Texas-based Parsley Energy has agreed to acquire rival Permian Basin-focused oil and gas company Jagged Peak in an all-stock deal worth around $2.27bn.

As per the terms of the deal, Parsley Energy will assume the Colorado-based Jagged Peak’s net debt that was around $625m, as of 30 June 2019.

The Texan firm said that the transaction will generate a complementary, high-margin presence in the Delaware Basin. The company said that Jagged Peak’s high-margin, oil-weighted asset base can be integrated into its own near-term development programme.

Parsley Energy president and CEO Matt Gallagher said: “The combination of Parsley and Jagged Peak is a natural fit. Jagged Peak’s oily, high-margin asset base slots in nicely to our returns-focused development approach, its acreage footprint and water infrastructure dovetails into our legacy Delaware Basin position, and its corporate culture aligns with our core values.”

Following the closing of the deal, Parsley Energy will have nearly 267,000 net acres in the Permian Basin. The company’s total acreage will include 147,000 net acres in the Midland Basin and highly contiguous 120,000 net acres in the Delaware Basin.

Jagged Peak is said to have invested around $90m towards the development of significant fresh and produced water infrastructure across its acreage, which is located nearby Parsley Energy’s existing water assets. According to Parsley Energy, integration of Jagged Peak’s water infrastructure network will boost corporate flexibility and operational scale.

Terms of Parsley Energy’s deal with Jagged Peak

As per the transaction terms, Jagged Peak’s shareholders will be issued 0.447 shares of Parsley Energy for each of the Jagged Peak shares they own. The deal values each of the Jagged Peak’s shares at $7.59.

Following the closing of the deal, Parsley Energy’s shareholders will own nearly 77% of the enlarged company, while Jagged Peak’s shareholders will own the remaining 23% stake.

Jagged Peak president and CEO Jim Kleckner said: “The combined assets of Jagged Peak and Parsley Energy are a great fit that create a stronger combined Permian company.

“The pro-forma company provides our shareholders with premier acreage in both the Midland and Delaware sub-basins, while providing additional scale, significant operational synergies, and free cash flow in this competitive environment.”

The transaction is likely to be closed in the first quarter of 2020.

In 2017, Parsley Energy acquired certain assets in the Permian Basin from Double Eagle Energy Permian for about $2.8bn.