[Editor's note: This story was updated at 12:27 p.m. to include additional information.]

SM Energy Co. (NYSE: SM) has jump-started its position in the Midland Basin with the purchase of 24,783 net acres in Howard County, Texas.

The acquisition more than doubles the Denver-based company's Midland footprint to about 46,750 net acres from roughly 20,000 net acres. SM also will add about 4,900 barrels of oil equivalent per day (boe/d) of net production, increasing its production in the basin by 80%.

SM Energy said Aug. 8 it entered a definitive agreement to acquire the largely contiguous acreage position in West Texas for $980 million in cash. The seller is Rock Oil Holdings LLC, a Riverstone Holdings-backed company with offices in Houston and Denver.

The deal represents 22% of SM’s current $4.5 billion enterprise value, said Brian Velie, a senior analyst at Capital One Securities.

As SM Energy’s focus has turned to the Midland Basin this year, the company “needed to scale up in order to make it a long-term piece of the portfolio,” Velie said.

SM Energy will pay $28,000 to $30,000 per undeveloped acre, depending on value assigned for production—a price “quite a bit above recent transaction comps in the Howard County area,” Velie said in a report.

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Rock Oil was formed in 2014 with an equity commitment from Riverstone of up to $250 million. The company is led by chairman and CEO Kyle R. Miller.

Miller previously built a position in the Eagle Ford Shale with a commitment of $84 million in private equity funds. That entity, Rock Oil Co. I, sold its acreage in deals to Sabine Oil and Gas in 2012 and Sanchez Energy Corp. (NYSE: SN) in 2013 for a combined $291 million.

The company has been actively executing a horizontal development program in Howard County despite faltering prices.

“Our ability to drive value in a challenging commodity price environment is a testament to the quality and technical expertise of the Rock Oil team and our strong and supportive working relationship with Riverstone,” Miller said in a statement. “We wish SM Energy success with these world class Permian assets.”

SM Energy will fund the acquisition through a public offering of stock and senior convertible notes. The equity offering is comprised of 15 million shares with a 2.25 million share greenshoe and should bring in about $455 million in proceeds, or 46% of the purchase price, Velie said.

The acquisition consists of undeveloped leasehold interests, producing wells and associated infrastructure assets. The acreage includes 6 MMBoe of proved developed producing reserves.

As a result of the deal, SM Energy is increasing its 2016 capex by about $15 million to $20 million, to between $685 million and $690 million. The company anticipates running a rig in the area in the fourth quarter and another in 2017. Two new wells are expected to come online in August.

SM Energy’s “operational expertise” in the region can immediately be applied to the acquired assets, said Jay Ottoson, president and CEO.

"We expect that the implementation of pad drilling, reservoir modeling, zipper fracks and leading edge completion technologies will add value from the start," he said in a statement.

Ottoson said SM Energy has been looking "for some time" to expand its asset base if the terms and the location were just right. The company has had recent success on the sell side of deal-making.

On Aug. 1, SM Energy said it entered definitive agreements with undisclosed companies to sell noncore properties for a better-than-expected price of $172.5 million. The assets included 79,000 net acres in Southeast New Mexico and the Williston Basin.

Proceeds from the sale were expected to be used to pay down SM's revolver and strengthen its balance sheet.

RELATED: SM Energy Discards New Mexico, Williston Assets For $173 Million

At the end of the first quarter, SM had about $290 million drawn on its senior secured credit facility, which has a borrowing base and lender commitments of $1.25 billion.

SM's acquisition is expected to close Oct. 4, subject to the satisfaction of customary closing conditions. The transaction's effective date is Sept. 1.

Jefferies was Rock Oil's lead financial adviser. Petrie Partners also was a financial adviser to Rock Oil. Latham & Watkins LLP was legal counsel to Rock Oil and Riverstone.

Emily Moser can be reached at emoser@hartenergy.com.