shares of Noble Energy traded up 4.2%, at $38.97 in a 52-week range of $23.77 to $42.03. The stock’s 12-month consensus price target is $45.85.