US independent Occidental Petroleum has entered into a definitive agreement to sell for $508 million certain non-strategic acreage in the Permian basin in the US to an affiliate of Colgate Energy Partners III.

The transaction, which is expected to close in the third quarter of 2021, includes approximately 25,000 net acres in the Southern Delaware basin in Texas which are adjacent to Colgate’s existing position in Reeves and Ward counties.

The assets have current production of approximately 10,000 barrels of oil equivalent per day from some 360 active wells.

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“The acquisition of these assets in the core of the Southern Delaware basin is a transformational deal for Colgate that checks all of the boxes of our acquisition criteria. It is a great mix of low decline production and high rate of return locations that will immediately compete for capital with our existing portfolio,” said Will Hickey, co-chief executive of Colgate.

“Given the proximity to our current assets, we are confident that we can leverage our ongoing operations to maximize the value of this acquisition for our investors.”

Oxy will apply the proceeds from the sale toward debt reduction.

“We continue to advance our divestiture and deleveraging goals while delivering value for our shareholders,” said Oxy chief executive Vicki Hollub.

“This transaction brings our post-Colombia divestiture total to over $1.3 billion of the planned $2 billion to $3 billion, and since August 2019 we have divested more than $9 billion of assets.”

The operator’s US business is focused in the Permian basin of west Texas and southeast New Mexico, which it said is one of the largest and most active oil basins in the US, accounting for approximately 30% of the nation’s total crude production.

Oxy’s website hails it as the number one producer in the Permian basin, with operations focused on the Delaware and Midland basins, as well as the Central Basin Platform.

The company manages operations in the Permian basin through two businesses: Permian Resources, which consists of growth-oriented unconventional opportunities, and Permian EOR, which utilises enhanced oil recovery techniques, such as carbon dioxide flooding and waterflooding.

The total amount of the Colgate deal is subject to closing adjustments to reflect a 1 April 2021 effective date.

Oxy on Thursday said its 2021 capital and production guidance remains unchanged.