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Noble Energy: Now A Strong Stock On New Focus

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Investment Underground

by Laura McPherson

Noble Energy (NBL) recently disclosed terms of the deal to sell certain assets in the Granite Wash and Marmaton fields to Unit (UNT). The divestiture to Unit is part of Noble's strategy to streamline its portfolio into attractive, high value assets, which in turn should allow it better flexibility with its capital expenditures. The strategy will eventually drive revenues higher with more rigs drilling on the plays that are most likely to return value to Noble.

Sale to Unit is First Step in New Strategy

Under the terms of the deal, Unit will receive Noble's 900 oil and gas wells across 84,000 acres of the Granite Wash and Marmaton, which are currently producing 60 mcf of natural gas per day, in a mix of 65% dry natural gas, 27% natural gas liquids, and 8% crude oil. Unit will pay Noble $617 million, which it plans to fund through the acquisition of long term debt, in part in the form of privately offered senior subordinated notes. According to Noble President and COO David L. Stover, "the sale is part of our previously announced non-core divestiture plan which will allow us to allocate capital and people to high-value and high-growth areas."

Though the sale does reduce Noble's participation in horizontal drilling, it will plan, under terms of the deal, to use at least part of its freed resources on its holdings in the DJ Basin. It will also be able to use part of its new flexibility on the Marcellus, where it plans to drill 99 wet wells with its joint venture partner Consol Energy (CNX) this year. Noble anticipates 126% annual growth in production on the Marcellus, far ahead of its next highest annual growth prediction for a single play, which is 32% for the Gulf of Mexico.

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