Noble Energy said on Tuesday that it will acquire Clayton Williams Energy in a deal valued at $2.7 billion.
Houston-based Noble said the boards of directors of both companies have unanimously approved the deal.
The companies have executed a definitive agreement that calls for Noble to acquire all of Clayton’s outstanding common stock for $2.7 billion in Noble Energy stock and cash.
Clayton Williams shareholders will receive 2.7874 shares of Noble Energy common stock and $34.75 in cash for each share of common stock held.
In the aggregate, that totals 55 million shares of Noble Energy stock and $665 million in cash.
On an individual basis, shareholders will be able to elect to receive cash or stock, subject to proration.
The acquisition includes 71,000 highly contiguous net acres in the core of the Southern Delaware Basin in Reeves and Ward counties in Texas that are directly adjacent to Noble Energy’s existing 47,200 net acres.
As part of the deal, Noble will also acquire an additional 100,000 net acres in other areas of the Permian Basin.
The Southern Delaware acres have an average working position of 80 percent, with more than 95 percent of the acreage being operated.
Noble will also acquire 2,400 identified gross drilling locations identified that target the Upper and Lower Wolfcamp A zones as well as Wolfcamp B and C.
The average lateral length of the future locations is 8,000 feet.
Total estimated net unrisked resource potential on the acreage sits at over 1 billion barrels of oil equivalent in the Wolfcamp zones.
Noble added that there is “significant upside potential in other zones.”
Noble said its outlook is to increase production on the acquired assets from a current level of 10,000 barrels of oil equivalent per day, with 70 percent being oil, to about 60,000 boepd in 2020.
Noble said rig activity on the new acreage is planned to accelerate from its current level of one rig to three rigs by the end of 2017 and to between five and six rigs in 2020.
Existing midstream Delaware Basin assets include over 300 miles of oil, natural gas and produced water gathering pipelines with over 100 miles for each product.
Noble said it intends to fund the cash portion of the acquisition through a draw on its revolving credit facility.
As of the end of 2016, the company’s $4 billion facility was completely undrawn.
Noble anticipates it will generate in excess of $1 billion in proceeds in 2017 through ongoing portfolio management and optimization.
Noble said it also anticipates retiring Clayton’s outstanding debt assumed as part of the transaction at or following the closing.
Noble said the debt retirement, along with general and administrative cost elimination, will result in about $75 million in annual cost synergies to Noble.
“Following our ramp of activity in 2017, the acquired assets are expected to be self-funding and accretive to Noble Energy’s earnings and cash flow per share beginning next year. This is an excellent fit for Noble Energy, and we expect the transaction to generate substantial shareholder value,” Noble Energy CEO, chairman and president David L. Stover said.
