Diamondback Energy Inc., which has become an exploration master in the Permian Basin’s Midland sub-basin, is grabbing more Texas leasehold in a $560 million agreement that gives it entry into the basin’s twin prolific play, the Delaware.

The pending acquisition by the Midland, TX-based independent would add 19,180 net (38,765 gross) surface acres of operated leasehold, mostly along the Pecos River in Reeves and Ward counties. The transaction with the undisclosed seller, set to close in September, would bring its total Permian leasehold to 105,000 net acres.

“Diamondback’s accretive entrance into the Delaware Basin represents another strategic milestone for our company,” CEO Travis Stice said. “The acreage sits within the most coveted area of the Southern Delaware Basin and has significant multi-zone and long-lateral potential.”

Stice signaled in February that the company was prowling for opportunistic Permian bolt-ons (see Shale Daily, Feb. 18). Two of the three derisked zones in the acreage now being bought “have comparable estimated ultimate recoveries (EUR) per lateral foot” to the Lower Spraberry in the Northern Midland sub-basin, where Diamondback is one of the biggest operators.

“With Diamondback’s proven ability to execute, we now believe we have a path to achieve 100,000 boe/d in daily production in the coming years,” Stice said.

The acquisition includes about 1,000 boe/d net output, with net proved developed reserves estimated at 2.2 million boe. Potential horizontal drilling locations were estimated at 290 net across four zones, with the contiguous position supporting average drilling lengths of 9,500 feet. Saltwater disposal infrastructure included in the transaction is valued at $10-15 million.

With the purchase, Diamondback boosted its 2016 production guidance to 38,000-40,000 boe/d, 11% higher than the midpoint issued in February. Activity in the Permian would be increased to four rigs from three, and if commodity prices continue to strengthen, a fifth rig could be added later this year.

“We believe our recently added fourth rig will put us in a position of strength exiting the year and enable us to have double-digit production growth in 2017, while spending within cash flow at a $55 flat West Texas Intermediate price environment,” Stice said. Early performance from wells in Glasscock and Howard counties in Texas “continues to impress, and these areas will be core assets for Diamondback for years to come. We are encouraged by early production from our first operated three-well pad in Howard County and intend to provide 30-day rates when available.”

Diamondback now expects to complete 60-75 gross horizontals this year, 30% higher than earlier guidance. To pay for the increased completions, 2016 capital expenditures are forecast to be $350-425 million from earlier guidance of $250-375 million. However, full-year lease operating expenses now are expected to be $5.50-6.25/boe from prior estimates of $5.50-6.50 because of cost savings and efficiencies.

Operations-wise, Diamondback recently completed two Wolfcamp A wells in Spanish Trail with average lateral lengths of 10,800 feet. The wells have produced an average of 1,665 boe/d, 92% weighted to oil, over 14 days.

Diamondback’s average production between April and June was 36,841 boe/d, 72% oil. Realized prices during the period averaged $41.88/bbl oil, $1.60/Mcf natural gas and $13.95/bbl liquids.

Subsidiary Viper Energy Partners LP, also a Permian pure-play operator, reported average 2Q2016 output of 5,380 boe/d, 76% oil. Viper’s realized prices averaged $41.73 oil, $1.56 gas and $13.03 liquids. Viper expects to be at the low end of its 6,000-6,500 boe/d guidance for 2016 because operators deferred completions in the first six months.