Houston's Noble Energy Inc. (NYSE: NBL) executives said they will double the expectations for future production on acreage acquired in its $3.2 billion deal to buy Midland, Texas-based Clayton Williams Energy Inc.(NYSE: CWEI).
Though the company initially reported that the deal was a $2.7 billion cash-and-stock agreement, Noble's CEO David Stover said on a Jan. 17 conference call that amount did not include about $500 million in Clayton debt.
The deal, which is set to close in the second quarter, adds 71,000 net acres in the core of the southern Delaware Basin, a part of the Permian Basin, and brings Noble's position there to 120,000 net acres, Stover said.
"These are fantastic assets in the core of the Delaware Basin, which we have had our eye on for some time,” Stover said.
That means Noble will hold the second-largest collection of net acreage in the southern Delaware Basin, after Midland, Texas-based Concho Resources Inc. (NYSE: CXO), according to data Noble provided with the conference call.
Noble is forecasting it will produce 30,000 barrels of oil equivalent each day out of the new acreage in 2018, Gary Willingham, Noble's executive vice president of operations, said on the conference call. That's more than double what analysts had previously predicted for Clayton's acreage.
The company will do that by adding rigs to the new acreage this year. When the deal closes, it will have one rig on the Clayton assets, but it will add another in the middle of 2017 and yet another at the end of the year, Stover said. That will bring its total rig count in the region to six.
Another part of the value prospect on the acquisition, is the midstream situation. The acreage represented one of the only available deals of this scale that didn't come already tied up in midstream commitments to third parties, Stover said.
That means Noble and its midstream arm, Noble Midstream Partners LP (NYSE: NBLX), can build and operate their own infrastructure on the acreage to suit their own needs.
"We are strong proponents of controlling out own destiny through infrastructure ownership," Willingham said.
By the numbers
71,000 acres
The number of southern Delaware Basin net acres Noble is adding with the acquisition.
120,000 acres
Noble's total southern Delaware Basin net position, including the recent acquisition.
6
The number of rigs Noble plans to operate in the region by the end of the year.
30,000
The average number of barrels of oil equivalent Noble plans to produce on the new acreage each day in 2018.
Closer Look
Noble Energy Inc.
HQ: Houston
Revenue (2015): $3.13 billion
Employees: 2,395
Top executive: David Stover, CEO, chairman and president
Founded: 1932
NYSE: NBL
Recent deals in the Permian Basin
Several other companies have been expanding their footprints in the Permian Basin, an area that has proved profitable even at low oil prices, through recent deals. Here's a list of a few of the largest:
Irving, Texas-based Exxon Mobil corp. (NYSE: XOM) could spend up to $6.6 billion to buy companies owned by the Bass family in Fort Worth. The companies collectively hold 275,000 total acres in the Delaware Basin and produce more than 18,000 barrels of oil equivalent per day.
Houston-based Occidental Petroleum Corp. (NYSE: OXY) spent $2 billion on a slew of Permian deals, including about 35,000 net acres in West Texas’ Reeves and Pecos counties in the Southern Delaware Basin.
Noble Energy Inc. (NYSE: NBL), prior to announcing the Clayton deal, closed a $300 million acreage buy, adding 7,200 acres in the southern Delaware Basin near Reeves County, Texas.
Oklahoma's WPX Energy (NYSE: WPX) agreed to a $775 million deal with Sugar Land-based Carrier Energy Partners LLC and Oklahoma-based Panther Energy Company II LLC. WPX will come away from the deal with 23 producing wells, two drilled but uncompleted horizontal laterals in Reeves, Loving, Ward and Winkler counties in Texas and 920 gross undeveloped locations in the Delaware Basin.
Denver-based SM Energy Co. (NYSE: SM) bought Rock Oil Holdings LLC, based out of Houston and Denver, for $980 million. Rock Oil holds 24,783 acres that produce about 4,900 barrels of oil per day in the Permian Basin.
Denver-based SM Energy Co. (NYSE: SM) is buying Houston-based QStar LLC, a portfolio company of Houston’s EnCap Investments LP, for $1.6 billion. The deal includes 35,700 net acres in Texas’ Howard and Martin counties, which produce about 2,400 net barrels of oil equivalent per day.
Denver-based Centennial Resource Development Inc. (Nasdaq: CDEV) is spending $855 million on 35,000 acres of Texas oil field assets in Reeves County.