Noble Energy expands in Permian with $2.7-billion Clayton Williams buy

1/16/2017

HOUSTON and MIDLAND, Texas -- Noble Energy is to acquire all of the outstanding common stock of Clayton Williams Energy for $2.7 billion in a stock and cash deal.

David L. Stover, Noble Energy's chairman, president and CEO, stated, "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 Bboe 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."

Stover concluded, "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. 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."

Acquisition highlights:

  • 71,000 highly contiguous net acres in the core of the Southern Delaware basin in Reeves and Ward counties, Texas (directly adjacent to Noble Energy's existing 47,200 net acres). In addition, there are an additional 100,000 net acres in other areas of the Permian basin.
  • 80% average working interest in the Southern Delaware position, with more than 95% of the acreage operated.
  • 2,400 Delaware basin gross drilling locations 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 ft.
  • Total estimated net unrisked resource potential on the acreage of over 1 Bboe in the Wolfcamp zones, with significant upside potential in other zones.
  • Noble Energy's outlook is to increase production on the acquired assets from 10,000 boed currently (70% oil) to approximately 60,000 boed in 2020 in the company's base plan.
  • Highly competitive economics, with Wolfcamp A wells (estimated ultimate recovery of 1.0 MMboe for a 7,500-ft lateral) generating approximately 60% to 90% before-tax rate of return at base and upside plan pricing, respectively.
  • The acquired Delaware basin acreage is largely undedicated to third-party oil and gas gathering and water systems, and approximately 12,500 acres are dedicated from a third-party operator.
  • Existing midstream Delaware basin assets include over 300 mi of oil, natural gas, and produced water gathering pipelines (over 100 mi for each product).

Closing is expected in the second quarter of 2017 and is subject to customary regulatory approvals, approval by the holders of a majority of Clayton Williams Energy common stock, and certain other conditions.

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