Cimarex is primarily focused on exploration and production in the Permian Basin and Mid-Continent areas. Credit: Vincent Parsons.

US oil and gas exploration and production firm Cimarex has signed a $1.6bn agreement to acquire Resolute Energy to enhance its presence in the Permian Basin.

According to the cash-and-stock deal, Resolute Energy shareholders will receive 0.3943 shares of Cimarex common stock, $35 a share in cash, or a combination of $14 a share in cash and a 0.2366 share of common stock.

Including the assumption of Resolute’s $710m long-term debt, the transaction is expected to expand Cimarex’s footprint in Reeves County by 21,100 net acres and add 35Mboe/d to its production base.

“The Resolute assets are expected to generate free cash flow in 2019, basically funding any additional development capital from the start.”

Cimarex chairman, president and CEO Thomas Jorden said: “It is a perfect fit with our existing Reeves County position and will allow us to leverage our knowledge and deliver superior results over a broader asset base for the benefit of both Cimarex and Resolute shareholders.

“The Resolute assets are expected to generate free cash flow in 2019, basically funding any additional development capital from the start.”

Following the completion of the transaction, Cimarex shareholders will own 94.4% of the combined entity, while Resolute shareholders will hold the remaining 5.6%.

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Subject to shareholder and regulatory approvals, the acquisition is expected to close by the end of the first quarter of next year.

Cimarex operates in the Permian Basin and Mid-Continent areas of the US. The company expects its fourth quarter 2018 production volumes to average between 238Mboe/d and 247Mboe/d.

Evercore and Akin Gump Strauss Hauer & Feld are respectively serving as Cimarex’s financial and legal advisers.