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Image courtesy of QEP Resources.

QEP Resources said Tuesday that it has agreed to buy properties in the Permian Basin from a group of undisclosed sellers for $600 million.

The Colorado-based company said it has entered into a definitive agreement “with certain individuals and entities” to acquire oil and gas properties in the Permian Basin.

The acquisition properties are located about 10 miles east of existing QEP operations and encompass about 9,400 net acres in Martin County, Texas.

QEP said 98 percent of acreage is held by production to the base of the Wolfcamp Formation or deeper.

The company will have a 96 percent average working interest subject to a 23 percent royalty burden.

Current net production is currently 1,400 barrels of oil equivalent per day, with crude oil accounting for about 83 percent, from 96 vertical wells.

The company said there is potential for over 430 horizontal drilling locations over four horizons – Wolfcamp A, Wolfcamp B, Middle Spraberry and Spraberry Shale – with additional potential in deeper and shallower horizons.

The properties have net proved reserves, based on internal estimates, of about 76 million barrels of oil equivalent and total net recoverable resources, based on internal estimates, of about 275 MMBoe.

QEP said that properties “will further broaden the company’s exploration and production footprint in the core of the northern Midland Basin.”

The company said the acquisition advances its strategy of “acquiring, developing and producing oil and gas from resource plays in its core operating areas and expanding into areas where it can capitalize on its operating and technical expertise.”

The agreement provides that the initial sellers have until July 13 to obtain executed joinders to the agreement from the associated owners.

In addition to customary purchase price adjustments, the $600 million purchase price will be reduced by the allocated value of any assets owned by associated owners who fail to execute a joinder of the agreement prior to the election deadline.

The agreement may be terminated by QEP, at its sole option, if the aggregate allocated value of all assets owned by non-participating associated owners exceeds 10 percent of the $600 million purchase price.

“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,” QEP chairman, president and CEO Chuck Stanley said.

The transaction is expected to close in September 2016, subject to customary closing conditions, with an effective date of April 1, 2016.