Diversified Energy Co. has agreed to acquire Birch Permian Holdings Inc. and certain affiliated companies from affiliates of Elliott Investment Management LP for about $1.8 billion, expanding its position in the Permian basin and adding operated, producing assets to its portfolio.

The acquisition is expected to increase Diversified's production by about 35%, the company said in a release Sept. 2. Following closing, Diversified said operated gross production volumes are expected to total about 2.5 bcefd, or roughly 1.6 bcfed net.

Birch's assets currently produce about 68,000 boe/d net (about 409 MMcfed), consisting of 38% oil, 32% natural gas liquids, and 30% natural gas. The portfolio includes about 480 net wells across 46,000 net mineral acres in the Permian basin.

The acquired properties contain proved reserves of about 1.17 tcfe and a reported PV-10 value of about $2 billion.

The transaction also includes gathering, processing, and water-handling infrastructure. Midstream assets comprise 12 central production facilities, nine well gathering facilities, more than 60 miles of gathering pipeline, and five water disposal facilities connected by more than 80 miles of disposal and recycling pipelines. Processing capacity includes up to 345,000 b/d of oil and 310 MMcfd of gas.

Diversified said the acquisition establishes a platform for further consolidation of mature, producing Permian assets consistent with its strategy of acquiring and managing proved developed producing (PDP) properties. The company also cited enhanced oil recovery (EOR) potential, noting the acquired position includes more than 150 permitted EOR locations.

"This $1.8 billion acquisition is our largest in the company's 25-year history," said chairman and chief executive officer Rusty Hutson Jr. He said the assets provide a concentrated operated position in the Permian basin with integrated infrastructure and predictable cash flow characteristics.

The acquisition is expected to be funded primarily through a privately rated asset-backed securitization originated and structured by Carlyle of about $1.5 billion, secured by the acquired PDP assets, along with existing liquidity under Diversified's revolving credit facility and other customary financing sources.

The deal is expected to close in this year’s fourth quarter, subject to regulatory approvals and other closing conditions.