UK-headquartered energy major BP will buy BHP Billiton’s onshore oil and gas business in the US for £8 billion.
BP said the deal would add production of 190,000 barrels of oil equivalent (boe) per day to its portfolio and generate savings of more than £265 million a year.
Its existing US onshore business currently produces around 315,000 boe per day.
The firm also raised its upstream free cash flow target by £760m to £10.5-£11.4bn.
Half of the fee will be paid on completion of the deal, with the remaining payments being deferred over six months.
The transaction is expected to go through by the end of October.
The combined business will be led by David Lawler, chief executive of BP’s existing US onshore business.
The acquisition will give BP assets in the Permian-Delaware, Eagle Ford and Haynesville basins.
BP said it intended to make £3.8-£4.6bn worth of new divestments, mainly in the upstream segment, after it completes the BHP deal.
The cash will go towards funding its share buyback programme.
BP chief executive Bob Dudley said: “This is a transformational acquisition for our Lower 48 business, a major step in delivering our upstream strategy and a world-class addition to BP’s distinctive portfolio.
“Given our confidence in BP’s future – further bolstered by additional earnings and cash flow from this deal – we are increasing the dividend, reflecting our long-standing commitment to growing distributions to shareholders.”