Diamondback Energy (FANG) on Tuesday agreed to acquire certain subsidiaries of oil producer Double Eagle IV Midco in a cash-and-stock deal to bolster its position in the Midland Basin.

The transaction consists of about 6.9 million Diamondback shares and $3 billion in cash, according to the oil and natural gas company. Diamondback aims to finance the cash portion of the acquisition through a combination of cash on hand, borrowings under its credit facility and proceeds from term loans and senior note offerings.

The deal, which requires approval from regulators, is expected to complete on April 1.

"Double Eagle is the most attractive asset remaining in the Midland Basin," Diamondback Chief Executive Travis Stice said in a statement. "With 407 locations adjacent to our core position, this largely undeveloped asset adds high-quality inventory that immediately competes for capital."

The transaction is expected to be immediately accretive to all of Diamondback's relevant financial metrics, including cash flow per share, the company said. As part of the agreement, the firms will accelerate development on a portion of Diamondback's non-core southern Midland Basin acreage, resulting in substantial free cash flow growth next year and beyond with minimum capital deployment.

"The deal provides nearly 350 relatively contiguous locations that continues to boost FANG's leading Midland position," Truist Securities said in a Tuesday client note. "We forecast the transaction to be slightly accretive despite production likely falling off from its initial level."

Diamondback also plans to offload at least $1.5 billion of noncore assets to speed up debt reduction on a pro forma basis to maintain a robust balance sheet. The company aims to reduce its net debt to $10 billion and maintain leverage of $6 billion to $8 billion in the long term.

"Additionally, we see value uplift to our existing inventory as acreage overlap allows for meaningful lateral length extensions and infrastructure synergies," according to Stice. "While we are adding a small amount of leverage to complete this trade, we are confident that we can quickly reduce debt both naturally through our consistent and growing free cash flow and through our commitment to sell at least $1.5 billion of non-core assets."

The deal is anticipated to further increase Diamondback's inventory, Double Eagle co-CEOs Cody Campbell and John Sellers said in the statement.

In September, Diamondback completed its acquisition of exploration and production company Endeavor Energy Resources in a cash-and-stock deal worth roughly $26 billion including debt.