Oil and gas company Talos Energy has announced its plans to acquire QuarterNorth Energy in a deal worth $1.29 billion.

The acquisition, which will be a combination of cash and stock, is expected to strengthen Talos’ presence in Mexico.

QuarterNorth Energy is a privately held exploration and production company based in the US Gulf of Mexico with ownership in six major fields. Talos expects the acquisition to improve its base decline rate by approximately 20%.

As part of the deal, QuarterNorth Energy will receive 24.8 million shares of Talos’ common stock and $965 million in cash. This is a significant move for Talos, as it looks to expand its operations in Mexico.

Last year, more than a dozen companies, including Chevron and Repsol, pulled out of offshore oil and gas exploration areas in Mexico due to disappointing results. Only a handful of companies had made significant finds in the area, which included Talos.

“The addition of QuarterNorth’s overlapping deepwater portfolio with valuable operated infrastructure will increase Talos’s operational breadth and production profile while enhancing our margins and cash flow,” said Talos CEO Timothy S. Duncan.

The acquisition of QuarterNorth Energy is expected to add approximately 30 thousand barrels of oil equivalent per day (Mboe/d) for the full current year. It will also add about 69 million barrels of oil equivalent (MMBoe) in proved reserves to Talos’ existing assets.

Moreover, the company said that it anticipates annual run-rate synergies of approximately $50 million by year-end 2024.

Notably, Talos Energy, along with Grupo Carso, currently holds a 17.4% stake in Zama, a Mexican oil and gas project in the Gulf of Mexico. The project has gross recoverable resources estimated at 735 million barrels and has the potential to produce up to 190,000 barrels per day (bbl/d) of medium crude and associated gas.