Occidental Petroleum Corp. is gaining a bit of running room in the Permian Basin under a joint venture (JV) with Colombia’s Ecopetrol SA to develop 97,000 net acres in the Permian Basin’s Midland formation.

The JV, subject to U.S. regulatory approval, would enable Ecopetrol to book 160 million boe of proved undeveloped reserves when the transaction is completed and progressively increase output until 2027.

“We are excited to partner with one of the largest operators in the Permian Basin, especially one we have worked successfully with for so many decades,” said Ecopetrol CEO President Felipe Bayon. “This is a key step to enhance our reserve base and production growth whilst we strengthen our capabilities in shale development and bring this technology to Colombia for the economic benefit of the country.”

Under terms of the agreement, Ecopetrol would pay $750 million in cash plus $750 million of carried capital in exchange for a 49% stake in the venture. Occidental would be majority owner at 51% and operate the assets. Over the carry period, Ecopetrol would pay 75% of Occidental’s share of capital expenditures.

In addition to its share of future production, Ecopetrol would have employees on the ground in the Permian to ensure that technology and knowledge learned would transfer to its assets in Colombia.

Ecopetrol plans to invest up to $500 billion in unconventional pilot programs from 2019-2021.

Last December, Colombia’s Agencia Nacional de Hidrocarburos Director Luis Miguel Morelli approved three hydraulic fracturing pilots in the Middle Magdalena and Cesar Ranchería basins. The new JV, set to be completed by year’s end, would allow Houston-based Occidental to accelerate its development plans. The company is nearing the finish line in a costly takeover of Anadarko Petroleum Corp. With the JV, Occidental would retain production and cash flow from its existing Midland operations.

Ecopetrol is receiving financial advice from Credit Suisse, legal advice from Shearman & Sterling and technical advice from DeGolyer and McNaughton. Petrie Partners is advising the Ecopetrol board.

Tudor, Pickering, Holt & Co. (TPH) was Occidental’s financial adviser.

“In this unique transaction between existing long-time partners in Colombia, Occidental will benefit from cash proceeds today as well as funding for accelerated development on a core Midland Basin position,” said TPH CEO Maynard Holt, “while Ecopetrol is able to gain exposure to the leading North American oil basin with a great partner and also advance their expertise in shale development.

“Over time, Ecopetrol could benefit from taking lessons learned in the Permian to their assets in Colombia. In short, this unique arrangement will benefit both partners in achieving their respective strategic goals…As the world recognizes the attractive opportunities for putting money to work in oil and gas, we are optimistic this transaction will grab people’s attention as we all explore creative ways to fund our industry.”

To develop the JV, Ecopetrol incorporated two new companies, Ecopetrol Permian LLC and Ecopetrol USA Inc., and converted Ecopetrol America Inc. into Ecopetrol America LLC, which would continue to focus on U.S. Gulf of Mexico operations.

Ecopetrol USA was incorporated in Delaware, and is 100% owned by Ecopetrol SA through subsidiary Ecopetrol Global Energy SLU. Ecopetrol Permian also was incorporated in Delaware, and is 100% owned by Ecopetrol USA and indirectly by Ecopetrol SA.