Laredo Petroleum Inc. (NYSE: LPI) said Jan. 17 it will divest 2,900 net acres—roughly 2% of its Midland Basin acreage—for cash that will help cover company outspending to drill the Upper and Middle Wolfcamp.

The company also said its drilling and completion costs had ticked up sharply from December.

The sale for net proceeds of $60 million was expected to close on Jan. 17, Laredo said. The company will pay debt, leaving $15 million drawn on its $815 million credit facility.

Laredo likely sold noncore acreage on the Glasscock and Howard counties, Texas, border to SM Energy (NYSE: SM) for about $21,000 per acre, said Chris Stevens, an analyst at KeyBanc Capital Markets.

Proceeds will fund about half of the 2017 cash flow deficit at current strip pricing, Stevens said.

It’s still unclear whether Laredo would consider selling its 600-mile Medallion Pipeline, which Stevens said would “go a long way toward paying down debt and enabling an accelerated development program.”

Laredo is expected to outspend cash flow by about $165 million in 2017, the analyst said. The company has budgeted $450 million for drilling and completions, which have increased by roughly $1 million per well since December.

The “biggest delta on capex in our model relates to well costs, which saw a ~16% uptick from … ‘mid-$5 million’ as of December 2016 to $6.4 million currently, which management attributes to service cost inflation,” Seaport Global Securities said in a Jan. 18 report.

“Our 2017 capital budget takes advantage of our contiguous acreage position and production corridor investments to generate capital-efficient production growth,” said Randy A. Foutch, Laredo chairman and CEO. “The horizontal wells we expect to drill this year have an average lateral length of approximately 10,000 feet and almost all production and produced water from these wells is expected to be gathered by Laredo Midstream Services’ production corridors and pipeline assets, maximizing capital efficiency and minimizing operating costs.”

The company plans to capitalize on its production corridors to handle the movement of large volumes of oil, gas and water, enabling development of multiwell packages, Foutch said.

“We plan to primarily target our highly productive Upper and Middle Wolfcamp zones while continuing to optimize completions by adjusting stage and cluster spacing and proppant concentrations,” he said.

Laredo expects to operate four horizontal rigs in 2017 and to drill and complete about 70 horizontal wells with an average working interest of about 95%. Roughly 85% of drilling activity is set to target the Upper and Middle Wolfcamp zones with the remainder in the Lower Spraberry and Cline zones. Production is expected to grow more than 15% vs. full-year 2016 volumes.

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