KLR Energy Acquisition Corp., a blank check company, has reached an agreement to merge with Tema Oil and Gas Co. to form Rosehill Resources Inc., a new pure-play company focused on the Delaware Basin, in a deal valued at $445 million.

In a statement Tuesday, KLR Energy said the merger with Tema has been unanimously approved by the boards of directors at both companies, and was expected to close in the first half of 2017. The deal is still subject to certain closing conditions, including KLR Energy shareholder approval.

“This transaction represents exactly the type of business combination target we were seeking to provide to our investors when we took KLR Energy public earlier this year,” said KLR Energy CEO Gary Hanna. He added that following the merger, Rosehill will have “a strong balance sheet and outstanding growth potential.”

Hanna will serve as chairman of the board of directors at Rosehill following the merger, while Tema President Alan Townsend will become CEO of the new company.

According to KLR Energy, the anticipated pro forma enterprise value of Rosehill is $445 million, which implies a projected adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of 9.8x and 5.8x for calendar years 2017 and 2018, respectively. Post-closing equity and preferred capitalization is expected to total $507 million at $10.40/share, assuming there are no stockholder redemptions. Rosehill also expects to have $117 million of projected liquidity to fund its development plan.

“Rosehill will have an excellent existing production base, a strong balance sheet with significant liquidity and a deep bench of technical, land and operations expertise,” Townsend said. “Tema has approximately 200 potential drilling locations on its existing acreage. That is about nine years of inventory assuming a two-rig drilling program and doesn’t include significant upside potential through a downspacing program.

“Following the business combination, we will immediately begin to accelerate development of the Tema assets while also pursuing focused acquisitions.”

The merger calls for KLR Energy to officially change its name to Rosehill and apply to continue trading on NASDAQ under the new ticker symbols ROSE, ROSEU and ROSEW.

In connection with the merger, KLR Energy said “certain institutional investors” will purchase $75 million of Rosehill’s Series A Preferred Stock at $1,000/share and warrants. Additionally, Tema’s parent company, Rosemore Inc., and KLR Energy’s sponsor — KLR Energy Sponsor LLC, an affiliate of KLR Group Holdings LLC and KLR Group LLC — agreed to purchase up to $20 million of Series A Preferred Stock or Class A Common Stock “in certain circumstances to backstop redemptions.”

Proceeds from the aforementioned private placements and the backstop will be used to fund a portion of the cash consideration required to effect the merger and for general corporate purposes, KLR Energy said. After the deal closes, Rosemore and its affiliates will become the single largest stockholder in Rosehill and will have two members on the new company’s board.

Rosehill will have 4,771 net acres in the core of the Delaware Basin, with more than 80% held by production and 99% operated. Net production is expected to exceed 6,000 boe/d in January 2017.

KLR Energy was to launch an initial public offering (IPO) last March, but the IPO was delayed.

BMO Capital Markets and KLR Group acted as capital market advisors and private placement agents for KLR Energy, while the law firm Vinson & Elkins LLP acted as legal counsel to KLR Energy and KLR Group. Meanwhile, Petrie Partners LLC acted as financial advisor to Rosemore and Tema, and the law firm Norton Rose Fulbright US LLP acted as legal counsel to Rosemore and Tema.