US electricity producer Calpine has agreed to sell its domestic oil and gas exploration and production assets for $1.05 billion to undisclosed private investors.

According to the terms of the sale, Calpine will create a new subsidiary, Rosetta Resources, which will issue 45.3 million shares for $725 million in a private placement.

Rosetta will then use the proceeds as well as $325 million in proceeds from a new credit facility, to buy all of Calpine’s domestic oil and gas exploration and production assets. Following the transaction, Calpine will surrender its interest in Rosetta.

Calpine will use to sale to further its plan to cut $3 billion of debt. From May this year Calpine said its oil and gas reserves totaled 383 billion cubic feet equivalent. The sale is scheduled to close on July 7, 2005.