Diamondback Energy Inc. (FANG) coiled and struck in the first quarter of 2015, beating production guidance, holding capex flat and throwing in the acquisition of 11,948 net Midland Basin acres for good measure.

Since January 2015, the company has acquired or entered into definitive purchase agreements in Howard County, Texas, totaling about $437.8 million, subject to adjustments. The deals, expected to close by the end of June, will increase the company’s interest in the basin to 89,216 net acres.

Gordon Douthat, senior analyst, Wells Fargo Securities, said that at $20,900/acre, Diamondback adds 232 high impact locations across three horizons—the Wolfcamp B, Wolfcamp A and Lower Spraberry.

Diamondback ranked the assets among the top quartile of its acreage and said it intends to start developing in early 2016.

“The company is making plans to ramp activity in light of cost savings and efficiency gains, and updated 2015 guidance is conservative in our view, but also sets up for a strong 2016, something not many E&Ps can boast in this environment,” Douthat said.

Much of the assets are located in northwest Howard County and include about 2,500 barrels of oil equivalent per day (boe/d) of net production based on company estimates using April data provided by the sellers. The acreage is 83% HBP.

Douthat rated the company Outperform and said Diamondback “remains our top pick.”

Diamondback said it plans to pay for the acquisitions primarily with proceeds from one or more capital market transactions, which may include debt or equity offerings. The company has offered an average of about 1.5% overriding royalty interest in some acreage to its subsidiary Viper Energy Partners LP (VNOM) for $33.7 million.

The offer is subject to the approval of Viper's general partner and completion of the acquisition.

Travis Stice, Diamondback’s CEO, said the deals combine the company’s acquisition strategy of pursuing large, contiguous blocks and small bolt-on acreage near its holdings.

“Analysis of wells in the immediate vicinity of northwest Howard County suggests estimated ultimate recoveries (EURs) ranging from 600 to 900 Mboe in three proven zones with economics favorable to horizontal development, even at $50/bbl oil,” Stice said.

The blocky nature of the acquisitions will facilitate longer laterals. About 42% of the potential horizontal locations are 10,000-foot laterals, which can provide higher rates of return and capital efficiency than shorter laterals.

The acquisition includes $4.9 million in salt water disposal infrastructure and 3-D seismic data.

“As a result, Diamondback's peer-leading capital efficiency and finding costs are expected to improve even further," Stice said.

Net proved developed reserves, based on Diamondback's internal estimates as of the effective date for the acquisition of the applicable assets, were about 4,347 Mboe.

The acreage is largely contiguous with minimal surface or urban encroachment issues.

Diamondback’s new guidance increases 2015 production by 11% at the mid-point to 29-31 Mboe/d from 26-28 Mboe/d. Its 2015 capex remains at $400- to $450 million, with increased completions are expected to be funded with the incremental service costs savings and efficiency gains.

“We believe FANG’s guidance remains conservative and continue to view the company as a beat-and-raise story,” said Gabriele Sorbara, analyst, Topeka Capital Markets.

First-quarter 2015 production was 30.6 Mboe/d, well above Sorbara’s 27 Mboe/d estimate and consensus of 26.7 Mboe/d.