Parsley Energy Inc. (NYSE: PE) certainly has a taste for the Permian Basin, saying Aug. 15 that it would purchase 9,140 net leasehold acres near its existing leasehold in Glasscock County, Texas.

Parsley said it purchased the acreage from an undisclosed party for $400 million. A Keybanc Capital Markets analyst said Parsley appears to have paid about $43,000/net acre, one of the highest per-acre prices in the Midland Basin to date.

In 2016, Parsley has announced at least $1 billion in Permian deals.

The acquisition adds a key development area for the company, said Bryan Sheffield, CEO of Parsley Energy.

“Offset well performance and initial results on our first horizontal well in the area suggest that the properties to be acquired may compete with the best of our existing horizontal drilling inventory, and the acquisition of associated royalty interests boosts the return profile of these properties,” he said. “We continue to build a high-quality acreage footprint consisting of favorably distributed development areas that can accommodate significant rig count additions, and we believe this acquisition represents an important step toward a large-scale, basin-wide development program that can generate sustainably strong production and cash flow growth.”

The company has made high-profile Midland Basin and Delaware Basin purchases this year, including a $359 million April deal to buy 22,908 net acres and a $280.5 million deal to buy 30,000 mineral rights under its leasehold in Pecos and Reeves counties, Texas.

In its latest acquisition, Parsely adds acreage with 240 gross (215 net) horizontal drilling locations in the Lower Spraberry, Wolfcamp A and Wolfcamp B formations, based on 660 ft between-well spacing and an estimated average lateral length of about 7,500 ft.

Additional horizontal drilling locations may be available in the Middle Spraberry, Wolfcamp C, and Cline formations.

Chris Stevens, an analyst at KeyBanc Capital Markets, said the transaction will be 70% funded with equity and the remainder with high-yield debt.

“The deal is about 5% accretive to NAV, aided by a portion of it being financed with debt,” Stevens said. “This is a relatively lofty valuation that might be the second-most expensive dollar/acre price paid in the Midland Basin.”

However, Stevens said the price is supported by a lower royalty rate—20% compared with the Midland’s typical 25%—and strong well performance just west of the acquisition.

The lower royalty “helps the economics and capital efficiency of wells drilled on this acreage,” he said.

Parsley’s first producing horizontal well on the Glasscock acreage that it acquired in May has shown encouraging results to date, the company said.

The Dwight Gooden 6-7-01AH, located about 2.5 miles west of the acreage to be acquired and completed in the Wolfcamp A interval with a 5,890 ft stimulated lateral, registered a strong peak 30-day IP rate of 1,161 barrels of oil equivalent per day (boe/d). Normalized to 7,000 lateral ft, the well is outperforming the company’s 1 MMboe EUR type curve for Midland Basin Wolfcamp A/B wells by 10% after almost 90 days of production. It has generated 82% oil during that time frame.

Parsley is offering an upsized public offering of 7.25 million shares of common stock for gross proceeds of $243.2 million.

The equity offering is expected to close Aug. 19. J.P. Morgan Securities LLC is acting as sole lead book-runner for the equity offering.

The acquisition is expected to close by Oct. 4.

Darren Barbee can be reached at dbarbee@harternergy.com.

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