Blog Coverage Noble Energy Accelerates its Plans for Delaware Position with the Acquisition of Clayton Williams Energy
LONDON, UK / ACCESSWIRE / January 18, 2017 / Active Wall St. blog coverage looks at the headline from Noble Energy, Inc. (NYSE: NBL) and Clayton Williams Energy, Inc. (NYSE: CWEI). Noble Energy announced on January 16, 2017 the acquisition of Clayton Williams Energy for $2.7 billion in an all-cash and stock deal. The Boards of Directors of both the companies have already given their consent for the merger. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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Noble Energy has valued the future potential of Clayton Williams Energy's acreage and infrastructure and sees great value in existing production and midstream opportunities. After taking into account all the debt and associated costs, the purchase price works out to approximately $32,000 per core Southern Delaware acre.
Midland, Texas based Clayton Williams Energy is an independent energy company engaged in exploration for and production of oil and natural gas in Texas and New Mexico.
Commenting on the acquisition, Chairman, President and CEO of Noble Energy, David L. Stover said:
"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."
Chairman and CEO of Clayton Williams Energy, Clayton W. Williams, Jr., added:
"Noble Energy's long track record of operational excellence and value creation, as well as its reputation as a tremendous corporate citizen, make it the ideal partner for us. We look forward to being shareholders of Noble Energy and benefiting from its world class asset portfolio."
Terms of the agreement
Based on the agreement signed, each shareholder of Clayton Williams Energy will receive 2.7874 shares of Noble Energy common stock and $34.75 in cash. The purchase price is at a 34% premium of Clayton Williams Energy share prices on January 13, 217, the last trading day before the deal was announced. Individual shareholders of Clayton Williams Energy can opt to receive either cash or stock on proration basis, however there will be no change in the exchange value. The entire value of the transaction is approximately $3.2 billion including $500 million in debts.
Noble Energy plans to take care of the cash portion of the transaction via revolving credit facility of $4 billion which remained unused till the end of 2016. By the completion of the transaction, Noble Energy plans to pay off all the debts of Clayton Williams Energy.
The funds managed by Ares Management, L.P. own a majority stake of around 35% Clayton Williams Energy as on December 31, 2016 and have agreed to vote in favour of the transaction.
The transaction is expected to close in Q2 2017 and is subject to customary regulatory approvals. Once the deal is finalized, Clayton Williams Energy's shareholders will own approximately 11% in Noble Energy.
Advantages of the acquisition
After the acquisition, Noble Energy will hold the second largest acreage position in the Southern Delaware sub basin.
Since the assets of Clayton Williams Energy will be free of debts by the finalization of the deal, Noble Energy will be able to benefit from the cash flows generated from the daily productions.
With this acquisition, Noble Energy adds around 120,000 net acreages as assets. Out of these, around 71,000 net acres is directly adjacent to Noble Energy's existing acreage at the Southern Delaware Basin. Noble Energy also adds approximately 100,000 net acres at other locations in the Permian Basin.
With this acquisition, Noble Energy's working interest in the Southern Delaware Basin reaches 80% of total 95% operated acreage. It has identified 2,400 gross drilling locations at the Upper and Lower Wolfcamp A zones, along with the Wolfcamp B and C in Delaware Basin. The total unrisked resource potential at the Wolfcamp acreage is over 1 billion Boepd (barrels of oil equivalent per day). With the addition of new 2,400 drilling locations, Noble Energy now has over 4,200 drilling locations with 2 billion boepd in reserves.
Noble Energy will also get the existing midstream assets at the Delaware Basin which includes more than 300 miles of oil, natural gas, and produced water gathering pipelines as a part of the current deal. The deal is expected to benefit Noble Energy with annual coast savings of more than $75 million.
Noble Energy had acquired approximately 7,200 net acres at the Southern Delaware Basin position in Reeves County, Texas in the second week of January 2017 for $300 million. These properties have the production capacity of approximately 2,400 boepd which has helped Noble Energy to expand its acreage position and production capacity by 20%.
Future Plans for 2016 – 2020
Noble Energy also shared its plans for the next four years and the key takeaways are as follows:
- Ambitious plans to increase its production from 10,000 boepd to 60,000 – 70,000 boepd by the year 2020.
- Increase rig activity from 1 rig to 3 rigs by end of 2017 and 5-6 rigs by end of 2020.
- Total net production from Delaware Basin to grows from 145 Million boepd i.e. 73% CAGR to 180 Million boepd, i.e. 83% CAGR, from a combined 10-13 drilling rigs planned in the Delaware by 2020.
- Noble Energy's onshore US oil volume CAGR has been raised 5% and is now estimated to grow between 28% CAGR to 34% CAGR on pro-forma basis.
- Total Company oil volumes now increase at a 16% CAGR in the base plan and 21% CAGR in the upside plan, up 5% versus its November 2016 plan.
- The full production capacity is expected to reach between 600 Million boepd to 700 Million boepd by 2020 which translates to 11%-15% CAGR.
- Projected increase in operating cash flow to be between CAGR of 33% to 45% which is an increase of 7%.
Stock Performance
On Tuesday, the stock closed the trading session at $40.05, rising 7.11% from its previous closing price of $37.39. A total volume of 17.51 million shares have exchanged hands, which was higher than the 3-month average volume of 3.80 million shares. Noble Energy's stock price advanced 14.15% in the last three months, 9.18% in the past six months, and 46.64% in the previous twelve months. The stock currently has a market cap of $17.11 billion and has a dividend yield of 1.00%.
Clayton Williams Energy's share price finished yesterday's trading session at $145.25, surging 39.69%. A total volume of 4.60 million shares exchanged hands, which was higher than the 3 months average volume of 407.75 thousand shares. The stock has advanced 370.98% and 783.52% in the last six months and past twelve months, respectively. At the last closing price, the stock has a market cap of $2.60 billion.
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