Chesapeake Energy Corp. (NYSE: CHK) will swap Powder River Basin (PRB) land and $450 million for RKI Exploration & Production LLC’s interests in the play, Chesapeake said July 29.

The move consolidates Chesapeake’s holdings in the basin in southeastern Wyoming while parting with its northern holdings.

The swap would increase Chesapeake’s position in the Powder River Basin to 388,000 net acres, and its working interest to 79% from 38%. The company estimates potential recoverable gross resources of more than 2 billion barrels of oil equivalent (boe) on its PRB acreage.

The deal provides the company with a more concentrated, high-quality acreage position “while underscoring the long term potential from the PRB,” said David Tameron, senior analyst with Wells Fargo Securities LLC.

The deal gives 137,000 net acres and 67 gross wells in the northern basin to RKI, its operating partner, in exchange for 203,000 net acres and 186 gross wells.

By the foot, Chesapeake has seen more than 50% drilling cost reductions in the past two years in the Niobrara Formation. Chesapeake has achieved reduction greater than 50% in drilling cost per foot over the past two years. Single-well rate of return potential is targeted to exceed 40%, assuming a constant West Texas Intermediate (WTI) crude oil price of $90/bbl and a Henry Hub natural gas price of $4 per thousand cubic feet.

Recently, the company drilled a record 9,600-foot lateral Niobrara well in 32 days with a drilling cost of $5 million, compared to 2013 vintage Niobrara wells with an average lateral length of 5,300 feet and average drilling cost of $6.6 million.

Doug Lawler, Chesapeake’s CEO, said the company is expanding into an outstanding asset in the southern portion of the PRB.

“Excellent results to date from the Niobrara and Sussex Formations, coupled with additional stacked pay potential in other Upper Cretaceous sands as well as the Frontier and Mowry Formations, demonstrate the potential of the Powder River Basin to be a major oil growth engine for the company,” he said.

The company also announced it would repurchase Utica subsidiary preferred shares, eliminating Chesapeake’s highest cost leverage instrument and about $75 million in annual cash dividend payments.