Oil and gas producer Apache Corp will buy privately held Cordillera Energy Partners III in a cash-and-stock deal worth $2.85 billion, part of a plan to expand its holdings of energy-rich reserves in the Midwestern United States.

The deal will double Apache's acreage in the energy-rich Anadarko basin, a shale formation in western Oklahoma and the Texas panhandle in which the company has been drilling for more than 50 years.

Apache is buying Cordillera's access to the Granite Wash -- a geological formation within Anadarko that holds tight gas trapped in its sands.

The acquisition, which Apache expects to boost its earnings starting this year, will give the company access to proven reserves of 71.5 million barrels of oil equivalent (boe) and current net production of 18,000 boe per day.

Oil and liquids contributed to about 80 percent of Apache's total production in the third quarter of 2011.

Cordillera, owned by private equity firm EnCap Investments L.P. and other investors, has about 14,000 potential drilling locations, Apache said.

According to the deal, EnCap, Cordillera management and other institutional investors will receive about $600 million in Apache common stock. Houston, Texas-based Apache said the balance will be paid in cash and will be funded with debt.

Reuters reported last October that Cordillera was exploring a sale and was hoping to bring in more than $3 billion.

The deal comes as the prices of natural gas is at a 10-year low.

While unconventional assets like shale gas have attracted firms looking to tap into rich resources, the process used to release the gas -- known as fracking -- has led to a backlash from some local residents and environmentalists who say contaminates drinking water supplies and fouls streams and rivers.

Apache's advisers on the deal, expected to close in the second quarter, were Goldman Sachs & Co and Tudor, Pickering, Holt & Co.

Shares of Apache were up 1 percent to $97.80 in premarket trading on Monday, up from Friday's closing price of $96.80 on the New York Stock Exchange.

(Reporting by Ernest Scheyder in New York, and Kavyanjali Kaushik and Vaishnavi Bala in Bangalore; Editing by Miral Fahmy and Dan Lalor)