Oil and gas company Permian Resources announced on Monday the closure of a deal to fully acquire Earthstone Energy for $4.5bn, inclusive of Earthstone’s debt, as upstream producers look to expand their portfolios.

The deal will strengthen Permian’s position in the Delaware Basin in Texas and New Mexico  by  increasing its total assets by more than 400,000 acres, the company said in a statement. The acquisition will also boost production by approximately 300,000 barrels of oil equivalent per day.

Returns to shareholders will be increased, the company said, with a 20% increase in its quarterly base dividend to $0.06 per share expected to begin from the first quarter of 2024.

Permian co-CEO Will Hickey said: “We have identified numerous ways to leverage our deep Delaware Basin experience and incremental scale to improve upon these assets across the board, including approximately $175m of annual [cash flow improvement]. Permian Resources has a proven integration track record, and we believe the successful execution of these cost savings will create incremental value for both Permian Resources and Earthstone stakeholders.”

The transaction has been “unanimously approved” by boards at both Permian and Earthstone and is expected to close by the end of this year, subject to customary closing conditions, regulatory approvals and shareholder approvals, Permian said.

Upon closing the transaction, Permian Resources’ board of directors will be expanded to consist of 11 directors, which includes the addition of two representatives from Earthstone.

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According to the Financial Times, upstream merger and acquisitions activity in the US reached $24bn in this year’s second quarter, up 167% from the first quarter. Oil giant Chevron’s acquisition of PDC Energy at the beginning of this month, valued at $6.3bn, represented one of the largest deals of the quarter.

US crude oil and gas production is expected to reach record highs this year, according to the Energy Information Administration.