Earthstone Energy has signed an agreement with Chisholm Energy Holdings to acquire its assets located in the northern Delaware Basin of New Mexico, US, for $604m.

The transaction includes 36,100 net acres in the core of the Delaware Basin in Eddy and Lea Counties, with a current net production of nearly 13,500 barrels of oil equivalent per day (Boepd).

Currently, Chisholm is operating a two-rig drilling programme, which is expected to be maintained by Earthstone, upon the completion of the transaction.

The acquisition is expected to increase Earthstone’s net production by about 39%, apart from expanding its Permian Basin acreage by over 35% to approximately 138,000 net acres.

Earthstone president and CEO Robert Anderson said: “The Chisholm Acquisition caps off a series of highly-accretive and value-adding transactions that have dramatically transformed Earthstone during 2021 and further establishes Earthstone as a Permian Basin focused company with increasing scale.

“When this acquisition is combined with the previous four acquisitions completed in 2021, we will have increased our Permian Basin net acreage footprint by approximately 400%, almost tripled our daily production rate and meaningfully increased Free Cash Flow generation capacity.”

The consideration for the acquisition of Chisholm, which is majority owned by Warburg Pincus and its affiliates, consists of $340m in cash at closing.

Earthstone is expected to fund the cash portion of the acquisition price and fees and expenses with cash on hand and new borrowings under its senior secured revolving credit facility.

Wells Fargo Securities served as exclusive financial advisor to Earthstone in connection with the transaction, while Jefferies served as exclusive financial advisor to Chisholm.

Earthstone is engaged in the development and operation of oil and natural gas properties, with its main assets located in the Permian Basin of west Texas.

In November this year, the company has completed the acquisition of operated assets located in the Midland Basin from Foreland Investments and from BCC-Foreland.