Southwestern Energy has agreed to acquire US-based GEP Haynesville in a $1.85bn deal to create the largest dual-basin natural gas producer.

Under the deal, GEP Haynesville will receive a cash payment of $1.33bn and about $525m in Southwestern shares.

Southwestern Energy expects the acquisition to add 700 million cubic feet of gas per day production in Haynesville.

In addition to boosting 2022 free cash flow per share by 15% for Southwestern, the transaction is expected to immediately add to the firm’s margins, returns and key per-share metrics.

Southwestern Energy president and CEO Bill Way said the deal will position the firm as the largest producer in Haynesville while enhancing its presence in the US’ top two premier natural gas basins.

Planned to be closed by the end of this year, the transaction is subject to customary closing conditions and regulatory approvals.

The combined unit is expected to have a production capacity of about 4.7 billion cubic feet equivalent (bcfe) per day.

It is also expected to provide Southwestern with immediate annual cost savings of $25m.

Southwestern said in a statement: “Within Southwestern’s balanced portfolio, approximately 65% of its daily natural gas production will be marketed to growing demand centres along the Gulf Coast, positioning the company to efficiently capture natural gas price improvement and expand margins.

“The company expects further value-enhancing opportunities through operating economies, marketing synergies, contract optimisation, and reduced cost of capital given its improved financial and business risk profile.”

GEP Haynesville purchased the property in the Louisiana portion of the Haynesville basin in 2015 from Encana Corp for $850m.

GEP Haynesville is a joint venture between GeoSouthern Haynesville LP and funds managed by GSO Capital Partners.