Noble acquires Rosetta Resources for $2.1bn

Noble Energy will acquire Rosetta Resources for $2.1bn in stock, gaining entry to two top US shale areas of the Eagle Ford and the Permian basin.

Noble will also take on $1.8bn of Rosetta's debt.

The deal is one of the relatively few acquisitions to occur since a sharp drop in crude prices that started last summer began to squeeze cash flow for producers. Smaller companies such as Quicksilver Resources and American Eagle Energy have declared bankruptcy while larger peers dipped into debt and equity markets to fund operations. Continental Resources, for example, raised $2.5bn in February under its existing facility, while Marathon raised its revolving credit facility to $3bn through 2020 from $2.5bn.

As low prices persist, the distress among smaller independents may offer stronger firms like Noble more opportunities.

Rosetta had raised about $237mn in March by selling shares to repay outstanding debt under its revolving credit facility and to meet everyday expenses. In February it expanded a revolving credit facility to $950mn with a commitment of around $800mn. It posted a net loss of $8.6mn in the first quarter versus profits of $45.6mn a year earlier.

Rosetta's asset base includes about 50,000 net acres in the Eagle Ford and 56,000 net acres in the Permian, both in Texas. Analysts at Tudor Pickering Holt said the deal lets Noble add a third leg to its US onshore portfolio, complementing existing Delaware basin and Marcellus shale assets.

Noble has identified more than 1,800 horizontal drilling locations for development on the Rosetta acreage, providing net unrisked resource potential of 1bn barrels of oil equivalent (boe), the company said.

"The Eagle Ford and the Permian are premier unconventional resource plays, two of the most economic in the US, which will expand our resource base and development inventory and further diversify our portfolio," Noble's chief executive Dave Stover said.

Rosetta produced 66,000 boe/d in the first quarter, and year-end 2014 proved reserves were 282mn boe. More than 60pc of Rosetta's current output and proved reserves are liquids. Noble expects an annual output growth of about 15pc over the next few years.

Noble Energy, which also posted a loss in the first quarter, had total liquidity of $5.7bn, which included $1.7bn in cash and $4bn in unused credit facilities. It had raised over $1bn issuing new shares in the first quarter.

mg/tdf

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