May 11, 2015 / 12:15 PM / 5 years ago

Noble Energy's $2 billion Rosetta deal reopens U.S. shale oil M&A

(Reuters) - Noble Energy Inc said on Monday it would acquire Rosetta Resources Inc for about $2 billion in stock, marking the first significant deal among U.S. shale oil producers following a steep fall in global crude prices.

A nearly 50 percent drop in crude prices since June highs of over $100 per barrel has for months raised expectations for a wave of mergers and acquisitions in the highly-fragmented shale oil industry.

But until now buyers and sellers had been unable to agree on valuations and the outlook for future prices. With the Noble acquisition, a precedent has been set that will clear a path for other companies plotting shale deals, people familiar with the transaction said.

Shares of Rosetta rose 25 percent to $24.23 and shares of Noble fell 7 percent to $45.39 on the New York Stock Exchange.

The deal will give Noble entry into two of the country’s top producing shale fields, the Eagle Ford Shale and Permian Bain in Texas. Noble, which is also drilling for natural gas offshore Israel, is already pumping oil and gas in other fields, including in Colorado.

The Houston-based company said it had identified more than 1,800 drilling locations across Rosetta’s liquids-rich assets, consisting of 50,000 net acres (20,234 net hectares) in the Eagle Ford shale and 56,000 net acres in the Permian.

The assets have the potential to produce about 1 billion barrels of oil equivalent and will raise company-wide production 21 percent, Noble said.

“Noble has the balance sheet, the expertise, and the bandwidth to do a great job with these two properties,” Irene Haas, an analyst with Wunderlich Securities Inc, said in a note.

Royal Dutch Shell agreed last month to buy BG Group for about $70 billion in a deal centered around liquefied natural gas. That deal was also seen as paving the way for mergers and acquisitions in the oil sector..

The offer of 0.542 Noble share for each Rosetta share held represents a 38 percent premium to Rosetta’s Friday close. The shares had lost nearly two-thirds of their value since June.

Noble will also assume Rosetta’s net debt of $1.8 billion as of March 31.

“The purchase does add diversification into the Permian and Eagle Ford, which reduces Noble’s exposure to Israel,” Barclays analysts wrote in a note.

Up to Friday’s close, Noble’s shares had fallen nearly 37 percent since last June.

Additional reporting by Mike Stone in New York and Anna Driver in Houston

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