Exploration and production company Chaparral Energy has signed an agreement to divest its North Burbank and Texas Panhandle enhanced oil recovery (EOR) assets in the US for $170m to an undisclosed buyer in order to enhance its liquidity.

The agreement also contains contingent payments to Chaparral through December 2020.

The company has received an $11.9m performance deposit towards the sale.

Chaparral Energy CEO Earl Reynolds said: “The sale of these assets marks a major milestone in the transition of Chaparral to a premiere pure-play STACK operator.

“Our teams will now be able to further focus our capital, activity and operational knowledge exclusively on accelerating development of our highly economic STACK inventory.

“The sale of these assets marks a major milestone in the transition of Chaparral to a premiere pure-play STACK operator.”

“In addition, the proceeds from this transaction will allow us to further reduce our debt, increase liquidity and strengthen our already strong balance sheet. The sale will also materially lower our overall total operating cost structure, which we view as critical in this volatile commodity price environment.”

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The proceeds from the transaction enable the company to reduce its debt, increase liquidity and strengthen balance sheet.

Subject to the fulfilment of certain customary closing conditions, the transaction is scheduled to be closed next month.

As per an earlier statement, the company’s 2017 production guidance, including its EOR assets, was 8.3 to 8.7 million barrels of oil equivalent.

The guidance took into consideration a projected 45% year-over-year increase in STACK production ranging from 9,100 to 9,500 barrels of oil equivalent per day (boepd).

The EOR assets have an estimated current production of around 5,700boepd.