QEP Resources Inc. is expanding its Permian Basin drilling locations by more than half after agreeing to pay $600 million for acreage in the northern Midland sub-basin of West Texas.

The tentative purchase would give the Denver-based independent about 9,400 net acres in Martin County that include an estimated 430-plus potential horizontal drilling locations in four target horizons of the Wolfcamp and Spraberry formations. Current net production from 96 vertical wells is 1,400 boe/d, 83% weighted to crude oil. Net proved reserves based on internal estimates are 76 million boe, with total net recoverable resources of 275 million boe.

“The acquisition adds significant drilling inventory in the core of the northern Midland Basin and broadens our footprint in a world-class crude oil basin,” CEO Chuck Stanley said. “We believe this acquisition, combined with our existing crude oil assets, will enhance our crude oil production growth and improve our operating efficiency.”

Subsidiary QEP Energy Co. has increasingly focused on the Permian’s Midland sub-basin since late 2013 (see Shale Daily, May 7, 2014). The latest agreement involves acreage that is about 10 miles east of existing operations. Nearly all (98%) of the acreage is held by production to the base of the Wolfcamp formation or deeper, and the acreage has a 96% average working interest subject to a 23% royalty burden.

Under the agreement, the initial sellers have until July 13 to obtain executed joinders from associated owners. Legally, joinders allow multiple parties to be heard when the issues or parties involved overlap, allowing, for instance, a sales process to be more efficient or more fair. The $600 million purchase price could be reduced by the allocated value of any assets owned by associated owners that fail to execute a joinder before the deadline.

QEP also said it could, at its discretion, terminate the agreement if the aggregate allocated value of all assets owned by associated owners that fail to participate exceeds 10% of the purchase price.

The transaction is expected to close in September.