Centennial Resource Development Inc. on Monday agreed to ante up $350 million to GMT Exploration Co. to expand its Permian Basin holdings into New Mexico’s Delaware sub-basin.

Once the acquisition is in hand, expected by the end of June, Centennial expects to build its Permian reserves faster than it had forecast in March.

The explorer has reset its 2020 production target to 60,000 b/d from 50,000 b/d, representing a four-year compound annual oil growth rate of 80%. Less than two months ago, it had forecast its Permian volumes would expand by 72%/year over the four-year period.

“Located in the sweet-spot of the Bone Spring trend, this acquisition marks our entry into the Northern Delaware Basin, further expanding our footprint into an area with similar producing horizons as our existing acreage,” said CEO Mark Papa. “This is an area where our geoscience and reservoir teams have built their careers and worked these geologic formations.

“Consistent with our strategy, this acquisition fits our high rate-of-return threshold and increases our overall oil-weighting. We expect well results in this northern area to provide rates of return that are competitive with our existing portfolio.”

The acquisition includes 11,860 net acres in Lea County, 79% operated and 85% average working interest. The acreage, 77% state-owned, 19% federal and 4% fee, produced 2,100 boe/d net on average in the first quarter, 77% weighted to oil.

Papa said there were minimal drilling requirements on the land, which is 67% held by production. Less than one operated rig would be able to hold the acreage.

Estimated undeveloped resource potential on the GMT acreage is more than 91 million boe, with at least 255 gross horizontal drilling locations in the Avalon Shale, Second and Third Bone Spring and Wolfcamp A formations based on well spacing of 660-1,056 feet.

Located in southern New Mexico directly north of the prolific Red Hills oil and gas field, the acquisition boosts Centennial’s Delaware position to 88,000 net acres from 76,000 at the end of 2016. Offset operators include Papa’s former company EOG Resources Inc. and Concho Resources Inc.

“Based on a thorough technical review by Centennial’s geoscience team, the company is optimistic about the exploration and development potential on the newly acquired acreage,” Papa said. “Centennial has significant subsurface control through 36 existing horizontal wells on the acquired acreage as well as significant industry activity surrounding the acreage.”

Pro forma for the Delaware acquisition, Centennial increased the midpoint of its 2017 production guidance to 25,750 boe/d from 24,500 boe/d and raised the midpoint of to 15,750 b/d from 14,850 b/d.

GMT currently has no operated rigs on the acreage, but Centennial expects to add one horizontal rig during the third quarter and spud about five gross wells through the end of the year. Four wells are expected to be completed and placed on production late this year.

Well costs on the acquired acreage should be similar to the company’s Reeves County wells in West Texas, which are $6-7.0 million for 4,500-foot laterals.

Because of the incremental activity associated with the acquisition, Centennial increased the midpoint of its full-year 2017 drilling and completion capital expenditure guidance by $38 million, with 85% associated with operated activity.

The purchase is to be financed from proceeds from capital markets transactions. Latham & Watkins LLP acted as legal counsel to Centennial, while Tudor, Pickering, Holt & Co. acted as GMT’s financial adviser.

Centennial also issued preliminary first quarter guidance, indicating average output was 10,500 b/d, a 65% increase from a partial fourth quarter, Oct. 11 through Dec. 31. Papa’s Silver Run Acquisition Corp., which launched early last year, in October took over Centennial and rebranded under its name.

“Estimated oil production during the quarter was higher than the company’s internal expectations, which was driven by continued strong well results across its acreage position in Reeves County, TX,” management said. More details about first quarter performance are scheduled to be issued on May 10.