Oil and gas company Concho Resources has signed an agreement to acquire approximately 40,000 net acres in the core of the Midland Basin in Texas, US, from privately held Reliance Energy for $1.625bn.

The deal is in line with Concho’s plan to expand its core Midland Basin acreage to more than 150,000 net acres and production of 30,000 barrels of oil equivalent per day (MBoepd).

Under the terms of the deal, Concho will purchase 10 MBoepd from 326 vertical wells and 44 horizontal wells.

However, only one of these wells was completed in 2016, Concho said.

Concho CEO and president Tim Leach said: “This transaction demonstrates Concho’s commitment to the Midland Basin as a core operating area and highlights our continued efforts to consolidate complementary leasehold.

“In line with the objectives of our southern Delaware Basin acquisition in the first quarter of 2016, these assets not only build scale, but more importantly high-grade our inventory with additional long-lateral locations that compete with the best projects in the Permian Basin.”

The acquired acreage, which is located in Andrews, Martin and Ector counties, is expected to add more than 530 long-lateral drilling locations to Concho’s inventory by targeting the Middle Spraberry, Lower Spraberry and Wolfcamp B.

According to estimates, the assets considered for acquisition have combined proved reserves of approximately 43 million Boe.

“As we continue to enhance our ability to efficiently allocate capital across our four key assets in the Permian Basin, we are uniquely positioned to deliver attractive returns today and build shareholder value over the long term.”

Scheduled to be completed in October 2016, the acquisition is subject to customary closing conditions.

Concho intends to acquire the Midland Basin assets for about $1.1bn in cash and 3.96 million of its shares.

In an effort to fund part of the cash portion, Concho said it plans to offer 9 million shares in an underwritten public offering.

Image: Concho Resources plans to expand its boost its core Midland Basin acreage to more than 150,000 net acres. Photo: courtesy of Rosemary Ratcliff/FreeDigitalPhotos.net