RSP Permian has signed agreements to acquire oil and gas company Silver Hill Energy Partners for about $2.4bn in a bid to strengthen its operations in the US.

Silver Hill, which is owned by affiliates of Kayne Anderson Capital Advisors and Ridgemont Equity Partners, owns 41,000 net acres in northeast Loving and northwest Winkler Counties in Texas.

As per the deal, RSP Permian will purchase Silver Hill’s two privately held entities, Silver Hill Energy Partners (SHEP I) and Silver Hill E&P (SHEP II), for $1.25bn in cash and 31 million shares of its common stock.

The acquisition offers an opportunity for RSP Permian to combine two growth-focused firms in the Permian Basin with complementary asset bases.

RSP CEO Steve Gray said: "This transaction creates a compelling growth platform with the highest quality assets in the core of both the Midland and Delaware Basins that each exhibit strong returns and have substantial combined upside.

“The Silver Hill team has done an incredible job of demonstrating the vast potential of the asset base with strong results across multiple horizontal zones." 

RSP Permian said that the two entities have combined production capacity of 15,000 barrels of oil equivalent per day (boe/d).

Gray added: "We believe the assets of Silver Hill are located in the best part of the Delaware Basin and will be a perfect complement to our existing asset base. 

“The returns on Silver Hill's horizontal wells compare favorably with our Midland Basin assets and generally rank in the top quartile of our drilling inventory.”

The transaction for SHEP I is planned to be completed in the fourth quarter of 2016. The entity will receive approximately $604m cash and 15 million RSP shares. 

On the other hand, the deal to acquire SHEP II is scheduled to be completed in the first quarter of 2017. SHEP II will receive approximately $646m cash and 16 million RSP shares. 

The two transactions are subject to certain closing conditions, customary purchase price adjustments, and regulatory and third party approvals.

Image: Silver Hill’s two entities have combined production capacity of 15,000 boe/d in US. Photo: courtesy of Rosemary Ratcliff/