Oil producer RSP Permian Inc (RSPP.N) said it would buy oil and gas company Silver Hill Energy Partners for about $2.4 billion to expand its assets in the Permian Basin in Texas.
RSP Permian is the latest company to bulk up in the Permian Basin, widely seen as the cheapest place to develop onshore fields in the United States.
Thursday's deal adds to more than $12 billion in transactions this year in the Permian Basin.
RSP Permian, with a majority of its acreage located in the core of the Midland Basin within the Permian Basin, said Silver Hill was based in the oil-weighted area of the Delaware Basin.
Reuters reported in August that Silver Hill was up for sale.
RSP Permian said on Thursday that it would pay $1.25 billion in cash and 31 million in shares for Silver Hill, owned by private equity firms Kayne Anderson Capital Advisors LP and Ridgemont Equity Partners.
RSP also said the purchase would be funded by an offering of 20 million shares.
Silver Hill Energy Partners comprises two entities, Silver Hill Energy Partners LLC and Silver Hill E&P II LLC. Their current net production is 15,000 barrels of oil equivalent per day (boe/d).
The deal for Silver Hill Energy Partners LLC is expected to close in November and the other entity in March.
RSP also increased its average daily production forecast in 2016 to 28,500-29,500 boe/d from 26,500-28,500 boe/d, largely attributing this to its existing wells' performance.
The short period of the newly acquired production would not meaningfully impact the forecast, the company said.
RBC Capital Markets is the lead M&A adviser to RSP and Barclays Capital the co-adviser. Vinson & Elkins L.L.P. served as legal counsel to RSP.
Jefferies LLC advised Silver Hill while Thompson & Knight LLP and DLA Piper LLP served as legal counsel.
RSP's shares were down 4.8 percent at $39.73 in extended trading.
(Reporting by Vishaka George in Bengaluru; Editing by Don Sebastian)