Noble buys Clayton for $2.7 billion to expand in Permian

Noble Energy agreed to buy Clayton Williams Energy for $2.7 billion in stock and cash to expand in America’s hottest shale play.

The combination will create the second-largest acreage position in the Southern Delaware Basin of the Permian shale formation, Houston-based Noble said in a statement Monday. The deal provides more than 4,200 drilling locations on about 120,000 net acres, with resources of more than 2 billion barrels of oil equivalent, Noble said.

The Permian has been a hot spot for deals because it’s one of the few areas in the world where producers managed to make a profit during the downturn. While crude prices rallied last year thanks to an OPEC-led agreement to ease a global supply glut, they’re at half their peak level in mid-2014.

Shareholders of Clayton Williams, based in Midland, Texas, will receive 2.7874 shares of Noble’s common stock and $34.75 for each share of common stock held, totaling 55 million shares and $665 million in cash, Noble said. In addition, the deal includes the assumption of about $500 million in net debt.

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Noble plans to increase production on the acquired assets to about 60,000 barrels of oil equivalent a day by 2020, from about 10,000 currently.

The cash portion of the acquisition will be financed through a $4 billion revolving credit facility, from which Noble hadn’t drawn any funds as of the end of last year. The company expects to retire Clayton Williams’s outstanding debt. The deal will bring annual cost savings to Noble of approximately $75 million.