Parsley Energy signs a definitive agreement to acquire Jagged Peak Energy for $2.27bn. Credit: skeeze from Pixabay.

Parsley Energy has signed a definitive agreement to acquire Jagged Peak Energy in an all-stock deal worth $2.27bn.

The deal also includes Jagged Peak’s debt of $625m as of 30 June.

Under the terms of the merger, Jagged Peak shareholders will receive 0.447 Parsley shares for each Jagged Peak share they own.

With the acquisition, Parsley will expand its Delaware Basin footprint by obtaining access to Jagged Peak’s oil and natural gas reserves in the southern Delaware Basin.

Parsley Energy president and CEO Matt Gallagher said: “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.

“In short, we now have a premier Delaware Basin business that rivals our foundational Midland Basin business. This transaction also creates tangible synergies that will enhance our corporate free cash flow profile and will be shared by the combined shareholder base.”

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Following the deal, Parsley will have 267,000 net acres in the Permian on a pro-forma basis, including 147,000 net acres in the Midland Basin and a 120,000-net acre footprint in the Delaware Basin.

The combination of the companies’ acreage positions is expected to create an interlocking footprint in the Delaware Basin allowing for optimised lease geometry with additional extended lateral wells.

Jagged Peak president and CEO Jim Kleckner said: “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.”

Upon completion of the transaction, Parsley will own 77% of the combined company. Jagged Peak shareholders will own the remaining 23%.

Parsley mentioned that the all-stock transaction is intended to be tax-free to Jagged Peak shareholders.

Expected to be closed in the first quarter of next year, the transaction is subject to customary closing conditions and other regulatory approvals, including Parsley and Jagged Peak shareholders’ approval.