Denver-based Cimarex has signed an agreement to acquire oil and gas company Resolute Energy in a cash and stock deal worth nearly $1.6bn.
Following the completion of the transaction, Cimarex shareholders will hold about 94.4% stake in the combined entity, while Resolute Energy shareholders will own nearly 5.6%.
Resolute Energy is involved in the acquisition and development of unconventional oil and gas properties in the Delaware Basin portion of the Permian Basin of west Texas. The company has been active in the Delaware Basin since 2011.
Cimarex said that the acquisition is in line with its investment and capital allocation strategy, under which the company targets to purchase assets with attractive returns.
The company expects the combined companies to generate free cash flow in 2020.
The acquisition is expected to result in an addition of 21,100 acres to Cimarex’s acreage in Reeves County, Texas.
Cimarex chairman, president and CEO Thomas Jorden said: “This high-quality, bolt-on asset is tailor-made for Cimarex.
“It is a perfect fit with our existing Reeves County position and will allow us to leverage our knowledge and deliver superior results over a broader asset base for the benefit of both Cimarex and Resolute shareholders.”
The company intends to fund the acquisition of Resolute Energy through a combination of cash on hand and borrowings under its revolving credit facility.
The transaction is expected to be completed by the end of the first quarter of 2019. It is subject to the approval of Resolute Energy shareholders, and the satisfaction of certain regulatory approvals and other customary closing conditions.
With principal operations in the Permian Basin and Mid-Continent areas of the US, Cimarex is an independent oil and gas exploration and production firm.
In September, the company completed the sale of oil and gas properties principally located in Ward County, Texas, for $570m in cash to Callon Petroleum.
The properties have a production capacity of about 6,831 barrels of oil equivalent per day.