Noble Energy (NBL) to Offer Senior Notes in Two Tranches – August 11, 2017

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Noble Energy, Inc. (NBL Free Report) announced its decision to issue senior notes in two tranches. Per the company, it will issue $600 million of 3.850% senior notes with the maturity date of Jan 15, 2028 and $500 million of 4.950% senior notes with the maturity date of Aug 15, 2047.

Subject to customary closing conditions, this offering is expected to close latest by Aug 15.

Proceeds from the Offering

The company wants to utilize the net proceeds from the issue along with some available liquidity or cash on hand to purchase cash tender offer or redeem a part or the entire of its outstanding $1 billion or 8.25% senior notes which will also include paying fees, premiums, expenses and other unpaid and accrued interest related to the tender offer or redemption.

Factors Favoring Noble Energy

Noble Energy is backed by organic and inorganic assets, cost reduction initiatives and higher demand from international and domestic assets. The company’s presence in the resource-rich Eagle Ford Shale and Permian Basin was highly boosted with the acquisition of the Rosetta Resources.

Permian Basin Shale covers roughly 75,000 square miles, almost half the size of California. As per experts, it is cheaper to drill and complete oil wells in the Permian Basin than most other major fields. This is the reason why Exxon Mobil Corp. (XOM Free Report) , WPX Energy Inc. (WPX Free Report) and Resolute Energy Corp. (REN Free Report) have been more inclined to increase their portfolio in the region. (Read More: 5 Ways Permian Basin’s Oil Boom Can Make You Rich)

NBL Energy has also completed acquiring the Clayton Williams Energy, Inc. and further strengthened its position in onshore U.S. The company expects production volumes to improve sequentially due to higher number of wells brought online in the DJ Basin, Eagle Ford and the Delaware area.

The company is also targeting to sell off some of its non-core assets. This way it aims to generate at least $1 billion cash proceeds.

Additionally, the company exited 2016 with liquidity of $4.5 billion. An improved liquidity profile, following the asset sales, will enable Noble Energy to pay off some of its existing debt. This will lower the underlying cost structure and strengthen its balance sheet.

Price Movement

Shares of Noble Energy have lost 29.2% in the last 12 months compared with the industry’s loss of 26.7%.

A stringent drilling regulations and lack of adequate infrastructure facilities near its drilling zones could affect performance.

Zacks Rank

NBL Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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