Noble Energy(NBL) - Get Report will buy Clayton Williams Energy (CWEI) for about $2.7 billion in a cash-and-stock deal, the companies said in a news release Monday. The deal expands Noble's holdings in the sought-after Permian Basin.
The boards of both companies agreed to the sale Monday, which gives Clayton Williams shareholders 2.7874 shares of Noble Energy common stock and $34.75 in cash for each share of common stock held under terms of the deal, according to the release.
The deal is expected to close in the second quarter of 2017, subject to customary regulatory approvals and approval by the holders of a majority of Clayton Williams Energy common stock.
The value of the transaction, based on Noble Energy's closing stock price as of January 13, is approximately $139 per Clayton Williams Energy share. Including the assumption of about $500 million in net debt, the deal values Clayton Williams at $3.2 billion.
This represents a 34% premium to Midland, Texas-based Clayton Williams Energy's January 13 closing stock price. Noble has a market cap of $16 billion and Clayton Williams' is $1.75 billion.
The acquisition provides Noble with 71,000 net acres in the core of the southern Delaware Basin in Reeves and Ward counties in Texas directly adjacent to Noble Energy's existing 47,200 net acres, according to the release.
Houston-based Noble also gains an additional 100,000 net acres in other areas of the Permian Basin, which according to the U.S. Energy Information Administration (EIA) is the nation's most prolific oil producing area.
"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," said David L. Stover, Noble Energy's chairman, president and CEO, in a press release posted on Noble's website.
"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," he added.
The executive noted that Noble is expanding quickly this year, beginning with four rigs in the southern Delaware Basin, three on Noble's acreage and one of Clayton William's position.
Noble also gains 80% average working interest in the southern Delaware position, with more than 95% of the acreage operated, as well as 2,400 Delaware Basin gross drilling locations identified, targeting the Upper and Lower Wolfcamp A zones, along with the Wolfcamp B and C.
Noble Energy's outlook is to increase production on the acquired assets from 10 millions of barrels of oil equivalent per day (MBoe/d) currently (70% oil) to approximately 60 MBoe/d in 2020 in the company's base plan.
In October, Clayton Williams hired Patrick G. Cooke as the company's new chief operating officer. Cooke had been with Noble Energy for the previous four years in various management level positions.
The company has been in the midst of a restructuring, selling off noncore assets. The Deal reported the sale of Clayton Williams' Giddings-area assets in East Central Texas for $400 million to an undisclosed buyer in October, yet another publicly traded oil and natural gas exploration and production company moving to become a pure-play operator in West Texas' lucrative Permian Basin.
Citing company followers, The Deal reported at the time that noncore Permian Basin asset sales were on the way for the stuggling producer.
Advising Noble Energy on the deal is Skadden. In Houston, Skadden's team included corporate partners Frank Bayouth and Eric Otness, and associates Christopher Baeza, Rebekah Reneau, Pete Osornio and Marc-Anthony Delgado. In New York were tax partners David Rievman and Brian Krause, and associate Drew Hermiller.
Leading the deal were Michael Dillard and John Greer at Latham, Jon Hughes and Mark Carmain at Petrie Partners, Shaun Finnie at Evercore and Brian Haufrect at Goldman.
Noble's team include Arne Johnson, John Zabaneh, Aaron Carlson, Meghan Eilers, Kirk Moore and Pamela Taylor.
Neither Noble Energy nor Clayton Williams Energy responded to requests for additional comments on the sale.