Earthstone Energy has agreed to acquire the assets of oil and gas producer Bighorn Permian Resources in a deal worth around $860m.

The transaction includes $770m in cash and up to 6.8 million shares of Earthstone’s Class A common stock valued at $90m.

Bighorn has nearly 110,600 net acres in the Midland Basin, mainly in the areas of Reagan and Irion counties.

The company’s assets have reported average daily production of 42,400 barrels of oil equivalent per day (boepd), including 25% oil and 57% liquids, during November last year.

Earthstone president and CEO Robert Anderson said: “The transformation of Earthstone continues with the announcement of the significant and highly-accretive Bighorn acquisition.

“Combining the Bighorn Acquisition with the four acquisitions completed in 2021 and the pending Chisholm acquisition, we will have more than quadrupled our daily production rate, greatly expanded our Permian Basin acreage footprint and increased our Free Cash Flow generating capacity by many multiples since year-end 2020.”

Earthstone aims to use the cash on hand, borrowings under its credit facility and proceeds from a private placement of its equity to fund the cash portion of the consideration.

Subject to customary closing adjustments, the deal is expected to be completed in the second quarter of this year.

Earthstone has also signed an agreement to privately issue $280m of equity with two institutional investors, including affiliates of EnCap Investments and funds managed by Post Oak Energy Capital.

The company is also expecting the completion of earlier announced acquisition of the assets of Chisholm Energy Holdings in the middle of this month.

In December last year, Earthstone signed an agreement with Chisholm Energy to acquire its assets located in the northern Delaware Basin of New Mexico for $604m.