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EOG Resources said Tuesday that it will combined with Yates Petroleum in a transaction worth $2.5 billion.

Under the agreement, EOG will combined with Yates Petroleum Corporation, Abo Petroleum Corporation, MYCO Industries, Inc. and certain other entities.

Under the terms of the private, negotiated transaction, EOG will issue 26.06 million shares of common stock valued at $2.3 billion and pay $37 million in cash, subject to certain closing adjustments and lock-up provisions.

EOG will assume and repay $245 million of Yates debt at closing that will be offset by $131 million of anticipated cash from Yates.

Yates is a privately held, independent crude oil and natural gas company with 1.6 million net acres across the western United States.

Yates produces 29,600 net barrels of crude oil equivalent per day, with oil accounting for 48 percent of production.

Yates has proved developed reserves of 44 million net barrels of oil equivalent and large positions in the Delaware Basin, Northwest Shelf and Powder River Basin position of 200,000 net acres.

Yates also holds an additional 1.1 million net acres in New Mexico, Wyoming, Colorado, Montana, North Dakota and Utah.

EOG said the deal will double its position in the Delaware Basin and adjacent plays.

The transaction will immediately add an estimated 1,740 net premium drilling locations in the Delaware Basin and Powder River Basin to EOG’s inventory.

The new premium drilling location additions mark a 40 percent boost from EOG’s previous premium drilling location inventory level, EOG said.

EOG plans to commence drilling on the Yates acreage in late 2016 with additional rigs to be added in 2017.

The transaction is expected to close in early October 2016.

Following the transaction closing, EOG intends to maintain Yates’ office in Artesia, New Mexico to support the newly combined operation.

EOG is the largest oil producer in the Lower 48, with average net daily production of 551,000 barrels of crude oil equivalent.

“This transaction combines the companies’ existing large, premier, stacked-pay acreage positions in the heart of the Delaware and Powder River basins, paving the way for years of high-return drilling and production growth,” EOG chairman and CEO William R. Thomas said.