Chesapeake Energy has signed definitive agreements to acquire US-based Chief E&D and associated non-operated interests held by affiliates of Tug Hill for a sum of around $2.5bn.

The consideration by the US shale gas producer is made up of $2bn in cash and nearly 9.44 million common shares.

Chief and Tug Hill maintain producing assets and an inventory of drilling locations in the Marcellus Shale in Northeast Pennsylvania.

Through the acquisition, Chesapeake Energy will add nearly 113,000 net acres in Marcellus, of which more than 90% is held by production.

According to the company, the acquisition bolsters its position in Marcellus. It will expand the company’s premium undeveloped locations by nearly 25%, while extending drilling inventory to more than 15 years, based on current activity levels.

Furthermore, the shale gas producer expects to increase its daily production capacity in Marcellus by up to 200mmcf of gas.

Chesapeake Energy also expects sustained acquired production of 800-900mmcf per day with one or two rigs over the next several years.

Chesapeake Energy president and CEO Nick Dell’Osso said: “We know the importance of scale and the Chief and Tug Hill assets fit like a glove with our existing position in the northeast Marcellus Shale.

“The acquisition checks all the boxes: it lengthens our premium inventory, further focuses our capital allocation, provides operational efficiencies, is accretive to free cash flow per share, allows us to grow our base dividend, preserves our balance sheet strength and improves our GHG emissions metrics.”

The deal, which is subject to certain regulatory approvals and conditions, is anticipated to close by the end of Q1 2022.

Separately, Chesapeake Energy agreed to divest its assets in Powder River Basin in Wyoming to Continental Resources for a sum of around $450m.

This deal is also expected to close in Q1 2022 and is subject to certain customary closing conditions.

Last November, Chesapeake Energy had closed a $2.2bn deal to acquire Vine Energy, a natural gas production company that is active in the Haynesville and Mid-Bossier shale plays located in Northwest Louisiana.